SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 17, 1997
HEALTH AND RETIREMENT PROPERTIES TRUST
(Exact name of registrant as specified in charter)
Maryland 1-9317 04-6558834
(State or other (Commission file (IRS employer
jurisdiction of number) identification no.)
incorporation)
400 Centre Street, Newton, Massachusetts 02158
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 617-332-3990
<PAGE>
THIS CURRENT REPORT CONTAINS FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE
SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE ANTICIPATED OR PROJECTED. INVESTORS ARE CAUTIONED
NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS WHICH SPEAK ONLY
AS OF THE DATE HEREOF. THE REGISTRANT UNDERTAKES NO OBLIGATION TO PUBLISH
REVISED FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE
DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
Item 5. Other Events.
A. GPI Acquisition.
As previously announced, on February 17, 1997 Health and Retirement
Properties Trust (the "Company" or "HRP") entered into a Agreement of Merger
(the "Merger Agreement") with Government Property Investors, Inc. (together
with its subsidiaries, except where the context requires otherwise, "GPI"), a
Delaware corporation, providing for the merger (the "Merger") of a wholly-owned
subsidiary of GPI into and with a wholly-owned subsidiary of the Company ("HRP
Merger Sub"). Except with respect to references to common shares of beneficial
interest of the Company ("Common Shares") and unless the context otherwise
requires, references in this Item of this Report to the Company include HRP
Merger Sub and its subsidiaries.
Pursuant to the Merger and related transactions, the Company would
acquire up to 30 office buildings containing approximately 3.4 million square
feet, substantially all of which is leased to various agencies of the United
States Government (the "Government Office Properties"). Based upon the closing
sale price for the Common Shares as reported by the New York Stock Exchange (the
"Closing Price") on February 25, 1997 ($20.25 per share), the purchase price
would be approximately $448 million. The value of the First Closing
Consideration (as hereafter defined) will vary with the Common Share price on
the Closing Date (as hereafter defined). As set out in the Merger Agreement, the
purchase price payable on the Closing Date will be approximately $436 million,
of which approximately $72.6 million will be paid by the issuance of
approximately 4.2 million Common Shares, valued at $17.291 per share (the "First
Closing Consideration"), approximately $47 million will be paid by the Company's
assumption of debt secured by mortgages on four properties, and approximately
$317 million will be paid in cash at the time of or shortly after the
consummation of the Merger to retire other debt and pay certain obligations of
GPI and its subsidiaries assumed by the Company.
The Company will pay an additional amount (the "Second Closing
Consideration") equal to the greater of $8 million or 3% of the aggregate cost
of Additional Properties (as hereafter defined) acquired by the Company prior
to the first anniversary of the Closing Date (the "Second Closing Date") by
the issuance of Common Shares valued at the arithmetic average of the closing
sales prices for the Common Shares as reported by the NYSE for the 20 trading
days immediately prior to the Second Closing Date.
This transaction is expected to close, at least with respect to 24
Government Office Properties with a value of approximately $389 million
(calculated based upon the Closing Price on February 25, 1997), on or about
March 31, 1997 (the "Closing Date"). In addition, the Company will have the
option to pursue the acquisition of Additional Properties (as hereafter defined)
leased to various Government agencies where negotiations were commenced by the
sellers of the Government Office Properties.
The information presented in this Report, unless otherwise indicated,
is stated as though the acquisition of all 30 of the Government Office
Properties has occurred. The closing under the Merger Agreement is subject to
certain conditions, including the delivery of certain estoppel certificates and
obtaining certain third-party consents. There can be no assurance, however, that
the acquisition of any or all of the Government Office Properties will be
completed, that the net operating income set forth herein will be achieved or
that, after the occurrence of the Merger, the Company will acquire all of the
properties under contract for acquisition or development or any additional
Government Office Properties.
A copy of the Merger Agreement is filed as an exhibit to this Report.
The description of the Merger set forth herein describes certain provisions of
the Merger Agreement, but does not purport to be complete and is subject to,
and qualified in its entirety by reference to, all of the provisions of the
Merger Agreement, including the definition of certain terms therein.
<PAGE>
The Merger. Pursuant to the Merger Agreement, Government Property
Holdings Trust (together with its subsidiaries, except where context requires
otherwise, "GPH"), a Maryland real estate investment trust to be formed by GPI,
will merge with and into HRP Merger Sub and all outstanding stock of GPH will be
converted into the right to receive the First Closing Consideration and the
Second Closing Consideration. Prior to the Merger, GPI will contribute all of
its interest in certain of its subsidiaries to GPH, and GPH will assume certain
of GPI's indebtedness and certain other obligations of GPI. On the Closing Date,
pursuant to the Merger Agreement GPI, GPH, HRP, HRP Merger Sub and certain
related parties will enter into additional agreements (the "Other
Transactions"), among them the Investment and Registration Rights Agreement (the
"Registration Rights Agreement"), the Indemnification Agreement, the Voting
Agreement, Information Access Agreement and the Service Contract. See
"--Additional Agreements." The Merger is intended to qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended.
Government Office Properties. The Government Office Properties
consist of (i) 24 completed facilities purchased or developed by GPI prior to
the Merger (collectively, the "Existing Government Office Properties"); (ii)
three office buildings under development by GPI and third parties pursuant to
development agreements (the "Development Properties"); and (iii) three office
buildings with respect to which GPI has entered into purchase and sale
agreements as purchaser (the "Contract Properties"). Pursuant to the Merger
Agreement, if certain conditions relating to (i) the Development Property
located in Aurora, Colorado (the "Aurora Premises") are satisfied on or before
July 31, 1997, HRP will buy all interests of GPI and its affiliates in the
Aurora Premises and (ii) the Contract Properties are satisfied on or before the
Second Closing Date (hereafter defined), HRP will buy all interests of GPI and
its affiliates in the Contract Properties. In addition, GPI has entered into
negotiations to acquire an additional ten office buildings (the "Additional
Properties") which negotiations HRP may elect to continue following the Merger.
GPI has the option to transfer the Existing Government Office Property located
in Houston, Texas (the "Houston Premises") to a third party in return for a $5
million reduction in the purchase price. Based upon the Closing Price on
February 25, 1997, the reduction in the First Closing Consideration would be
$5.9 million.
The Government Office Properties are located in 17 states and the
District of Columbia and are occupied by different agencies of the U.S.
Government, including the Internal Revenue Service, Drug Enforcement Agency,
Army Corps of Engineers and Department of Energy. GSA leases have been awarded
for the Development Properties, which are under development by GPI in
conjunction with third party developers and are scheduled to be completed by
January 1998. The Additional and Contract Properties are generally 100% leased,
primarily to the U.S. Government. See "Summary of the Government Office
Properties." The number of useable square feet of each Government Office
Property has been determined for these purposes based on the aggregate leased
square footage specified in currently effective leases.
The average remaining lease term for the Government Office Properties
is approximately eight years. Most of these leases include tenant renewal
options for extended periods. The current rents payable under these leases are
approximately $61 million per year and most of the rental rates are subject to
annual adjustments based upon increasing operating expenses as measured by
Consumer Price Index increases. Generally, the leases are so called "modified
gross leases" under which the Company, as landlord, will be required to provide
certain property management services. The net operating income which the Company
will receive from these leases, before depreciation, amortization and interest
costs, and before management and home office costs, will depend upon the
efficiency with which the Company is able to provide these services, but the
Company estimates that such net income would be approximately $45 million per
annum. Five of the 30 Government Office Properties are currently under contract
for acquisition and/or development and will not produce rental income
until their acquisition and development is completed.
First Closing Consideration. The First Closing Consideration is
payable by the issuance of Common Shares, valued at $17.291 per share, equal
to $436 million minus the total debt of GPI and its subsidiaries (including
approximately $47 million of debt which will be assumed by HRP Merger Sub on the
Closing Date (the "Assumed Debt") but excluding debt to affiliates and certain
others), plus the aggregate amount of certain net current assets of GPH and its
subsidiaries as of the Closing Date.
First Closing Consideration Adjustments. The amount of the First
Closing Consideration is subject to the following reductions:
i. an amount equal to the aggregate of prepayment penalties, if
any, which would be incurred as the result of the prepayment of
debt of GPI and its subsidiaries (exclusive of the Assumed Debt)
on the Closing Date;
ii. if the Development Property located in Golden, Colorado (the
"Golden Premises") is not complete and the obligation of the tenant
thereof to pay rent has not commenced by the Closing Date, the
amount of $9,046,823;
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iii. if the Development Property located in San Diego, California (the
"San Diego Premises") is not complete and the obligation of both of
the tenants thereof to pay rent has not commenced by the Closing
Date, the amount of $1,530,954;
iv. $11,647,101, provided that GPH has not succeeded to the interest
of GPI in the Aurora Premises;
v. if the Contract Property located in Waco, Texas (the "Waco
Premises") is not ready for acquisition on the Closing Date,
the amount of $8,514,714;
vi. if the Contract Property located in Los Angeles, California (the
"LA MEPS Premises") is not ready for acquisition on the
Closing Date, the amount of $10,060,162;
vii. if the Contract Property located in Phoenix, Arizona (the "Phoenix
Premises") is not ready for acquisition on the Closing Date,
the amount of $12,159,106; and
viii. if GPI exercises its right to retain the Houston Premises, the
amount of $5,000,000.
The Merger Agreement contemplates that GPH will not succeed to the interest of
GPI in the Aurora Premises on or before the Closing Date.
If GPI elects to retain the Houston Premises and sells the Houston
Premises prior to the Closing Date and any of the proceeds of such sale (the
"Houston Proceeds") are included in the current assets of GPH used in the
calculation of the First Closing Consideration, the Common Shares issued on
account of the Houston Proceeds will be that number of Common Shares equal to
the quotient of the Houston Proceeds divided by $19.2125 per share.
Upon completion of the development or acquisition of the Golden
Premises, the San Diego Premises, the Aurora Premises, the Waco Premises, the LA
MEPS Premises and the Phoenix Premises, the amount of the reductions referred to
above, less amounts expended (or anticipated to be expended) by HRP Merger Sub
in connection with the acquisition or development of such premises (and in the
case of the Aurora Premises, see "--The Aurora Premises") will be payable by the
issuance of Common Shares valued at $17.291 per share.
Second Closing Consideration. The aggregate cost of acquiring
Additional Properties used to determine the Second Closing Consideration will
include the purchase price, any contingent purchase price, the amount of any
indebtedness assumed (but exclusive of transaction expenses and commissions paid
by HRP or any of its affiliates), and will include Additional Properties with
respect to which, prior to the Second Closing Date, HRP or any of its affiliates
have purchased or entered into a binding agreement to purchase. The Second
Closing Consideration payable in Common Shares will be adjusted (i) to offset
any difference between the debt and certain current assets of GPI used in the
determination of the First Closing Consideration as of the Closing Date and the
actual amounts of such debt and certain current assets following the Closing
Date; (ii) if the amounts paid to GPI or its successor pursuant to the Service
Contract (as hereafter defined) (the "Service Contract Payment") are less than
the amounts actually paid by GPI or its successor for office expenses, salaries
and other operating expenses through July 31, 1997, by the addition of an amount
of up to the difference between such amounts, provided that such amount shall
not exceed the difference between $947,935 and the Service Contract Payment;
(iii) if the aggregate amount funded or anticipated to be funded by HRP
subsequent to the consummation of the Merger to complete the Golden Premises
(including interest thereon) exceeds $9,046,823, by the deduction of one-half of
such excess; and (iv) if the aggregate amount funded or anticipated to be funded
by HRP subsequent to the consummation of the Merger to complete the San Diego
Premises (including interest thereon) exceeds $1,530,954, by the deduction of
one-half of such excess.
Additional Agreements. Pursuant to the Merger Agreement, the
agreements described below (the "Additional Agreements") are to be entered into
by certain parties to the Merger Agreement and others. A copy of the form of
each Additional Agreement and each of certain other related agreements is filed
as a schedule to Exhibit 10.1 to this Report. The descriptions of the Additional
Agreements describe the material provisions of each of the Additional
Agreements, but do not purport to be complete and are subject to, and qualified
in their entirety by reference to, all of the provisions of each of the
Additional Agreements, including the definition of certain terms therein.
Registration Rights Agreement. Pursuant to the Registration Rights
Agreement, HRP has agreed to file with the Securities and Exchange Commission
within 30 days following the Closing Date a registration statement relating to
the offer and sale of Common Shares delivered on the Closing Date to GPI
pursuant to the Merger Agreement by the holders thereof. The Company has also
agreed to amend such registration statement from time to time to include
additional Common Shares delivered after the Closing Date to GPI and its
successors pursuant to the Merger Agreement. HRP is required to use its best
efforts to have such registration statement declared effective as soon as
reasonably practicable after filing and to maintain the continuous effectiveness
of such registration statement for three years from the Closing Date or such
shorter period as will terminate when all such Common Shares have been sold. The
Registration Rights Agreement provides for suspension periods when the
registration statement is not effective and for block out periods in connection
with other offerings of the securities of HRP, each on customary terms and
conditions. The Registration Rights Agreement also provides certain
cross-indemnities between HRP and sellers of the Common Shares subject to the
Registration Rights Agreement. Such indemnities may be unenforceable, in whole
or in part, under federal or state securities laws or certain public policies.
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Indemnification Agreement. Pursuant to the Indemnification
Agreement, GPI will indemnify HRP and other related parties for certain losses
arising out of any breach of any warranty or representation made by GPI in the
Merger Agreement, the Registration Rights Agreement or the Indemnification
Agreement; provided that, any claim for indemnification must be made by
December 31, 1997. The Indemnification Agreement provides that GPI has no
liability for such losses until such losses exceed $1,500,000 in the aggregate
(except for certain losses related to the Existing Government Office Property
located in College Park, Maryland) and that GPI shall have no liability for
losses in excess of the Second Closing Consideration.
Voting Agreement. At the time of the Merger, HRP Merger Sub
and The 1818 Fund II, L.P. and Rosecliff Realty, L.P., the principal
stockholders of GPI (the "Principal Stockholders"), will enter into the Voting
Agreement, pursuant to which each Principal Stockholder has agreed that it will
not, until the occurrence of a Change in Management (as defined in the Voting
Agreement) or until such Principal Stockholder, with its affiliates, owns less
than 25% of the aggregate Common Shares received by such Principal Stockholder
as Merger Consideration, unless otherwise approved by the Board of Trustees of
HRP, (i) transfer any Common Shares held by Principal Stockholder to any person
who, to the Principal Stockholders' knowledge, holds directly, or is an
affiliate of a person who holds, 5% or more of the aggregate Common Shares at
the time outstanding; (ii) make directly or indirectly or participate in an
unsolicited offer to purchase any Common Shares; (iii) vote (or direct to be
voted) any Common Shares or any other shares of equity interest in HRP as to
which either has direct or indirect voting power or control in favor of any
transaction that could result in a Change of Control (as defined in the Voting
Agreement) of HRP; or (iv) present any shareholder proposal dealing with a
Change of Control of HRP.
Information and Access Agreement. At the time of the Merger,
the Company and the Principal Stockholders will enter into the Information and
Access Agreement pursuant to which the Company will, upon request, permit the
Principal Stockholders to inspect the Company's properties, provide financial
information, make certain of the Company's officers available for consultation
and inform the Principal Stockholders of significant corporate actions. Each
Principal Stockholder has agreed to hold all such information in confidence. The
Information and Access Agreement will terminate on the third anniversary of the
Closing Date.
Service Contract. At the time of the Merger, GPI and M&P
Partners, Limited Partnership ("M&P"), an affiliate of HRPT Advisors, Inc.
("Advisors"), the Company's investment advisor, which is owned by Advisors and
Messrs. Gerard M. Martin and Barry M. Portnoy, the Managing Trustees of the
Company, will enter into the Service Contract, pursuant to which certain
employees of GPI will provide administrative and support services to HRP Merger
Sub until July 31, 1997. M&P is required to reimburse GPI for such employees'
compensation and for rent payments for GPI's office space in Washington, D.C.
until July 31, 1997 in an amount not to exceed $700,000.
The Aurora Premises. If, at any time on or before
July 31, 1997, certain conditions relating to the Aurora Premises have been
satisfied, HRP will issue to GPI a number of Common Shares with an aggregate
value (with each such Common Share valued at $17.291) equal to $11,647,101 less
the sum of (x) $1,000,000, (y) the amount of any indebtedness or funding
obligations assumed by HRP with respect to the Aurora Premises, and (z) the cost
to complete construction of the Aurora Premises in accordance with the plans and
specifications therefor and as set forth in the guaranteed maximum price
construction contract relating to the Aurora Premises and including, without
limitation, any amounts required to be paid to buy out the third party
development partner and interest imputed on amounts advanced by HRP with respect
to the Aurora Premises, from the date advanced until the date the obligation to
pay rent of the tenant under the development lease in effect with respect to the
Aurora Premises shall commence, in consideration for the transfer of all GPI and
GPI affiliate ownership interests in the entity holding title to the Aurora
Premises. Within thirty (30) days after the last to occur of (x) completion of
the construction of the Aurora Premises, (y) the novation of the lease in effect
with respect to the Aurora Premises to HRP and (z) the commencement of the
obligation of the tenant under the lease to pay rent, HRP will issue GPI a
number of Common Shares valued at $17.291 per share with an aggregate value
equal to the amount, if any, by which $11,647,101 exceeds the
actual aggregate amounts funded by HRP with respect to the Aurora Premises
(including, without limitation, interest and third party development partner
buy-out costs and Common Shares previously issued).
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Plan of Financing. Pursuant to the Merger Agreement, HRP will pay
certain debt and other obligations of GPI and its subsidiaries in the amount of
approximately $317 million on the Closing Date. Funds to pay such debt and
other obligations may come from borrowings under HRP's unsecured bank credit
facility (the "Bank Credit Facility"), from new borrowings or from the sale of
Common Shares. The Bank Credit Facility is a $250 million unsecured revolving
credit facility with a syndicate of banks. This facility matures in 2000 and
interest on drawings is at LIBOR plus 87.5 basis points or prime. Aggregate
borrowings under the Bank Credit Facility at February 26, 1997 were $140
million. HRP is in the process of negotiating amendments to the Bank Credit
Facility to permit HRP to consummate the Merger and to extend the maturity
until 2001.
The Government Office Properties Business. Most of the Government
Office Properties are leased through the General Services Administration
("GSA"). HRP believes that the GSA's long term demand for leased space will
continue to be strong as a result of federal budget pressures to limit capital
expenditures and the need to use funds available for capital expenditures to
modernize the GSA inventory of owned buildings, over half of which exceed 50
years of age. Most large GSA leases are written for initial contractual terms of
10 to 20 years plus renewal options totaling an additional 5 to 20 years. Many
GSA leases, including leases for some Government Office Properties, permit the
GSA to terminate the lease by notices given any time after a so called "firm
term." The average remaining firm term for the Government Office Properties to
be acquired by HRP is approximately 8 years; the average remaining contractual
term for these properties is approximately 10 years; and the average remaining
full term for these leases, including all renewal options, is approximately 13
years.
Based upon the GSA or tenant investments in improvements to the
Government Office Properties, the high cost of relocation, the stability of the
tenant missions and space requirements of the Government agencies which occupy
these properties, HRP believes that there is a high probability of lease
renewals for the Government Office Properties in many cases beyond the renewal
periods. Moreover, because of the locations of many of these properties and the
high standards to which they have been developed, HRP believes it may be able to
lease or sell most of such properties to commercial users in the event the GSA
terminates or fails to renew a lease.
GSA is not directly dependent upon the government appropriations
process to fund its annual budget for contractual lease obligations. GSA has
authority to spend a lump sum amount from the Federal Buildings Fund for payment
of its lease obligations. The Federal Buildings Fund is primarily funded with
the lease payments of the government agency tenants, who pay GSA quarterly in
advance for the space they occupy. Although the budget of each GSA tenant agency
is subject to the appropriations process, virtually none of the agencies require
line item approval for lease payments under existing leases, and funds to meet
obligations under existing leases have been consistently available and have
continued to be available during government shut-downs. Each year Congress
allocates the percentage of the Federal Buildings Fund that GSA can spend for
leased space.
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While the payment structure described in the preceding paragraph has
been in place since 1975 and GSA has historically had sufficient authority and
resources to meet its obligations under long-term leases, changes in the U.S.
Government's policies or regulations in this regard could have an adverse effect
on HRP. HRP's operation of the Government Office Properties could also be
adversely affected by changes in the procedures for authorizing GSA to enter
into new leases. HRP cannot predict what impact, if any, such initiatives will
have on HRP.
Leases. The Government Office Properties are primarily leased to U.S.
Government agencies through GSA and, in three cases (the Government Office
Properties in Safford, Arizona, Gaithersburg, Maryland and Santa Fe, New
Mexico), directly to the tenant agency. While HRP believes the provisions of the
GSA leases on the Government Office Properties (the "Leases") as summarized
below are representative of the lease terms generally available from GSA, there
can be no assurance that such terms will be available with respect to other
properties acquired by HRP or to renewals by GSA of the Leases.
Although the Safford, Gaithersburg and Santa Fe leases do not have GSA as the
lessee, such leases are on GSA lease forms; therefore, for purposes of
general description, the description of the Leases herein includes such leases.
Each of the Leases requires GSA to pay (i) a fixed base rent amount
("Base Rent"), (ii) a pass-through for changes in real estate taxes from a base
year and (iii) annual CPI adjustments of the portion of the Base Rent that
represents estimated operating expenses and utilities. The Leases generally
provide that GSA's obligation to pay rent is dependent on the lessor's
obligation to provide services, including all required building services,
utilities, maintenance and repairs. Therefore, if the lessor fails to provide
any such service, GSA has the right to offset the amount of any valid claim
against rent.
Rental obligations under the Leases are absolute and unconditional
general obligations of the United States, subject to the terms of the particular
Lease. With one exception, the Leases do not contain any provisions conditioning
the payment of rent on annual appropriations. The U.S. Government's obligations
under leases such as the Leases are subject to the Prompt Payment Act and the
regulations promulgated thereunder by the Office of Management and Budget,
pursuant to which any rent payments not made when due will bear interest from
the day after the due date for not more than one year at an interest rate from
time to time established by the Secretary of the Treasury. Payment of the Base
Rent (including the CPI adjustment component of the Base Rent) is not
conditioned on monthly invoices or notices of adjustments, while invoices are
required for additional charges above the Base Rent. The Leases do not provide
for acceleration of the payment obligations thereunder for failure to make a
payment when due, but the Lessor would have standing to sue for collection of
unpaid rent under the Contract Disputes Act of 1978, as amended.
The Leases generally have a fixed Base Term during which the lease is
not terminable or cancelable by either the U.S. Government tenant or the lessor.
In some cases, the lease may provide for a renewal option, in which case GSA
must take affirmative action to renew the lease. In other cases, the lease may
provide for early termination rights either after a specified date in the Base
Term or during a renewal period, in which case occupancy continues unless GSA
affirmatively acts to terminate the lease.
The Leases can also be terminated at any time under the following
limited circumstances: (i) a substantial casualty or a taking by eminent domain
of a substantial portion of the leased property, (ii) upon default by the lessor
of its obligations under the lease, which default remains uncured after
applicable notice and cure period, or upon "repeated and unexcused" defaults
notwithstanding timely cure of such defaults, (iii) breach by the lessor of
various representations, including those regarding PCB's, asbestos or other
hazardous waste or (iv) violation by the lessor of statutes relating to, among
other things, kick-backs, equal opportunity or use of small business concerns
and small disadvantaged business concerns. Any provider of goods and
services to the U.S. Government, including a landlord under a lease, may be
debarred, suspended or otherwise declared ineligible for the award of contracts
by any federal agency if such provider is determined to have, among other
things, committed fraud or a criminal offense in obtaining or performing public
contracts, violated federal or state anti-kickback or similar statutes or
repeatedly defaulted under public contracts. In addition, GSA has the right to
terminate a lease in the event of a violation by the landlord of certain
regulations such as those requiring equal opportunity hiring
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or the use of subcontractors that qualify as small businesses or minority-owned
businesses. Any such violation or repeated defaults by HRP or any of its
officers could (i) disqualify HRP from acquiring additional government-leased
properties or obtaining renewals of the Leases or (ii) result in termination of
the Leases, all of which would have an adverse effect on HRP's Funds from
Operations and its ability to make expected distributions to shareholders. HRP
will generally be compensated by insurance proceeds in the case of insured
casualties or a condemnation award in the case of a taking by eminent domain.
HRP believes that the probability of renewal for GSA leases is high, primarily
because of the tenant's investment in the leased facilities and, with respect to
the Government Office Properties, the stability of the tenant's mission and
resulting space requirements.
While at the closing of the Merger HRP (i) anticipates receiving
certificates from GSA to the effect that GSA has given no notice of existing
defaults by GPI under any of the leases of the Existing Government Office
Properties and (ii) will be provided a limited indemnity for liabilities HRP
incurs that relate to prior periods, there can be no assurance that such
certificates and indemnities would be sufficient to protect HRP from such
liabilities.
Summary of the Government Office Properties. Set forth below is a
summary of the Government Office Properties:
<TABLE>
<CAPTION>
Primary Percent
Yr. Built/ Tenant Rentable Leased
Street Address Location Renovated Agency Sq. Ft. 12/31/96
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Existing Government
Office Properties
4700 River Road College Park, MD 1994 Animal and 324,415 100%
Plant Health
Inspection
Service
20 Massachusetts Washington, D.C. 1974/96 Army Corps of 323,270 100%
Avenue Engineers
50 North Robinson Oklahoma City, OK 1992 Internal 180,781 100%
Revenue Service
400 State Avenue Kansas City, KS 1970/90 Housing and 161,015 89%
Urban Develop-
ment(1)
5600 Columbia Pike Falls Church, VA 1966/93 Defense 163,674 100%
Information
Systems Agency
625 Indiana Avenue Washington, D.C. 1989 Defense 157,005 93%
Nuclear Safety
Board(2)
4560 Viewridge Drive San Diego, CA 1996 Drug 147,955(6) 100%
Enforcement
Agency
130 and 138 Buffalo, NY 1994 Department of 146,779 100%
Delaware Avenue Justice(3)
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Primary Percent
Yr. Built/ Tenant Rentable Leased
Street Address Location Renovated Agency Sq. Ft. 12/31/96
- -----------------------------------------------------------------------------------------------------
820 West Diamond Gaithersburg, MD 1995 National 137,087 100%
Avenue Institution of
Standards and
Technology
5353 Yellowstone Cheyenne, WY 1995 Bureau of Land 122,647 100%
Boulevard Management
6710 Oxon Hill Road Oxon Hill, MD 1992 Internal 122,042 100%
Revenue Service
610 Business Park Houston, TX(4) 1993 Department of 118,656 100%
Veteran Affairs
9797 and 9799 San Diego, CA 1994 Federal Bureau 94,272 100%
Aero Drive of Investigation
2420 Stevens Center Richland, WA 1995 Department of 90,262 100%
Place Energy
20400 Century Germantown, MD 1995 Department of 80,269 100%
Boulevard Energy
4241 N.E. 34th Street Kansas City, MO 1995 Financial 77,993 100%
Management
Services
1474 Rodeo Drive Santa Fe, NM 1987 Bureau of Land 76,978 100%
Management
2430 Stevens Center Richland, WA 1995 Department of 47,069 100%
Place Energy
711 14th Avenue Safford, AZ 1992 Bureau of Land 37,780 100%
Management
2029 Stonewall Falling Waters, WV 1993 Bureau of 36,818 100%
Jackson Drive Alcohol,
Tobacco and
Firearms
220 E. Bryan Street Savannah, GA 1970/90 Federal Bureau 35,759 100%
of Investigation
3200 E. Hemisphere Tucson, AZ 1993 Drug 30,112 100%
Loop Enforcement
Agency
8
<PAGE>
Primary Percent
Yr. Built/ Tenant Rentable Leased
Street Address Location Renovated Agency Sq. Ft. 12/31/96
- ------------------------------------------------------------------------------------------------------
435 Montano NE Albuquerque, NM 1984 Bureau of Land 29,756 100%
Management
15 12th Avenue North Petersburg, AK 1983 Forest Service 24,279 100%
Contract Properties
201 E. Indianola Phoenix, AZ 1984/97 Federal Bureau 87,308 100%
Avenue of Investigation
5051 Rodeo Road Los Angeles, CA 1960/96 Military 70,000 100%
Entrance
Processing
Station
[No Street Address] Waco, TX 1997 Department of 137,784 100%
Veterans
Affairs(5)
Development
Properties
4181 Ruffin Road San Diego, CA 1980/97 Defense 148,000 96%
Finance and
Accounting
Services(6)
16401 East Aurora, CO 1997 Office of Civilian
CenterTech Parkway Health and Medical
Programs of the
Uniformed Services(5) 116,500 100%
59th Avenue and Golden, CO 1997 Environmental 43,232 100%
McIntyre Street Protection --------
Agency
Total-All Properties 3,369,497
</TABLE>
(1) The Kansas City property is occupied by six federal government agencies
under four separate leases: Housing and Urban Development, Bureau of
Census, Bureau of Prisons, Department of Labor, Equal Employment
Opportunity Commission and Civil Rights Commission. A portion of the space
is leased to commercial tenants and the State of Kansas.
(2) The Washington, D.C. (Indiana Ave.) property is occupied by four agencies
under separate leases: the Defense Nuclear Facilities Safety Board; the
Veteran's Administration General Counsel; the U.S. Court of Veteran's
Appeals; and the Department of Justice Child Care Center. A portion of the
space is leased to commercial retail tenants.
(3) The Buffalo, NY property is leased under three separate GSA leases to
different agencies within the Department of Justice: the U.S. Attorney's
Office; the Immigration and Immigration and Naturalization Service and the
Executive Office of Immigration Review.
9
<PAGE>
(4) This Property is under an active lease and lease payments are being made,
but the tenant is not occupying this building.
(5) Occupancy to begin upon completion of development.
(6) There are two government agency leases for this property. The primary
tenant has begun occupancy. The secondary tenant's occupancy will begin
when certain buildouts have been completed.
GSA's standards for office facilities are comparable to Class A
commercial facilities, and the improvements in many of the Government Offices
have security features, energy conservation systems and technological capacity
that are higher than in most commercial facilities and amenities not normally
included in standard commercial space, such as child care centers, fitness
centers and cafeterias. In addition, GSA requires its leased premises to comply
with strict building safety standards, including handicap accessibility, testing
for radon, lead in paint or water and air quality.
HRP will carry, upon taking title to the Government Office Properties,
comprehensive liability, fire, extended coverage, rental loss and title
insurance covering all of the Government Office Properties, with policy
specifications, insured limits and deductibles customarily carried for similar
properties with carriers management deems capable to providing such coverage.
However, certain losses may not be insurable or may be insurable only at
prohibitive rates. In the event of a partial casualty or condemnation of a
Government Office Property, GSA is entitled to a rent abatement for the
untenantable portion of the Government Office Property, and HRP's coverage will
include rental loss for all periods during which GSA is entitled to an abatement
under the Leases. The Government Office Properties are insured for loss due to
terrorist activities, although there can be no assurance that insurance for
such risks will continue to be available at acceptable rates. Should an
uninsured loss or a loss in excess of insured limits occur, HRP could lose its
capital invested in the affected property, as well as the anticipated future
revenues from such property and would continue to be obligated on any mortgage
indebtedness or other obligations related to the property. Any such loss could
materially and adversely affect the business and financial condition of HRP. HRP
believes that the Government Office Properties will be adequately insured in
accordance with industry standards.
In connection with each Property, a Phase I environmental site
assessment was performed by an independent engineering firm. The studies were
performed at various times between 1993 and 1996 and in connection with the
Merger, HRP has contracted for updates to such Phase I studies. These Phase I
studies have included, among other things, a visual inspection of the Properties
and the surrounding area and a review of relevant state, federal and historical
documents. In certain instances, the consultant performed limited sampling for
the presence of radon, lead paint, and asbestos containing materials. In several
cases surface sampling was undertaken either as part of the Phase I study, as a
subsequent Phase II investigation or by others prior to GPI's acquisition of the
property.
Based on the Phase I and other environmental studies, HRP does not
believe that there are any environmental liabilities associated with any of the
Government Office Properties that would have a material adverse effect on HRP's
business, assets or results of operations taken as a whole, nor is HRP aware of
any such material environmental liability. Nevertheless, it is possible that the
Phase I and other environmental studies did not reveal all environmental
liabilities or that there are material environmental liabilities of which HRP is
unaware.
In addition, there can be no assurance that (i) future laws,
ordinances regulations, or court decisions will not impose any material
environmental liability or (ii) the current environmental conditions of the
Government Office Properties will not be affected by tenants, by the condition
of land or operations in the vicinities of the properties (such as the presence
or operation of underground storage tanks), or by third parties unrelated to
HRP.
B. Authorization of Additional Common Shares of Beneficial Interest.
In connection with the Merger described above under "GPI Acquisition"
and the contemplated financing thereof, the Trustees of the Company have voted
to increase the authorized number of common shares of beneficial interest,
$0.01 par value per share, of the Company from 100,000,000 to 125,000,000. As
provided in the Company's Amended and Restated Declaration of Trust, as amended,
such increase does not require the consent or approval of shareholders of the
Company.
10
<PAGE>
C. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Health and Retirement Properties Trust
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
- ---------------------
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Total revenues for the year ended December 31, 1996 were $120.2 million, an
increase of $6.9 million over the year ended December 31, 1995. Rental income
increased to $98.0 million from $90.2 million and interest and other income
decreased to $22.1 million from $23.1 million. Rental income increased as a net
result of new real estate investments during 1996, offset by the exclusion of
rental revenue from the Company's formerly wholly owned subsidiary Hospitality
Properties Trust ("HPT"). HPT is a real estate investment trust investing
principally in income producing hotel real estate. The Company's investment in
HPT is accounted for using the equity method, and the 1996 period does not
include revenue and expenses of HPT. Interest and other income decreased as a
[net result of the scheduled and early repayment of mortgage loans acquired from
the Resolution Trust Company in 1992 and 1993. The Company anticipates that such
prepayments will continue and consequently interest income will decline in the
future. This interest income decline was partially offset in 1996 by short term
investment income on excess cash which resulted from the Company's issuance of
convertible debentures during the fourth quarter of 1996.
Total expenses for 1996 increased to $55.5 million from $54.7 million in
1995. The increase of $0.8 million is the net result of higher operating,
general and administrative expenses during the 1996 period. Interest expense
declined due to lower borrowings and lower interest rates during 1996 as
compared to 1995. Depreciation expense was essentially unchanged as the net
result of new real estate investments during 1996 was offset by the HPT
transaction described above. Amortization expense declined due to the write-off
of deferred finance fees in March 1996 and October 1996.
Income before gain (loss) on sale of properties and extraordinary items for
1996 increased to $77.2 million, or $1.16 per share, from $61.8 million, or
$1.04 per share, in 1995. Net income for 1996 increased to $73.3 million, or
$1.11 per share, from $64.2 million, or $1.08 per share, in 1995. These
increases are primarily the result of net new real estate investments and the
recognition of the gain on the equity transaction of HPT.
The Company's business goal is to maximize funds from operations ("FFO")
rather than net income. The Company's Board of Trustees considers FFO, among
other factors, when determining dividends to be paid to shareholders. The
Company has adopted the National Association of Real Estate Investment Trust's
("NAREIT") definition of FFO as income before equity in earnings of HPT, gain
(loss) on sale of real estate and extraordinary items, plus depreciation, other
non-cash items and the Company's proportionate share of HPT's FFO. Funds from
operations for the year ended December 31, 1996, was $99.1 million, or $1.50 per
share, versus $84.6 million, or $1.43 per share, in 1995. Funds from operations
for 1996 increased $14.5 million, or 17.1%, over the prior year. The increase is
the result of new investments in 1996. Dividends declared for the years ended
December 31, 1996 and 1995 were $94.3 million, or $1.42 per share, and $83.9
million, or $1.38 per share, respectively. Dividends in excess of net income
constitute a return of capital. For 1996, the return of capital portion reported
was 24.8% of dividends. Cash flow provided by operating activities and cash
available for distribution may not necessarily equal funds from operations as
the cash flow of the Company is affected by other factors not included in the
funds from operations calculation, such as changes in assets and liabilities.
Cash flow provided by (used for) operating, investing and financing
activities were $98.3 million, ($235.3 million) and $140.2 million, respectively
for the year ended December 31, 1996 and $82.3 million, ($190.3 million) and
$68.8 million, respectively, for the year ended December 31, 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Total revenues for the year ended December 31, 1995 were $113.3 million, an
increase of $26.6 million, or 30.7%, over the year ended December 31, 1994.
Rental income increased to $90.2 million from $63.9 million and interest income
increased to $23.1 million from $22.8 million. Rental income increased as a
result of new purchase and lease investments during 1995 and a full year's
results on 1994 investments. Interest income increased slightly due to interest
income from new investments in mortgages and notes, offset by the reduction in
interest income resulting from the repayment of existing mortgages and notes.
11
<PAGE>
Health and Retirement Properties Trust
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Total expenses for 1995 increased to $54.7 million from $28.8 million for
the comparable 1994 period. The increase of $25.9 million was due primarily to
increases in interest expense of $15.3 million, general and administrative
expense of $1.8 million, and depreciation and amortization expense of $8.1
million. The increases in general and administrative and depreciation and
amortization expenses are directly related to the Company's increased real
estate investments whereas interest expense increased primarily due to higher
amounts outstanding under the revolving credit facility and the issuance of $200
million senior notes issued in July 1994.
Income before gain (loss) on sale of properties and extraordinary items for
1995 increased to $61.8 million, or $1.04 per share, from $57.9 million, or
$1.10 per share, in 1994. Per share amounts decreased reflecting the issuance of
9 million new shares of the Company's stock in December 1994 and 6.5 million new
shares issued in December 1995.
Net income in 1995 and 1994 was $64.2 million, or $1.08 per share, and
$49.9 million, or $.95 per share, respectively. Funds from operations for the
year ended December 31, 1995 was $84.6 million, or $1.43 per share, versus $71.9
million, or $1.36 per share, in 1994. FFO for 1995 increased $12.7 million, or
17.7%, over the prior year. The increase is the result of new investments in
1995. Dividends declared for the years ended December 31, 1995 and 1994 were
$1.38 and $1.33 per share, respectively. Dividends in excess of net income
constitute a return of capital. For 1995 the return of capital portion was 11.8%
of dividends and 5.9% of dividends was considered a long term capital gain.
Cash flow provided by (used for) operating, investing and financing
activities were $82.3 million, ($190.3 million) and $68.8 million, respectively,
for the year ended December 31, 1995 and $76.4 million, ($261.8 million) and
$229.4 million, respectively in 1994.
Liquidity and Capital Resources
Total assets of the Company increased to $1.2 billion at December 31, 1996
from $999.7 million as of December 31, 1995. The increase of $229.8 million, or
23.0%, is primarily the result of increases in the Company's net new real estate
investments.
During 1996, the Company acquired five nursing properties, three retirement
communities, twelve medical office buildings and invested in capitalized
improvements for existing properties for an aggregated amount of approximately
$225.4 million. In addition, the Company provided debt and improvement financing
totaling $17.2 million secured by a retirement community and by properties under
existing mortgages with the Company. These transactions were funded by borrowing
on the Company's revolving credit facility and available cash. In addition, the
Company received principal payments and repayments on real estate mortgages of
$10.2 million.
At December 31, 1996, the Company owned 4,000,000, or 14.9%, of the common
shares of beneficial interest of HPT with a carrying value of $103.1 million and
market value of $116.0 million. During April 1996, HPT completed a public stock
offering of 14,250,000 common shares of beneficial interest at a per share price
of $26.625 for total consideration of approximately $379.4 million. As a result
of this transaction, the Company's ownership percentage in HPT was reduced from
31.8% to 14.9% and the Company realized a gain of $3.6 million. Although the
Company did not sell any shares, pursuant to the Company's accounting policy,
gains and losses on the issuance of common shares of beneficial interest by HPT
are recognized in the Company's income statement.
In January 1996, the Company issued 475,000 common shares resulting in net
proceeds of approximately $7 million as a result of the underwriters' exercise
of the over-allotment option granted pursuant to the Company's equity offering
in December 1995.
In March 1996, the Company entered into a new credit facility to refinance
its $250 million unsecured revolving bank credit facility. The restated credit
facility matures in 2000 and bears interest at LIBOR plus 0.875% per annum. In
connection with the refinancing, the Company recognized an extraordinary loss of
$2.4 million from the early write-off of capitalized expenses associated with
the prior credit facility.
12
<PAGE>
Health and Retirement Properties Trust
Management's Discussion and Analysis of Financial Condition
and Results of Operations
In April, 1996 the Company prepaid the outstanding secured Revenue
Refunding Bonds totaling $17.6 million by borrowing on the revolving bank credit
facility and from available cash.
In October 1996, the Company issued $200 million of 7.5% and $40 million of
7.25% Convertible Subordinated Debentures (the "Debentures") due 2003 and 2001,
respectively. The Debentures are non-callable for three years but are
convertible at any time prior to maturity into common shares of the Company at a
price of $18 per share. The net proceeds were used in part to repay the then
outstanding balance of $147 million on the Company's revolving bank credit
facility and $75.5 million was placed in an irrevocable trust to complete an
in-substance defeasance of the $75 million Floating Rate Senior Notes, Series A,
due 1999. The Company recognized an extraordinary loss of $1.5 million as a
result of the write-off of capitalized expenses associated with the debt prepaid
in the fourth quarter of 1996. At December 31, 1996, approximately $12.2 million
of the Debentures due 2003 had been converted into 679,441 common shares of the
Company. During January 1997, approximately $16 million of the Debentures due
2003 had been converted into 891,496 common shares of the Company.
At December 31, 1996, the Company had $21.9 million of cash and cash
equivalents and had drawn $140 million of the $250 million revolving debt
facility. In addition, in June 1996 the Company filed a $750 million shelf
registration statement ("Shelf") that was declared effective by the Securities
and Exchange Commission. At December 31, 1996, $640 million was available to be
drawn on the Shelf.
As of December 31, 1996, the Company had commitments to provide improvement
financing to existing properties and to purchase a medical office building
totaling approximately $16 million. In January 1997, the Company acquired the
medical office building for $5.4 million with available cash. In February 1997,
the Company announced it had entered into an agreement to acquire up to 30
office buildings which are leased to various agencies of the United States
government. The properties comprise approximately 3.4 million square feet and
are located in 17 states and the District of Columbia. Under the terms of the
acquisition agreement, consideration to be paid for this acquisition is
approximately $317 million in cash to retire certain assumed debt and to pay
certain other obligations of the seller, plus the assumption of approximately
$47 million of other debt and the issuance of approximately 4.2 million
unregistered common shares of the Company. The acquisition is subject to various
conditions customary in real estate transactions and is expected to be
substantially consummated by March 31, 1997; however, no assurances can be given
that this transaction will actually close.
The Company intends to fund these commitments with a combination of cash on
hand, amounts available under its existing credit facilities, proceeds of
mortgage prepayments, if any, and/or proceeds of other financings such as the
possible issuance of additional securities.
The Company continues to seek new investments to expand and diversify its
portfolio of leased and mortgaged health care, retirement and related real
estate. The Company believes that the transactions described above will improve
the security of its future funds from operations, cash available for
distribution, and dividends. The Company intends to balance the use of debt and
equity in such a manner that the long term cost of funds borrowed to acquire or
mortgage finance facilities is appropriately matched, to the extent practicable,
with the terms of the investments made with such borrowed funds. As of December
31, 1996, the Company's debt as a percentage of total book capitalization was
approximately 41%. There can be no assurances that debt or equity financing will
be available to fund the Company's existing commitments or its future growth,
but the Company expects such financing will be available.
Impact of Inflation
- -------------------
Management believes that the Company is not adversely affected by
inflation. In the real estate market, inflation tends to increase the value of
the Company's underlying real estate which may be realized at the end of the
lessees' fixed rent terms. In the health care and hotel industries, inflation
usually increases the lessees' and mortgagors' revenues, thereby increasing the
Company's additional rent or interest. At December 31, 1996, increases in
interest rates on $200 million of the Company's outstanding debt were capped by
the use of interest rate cap agreements which provide for maximum weighted
average interest rates of approximately 6.24% on its variable rate debt.
13
<PAGE>
Health and Retirement Properties Trust
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Certain Considerations
- ----------------------
The discussion and analysis of the Company's financial condition and
results of operations requires the Company to make certain estimates and
assumptions and contains certain statements of the Company's beliefs, intent or
expectation concerning projections, plans, future events and performance. The
estimates, assumptions and statements, such as those relating to the Company's
ability to expand its portfolio, performance of its assets, the ability to pay
dividends from FFO, its tax status as a "real estate investment trust," the
ability to appropriately balance the use of debt and equity and to access
capital markets depends upon various factors over which the Company and/or the
Company's lessees and mortgagors have or may have limited or no control. Those
factors include, without limitation, the status of the economy, capital markets
(including prevailing interest rates), compliance with and changes to
regulations within the health care industry, competition, changes to federal,
state and local legislation and other factors. The Company cannot predict the
impact of these factors, if any. However, these factors could cause the
Company's actual results for subsequent periods to be different from those
stated, estimated or assumed in this discussion and analysis of the Company's
financial condition and results of operations. The Company believes that its
estimates and assumptions are reasonable and prudent at this time.
14
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial Statements (see index on page F-1)
(b) Pro Forma Financial Information and Other Data (see index
on page F-1)
(c) Exhibits
10.1 Merger Agreement dated February 17, 1997 between Health and
Retirement Properties Trust and Government Property Investors,
Inc. including forms of Escrow Agreement, Investment and
Registration Rights Agreement, Voting Agreement, Information
Access Agreement, Indemnification Agreement, Service Contract,
Non-Solicitation Agreement and Second Closing Escrow Agreement
10.2 Third Amended and Restated Revolving Loan Agreement, dated
as of March 15, 1996, among Health and Retirement Properties
Trust, as borrower, the lenders named therein, Kleinwort Benson
Limited, as agent, Wells Fargo Bank, National Association, as
administrative agent, Natwest Bank, N.A., as co-agent, et al.
10.3 Letter Agreement, dated as of October 21, 1996, among
Health and Retirement Properties Trust, as borrower, Kleinwort
Benson Limited, as agent, and the Majority Lenders clarifying
certain provisions of the Third Amended and Restated Revolving
Loan Agreement relating to Health and Retirement Properties
Trust's 7.5% Convertible Subordinated Debentures due 2003,
Series B
10.4 First Amendment, dated as of December 15, 1996, to Third
Amended and Restated Revolving Loan Agreement, dated as of March
15, 1996, among Health and Retirement Properties Trust, as
borrower, the lenders named therein, Kleinwort Benson Limited, as
agent, Wells Fargo Bank, National Association, as administrative
agent, Natwest Bank, N.A., as co-agent, et al.
23.1 Consents of Ernst & Young LLP
27.1 Financial Data Schedule
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ David J. Hegarty
-----------------------------------
David J. Hegarty, President
Date: February 27, 1997
16
<PAGE>
Contents
<TABLE>
<S> <C>
a.) (i) Consolidated Financial Statements of Health and Retirement Properties Trust
Report of Ernst & Young LLP, Independent Auditors ......................................................F-2
Report of Arthur Andersen LLP, Independent Public Accountants ..........................................F-3
Consolidated Balance Sheets for the years ended December 31, 1996 and 1995 .............................F-4
Consolidated Statements of Income for each of the three years in the period ended December 31, 1996 ....F-5
Consolidated Statements of Shareholders' Equity for each of the three years in the period
ended December 31, 1996 ............................................................................F-6
Consolidated Statements of Cash Flows for each of the three years in the period ended
December 31, 19996 .................................................................................F-7
Notes to Consolidated Financial Statements .............................................................F-8
a.) (ii) Consolidated Financial Statements of Government Property Investors, Inc.
Report of Ernst & Young LLP, Independent Auditors ......................................................F-15
Consolidated Balance Sheets.............................................................................F-16
Consolidated Statements of Operations for the years ended December 31, 1996 and 1995 and
Combined Statement of Operations for the period from May 20 (Inception) to December 31,
1994.................................................................................................F-17
Consolidated Statements of Stockholders' Equity/(Deficit) for the years ended December 31,
1996 and 1995 and Combined Statement of Owners' Equity for the period from May 20
(Inception) to December 31, 1994.....................................................................F-18
Consolidated Statements of Cash Flows for the years ended December 31, 1996 and 1995 and
Combined Statement of Cash Flows for the period from May 20 (Inception) to December 31,
1994.................................................................................................F-19
Notes to Consolidated Financial Statements .............................................................F-21
b.) Pro Forma Financial and Other Data
Unaudited Pro Forma Balance Sheets and Other Data and Unaudited Pro Forma Statement of
Income and Other Data Background Information ........................................................F-43
Unaudited Pro Forma Balance Sheets and Other Data ......................................................F-44
Unaudited Pro Forma Statement of Income and Other Data .................................................F-45
Notes to Pro Forma Financial Data and Other Data .......................................................F-46
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Trustees and Shareholders
Health and Retirement Properties Trust
We have audited the accompanying consolidated balance sheets of Health and
Retirement Properties Trust as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The financial statements of Hospitality Properties Trust (a real
estate investment trust in which the Company has a 14.9% interest) have been
audited by other auditors whose report has been furnished to us; insofar as our
opinion on the consolidated financial statements relates to data included for
Hospitality Properties Trust, it is based solely on their report.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Health and Retirement Properties
Trust at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
February 6, 1997
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders of
Hospitality Properties Trust:
We have audited the consolidated balance sheets of Hospitality Properties Trust
(the "Company") as of December 31, 1995 and 1996, and the related consolidated
statements of income, shareholders' equity and cash flows for the period from
February 7, 1995 (inception) to December 31, 1995 and the year ended
December 31, 1996 not presented separately herein. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hospitality
Properties Trust as of December 31, 1995 and 1996, and the results of its
operations and its cash flows for the period from February 7, 1995 (inception)
to December 31, 1995 and the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Washington, D.C.
January 10, 1997
F-3
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1996 1995
-------------------------------------
<S> <C> <C>
ASSETS
Real estate properties, at cost (including properties leased to affiliates with a
cost of $109,843 and $103,324, respectively):
Land $ 93,522 $ 72,124
Buildings and improvements 912,217 706,087
-------------------------------------
1,005,739 778,211
Less accumulated depreciation 76,921 55,855
-------------------------------------
928,818 722,356
Real estate mortgages and notes, net (including note from an affiliate
of $2,365 and $1,565, respectively) 150,205 141,307
Investment in Hospitality Properties Trust 103,062 99,959
Cash and cash equivalents 21,853 18,640
Interest and rents receivable 11,612 7,895
Deferred interest and finance costs, net, and other assets 13,972 9,520
-------------------------------------
$ 1,229,522 $ 999,677
=====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank notes payable $ 140,000 $ 53,000
Senior notes and bonds payable, net 124,385 216,759
Convertible subordinated debentures 227,790 -
Accounts payable and accrued expenses 10,711 4,678
Prepaid rents 7,608 6,919
Security deposits 8,387 7,386
Due to affiliates 2,593 2,351
Dividends payable - 22,992
Commitments and contingencies - -
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, 66,888,917 shares and
65,690,166 shares issued and outstanding, respectively 669 657
Additional paid-in capital 795,263 775,688
Cumulative net income 306,298 233,044
Dividends (394,182) (323,797)
-------------------------------------
Total shareholders' equity 708,048 685,592
-------------------------------------
$ 1,229,522 $ 999,677
====================================
</TABLE>
See accompanying notes
F-4
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1996 1995 1994
------------------------------------------
<S> <C> <C> <C>
Revenues:
Rental income $ 98,039 $ 90,246 $ 63,856
Interest and other income 22,144 23,076 22,827
------------------------------------------
Total revenues 120,183 113,322 86,683
------------------------------------------
Expenses:
Operating expenses 3,776 644 -
Interest 22,545 24,274 8,965
Depreciation and amortization 22,106 22,849 14,724
General and administrative 7,055 6,914 5,116
------------------------------------------
Total expenses 55,482 54,681 28,805
------------------------------------------
Income before equity in earnings of Hospitality Properties Trust,
gain (loss) on sale of properties and extraordinary items 64,701 58,641 57,878
Equity in earnings of Hospitality Properties Trust 8,860 3,119 -
Gain on equity transaction of Hospitality Properties Trust 3,603 - -
------------------------------------------
Income before gain (loss) on sale of properties and
extraordinary items 77,164 61,760 57,878
Provision for loss on sale of properties - - (10,000)
Gain on sale of properties - 2,476 3,994
------------------------------------------
Income before extraordinary items 77,164 64,236 51,872
Extraordinary items - early extinguishment of debt (3,910) - (1,953)
------------------------------------------
Net income $ 73,254 $ 64,236 $ 49,919
==========================================
Weighted average shares outstanding 66,255 59,227 52,738
==========================================
Per share amounts:
Income before gain (loss) on sale of properties and
extraordinary items $ 1.16 $ 1.04 $ 1.10
==========================================
Income before extraordinary items $ 1.16 $ 1.08 $ .98
==========================================
Net income $ 1.11 $ 1.08 $ .95
==========================================
</TABLE>
See accompanying notes
F-5
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Additional Cumulative
Number of Common Paid-in Net
Shares Shares Capital Income Dividends Total
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 44,121,000 $ 441 $ 470,572 $ 118,889 $ (148,767) $ 441,135
Issuance of shares 13,251,500 133 182,233 - - 182,366
Stock grants 12,500 - 184 - - 184
Net income - - - 49,919 - 49,919
Dividends - - - - ( 71,565) (71,565)
--------------------------------------------------------------------------------------
Balance at December 31, 1994 57,385,000 574 652,989 168,808 (220,332) 602,039
Issuance of shares to
acquire real estate 1,777,766 18 24,426 - - 24,444
Issuance of shares 6,500,000 65 97,879 - - 97,944
Stock grants 27,400 - 394 - - 394
Net income - - - 64,236 - 64,236
Dividends - - - - (103,465) (103,465)
--------------------------------------------------------------------------------------
Balance at December 31, 1995 65,690,166 657 775,688 233,044 (323,797) 685,592
Issuance of shares 475,000 5 6,985 - - 6,990
Conversion of convertible
subordinated debentures 679,441 7 11,860 - - 11,867
Stock grants 44,310 - 730 - - 730
Net income - - - 73,254 - 73,254
Dividends - - - - (70,385) (70,385)
--------------------------------------------------------------------------------------
Balance at December 31, 1996 66,888,917 $ 669 $ 795,263 $ 306,298 $ (394,182) $ 708,048
======================================================================================
</TABLE>
See accompanying notes
F-6
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1996 1995 1994
------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 73,254 $ 64,236 $ 49,919
Adjustments to reconcile net income to cash
provided by operating activities:
Gain on sale of properties - (2,476) (3,994)
Gain on equity transaction of Hospitality Properties Trust (3,603) - -
Equity in earnings of Hospitality Properties Trust (8,860) (3,119) -
Dividends from Hospitality Properties Trust 9,360 960 -
Extraordinary items 3,910 - 1,953
Depreciation 21,065 21,048 13,593
Amortization 1,041 1,801 1,131
Provision for loss on real estate - - 10,000
Amortization of deferred interest costs 1,444 1,529 864
Change in assets and liabilities:
Increase in interest and rents receivable and other assets (7,839) (1,639) (5,148)
Increase (decrease) in security deposits 1,001 3,586 (4,500)
Increase (decrease) in accounts payable and
accrued expenses 6,033 (11,427) 11,828
Increase in prepaid rents 689 6,919 -
Increase in due to affiliates 823 843 799
------------------------------------------------
Cash provided by operating activities 98,318 82,261 76,445
------------------------------------------------
Cash flows from investing activities:
Real estate acquisitions and improvements (225,428) (267,470) (324,554)
Investments in mortgage loans (17,191) (24,375) (9,372)
Proceeds from repayment of notes and mortgage loans 8,091 38,107 48,762
Proceeds from sale of real estate - 5,000 23,318
Proceeds from Hospitality Properties Trust
initial public offering - 60,000 -
Loans to affiliate (800) (1,565) -
------------------------------------------------
Cash used for investing activities (235,328) (190,303) (261,846)
------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common shares 6,990 97,944 182,366
Proceeds from borrowings 481,000 219,000 333,770
Payments on borrowings (247,070) (166,000) (208,000)
Deferred finance costs incurred (7,320) (1,666) (7,180)
Dividends paid (93,377) (80,473) (71,565)
-------------------------------------------------
Cash provided by financing activities 140,223 68,805 229,391
------------------------------------------------
Increase (decrease) in cash and cash equivalents 3,213 (39,237) 43,990
Cash and cash equivalents at beginning of period 18,640 57,877 13,887
------------------------------------------------
Cash and cash equivalents at end of period $ 21,853 $ 18,640 $ 57,877
================================================
Supplemental cash flow information:
Interest paid $ 19,662 $ 22,783 $ 5,677
===============================================
Non-cash investing and financing activities:
Investment in real estate mortgages $ - $ (19,500) $ (5,100)
Assumption of bonds payable - - 17,620
Real estate acquisitions - (24,444) (17,620)
Sale of real estate - 19,500 5,100
Issuance of common shares 12,597 24,838 184
Conversion of convertible subordinated debentures (11,867) - -
Investment in Hospitality Properties Trust - (100,000) -
</TABLE>
See accompanying notes
F-7
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Note 1. Organization
Health and Retirement Properties Trust, a Maryland real estate investment
trust (the "Company"), was organized on October 9, 1986. The Company invests in
income-producing real estate, primarily retirement housing and health care
related properties. As of December 31, 1996, the Company had investments in 175
properties located in 28 states and the District of Columbia. The properties
include 122 long-term care facilities, 25 retirement and assisted living
communities, 12 nursing homes with subacute services and 16 medical office
buildings and clinics. In addition, at December 31, 1996, the Company had a
14.9% equity investment in Hospitality Properties Trust ("HPT"). At December 31,
1996, HPT owned 82 hotels in 26 states.
The Company is dependent upon its lessees' and mortgagors' compliance with
regulations within the health care industry. Future changes to these regulations
may affect the health care industry, the Company's lessees and mortgagors and,
as a result, the Company.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation. The consolidated financial statements include the
Company's investment in 100% owned subsidiaries. The Company's investment in 50%
or less owned companies is accounted for using the equity method. All
inter-company transactions have been eliminated. The Company uses the income
statement method to account for issuance of common shares of beneficial interest
by HPT. Under this method, gains and losses on issuance of stock by HPT are
recognized in the Company's income statement.
Real Estate Property and Mortgage Investments. Real estate properties and
mortgages are recorded at cost. Depreciation on real estate investments is
provided for on a straight-line basis over the estimated useful lives ranging up
to 40 years. Impairment losses on investments are recognized where indicators of
impairment are present and the undiscounted cash flow (net realizable value)
estimated to be generated by the Company's investments are less than the
carrying amount of such investments. The determination of net realizable value
includes consideration of many factors including income to be earned from the
investment, holding costs (exclusive of interest), estimated selling prices, and
prevailing economic conditions.
Cash and Cash Equivalents. Cash, over-night repurchase agreements and
short-term investments with maturities of three months or less at the date of
purchase are carried at cost plus accrued interest.
Deferred Interest and Finance Costs. Costs incurred to secure certain
borrowings are capitalized and amortized over the terms of the respective loans.
Accumulated amortization at December 31, 1996 and December 31, 1995 was $1,171
and $2,853 respectively.
Interest Rate Hedging Arrangements. The Company enters into interest rate
hedging arrangements to limit its exposure to increasing interest rates with
respect to its bank borrowings and notes payable. Their cost is included in
interest expense ratably over the terms of the respective agreements. Amounts
receivable from hedging arrangements are accrued as an adjustment to interest
expense. The unamortized cost of these agreements is included in other assets.
Revenue Recognition. Rental income from operating leases is recognized on a
straight line basis over the life of the lease agreements. Interest income is
recognized as earned over the terms of the real estate mortgages. Additional
rent and interest revenue is recognized as earned.
Income Per Share. Income per share is computed using the weighted average
number of shares outstanding during the period. The effect of the convertible
debentures on fully diluted earnings per share is anti-dilutive. Supplemental
income per share for the years ended December 31, 1995, and 1994 was $1.11 and
$.93, respectively, based on the assumption that the issuance of shares in the
Company's public offerings during 1995 and 1994, and the related repayment of
outstanding bank borrowings, took place at the beginning of each year.
Reclassifications. Certain reclassifications have been made to the prior
years' financial statements to conform with the current year's presentation.
Federal Income Taxes. The Company is a real estate investment trust under
the Internal Revenue Code of 1986, as amended. Accordingly, the Company expects
not to be subject to federal income taxes provided it distributes its taxable
income and meets certain other requirements for qualifying as a real estate
investment trust.
Use of Estimates. Preparation of these financial statements in conformity
with generally accepted accounting principles requires management to make
certain estimates and assumptions that may affect the amounts reported in these
financial statements and related notes. The actual results could differ from
these estimates.
F-8
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Note 3. Real Estate Properties
During the year ended December 31, 1996, the Company acquired five nursing
properties, three retirement communities and twelve medical office buildings for
an aggregated amount of approximately of $213,911 in nine separate transactions.
In addition, the Company provided improvement financing at existing properties
of approximately $11,517. The medical office buildings are managed by M&P
Partners Limited Partnership ("M&P"), an affiliate of the Company. In January
1997, the Company acquired a medical office building for $5,375; this building
is also managed by M&P.
The Company's real estate properties are leased pursuant to noncancellable,
fixed term operating leases expiring from 1997 to 2021. Generally, the Company's
leases to a single tenant are cross-collateralized, cross-defaulted and
cross-guaranteed. The leases generally provide for renewal terms at existing
rates followed by several market rate renewal terms. The majority of the leases
are triple net leases and generally require the lessee to pay minimum rent,
additional rent based upon increases in net patient revenues, real estate taxes,
and all operating costs associated with the leased property. Additional rent and
interest for the years ended December 31, 1996, 1995 and 1994 were $3,222,
$3,768 and $2,768, respectively.
The future minimum lease payments to be received by the Company during the
current terms of the leases as of December 31, 1996, are approximately $108,965
in 1997, $107,934 in 1998, $102,612 in 1999, $101,306 in 2000, $98,403 in 2001
and $871,523 thereafter.
Note 4. Investment in Hospitality Properties Trust
At December 31, 1996, the Company owned 4,000,000 common shares of
beneficial interest of HPT with a carrying value of $103,062 and market value of
$116,000. HPT is a real estate investment trust investing principally in income
producing hotel real estate. The Company's percentage of ownership of HPT as of
December 31, 1996, was 14.9%. The Company's investment in HPT has been accounted
for using the equity method. During April 1996, HPT completed a public stock
offering of 14,250,000 common shares of beneficial interest at a per share price
of $26.625 for total consideration of approximately $379,406. As a result of
this transaction, the Company's ownership percentage in HPT was reduced from
31.7% to 14.9% and the Company realized a gain of $3,603. Although the Company
did not sell any shares, pursuant to the Company's accounting policy, gains and
losses on the issuance of common shares of beneficial interest by HPT are
recognized in the Company's income statement.
Summarized financial data of HPT is as follows:
December 31,
----------------------------
1996 1995
-------------- --------------
Real estate $ 816,469 $ 326,752
properties, net
Other assets, net 55,134 12,195
-----------------------------
$ 871,603 $ 338,947
=============================
Security deposits $ 81,360 $ 32,900
Other liabilities 145,035 8,096
Shareholders'
equity 645,208 297,951
-----------------------------
$ 871,603 $ 338,947
=============================
February 7, 1995
Year Ended (inception) to
December 31, December 31,
1996 1995
----------------------------------------
Revenues $ 82,629 $ 23,642
Expenses 30,965 12,293
----------------------------------------
Net Income $ 51,664 $ 11,349
========================================
Average shares 23,170 4,515
========================================
Net income per share $ 2.23 $ 2.51
========================================
F-9
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Note 5. Real Estate Mortgages and Notes Receivable, Net
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
----------------------------
<S> <C> <C>
Mortgage notes receivable, net of discounts of $1,574 and
$3,875, respectively, and net of reserves of $1,743
and $1,550, respectively, due January 1997 through
December 2016 $58,750 $62,065
Mortgage note receivable due December 2010 19,358 19,500
Mortgage notes receivable due December 2016 15,444 14,582
Mortgage note receivable due December 2002 12,309 12,309
Mortgage note receivable due December 2010 11,500 11,500
Mortgage note receivable due April 2007 11,500 11,500
Mortgage note receivable due December 2008 10,000 -
Mortgage note receivable due December 2016 8,634 7,792
Other collateralized notes receivable due July 1998 345 494
Loan to an affiliate due June 1997 2,365 1,565
=============================
$ 150,205 $ 141,307
=============================
</TABLE>
During 1996, the Company provided debt financing totaling $15,000 secured by
a retirement community and by properties under existing mortgages with the
Company. The Company also provided improvement financing for existing properties
of $2,191 and a loan to an affiliate of $800. In addition, the Company received
principal payments on real estate mortgages of $1,493 and proceeds of $6,598,
net of discounts, from the prepayment of mortgage loans.
At December 31, 1996, the interest rates on the mortgages and notes
receivable ranged from 8.1% to 13.75% per annum.
Note 6. Shareholders' Equity
In January 1996, the Company issued 475,000 common shares resulting in net
proceeds of approximately $6,990 as a result of the underwriters' exercise of
the over-allotment option granted pursuant to the Company's equity offering in
December 1995.
In January 1997, the Company declared a dividend of $.36 to be distributed
on February 20, 1997. Dividends per share paid by the Company for 1996, 1995 and
1994 were $1.41, $1.37 and $1.32, respectively.
The Company has reserved 1,000,000 shares of the Company's common shares
under the terms of the 1992 Incentive Share Award Plan (the "Award Plan").
During 1996, 1995 and 1994, 7,250, 8,500 and 11,000 shares, respectively, were
granted to officers of the Company and certain employees of HRPT Advisors, Inc.
(the "Advisor"), an affiliate. The three independent Trustees, as part of their
annual fee, are each granted 500 common shares annually. The shares granted to
the Trustees vest immediately. The shares granted to the officers and certain
employees of the Advisor vest over a three year period. At December 31, 1996,
900,790 shares of the Company's common shares remain reserved for issuance under
the Award Plan.
Note 7. Commitments and Contingencies
At December 31, 1996, the Company had total commitments aggregating $16,024
to finance improvements to certain properties leased or mortgaged by the Company
and to purchase a medical office building. The medical office building was
purchased in January 1997.
The Company is involved in litigation with a former tenant. The amounts
claimed against the Company are material. The Company intends to defend itself
and to pursue its claims and rights against the former tenant. The outcome of
this pending litigation cannot be predicted.
F-10
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Note 8. Transactions with Affiliates
The Company has an agreement with the Advisor whereby the Advisor provides
investment, management and administrative services to the Company. The Advisor
is owned by Gerard M. Martin and Barry M. Portnoy, who also serve as Managing
Trustees of the Company. Messrs. Martin and Portnoy are principal shareholders
of Connecticut Subacute Corporation ("CSC"), Connecticut Subacute Corporation
II, New Hampshire Subacute Corporation and Vermont Subacute Corporation
(collectively the "Subacute Entities") and were formerly directors of
Horizon/CMS Healthcare Corporation ("Horizon") and Greenery Rehabilitation
Group, Inc. ("Greenery"), which merged with Horizon in 1994. Horizon and the
Subacute Entities are lessees of the Company. The Company has extended a $4,000
line of credit to CSC until June 30, 1997. At December 31, 1996, there was
$2,365 outstanding under this agreement. The lease and mortgage transactions
with the Subacute Entities and Horizon are based on market terms and are
generally similar to the Company's lease and mortgage agreements with
unaffiliated companies. The former president of the Company is the president of
the Subacute Entities. Mr. Portnoy is a partner in the law firm which provides
legal services to the Company. The Advisor is the general partner of M&P, which
provides management services for some of the Company's recently acquired medical
office buildings. The property management fees paid to M&P are generally equal
to three percent of gross rents from the managed properties.
The Advisor is compensated at an annual rate equal to .7% of the Company's
real estate investments up to $250 million and .5% of such investments
thereafter. The Advisor is entitled to an incentive fee comprised of restricted
shares of the Company's common stock based on a formula. Incentive fees for the
years ended December 31, 1996, 1995 and 1994 were $610, $580 and $239, which
represent approximately 32,846, 35,560 and 17,400 common shares respectively. At
December 31, 1996, the Advisor owned 1,049,210 common shares.
Amounts resulting from transactions with affiliates included in the
accompanying statements of income, shareholders' equity and cash flows are as
follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1996 1995 1994
------------------------------------
<S> <C> <C> <C>
Investment advisory fees paid to the Advisor $ 5,349 $ 5,183 $ 3,839
Dividends paid to the Advisor 1,467 1,383 1,315
Rent from Greenery -- -- 2,689
Rent and interest income from Subacute Entities 12,981 12,015 8,481
Management fee paid to M&P 355 17 --
</TABLE>
Note 9. Indebtedness
<TABLE>
<CAPTION>
December 31,
-----------------------------
1996 1995
-----------------------------
<S> <C> <C>
$250,000 unsecured revolving bank credit facility, due March 2000,
at LIBOR plus a premium $140,000 $ 53,000
Senior Notes, Series A, repaid in 1996 - 75,000
Senior Notes, Series B, due July 1999 at LIBOR plus 0.72% 125,000 125,000
Revenue Refunding Bonds, repaid in 1996 - 17,620
Convertible Subordinated Debentures, due 2003 at 7.50% 187,790 -
Convertible Subordinated Debentures, due 2001 at 7.25% 40,000 -
-----------------------------
492,790 270,620
Less unamortized discount (615) (861)
-----------------------------
$492,175 $269,759
=============================
</TABLE>
In March 1996, the Company entered into a new credit facility to refinance
its $250 million unsecured revolving bank credit facility. The restated credit
facility matures in 2000 and bears interest at LIBOR plus 0.875% per annum. In
connection with the refinancing, the Company recognized an extraordinary loss of
$2,443 from the early extinguishment of debt.
At December 31, 1996, the three month LIBOR was 5.56%.
In April, 1996 the Company prepaid the outstanding secured Revenue Refunding
Bonds totaling $17,620 by borrowing on the revolving bank credit facility and
from available cash.
F-11
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Note 9. Indebtedness - continued
In October 1996, the Company issued $200,000 of 7.5% and $40,000 of 7.25%
Convertible Subordinated Debentures (the "Debentures") due 2003 and 2001,
respectively. The Debentures are non-callable for three years but are
convertible at any time prior to maturity into common shares of the Company at a
price of $18 per share. The net proceeds were used in part to repay the then
outstanding balance of $147,000 on the Company's revolving bank credit facility
and $75,450 was placed in an irrevocable trust to complete an in-substance
defeasance of the $75,000 Floating Rate Senior Notes, Series A, due 1999. The
Company recognized an extraordinary loss of $1,467 as a result of the early
extinguishment of this debt in the fourth quarter of 1996. At December 31, 1996,
approximately $12,210 of the Debentures due 2003 had been converted into 679,441
common shares of the Company. At December 31, 1996, 12,653,893 of the Company's
common shares were reserved for issuance for conversion of the Debentures.
During January 1997, approximately $16,047 of the Debentures due 2003 had been
converted into 891,496 common shares of the Company.
At December 31, 1996, the Company had interest rate hedging agreements which
cap interest rates on a maximum of $200,000 through 1997. The maximum average
rates payable on such borrowings under these arrangements is 6.24% per annum.
The required principal payments due during the next five years are $125,000 in
1999 and $40,000 in 2001.
The Senior Notes Series B may be called at the Company's option prior to
maturity.
Note 10. Fair Value of Financial Instruments
The Company's financial instruments include cash and cash equivalents,
mortgage notes receivable, rents receivable, an equity investment, interest rate
hedging agreements, senior notes, convertible debentures, accounts payable and
other accrued expenses, and security deposits. Except as follows, the fair value
of the financial instruments were not materially different from their carrying
values at December 31, 1996.
<TABLE>
<CAPTION>
Carrying Amount Fair Value
--------------------------------------
<S> <C> <C>
Real estate mortgages and notes $150,205 $169,983
Investment in HPT 103,062 116,000
Interest rate hedging agreements 565 810
Senior notes and convertible debentures 352,175 352,349
Commitments - 16,024
</TABLE>
The fair values of the real estate mortgages, senior notes, convertible
debentures are based on estimates using discounted cash flow analysis and
currently prevailing rates. The fair value of the investment in HPT is based on
the per share price of $29.00 at December 31, 1996. Interest rate hedging
agreements are based on quoted market prices. The fair value of the commitments
represents the actual amounts committed.
Note 11. Concentration of Credit Risk
The Company's assets are primarily invested in income producing health care
related real estate located throughout the United States. The Company's
significant lessees, mortgagees and equity investment are as follows:
<TABLE>
<CAPTION>
Equity Investment, Notes, Mortgages Equity Earnings, Rent and
and Real Estate Properties, Net Mortgage Interest Revenue
-------------------------------------- -----------------------------------
December 31, 1996 Year Ended December 31, 1996
-------------------------------------- -----------------------------------
Amount % of Total Amount % of Total
------------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Marriott International, Inc. $307,219 26% $30,524 24%
Horizon/CMS Healthcare Corporation 114,008 10 16,180 13
Community Care of America, Inc. 106,306 9 11,239 9
Equity investment in HPT 103,062 9 8,860 7
GranCare, Inc. 87,184 7 15,491 13
Other 464,306 39 42,948 34
------------------------------------- -----------------------------------
$1,182,085 100% $125,242 100%
===================================== ===================================
</TABLE>
F-12
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Note 11. Concentration of Credit Risk - continued
<TABLE>
<CAPTION>
Equity Investment, Notes, Mortgages Equity Earnings, Rent and
and Real Estate Properties, Net Mortgage Interest Revenue
-------------------------------------- -----------------------------------
December 31, 1995 Year Ended December 31, 1995
--------------------------------------- -----------------------------------
Amount % of Total Amount % of Total
-------------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Marriott International, Inc. $314,544 33% $29,482 26%
Horizon/CMS Healthcare Corporation 117,698 12 16,149 14
Community Care of America, Inc. 76,155 8 8,790 8
Equity investment in HPT 99,959 10 12,455 11
GranCare, Inc. 89,180 9 15,408 14
Other 266,086 28 31,205 27
------------------------------------- -----------------------------------
$963,622 100% $113,489 100%
===================================== ===================================
</TABLE>
Note 12. Selected Quarterly Financial Data (Unaudited)
The following is a summary of the unaudited quarterly results of operations
of the Company for 1996 and 1995. The amounts are in thousands except for the
per share amounts.
<TABLE>
<CAPTION>
1996
-----------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $28,480 $29,624 $29,917 $32,162
Income before equity in earnings of HPT and gain
on equity transaction of HPT 16,120 16,623 16,157 15,801
Equity in earnings and gain on equity 2,092 5,839 2,301 2,231
transaction of HPT
Income before extraordinary items 18,212 22,462 18,458 18,032
Extraordinary items - early extinguishment of (2,443) - - (1,467)
debt
Net income 15,769 22,462 18,458 16,565
Per share data:
Income before equity in earnings of HPT and gain
on equity transaction of HPT .24 .25 .24 .24
Income before extraordinary items .28 .34 .28 .27
Net income .24 .34 .28 .25
</TABLE>
<TABLE>
<CAPTION>
1995
--------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 25,992 $ 30,498 $ 28,974 $ 27,858
Income before equity in earnings of HPT and
gain on sale of property 15,832 15,668 15,154 11,987
Equity in earnings of HPT -- -- 898 2,221
Income before gain on sale of property 15,832 15,668 16,052 14,208
Net income 18,308 15,668 16,052 14,208
Per share data:
Income before equity earnings and gain on
sale of property .27 .26 .26 .20
Income before gain on sale of property .27 .26 .27 .25
Net income .31 .26 .27 .25
</TABLE>
F-13
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Note 13. Pro Forma Information (Unaudited)
The following unaudited condensed Pro Forma Statements of Income assumes the
transactions described in Notes 3, 4, 5, 6 and 9 had occurred on January 1, 1995
and give effect to the Company's borrowing rate throughout the periods
indicated.
These pro forma statements are not necessarily indicative of the expected
results of operations for any future period. Differences could result from, but
are not limited to, additional property investments, changes in interest rates
and changes in the debt and/or equity structure of the Company.
Condensed Pro Forma Statements of Income (unaudited)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1996 1995
--------------------------------------
<S> <C> <C>
Total revenues $140,186 $136,645
Total expenses 72,779 73,571
--------------------------------------
Income before equity earnings 67,407 63,074
Equity in earnings of HPT 8,860 8,938
--------------------------------------
Net income $76,267 $72,012
======================================
Weighted average shares outstanding 68,888 68,888
======================================
Net income per share $1.14 $1.08
======================================
</TABLE>
F-14
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
Government Property Investors, Inc.
We have audited the accompanying consolidated balance sheets of Government
Property Investors, Inc., (the "Company") as of December 31, 1996 and 1995 and
the related consolidated statements of operations, stockholders'
equity/(deficit), and cash flows for the years ended December 31, 1996 and 1995,
and the combined statements of operations, owners' equity, and cash flows of
GovProp Entities for the period from May 20, 1994 (inception) to December 31,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Government Property Investors, Inc. at December 31, 1996 and 1995 and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1996 and 1995, and the combined financial statements referred
to above present fairly, in all material respects, the combined results of
operations and cash flows of GovProp Entities for the period from May 20, 1994
(inception) to December 31, 1994, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that
Government Property Investors, Inc. will continue as a going concern. As more
fully described in Note 1, the Company has incurred recurring operating losses
and has a working capital deficiency. In addition, the Company has not complied
with certain loan convenants and a substantial portion of the Company's debt
matures in 1997. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
ERNST & YOUNG LLP
Washington, D.C.
January 31, 1997, except for the
last paragraphs of Note 1 and
Note 12, as to which the date is
February 18, 1997
F-15
<PAGE>
Government Property Investors, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Assets
Rental property, at cost:
Land $ 64,849,593 $ 24,726,708
Buildings and improvements 277,449,522 150,981,183
Furniture, fixtures and equipment 636,093 578,178
------------- -------------
342,935,208 176,286,069
Less: accumulated depreciation (8,026,580) (1,899,310)
------------- -------------
334,908,628 174,386,759
Property under development 4,152,654 8,716,200
Cash and cash equivalents 775,823 591,633
Restricted cash 5,499,032 3,542,907
Accounts receivable 4,436,447 2,576,695
Deferred charges, net 8,733,508 9,335,361
Notes receivable and accrued interest - affiliates 767,833 947,956
Deposits on properties 840,000 550,000
Other assets 4,829,130 737,106
------------- -------------
Total assets $364,943,055 $201,384,617
============= =============
Liabilities and stockholders' equity/(deficit)
Liabilities:
Mortgages, notes loans payable and capital lease
obligations $311,081,018 $145,033,120
Notes payable - affiliates 47,467,708 43,310,893
Accounts payable and accrued expenses 10,580,613 5,871,831
Accrued interest payable 1,437,231 761,618
Accrued interest payable - affiliates 52,083 52,083
------------- -------------
Total liabilities 370,618,653 195,029,545
------------- -------------
Commitments and contingencies
Stockholders' equity/(deficit):
Preferred stock: $.01 par value; 500,000 shares
authorized, no shares issued and outstanding - -
Common stock: Class A $.01 par value; 9,000,000
shares authorized; 1,957,879 shares issued and 19,579 19,579
outstanding
Common stock: Class B $.01 par value; 500,000
shares authorized; 200,000 shares issued and 2,000 2,000
outstanding
Additional paid-in capital 16,574,007 16,574,007
Note receivable - officer (260,000) (460,000)
Treasury stock (219,108) -
Retained deficit (21,792,076) (9,780,514)
------------- -------------
Total stockholders' equity/(deficit) (5,675,598) 6,355,072
------------- -------------
Total liabilities and stockholders' equity/(deficit) $364,943,055 $201,384,617
============= =============
</TABLE>
See accompanying notes.
F-16
<PAGE>
Government Property Investors, Inc.
Consolidated Statements of Operations
and
GovProp Entities
Combined Statement of Operations
<TABLE>
<CAPTION>
Government Property Investors, Inc. GovProp Entities
--------------------------------------------- ------------------------
For the period from May
Year ended Year ended 20 (Inception) to
December 31, 1996 December 31, 1995 December 31, 1994
----------------------- --------------------- -----------------------
<S> <C> <C> <C>
Revenue:
Rental income $36,523,081 $13,362,543 $ 1,604,260
Interest 780,208 571,402 40,748
------------ ----------- -----------
Total revenues 37,303,289 13,933,945 1,645,008
------------ ----------- -----------
Expenses:
Property operating 8,657,140 3,177,843 507,568
General and administrative 3,684,449 3,675,000 535,564
Loss on impairment of rental - 2,793,462 -
property
Write-off of deferred offering 1,886,179 - -
costs
Interest - affiliates 6,373,062 4,217,243 788,878
Interest 22,356,746 5,669,919 813,410
Depreciation and amortization 6,357,275 2,556,614 340,683
------------ ----------- -----------
Total expenses 49,314,851 22,090,081 2,986,103
------------ ----------- -----------
Loss before extraordinary item (12,011,562) (8,156,136) (1,341,095)
Extraordinary loss on early
extinguishment of debt - (297,201) -
------------- ----------- -----------
Net loss $(12,011,562) $ (8,453,337) $(1,341,095)
============= =========== ===========
</TABLE>
See accompanying notes.
F-17
<PAGE>
Government Property Investors, Inc.
Consolidated Statement of Stockholders' Equity / (Deficit)
and
GovProp Entities
Combined Statement of Owners' Equity
<TABLE>
<CAPTION>
Common Stock Additional Total
---------------------- Paid-In Note Treasury Retained Stockholders'
Shares Amount Capital Receivable Stock Deficit Equity
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at May 20, 1994 $ - $ - $ - $ - $ $
- - -
Initial partnership contribution - - - - - 8,549,334 8,549,334
Issuance of common stock 1,000 10 320,527 - - - 320,537
Net loss - - - - - (1,341,095) (1,341,095)
------- - -------- -------- -------- --------- ----------- -----------
Balance at December 31, 1994 1,000 10 320,527 - - 7,208,239 7,528,776
Restructuring distribution (1,000) (10) 8,198,038 - - (8,535,416) (337,388)
Issuance of Class A common stock 1,957,879 19,579 7,967,442 - - - 7,987,021
Issuance of Class B common stock 200,000 2,000 88,000 - - - 90,000
Note receivable - officer - - - (460,000) - - (460,000)
Net loss - - - - - (8,453,337) (8,453,337)
------- - -------- -------- -------- --------- ----------- -----------
Balance at December 31, 1995 2,157,879 21,579 16,574,007 (460,000) - (9,780,514) 6,355,072
Purchase of Class A common stock - - - - (201,000) - (201,000)
Purchase of Class B common stock - - - - (18,108) - (18,108)
Reduction of note receivable - - - 200,000 - - 200,000
Net loss - - - - - (12,011,562) (12,011,562)
------- - -------- -------- -------- --------- ------------ ------------
Balance at December 31, 1996 2,157,879 $21,579 $16,574,007 $(260,000) $(219,108) $(21,792,076) $ (5,675,598)
========= ======= ========== ======== ========= =========== ============
</TABLE>
See accompanying notes.
F-18
<PAGE>
Government Property Investors, Inc.
Consolidated Statements of Cash Flows
and
GovProp Entities
Combined Statement of Cash Flows
<TABLE>
<CAPTION>
Government Property Investors, Inc. GovProp Entities
-------------------------------------------------- -----------------------------
For the period from
Year ended Year ended May 20 (Inception) to
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Operating activities:
Net loss $ (12,011,562) $ (8,453,337) $ (1,341,095)
Adjustments to reconcile net loss to net
cash (used in)/provided by operating
activities:
Depreciation and amortization 6,357,272 2,556,614 340,683
Amortization of deferred charges
included in interest expense 4,816,199 1,125,442 523,539
Loss on impairment of rental property - 2,793,462 -
Extraordinary loss on early
extinguishment of debt - 297,201 -
Changes in operating assets and
liabilities:
Increase in accounts receivable (1,859,752) (2,362,416) (365,637)
Increase in other assets (4,092,027) (263,687) (135,126)
Increase in accounts payable and
accrued expenses 3,856,280 2,557,683 1,307,596
Increase in accrued interest payable 675,613 735,451 26,167
Increase in accrued interest payable
-affiliates - 52,083 -
------------ ------------ -----------
Net cash (used in)/provided by operating
activities (2,257,977) (961,504) 356,127
------------ ------------ -----------
Investing activities:
Purchases of land, buildings and
improvements (166,591,221) (161,772,015) (16,271,476)
Purchase of furniture, fixtures and
equipment (57,915) (233,384) (344,794)
Decrease/(increase) in property under
development 4,563,546 (4,445,410) (4,270,790)
Increase in accounts payable -
property under development 852,504 1,281,977 -
Investment in partnerships - - (216,313)
(Increase)/decrease in deposits on
properties (290,000) 50,000 (600,000)
Decrease/(increase) in notes
receivable -affiliates 380,123 (947,956) -
Decrease/(increase) in organization - 122,433 (1,568,295)
costs
Increase in restricted cash (2,631,101)
(1,956,125) (911,806)
------------ ------------ -----------
Net cash used in investing activities (163,099,088) (168,575,456) (24,183,474)
------------ ------------ -----------
</TABLE>
Continued on next page
F-19
<PAGE>
Government Property Investors, Inc.
Consolidated Statements of Cash Flows
and
GovProp Entities
Combined Statement of Cash Flows
(continued)
<TABLE>
<CAPTION>
Government Property Investors, Inc. GovProp Entities
------------------------------------------------- ---------------------------
For the period from
Year ended Year ended May 20 (Inception) to
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Financing activities:
Capital contributions from
shareholders/owners, net - 7,279,633 8,869,876
Purchase of treasury stock (219,108) - -
Proceeds from notes, loans and
mortgages payable 172,466,362 153,219,823 6,889,432
Proceeds from notes payable -
affiliates 4,156,815 29,866,950 13,443,943
Repayment of notes, loans and
mortgages payable (6,418,464) (14,285,234) (790,902)
Additions to deferred financing costs (4,444,350) (9,490,504) (1,047,077)
----------- ----------- ----------
Net cash provided by financing activities 165,541,255 166,590,668 27,365,272
----------- ----------- ----------
Net increase/(decrease) in cash 184,190 (2,946,292) 3,537,925
Cash and cash equivalents, beginning of
period 591,633 3,537,925 -
----------- ----------- ----------
Cash and cash equivalents, end of period $ 775,823 $ 591,633 $ 3,537,925
=========== =========== ==========
</TABLE>
See accompanying notes.
F-20
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements
1. Organization
Government Property Investors, Inc., and subsidiaries ("GPI" or the "Company")
and the GovProp Entities were formed for the purpose of acquiring, owning,
developing, leasing and operating a portfolio of U.S. Government-leased
properties. As of December 31, 1996, the Company owned twenty-five office
buildings, comprising approximately 2.9 million rentable square feet, occupied
by various U.S. Government agencies. Seven office buildings, representing
approximately 54 percent of the value of the Company's portfolio, are located in
the greater metropolitan Washington, DC area of the United States. The Company
intends to continue developing and acquiring additional properties as well as
expanding properties within its existing portfolio.
The GovProp Entities include Rosecliff Realty, Inc. ("RRI") and GovProp, L.P.
("GovProp"). RRI was formed on January 7, 1994 and commenced operations on May
20, 1994 ("Inception"). Its primary function was to manage the properties owned
by GovProp. GovProp was formed and commenced operations on May 20, 1994. Its
primary function was to acquire, own, lease and operate a portfolio of
government-leased properties. During 1994, RRI carried out property management,
development, acquisition and corporate management functions and GovProp held
title to real property under development, fully developed real property and
issued debt relating to such real property.
Disclosures made herein, for the period from Inception to December 31, 1994
pertain to the GovProp Entities. Disclosures for periods subsequent to December
31, 1994, except those specifically identified as relating to transactions prior
to the formation of the Company, pertain to GPI.
The Company was incorporated in Delaware on January 13, 1995 and, after the
merger transaction discussed below, commenced operations on February 7, 1995
(the date GovProp and RRI were merged with and into the Company). In connection
with the merger, RRI distributed its one percent ownership interest in GovProp
to its sole shareholder. On January 13, 1995, one share of Series A Common Stock
(then representing 100% ownership interest in the Company) was issued to
Rosecliff Realty L.P. ("RRLP"). In exchange for RRLP's ownership interests in
the GovProp Entities, RRLP received a total of 995,999 additional shares of GPI
Series A Common Stock; the GovProp Entities were concurrently merged with and
into GPI.
F-21
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
1. Organization (continued)
At the merger date, the GovProp Entities owned 99% of GovProp Funding L.P. In
conjunction with the merger transaction, RRLP acquired the remaining 1% interest
in GovProp Funding L.P.; this remaining partnership interest was then exchanged
by RRLP for 4,000 shares of GPI Series A Common Stock and GovProp Funding L.P.
was concurrently merged with and into GPI's wholly owned subsidiary, Rosecliff
Realty Funding, Inc.
In addition to the merger transactions referred to above, the Company sold
944,559 shares of Series A Common Stock for $8.5 million and issued $25.3
million of subordinated debt to The 1818 Fund II, L.P. ("The 1818 Fund" - see
Note 6). Fees of approximately $4.6 million were incurred in connection with
this transaction; $3.4 million was allocated to deferred financing costs and
$1.2 million was allocated to additional paid-in capital based on the dollar
amount of each type of financing.
Additionally, to attract and retain qualified management personnel and provide
for continued sources of financing, Series A and Series B Common Stock has been
issued for approximately $700,000 to additional equity investors and Company
management personnel. Upon the occurrence of a valuation realization event (as
defined in the Amended and Restated Certificate of Incorporation), which
includes an initial public offering of stock and a change of control, and based
upon specified terms, as defined, shares of Series B Common Stock convert to
shares of Series A Common Stock.
As of December 31, 1996, the Company was authorized to issue 9,000,000 shares of
Series A Common Stock, 500,000 shares of Series B Common Stock, 500,000 shares
of Preferred Stock, and 10,000,000 shares of Excess Stock. As of December 31,
1996, total Company shares issued and outstanding are as follows:
F-22
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
1. Organization (continued)
Number
Ownership entity of shares Series of stock
---------------------------- ------------ ------------------
Rosecliff Realty L.P. 1,000,000 Series A Common
The 1818 Fund II, L.P. 944,559 Series A Common
Additional equity investors 13,320 Series A Common
Company management 200,000 Series B Common
----------
Total shares 2,157,879
==========
During 1996, the Company repurchased 111 shares of Series A Common Stock from an
additional equity investor, 22,176 shares of Series A Common Stock from
Rosecliff Realty, L.P., and 40,242 shares of Series B Common Stock from the
Company's former president (the "Former President") and the Company's former
general counsel. The treasury stock has been recorded at its original issue
price with the excess of repurchase cost over the original issue price charged
to earnings in the current period.
Going Concern
During the years ended December 31, 1996 and 1995, and the period from May 20,
1994 (inception) to December 31, 1994, the Company has experienced losses of
approximately $12.0 million, $8.5 million and $1.3 million, respectively. As of
December 31, 1996, these losses have created an equity deficit of $21.8 million.
Since inception, the Company has relied upon equity investments and loans from
affiliated parties to meet operating and administrative requirements.
Additional investments from existing stockholders is not currently anticipated.
As of December 31, 1996, the Company does not have sufficient working capital to
fully discharge all operating obligations and has not obtained additional
financing to meet such obligations. The Company's long-term debt due in 1997,
exclusive of debt due to affiliates, approximates $225 million. The Company has
not obtained extensions on these obligations and, due to events described in
Note 12, the Company is not in active negotiations to replace such debt at
maturity. In the event existing debt is not extended or refinanced prior to
maturity, the Company would be in default on such debt.
F-23
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
1. Organization (continued)
Going Concern (continued)
Additionally, as discussed in Note 5, various of the Company's borrowing
agreements contain covenants imposing restrictions on cash flow and the
maintenance of certain ratios, as defined. As of January 31, 1997, debt totaling
approximately $93 million was not in compliance with these requirements. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern.
As discussed in Note 12, in February 1997, the Company signed an agreement to
sell substantially all of its assets and merge with Health and Retirement
Properties Trust. The sale would result in the repayment or restructuring of a
substantial portion of the Company's debt and result in lower interest expense.
The Company believes that, until the sale is finalized, existing cash balances
and anticipated cash receipts will be adequate to cover operating requirements,
including interest and principal payments. There can be no assurance that the
sale will be successfully accomplished on terms and conditions acceptable to the
Company. In the event that the sale is not completed, the Company would endeavor
to extend and refinance its debt.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements for the years ended December 31, 1996 and
1995 include the results of operations of the GovProp Entities and those of GPI
and subsidiaries on a consolidated basis. All significant intercompany accounts
and transactions have been eliminated in consolidation. The results of
operations of the GovProp Entities, prior to the merger transactions, and GPI
have been presented for the year ended December 31, 1995 on a historical basis
because of prior common ownership, management and control.
F-24
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Basis of Presentation (continued)
The accompanying 1994 financial statements present the combined historical
financial position and results of operations of RRI and GovProp, as the ultimate
ownership and control of RRI and GovProp was held by the same group of investors
and this control continued through the merger transaction discussed in Note 1.
All significant intercompany transactions and accounts have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the associated amount of revenues and expenses during
the reporting period; actual results could differ from those estimates.
Rental Property
Costs incurred for the acquisition, development and construction of rental
property, which includes assets recorded under capital leases, are capitalized
and depreciated or amortized on a straight-line basis over the estimated useful
lives of the related assets, as follows:
Buildings and improvements...............................40 years
Furniture, fixtures and equipment.........................5 years
Expenditures for ordinary maintenance and repairs are expensed to operations as
incurred. Significant renovations and improvements, which extend the useful
lives of the assets, are capitalized and depreciated over their estimated useful
lives.
The Company's properties are carried at the lower of historical cost or fair
value. The Company records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amount of those assets.
F-25
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Rental Property (continued)
Fair values are determined on a periodic basis, and include consideration of the
assets' net operating income, comparable prices of other properties in the area,
existing environmental and zoning restrictions and other factors effecting
current economic conditions. In 1996, the Company adopted FASB No. 121,
"Accounting for the Impairment of Long-Lived Assets to be Disposed of". There
was no effect on the Company's financial statements in 1996 as a result of this
adoption.
Property Under Development
Project development costs, including related costs of architecture and
engineering, construction, interest and real estate taxes incurred during the
period of construction are capitalized. Upon completion of construction, all
related costs are included in the basis of the real property and depreciated
over its estimated useful life.
Cash and Cash Equivalents
Cash includes amounts on deposit with financial institutions. Cash equivalents
include highly liquid investments with original maturities of three months or
less from date of purchase.
Restricted Cash
Restricted cash includes amounts held in escrow for payment of insurance,
property taxes and replacement reserve deposits.
Deferred Financing and Organization Costs
Deferred financing costs include fees and associated costs incurred to obtain
financing. These costs, amortized on the interest method over the terms of the
respective loans, are included in interest expense. Organization costs include
primarily legal and other costs incurred in the formation of GPI and
subsidiaries. These costs are amortized on a straight-line basis over a five
year period.
F-26
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Fair Value of Financial Instruments
The fair value of the Company's long-term debt has been estimated using
available market information, including rates currently offered to the Company
for debt of similar maturities.
Revenue Recognition
Minimum rent, including rental abatements and contractual fixed increases or
decreases attributable to operating leases, is recognized on a straight-line
basis over the term of the related lease. The excess amount of rental payments
contractually due over rents recognized is included in deferred rents payable, a
component of accounts payable and accrued expenses, in the accompanying balance
sheets. Contractually due but unpaid rent payments are included in accounts
receivable on the accompanying balance sheets. Most of the Company's leases
provide for additional revenues in the form of operating expense reimbursements
based on annual increases in the Consumer Price Index. These revenues are also
recognized on the accrual basis.
Stock Based Compensation
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 123, "Accounting for Stock Based
Compensation", which is effective for the Company's December 31, 1996 financial
statements. SFAS No. 123 allows companies to account for stock based
compensation either under the new provisions of SFAS No. 123 or under the
provisions of APB Opinion No. 25, with further pro forma disclosures within the
footnotes and financial statements as if the measurement provisions of SFAS No.
123 had been adopted. The Company intends to continue accounting for its stock
based compensation in accordance with the provisions of APB No. 25. As such, the
adoption of SFAS No. 123 will not impact the financial position or results of
operations of the Company.
F-27
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Income Taxes
For federal income tax purposes, the Company is a real estate investment trust
("REIT"). As a REIT, the Company is required to distribute at least 95% of its
taxable income and meets certain other requirements. No provision for federal
income taxes is recorded in the financial statements because the Company expects
to distribute in excess of its taxable income to its shareholders. For the
period prior to the mergers discussed in Note 1, taxable income or loss is
reported on the owners' respective tax returns.
Supplemental Disclosures of Cash Flow Information
During the year ended December 31, 1996: (i) $18.1 million was paid for
interest, net of amount capitalized, and (ii) accrued interest of $4.0 million
was converted to subordinated debt and convertible debt. Additionally, the
following significant non-cash transactions occurred during the year ended
December 31, 1996: (i) reduction of $200,000 of the Former President's note
receivable in exchange for 22,176 Series A Common Shares held by RRLP, and (ii)
reduction of approximately $381,000 of the Former President's note receivable
and accrued interest in exchange for an equal reduction in Subordinated Debt due
to GovProp Sub-Debt Partners, L.P.
During the years ended December 31, 1995 and the period from May 20, 1994 to
December 31, 1994: (i) $4.8 million and $.3 million were paid for interest, net
of amounts capitalized and (ii) accrued interest of $3.5 million and $0.8
million were converted to subordinated debt. Additionally, the following
significant non-cash transactions occurred during the year ended December 31,
1995: (i) convertible subordinated debt of approximately $440,000 was issued as
additional consideration in connection with a line of credit agreement (see Note
5) and subordinated debt (see Note 6), (ii) as a result of the reorganization of
the Company, approximately $337,000 (consisting of certain ownership interests
in the GovProp Entities) was distributed to the owners, and (iii) $90,000 of
Series B Common Stock was issued under employee compensation agreements.
During the years ended December 31, 1996 and 1995, and the period from May 20,
1994 (inception) to December 31, 1994, the Company capitalized approximately
$859,000, $489,000, and $0, respectively, of interest incurred on outstanding
debt to property under development.
F-28
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Reclassifications
Certain reclassifications have been made to the 1995 and 1994 financial
statements to conform with the current year's presentation.
3. Deferred Charges
Deferred charges consist of the following (in thousands):
December 31,
1996 1995
-------- ------------
Deferred financing costs $15,554 $10,240
Organization and other costs 1,590 1,103
-------- --------
17,144 11,343
Less accumulated amortization (8,410) (2,008)
-------- --------
Deferred charges, net $ 8,734 $ 9,335
======== ========
In 1996, the Company incurred approximately $1.9 million in expenses from the
write-off of costs associated with a proposed initial public offering of its
common stock.
F-29
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
4. Tenant Lease Agreements
Future minimum rentals to be received under noncancelable tenant leases at
December 31, 1996 are due as follows (in thousands):
For the year ending
December 31, Amount
-----------------------------------------------
1997 $ 52,822
1998 51,527
1999 50,643
2000 50,751
2001 36,927
Thereafter 147,559
--------
$390,229
========
Certain of the Company's leases contain renewal options; these renewal options
are primarily for five or ten year periods.
5. Mortgages, Notes and Loans Payable
Mortgages, notes and loans payable consist of the following (in thousands):
December 31,
1996 1995
------------------------
Mortgages, notes, loans payable $ 88,811 $ 64,764
Capital lease obligation 13,025 -
Lines of credit 208,856 79,916
Convertible debt 389 353
-------- ---------
$311,081 $145,033
======== =========
F-30
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
5. Mortgages, Notes and Loans Payable (continued)
As of December 31, 1996, future maturities of mortgages, notes and loans payable
are as follows (in thousands):
For the year ending
December 31, Amount
-------------------------- ---------
1997 $224,546
1998 6,761
1999 7,290
2000 7,910
2001 8,495
Thereafter 56,079
--------
$311,081
========
Secured Notes
At December 31, 1996 and 1995, the Company had $55.8 million and $60.3 million,
respectively, of fixed-rate debt backed by the securitization of the underlying
government lease payments and issuing U.S. Government General Service
Administration certificates of participation (the "Securitized Debt"). In
December 1996, the Company entered into an agreement with a lender to provide
funding to refinance $27.0 million of this fixed-rate debt (see Notes 8 and 12).
At December 31, 1996 and 1995, the weighted average interest rate of funds
borrowed under the Securitized Debt is 7.2 percent per annum. At December 31,
1996 and 1995, the Securitized Debt is collateralized by rental property
totaling $78.1 million and $80.7 million, respectively. The Securitized Debt
matures from 2002 through 2009. Additionally, all rents from the pledged
properties are assigned for payment of debt service, operating expenses, taxes,
insurance and reserves; remaining funds are remitted to the Company.
At December 31, 1996 and 1995, the Company had a permanent loan (the "Bayerische
Facility") with an outstanding balance of $4.2 million and $4.5 million,
respectively. The Bayerische Facility bears interest at 6.86 percent per annum,
and is collateralized by the underlying rental property totaling approximately
$5.9 million and $6.0 million at December 31, 1996 and 1995, respectively. The
Bayerische Facility matures in 2005.
F-31
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
5. Mortgages, Notes and Loans Payable (continued)
Additionally, all rents from the pledged property are assigned to the lender
primarily for payment of debt service and reserves; remaining funds are remitted
to the Company.
At December 31, 1996, the Company had a loan (the "John Hancock Loan") with an
outstanding balance of $19.5 million. The John Hancock Loan bears interest at
7.65 percent, matures in 2016, and is collateralized by the underlying rental
property. Upon completion of construction in May 1996, the loan converted to a
permanent loan and is collateralized by the underlying rental property with a
completed cost of $20.5 million. Additionally, all rents from the pledged
property are assigned for payment of debt service and reserves; remaining funds
are remitted to the Company.
In April, 1996 the Company entered into an agreement providing for loans up to
$10.3 million for the purchase of land and construction of a building. These
loans bear interest at LIBOR plus 1.9 percent and mature in April of 1997 and
are collateralized by the underlying property and its rental income. As of
December 31, 1996, this construction loan had an outstanding balance of $1.6
million, with $8.7 million available for future borrowing.
In August, 1996, the Company entered into an agreement providing for loans up to
$11.3 million for the purchase of land and building and construction of building
improvements. These loans bear interest at LIBOR plus 1.75 percent, mature in
December of 1996, and may be extended until February, 1997 and are
collateralized by the underlying property and its rental income. In 1996, the
Company extended this loan until February, 1997. As of December 31, 1996, this
loan had an outstanding balance of $7.8 million, with $3.5 million available for
future borrowing.
Capital Lease
In March, 1996, the Company entered into a capital lease with the Erie County
Industrial Development Agency ("ECIDA"). The Company's obligations under the
capital lease approximate ECIDA's obligations under a $13.5 million, fixed rate
county revenue bond (the "ECIDA Bond"). The ECIDA Bond is backed by the
securitization of the underlying lease payments, bears interest at 7.66 percent
and matures in 2004. At December 31, 1996, the outstanding capital lease
obligation and balance on the ECIDA Bond approximated $13.0 million. If the
underlying tenant leases are extended, the term of the
F-32
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
5. Mortgages, Notes and Loans Payable (continued)
Capital Lease (continued)
capital lease and the ECIDA Bond can be extended through the lease extension
date, and will bear interest at the prevailing U.S. Treasury rate plus two
percent. The ECIDA Bond is collateralized by rental property totaling
approximately $21.3 million. Additionally, all rents from the pledged property
are assigned for payment of debt service and reserves; remaining funds are
remitted to the Company.
Lines of Credit and Other
During 1994, the GovProp Entities entered into an acquisition facility (the
"Acquisition Facility") with the maximum principal amount of $112.5 million, to
be used to finance up to 75 percent of the acquisition cost of properties
purchased and to meet certain funding criteria as specified by the Lender,
including closing costs and debt origination fees not to exceed to 3.5 percent
of the purchase price. At December 31, 1994, the Acquisition Facility's $6.1
million balance was collateralized by three properties, totaling approximately
$16.3 million. The Acquisition Facility had an initial maturity of June 1995, an
interest rate 300 basis points over one-month LIBOR and an origination fee of 2
percent of the principal amount borrowed. All available cash flow from the
properties acquired under the Acquisition Facility, after expenses, reserves and
distributions for estimated taxes, are used to repay the loan. At December 31,
1994, the interest rate on this facility was 9 percent.
During 1995, the Company negotiated an extension of the maturity date,
reductions of the interest rate and origination fees and increased the amount
available under the Acquisition Facility to $150 million. At December 31, 1995,
the balance outstanding under the Acquisition Facility was $57.8 million; future
borrowings of $92.2 million were available under this agreement. At December 31,
1995, the Acquisition Facility was collateralized by eleven properties, totaling
$86.8 million. At December 31, 1995, the 30 day LIBOR rate was approximately
5.72 percent.
In September 1996, the Acquisition Facility was renegotiated and extended to
include maximum funding of $200 million, at a rate of LIBOR plus 2.95 percent,
maturing in December 1996 and may be extended for two additional three month
periods. In December 1996, the Company extended the Acquisition Facility for one
additional three
F-33
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
5. Mortgages, Notes and Loans Payable (continued)
Lines of Credit and Other (continued)
month period. At December 31, 1996, the balance outstanding under the
Acquisition Facility was $158.9 million; future borrowings of $41.1 million are
available under this agreement. At December 31, 1996, the Acquisition Facility
is collateralized by sixteen properties, totaling $196.0 million. At December
31, 1996, the 30 day LIBOR rate was approximately 5.53 percent.
In 1995, the Company entered into another line of credit agreement (the "BHF
Facility"), totaling $50.0 million, to finance the balance of property
acquisition costs not covered under the Acquisition Facility. At December 31,
1996 and 1995, the BHF Facility had an outstanding balance of $50.0 million and
$22.1 million, respectively. The BHF Facility matures in October of 1997.
Funding under the BHF Facility bears interest at a fixed rate of 10 percent per
annum, is subordinated to the Company's other non-affiliated debt, and is
collateralized by stock in the Company's subsidiaries, with a secondary security
interest in all rents from the pledged properties.
Convertible Debt
At December 31, 1996, the Company had also issued approximately $390,000 of
convertible subordinated debt to the lenders of the BHF Facility. At the
holders' option, this debt is convertible, at $9.00 per share, into
approximately 43,000 shares of Series A Common Stock. Conversion is dependent
upon the occurrence of certain events, including an initial public offering of
stock or a change in control, as defined. Additionally, this convertible
subordinated debt is redeemable, at the option of either the holders or the
Company, starting in 1998.
In December, 1996, the Company entered into an interest rate protection
agreement (the "Hedge Agreement") with a financial institution, protecting the
Company from increases in interest rates effecting certain prepayment penalties
which will be incurred in connection with $27.0 million of Securitized Debt that
was refinanced in January, 1997 (see Notes 8 and 12). This transaction is
accounted for as a hedge; gains or losses are deferred as adjustments to the
carrying value of the $27.0 million of Securitized Debt as a component of the
gain or loss in the period the debt is refinanced.
F-34
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
5. Mortgages, Notes and Loans Payable (continued)
Convertible Debt (continued)
During 1995, the Company refinanced approximately $11.3 million of debt. In
conjunction with this transaction, approximately $297,000 of deferred financing
charges were written off and classified as an extraordinary item in the
accompanying statement of operations.
Various of the Company's borrowing agreements contain covenants imposing
restrictions on cash flow and the maintenance of certain ratios, as defined. As
of December 31, 1996, the Company is not in compliance with certain of these
financial covenants.
6. Notes Payable - Affiliates
At December 31, 1996 and 1995, the Company had $47.5 million and $43.3 million,
respectively, of unsecured subordinated debt outstanding with equity partners
(the "Subordinated Debt"). The Subordinated Debt provides funding for
acquisitions and development properties, as defined, and for general corporate
purposes. Under these credit agreements, as of December 31, 1996 and 1995, $18.5
million is payable to GovProp Sub-Debt Partners, L.P., a limited partnership
whose partners are also partners in RRLP. Additionally, as of December 31, 1996
and 1995, $29.0 million and $26.8 million, respectively, in notes payable is due
to The 1818 Fund, a shareholder of the Company. All funding under the
Subordinated Debt agreements bears a fixed rate of interest; the weighted
average interest rate is approximately 12.5 percent per annum. As of December
31, 1996, $12.5 million of Subordinated Debt matures in 1997; the remaining
$35.0 million matures in years 2003 through 2005.
At December 31, 1996 and 1995, $5.4 million and $4.6 million, respectively, of
the Subordinated Debt (the "Subordinated Convertible Debt") contained conversion
provisions. At the holders' option, the Subordinated Convertible Debt is
convertible into approximately 478,000 shares of GPI Series A Common Stock at
conversion prices ranging from $9.00 to $11.27 per share. Conversion is
dependent upon the occurrence of certain events, including an initial public
offering of stock or a change in control, as defined.
F-35
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
6. Notes Payable - Affiliates (continued)
Certain borrowing agreements contain covenants requiring the maintenance of
ratios, as defined. As of December 31, 1996, the Company is not in compliance
with certain of these financial covenants.
7. Leases
The Company leases office space and equipment for its corporate offices under
operating leases that terminate in 1997. For the years ended December 31, 1996
and 1995, and the period from May 20, 1994 (inception) to December 31, 1994,
rental expenses for corporate office space and equipment under operating leases
were $302,950, $201,040 and $58,917, respectively. Future minimum noncancelable
rentals of approximately $226,000 are due in 1997.
In 1996, the Company entered into a lease with the Erie County Industrial
Development Agency. Based upon the terms of the lease, which include a bargain
purchase option at the end of the lease, the Company has classified the lease as
a capital lease. The underlying asset is included in real estate in the
accompanying consolidated December 31, 1996 balance sheet as follows (in
thousands):
Description Amount
-------------------------------- ------------
Land $ 889
Building 20,692
------------
21,581
Less accumulated amortization (431)
------------
Asset under capital lease, net $21,150
============
F-36
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
7. Leases (continued)
Capital lease obligations are summarized as follows (in thousands):
For the year ending
December 31, Amount
------------------------------------------ --------
1997 $ 1,629
1998 1,629
1999 1,629
2000 1,629
2001 1,629
Thereafter 10,460
---------
18,605
Less amount representing interest (5,580)
---------
Present value of net minimum lease payments
$13,025
=========
8. Commitments and Contingencies
At December 31, 1996, the Company had signed commitments to purchase or develop
properties totaling approximately $27.9 million. In connection with these
acquisitions, the Company has placed $725,000 on deposit. In addition, the
Company is endeavoring to obtain the return of $115,000 of funds held in escrow
for projects it is no longer actively pursuing.
In December, 1996 the Company entered into a commitment with a lender for $31
million of financing to fund the refinancing of an existing property. In
connection with this transaction, the Company has placed $600,000 on deposit
and, as of December 31, 1996, is included in other assets in the accompanying
financial statements. This refinancing transaction was consummated in 1997 (see
Notes 5 and 12).
In 1996, the Company entered into and extended employment contracts with certain
management employees that expire in 1997 and 1998. These contracts provide that,
if employment is terminated "without cause," these employees will be paid their
base salaries and certain benefits through the remainder of the contract period.
Additionally, the
F-37
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
8. Commitments and Contingencies (continued)
Company is obligated to pay its Former President a $275,000 fee, contingent upon
an initial public offering of stock.
In 1995, a property that is leased to the General Services Administration
("GSA") and was occupied by one of the agencies of the U.S. Government, was
vacated by its occupant. GSA has continued to pay rent under its non-cancelable
lease and is obligated to do so until May 1998, the lease expiration date. The
Company has determined that, unless the Government renews its lease at similar
rental rates in 1998, the carrying amount of the property will be impaired.
Accordingly, at December 31, 1995, the Company recorded a $2.8 million
impairment loss to write down the property to its estimated fair value of $6.5
million. Fair value was based on the estimated cash flow the property will
generate over the remainder of the GSA lease term and from a replacement tenant.
The Company's plan of action is to locate suitable replacement tenants to occupy
the space at the end of the lease term. Additionally, GSA is currently
evaluating other agencies for occupancy in the space.
Purchase agreements with the prior owners of two properties, acquired by the
Company during 1995, provide for contingent payments to the sellers. Pursuant to
the purchase agreements, the sellers may earn additional purchase price
consideration if the lessees exercise lease renewal options. The additional
purchase price consideration for one of the properties totals $1.0 million, plus
accrued interest at 10 percent per annum, accruing from the Company's original
purchase date. The additional purchase price consideration for the second
property could approximate $4.5 million; the final determination of the amount
of additional purchase consideration is further dependent upon certain terms and
conditions, as defined in the purchase agreement. Contingencies under these
purchase agreements expire in 2005; no amounts have been accrued under the
purchase agreements.
9. Employee Benefit Plan
The Company has a 401(k) benefit plan (the "Plan") for all permanent, full-time
employees. Starting on the first day of the month following commencement of
employment, eligible employees may participate in the Plan. The Company matches
50% of all employee contributions (which are subject to statutory limitations);
100% of all employer contributions vest immediately. During the years ended
December 31, 1996 and
F-38
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
9. Employee Benefit Plan (continued)
1995, and the period from Inception to December 31, 1994, the Company's share of
Plan contributions was approximately, $67,600, $45,000 and $9,100, respectively.
10. Related Party Transactions
In November 1996, the Company entered into an agreement with its Former
President (the "Termination Agreement"), providing for: (i) repurchase of 33,582
shares of the Former President's Series B Common Shares for $150,000 (of which
approximately $135,000 is reflected as compensation expense in 1996 and
approximately $15,000 is reflected as the cost of treasury stock), plus a
contingent payment of approximately $350,000 if certain investment goals are met
(such payment will be reflected as compensation expense when incurred), (ii)
reduction of $200,000 of the Former President's note receivable in exchange for
22,176 Series A Common Shares held by RRLP, as such amounts approximate the
original issue price, (iii) reduction of approximately $381,000 of the Former
President's note receivable and accrued interest in exchange for an equal
reduction in Subordinated Debt due to GovProp Sub-Debt Partners, L.P., an
affiliate of RRLP, and (iv) compensation to the Former President of $200,000 for
his continuing services as a member of the Company's Board of Directors through
October, 1997.
At December 31, 1996 the Company had notes receivable from its Former President
aggregating $947,833 (including accrued interest at 10 percent per annum).
During the years ended December 31, 1996 and 1995, interest income of
approximately $130,000, and $122,000, respectively, was earned on these notes.
At December 31, 1996, $260,000 of these notes receivable mature in May, 2001 and
were used to purchase stock of the Company; this amount is classified as a
reduction of stockholders' equity in the accompanying financial statements.
Further, $687,833 of these notes receivable for advances to its Former
President, and accrued interest on all notes receivable from its Former
President, are reflected as affiliated notes receivable in the accompanying
financial statements. As of December 31, 1996, approximately $586,000 of the
funds advanced to the Company's Former President were used to fund a portion of
the Subordinated Debt issued by the Company to GovProp Sub-Debt Partners, L.P.,
an affiliate of RRLP, which bears interest at 14% per annum and matures in
March, 2003 (see Note 6).
F-39
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
10. Related Party Transactions (continued)
During the year ended December 31, 1995, the Company paid the Fund $1.9 million
of transaction fees for its debt and equity raising efforts and paid an
affiliate of RRLP $500,000 of transaction fees for its debt and equity raising
efforts; of these amounts $2.0 million is classified as deferred financing costs
and $0.4 million is classified as a reduction of additional paid-in capital in
the accompanying financial statements.
During the year ended December 31, 1995, an affiliate of RRLP entered into a
consulting services agreement (the "Consulting Services Agreement") with the
Company to provide management, strategic planning and financing services. The
Company is required to pay certain fees upon achieving predetermined acquisition
or financing goals, plus an annual consulting fee of approximately $350,000
(adjusted annually by the consumer price index). The Consulting Services
Agreement expires in January, 2000. Under the Consulting Services Agreement, the
Company incurred consulting fees of $1,550,000 during the year ended December
31, 1995. In connection with debt and equity raising efforts, during the year
ended December 31, 1995, $900,000 was classified in the accompanying financial
statements as deferred financing costs, and $300,000 was classified as a
reduction of additional paid-in capital; the remaining $350,000 annual
consulting fee was included in general and administrative expenses.
In 1996, under the Consulting Services Agreement, the Company paid an annual
consulting fee of approximately $359,000. As of December 31, 1996, the Company
has a contingent obligation to pay approximately $554,000 in additional
consulting fees upon the consummation of a value realization event, as defined.
11. Fair Value of Financial Instruments
The following disclosures of estimated fair value were determined by management,
using available market information and valuation methodologies. Considerable
judgment is necessary to interpret market data and develop estimated fair value.
The use of different market assumptions or estimation methodologies may have a
material effect on the estimated fair value amounts.
Cash equivalents, accounts receivable, notes receivable, accounts payable,
accrued expenses and variable rate debt are carried at amounts which reasonably
approximate their fair values. As of December 31, 1996 and 1995, fixed rate
notes payable to nonaffiliated
F-40
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
11. Fair Value of Financial Instruments (continued)
entities with a carrying value of $142.5 million and $86.9 million,
respectively, have an estimated aggregate fair value of $141.4 million and $86.9
million, respectively. Due to the interrelationship of the Company's equity
funding, the estimated fair value of its Subordinated Debt at December 31, 1996
and 1995 is not readily determinable.
Disclosure about fair values of financial instruments is based on pertinent
information available to management as of December 31, 1996. Although management
is not aware of any factors that would significantly affect the reasonable fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since December 31, 1996, and current estimates of
fair value may differ from the amounts presented herein.
12. Subsequent Events
In January, 1997, the Company repurchased $27.0 million of Securitized Debt with
the proceeds of a $31.0 million term loan (the "Term Loan"). In connection with
this transaction, the Company paid a premium of approximately $820,000 to redeem
the Securitized Debt and incurred approximately $91,000 of associated redemption
costs, for a total loss on refinancing of approximately $911,000. Additionally,
under the related Hedge Agreement, the Company recognized gains of approximately
$43,000. These amounts will be reflected as an extraordinary loss in the period
subsequent to year-end.
The Term Loan bears interest at the lender's prime rate, and initially matures
in April of 1997 and is collateralized by an assignment of the Securitized Debt
repurchased with the proceeds and a secondary security interest in the rental
property and assignment of rents which collateralize the Securitized Debt. The
Term Loan may be extended, at the Company's option, for two additional one month
periods. All available cash flow from the underlying property, after expenses,
reserves and distributions for estimated taxes, is used to repay the loan.
In February 1997, the Company reached an agreement to sell substantially all of
its assets and merge with Health and Retirement Properties Trust. The
transaction is subject to various conditions, including completion of due
diligence; however, the parties anticipate consummating this transaction on or
around March 31, 1997. In connection with this transaction certain fees will be
incurred, deferred financing fees will be written off and
F-41
<PAGE>
Government Property Investors, Inc.
and
GovProp Entities
Notes to Financial Statements (continued)
12. Subsequent Events (continued)
compensation expense attributable to the issuance and conversion of Series B
Common Stock, settlement of employment contracts, associated severance and other
costs will be incurred. The amount of these costs has not been finalized, but is
expected to be material; these items will be charged against earnings in the
period the transaction is consummated.
F-42
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
Unaudited Pro Forma Balance Sheet,
Unaudited Pro Forma Statement of Income
and Other Data
The following unaudited pro forma balance sheet at December 31, 1996 and
unaudited pro forma statement of income for the year ended December 31, 1996 are
intended to present the financial position and results of operations of the
Company as if the transactions described in the Notes were consummated on
December 31, 1996 and January 1, 1996, respectively. These unaudited pro forma
financial statements should be read in conjunction with the separate financial
statements of the Company and of Government Property Investors, Inc. (the
"Seller"), both for the year ended December 31, 1996, and both included
elsewhere herein. These unaudited pro forma financial statements are not
necessarily indicative of the expected financial position or results of
operations of the Company for any future period. Differences would result from,
among other considerations, future changes in the Company's portfolio of
investments, changes in interest rates, changes in the capital structure of the
Company, delays in the acquisition of certain properties, and changes in
property level operating expenses.
The following unaudited pro forma balance sheet and unaudited pro forma
statement of income were prepared pursuant to the Securities and Exchange
Commission's rules for the presentation of pro forma data. The pro forma and
adjusted pro forma data give effect to the acquisition by the Company of the
Government Office Properties (the "Transaction") from the Seller and an offering
of common shares of beneficial interest ("Shares") to fund the payment of
certain debt of the Seller and the Company. Certain properties expected to be
acquired by the Company are currently under construction or development by the
Seller or third parties. Other properties were under construction or renovation
during 1996 when they were owned or under development by the Seller. The
accompanying pro forma operating data does not give further effect to the
completion of construction or the related lease commencement for any period
prior thereto. Construction projects not completed by December 31, 1996 are
likewise not reflected in the pro forma balance sheet data. Rather, the effect
of completion of these construction projects is presented separately from the
pro forma data as described in the accompanying notes. The Company believes that
a display of such adjusted pro forma data is meaningful and relevant to the
understanding of the Transaction and, accordingly has presented such data in the
final two columns, labelled "Other Data," on the accompanying pages.
F-43
<PAGE>
Health and Retirement Properties Trust
Balance Sheet and Other Data
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Pro Forma Data Other Data
----------------------------------------------------------------------------- -------------------------
HRPT Government Office
--------------------------- ----------------------------
Historical Adjustments Historical Acquisitions Pro Forma Pro Forma Other Adjusted
December 31, December 31, Adjustments Adjustments Pro Forma
1996 (A) (B) 1996 (C) (D) (M)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Real estate properties,
at cost:
Land $ 93,522 $ 537 $ 64,850 $ 4,266 $ 8,438 $ 171,613 $ 6,111 $ 177,724
Buildings and
improvements 912,217 4,838 278,085 18,292 37,293 1,250,725 25,095 1,275,820
-------------------------------------------------------------------------------------------------------
1,005,739 5,375 342,935 22,558 45,731 1,422,338 31,206 1,453,544
Less accumulated
depreciation 76,921 0 8,026 (8,026) 76,921 0 76,921
-------------------------------------------------------------------------------------------------------
928,818 5,375 334,909 22,558 53,757 (E) 1,345,417 31,206 1,376,623
Real estate mortgages 150,205 0 0 0 0 150,205 0 150,205
Investment in HPT 103,062 0 0 0 0 103,062 0 103,062
Cash and cash equivalents 21,853 (5,375) 776 0 (5,212)(F) 12,042 0 12,042
Interest and rent
receivables 11,612 0 4,436 0 0 16,048 0 16,048
Deferred interest and
finance costs, net
and other assets 13,972 0 24,822 0 (9,216)(G) 29,578 0 29,578
-------------------------------------------------------------------------------------------------------
$1,229,522 $0 $364,943 $22,558 $39,329 $1,656,352 $31,206 $1,687,558
=======================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank notes payable $ 140,000 0 $0 $20,240 ($81,101)(H) $79,139 $29,383 $108,522
Senior notes and bonds
payable, net 124,385 0 0 0 0 124,385 0 124,385
Mortgages payable 0 0 311,081 0 (264,387)(I) 46,694 0 46,694
Convertible subordinated
debentures 227,790 0 0 0 0 227,790 0 227,790
Accounts payable and
accrued expenses 18,319 0 12,018 0 2,271 (J) 32,608 0 32,608
Security deposits 8,387 0 0 0 0 8,387 0 8,387
Due to affiliates 2,593 0 47,520 0 (47,520)(K) 2,593 0 2,593
Dividends payable 0 0 0 0 0 0 0 0
Shareholders' equity:
Seller deficit 0 0 (5,676) 0 5,676 (K) 0 0 0
Preferred shares 0 0 0 0 0 0 0 0
Common shares of
beneficial interest,
$.01 par value 669 0 0 1 220 (L) 890 0 890
Additional paid-in
capital 795,263 0 0 2,317 424,170 (L) 1,221,750 1,823 1,223,573
Cumulative net income 306,298 0 0 0 0 306,298 0 306,298
Distributions of cash
available from
operations (394,182) 0 0 0 0 (394,182) 0 (394,182)
-------------------------------------------------------------------------------------------------------
Total shareholders'
equity 708,048 0 (5,676) 2,318 430,066 1,134,756 1,823 1,136,579
-------------------------------------------------------------------------------------------------------
$1,229,522 $0 $364,943 $22,558 $39,329 $1,656,352 $31,206 $1,687,558
=======================================================================================================
</TABLE>
F-44
<PAGE>
Health and Retirement Properties Trust
Pro Forma Statement of Income and Other Data
(amounts in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
Pro Forma Data Other Data
------------------------------------------------------------------------------------- -----------------------
HRPT Government Office
-------------------------- ---------------------------
1996 1996 Pro Forma Other Adjusted
Historical(N) Adjustments Historical(S) Acquisitions Adjustments Pro Forma Adjustments Pro Forma
------------- ----------- ---------- ------------ ----------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income $98,039 $20,399 (O) $36,523 $15,055 (T) -- $170,016 $8,391(Z) $178,407
Interest income 22,144 (396)(P) 780 -- -- 22,528 -- 22,528
----------------------------------------------------------------------------------------------------------------
Total revenues 120,183 20,003 37,303 15,055 -- 192,544 8,391 200,935
----------------------------------------------------------------------------------------------------------------
Expenses:
Interest 22,545 11,624 (Q) 28,730 8,313 (U) (37,299)(V) 33,913 1,873(AA) 35,786
Operating expenses 3,776 328 (O) 8,657 5,605 (T) 1,073 (W) 19,439 1,107(Z) 20,546
Depreciation and
amortization 22,106 4,402 (O) 6,357 1,174 (T) 932 (X) 34,971 627(Z) 35,598
General and
administrative 7,055 943 (O) 5,570 -- (3,486)(W) 10,082 155(Z) 10,237
----------------------------------------------------------------------------------------------------------------
Total expenses 55,482 17,297 49,314 15,092 (38,780) 98,405 3,762 102,167
----------------------------------------------------------------------------------------------------------------
Net income before
equity income and
extraordinary item 64,701 2,706 (12,011) (37) 38,780 94,139 4,629 98,768
HPT equity income 8,860 -- -- -- -- 8,860 -- 8,860
Gain on HPT equity
transaction 3,603 -- -- -- -- 3,603 -- 3,603
----------------------------------------------------------------------------------------------------------------
Income before
extraordinary item $77,164 $2,706 $(12,011) $(37) $38,780 $106,602 $4,629 $111,231
----------------------------------------------------------------------------------------------------------------
Average shares
outstanding 66,255 633 (R) -- -- 22,062 (Y) 88,950 90(BB) 89,040
================================================================================================================
Per Share Data:
Income before
extraordinary item $1.16 $1.20 $1.25
===== ===== =====
</TABLE>
F-45
<PAGE>
Health and Retirement Properties Trust
Notes to Pro Forma Financial Data and Other Data
(dollars in thousands except share amounts)
Pro Forma Balance Sheet Adjustments
A. Represents the historical balance sheet of the Company at December 31,
1996.
B. Represents the acquisition by the Company of a medical office building in
January 1997, purchased with cash on hand.
C. Represents the historical balance sheet of the Seller at December 31, 1996.
D. In connection with the Transaction, the Company expects to purchase two
properties (the "Contract Properties") from third parties simultaneously
with the consummation of the Transaction for an aggregate purchase price of
approximately $22,558 consisting of approximately $20,240 in cash to such
third parties and the remainder in Shares to the Seller.
E. Represents the adjustment from the Seller's historical basis in existing
assets to the new basis of the Company as a result of the Transaction.
F. Represents the net use of cash on hand in connection with the Transaction.
G. Represents adjustment to eliminate certain other assets (primarily deferred
financing fees) of the Seller and to reflect certain assets acquired in
connection with the Transaction including prepaid expenses ($1,750),
minimum payment due to the Seller with respect to certain potential
acquisitions ($8,000) and the value of one property held for future
disposition ($5,856).
H. Represents repayments under the Bank Credit Facility as a result of the
assumed offering and the Transaction.
I. Represents repayment of secured financing of the Seller with the exception
of $46,694 that is not expected to be repaid as part of the Transaction.
J. Represents adjustment to record accounts payable, accrued expenses and
deferred minimum acquisition fees assumed by the Company as part of the
Transaction.
K. Represents the elimination of the Seller's historical net retained deficit
and removal of Seller affiliate debt not assumed or paid by the Company as
part of the transaction.
L. Represents the following:
Gross Proceeds from the assumed offering
(18,000,000 Shares at $20.25/Share) $364,500
Estimated expenses from the assumed offering (20,048)
-------
344,452
Value of Transaction Shares (3,947,556 shares
at $20.25/Share) 79,938
-------
$424,390
=======
Par value of Shares 220
Additional paid-in capital $424,170
-------
$424,390
=======
F-46
<PAGE>
Health and Retirement Properties Trust
Notes to Pro Forma Financial Data and Other Data
(dollars in thousands except share amounts)
Other Data - Balance Sheet Adjustments
M. In connection with the Transaction, the Company expects to purchase three
properties currently under construction and complete the construction of
one additional property (the "Construction Properties"), all of which are
expected to be substantially complete in 1997, subsequent to the closing
of the Transaction, for an aggregate cost of approximately $31,206,
consisting of approximately $29,382 in cash and $1,824 in Shares.
Income Statement Adjustments
N. Represents the historical income statement of the Company for the year
ended December 31, 1996.
O. Represents adjustments to rent and expenses arising from the Company's
acquisitions completed during 1996 and 1997, assuming the current
contractual rents were in effect since January 1, 1996. Property level
expense adjustments represent the annualized historical operating expenses
for one gross lease property acquired. Depreciation expense adjustements
assume an average building life of 40 years. Also reflects adjustments to
general and administrative expenses which would arise from the Company's
1996 and 1997 completed investment transactions.
P. Represents reduction of interest income arising from the use of cash
balances to fund a portion of the Company's 1996 acquisitions.
Q. Represents pro forma effect on interest expense related to financing placed
during 1996 to fund the Company's acquisitions at an average interest cost
of 6.38%.
R. Represents the impact of convertible debentures converted during 1996 as
if such shares were issued on January 1, 1996.
S. Represents the historical income statement of the Seller for the year ended
December 31, 1996.
T. Represents adjustments to rent and expenses arising from the Seller's
acquisitions of operating properties completed during 1996 and,
additionally, the acquisitions of the Contract Properties, assuming the
current contractual rents were in effect since January 1, 1996. Property
level expense adjustments are established for the purposes of this pro
forma presentation as equal to the percentage of rents which is the same
percentage of rents as was represented by property level operating expenses
for the properties which were owned by the Seller during 1996.
Depreciation expense adjustments assume an average building life of
40 years.
U. Represents the effect on interest expense of the Seller's acquisition
financing activity assuming such financing occured on January 1, 1996 at a
weighted average interest rate of 7.42%. For purposes of interest expense
related to the Contract Property acquisition, it has been assumed for
purposes of this pro forma presentation that the cost of borrowing is
equal to the cost of borrowing of the Company under its Bank Credit
Facility at a weighted average interest rate of 6.38%. Such costs are
believed to be less than the costs that could have been acheived by the
Seller had the Seller undertaken to acquire such properties on a
stand-alone basis. See Note D and Note H, above.
F-47
<PAGE>
Health and Retirement Properties Trust
Notes to Pro Forma Financial Data and Other Data
(dollars in thousands except share amounts)
V. Represents the reduction of interest expense arising from the Company's
repayment of all of the Seller's mortgage and affiliate debt, except
$46,694 of mortgage debt that is not expected to be repaid as part of the
Transaction, and the reduction of interest expense arising from expected
net reductions in the balance of the Company's Bank Credit Facility with
the use of proceeds from the assumed offering discussed in Note M, above.
W. Represents the net reduction in administrative expenses arising from the
differences in the Company's cost structure (which include the full year
effect of general and administrative and property management services) and
the cost structure of the Seller (which included the employment by the
Seller of separate property management companies for certain of the
Government Office Properties under separate fee arrangements and costs
related to administrative, financial, acquisition and other activities
performed by the Seller's management).
X. Represents the effect on depreciation arising from the adjustment of the
Seller's historical basis in existing assets to the new basis of the
Company as a result of the Transaction.
Y. Represents the impact on weighted average shares from the assumed offering
and the Transaction as discussed in Note M above.
Other Data--Income Statement Adjustments
Z. Represents the adjustment to reflect current rents from existing leases
for properties under construction during the 1996 period and the
Construction Properties assuming such leases and related contractual rents
were in effect as of January 1, 1996. Property level expense adjustments
are established for the purposes of this adjusted pro forma presentation
as equal to the percentage of rents which is the same percentage of rents
as was represented by property level operating expenses for the properties
which were owned by the Seller during 1996. Property level expense
adjustments and general and administrative expense adjustments also
include the full year impact of the Company's cost structure discussed in
Note W, above. Depreciation expense adjustments assume an average building
life of 40 years.
AA. Represents interest expense related to increased borrowings necessary
for the acquisition and completion of the properties under construction
during 1996 (see Note Z) and the Construction Properties.
BB. Represents balance of Transaction Shares to be issued in connection with
the acquisition of the Construction Properties.
F-48
AGREEMENT OF MERGER
between
HEALTH AND RETIREMENT PROPERTIES TRUST
and
GOVERNMENT PROPERTY INVESTORS, INC.
February 17, 1997
<PAGE>
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER ("Agreement") is made and entered into
February 17, 1997, between: HEALTH AND RETIREMENT PROPERTIES TRUST ("HRPT"), a
Maryland real estate investment trust, with its principal office located in
Newton, Massachusetts, and GOVERNMENT PROPERTY INVESTORS, INC. ("GPI"), a
corporation organized and existing under the laws of the State of Delaware, with
its principal office located in Washington, D.C.
RECITALS:
1. The Trustees and/or Boards of Directors of HRPT and GPI are each of
the opinion that the transactions described in this Agreement are in their
respective best interests and of their respective shareholders and, accordingly,
have agreed to effect the merger provided for in this Agreement upon the terms
and subject to the conditions set forth in this Agreement; and
2. This Agreement provides for the merger (the "Merger") of Government
Property Holdings Trust ("GPH"), a Maryland real estate investment trust, to be
organized by GPI, with and into Hub Acquisition Trust ("Merger Sub"), a Maryland
real estate investment trust, to be organized by HRPT, so that Merger Sub will
be the surviving entity, and for GPI to receive common shares of beneficial
interest of HRPT in exchange for its shares of beneficial interest of GPH, and
following the Merger, for Merger Sub to conduct the business and operations of
GPI; and
3. Pursuant to a plan of liquidation and dissolution to be adopted by
the stockholders of GPI, GPI will liquidate and dissolve and as a result, the
former stockholders of GPI shall become shareholders of HRPT; and
4. HRPT and GPI desire to make certain representations, warranties and
agreements in connection with the Merger; and
5. The parties intend that the Merger and subsequent liquidation of GPI
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code").
In consideration of the foregoing, and the representations, warranties,
covenants and agreements set forth in this Agreement, the parties agree as
follows:
SECTION 1
DEFINITIONS
Except as otherwise provided in this Agreement, the capitalized terms
set forth below (in their singular and plural forms as applicable) shall have
the following meanings:
<PAGE>
1.1 "1933 Act": the Securities Act of 1933, as amended.
1.2 "1934 Act": the Securities Exchange Act of 1934, as amended.
1.3 "Acquisition Proposal": defined in Section 6.3.
1.4 "Additional Properties": the land and improvements and fixtures, if
any, described on Disclosure Schedule 1.4 together with personal property of the
sellers of such Additional Properties used in connection therewith (other than
personal property of any tenant).
1.5 "Additional Properties Acquisition Cost": the aggregate cost of
acquiring Additional Properties including the purchase price, any contingent
purchase price, the amount of any indebtedness assumed (but exclusive of
transaction expenses and commissions paid by HRPT or any of its affiliates)
that, prior to the Second Closing Date, HRPT or any of its affiliates have
purchased or entered into a binding agreement to purchase.
1.6 "Aggregate Closing Consideration": $436,000,000 minus (a) the total
debt of GPI and the GPI subsidiaries on a consolidated basis (exclusive of the
GPI Affiliate Debt), plus (b) for GPH and the other GPI Subsidiaries cash and
cash equivalents, restricted cash, utility deposits, prepaid expenses (including
real estate and other ad valorem tax expense, rent expense and insurance expense
related to insurance policies set out on Disclosure Schedule 4.18), accounts
receivable (less reserves for doubtful accounts) for rent or for tenant
improvement work performed, and other assets (excluding (1) deposits for the LA
MEPS Premises, Waco Premises and Phoenix Premises, (2) acquisition deposits
relating to any other property not included in Premises, (3) accruals related to
straight-line rents, (4) intercompany receivables, (5) capitalized leasing or
brokers commissions, (6) deferred or capitalized costs of any kind) less (c) for
GPH and the other GPI Subsidiaries, accounts payable and accrued expenses
(including (1) payments due for goods and services to be made to vendors,
contractors and the like, (2) payments due or accruals for payroll, vacation,
insurance and other benefits of employees and related taxes, (3) accruals or
payments due for real estate, personal property or other ad valorem taxes, state
or local income, sales, revenue, franchise or net worth taxes, reimbursements to
employees for business-related expenses (4) contractors retention, (5) future
rent abatements, if any, (6) prepaid rents if any, (7) leasing commissions
earned but not paid on space listed as "vacant" on Disclosure Schedule 4.22(c)
or for replacement of tenants other than tenants on Material Leases, (8) debt
prepayment penalties related to debt other than that secured solely by the
Premises identified on Disclosure Schedule 1.71 as Properties Nos. 13, 14, 19
and 20, (9) Transaction Expenses, (10) expected payments due to insurance
carriers for retropremiums, if any, and (11) an amount equal to $167,021; and
excluding straight-line rent accruals), and accrued interest payable (exclusive
of accrued interest related to GPI Affiliate Debt), all in accordance with GAAP,
collectively referred to as "working capital" for GPI and the GPI Subsidiaries
on a consolidated basis. GPI and HRPT shall prepare, by March 15, 1997, a Pro
Forma Balance Sheet as of March 31, 1997 (the "Pro Forma Balance Sheet") based
on the Consolidated Balance Sheet of GPI and its Subsidiaries as of February 28,
1997, in accordance with GAAP. Within 30 days of the Closing Date, GPI and HRPT
shall prepare a consolidated balance sheet as of March 31, 1997, comparative
-2-
<PAGE>
to the Pro Forma Balance Sheet. Ernst & Young LLP, independent accountants,
shall perform agreed upon procedures as set forth on Disclosure Schedule 1.6.
Any difference between the Pro Forma Balance Sheet and the consolidated balance
sheet of GPI and its Subsidiaries as of March 31, 1996, confirmed by Ernst &
Young LLP which would have affected the determination of the Aggregate Closing
Consideration shall be an adjustment to the Second Closing Consideration. The
Aggregate Closing Consideration may also be subject to adjustment as provided in
Sections 7.3, 8.2, 8.3, and 8.4.
1.7 "Agreement": this Agreement of Merger and, for purposes of Sections
4.2, 4.5, 5.2 and 5.4, each of this Agreement of Merger, the Registration Rights
Agreement, the Indemnification Agreement, the Non-Solicitation Agreement, the
Service Agreement, the Consulting Agreement and the Representation Letter to
which the Person making the representation is a party.
1.8 "Articles of Merger": the Articles of Merger to be executed by
Merger Sub and GPH and delivered to the Department of Assessments and Taxation
of the State of Maryland relating to the merger of GPH with and into Merger Sub
as contemplated by Section 2.1.
1.9 "Aurora Premises": the premises identified on Disclosure Schedule
1.25 as Subject Property No. 1.
1.10 "Certificate": defined in Section 3.3.
1.11 "Charter Documents": with respect to a Person which is a
corporation or a real estate investment trust, its certificate or articles of
incorporation or organization or its declaration of trust and its by-laws and,
with respect to a Person which is a partnership, its agreement and certificate
of partnership.
1.12 "Closing": the closing of the Merger which will take place as
described in Section 3.1.
1.13 "Closing Date": the date on which the Closing occurs.
1.14 "COBRA": the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, as set forth in Section 4980B of the Internal Revenue Code and
Part 6 of Title I of ERISA.
1.15 "College Park Premises": the premises identified on Disclosure
Schedule 1.71 as Subject Property No. 17.
1.16 "Company Benefit Arrangement": any benefit arrangement maintained
by GPI or any GPI Subsidiary, or any ERISA Affiliates of GPI or any GPI
Subsidiary, covering any employees, former employees, directors or former
directors of GPI or any GPI Subsidiary or any of their respective ERISA
Affiliates, and the beneficiaries of any of them.
1.17 "Company Employee Benefit Plan": any Employee Benefit Plan that is
sponsored or contributed to by GPI or any GPI Subsidiary or any of their ERISA
Affiliates
-3-
<PAGE>
covering the employees or former employees of GPI or any GPI Subsidiary or any
of their ERISA Affiliates.
1.18 "Company Plan": any Company Employee Benefit Plan or Company
Benefit Arrangement.
1.19 "Consulting Agreement": defined in Section 7.2(d).
1.20 "Contract": any contract, agreement, indenture, note, bond, loan
agreement, instrument, lien, conditional sales contract, lease, ground lease,
Tenant Lease, mortgage, license, franchise, insurance policy, commitment or
other arrangement or agreement, including, without limitation, the Development
Partnership Agreements.
1.21 "Contract Properties": the land and improvements and fixtures, if
any, described on Disclosure Schedule 1.21, together with any personal property
of the sellers of such Contract Properties to be sold pursuant to the applicable
purchase and sale agreement and used in connection therewith.
1.22 "Contract Property Leases": all leases of the Contract Properties
listed on Disclosure Schedule 1.22.
1.23 Intentionally Deleted.
1.24 "Development Partnership Agreements": the agreements with third
parties identified on Disclosure Schedule 1.24.
1.25 "Development Properties": the properties described on Disclosure
Schedule 1.25.
1.26 "Development Property Leases": all leases of the Development
Properties listed on Disclosure Schedule 1.26.
1.26A "Disclosure Schedule": the disclosure schedules delivered by HRPT
and GPI to each other prior to the execution of this Agreement.
1.27 "Effective Time": the date and time at which the Merger becomes
effective pursuant to Maryland Law and as provided in Section 3.2 of this
Agreement.
1.28 "Employee Benefit Plan": any employee benefit plan, as defined in
Section 3(3) of ERISA.
1.29 "Environmental Laws": any and all applicable federal, state and
local environmental statutes, laws and ordinances, all regulations and rules of
all governmental agencies, bureaus or departments and all applicable judicial,
administrative and regulatory decrees, judgments and orders, including common
law rulings, relating to injury to, or the protection of, the environment, or
the impact of the environment on human health, including, without limitation,
all requirements pertaining to reporting, licensing, permitting, investigation,
remediation and removal of emissions, discharges, releases or threatened
-4-
<PAGE>
releases of Hazardous Materials into the environment or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
1.30 "Environmental Reports": defined in Section 4.24(e).
1.31 "ERISA": the Employee Retirement Income Security Act of 1974, as
amended.
1.32 "ERISA Affiliate": a Person and/or such Person's Subsidiaries or
any trade or business (whether or not incorporated) which is under common
control with such Person or such Person's Subsidiaries or which is treated as a
single employer with such Person or any Subsidiary of such Person under Section
414(b), (c), (m) or (o) of the Internal Revenue Code or Section 4001(b)(1) of
ERISA.
1.33 "Escrow Agreement": the escrow agreement in the form attached as
Schedule 1.33.
1.34 "Financial Statements": defined in Section 4.8.
1.35 "GAAP": generally accepted accounting principles as in effect on
the date of the financial statements, taxes or other item being referenced.
1.36 "Golden Premises": the premises identified on Disclosure Schedule
1.25 as Subject Property No. 2.
1.37 "GPH Common Shares": the shares of beneficial interest, par value
$.01 per share, of GPH.
1.38 "GPI Affiliate Debt": certain notes of GPI in the principal
amounts and payable to the persons listed on Disclosure Schedule 1.38.
1.39 "GPI Common Stock": the common stock, par value $0.01 per share of
GPI, including the Series A and Series B Common Stock of GPI.
1.40 "GPI Property Debt": the indebtedness of certain of the GPI
Subsidiaries listed on Disclosure Schedule 1.40.
1.41 "GPI Subsidiaries": the Subsidiaries of GPI listed on Disclosure
Schedule 4.4, each of which is a "GPI Subsidiary."
1.42 "GPI Third Party Debt": the notes of GPI held by the Persons
listed on Disclosure Schedule 1.42 in the principal amounts set forth opposite
their names.
1.43 "Hazardous Materials": any substance defined as a "hazardous
substance", "hazardous material", "hazardous" or "dangerous waste" or similar
term under the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. Section 9601 et seq.), the Resource Conservation and Recovery Act
(42 U.S.C. Section
-5-
<PAGE>
6901 et seq.) or any similar or analogous state or local statute, law or
regulation or which contains or consists of gasoline, diesel fuel or other
petroleum products or natural gas, natural gas liquids, liquefied natural gas or
synthetic gas usable for fuels.
1.44 "Houston Premises": the Premises identified on Disclosure Schedule
1.71 as Subject Property No. 1.
1.45 "HRPT Common Shares": the common shares of beneficial interest,
par value $0.01 per share, of HRPT of the same class and series as that traded
on the NYSE on the date of this Agreement.
1.46 "HRPT Merger Shares": a number of HRPT Common Shares equal to the
quotient obtained by dividing the Aggregate Closing Consideration by the Merger
Price, provided the fractional portion of the quotient, if any, shall be
disregarded.
1.47 "HRPT Second Closing Shares": a number of HRPT Common Shares equal
to the quotient obtained by dividing the Second Closing Consideration by the
Second Closing Price.
1.48 "HRPT SEC Reports": collectively, (a) HRPT's Annual Report on Form
10-K for the fiscal year ended December 31, 1995, as filed with the SEC, (b)
proxy and information statements relating to (i) all meetings of HRPT's
shareholders (whether annual or special) and (ii) actions by written consent in
lieu of a shareholders' meeting, if any, from December 31, 1995 until the date
hereof, and (c) all other reports, including quarterly reports, and registration
statements filed by HRPT with the SEC since December 31, 1995.
1.49 "HRPT Terminating Event": any of the occurrences set forth in
Section 10.1(e).
1.50 "HRPT Subsidiaries": the Subsidiaries of HRPT, each of which is an
"HRPT Subsidiary."
1.51 "HSR Act": the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
1.52 "Internal Revenue Code": defined in the Recitals.
1.53 "IRS": the Internal Revenue Service.
1.54 "Knowledge": the terms "GPI's knowledge" and "to the knowledge of
GPI" mean the knowledge of those officers and directors of GPI and the GPI
Subsidiaries listed on Disclosure Schedule 1.54; the terms "HRPT's knowledge"
and "to the knowledge of HRPT," and the terms "Merger Sub's knowledge" and "to
the knowledge of Merger Sub" mean the knowledge of any of their respective
officers or trustees.
1.55 "LA MEPS Premises": the premises identified on Disclosure Schedule
1.21 as Subject Property No. 3.
-6-
<PAGE>
1.56 "Lien": any interest in property, whether such interest is based
on common law, statute, court decision or contract and including, without
limitation, any mortgage, pledge, security interest, lease, encumbrance
(including any easement, exception, reservation or limitation, right of way or
the like), lien, purchase option, call or right, or charge of any kind
(including any agreement to give or permit any of the foregoing), any
conditional sale or other title retention agreement, any lease of property
(whether real, personal or mixed) which is required, in accordance with GAAP, to
be recorded by the lessee as the acquisition of an asset and the incurrence of a
liability, and the filing of any financing statement under the Uniform
Commercial Code or personal property security legislation of any jurisdiction.
1.57 [Intentionally omitted.]
1.58 "Maryland Law": Title 8 of the Corporations and Associations
Article of the Annotated Code of Maryland and the Maryland General Corporation
Law.
1.59 "Material Adverse Effect": (i) any material adverse effect on the
business, assets, liabilities, financial condition or results of operations of
GPI and its Subsidiaries, taken as whole; or, (ii) with respect to any of the
Premises, any event which gives any U.S. Government tenant under a Material
Lease a right to terminate such lease or abate or offset any rental payments
thereunder in accordance with the terms of such lease.
1.60 "Material Leases": all of the Tenant Leases identified on
Disclosure Schedule 1.60.
1.61 "Merger": the merger of GPH with and into Merger Sub as provided
in Section 2.1 of this Agreement.
1.62 "Merger Price": $17.291.
1.63 "Multiemployer Plan": a multiemployer plan, as defined in Sections
3(37) and 4001(a)(3) of ERISA.
1.64 "NYSE": The New York Stock Exchange, Inc.
1.65 "Party": HRPT or GPI and "Parties" shall mean HRPT or GPI.
1.66 "Pension Plan": any employer pension benefit plan, as defined in
Section 3(2) of ERISA.
1.67 "Permits": defined in Section 4.11.
1.68 "Permitted Liens": Liens set forth on Disclosure Schedule 1.68 and
(i) any Liens for real estate Taxes not yet due or delinquent; (ii) any
imperfection of title or similar Lien that, individually or in the aggregate
with other such Liens, do not materially and adversely interfere with the
current use of such Premises or Development Properties; (iii) statutory liens of
mechanics, materialmen and other similar liens arising by operation of law which
arise in the ordinary course of construction in accordance with the approved
plans
-7-
<PAGE>
and specifications relating to the Development Properties, or which are incurred
pursuant to any of the Development Partnership Agreements, in all cases which
Liens are not yet delinquent; (iv) applicable zoning regulations and ordinances,
provided that the same do not prohibit or impair in any material respect the use
of any Premises or Development Properties as currently used; (v) the ground
lease with respect to the Premises located in Buffalo, New York; (vi) any other
Liens approved by HRPT; and (vii) Liens listed as exceptions on Schedule B to
any title reports and policies with respect to real property provided to or
otherwise obtained by HRPT prior to the date hereof (for purposes of the Aurora
Premises and the Golden Premises, the Liens listed on Disclosure Schedule 1.68
in lieu of this clause (vii)).
1.69 "Person": an individual, partnership, joint venture, corporation,
limited liability company, trust and any other form of business organization.
1.70 "Phoenix Premises": the premises identified on Disclosure Schedule
1.21 as Subject Property No. 2.
1.71 "Premises": the land, improvements and fixtures described in
Disclosure Schedule 1.71 together with all personal property owned by GPI or any
of the GPI Subsidiaries and used in connection therewith.
1.72 "Prohibited Transaction": a transaction that is prohibited under
Section 4975 of the Internal Revenue Code or Section 406 of ERISA and not exempt
under Section 4975 of the Internal Revenue Code or Section 408 of ERISA,
respectively.
1.73 "Proprietary Data": defined in Section 4.23.
1.74 "Registration Rights Agreement": defined in Section 2.6.
1.75 "Reportable Event": a "reportable event", as defined in Section
4043 of ERISA, whether or not the reporting of such event to the Pension Benefit
Guaranty Corporation has been waived.
1.76 "Representation Letter": that certain letter, dated the date
hereof, from GPI to HRPT with respect to certain matters concerning the College
Park Premises.
1.77 "San Diego Premises": the premises identified on Disclosure
Schedule 1.25 as Subject Property No. 3.
1.78 "SEC": the United States Securities and Exchange Commission.
1.79 "Second Closing": the closing which will take place as described
in Section 9.
1.80 "Second Closing Consideration": the greater of $8,000,000 or an
amount equal to 3% of the Additional Properties Acquisition Cost. The Second
Closing Consideration may be subject to adjustment as provided in Sections 1.6,
8.3 and 8.10.
-8-
<PAGE>
1.81 "Second Closing Date": the one year anniversary of the Closing
Date.
1.82 "Second Closing Price": the arithmetic average of the closing sale
prices for an HRPT Common Share as reported by NYSE for the 20 trading days
immediately prior to the Second Closing Date.
1.83 "Second Closing Recipient": the successor to GPI designated in its
plan of liquidation to be adopted prior to the Closing.
1.84 "Subsidiaries": all corporations, associations or other entities
of which a person owns, directly or indirectly, 50% or more of the voting stock
or other voting equity interests of such corporation, association or other
entity.
1.85 "Survivor": defined in Section 2.1.
1.86 "Taxes": defined in Section 4.16.
1.87 "Tax Returns": defined in Section 4.16.
1.88 "Tenant Leases": all leases of the Premises listed on Disclosure
Schedule 1.88.
1.89 "Transaction Expenses": the expenses of GPI incurred in connection
with the transactions contemplated by this Agreement set forth on Disclosure
Schedule 1.89.
1.90 "Waco Premises": the premises identified on Disclosure Schedule
1.21 as Subject Property No. 1.
SECTION 2
TRANSACTIONS AND TERMS OF MERGER
2.1 Merger.
Subject to the terms and conditions of this Agreement, at the Effective
Time, GPH shall be merged with and into Merger Sub in accordance with the
provisions of and with the effect provided in Maryland Law. The separate
existence of GPH shall thereupon cease, and Merger Sub shall be the surviving
entity of the Merger (sometimes referred to as the "Survivor") and shall
continue to be governed by Maryland Law. The Merger shall be consummated
pursuant to the terms of this Agreement, which has been approved and adopted by
the Boards of Directors and/or Trustees of HRPT, Merger Sub and GPI and GPH.
2.2 Declaration of Trust of the Survivor.
The Declaration of Trust of Merger Sub in effect immediately prior to
the Effective Time shall be the Declaration of Trust of the Survivor, until
amended in accordance with Maryland Law.
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2.3 Bylaws of the Surviving Corporation.
The Bylaws of Merger Sub in effect immediately prior to the Effective
Time shall be the Bylaws of the Survivor, until amended in accordance with
Maryland Law.
2.4 Directors and Officers of the Survivor.
The directors and officers of Merger Sub immediately prior to the
Effective Time shall be the directors and officers of the Survivor as of the
Effective Time.
2.5 Manner of Converting Shares.
All of the HRPT Common Shares and all shares of beneficial interest of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding after the Effective Time and shall be unaffected
by the Merger. The manner and basis of converting the shares of beneficial
interest of GPH upon consummation of the Merger shall be as follows:
(a) GPH Common Shares. Except as otherwise provided in this
Section 2.5, each GPH Common Share issued and outstanding immediately
prior to the Effective Time shall, as of the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive one percent of (i) the HRPT
Merger Shares, (ii) any HRPT Common Shares issued to pursuant to
Sections 8.3 and 8.4 and (iii) HRPT Common Shares issued pursuant to
Section 9.2.
(b) Anti-Dilution Provisions. If HRPT changes the number of
HRPT Common Shares issued and outstanding, after the determination of
the Merger Price and prior to the Effective Time, as a result of a
stock split, stock dividend, recapitalization, reclassification,
redemption, exchange, self-tender or exchange offer, or any action by
HRPT similar to any of the foregoing, or affects the value of the HRPT
Common Shares as a result of any dividend or distribution of cash,
securities or other property (other than regular cash dividends
declared and paid in a manner and amount consistent with recent past
practice and other than the issuance of HRPT Common Shares in
connection with business combination transactions) and the record date
therefor shall be after the date of this Agreement and prior to the
Effective Time, the numbers of HRPT Common Shares to be issued pursuant
to this Agreement shall be appropriately adjusted.
(c) Treasury Shares. Any and all GPH Common Shares held as
treasury shares by GPH shall be cancelled and retired at the Effective
Time, and no consideration shall be issued in exchange therefor.
(d) Fractional Shares. No fractional HRPT Common Shares will
be issued as a result of the Merger. In lieu of the issuance of
fractional shares pursuant to this Agreement, cash adjustments (without
interest) will be paid to GPI in respect of any fraction of an HRPT
Common Share that would otherwise be issuable to GPI, and
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the amount of such cash adjustment shall be determined by multiplying
the fraction of an HRPT Common Share otherwise issuable times the
Merger Price.
2.6 Investment and Registration Rights Agreement.
The issuance of the HRPT Merger Shares pursuant to this Agreement will
not be registered under the 1933 Act or any state securities laws in reliance
upon certain exemptions from registration contained therein. The transfer of the
HRPT Merger Shares will, accordingly, be subject to certain restrictions as set
forth in the Investment and Registration Rights Agreement, in the form attached
as Schedule 2.6 (the "Registration Rights Agreement"). GPI shall have certain
rights to require the registration of an offering of the HRPT Merger Shares
pursuant to the Registration Rights Agreement.
SECTION 3
CLOSING, EFFECTIVE TIME AND DELIVERY OF CONSIDERATION
3.1 The Closing.
Following the day on which the last of the conditions set forth in this
Agreement shall be fulfilled or waived in accordance herewith (other than those
conditions which are to be fulfilled contemporaneously with the Closing),
subject to the terms and conditions of this Agreement, the closing of the Merger
shall take place (a) at the offices of Sullivan & Worcester LLP, at Boston,
Massachusetts at 9:00 a.m. (local time), on the day set forth in a notice from
HRPT to GPI which shall not be sooner than 3 business days following the date of
such notice and not later than March 31, 1997 (unless delayed as permitted by
Section 10.2), or (b) at such other time, date or place as the Parties may
agree.
3.2 Effective Time.
If all of the conditions to the Merger set forth in this Agreement
shall have been fulfilled or waived and this Agreement shall not have been
terminated, on the Closing Date the Parties shall deliver to the Department of
Assessments and Taxation of the State of Maryland the Articles of Merger in
accordance with Maryland Law. The Merger shall become effective at the time of
filing of the Articles of Merger.
3.3 Issuance of HRPT Merger Shares.
At the Closing, HRPT shall authorize the transfer agent for the HRPT
Common Shares to issue the number of whole HRPT Common Shares to which GPI is
entitled pursuant to Section 2.5. As promptly as possible after the Effective
Date, GPI, as the sole record holder of all of the outstanding certificates
which immediately prior to the Effective Time represented GPH Common Shares
(collectively, the "Certificates" and each a "Certificate") shall surrender such
Certificates (together with a stock power, duly executed in blank) to HRPT and
shall thereupon be entitled to receive in exchange therefor (i) one or more
certificates as requested by GPI (properly issued, executed and counter-signed,
as appropriate) representing, in the aggregate, the HRPT Merger Shares to which
GPI shall have become entitled pursuant to the provisions of Section 2.5 and
(ii) as to any fractional
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share, a check representing the cash consideration to which GPI shall have
become entitled pursuant to Section 2.5. The Certificates so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on the cash payable
upon the surrender of the Certificates. From the Effective Time until surrender
in accordance with the provisions of this Section 3.3, each Certificate shall
represent for all purposes only the right to receive the consideration provided
in Section 2.5. No dividends that are otherwise payable on HRPT Common Shares
will be paid GPI until GPI surrenders the Certificates. After such surrender,
there shall be paid GPI any dividends on such HRPT Common Shares that shall have
a record date on or after the Effective Time and prior to such surrender. If the
payment date for any such dividend is after the date of such surrender, such
payment shall be made on such payment date. In no event shall the persons
entitled to receive such dividends be entitled to receive interest on such
dividends.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF GPI
GPI represents and warrants to HRPT and acknowledges that HRPT is
relying upon such representations and warranties in connection with the
transactions provided for in this Agreement:
4.1 Organization, etc.
GPI and each of the GPI Subsidiaries is duly organized, validly
existing and in good standing as a corporation, real estate investment trust,
limited liability company or partnership, as the case may be, and has all
requisite power and authority (i) to conduct its business as it is now
conducted, (ii) to own or lease all of the properties owned or leased by it,
(iii) in the case of GPI, to enter into and perform this Agreement and (iv) to
otherwise consummate the transactions contemplated by this Agreement. True,
correct and complete copies of the Charter Documents of GPI and each of the GPI
Subsidiaries as of the date of this Agreement have been previously delivered or
made available to HRPT. The records and minute books of GPI and each of the GPI
Subsidiaries contain complete and accurate, in all material respects, minutes of
all meetings of the directors and/or trustees and shareholders of GPI and each
of the GPI Subsidiaries held since their respective dates of organization, all
such meetings were duly called and held, and the share certificate books and
register of shareholders of GPI and each of the GPI Subsidiaries are complete
and accurate. GPI and each of the GPI Subsidiaries is duly qualified to do
business and is in good standing in all jurisdictions in which the ownership or
lease of property by it or the conduct of its business makes such qualification
necessary, except where the failure to be so qualified would not have a Material
Adverse Effect.
4.2 Authorization; Execution; Binding Effect.
The execution, delivery and performance of this Agreement, and the
consummation of the transactions provided for in this Agreement, have been duly
authorized by all necessary action on the part of GPI and this Agreement
constitutes the legal, valid and binding obligation of GPI, enforceable against
GPI in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or other laws
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affecting creditors' rights and remedies generally and by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
4.3 Capitalization.
The authorized capital stock of GPI and the number of shares
outstanding on the date of this Agreement is set forth in Disclosure Schedule
4.3. Except as set forth on Disclosure Schedule 4.3, GPI has no shares of
capital stock or any other voting or equity securities or interests outstanding.
All outstanding shares of GPI Common Stock are duly authorized, validly issued
and fully paid and non-assessable. Except for this Agreement or as set forth in
Disclosure Schedule 4.3, there is no existing subscription, option, warrant,
call, right, commitment or other agreement to which GPI is a party requiring,
and there are no convertible securities of GPI outstanding which upon conversion
would require, directly or indirectly, the issuance of any additional GPI Common
Stock or other securities convertible into GPI Common Stock or any other equity
security of GPI, and there are no outstanding contractual obligations of GPI to
repurchase, redeem or otherwise acquire any outstanding GPI Common Stock. Except
as set forth on Disclosure Schedule 4.3, there are no preemptive rights nor any
rights to demand or require registration under the 1933 Act or any state
securities laws in respect of shares of GPI Common Stock. The holders of GPI
Common Stock set forth in Disclosure Schedule 4.3 are the record and beneficial
owners of such number of shares set forth opposite their respective names on
such schedule, which shares represent all of the issued and outstanding capital
stock of GPI.
4.4 Share Holdings.
Except as set forth in Disclosure Schedule 4.4, GPI is the sole record
and beneficial owner of such number of shares of each of the GPI Subsidiaries as
set forth opposite such Subsidiary's name on such schedule, which shares
represent all of the outstanding capital stock/equity of each such Subsidiary,
such shares are held free and clear of any and all Liens and there are no
existing options, warrants, calls, rights or commitments with respect to such
shares. The Subsidiaries of GPI which are listed on Disclosure Schedule 4.4(A)
have no assets and are not engaged in any trade or business. The Subsidiaries of
GPI which are listed on Disclosure Schedule 4.4(B) hold only interests related
to the Aurora Premises.
4.5 No Conflicting Agreements or Charter Provisions.
Except as set forth on Disclosure Schedule 4.5, the execution, delivery
and compliance with and performance of the terms and provisions of this
Agreement will not conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default under, or result in any violation of,
(i) the Charter Documents of GPI or any of the GPI Subsidiaries or any
resolutions adopted by the shareholders or the Board of Directors and/or
Trustees of GPI or any of the GPI Subsidiaries, (ii) any provision of any
material Contract to which GPI or any of the GPI Subsidiaries is a party or by
which it or any of the GPI Subsidiaries or any part of its or any of the GPI
Subsidiaries' assets may be bound, or (iii) any order, judgment, decree,
license, permit, statute, law, rule or regulation to which GPI or any of the GPI
Subsidiaries is subject, which conflict, breach, default or violation
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has or could reasonably be expected to have a Material Adverse Effect. The
execution, delivery and performance of this Agreement will not result in the
creation of any Lien (other than a Lien in favor of GPI or HRPT) upon or any
preferential arrangement with respect to the business or any material part of
the assets or properties of GPI or any of the GPI Subsidiaries.
4.6 Litigation.
Except as set forth in Disclosure Schedule 4.6, there is (whether
insured or uninsured) no action, suit, proceeding or investigation pending or,
to the knowledge of GPI, threatened, at law or in equity, in any court or before
or by any federal, state, municipal or other governmental authority, department,
commission, board, agency or other instrumentality (i) against GPI or any of the
GPI Subsidiaries, (ii) to the knowledge of GPI, affecting GPI or any of the GPI
Subsidiaries or any of their properties, except for litigation that would not
have a Material Adverse Effect, (iii) to the knowledge of GPI, against or
adversely affecting any director, trustee or officer of GPI or any of the GPI
Subsidiaries with respect to which such director, trustee or officer would be
entitled to indemnification from GPI or any of the GPI Subsidiaries, or (iv)
adversely affecting this Agreement or any action taken or to be taken or
documents executed or to be executed pursuant to or in connection with the
provisions of this Agreement.
4.7 Names.
Schedule 4.7 sets forth a preliminary listing of each name under which
each of GPI and each of the GPI Subsidiaries has conducted business at any time
as well as any entity with or into which any of them has merged. A complete
listing of such names will be provided on or before February 27, 1997.
4.8 Financial Statements.
GPI has delivered to HRPT copies of GPI's consolidated balance sheet
and consolidated statements of income and of cash flows of and for the years
ended December 31, 1995 and December 31, 1996, audited by Ernst & Young LLP,
independent certified public accountants ("Financial Statements"). Each of the
Financial Statements (i) has been prepared from the books and records of GPI and
the GPI Subsidiaries, which in all material respects account for transactions,
assets and liabilities consistent with good business and accounting practice and
(ii) fairly present the financial position, results of operations and cash flows
of GPI and the GPI Subsidiaries, in accordance with GAAP, applied on a
consistent basis.
4.9 No Undisclosed Liabilities.
As of December 31, 1996, neither GPI nor any of the GPI Subsidiaries
had any material obligations, indebtedness or liabilities of any nature which
would have been required by GAAP to be reflected in the Financial Statements
that are not shown in the Financial Statements or the notes thereto or disclosed
in this Agreement. Except as set forth in the Financial Statements or as set
forth on Disclosure Schedule 4.9, neither GPI nor any of the GPI Subsidiaries,
on the date of this Agreement, has outstanding any
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material obligation, indebtedness or liability, and GPI does not know of any
basis for the assertion against GPI or any of the GPI Subsidiaries of any such
material obligation, indebtedness or liability, other than those incurred since
December 31, 1996 in the ordinary course of business.
4.10 Default.
Except for defaults, events or occurrences, the consequences of which,
individually or in the aggregate, would not have a Material Adverse Effect,
neither GPI nor any of the GPI Subsidiaries is in default or, to GPI's
knowledge, alleged to be in default with respect to any judgment, order, writ,
injunction or decree of any court or any federal, state, municipal or other
governmental authority, department, commission, board or agency or other
governmental entity. Except for defaults, events or occurrences, the
consequences of which, individually or in the aggregate, would not have a
Material Adverse Effect, neither GPI nor any of the GPI Subsidiaries is in
breach or default or alleged to be in breach or default under any Contract and
GPI does not know of any condition or state of facts which is likely to cause or
create a default or defaults under any such Contract (other than as set forth on
Disclosure Schedule 4.5). Neither GPI nor any GPI Subsidiary has received
written notice that any of them is in breach or default or alleged to be in
breach or default under any of the agreements evidencing the indebtedness
secured by the Premises identified on Disclosure Schedule 1.71 as Properties
Nos. 13, 14, 19 and 20 and to GPI's knowledge there exists no condition or state
of facts which constitutes or which with the giving of notice and/or lapse of
time would constitute an event of default under any such agreement. Except as
set forth on Disclosure Schedule 4.10, GPI does not know of any other party to
any Contract to which GPI or any of the GPI Subsidiaries is a party and which is
material to the business of GPI and the GPI Subsidiaries, that is in material
default thereunder and, to the knowledge of GPI, there exists no condition or
event which, after notice or lapse of time or both, would constitute a material
default of any other party to any such Contract.
4.11 Compliance with Law.
(a) Except as may have been disclosed to HRPT by a third party
in writing or orally disclosed to HRPT by its local counsel in
connection with HRPT's zoning due diligence, prior to the date of this
Agreement, GPI and each of the GPI Subsidiaries (A) has complied with
all laws, regulations and orders which are applicable to their
respective businesses as presently conducted, (B) possesses all
permits, licenses and other governmental approvals, accreditations,
participation agreements, consents, authorizations and orders
specifically applicable to, or necessary for the conduct of, its
business as currently conducted (collectively, "Permits"), and (C)
except as set forth on Disclosure Schedule 4.5, has obtained all
governmental approvals and all other approvals, consents,
certifications and waivers and has made all filings, given all notices
and otherwise complied with all governmental laws, rules and
regulations which are required on the part of GPI to enter into and
perform this Agreement, and to otherwise consummate the transactions
contemplated by this Agreement, except in each case, where the failure
to have acted in accordance with clauses (A), (B) and (C) has not and
would not reasonably be expected to have a Material Adverse Effect.
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(b) Except as may have been disclosed to HRPT by a third party
in writing or orally disclosed to HRPT by its local counsel in
connection with HRPT's zoning due diligence, prior to the date of this
Agreement, to GPI's knowledge, (i) the Premises and the use and
operation thereof do not violate any material federal, state, municipal
and other governmental statutes, ordinances, by-laws, rules,
regulations or any other legal requirements, including, without
limitation, those relating to construction, occupancy, zoning, adequacy
of parking, environmental protection, occupational health and safety
and fire safety applicable thereto; and (ii) there are presently in
effect all material licenses, permits and other authorizations
necessary for the current use, occupancy and operation thereof, except,
in each case, where the failure to comply with clauses (i) and (ii)
preceding has not and would not reasonably be expected to have a
Material Adverse Effect. Except as set forth on Disclosure Schedule
4.11(b), GPI has not received written notice of any request,
application, proceeding, plan, study or effort which would materially
adversely affect the current use of any of the Premises or the Waco
Premises or the proposed use of any of the Development Properties or
zoning of any of the Premises or which would modify or realign any
adjacent street or highway.
4.12 No Adverse Changes; Acquisitions, Disposition and Commitments.
(a) Except as set forth on Disclosure Schedule 4.12, since
December 31, 1996, there has not been, occurred or arisen (i) any
change in, or agreement to change the character or nature of the
business of GPI or any of the GPI Subsidiaries, (ii) any change in the
financial condition, results of operations, business, properties,
assets or liabilities of GPI and the GPI Subsidiaries, which would have
a Material Adverse Effect, (iii) any damage or destruction in the
nature of a casualty loss, whether covered by insurance or not,
adversely affecting any property of GPI or any of the GPI Subsidiaries
in a manner that would have a Material Adverse Effect, (iv) to GPI's
knowledge, any new or proposed legislation or regulation relating, in
either case, to the business of leasing real property to agencies of
the United States, which would reasonably be expected to have a
Material Adverse Effect, (v) any termination of any Tenant Lease (other
than a scheduled expiration of the term thereof), (vi) except in the
ordinary course of business consistent with past practice, any material
increase in the compensation payable or to become payable by GPI or any
of the GPI Subsidiaries to any of its directors, officers, management,
personnel, consultants or agents or any material increase in benefits
under any bonus, insurance, pension or other benefit plan made for or
with any of such persons, (vii) any actual or threatened strike or
other labor trouble or dispute which has or might have a Material
Adverse Effect, (viii) any direct or indirect redemption, purchase or
other acquisition by GPI or any of the GPI Subsidiaries of any shares
of GPI or any of the GPI Subsidiaries, any declaration, setting aside
or payment of any dividend or other distribution by GPI or any of the
GPI Subsidiaries in respect of shares of GPI or any of the GPI
Subsidiaries whether in cash, shares or property, or any loan to any
stockholder other than advances for expenses in the ordinary course of
business to any stockholder in his capacity as an officer, director or
employee of GPI or any of the GPI Subsidiaries, (ix) any extraordinary
item (as defined by GAAP) resulting in a loss suffered by GPI or any of
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the GPI Subsidiaries, which, individually or in the aggregate, would
have a Material Adverse Effect, (x) any waiver by GPI and the GPI
Subsidiaries of any material right or rights, except for waivers in the
ordinary course of business consistent with past practices, (xi) any
Lien on any of the assets of GPI or any of the GPI Subsidiaries, except
Liens incurred in the ordinary course of business and consistent with
past practice or Permitted Liens, (xii) any obligation incurred by GPI
or any of the GPI Subsidiaries other than any incurred in the ordinary
course of business or which, individually or in the aggregate, with all
other obligations so incurred, is or are not material in amount to GPI
and the GPI Subsidiaries, taken as a whole, or (xiii) any other event,
condition or state of facts of any character peculiar to GPI or any of
the GPI Subsidiaries or to their operations and not generally
applicable to private enterprises in the same business as GPI or any of
the GPI Subsidiaries which has, or might reasonably be expected in the
future to have, a Material Adverse Effect.
(b) Since December 31, 1996, except as set forth in Disclosure
Schedule 4.12, neither GPI nor any GPI Subsidiary has acquired, sold,
leased or disposed of any property or assets or entered into any
commitment or agreement to do any of the foregoing.
4.13 Patents, etc.
GPI and each of the GPI Subsidiaries owns or has the right to use all
rights under any patent, trademark, trade name, or copyright (or any application
or registration respecting any thereof), discovery, improvement, process,
formula, know-how, data, plan, specification, drawing or the like, necessary or
required for the conduct of its business as such business is currently being
conducted and, to the knowledge of GPI, is not infringing or alleged to be
infringing upon the rights of any third party with respect to any of the
foregoing, and GPI does not know of any basis for the assertion against GPI or
any of the GPI Subsidiaries of a claim for such infringement.
4.14 Certain Transactions.
Except as set forth in Disclosure Schedule 4.14, there are no contracts
or business or financial arrangements between GPI or any of the GPI Subsidiaries
and any officer or director of GPI or any of the GPI Subsidiaries, nor, to the
knowledge of GPI, are there any such contracts or business or financial
arrangements with a holder of the outstanding shares of GPI or any of the GPI
Subsidiaries, nor, to the knowledge of GPI, are there any such contracts or
business or financial arrangements with any such person's family members or
affiliates, involving or affecting the business, properties, or assets of GPI or
any of the GPI Subsidiaries or creating a potential conflict of interest.
Disclosure Schedule 4.14 sets forth a list of all of the directors, trustees,
officers and employees of GPI and each of the GPI Subsidiaries together with the
salaries of all officers and employees of GPI and each of the GPI Subsidiaries.
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4.15 Pension and Benefit Plans.
(a) Company Employee Benefit Plans and Company Benefit
Arrangements. Schedule 4.15(a) lists each Company Employee Benefit Plan
and Company Benefit Arrangement. GPI and the GPI Subsidiaries have
delivered to HRPT with respect to each such Company Employee Benefit
Plan and Company Benefit Arrangement true and complete copies of (i)
all written documents comprising such plans and arrangements (including
amendments and individual, trust or insurance agreements relating
thereto); (ii) the most recent Federal Form 5500 series (including all
schedules thereto) filed with respect to each such Company Employee
Benefit Plan; (iii) the two most recent financial statements and
actuarial reports, if any, pertaining to each such plan or arrangement;
(iv) the summary plan description currently in effect and all material
modifications thereto, if any, for each such Company Employee Benefit
Plan; and (v) written communications to employees to the extent the
substance of any Company Employee Benefit Plan described therein
differs materially from the other documentation furnished under this
Section.
(b) Multiemployer Plans. Neither GPI nor any GPI Subsidiary
nor any ERISA Affiliate of GPI or any GPI Subsidiary has at any time
during the 6-year period preceding the date hereof participated in or
been required to make or accrue a contribution to any Multiemployer
Plan. Neither GPI nor any GPI Subsidiary nor any of their respective
ERISA Affiliates has incurred or reasonably expects to incur any
material withdrawal liability (within the meaning of Section 4201 of
ERISA) or any other material current, contingent or potential liability
with respect to any Multiemployer Plan.
(c) Welfare Benefits Plans. Except as set forth in Disclosure
Schedule 4.15(c) and pursuant to the provisions of COBRA, no Company
Employee Benefit Plan provides benefits described in Section 3(1) of
ERISA to any former employees or retirees of GPI or any GPI Subsidiary.
Except as set forth in Disclosure Schedule 4.15 (c), no condition
exists that would prevent GPI or any GPI Subsidiary from amending or
terminating any Company Employee Benefit Plan or Company Benefit
Arrangement providing health or medical benefits in respect of any
active or retired employee other than limitations imposed by law.
(d) Company Employee Benefit Plans. None of the Company
Employee Benefit Plans is a Pension Plan which is subject to Title IV
of ERISA and neither GPI nor any GPI Subsidiary nor any ERISA Affiliate
has at any time maintained or sponsored a Pension Plan which is subject
to Title IV of ERISA. Neither GPI nor any GPI Subsidiary nor any ERISA
Affiliate has incurred any material liability under Section 4062 of
ERISA to the Pension Benefit Guaranty Corporation or to a trustee
appointed under Section 4042 of ERISA. All Company Employee Benefit
Plans that are Pension Plans intended to be qualified under Section 401
of the Internal Revenue Code are so qualified and have been so
qualified during the period since their adoption; each trust created
under any such plan is exempt from tax under Section 501(a) of the
Internal Revenue Code and has been so exempt since its creation. A true
and correct copy of the most recent determination letter from the IRS
regarding such qualified status for each such plan has been delivered
to HRPT.
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(e) Additional Benefits. Except as set forth on Disclosure
Schedule 4.15(e), no employee of GPI or of any ERISA Affiliate of GPI
will receive or be entitled to, and neither GPI nor any GPI Subsidiary
shall be liable for, any additional benefits, bonuses, service or
accelerated rights to payment of benefits under any Company Plan,
including the right to receive any parachute payment, as defined in
Section 280G of the Internal Revenue Code, or become entitled to any
severance, termination allowance or similar payments as a result of the
transactions contemplated by this Agreement.
(f) Compliance with Laws; Contributions. Each Company Plan has
at all times prior hereto been maintained, in all material respects, in
accordance with all applicable laws. Other than claims for benefits in
the ordinary course, there is no claim pending or, to the knowledge of
GPI, threatened involving any Company Plan by any Person against such
plan or GPI or any GPI Subsidiary. There is no pending or, to the
knowledge of GPI, threatened proceeding involving any Company Plan
before the IRS, the United States Department of Labor or any other
governmental authority. Each of GPI and the GPI Subsidiaries and their
respective ERISA Affiliates have made full and timely payment of all
amounts required to be contributed under the terms of each Company Plan
and applicable law or required to be paid as expenses under such
Company Plan. To the extent it might give rise to any material
liability: (i) no Prohibited Transaction has occurred with respect to
any Company Employee Benefit Plan or any other employee benefit plan or
arrangement maintained by GPI or any GPI Subsidiary or any of their
respective ERISA Affiliates which is covered by Title I of ERISA; (ii)
no Reportable Event that was not waived by regulation of the Pension
Benefit Guaranty Corporation, and no event described in Section 4062 or
4063 of ERISA, has occurred in connection with any Company Employee
Benefit Plan; and (iii) neither GPI nor any GPI Subsidiary nor any of
their current or former ERISA Affiliates (while an ERISA Affiliate) has
engaged in, or is a successor or parent corporation to any entity that
has engaged in, a transaction described in Section 4069 of ERISA.
4.16 Tax Matters.
(a) GPI and each of the GPI Subsidiaries have (x) filed when
due with local, foreign and other governmental agencies all tax
returns, estimates, information and reports ("Tax Returns") required to
be filed by them with respect to all federal, state, local or foreign
taxes, levies, imposts, duties, licenses and registration fees, and
charges of any nature whatsoever including, without limitation, income
taxes, unemployment and social security withholding taxes, interest,
penalties, and additions to tax with respect thereto ("Taxes"), and (y)
paid when due and payable or, to the extent of Taxes not yet due and
payable, have accrued or otherwise adequately reserved in accordance
with GAAP for the payment of all Taxes. All such Tax Returns are
correct and complete in all respects excluding defects which,
individually and in the aggregate, will not have a Material Adverse
Effect. Complete and accurate copies of all such Tax Returns have been
furnished or made available to HRPT. Neither GPI nor any of the GPI
Subsidiaries has obtained an extension of the time within which to file
any Tax Return. Neither GPI nor any of its Subsidiaries
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has received written notice from any governmental agency in a
jurisdiction in which such entity does not file a Tax Return stating
that such entity is or may be subject to taxation by that jurisdiction.
(b) No Taxes have been assessed or asserted in writing in
respect of any Tax Returns filed by GPI or any of the GPI Subsidiaries
or claimed in writing to be due by any taxing authority or otherwise
that are not accrued or adequately reserved for in accordance with
GAAP. No Tax Return of GPI or any of the GPI Subsidiaries has been or,
to GPI's knowledge, is currently being audited by the IRS or other
taxing authority (whether foreign or domestic). Neither GPI nor any of
the GPI Subsidiaries has executed or filed with the IRS or any other
taxing authority (whether foreign or domestic) any agreement, waiver,
or other document extending, or having the effect of extending, the
period for assessment or collection of any Taxes, which extension or
waiver is still in effect, and neither GPI nor any of the GPI
Subsidiaries has entered into any tax allocation or sharing agreement
with any other entity. GPI has delivered to HRPT correct and complete
copies of all examination reports, statements of deficiencies and
similar documents prepared by the IRS or any other taxing authority
that have been received by GPI or any GPI Subsidiary. All final
adjustments made by the IRS with respect to any Tax Return of GPI or
any of the GPI Subsidiaries have been reported to the relevant state,
local, or foreign taxing authorities to the extent required by law. No
requests for ruling or determination letters filed by GPI or any of the
GPI Subsidiaries are pending with any taxing authority. Neither GPI nor
any GPI Subsidiary has any liability to any Person, with respect to
Taxes paid, owed or to be paid for periods of time during which GPI or
any GPI Subsidiary or any predecessor thereof were members of a
consolidated group other than a consolidated group of which GPI is the
common parent.
(c) At all times that it has been in existence, GPI has
qualified as a "real estate investment trust" under Section 856 of the
Internal Revenue Code, and each GPI Subsidiary (other than general or
limited partnerships or limited liability companies) has qualified as a
"qualified REIT Subsidiary" under Section 856(i) of the Internal
Revenue Code. GPI has at all times satisfied Section 857(a)(3) of the
Internal Revenue Code and does not have any "non-REIT earnings and
profits" within the meaning of Treasury Regulation ss. 1.857-11. The
assets of GPI as of the Effective Time fulfill the "substantially all"
requirement as it is set forth in IRS Revenue Procedure 77-37, ss.
3.01. Neither GPI nor any of the GPI Subsidiaries has filed a consent
pursuant to Section 341(f) of the Internal Revenue Code, or agreed to
have Section 341(f)(2) of the Internal Revenue Code apply to any
disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Internal Revenue Code) owned by it. No
property of GPI or any of the GPI Subsidiaries is property that such
entity is or will be required to treat as being owned by another person
pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986. Neither GPI nor any of the GPI
Subsidiaries has agreed to or is required to make any adjustment
pursuant to Section 481(a) of the Internal Revenue Code by reason of a
change in the accounting method initiated by GPI or any of the GPI
Subsidiaries, and GPI has no knowledge that the IRS has proposed any
such
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adjustment or change in accounting method. Neither GPI nor any of the
GPI Subsidiaries has executed or entered into a closing agreement
pursuant to Section 7121 of the Internal Revenue Code or any
predecessor provision thereof or any similar provision of state, local
or foreign law.
4.17 Contracts.
(a) Except as set forth in Disclosure Schedule 4.17, neither
GPI nor any of the GPI Subsidiaries is a party to or bound by any (A)
Contract not made in the ordinary course of business and not terminable
on thirty (30) days notice without payment of premium or penalty; (B)
advertising, public relations, franchise, distributorship or sales
agency Contract; (C) Contract involving the commitment or payment of in
excess of $100,000, at any one time or annually for the future purchase
or sale by GPI or any of the GPI Subsidiaries of property improvements,
services or equipment that is not otherwise reimbursable; (D) Contract
among shareholders or granting a right of refusal or for a partnership
or for a joint venture or for the acquisition, sale or lease (other
than the Tenant Leases and Development Property Leases) of any material
assets of GPI or any of the GPI Subsidiaries; (E) mortgage, pledge,
conditional sales contract, security agreement, factoring agreement or
other similar Contract with respect to any real or tangible personal
property of GPI or any of the GPI Subsidiaries; (F) loan agreement,
credit agreement, promissory note, guarantee, indenture, subordination
agreement, letter of credit or any other similar type of Contract; or
(G) retainer Contract with attorneys, accountants, actuaries,
appraisers, investment bankers or other professional advisers (other
than those referred to in Section 4.28). GPI and each of the GPI
Subsidiaries has delivered or otherwise made available to HRPT true,
correct and complete copies of the Contracts listed in Disclosure
Schedule 4.17, together with all amendments, waivers, modifications,
supplements or side letters affecting the obligations of any party
thereunder.
(b) Except as set forth in Disclosure Schedule 4.17, GPI is
not a party to or bound by any employment, consulting, non-competition,
severance or indemnification Contract and no GPI Subsidiary is a party
to or bound by any employment, consulting, non-competition, severance
or indemnification Contract.
(c) Except as set forth opposite the description of a Contract
in Disclosure Schedule 4.17:
(i) Each of the Contracts which is material to any of
GPI or any of the GPI Subsidiaries is valid and enforceable in
accordance with its terms, assuming the validity and
enforceability thereof against the other parties thereto in
all material respects, and subject to applicable bankruptcy,
insolvency, reorganization and similar laws affecting
creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in
equity).
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(ii) No previous or current party to any such
Contract which is material to any of GPI or any of the GPI
Subsidiaries has given to GPI or any of the GPI Subsidiaries
written notice of or made a claim with respect to any breach
or default under any such Contract which breach or default has
not been cured or waived.
4.18 Insurance.
(a) Schedule 4.18 sets forth a true and correct list of all
insurance policies of any kind or nature whatsoever which are in force
and to which GPI or any of the GPI Subsidiaries is a named party or
beneficiary, specifying the insurance carrier, the type of insurance
coverage, the policy number, the date through which premiums have been
paid, the aggregate amount of insurance coverage per claim or per
occurrence, as the case may be, applicable self-retention limits and/or
self- or co-insurance requirements, and describing in reasonable detail
each pending claim under each such policy. Such insurance provides
coverage against, among other matters, property damage and other
casualty loss, personal injury, workers' compensation claims, general
liability, and other similar risks and matters incident to the conduct
of the business of GPI and each of the GPI Subsidiaries and similarly
situated businesses and in a manner and in an amount that is consistent
with industry practice. GPI and each of the GPI Subsidiaries regularly
accrues, and the financial statements of GPI reflect the accrual of,
adequate reserves against loss contingencies, in accordance with GAAP,
arising from known and incurred claims against GPI and each of the GPI
Subsidiaries. Based on the past claims experience of GPI and each of
the GPI Subsidiaries, such insurance together with such reserves is
reasonably likely to adequately cover any loss contingencies and, to
GPI's knowledge, all policies of such insurance are binding and
effective upon the issuers (each of whom is reputable and creditworthy)
in accordance with their respective terms.
(b) Neither GPI nor any of the GPI Subsidiaries has received
written notice from any insurance carrier of defects or inadequacies in
the Premises which, if uncorrected, would result in a termination of
insurance coverage or a material increase in the premiums charged
therefor.
4.19 Bank Accounts.
Schedule 4.19 contains a correct and complete list of every bank
account or lock box that GPI or any of the GPI Subsidiaries has or maintains
with any bank, savings and loan association or other financial institution, the
account identification number, if any, and the names of persons authorized to
make withdrawals or have access to each such account or lock box.
4.20 Accounts.
(a) The accounts receivable of GPI and each of the GPI
Subsidiaries as reflected in the Financial Statements or arising after
the date thereof are the result of bona fide transactions in the
ordinary course of business.
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(b) All accounts payable of GPI and each of the GPI
Subsidiaries as reflected in the Financial Statements or arising after
the date thereof are the result of bona fide transactions in the
ordinary course of business and have been paid or are not yet due and
payable (giving due regard to payment practices prevailing in the
industry and GPI's and such GPI Subsidiary's historical course of
dealing with its vendors and suppliers).
4.21 Labor Matters.
(a) No employees of GPI or any of the GPI Subsidiaries are
represented by any labor organization, and no labor organization or
group of employees of GPI or any of the GPI Subsidiaries have made a
pending demand for recognition or have filed a petition seeking a
representation proceeding with the National Labor Relations Board
within the last two years; and
(b) There are no strikes, grievances or other labor disputes
pending against GPI or any of the GPI Subsidiaries and, to the
knowledge of GPI, there are no such strikes, grievances and disputes
threatened. There are no unfair labor practice charges or complaints
pending or, to the knowledge of GPI, threatened by or on behalf of any
employee or group of employees of GPI or any of the GPI Subsidiaries.
4.22 Title to Properties.
(a) Schedule 4.22 identifies (i) the real property comprising
the Premises and the Development Properties which, as of the date
hereof, constitute all of the real property owned by GPI and the GPI
Subsidiaries (based on surveys and title insurance policies issued in
favor of GPI or the GPI Subsidiaries with respect to such Premises and
Development Properties) and (ii) the leases of all real property which
is leased by any of them, and of the nature of GPI's and the GPI
Subsidiaries' interest therein.
(b) Except as otherwise set forth in Disclosure Schedule 4.22,
the GPI Subsidiaries have marketable title to all real property
constituting the Premises and Development Properties and title to all
other property and assets, tangible and intangible, owned by them, in
each case free and clear of all Liens, except: (i) the Tenant Leases
and Development Property Leases, (ii) Permitted Liens, and (iii) Liens
reflected in the Financial Statements.
(c) Other than the Tenant Leases, neither GPI nor any GPI
Subsidiary has entered into any contract or agreement with respect to
the occupancy of the Premises and, to GPI's knowledge, other than the
Development Property Leases, there are no contracts or other agreements
with respect to the occupancy of the Development Properties, which will
be binding after the Closing. To GPI's knowledge, other than the
Contract Property Leases, there is no contract or agreement with
respect to the occupancy of the Contract Properties which will be
binding after the Closing with respect thereto. The copies of the
Tenant Leases, the Development Property Leases and the Contract
Property Leases heretofore delivered
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or made available by GPI to HRPT are true, correct and
complete copies thereof; the Tenant Leases have not been amended except
as evidenced by amendments similarly delivered or made available and
constitute the entire agreement between GPI or the GPI Subsidiaries and
the tenants thereunder. Disclosure Schedule 4.22 includes a true,
correct and complete rent-roll with respect to each of the Premises
and, except as otherwise set forth in Disclosure Schedule 4.22: (i) to
GPI's knowledge, each of the Tenant Leases is in full force and effect
on the terms set forth therein in all material respects and each tenant
thereunder is bound by its obligations in accordance with the terms set
forth therein and has no currently exercisable rights of abatement,
offsets, defenses or other basis for relief or adjustment as a result
of any default of any GPI Subsidiary; (ii) no tenant under a Tenant
Lease has asserted in writing or, to GPI's knowledge, has any defense
to, offsets or claims against, rent payable by it or the performance of
its other obligations under its Tenant Lease; (iii) neither GPI nor any
GPI Subsidiary has any material overdue outstanding obligation to
provide any tenant under a Tenant Lease with an allowance to construct,
or to construct at its own expense, any tenant improvements; (iv) no
tenant under a Tenant Lease is in arrears in the payment of any sums or
in the performance of any material obligation required of it under its
Tenant Lease beyond any applicable grace period, and no tenant under a
Tenant Lease has prepaid any rent or other charges, except for one
month's rent and related charges; (v) no Tenant has filed a petition in
bankruptcy or for the approval of a plan of reorganization or
management under the Federal Bankruptcy Code or under any other similar
state law, or made an admission in writing as to the relief therein
provided, or otherwise become the subject of any proceeding under any
federal or state bankruptcy or insolvency law, or has admitted in
writing its inability to pay its debts as they become due or made an
assignment for the benefit of creditors, or has petitioned for the
appointment of or has had appointed a receiver, trustee or custodian
for any of its property; (vi) no tenant under a Tenant Lease or, to the
knowledge of GPI, under a Development Property Lease has requested in
writing a modification of its Tenant Lease, or a release of its
obligations under its Tenant Lease in any material respect or has given
written notice terminating its Tenant Lease, or has been released of
its obligations thereunder in any material respect prior to the normal
expiration of the term thereof; (vii) no guarantor of any tenant's
obligations has been released or discharged, voluntarily or
involuntarily, or by operation of law, from any obligation under or in
connection with any Tenant Lease or any transaction related thereto;
(viii) all security deposits paid by tenant under Tenant Leases are as
set forth in Disclosure Schedule 4.22; and (ix) all tenant finish and
lease commissions due with respect to each of the Tenant Leases have
been paid.
(d) To GPI's knowledge, all warranties, certifications and
representations of the landlords under the Tenant Leases (including in
any solicitations or requests for offers delivered in connection with
such landlords' entering into the Tenant Leases) and in any collateral
documentation are true and correct in all material respects as of the
relevant date thereof. All covenants and agreements of the GPI
Subsidiaries as landlords under the Tenant Leases required to be
performed as of the date hereof have been performed in all material
respects.
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(e) No Person other than GPI, the GPI Subsidiaries and tenants
under Tenant Leases has any interest in the Premises, except as set
forth in Disclosure Schedule 4.22 or pursuant to Permitted Liens.
4.23 Proprietary Information.
GPI and each of the GPI Subsidiaries owns, or has a right to use
without material limitations or restrictions adversely affecting the use of the
same in the ordinary conduct of its business, subject to all applicable laws,
rules and regulations, including without limitation, directives, orders or
similar actions of any applicable state regulatory authority, all technology,
know-how, processes and other proprietary information now used in the conduct of
its business (collectively, "Proprietary Data"), and the consummation of the
transactions contemplated by this Agreement will not alter or impair any such
rights or breach any agreements with third party vendors or require payments of
additional sums thereto. No claims have been asserted by any person to use or
obtain access to any such Proprietary Data and no person has challenged or
questioned (i) the validity or effectiveness of any license or agreement
relating to the same in accordance with the terms thereof or (ii) the right of
GPI or any of the GPI Subsidiaries to copy, modify, use or distribute the same,
nor to the best of GPI's knowledge, is there any basis for any such claim,
challenge or question. The manner in which GPI or any of the GPI Subsidiaries
has actually used or copied such Proprietary Data does not infringe on the
rights of any persons.
4.24 Environmental Matters.
(a) Except as disclosed in Disclosure Schedule 4.24(a) or the
Environmental Reports, GPI and each of the GPI Subsidiaries:
(i) is in compliance in all material respects with
all Environmental Laws, has not received any written
notification of potential liability under, or any written
request for information pursuant to, the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), the Resource Conservation
Recovery Act, as amended
("RCRA"), or any similar state law;
(ii) has not entered into and is not a party under
any consent decree, compliance order, or administrative or
judicial order, injunction or judgment pursuant to any
Environmental Law; and
(iii) except where such would not reasonably be
expected to result in a Material Adverse Effect, has obtained
all permits, licenses and other authorizations and made all
filings which are required to be obtained by GPI and each GPI
Subsidiary for the ownership of its property, facilities and
assets and the operation of its businesses under all
Environmental Law, is and at all times since its organization
has been in compliance with the terms and conditions of all
such required permits, licenses and other authorizations,
and is not the subject of any pending or, to GPI's knowledge,
threatened
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with any legal action involving a demand for damages or
other potential liability arising under or relating to any
Environmental Law.
(b) Except as disclosed in Disclosure Schedule 4.24(b) or the
Environmental Reports:
(i) except where such would not reasonably be
expected to have a Material Adverse Effect, no disposal,
release, burial or placement of Hazardous Materials has
occurred on any property or facility owned, leased, operated
or occupied by GPI or any GPI Subsidiary during the period
that such facilities and properties were owned, leased,
operated or occupied by GPI or any of the GPI Subsidiaries or,
to the knowledge of GPI and the GPI Subsidiaries, at any prior
time or, to the knowledge of GPI and the GPI Subsidiaries, at
any other facility or site listed on the National Priorities
List or otherwise listed or subject to pending investigation
or remediation under CERCLA, RCRA or any analogous state
statute to which Hazardous Materials from or generated by GPI
or any GPI Subsidiary may have been taken at any time in the
past;
(ii) there has been no disposal, release, burial or
placement of Hazardous Materials on any other property which
has resulted in contamination of or beneath any properties or
facilities currently or, to the knowledge of GPI and the GPI
Subsidiaries, formerly owned, leased, operated or occupied by
GPI or any GPI Subsidiary during the period that such
facilities and properties were owned, leased, operated or
occupied by it (or, to the knowledge of GPI, at any prior
time) which would reasonably be expected to result in any
material liability for the removal or remediation of such
contamination; and
(iii) no Lien has been imposed on any GPI or any of
the GPI Subsidiaries' properties or facilities under any
Environmental Law.
(c) Except as disclosed in Disclosure Schedule 4.24(c) or in
the Environmental Reports, to GPI's knowledge, there are no
above-ground or underground storage tanks; no friable asbestos; no
polychlorinated biphenyls in excess of legally permissible
concentrations; and no insulating material containing urea formaldehyde
on any property currently owned, leased, operated or occupied by GPI or
any GPI Subsidiary;
(d) Neither GPI nor any GPI Subsidiary has received written
notice of any claim or allegation of injury to human health as a result
of the quality of air within the buildings at any of the properties
owned, leased, operated or occupied by GPI or any of the GPI
Subsidiaries; and
(e) GPI and each of the GPI Subsidiaries has delivered to HRPT
a true and complete copy of all written reports of environmental
audits, evaluations, assessments, studies or tests in their possession,
custody or control relating to GPI
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and each of the GPI Subsidiaries, their business and their assets and
properties (collectively, "Environmental Reports").
4.25 Utilities, Etc.
All utilities and services necessary for the use and operation of the
Premises (including, without limitation, road access, gas, water, electricity
and telephone) are available thereto, are of sufficient capacity to meet
adequately all needs and requirements necessary for the current use and
operation of such Premises and for their respective intended purposes. To GPI's
knowledge, no fact, condition or proceeding exists which would result in the
termination or material impairment of the furnishing of such utilities to any of
the Premises.
4.26 Substantial Completion.
GPI reasonably anticipates that substantial completion of the
Development Properties will occur on or before the dates specified in Disclosure
Schedule 4.26 in accordance with the Development Budgets attached to Disclosure
Schedule 4.26 and in accordance with all applicable material requirements of the
Development Property Leases for such Development Properties.
4.27 GPH.
(a) GPH will be organized prior to the Closing Date to act as
a holding company for all of GPI's Subsidiaries. Between the date of
its organization and the Closing Date, GPH will conduct no business,
have no employees and will not be a party to any lease, license,
contract, agreement, commitment, instrument or obligation.
(b) The authorized equity of GPH will be one hundred (100) GPH
Common Shares. On the Closing Date: (i) GPH will have no other voting
or equity securities or interests outstanding except for one hundred
(100) GPH Common Shares; (ii) all outstanding GPH Common Shares will be
duly authorized, validly issued and fully paid and non-assessable and
will be owned, beneficially and of record, by GPI; (iii) there will be
no existing subscription, option, warrant, call, right, commitment or
other agreement to which GPH is a party requiring, and (iv) there will
be no convertible securities of GPH outstanding which upon conversion
would require, directly or indirectly, the issuance of any additional
GPH Common Shares or other securities convertible into GPH Common
Shares or any other equity security of GPI, and there are no
outstanding contractual obligations of GPH to repurchase, redeem or
otherwise acquire any outstanding GPH Common Shares. On the Closing
Date, GPI will be the record and beneficial owner of all of the issued
and outstanding shares of beneficial interest of GPH.
(c) On the Closing Date, GPH will be a real estate investment
trust, duly organized, validly existing and in good standing under the
laws of the state of Maryland with all requisite trust power and
authority (i) to conduct its business as it
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is then conducted, (ii) to own or lease all of the properties owned or
leased by it, (iii) to consummate the transactions contemplated by this
Agreement.
(d) The consummation of the transactions provided for in this
Agreement will, on the Closing Date, have been duly authorized by all
necessary action on the part of GPH.
4.28 Fees.
No person acting on behalf of GPI is, or will be, entitled to any
commission, broker's, finder's or investment banking fees from any of the
Parties or from any Person controlling, controlled by or under a common control
with any Party, in connection with the transactions contemplated by this
Agreement except Merrill Lynch & Co. and Donaldson, Lufkin & Jenrette
Securities.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF HRPT
HRPT represents and warrants to GPI and acknowledges that GPI is
relying on such representations and warranties in connection with the
transactions provided for in this Agreement:
5.1 Organization, etc.
HRPT is a real estate investment trust, duly organized, validly
existing and in good standing under the laws of the state of Maryland and each
has all requisite trust power and authority (i) to conduct its business as it is
now conducted, (ii) to own or lease all of the properties owned or leased by it,
(iii) to enter into and perform this Agreement and (iv) to otherwise consummate
the transactions contemplated by this Agreement.
5.2 Authorization: Execution: Binding Effect.
The execution, delivery and performance of this Agreement and the
consummation of the transactions provided for in this Agreement have been duly
authorized by all necessary action on the part of HRPT. This Agreement
constitutes the legal, valid and binding obligations of HRPT, enforceable
against it in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights and remedies generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
5.3 Capitalization.
The authorized shares of beneficial interest of HRPT and the number of
shares of beneficial interest outstanding on the date of this Agreement is set
forth in the HRPT SEC Reports. All outstanding shares of beneficial interest are
duly authorized, validly issued and fully paid and non-assessable. HRPT has no
shares of beneficial interest or any other
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voting or equity securities or interests outstanding except for such shares.
Except for this Agreement and as set forth in Disclosure Schedule 5.3, there is
no existing subscription, option, warrant, call, right, commitment or other
agreement to which HRPT is a party requiring, and there are no convertible
securities of HRPT outstanding which upon conversion would require, directly or
indirectly, the issuance of any additional HRPT equity securities or other
securities convertible into any equity security of HRPT and there are no
outstanding contractual obligations of HRPT to repurchase, redeem or otherwise
acquire any outstanding HRPT equity securities. Except as described in
Disclosure Schedule 5.3, there are no preemptive rights nor any rights to demand
or require registration under the 1933 Act or any state securities laws in
respect of any equity securities.
5.4 No Conflicting Agreements or Trust/Charter Provisions.
Except as described in Disclosure Schedule 5.4, the execution, delivery
and compliance with and performance of the terms and provisions of this
Agreement will not conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default (or an event which, with notice, lapse
of time, or both, would constitute a default) under, or result in any violation
of, (A) the Charter Documents of HRPT or any resolutions adopted by the
shareholders or trustees of HRPT or (B) any provision of any Contract to which
HRPT or any of the HRPT Subsidiaries is a party or by which it or any of the
HRPT Subsidiaries or any part of it or any of the HRPT Subsidiaries' assets may
be bound or (C) any order, judgment, decree, license, permit, statute, law, rule
or regulation to which HRPT or any of the HRPT Subsidiaries is subject. The
execution, delivery and performance of this Agreement will not result in the
creation of any lien, charge or encumbrance upon or any preferential arrangement
with respect to the business or any part of the assets or properties of HRPT.
5.5 Litigation.
Except as set forth in the HRPT SEC Reports, there is (whether insured
or uninsured) no action, suit, proceeding or investigation pending or, to the
knowledge of HRPT, threatened, at law or in equity, in any court or before or by
any federal, state, municipal or other governmental authority, department,
commission, board, agency or other instrumentality (i) against HRPT or any of
the HRPT Subsidiaries, (ii) to the knowledge of HRPT, affecting HRPT or any of
the HRPT Subsidiaries or any of their properties, except for private civil
litigation involving claims which will not have a material adverse effect on the
business, assets, liabilities, financial condition, results of operations or
business prospects of HRPT and its subsidiaries, taken as a whole, (iii) to the
knowledge of HRPT, against or adversely affecting any officer of HRPT or any of
the HRPT Subsidiaries, or (iv) adversely affecting this Agreement or any action
taken or to be taken or documents executed or to be executed pursuant to or in
connection with the provisions of this Agreement.
5.6 No Undisclosed Liabilities.
Except as set forth in the HRPT SEC Reports, as of September 30, 1996,
neither HRPT nor any of the HRPT Subsidiaries had any obligations, indebtedness
or liabilities of any nature which would have been required by GAAP to be
reflected on the consolidated
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balance sheet of HRPT as of September 30, 1996, that are not shown on such
balance sheet or the notes to such balance sheet. Except as set forth in such
balance sheet, neither HRPT nor any of the HRPT Subsidiaries, on the date of
this Agreement, has outstanding any material obligation, indebtedness or
liability, and HRPT does not know of any basis for the assertion against HRPT or
any of the HRPT Subsidiaries of any such obligation, indebtedness or liability,
other than those incurred since September 30, 1996, in the ordinary course of
business or disclosed in Disclosure Schedule 5.6 or in the HRPT SEC Reports.
5.7 Default.
Except for events or occurrences, the consequences of which,
individually or in the aggregate, would not have a material adverse effect on
the business, assets, liabilities, financial condition, results of operations or
business prospects of HRPT and its Subsidiaries, taken as a whole, neither HRPT
nor any of the HRPT Subsidiaries is in default or, to HRPT's knowledge, alleged
to be in default with respect to any judgment, order, writ, injunction or decree
of any court or any federal, state, municipal or other governmental authority,
department, commission, board or agency or other governmental entity. Except for
events or occurrences, the consequences of which, individually or in the
aggregate, would not have a material adverse effect on the business, assets,
liabilities, financial condition, results of operations or business prospects of
HRPT and its Subsidiaries, taken as a whole, neither HRPT nor any of the HRPT
Subsidiaries is in breach or default or alleged to be in breach or default under
any lease, license, contract, agreement, commitment, instrument or obligation
and HRPT does not know of any condition or state of facts which is likely to
cause or create a default or defaults under any such lease, license, contract,
agreement, commitment, instrument or obligation. Except as set forth in
Disclosure Schedule 5.7, HRPT does not know of any other party to any lease,
license, contract, agreement, commitment, instrument or obligation to which HRPT
or any of the HRPT Subsidiaries is a party and which is material to the business
of HRPT and the HRPT Subsidiaries taken as a whole, that is in default
thereunder and, to the knowledge of HRPT, there exists no condition or event
which, after notice or lapse of time or both, would constitute a default of any
other party to any such lease, license, contract, agreement, commitment,
instrument or obligation.
5.8 Compliance with Law.
HRPT and each of the HRPT Subsidiaries (A) has complied with all laws,
regulations and orders which are applicable to their respective businesses as
presently conducted, (B) possesses all Permits, and (C) has obtained all
governmental approvals and all other approvals, consents, certifications and
waivers and has made all filings, given all notices and otherwise complied with
all governmental laws, rules and regulations which are required on the part of
HRPT to enter into and perform this Agreement, and to otherwise consummate the
transactions contemplated by this Agreement, except in each case, where the
failure to have acted in accordance with clauses (A), (B) and (C) has not and
will not have a material adverse effect on the business, assets, liabilities,
financial condition, results of operations or business prospects of HRPT and its
Subsidiaries, taken as a whole.
5.9 Securities Filings.
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All reports and statements filed with respect to HRPT pursuant to the
1934 Act since December 31, 1995, conform in all material respects to the
applicable requirements of the 1934 Act and the rules and regulations
promulgated thereunder and did not include at the time of filing such documents
any untrue statement of a material fact or omit to state any material fact
required to be stated or necessary to make the statements made, in light of the
circumstances under which they were made, not misleading. Since December 31,
1995, HRPT has not failed to make any filing required by the 1934 Act on a
timely basis.
5.10 Merger Shares.
As of their respective dates of issuance, the HRPT Common Shares to be
issued pursuant to this Agreement will have been duly authorized, validly issued
and fully paid and non-assessable, free and clear of any Lien created by or
attributable to HRPT and there are no preemptive rights with respect to such
issuance.
5.11 Tax Matters.
At all times after December 31, 1986, HRPT has qualified as a "real
estate investment trust" under Section 856 of the Internal Revenue Code
("REIT"), and each HRPT Subsidiary (other than general or limited partnerships)
has qualified either as a "qualified REIT subsidiary" under Section 856(i) of
the Internal Revenue Code or as a REIT. HRPT has at all times after December 31,
1986, satisfied Section 857(a)(3) of the Internal Revenue Code and does not have
any "non-REIT earnings and profits" within the meaning of Treasury Regulation
ss. 1.857-11. Neither HRPT nor any of the HRPT Subsidiaries has filed a consent
pursuant to Section 341(f) of the Internal Revenue Code, or agreed to have
Section 341(f)(2) of the Internal Revenue Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the
Internal Revenue Code) owned by it. No property of HRPT or any of the HRPT
Subsidiaries is property that such entity is or will be required to treat as
being owned by another person pursuant to the provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended and in effect immediately prior to
the enactment of the Tax Reform Act of 1986. Neither HRPT nor any of the HRPT
Subsidiaries has agreed to or is required to make any adjustment pursuant to
Section 481(a) of the Internal Revenue Code by reason of a change in the
accounting method initiated by HRPT or any of the HRPT Subsidiaries, and HRPT
has no knowledge that the IRS has proposed any such adjustment or change in
accounting method. Neither HRPT nor any of the HRPT Subsidiaries has executed or
entered into a closing agreement pursuant to Section 7121 of the Internal
Revenue Code or any predecessor provision thereof or any similar provision of
state, local or foreign law.
5.12 Merger Sub.
(a) Merger Sub will be organized prior to the Closing Date.
(b) On the Closing Date HRPT will be the record and beneficial
owner of all of the issued and outstanding shares of beneficial
interest of Merger Sub.
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(c) On the Closing Date, Merger Sub will be a real estate
investment trust, duly organized, validly existing and in good standing
under the laws of the state of Maryland with all requisite trust power
and authority (i) to conduct its business as it is then conducted, (ii)
to own or lease all of the properties owned or leased by it and (iii)
to consummate the transactions contemplated by this Agreement.
(d) The consummation of the transactions provided for in this
Agreement will, on the Closing Date, have been duly authorized by all
necessary action on the part of Merger Sub.
SECTION 6
CERTAIN COVENANTS AND AGREEMENTS
6.1 Conduct of Business by GPI.
From the date of this Agreement to the Effective Time, except as
required in connection with the Merger and the other transactions contemplated
by this Agreement or as set forth on Disclosure Schedule 6.1 and unless GPI
obtains HRPT's prior written consent (provided, if HRPT shall fail to respond
within five business days of a written request for consent, or such shorter
period as may be reasonably required under the circumstances, (GPI agreeing to
identify the response period and any circumstances requiring a response period
of fewer than five business days in its written request) such consent shall be
deemed to have been given) in each instance, GPI will, and will cause each GPI
Subsidiary to:
(a) Carry on its business as currently conducted and only in
the usual and ordinary course;
(b) Use its best efforts to preserve its business organization
intact, to continue to operate the Premises in a good and businesslike
fashion consistent with past practices and to maintain the Premises in
good working order and condition in a manner consistent with past
practice, to retain the services of its present employees and to
preserve the goodwill of its tenants;
(c) Maintain insurance coverage of the types and in the
amounts carried by it prior to the execution of this Agreement and
promptly report all known claims within the applicable claims period;
(d) Not purchase, sell, lease or dispose of any property or
assets and not incur any liability or make any material commitment or
enter into any other transaction, except, in each case, in the ordinary
and usual course of business or pursuant to Contracts existing on the
date hereof; provided (x) in the case of Additional Properties, neither
GPI nor any GPI Subsidiary will enter into an agreement to acquire such
Additional Property and (y) in the case of the Contract Properties,
neither GPI nor any GPI Subsidiary will enter into an amendment to the
agreement to acquire any Contract Property or waive any diligence
contingencies (except for such diligence contingencies that expire with
the passage of time)
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without HRPT's consent, which may be withheld in HRPT's sole
discretion, in the case of contracts to acquire Additional Properties,
and which may be withheld by HRPT in the case an amendment to an
agreement to acquire any Contract Property, in its reasonable
discretion provided if the amendment would have an adverse effect on
HRPT's expected yield with respect to the particular Contract Property
such withholding shall be deemed reasonable;
(e) Not issue any shares of capital stock or other securities
or options or rights to purchase shares of capital stock or other
securities, not purchase any of its capital stock and not pay any
dividend on its capital stock;
(f) Not increase the compensation of any officer, employee or
agent other than in the usual and ordinary course of business, and not
create any additional employee benefit plan or amend any existing
employee benefit plan;
(g) Not organize any new Subsidiary, and not acquire or enter
into an agreement to acquire, by merger, consolidation or purchase of
stock or assets, any business or entity;
(h) Not (i) create, incur or assume any long-term debt
(including obligations in respect of capital leases) or, except in the
ordinary course of business under existing lines of credit, create,
incur or assume any short-term debt for borrowed money, (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person, (iii) except in the ordinary course of business and consistent
with past practice, make any loans or advances to any other person, or
(iv) make any capital contributions to, or investments in, any person
(other than a GPI Subsidiary);
(i) Not enter into, modify, amend or terminate any of the
Material Leases or other material agreement with respect to any of the
Premises, which would encumber or be binding upon the Premises from and
after the Closing Date;
(j) Not amend or modify its charter documents;
(k) Whether or not in the ordinary course of business, unless
GPI elects to cause the Houston Premises to be transferred pursuant to
Section 8.2, not enter into a lease of the Houston Premises;
provided that GPI will cause GPH not to engage in any trade or business, and not
to enter into any lease, license, contract, agreement, commitment, instrument or
obligation from the date of this Agreement to the Effective Time, except as
required in connection with the Merger and the other transactions contemplated
by this Agreement.
In connection with the continued operation of the business of GPI
between the date of this Agreement and the Effective Time, GPI shall confer in
good faith with one or more representatives of HRPT as often as HRPT shall
reasonably request to report operational matters of materiality and the general
status of ongoing operations including, without limitation, the status of
Development Properties, and the Contract Properties and
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negotiations with respect to Additional Properties and the Contract Properties.
GPI acknowledges that HRPT does not and will not waive any rights it may have
under this Agreement as a result of such consultations nor shall HRPT be
responsible for any decisions made by GPI's officers and directors with respect
to matters which are the subject of such consultation unless HRPT so consents in
writing or unless its consent is deemed to have been given as provided above.
6.2 Inspection of and Access to Information.
Between the date of this Agreement and the Effective Time, GPI will,
and will cause each of the GPI Subsidiaries to: (i) provide HRPT and its
accountants, counsel and other authorized representatives full access, during
usual business hours to any and all of its premises, properties, contracts,
commitments, books, records and other information (including tax returns filed
and those in preparation); (ii) cause its respective officers to provide to HRPT
and its authorized representatives any and all financial, technical and
operating data and other information pertaining to its business as HRPT shall
from time to time reasonably request; and (iii) subject to such reasonable
limitations as GPI shall deem necessary, permit HRPT to discuss, and cooperate
in discussions, with the GPI Subsidiaries, employees, architects, contractors
and tenants.
6.3 No Solicitation.
From the date of this Agreement until the Effective Time or until this
Agreement is terminated or abandoned as provided in Section 10, neither GPI nor
any of the GPI Subsidiaries shall directly or indirectly (i) solicit or initiate
(including by way of furnishing any information) discussions with or (ii) enter
into negotiations with, or furnish any information that is not publicly
available to, any corporation, partnership, person or other entity (other than
HRPT pursuant to this Agreement) concerning any proposal for a merger, sale of
assets, sale of shares of stock or securities or other takeover or business
combination transaction (an "Acquisition Proposal") involving GPI or any GPI
Subsidiary, and GPI will instruct its officers, directors, advisors and other
financial and legal representatives and consultants not to take any action
contrary to the foregoing provisions of this sentence.
6.4 Best Efforts: Further Assurances: Cooperation.
Each of the Parties shall use its best efforts to perform its
obligations under this Agreement and to take, or cause to be taken or do, or
cause to be done, all things necessary, proper or advisable under applicable law
to obtain all regulatory approvals and satisfy all conditions to the obligations
of the Parties under this Agreement and to cause the Merger and the other
transactions contemplated in this Agreement to be carried out promptly in
accordance with the terms of this Agreement and shall cooperate fully with each
other and their respective officers, directors, employees, agents, counsel,
accountants and other designees in connection with any steps required to be
taken as a part of its obligations under this Agreement. Upon the execution of
this Agreement and thereafter, each Party shall do such things as may be
reasonably requested by the other Parties in order more effectively to
consummate the Merger and the other transactions contemplated by this Agreement,
including without limitation:
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(a) GPI and HRPT shall promptly make their respective filings
and submissions and shall take, or cause to be taken, all actions and
do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to (i) comply with the provisions
of the HSR Act, if applicable, and (ii) obtain any other required
consent or approval of any third party or any other federal, state or
local governmental agency or regulatory body with jurisdiction over the
transactions contemplated by this Agreement. GPI and HRPT agree to
cooperate and keep each other reasonably informed regarding any
required HSR filings and the process for obtaining HSR clearance, if
required.
(b) If any claim, action, suit, investigation or other
proceeding by any governmental body or other person is commenced which
questions the validity or legality of the Merger or any of the other
transactions contemplated by this Agreement or seeks damages in
connection therewith, the Parties agree to cooperate and use all
reasonable efforts to defend against such claim, action, suit,
investigation or other proceeding and, if an injunction or other order
is issued in any such action, suit or other proceeding, to use best
efforts to have such injunction or other order lifted, and to cooperate
reasonably regarding any other impediment to the consummation of the
transactions contemplated by this Agreement.
(c) Each Party shall give prompt written notice to the other
of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or
warranty of GPI or HRPT, as the case may be, contained in this
Agreement to be untrue or inaccurate in any material respect at any
time from the date of this Agreement to the Effective Time or that will
or may result in the failure to satisfy any of the conditions specified
in Section 7 and (ii) any failure of GPI or HRPT, as the case may be,
to comply with covenant, condition or agreement to be complied with or
satisfied by it by this Agreement.
6.5 Expenses.
If the Merger is consummated, each Party shall pay its own attorneys'
and accountants' fees and costs and costs of its internal personnel in
connection with the transactions contemplated hereby, HRPT shall pay all title
insurance premiums and charges, local and special regulatory counsel fees,
surveyor charges, environmental consultant charges, transfer taxes, recording
fees and the like, and the cost of the Ernst & Young LLP confirmation of the Pro
Forma Balance Sheet referred to in Section 1.6 and GPI shall pay the fees
referred to in Section 4.28. If the Merger is not consummated, each Party shall
pay all costs and expenses incurred by it in connection with the transactions
contemplated hereby including its own attorneys' and accountants' fees and costs
and the costs of its internal personnel, GPI shall pay the fees referred to in
Section 4.28 and HRPT shall pay all title insurance premiums and charges, local
and special regulatory counsel fees, surveyor charges and environmental
consultant charges.
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6.6 Public Announcements.
The timing and content of all announcements regarding any aspect of
this Agreement or the Merger to the financial community, government agencies,
employees or the public generally shall be mutually agreed upon in advance
(unless HRPT or GPI is advised by counsel that any such announcement or other
disclosure not mutually agreed upon in advance is required to be made by law or
NYSE rule in which case HRPT shall use commercially reasonable efforts to
consult with GPI prior to any such announcement).
6.7 Interim Financial Statements.
Prior to the Effective Time, (a) GPI shall deliver to HRPT, as soon as
available but in no event later than 45 days after the end of each fiscal
quarter, a consolidated balance sheet as of the last day of such fiscal period
and the consolidated statements of income, stockholders' equity and cash flows
of GPI and its Subsidiaries for the fiscal period then ended, each prepared in
accordance with GAAP and (b) HRPT shall deliver, promptly after filing, a copy
of any report or statement pursuant to the 1934 Act. GPI shall deliver to HRPT
monthly statements of income and/or financial position for any periods after the
date of this Agreement within 30 days of the end of each month.
6.8 Supplements to Schedules.
From time to time prior to the Effective Time, GPI and HRPT will each
promptly supplement or amend the respective schedules which they have delivered
pursuant to this Agreement with respect to any matter arising which, if existing
or occurring at the date of this Agreement, would have been required to be set
forth or described in any such disclosure schedule or which is necessary to
correct any information in any such schedule which has been rendered inaccurate.
The delivery of any supplement or amendment to the respective disclosure letters
of the parties pursuant to this Section 6.8 shall not in any matter constitute a
waiver by any party of any of the conditions contained in Section 7; provided,
however, that the disclosure by any party in any such supplement or amendment to
its disclosure letter of any matter arising or occurring after the date hereof
(which did not exist on the date hereof) shall not form the basis of a claim
against the disclosing party for misrepresentation or breach of a
representation, warranty, covenant or agreement.
6.9 Contribution to GPH.
On the Closing Date, GPI shall contribute all of its interest in the
other Subsidiaries of GPI and the contracts and other agreements listed on
Disclosure Schedule 6.9, to GPH, in each case free and clear of all Liens, in
consideration of the GPH Common Shares, the assumption of the GPI Third Party
Debt and Transaction Expenses.
6.10 Reorganization.
From and after the date of this Agreement and until the Effective Time,
neither HRPT nor GPI nor any of their Subsidiaries or other affiliates shall
take any action, or fail to take any action, with the intention of jeopardizing
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code. Each of
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the Parties agrees to treat the Merger as a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code for purposes of filing
all federal, state and local income tax returns.
6.11 Change of Name.
As soon as reasonably practicable after the Closing Date, HRPT will use
its best efforts to change the name of each of the GPI Subsidiaries to remove
"Rosecliff".
6.12 REIT Status.
GPI will take all action required in connection with its liquidation
and dissolution to (i) ensure that GPI will continue to be qualified as a "real
estate investment trust" and (ii) that each GPI Subsidiary will continue to be
qualified as a "qualified REIT subsidiary" through the Effective Time.
6.13 Substitute Guarantor.
To facilitate GPI's obtaining the consent of lenders under Section
7.3(k), HRPT will make an affiliate of HRPT with a net worth of not less than
$100,000,000 available to assume any guarantees by GPI of indebtedness relating
to the Premises identified on Disclosure Schedule 1.71 as Properties Nos. 13,
14, 19 and 20.
6.14 Names.
Within 10 days after the date of this Agreement, GPI will provide HRPT
additional information required to make Schedule 4.7 complete and correct.
6.15 GPI Shareholders.
Contemporaneously with the delivery of this Agreement by GPI, each of
Rosecliff Realty L.P. and The 1818 Fund II, L.P. shall deliver an agreement to
vote their shares of GPI Common Stock in favor of the transactions contemplated
by this Agreement and on or before February 27, 1997, GPI will deliver the
certificate of its secretary confirming that the Merger and the transactions
contemplated by this Agreement have been approved by its stockholders pursuant
to Section 228 of the Delaware General Corporation Law.
6.16 Co-Manager Letter.
Contemporaneously with the delivery of this Agreement by HRPT, HRPT
shall have executed and delivered a letter agreement relating to underwriting of
any equity offering the proceeds of which will be used to satisfy HRPT's
obligations under this Agreement.
6.17 Arbitration.
The Parties agree that any and all disputes or disagreements arising
out of or relating to this Agreement, other than actions or claims for
injunctive or other equitable relief or claims raised in actions or proceedings
brought by third parties, shall be resolved
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through negotiations or, if the dispute is not so resolved, through mediation
and if necessary binding arbitration conducted by a private mediator to be
agreed upon by the Parties and in accordance with rules and procedures to be
agreed upon by the Parties. If, within ten (10) business days after the date of
this Agreement, the Parties shall not have agreed upon the identity of the
private mediator or the rules and procedures governing the mediation and/or
arbitration, such mediation and/or arbitration shall be conducted by the
American Arbitration Association in accordance with the rules and procedures of
the American Arbitration Association. Any such mediation and/or arbitration,
whether by an agreed upon mediator or by the American Arbitration Association,
shall be conducted in Boston, Massachusetts, and the decision of the mediator
shall be binding on all parties and not appealable.
SECTION 7
CONDITIONS
7.1 Conditions to Each Party's Obligations.
The respective obligations of each Party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing of each of the following
conditions:
(a) HSR Act. Early termination shall have been granted or
applicable waiting periods shall have expired under the HSR Act, if
applicable.
(b) Injunction. At the Effective Time there shall be no
effective injunction, writ or preliminary restraining order or any
order of any nature issued by a court or governmental agency of
competent jurisdiction that the transactions provided for in this
Agreement or any of them not be consummated as provided in this
Agreement and no proceeding or lawsuit shall have been commenced or
threatened by any governmental or regulatory agency with respect to any
other transactions contemplated by this Agreement, which proceeding or
lawsuit in the reasonable opinion of HRPT or GPI makes it inadvisable
to consummate such transactions.
(c) Consents. All consents, authorizations, orders and
approvals of (or filing or registration with) any governmental
commission, board or other regulatory body required in connection with
the execution, delivery and performance of this Agreement shall have
been obtained, except to the extent that any such consent,
authorization, order or approval (or filing or registration) is
required due to any governmental commission, board or other regulatory
body's status as a payor of GPI, in which case such consent,
authorization, order or approval shall have been obtained (or filing or
registration shall have been made) except where the failure to obtain
the same would not have a Material Adverse Effect.
7.2 Conditions to Obligations of GPI.
The obligations of GPI to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of each of the following conditions:
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(a) Representations and Warranties. The representations and
warranties of HRPT set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
as of the Effective Time as though made on and as of the Effective Time
(except where such representation or warranty specifically relates to
an earlier date).
(b) Performance of Obligations By HRPT. HRPT shall have
performed in all material respects all covenants and agreements
required to be performed by it under this Agreement.
(c) Registration Rights Agreement. HRPT shall have executed
and delivered the Registration Rights Agreement to GPI and such
agreement shall be in full force and effect at the Effective Time.
(d) Information Access Agreement and Voting Agreement. Merger
Sub shall have executed and delivered an Information Access Agreement
and Voting Agreement to The 1818 Fund II, L.P. and Rosecliff Inc. in
the forms attached as Schedule 7.2(d), and such agreements shall be in
full force and effect at the Effective Time.
(e) Opinions of HRPT Counsel. GPI shall have received an
opinion of Sullivan & Worcester LLP, dated the Closing Date, in form
and substance reasonably satisfactory to GPI, with respect to the
transactions contemplated by this Agreement.
(f) Authorization of Merger. All corporate action necessary to
authorize the execution, delivery and performance of this Agreement by
HRPT and the consummation of the transactions contemplated by this
Agreement shall have been duly and validly taken.
(g) Certificates. HRPT shall furnish GPI with a certificate of
its appropriate officers as to compliance with the conditions set forth
in Section 7.2.
(h) Conduct of Business and No Material Adverse Change. The
fundamental character of the business of HRPT and its Subsidiaries as
investors in healthcare related real estate shall not, except for the
transactions contemplated by this Agreement, have changed between the
date hereof and the Effective Date. HRPT and its Subsidiaries, taken as
a whole, shall not have suffered a material adverse change in their
financial condition, business, assets, liabilities or operations from
the date hereof to the Effective Time; provided, however, that a
decline in the price of HRPT Common Shares or a change in any rating
assigned to any debt of HRPT by Moody's Investors Service, Inc.,
Standard & Poor's Ratings Group or Fitch Investors Services, L.P. shall
not in and of itself be deemed a material adverse change.
(i) Indemnification Agreement. HRPT shall have executed and
delivered an Indemnification Agreement (the "Indemnification
Agreement") in the form of Schedule 7.2(i), and such agreement shall be
in full force and effect at the Effective Time.
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(j) Service Contract. HRPT and/or its nominee shall have
executed and delivered a Service Contract (the "Service Contract") in
the form of Schedule 7.2(j), and such contract shall be in full force
and effect at the Effective Time.
(k) Prepayments. HRPT shall prepay all GPI Third Party Debt
and all GPI Property Debt (except for that GPI Property Debt secured
solely by Premises identified on Disclosure Schedule 1.71 as Properties
Nos. 13, 14, 19 and 20) on the Closing Date.
7.3 Conditions to Obligations of HRPT.
The obligations of HRPT to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of GPI set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and, except
as otherwise permitted under Sections 6.1 and 8.2, as of the Effective
Time as though made on and as of the Effective Time (except where such
representation or warranty specifically relates to an earlier date).
(b) Performance of Obligations of GPI. GPI shall have
performed in all material respects all covenants and agreements
required to be performed by it under this Agreement.
(c) Registration Rights Agreement. GPI shall have executed and
delivered the Registration Rights Agreement to HRPT and such agreement
shall be in full force and effect at the Effective Time.
(d) Opinion of GPI's Counsel. HRPT shall have received an
opinion of Willkie Farr & Gallagher, dated the Closing Date, in form
and substance reasonably satisfactory to HRPT, with respect to the
transactions contemplated by this Agreement and an opinion of
Kilpatrick Stockton LLP, dated the Closing Date, subject to customary
assumptions, qualifications and conditions, and otherwise in form and
substance reasonably satisfactory to HRPT, and stating in substance (i)
that the Development Partnership Agreements (x) do not violate
applicable federal law relating to the acquisition and administration
of federal contracts, including leases, or (y) give rise to a right on
the part of the U.S. Government to terminate the Development Property
Lease and (ii) that, under circumstances similar to those contemplated
by the Development Partnership Agreements, the U.S. Government would
customarily grant a novation in favor of the general partner acquiring
the interest of the developer general partner.
(e) Authorization of Merger. All corporate action necessary to
authorize the execution, delivery and performance of this Agreement by
GPI and the consummation of the transactions contemplated by this
Agreement shall have been duly and validly taken.
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(f) Shareholder Approval. The Merger shall have been approved
by GPI, as the sole shareholder of GPH, in accordance with Maryland Law
and shall also have been approved by the stockholders of GPI in
accordance with the Delaware General Corporation Law..
(g) No Material Adverse Effect. No change which has a Material
Adverse Effect shall have occurred from the date hereof to the
Effective Time.
(h) Certificates. GPI shall furnish HRPT with a certificate of
its appropriate officers as to compliance with or satisfaction of the
conditions set forth in Section 7.3.
(i) Nonsolicitation Agreements. At or prior to the Closing,
the persons listed on Disclosure Schedule 1.54 shall have each executed
and delivered a Nonsolicitation Agreement (the "Nonsolicitation
Agreements"), in the form of Schedule 7.3(i), and such agreement shall
be in full force and effect at the Effective Time.
(j) Indemnification Agreement. GPI shall have executed and
delivered the Indemnification Agreement in the form of Schedule 7.2(i),
and such agreement shall be in full force and effect at the Effective
Time.
(k) Consents and Prepayment. All consents and waivers required
under any agreements identified in Section 4.5 including, without
limitation, the agreements evidencing the indebtedness secured solely
by the Premises identified on Disclosure Schedule 1.71 as Properties
Nos. 13, 14, 19 and 20, shall have been obtained. If on the Closing
Date, the borrower shall not have the right to prepay, without premium
or penalty, all amounts owed to each lender identified on Disclosure
Schedule 7.3(k), the Aggregate Closing Consideration shall be reduced
by an amount equal to the aggregate premium and penalty which the
borrower would be obliged to pay if it prepaid all such indebtedness in
full on the Closing Date, provided there will be no such reduction with
respect to indebtedness secured solely by Premises identified on
Disclosure Schedule 1.71 as Properties Nos. 13, 14, 19 and 20. HRPT
shall have the right to prepay all GPI Third Party Debt and all GPI
Property Debt on the Closing Date other than the indebtedness secured
solely by the Premises identified on Disclosure Schedule 1.71 as
Properties Nos. 13, 14, 19 and 20.
(l) Mortgagee Estoppel Certificates. HRPT shall have received
estoppel certificates dated within thirty (30) days prior to the
Closing Date, executed by the lenders holding the indebtedness secured
by the Premises identified on Disclosure Schedule 1.71 as Properties
Nos. 13, 14, 19 and 20, which estoppel certificates shall specify the
principal balance outstanding and the date of the most recent interest
payment received thereunder and shall confirm whether such lender has
sent any written notice of any default by the applicable borrower (GPI
agreeing also to use reasonable efforts to cause the certifying party
to identify all material documents setting forth (provided, however,
that the delivery by GPI to the
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certifying party of a request for such identification together with
follow up telephone calls shall be deemed to constitute reasonable
efforts) the terms and conditions with respect to such indebtedness).
(m) Tenant Certificates. HRPT shall have received estoppel
certificates, satisfactory in form (HRPT agreeing to accept such form
as is required to be delivered by a tenant under its lease and provided
HRPT will accept, from any tenant under a Material Lease, a statement
that (i) the lease is in full force and effect, (ii) there are no
prepayments of rent or other charges due under the Lease in excess of
one month and (iii) no notice of default has been issued by tenant
under the lease), and substance to HRPT and dated within thirty (30)
days prior to the Closing Date, executed by all tenants under Material
Leases; provided, however, if GPI shall fail, after using commercially
reasonable efforts, to obtain any tenant estoppel certificate required
under this Section 7.3(m) as to Premises representing, in the
aggregate, no more than 840,500 square feet, GPI's certification as to
such material may be substituted for the tenants'.
(n) Partner Estoppel Certificates. HRPT shall have received
estoppel certificates, in the form attached hereto as Schedule 7.3(n),
executed by the third party partner to the Development Partnership
Agreement relating to the San Diego Premises and Golden Premises.
(o) Condition of the Premises. All of the Premises, including
all improvements located thereon, shall be in substantially the same
physical condition as on the date of this Agreement, ordinary wear and
tear excepted and except for construction of Development Properties in
accordance with the approved plans and specifications therefor, subject
to Section 8.3(a) and (b), in all material respects.
(p) No Condemnation. No action shall be pending or, to the
knowledge of GPI, threatened for the condemnation or taking by power of
eminent domain of any of the real properties comprising the Premises
which has had or would be reasonably expected to result in a Material
Adverse Effect.
(q) Title Insurance. With respect to the Golden Premises, a
title insurance company satisfactory to HRPT or the title insurance
company insuring the existing title policy shall be prepared, subject
only to payment of the applicable premiums and charges, to issue a
title insurance policy, to the applicable GPI Subsidiary, insuring
title to the Golden Premises is vested in the applicable GPI
Subsidiary, pursuant to an ALTA (or such other form if ALTA is not
available in such jurisdiction) title insurance policies in the form
attached hereto as Schedule 7.3(q) and a title insurance company
reasonably acceptable to HRPT or the existing title insurance company
shall be prepared, to amend the existing title insurance policy with
respect to the San Diego DFAS to provide affirmative coverage against
any violation of the matters described in Schedule B, item 3 thereof if
available.
(r) Survey. HRPT shall have received an ALTA survey of the
Premises located in Richland, Washington (or, if any ALTA survey is not
available in the applicable jurisdiction, such other form of survey in
accordance with the customary
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standards for such State), together with a certificate of such
surveyor, such survey and certification to be in form and substance
reasonably satisfactory to HRPT.
(s) Information Access Agreement and Voting Agreement. The
1818 Fund II, L.P. and Rosecliff Inc. shall have executed and delivered
to Merger Sub an Information Access Agreement and Voting Agreement in
the forms attached as Schedule 7.2(d), and such agreements shall be in
full force and effect as of the Effective Time.
(t) Service Contract. GPI shall have executed and delivered to
M&P Partners, L.P. the Service Contract in the form of Schedule 7.2(j)
and such agreement shall be in full force and effect at the Effective
Time.
(u) Termination of Agreements. The contracts and agreements
listed on Disclosure Schedule 7.3(u) shall have been terminated without
liability or recourse to any of the GPI Subsidiaries and HRPT shall
have received such evidence thereof as it shall reasonably request.
(v) GPH. The contribution of assets of GPI to GPH in
accordance with Section 6.9 shall have occurred and HRPT shall have
received such evidence thereof as it shall reasonably request.
(w) Resignations. All officers and directors of GPH and each
of the GPI Subsidiaries shall have delivered their resignations
effective upon the Effective Date.
SECTION 8
OTHER AGREEMENTS
8.1 Deposit.
Within three business days following the execution of this Agreement,
HRPT shall deposit $5,000,000 with Paul, Weiss, Rifkind, Wharton & Garrison
("PW") or if PW shall decline, within ten business days of the date the Parties
agree on another escrow agent, to be held pursuant to the terms of the Escrow
Agreement. On the Closing Date, upon compliance with and performance of the
conditions set forth in Section 7.2, or upon any termination of this Agreement
pursuant to Section 10.1(a) (b) or (c) or by HRPT pursuant to Section 10.1(e),
upon notice from HRPT to the escrow agent, the Escrow Agreement shall terminate
and all funds held thereunder shall be paid to HRPT. If this Agreement is
terminated by GPI pursuant to Section 10.1(d)(ii), all funds then held pursuant
to the Escrow Agreement shall be paid to GPI, as liquidated damages and GPI
shall have no further recourse against HRPT, the HRPT Subsidiaries or any of
their respective officers, trustees, directors, employees or stockholders.
8.2 Houston Premises.
Anything to the contrary contained herein notwithstanding, GPI may
elect to cause the Houston Premises to be transferred to GPI, an affiliate of
GPI or a third party, provided
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such election is made not later than the business day following the notice from
HRPT to GPI provided for in Section 3.1 and the transfer is completed not later
than the Closing Date. If GPI elects to transfer the Houston Premises, the
Aggregate Closing Consideration shall be reduced by $5,000,000 and all
representations and warranties contained in this Agreement shall be deemed not
to include the Houston Premises. If GPI elects to transfer the Houston Premises
and the proceeds thereof increase "working capital" (as defined in Section 1.6),
although the Aggregate Closing Consideration shall be reduced as provided in the
next prior sentence, HRPT shall issue GPI a number of HRPT Common Shares on the
Closing Date with an aggregate value (based upon a price for an HRPT Common
Share of $19.2125) equal to such increase in working capital.
8.3 Development Properties.
(a) Golden Premises. If completion of the Golden Premises in accordance
with the plans and specifications therefor shall not have occurred and the
obligation to pay rent of the tenant under the Development Property Lease in
effect with respect to the Golden Premises shall not have commenced by the
Closing Date, the Aggregate Closing Consideration shall be reduced by
$9,046,823. Upon (x) the 30th day after substantial completion of the Golden
Premises in accordance with the plans and specifications therefor, (y) the
transfer to HRPT of the third party developer partner's interest and (z) the
novation of the Development Property Lease in effect with respect to the Golden
Premises in favor of an HRPT Subsidiary, HRPT will issue GPI a number of HRPT
Common Shares with an aggregate value (with each such HRPT Common Share valued
at the Merger Price) equal to $9,046,823, less all amounts funded at or
subsequent to Closing, exclusive of HRPT Common Shares issued at Closing, or
anticipated to be funded in connection with the punch list items by HRPT to
complete the Golden Premises in accordance with the plans and specifications
therefor as set forth in the related guaranteed maximum price construction
contract, including, without limitation, any amounts paid to retire indebtedness
or to third party partner, together with interest thereon from the date advanced
by HRPT through the date of issuance of the HRPT Common Shares pursuant to this
Section 8.3(a) at an annual rate equal to 7.4%. If the aggregate amount so
funded, exclusive of HRPT Common Shares issued at Closing, or so anticipated to
be funded by HRPT (including the interest thereon) exceeds $9,046,823, one-half
such excess shall be deducted from the Second Closing Consideration.
(b) San Diego Premises. If completion of the San Diego Premises in
accordance with the plans and specifications therefor shall not have occurred
and the obligations to pay rent of both tenants under the Development Property
Leases in effect with respect to the San Diego Premises shall not have commenced
by the Closing Date, the Aggregate Closing Consideration shall be reduced by
$1,530,954. Upon (x) the 30th day after substantial completion of the San Diego
Premises in accordance with the Plans and specifications therefor, (y) the
transfer to HRPT of the developer partner's interest and (z) the novation of the
Development Property Leases in effect with respect to the San Diego Premises in
favor of an HRPT Subsidiary, HRPT will issue GPI a number of HRPT Common Shares
with an aggregate value (with each such HRPT Common Share valued at the Merger
Price) equal to $1,530,954 less all amounts funded or anticipated to be funded
in connection with the punch list items by HRPT at or subsequent to Closing to
complete the San Diego Premises in accordance with the plans and specifications
therefor, including,
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without limitation, any amounts paid to retire indebtedness or to third party
partners, together with interest thereon from the date advanced by HRPT through
the date of issuance of the HRPT Common Shares pursuant to this Section 8.3(b)
at an annual rate equal to 7.4%. If the aggregate amount so funded by HRPT
(including the interest thereon) exceeds $1,530,954, one-half such excess shall
be deducted from the Second Closing Consideration.
(c) Aurora Premises. Notwithstanding the provisions of Section
6.1(d) or 6.3 on or before the Closing Date, GPI will cause the
partnership interests in Rose Aurora, L.P. held by a GPI Subsidiary to
be transferred to GPI or an affiliate of GPI other than a GPI
Subsidiary and the Aggregate Closing Consideration shall be reduced by
$11,647,101. If, at any time on or before July 31, 1997, the Aurora
Closing Conditions (as defined below) shall have been satisfied, HRPT
will issue GPI a number of HRPT Common Shares with an aggregate value
(with each such HRPT Common Share valued at the Merger Price) equal to
$11,647,101 less the sum of (x) $1,000,000, (y) the amount of any
indebtedness or funding obligations assumed by HRPT with respect to the
Aurora Premises, and (z) the cost to complete construction of the
Aurora Premises in accordance with the plans and specifications
therefor and as set forth in the guaranteed maximum price construction
contract referred to below and including, without limitation, any
amounts required to be paid to buy out the third party partner and
interest imputed on amounts advanced by HRPT with respect to the Aurora
Premises, from the date advanced until the date the obligation to pay
rent of the tenant under the Development Lease in effect with respect
to the Aurora Premises shall commence, at the Construction Rate (as
defined below), in consideration for the transfer of all GPI and GPI
affiliate ownership interests in the entity holding title to the Aurora
Premises.
Within thirty (30) days after the last to occur of (x) completion of
the Aurora construction, (y) the novation of the Development Lease in effect
with respect to the Aurora Premises to an HRPT Subsidiary and (z) the
commencement of the obligation of the tenant under the Aurora Development Lease
to pay rent, HRPT will issue GPI additional HRPT Common Shares with an aggregate
value (with each such HRPT Common Share valued at the Merger Price) equal to the
amount, if any, by which $11,647,101 exceeds the actual aggregate amounts funded
by HRPT (including HRPT Common Shares issued under the next prior paragraph)
with respect to the Aurora Premises (including, without limitation, interest
imputed at the Construction Rate and third party buy-out costs.
As used herein, "Aurora Closing Conditions" shall mean the following:
(i) A title insurance company reasonably satisfactory to HRPT or
the title insurance company which issued the existing policy
shall be prepared, subject only to payment of the applicable
premium and charges, to issue a title insurance policy, to the
applicable GPI Subsidiary, in the form attached to Disclosure
Schedule 1.68, to the extent the attached endorsements thereto
are available in Colorado except for the addition of Permitted
Liens.
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(ii) HRPT shall have received such assurances as HRPT may
reasonably require confirming that, upon completion, the
Aurora Premises will comply in all material respects with all
applicable zoning and land use requirements.
(iii) HRPT shall have approved the aggregate development budget with
respect to the Aurora Premises (which budget shall include all
costs of completion and acquisition, including, without
limitation, interest imputed at the Construction Rate, and the
cost to buy out the third party partner), which approval shall
not be unreasonably withheld, provided that HRPT shall
determine that the Development Lease in effect with respect to
the Aurora Premises will, upon the commencement of the
obligation of the tenant to pay rent thereunder, provide HRPT
with an annual yield on the aggregate amounts funded
(including, without limitation, interest imputed at the
Construction Rate) with respect to the Aurora Premises of not
less than 10.3%.
(iv) HRPT and the tenant under the Development Lease with respect
to the Aurora Premises shall have approved the complete
construction drawings and/or final plans and specifications
with respect thereto (HRPT agreeing not unreasonably to
withhold, delay or condition its approval).
(v) There shall be executed and delivered a guaranteed maximum
price construction contract with respect to the Aurora
Premises, such contract to be in form and substance reasonably
satisfactory to HRPT and to comply with the applicable
Development Lease requirements.
(vi) The contractor under the above-described construction contract
shall have, in HRPT's reasonable determination, adequate
financial resources to ensure completion of the project as
contemplated by such construction contract or shall have
provided a completion bond in form and substance reasonably
satisfactory to HRPT; and such contractor shall have obtained
such insurance as HRPT may reasonably require.
(vii) HRPT shall have received an estoppel certificate, in the form
attached hereto as Schedule 7.3(n), executed by the third
party partner to the Development Partnership Agreement
relating to the Aurora Premises.
(viii) HRPT shall reasonably determine that (x) completion of
construction can occur within the deadlines applicable thereto
pursuant to the Aurora Development Lease, as the same may be
amended as herein provided, and (y) a novation of the lease
can be obtained and a buy-out of the third party partner
consummated not less than 120 days prior to the date set forth
in Section 18.2 of the Aurora Partnership Agreement for
expiration of the purchase option.
(ix) The representations and warranties set forth in Sections 4.1,
4.6, 4.9, 4.10, 4.11, 4.17, 4.22, 4.24 and 4.26 shall be true
and correct in all material respects with respect to the
Aurora Premises as a Development Property or the Aurora
Development Partnership, as the case may be; provided,
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however, that, GPI may, by written notice to HRPT, modify such
representations and warranties to reflect changes in
circumstances and HRPT shall not have the right to object to
such modifications unless the same shall materially and
adversely affect the contemplated development or use of Aurora
Premises or such Development Partnership.
As used herein, "Construction Rate" shall mean (x) one hundred
seventy-five (175) basis points in excess of the per annum rate of interest
reported in The Wall Street Journal as the London Interbank Offered Rate for
United States dollar deposits for a ninety (90) day term in the amount
outstanding as of the date of determination or (y), in the event the rate
described in clause (x) shall cease to be published, two (2) percentage points
in excess of the per annum rate of interest, from time to time, of the 14-day
moving average closing trading price of the 180-day Treasury Bills.
(d) Liquidation. If any payments due GPI under Sections 8.3
(a), (b) or (c) become payable after GPI has liquidated, the payments
shall be made to the Second Closing Recipient.
(e) Fractional Shares. If the Second Closing Recipient would
receive a fraction of a HRPT Common Share pursuant to Section 8.3(a),
(b) or (c), a check representing an amount determined by multiplying
such fractional share by the Merger Price shall be delivered to the
Second Closing Recipient.
(f) Control. Notwithstanding 6.1(d), HRPT will permit GPI to
control negotiations with the developer partners' and others and
supervision of construction in connection with any of the Development
Properties which are not completed on or before the Closing Date until
July 31, 1997, provided any modification or amendment of agreements
relating thereto will be subject to the reasonable approval of HRPT.
After July 31, 1997, HRPT will control negotiations with the
development partners' and others and supervision of construction,
provided that any modification or amendment of any agreements relating
thereto will be subject to the reasonable approval of GPI. In the case
of HRPT's refusal to give approval, if the proposed modification or
amendment would have an adverse effect on HRPT's expected yield with
respect to the particular Development Property HRPT's refusal shall be
deemed reasonable. In the case of GPI's refusal to give approval, if
the proposed modification or amendment would have an adverse effect on
GPI's expected profit with respect to the particular Development
Property, GPI's refusal shall be deemed reasonable. HRPT agrees to
comply in all material respects with the terms of the Development
Partnership Agreements.
8.4 Contract Properties.
(a) Waco Premises. If the Waco Premises have not been acquired
by Rosecliff Realty Funding, Inc. (a GPI Subsidiary) from McCord
Government Properties-Waco, Ltd. pursuant to the terms of an Agreement
of Purchase and Sale of Real Property and Escrow Instructions dated
April 1, 1996, as amended by the First Amendment thereto, dated as of
April 1, 1996, and further amended by the Tri-Party Agreement and
Amendment of Purchase and Sale of Real Property and Escrow
Instructions, dated as of "________", 1996, among Mellon Bank, N.A.,
McCord Government Properties - Waco, Ltd. and Rosecliff
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Realty Funding, Inc. (the "Waco Agreement") prior to the Closing Date,
the Aggregate Closing Consideration shall be reduced by $8,514,714. At
such time as the Waco Premises are acquired in accordance with the
terms of the Waco Agreement, HRPT shall issue GPI a number of HRPT
Common Shares with an aggregate value (with each such HRPT Common Share
valued at the Merger Price) equal to $253,936 plus a number of HRPT
Common Shares with an aggregate value (with each such HRPT Common Share
valued at the Merger Price) equal to the deposit under the Waco
Agreement. If the Waco Premises are not acquired by the Second Closing
Date, or at such earlier time as the Waco Agreement is terminated
solely as a result of a default by the seller thereunder, HRPT shall
pay GPI an amount equal to the deposit under the Waco Agreement in HRPT
Common Shares as calculated above promptly upon receipt thereof or
shall assign the rights of Rosecliff Realty Funding, Inc. to receive
the deposit under the Waco Agreement to GPI.
(b) LA MEPS Premises. If the LA MEPS Premises have not been
acquired by Rosecliff Realty Funding, Inc. (a GPI Subsidiary) from
Stamford Holdings No.2, Inc. pursuant to the terms of an Agreement of
Purchase and Sale of Real Property and Escrow Instructions dated
October 4,1996 (the "LA MEPS Agreement") prior to the Closing Date, the
Aggregate Closing Consideration shall be reduced by $10,060,162. At
such time as the LA MEPS Premises are acquired in accordance with the
terms of the LA MEPS Agreement, HRPT shall issue GPI a number of HRPT
Common Shares with an aggregate value (with each such HRPT Common Share
valued at the Merger Price) equal to $10,060,162, less the costs of
acquisition (net of any deposit) including closing costs. If the LA
MEPS Premises are not acquired by the Second Closing Date, or at such
earlier time as the LA MEPS Agreement is terminated, HRPT shall pay GPI
an amount equal to the deposit under the LA MEPS Agreement in HRPT
Common Shares as calculated above promptly upon receipt thereof or
shall assign the rights of Rosecliff Realty Funding, Inc. to receive
the deposit under the LA MEPS Agreement to GPI.
(c) Phoenix Premises. If the Phoenix Premises have not been
acquired by Rosecliff Realty Funding, Inc. (a GPI Subsidiary) from Chen
& Fei Corp. pursuant to the terms of an Agreement of Purchase and Sale
of Real Property and Escrow Instructions dated July 25, 1996 as amended
by the First and Second Amendments thereto, each dated as of October
15, 1996 (the "Phoenix Agreement") prior to the Closing Date, the
Aggregate Closing Consideration shall be reduced by $12,159,106. At
such time as the Phoenix Premises are acquired in accordance with the
terms of the Phoenix Agreement, HRPT shall issue GPI a number of HRPT
Common Shares with an aggregate value (with each such HRPT Common Share
valued at the Merger Price) equal to $12,159,106, plus the amount of
any increase in the purchase price for the Phoenix Premises pursuant to
any amendment to the Phoenix Agreement to which HRPT shall have
consented in writing less the costs of acquisition (net of any deposit)
including closing costs. If the Phoenix Premises are not acquired by
the Second Closing Date, or at such earlier time as the Phoenix
Agreement is terminated, HRPT shall pay GPI an amount equal to the
deposit under the LA MEPS Agreement in HRPT Common Shares as calculated
above, promptly upon receipt thereof or shall assign the rights of
Rosecliff Realty Funding, Inc. to receive the deposit under the Phoenix
Agreement to GPI or its designee.
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(d) Liquidation. If any payments due GPI under Sections 8.4
(a), (b) or (c) become payable after GPI has liquidated, the payments
shall be made to the Second Closing Recipient.
(e) Fractional Shares. If the Second Closing Recipient would
receive a fraction of a HRPT Common Share pursuant to Section 8.4(a),
(b) or (c), a check representing an amount determined by multiplying
such fractional share by the Merger Price shall be delivered to the
Second Closing Recipient.
(f) Control. Notwithstanding the Closing, if HRPT will permit
GPI to control negotiations with the sellers and others in connection
with any of the Contract Properties which were not purchased prior to
the Closing Date until July 31, 1997, provided any modification,
amendment or termination of agreements relating thereto will be subject
to the reasonable approval of HRPT. After July 31, 1997, HRPT will
control negotiations with the sellers and others, provided that any
modification or amendment of any agreements relating thereto will be
subject to the reasonable approval of GPI. In the case of HRPT's
refusal to give approval, if the proposed modification, amendment or
termination would have an adverse effect on HRPT's expected yield with
respect to the particular Contract Property HRPT's refusal shall be
deemed reasonable. In the case of GPI's refusal to give approval, if
the proposed modification or amendment would have an adverse effect on
GPI's expected profit with respect to the particular Contract Property
GPI's refusal shall be deemed reasonable. HRPT agrees to comply in all
material respects with the terms of the purchase and sale agreements
relating to the Contract Properties.
8.5 College Park.
If any payment is due or claimed to be due pursuant to Section 2.B or
2.C of the Purchase Agreement (as defined in the Representation Letter), the
amount thereof together with any diminution in value of the College Park
Premises resulting from the extension of the term shall be "Losses" (as defined
in the Indemnification Agreement) for which the Indemnified Parties (as defined
in the Indemnification Agreement) shall be entitled to indemnification under the
Indemnification Agreement, without regard to any minimum loss threshold and
regardless of whether the same results from any breach of representation or
warranty.
HRPT agrees that GPI shall have the right to participate in any
negotiations with the Sellers named in the Purchase Agreement with respect to
the matters contemplated by Section 2.B and 2.C of the Purchase Agreement and
HRP shall give GPI notice of any information obtained by HRP with respect
thereto.
8.6 Tax Returns.
GPI will, and will cause each GPI Subsidiary and the Subsidiaries of
GPI listed on Disclosure Schedule 4.4(B) to, prepare and file all Tax Returns
and other tax reports, filings and amendments thereto required to be filed by
any of them (provided with respect to the GPI Subsidiaries the obligation will
be only with respect to periods ending on or before the Effective Time), and
provide HRPT, at its request, with copies for HRPT's review, of all such
returns, reports, filings and amendments at GPI's offices prior to filing.
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8.7 Employee Matters.
As of the Effective Time, GPI will have assumed all past, present and
future liabilities and responsibilities as plan sponsor, within the meaning of
Section 3(16)(B) of ERISA, of any Company Employee Benefit Plan, and any past,
present and future liabilities and responsibilities as employer under any
Company Benefit Arrangement. On or before the Closing Date, HRPT or its designee
will enter into the Service Contract with GPI in the form attached as Schedule
7.2(j).
8.8 Liquidation and Dissolution.
Prior to the Effective Time, the directors and the GPI Stockholders
shall adopt a plan of liquidation and dissolution. GPI shall distribute the HRPT
Merger Shares pursuant to such plan of liquidation.
8.9 Stock Purchase.
If at any time prior to the Closing Date HRPT shall determine that it
requires the consent of its lenders to permit the transactions contemplated by
this Agreement to be consummated as a merger between Merger Sub and GPH and if
HRPT shall not have obtained such consent, HRPT may fulfill its obligations
under this Agreement by causing an HRPT Subsidiary to purchase the GPH Common
Shares for the Aggregate Closing Consideration and the Second Closing
Consideration on the terms and conditions set forth in this Agreement and the
parties agree to make such conforming changes as may be reasonably required as a
result thereof.
8.10 Service Contract Adjustment.
If (a) the amounts actually paid to GPI or its successor as
reimbursement for office expenses (including rent) and salaries (including
federal, state and local employment taxes payable by an employer (including,
without limitation, FICA and FUTA), but not including severance costs) from the
Closing Date through July 31, 1997 pursuant to the Service Contract are less
than (b) the lesser of (i) the aggregate amount of such office expenses
(including rent), salaries (including severance costs) and other operating
expenses incurred by GPI or its successor for such period or (ii) $947,935, then
the excess, if any, of the amount described in clause (b) above over the amount
described in clause (a) above shall be added to the Second Closing
Consideration.
SECTION 9
SECOND CLOSING AND DELIVERY OF CONSIDERATION
9.1 Second Closing.
The Second Closing shall take place (a) at the office of Sullivan &
Worcester, LLP, at Boston, Massachusetts, at 9:00 a.m. (local time) on the
Second Closing Date, or (b) at such other time, date or place as the Parties may
agree.
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9.2 Issuance of Second Closing Shares.
At the Second Closing, HRPT shall deliver to the Second Closing
Recipient a certificate (properly issued, executed and counter-signed, as
appropriate) representing that whole number of shares of HRPT Common Shares as
is determined by dividing the Second Closing Consideration by the Second Closing
Price and as to any fractional share, a check representing an amount determined
by multiplying such fraction of a share of HRPT Common Shares otherwise issuable
by the Second Closing Price. If, on or before the Second Closing Date, an
"Indemnified Party" (as defined in the Indemnification Agreement) shall have
made a claim for payment which has not been satisfied or otherwise resolved
prior to the Second Closing Date, a number of HRPT Common Shares with an
aggregate value (with each such HRPT Common Share valued at the Merger Price),
equal to the sum of all pending claims, shall be deposited with a mutually
acceptable escrow agent to be held pursuant to the terms of an escrow agreement
substantially in the form of Schedule 9.2.
SECTION 10
TERMINATION AND EXTENSION
10.1 Termination.
This Agreement may be terminated at any time (subject to the provisions
of this Section 10.1) prior to the Effective Time:
(a) by mutual agreement of the Board of Directors of GPI and
the trustees of HRPT;
(b) by either HRPT or GPI, in writing, without liability, if
for any reason the Closing has not occurred by March 31, 1997, except
that no party shall have the right to terminate under this Section
10.1(b) if the conditions precedent to such Party's obligation to close
have been or at Closing would be satisfied or have been waived by such
Party and such Party has nonetheless failed or refused to close;
(c) by either HRPT or GPI in writing, without liability, if
there shall be any order, writ, injunction or decree of any court or
governmental or regulatory agency binding on HRPT and/or GPI, which
prohibits or restrains HRPT and/or GPI from consummating the
transactions contemplated by this Agreement, provided that HRPT and GPI
shall have used their best efforts to have any such order, writ,
injunction or decree lifted and the same shall not have been lifted
within 90 days after entry, by any such court or governmental or
regulatory agency;
(d) by GPI in writing, without liability:
(i) if the conditions set forth in Sections 7.1 and
7.2 shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or
eliminated (or by its nature cannot be cured or eliminated) by
HRPT or otherwise by March 31, 1997; or
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(ii) if HRPT shall (i) fail to perform in any
material respect its agreements contained in this Agreement
required to be performed by it on or prior to the Closing
Date, or (ii) breach any of its representations or warranties
contained in this Agreement, which failure or breach is not
cured within ten days after GPI has notified HRPT of its
intent to terminate this Agreement pursuant to this Section
10.1(d)(ii);
(e) by HRPT, in writing, without liability:
(i) if the conditions set forth in Sections 7.1 and
7.3 shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or
eliminated (or by its nature cannot be cured or eliminated) by
GPI or otherwise by March 31, 1997; or
(ii) if GPI shall (i) fail to perform in any material
respect its agreements contained in this Agreement required to
be performed on or prior to the Closing Date, or (ii) breach
any of its representations or warranties contained in this
Agreement, which failure or breach is not cured within ten
days after HRPT has notified GPI of its intent to terminate
this Agreement pursuant to this Section 10.1(e)(ii);
provided if GPI shall breach a representation or warranty
which would have a Material Adverse Effect as defined in
Section 1.59(ii), HRPT shall not terminate this Agreement and
shall consummate the transactions on the Closing Date without
adjustment to the Aggregate Closing Consideration on account
of such breach and shall have recourse under the
Indemnification Agreement, it being agreed that HRPT's failure
to exercise its right to terminate this Agreement shall not be
deemed a waiver of such breach.
10.2 Extension.
(a) Notwithstanding anything contained in Section 10.1 to the
contrary, if GPI shall be unable to satisfy a closing condition prior
to March 31, 1997, GPI shall have the right to delay the Closing Date
and extend the date for termination of the rights and obligations of
the parties under Section 10.1 until the date which is 10 business days
following notice from GPI to HRPT that such closing condition(s) are
satisfied but not later than May 31, 1997.
(b) If the Closing Date is delayed pursuant to Section
10.2(a), the Aggregate Closing Consideration shall be determined based
upon a Pro Forma Balance Sheet as of the Closing Date which shall be
prepared not later than 5 business days prior to the Closing Date and
confirmed as provided in the definition of Aggregate Closing
Consideration.
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SECTION 11
MISCELLANEOUS PROVISIONS
11.1 Notices.
All notices, communications and deliveries required or permitted by
this Agreement shall be made in writing signed by the Party making the same,
shall specify the Section of this Agreement pursuant to which it is given or
being made, and shall be deemed given or made (i) on the date delivered if
delivered by telecopy or in person, (ii) on the third business day after it is
mailed if mailed by registered or certified mail (return receipt requested)
(with postage and other fees prepaid), or (iii) on the day after it is
delivered, prepaid, to an overnight express delivery service that confirms to
the sender delivery on such day, as follows:
To HRPT or Merger Sub:
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: David J. Hegarty, President
Telecopy No.: 617. 332.2261
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Alexander A. Notopoulos, Jr., Esq.
Telecopy No.: 617. 338.2880
To GPI or GPH:
Government Property Investors, Inc.
1775 Pennsylvania Avenue, N.W., Suite 1000
Washington, D.C. 20006
Attn: Mark Levin
Telecopy No.: 202.296.8335
with a copy to:
Rosecliff, Inc.
712 Fifth Avenue, 34th Floor
New York, NY 10019
Attn: Peter T. Joseph
Telecopy No. 212.554.5959
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<PAGE>
and a copy to:
Willkie Farr & Gallagher
One Citicorp Center
New York, New York 10022
Attn: Nora Ann Wallace, Esq.
Telecopy No.: 212-821-8111
The 1818 Fund II, L.P.
63 Wall Street
New York, NY 10005
Attn: Walter W. Grist
Telecopy No. 212-493-8429
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attn: Peter J. Rothenberg, Esq.
Telecopy No. 212-373-2004
or to such other representative or at such other address of a Party as such
Party may furnish to the other Party in writing.
11.2 Schedules.
The Schedules and all documents expressly referred to in this
Agreement, are incorporated into this Agreement and are made a part of this
Agreement as if set out in full.
11.3 Computation of Time.
Whenever the last day for the exercise of any privilege or the
discharge of any duty under this Agreement shall fall upon a Saturday, Sunday or
any date on which banks in Boston, Massachusetts are closed, the Party having
such privilege or duty may exercise such privilege or discharge such duty on the
next succeeding day which is a regular business day.
11.4 Assignment: Successors in Interest.
No assignment or transfer by HRPT, Merger Sub GPI or GPH, of its rights
and obligations under this Agreement prior to the Closing shall be made except
with the prior written consent of the other Party. This Agreement shall be
binding upon and shall inure to the benefit of the Parties and their permitted
successors and assigns, and any reference to a Party shall also be a reference
to a permitted successor or assign.
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<PAGE>
11.5 No Third-Party Beneficiaries.
With the exception of the Parties, there shall exist no right of any
person, including, without limitation, the stockholders and creditors of GPI, to
claim a beneficial interest in this Agreement or any rights occurring by virtue
of this Agreement.
11.6 Investigations; Non-Survival of Representations and Warranties.
The respective representations and warranties of GPI and HRPT contained
in this Agreement or in any Schedule, certificate, or other document delivered
by any Party prior to Closing shall not be deemed waived or otherwise affected
by any investigation made by a Party. Except for obligations of GPI under the
Indemnification Agreement and of HRPT pursuant to the Registration Rights
Agreement, the respective representations and warranties, covenants and
agreements (except for those covenants and agreements contained in Sections 6.4,
6.5, 6.11, 6.12, 6.16, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.10 and 9) of HRPT and GPI
contained in this Agreement shall expire with and be terminated by the Merger.
11.7 Number; Gender.
Whenever the context so requires, the singular number shall include the
plural and the plural shall include the singular, and the gender of any pronoun
shall include the other genders.
11.8 Captions.
The titles, captions and table of contents contained in this Agreement
are inserted in this Agreement only as a matter of convenience and for reference
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provision of this Agreement. Unless otherwise specified to the
contrary, all references to Sections are references to Sections of this
Agreement and all references to Exhibits and Schedules are references to
Exhibits and Schedules to this Agreement.
11.9 Amendments.
To the extent permitted by law, this Agreement may be amended by a
subsequent writing signed by all of the Parties upon the approval of the Boards
of Directors of each of the Parties.
11.10 Controlling Law: Integration: Waiver.
The Merger shall be governed by Maryland Law and otherwise, this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the Commonwealth of Massachusetts. This Agreement supersedes all
negotiations, agreements and understandings among the Parties with respect to
the subject matter of this Agreement (including, without limitation, the Term
Sheet dated January 7, 1997, between GPI and HRPT and the Confidentiality
Agreement dated May 17, 1996, between GPI and HRPT) and constitutes the entire
agreement among the Parties to this Agreement.
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<PAGE>
The failure of any Party at any time or times to require performance of any
provisions of this Agreement shall in no manner affect the right to enforce the
same. No waiver by any Party of any conditions, or of the breach of any term,
provision, warranty, representation, agreement or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be deemed or construed as a further or continuing waiver of any such condition
or breach of any other term, provision, warranty, representation, agreement or
covenant contained in this Agreement.
11.11 Severability.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction will, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement, and any such prohibition or unenforceability in
any jurisdiction will not invalidate or render unenforceable such provision in
any other jurisdiction. To the extent permitted by law, the Parties waive any
provision of law which renders any such provision prohibited or unenforceable in
any respect.
11.12 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and it shall not be necessary in making proof
of this Agreement or the terms of this Agreement to produce or account for more
than one of such counterparts.
11.13 HRPT Limitation of Liability.
The Declaration of Trust of HRPT, a copy of which has been duly filed
with the Department of Assessments and Taxation of the State of Maryland,
provides that the name "Health and Retirement Properties Trust" refers to the
trustees under such Declaration of Trust collectively as trustees, but not
individually or personally, and that no trustee, officer, shareholder, employee
or agent of HRPT shall be held to any personal liability, jointly or severally,
for any obligation of, or claim against, HRPT. All persons dealing with HRPT in
any way shall look only to the assets of HRPT, respectively, for the payment of
any sum or the performance of any obligation.
11.14 Diligence.
HRPT acknowledges that it has received surveys (other than with respect
to the Premises located in Richland, Washington) and title insurance commitments
and/or policies with respect to all of the Premises.
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<PAGE>
EXECUTED under seal as of the date first above written.
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ David J. Hegarty
David J. Hegarty
GOVERNMENT PROPERTY INVESTORS, INC.
By: /s/ Mark M. Levin
Mark M. Levin
Chief Executive Officer
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<PAGE>
TABLE OF CONTENTS
SECTION 1 DEFINITIONS......................................................1
SECTION 2 TRANSACTIONS AND TERMS OF MERGER.................................9
2.1 Merger..................................................9
2.2 Declaration of Trust of the Survivor....................9
2.3 Bylaws of the Surviving Corporation....................10
2.4 Directors and Officers of the Survivor.................10
2.5 Manner of Converting Shares............................10
2.6 Investment and Registration Rights Agreement...........11
SECTION 3 CLOSING, EFFECTIVE TIME AND DELIVERY OF CONSIDERATION...........11
3.1 The Closing............................................11
3.2 Effective Time.........................................11
3.3 Issuance of HRPT Merger Shares.........................11
SECTION 4 REPRESENTATIONS AND WARRANTIES OF GPI...........................12
4.1 Organization, etc......................................12
4.2 Authorization; Execution; Binding Effect...............12
4.3 Capitalization.........................................13
4.4 Share Holdings.........................................13
4.5 No Conflicting Agreements or Charter Provisions........13
4.6 Litigation.............................................14
4.7 Names..................................................14
4.8 Financial Statements...................................14
4.9 No Undisclosed Liabilities.............................14
4.10 Default................................................15
4.11 Compliance with Law....................................15
4.12 No Adverse Changes; Acquisitions, Disposition and
Commitments............................................16
4.13 Patents, etc...........................................17
4.14 Certain Transactions...................................17
4.15 Pension and Benefit Plans..............................18
4.16 Tax Matters............................................19
4.17 Contracts..............................................21
4.18 Insurance..............................................22
4.19 Bank Accounts..........................................22
4.20 Accounts...............................................22
4.21 Labor Matters..........................................23
4.22 Title to Properties....................................23
4.23 Proprietary Information................................25
4.24 Environmental Matters..................................25
4.25 Utilities, Etc.........................................27
4.26 Substantial Completion.................................27
4.27 GPH....................................................27
4.28 Fees...................................................28
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<PAGE>
SECTION 5 REPRESENTATIONS AND WARRANTIES OF HRPT.........................28
5.1 Organization, etc.....................................28
5.2 Authorization: Execution: Binding Effect..............28
5.3 Capitalization........................................28
5.4 No Conflicting Agreements or Trust/Charter Provisions.29
5.5 Litigation............................................29
5.6 No Undisclosed Liabilities............................29
5.7 Default...............................................30
5.8 Compliance with Law...................................30
5.9 Securities Filings....................................30
5.10 Merger Shares.........................................31
5.11 Tax Matters...........................................31
SECTION 6 CERTAIN COVENANTS AND AGREEMENTS...............................32
6.1 Conduct of Business by GPI............................32
6.2 Inspection of and Access to Information...............34
6.3 No Solicitation.......................................34
6.4 Best Efforts: Further Assurances: Cooperation.........34
6.5 Expenses..............................................35
6.6 Public Announcements..................................36
6.7 Interim Financial Statements..........................36
6.8 Supplements to Schedules..............................36
6.9 Contribution to GPH...................................36
6.10 Reorganization........................................36
6.11 Change of Name........................................37
6.12 REIT Status...........................................37
6.13 Substitute Guarantor..................................37
6.14 Names.................................................37
6.15 GPI Shareholders......................................37
SECTION 7 CONDITIONS.....................................................38
7.1 Conditions to Each Party's Obligations................38
7.2 Conditions to Obligations of GPI......................38
7.3 Conditions to Obligations of HRPT.....................40
SECTION 8 OTHER AGREEMENTS...............................................43
8.1 Deposit...............................................43
8.2 Houston Premises......................................43
8.3 Development Properties................................44
8.4 Contract Properties...................................47
8.6 Tax Returns...........................................49
8.7 Employee Matters......................................50
8.8 Liquidation and Dissolution...........................50
8.9 Stock Purchase........................................50
8.10 Service Contract Adjustment...........................50
SECTION 9 SECOND CLOSING AND DELIVERY OF CONSIDERATION...................50
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<PAGE>
9.1 Second Closing........................................50
9.2 Issuance of Second Closing Shares.....................50
SECTION 10 TERMINATION AND EXTENSION......................................51
10.1 Termination...........................................51
10.2 Extension.............................................52
SECTION 11 MISCELLANEOUS PROVISIONS.......................................52
11.1 Notices...............................................53
11.2 Schedules.............................................54
11.3 Computation of Time...................................54
11.4 Assignment: Successors in Interest....................54
11.5 No Third-Party Beneficiaries..........................54
11.6 Investigations; Non-Survival of Representations
and Warranties.....................................55
11.7 Number; Gender........................................55
11.8 Captions..............................................55
11.9 Amendments............................................55
11.10 Controlling Law: Integration: Waiver..................55
11.11 Severability..........................................56
11.12 Counterparts..........................................56
11.13 HRPT Limitation of Liability..........................56
11.14 Diligence.............................................56
SIGNATURE PAGE..............................................................57
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<PAGE>
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement") is made as of February
__, 1997 by and among Health and Retirement Properties Trust ("HRPT"),
Government Property Investors, Inc.
("GPI"), and ____________________ (the "Escrow Agent").
R E C I T A L:
HRPT and GPI have entered into a Merger Agreement (the "Merger
Agreement"), an executed copy of which has been provided to the Escrow Agent,
pursuant to which Government Property Holdings Trust ("GPH") will be merged with
and into HUB Acquisition Trust ("Merger Sub") on the terms and conditions set
forth in the Merger Agreement.
Pursuant to the Merger Agreement, HRPT has agreed to deposit $5,000,000
into escrow upon execution of this Escrow Agreement subject to the terms and
conditions set forth in the Merger Agreement and in this Escrow Agreement.
NOW, THEREFORE, the parties agree as follows:
Section 1. Defined Terms. Terms not otherwise defined herein shall have
the respective meanings prescribed therefor in the Merger Agreement. The
following terms are defined in this Escrow Agreement:
"Bank" is _______________.
"Escrow Fund" is defined in Section 3 of this Escrow Agreement.
Section 2. Appointment of Escrow Agent. HRPT and GPI hereby appoint the
Escrow Agent as the escrow agent to hold the Escrow Fund in accordance with the
terms and conditions of this Escrow Agreement.
Section 3. Delivery and Receipt of Funds. Simultaneously with the
execution of this Escrow Agreement, HRPT shall deliver to the Escrow Agent the
sum of $5,000,000 in immediately available funds by wire transfer. The Escrow
Agent shall open an escrow account in the name of HRPT and shall deposit into
such account such immediately available funds. The amount so deposited,
including accrued interest thereon, is referred to as the "Escrow Fund." Receipt
of the Escrow Fund from HRPT is hereby acknowledged by the Escrow Agent.
Section 4. Investment of Escrow Fund. Until distributed and released in
accordance with the terms and conditions of this Escrow Agreement, the Escrow
Agent shall invest the Escrow Fund in a so-called "money market" deposit fund
with the Bank or in such other liquid, investment grade securities as may be
specified in writing by HRPT. The Escrow Fund may be invested in the name of
Escrow Agent and may be commingled with other funds.
Section 5. Release of Escrow Fund. The Escrow Agent shall distribute
and release the Escrow Fund ten days after receipt of notice (a) from HRPT that
either there has been compliance with the conditions set forth in Section 7.2 of
the Merger Agreement or that the Merger Agreement has been terminated pursuant
to Section 10.1(a), (b), (c) or (e) thereof and that any applicable grace period
has expired or (b) from GPI that GPI has terminated the Merger Agreement
pursuant to Section 10.1(d)(ii) thereof and that any applicable grace period has
expired. Such notice shall contain a certification by the party delivering the
notice certifying that such distribution and release is being requested pursuant
to clause (a) or clause (b) of the preceding sentence, as applicable, and
<PAGE>
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that a copy of such notice has been concurrently sent to HRPT (in the case of a
notice by GPI) or to GPI (in the case of a notice by HRPT) and shall specify the
name and address of the party to whom such Escrow Fund shall be delivered and
wire transfer information. Within ten days after receipt of such notice,
provided that the Escrow Agent shall not have received a contrary instruction
from the other party, the Escrow Agent shall deliver the Escrow Fund to the
party so specified. If the Escrow Agent has received such a contrary
instruction, it shall release the Escrow Fund only pursuant to a joint direction
in writing of HRPT and GPI or pursuant to the decision of an arbitrator pursuant
to the arbitration proceedings set forth in Section 13 of this Agreement. Upon
distribution and release of the Escrow Fund, this Escrow Agreement shall be
deemed terminated and the Escrow Agent shall be released and discharged from all
further obligations hereunder.
Section 6. Duties of Escrow Agent. The acceptance by the Escrow Agent
of its duties as such under this Escrow Agreement is subject to the following
terms and conditions, which HRPT and GPI hereby agree shall govern and control
with respect to the rights, duties, liabilities and immunities of the Escrow
Agent:
(a) The Escrow Agent acts hereunder as a depositary only, and
is not responsible or liable in any manner whatever for any investment made
pursuant to the provisions of Section 4 or any failure, refusal or inability of
the Bank to release or make payment pursuant to the Escrow Agent's direction of
said Escrow Fund, including by reason of insolvency or bankruptcy of the Bank.
(b) The Escrow Agent shall not be liable for acting upon any
written notice, request, waiver, consent, receipt or other instrument or
document which the Escrow Agent in good faith believes to be genuine and what it
purports to be.
(c) It is understood and agreed that the duties of the Escrow
Agent hereunder are purely ministerial in nature and that it shall not be liable
for any error of judgment, fact or law, or any act done or omitted to be done,
except for its own willful misconduct, breach of fiduciary duty, bad faith or
gross negligence or that of its officers, directors, employees and agents. The
Escrow Agent's determination as to whether an event or condition has occurred,
or been met or satisfied, or as to whether a provision of this Escrow Agreement
has been complied with, or as to whether sufficient evidence of the event or
condition or compliance with the provision has been furnished to it, shall not
subject the Escrow Agent to any claim, liability or obligation whatsoever, even
if it shall be found that such determination was improper and incorrect,
provided, only, that the Escrow Agent and its officers, directors, employees and
agents shall not have been guilty of willful misconduct, breach of fiduciary
duty, bad faith or gross negligence in making such determination.
(d) The Escrow Agent may consult with, and obtain advice from,
legal counsel including its own officers, employees and partners in the event of
any dispute or question as to the construction of any of the provisions hereof
or its duties hereunder, and it shall incur no liability and shall be fully
protected in acting in good faith in accordance with the opinion and
instructions of such counsel.
(e) In the event of any disagreement or lack of agreement
between HRPT and GPI of which the Escrow Agent has knowledge, resulting or which
might result in adverse claims or demands with respect to the Escrow Fund, the
Escrow Agent shall be entitled, in its sole discretion, to refuse to comply with
any claims or demands on it with respect thereto until such matter shall be
resolved, and in so refusing, the Escrow Agent may elect to make no delivery or
other disposition of the Escrow Fund, and in so doing the Escrow Agent shall not
be or become liable in any way to either HRPT or GPI for its failure or refusal
to comply with such claims or demands, and it shall be entitled to continue so
to refrain from acting, and so to refuse to act, until all such claims or
demands (i) shall have been finally determined by a court of competent
jurisdiction, or (ii) shall have
<PAGE>
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been resolved by the agreement of HRPT and GPI and the Escrow Agent shall have
been notified thereof in writing.
(f) The Escrow Agent may resign at any time upon giving ten
(10) days' notice to HRPT and GPI and may appoint a successor escrow agent
hereunder so long as such successor shall accept and agree to be bound by the
terms of this Escrow Agreement and shall be acceptable to HRPT and GPI. It is
understood and agreed that the Escrow Agent's resignation shall not be effective
until a successor escrow agent agrees to be bound by the terms of this Escrow
Agreement.
Section 7. No Representations by Escrow Agent. The Escrow Agent makes
no representation as to the validity, value, genuineness, negotiability or
collectibility of any security or other document or instrument held by or
delivered to or by it.
Section 8. Obligations of Escrow Agent. The Escrow Agent shall be under
no obligation to institute or defend any actions, suits or legal proceedings in
connection herewith or take any other action likely to involve it in expense
unless first indemnified to its reasonable satisfaction.
Section 9. Expenses. The reasonable out-of-pocket expenses (including,
without limitation, reasonable legal fees and disbursements) incurred by the
Escrow Agent in the performance of its duties hereunder shall be reimbursed
one-half by GPI and one-half by HRPT. Such reimbursement for out-of-pocket
expenses shall be made by cash payment to the Escrow Agent from time to time
upon its written request. The Escrow Agent shall have no right or lien with
respect to the Escrow Fund for payment of such expenses. Except as otherwise
herein or in the Merger Agreement provided, each party shall pay its own
expenses incident to the performance or enforcement of this Escrow Agreement,
including all fees and expenses of its counsel for all activities of such
counsel undertaken pursuant to this Escrow Agreement.
[Section 10. Escrow Agent Status. _____ hereby acknowledges that the
Escrow Agent is counsel to _____ and agrees that it will not seek to disqualify
the Escrow Agent from acting and continuing to act as counsel to _____ in the
event of a dispute hereunder or in the course of the defense or prosecution of
any claim relating to the transactions contemplated hereby or by the Merger
Agreement; provided, however, that in the event of a dispute, the Escrow Agent
shall (a) immediately seek to appoint a successor escrow agent, which shall be
acceptable to HRPT and GPI, having no business relationships with HRPT or GPI
and (b) immediately resign upon acceptance of such appointment and agreement to
be bound by the terms of this Escrow Agreement by such successor escrow agent.]
Section 11. Assignment; Successors and Assigns. This Escrow Agreement
shall not be assignable by either party without the prior written consent of the
other.
Nothing in this Escrow Agreement expressed or implied is intended to or
shall be construed to confer upon or create in any Person (other than the
parties hereto and their permitted successors and assigns) any rights or
remedies under or by reason of this Agreement, including without limitation any
rights to enforce this Escrow Agreement.
Section 12. Specific Performance; Other Rights and Remedies. Each party
recognizes and agrees that the other party's remedy at law for any breach of the
provisions of this Escrow Agreement would be inadequate and agrees that for
breach of such provisions, such party shall, in addition to such other remedies
as may be available to it at law or in equity or as provided in this Escrow
Agreement, be entitled to injunctive relief and to enforce its rights by an
action for specific performance to the extent permitted by applicable law. Each
party hereby waives any requirement for security or the posting of any bond or
other surety in connection with any temporary or permanent award of injunctive,
mandatory or other equitable relief. Nothing herein contained shall
<PAGE>
-4-
be construed as prohibiting either party from pursuing any other remedies
available to it for such breach or threatened breach, including without
limitation the recovery of damages.
Section 13. Arbitration. The Parties agree that any and all disputes or
disagreements arising out of or relating to this Escrow Agreement, other than
actions or claims for injunctive or other equitable relief or claims raised in
actions or proceedings brought by third parties, shall be resolved through
negotiations or, if the dispute is not so resolved, through mediation and if
necessary binding arbitration conducted by ____________________, whose decision
shall be binding on all parties and not appealable. Any such mediation and/or
arbitration shall be conducted in _______________ pursuant to the procedures set
forth in Exhibit ___ attached hereto and made a part hereof and the arbitration
rules and procedures of ____________________.
Section 14. Entire Agreement. This Escrow Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements, arrangements, covenants, promises,
conditions, understandings, inducements, representations and negotiations,
expressed or implied, oral or written, between them as to such subject matter.
Section 15. Waivers; Amendments. Anything in this Escrow Agreement to
the contrary notwithstanding, amendments to and modifications of this Escrow
Agreement may be made, required consents and approvals may be granted,
compliance with any term, covenant, agreement, condition or other provision set
forth herein may be omitted or waived, either generally or in a particular
instance and either retroactively or prospectively with, but only with, the
written consent of the party entitled to the benefit thereof.
Section 16. Notices. All notices and other communications which by any
provision of this Escrow Agreement are required or permitted to be given shall
be given in writing and shall be (a) sent by nationally recognized overnight
courier service, (b) sent by telecopy confirmed by sending (by nationally
recognized overnight courier service) written confirmation at substantially the
same time, or (c) personally delivered to the receiving party. All such notices
and communications shall be mailed, sent or delivered as follows:
If to HRPT, at:
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attention: David J. Hegarty, President
Facsimile: 617-332-2261
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Alexander A. Notopoulos, Jr.
Facsimile: 617-338-2880
If to GPI, at:
Government Property Investors, Inc.
1775 Pennsylvania Avenue, N.W., Suite 1000
Washington, D.C. 20006
Attention: Mark Levin
Facsimile: 202-296-8335
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with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
New York, New York 10022
Attention: Nora Ann Wallace
Facsimile: 212-821-8111
or to such other person(s) or facsimile number(s) or address(es) as the party to
receive any such communication or notice may have designated by written notice
to the other party.
Section 17. Severability. If any provision of this Escrow Agreement
shall be held or deemed to be, or shall in fact be, invalid, inoperative,
illegal or unenforceable as applied to any particular case in any jurisdiction
or jurisdictions, or in all jurisdictions or in all cases, because of the
conflicting of any provision with any constitution or statute or rule of public
policy or for any other reason, such circumstance shall not have the effect of
rendering the provision or provisions in ques tion invalid, inoperative, illegal
or unenforceable in any other jurisdiction or in any other case or circumstance
or of rendering any other provision or provisions herein contained invalid,
inoperative, illegal or unenforceable to the extent that such other provisions
are not themselves actually in conflict with such constitution, statute or rule
of public policy, but this Escrow Agreement shall be reformed and construed in
any such jurisdiction or case as if such invalid, inoperative, illegal or
unenforceable provision had never been contained herein and such provision
reformed so that it would be valid, operative and enforceable to the maximum
extent permitted in such jurisdiction or in such case.
Section 18. Counterparts. This Escrow Agreement may be executed in
several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument, binding upon all
the parties hereto. In pleading or proving any provision of this Escrow
Agreement, it shall not be necessary to produce more than one of such
counterparts.
Section 19. Section Headings. The headings contained in this Escrow
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Escrow Agreement.
Section 20. Governing Law. The validity, interpretation, construction
and performance of this Escrow Agreement shall be governed by, and construed in
accordance with, the applicable laws of the Commonwealth of Massachusetts
applicable to contracts made and performed therein and, in any event, without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of domestic substantive laws of any other jurisdiction.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
HEALTH AND RETIREMENT PROPERTIES TRUST
By:_______________________
GOVERNMENT PROPERTY INVESTORS, INC.
By:________________________
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-6-
-----------------------,
as Escrow Agent
By:________________________
<PAGE>
SCHEDULE 2.6
INVESTMENT AND REGISTRATION RIGHTS AGREEMENT
THIS INVESTMENT AND REGISTRATION RIGHTS AGREEMENT (the "Agreement") is
made and entered ____________, 1997, among Health and Retirement Properties
Trust, a Maryland real estate investment trust ("HRPT"), and Government Property
Investors, Inc., a Delaware corporation (including its successors and assignees,
the "Holder").
RECITALS
A. Concurrently with the execution of this Agreement, HRPT has issued
to the Holder _____ shares of the beneficial interest $.01 par value per share
of HRPT ("Initial Shares") and from time to time will issue additional shares
("Additional Shares" and together with the Initial Shares and any other
securities which are hereafter issued with respect thereto by way of exchange,
reclassification, dividend or distribution, whether or not such securities have
been sold to the public, the "Securities") pursuant to a Merger Agreement, dated
February 17, 1997 (the "Merger Agreement"), among HRPT and the Holder.
B. The Securities have been issued to the Holder without registration
under the Securities Act of 1933, as amended (the "Securities Act"), and HRPT
and the Holder desire to provide for compliance with the Securities Act and for
the registration of the Securities upon the terms and conditions set forth
below.
NOW, THEREFORE, the parties agree as follows:
1. Certain Other Definitions. Capitalized terms used but not otherwise
defined in this Agreement shall have the meanings given therefor in the Merger
Agreement. The capitalized terms set forth below shall have the following
meanings:
1.1 "Commission": the United States Securities and Exchange
Commission and any successor federal agency having similar powers.
1.2 The terms "register", "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
1.3 "Registrable Securities": Securities that have not been sold
pursuant to a registration statement or under Rule 144 under the Securities Act.
1.4 "Registration Expenses": all expenses incurred by HRPT in
complying with Section 5, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel for HRPT, blue
sky fees and expenses, and accountants' expenses including, without limitation,
any special audits or comfort letters incident to or required by any such
registration, transfer taxes, fees of transfer agents and registrars, costs of
insurance, but excluding any fees and disbursements of underwriters,
underwriting discounts and commissions and expenses of Holder and, in the case
of an underwriter offering pursuant to Section 5.2(j) any filing fees.
2. Representations and Warranties of HRPT. The representations and
warranties of HRPT contained in Section 5 of the Merger Agreement are
incorporated by reference into this Agreement. The Holder is entitled to rely on
such representations and warranties as if they were set forth in this Agreement.
The Holder agrees that it shall not bring any action based on a breach of any
such
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representation and warranty against HRPT, any Subsidiary, any affiliate or any
officer, director, employee or agent of any of them with respect to any claim
made after the first anniversary of the date of this Agreement.
3. Representations and Warranties of Holder. GPI hereby represents,
acknowledges, covenants and agrees as follows: (i) the Securities are being
acquired for its own account for investment and not with a view to any
distribution or public offering within the meaning of the Securities Act or any
state securities law; (ii) the Securities have not been registered under the
Securities Act or any state securities law; (iii) it is an "accredited investor"
within the meaning of Rule 501 promulgated by the Commission pursuant to the
Securities Act; and (iv) it will not sell or otherwise transfer any of the
Securities except upon the terms and conditions specified herein and it will
cause any subsequent Holder of the Securities to agree to take and hold the
Securities subject to the terms and conditions of this Agreement, provided that
any Holder may sell the Securities in one or more private transactions not
requiring registration under the Securities Act or any state securities law.
4. Restrictions on Transfer.
4.1 Legend. Each certificate representing the Securities issued to
the Holder or to a subsequent Holder pursuant to Section 4.2 shall include a
legend in substantially the following form, provided that such legend shall not
be required if such transfer is being made in connection with a sale that is
exempt from registration pursuant to Rule 144 under the Securities Act or if the
opinion of counsel referred to in Section 4.3 is to the further effect that
neither such legend nor the restrictions on transfer in this Section 4 are
required in order to ensure compliance with the Securities Act:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES ACT AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM. SUCH SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE
WITH THE CONDITIONS SPECIFIED IN THE INVESTMENT AND REGISTRATION RIGHTS
AGREEMENT DATED AS OF __________, 1997, BETWEEN THE ISSUER AND THE
OTHER ENTITIES NAMED THEREIN, A COMPLETE AND CORRECT COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER AND WILL
BE FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT
CHARGE.
4.2 Notice of Transfer. Prior to any proposed assignment, transfer
or sale of any Securities (other than pursuant to a Registration Statement or
pursuant to Rule 144(k)), the Holder of such Securities shall give written
notice to HRPT of Holder's intention to effect such assignment, transfer or
sale, which notice shall set forth the date of such proposed assignment,
transfer or sale. Holder shall also furnish to HRPT an agreement by the
transferee that it is taking and holding the same subject to the terms and
conditions specified in this Agreement and a written opinion of Holder's
counsel, in form reasonably satisfactory to HRPT, to the effect that the
proposed transfer may be effected without registration under the Securities Act.
4.3 Termination of Restrictions. The restrictions set forth in
this Section 4 shall terminate and cease to be effective with respect to any of
the Securities (i) upon the sale of any such Securities which has been
registered under the Securities Act, (ii) upon receipt by HRPT of an opinion of
counsel, in form reasonably satisfactory to HRPT, to the effect that compliance
with such restrictions is not necessary in order to comply with the Securities
Act with respect to the sale of the Securities or (iii) upon the expiration of
the three-year period referred to in Rule 144(k) promulgated pursuant to the
Securities Act (or such other period set forth in Rule 144(k) as it may be
amended from time to time). Whenever such restrictions shall so terminate, the
Holder shall be entitled to receive from HRPT, without
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expense (other than transfer taxes, if any, if the Holder requests that
certificates be issued in another name), certificates for such Securities not
bearing the legend set forth in Section 4.1.
5. Registration under Securities Act etc.
5.1 Shelf-Registration.
(a) General. HRPT shall prepare and file with the Commission
on or prior to 30 days after the date hereof, a registration statement
on an appropriate form under the Act relating to the offer and sale of
the Initial Shares (and with respect to the Additional Shares, as soon
after their issuance as is reasonably practicable, HRPT shall prepare
and file appropriate amendments relating to such shares) by the Holder
in accordance with the methods of distribution set forth in such
registration statement and Rule 415 under the Act (hereafter, a "Shelf
Registration Statement") and shall use its best efforts to cause the
Shelf Registration Statement to be declared effective as soon as
reasonably practicable thereafter.
(b) Effective Period. HRPT agrees to use its best efforts to
keep the Shelf Registration Statement continuously effective in order
to permit the prospectus included in the Shelf Registration Statement
to be usable by the Holders for a period of three years from the
Closing Date or such shorter period that shall terminate when all the
Securities covered by the Shelf Registration Statement have been sold;
provided that HRPT shall be deemed not to have used its best efforts to
keep the Shelf Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in holders
of the Securities covered by the Shelf Registration Statement not being
able to offer and sell such Securities during that period, unless such
action is required by applicable law, and provided, further, that the
foregoing shall not apply to actions taken by HRPT in good faith and
for valid business reasons (not including avoidance of HRPT's
obligations pursuant to this Agreement), including, without limitation,
the acquisition or divestiture of a material portion of its assets, the
offering of Securities pursuant to the registration rights granted to
others or the offering of Securities by HRPT for its own account, so
long as HRPT promptly complies with the requirements of Section 5.2(f),
if applicable. Any such period during which HRPT fails to keep the
Shelf Registration Statement effective and usable for offers and sales
of Securities is hereafter referred to as a "Suspension Period". A
Suspension Period shall commence on and include the date on which HRPT
provides notice that the Shelf Registration Statement is no longer
effective that the prospectus included in the Shelf Registration
Statement is no longer usable for offers and sales of Securities or
that HRPT is required to suspend the sale of Securities because of the
occurrence of an underwritten offering in connection with the demand
registrations or primary registrations referred to above and shall end
on the date when each seller of Securities covered by the Shelf
Registration Statement either receives the copies of the supplemented
or amended prospectus contemplated by Section 5.2(f) or is advised in
writing by HRPT that use of the prospectus may be resumed; provided no
one Suspension Period shall continue for more than 75 days. If one or
more Suspension Periods occur, the time period referenced above shall
be extended by a period which is not less than the aggregate number of
days included in all Suspension Periods.
(c) Block-out Period. Each Holder of Registrable Securities
agrees by acquisition of such Registrable Securities, if so requested
by HRPT, not to effect any sale of Securities pursuant to the Shelf
Registration Statement for any period (but not more than 75 days)
reasonably deemed necessary by HRPT or its managing underwriter in
connection with the offering of HRPT equity pursuant to an underwritten
offering pursuant to demand registration rights granted to another
entity pursuant to Section 11 or the offering of any debt or equity
securities by HRPT for its own account (a "Block-out Period").
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(d) Anything in this Agreement to the contrary
notwithstanding, in any period of 12 consecutive months, the aggregate
time during which Holder would be prohibited from selling Securities
pursuant to the Shelf Registration Statement during any Suspension
Periods and Block- out Periods shall not exceed 150 days.
5.2 Registration Procedures. HRPT shall:
(a) cause any registration statement filed pursuant to Section
5.1 and the related prospectus and any amendment or supplement, as of
the effective date of such registration statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission promulgated under the Securities Act and (ii) not to contain
any 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;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to keep
such registration statement effective and to comply with the provisions
of the Securities Act with respect to the disposition of all
Registrable Securities and other securities covered by such
registration statement until the earlier of such time as all such
Registrable Securities and securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement or for a
period of three years from the Closing Date; and will furnish, upon
request, to each such seller and each Holder a copy of any amendment or
supplement to such registration statement or prospectus prior to filing
it and shall not file any such amendment or supplement to which any
such seller or Holder shall have reasonably objected on the grounds
that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or of the rules or
regulations thereunder;
(c) furnish to each seller of such Registrable Securities and
each Holder such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, such documents, if any,
incorporated by reference in such registration statement or prospectus,
and such other documents, as such seller or Holder may reasonably
request;
(d) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
the states of the United States as each seller or Holder shall
reasonably request, to keep such registration or qualification in
effect for so long as such registration statement remains in effect,
and do any and all other acts and things which may be necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of its Registrable Securities covered by such
registration statement, except that HRPT shall not for any such purpose
be required to qualify generally to do business as a foreign
corporation in any jurisdiction in which it is not and would not, but
for the requirements of this Section 5.2(d), be obligated to be so
qualified, or to subject itself to taxation in any such jurisdiction,
or to consent to general service of process in any such jurisdiction;
(e) upon request, furnish to each seller of Registrable
Securities and each Holder a signed counterpart, addressed to such
seller and such Holder, of (i) an opinion of counsel for HRPT, dated
the effective date of such registration statement, and (ii) a "comfort
letter", signed
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by the independent public accountants who have certified HRPT's
financial statements included in such registration statement, dated the
effective date of such registration statement, covering substantially
the same matters with respect to such registration statement (and the
prospectus included in such registration statement) and, in the case of
such accountants' letter, with respect to events subsequent to the date
of such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to underwriters
in underwritten public offerings of securities;
(f) immediately notify each seller of Registrable Securities
covered by such registration statement and each Holder, at any time
when a prospectus relating thereto is required to be delivered under
the Securities Act, upon discovery that, or upon the happening of any
event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, which
untrue statement or omission requires amendment of the registration
statement or supplementation of the prospectus, and at the request of
any such seller or Holder, as soon as practicable prepare and furnish
to such seller and each Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include 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 in
the light of the circumstances then existing; provided, however, that
each Holder of Registrable Securities registered pursuant to such
registration statement agrees that he will not sell any Registrable
Securities pursuant to such registration statement during the time that
HRPT is preparing and filing with the Commission a supplement to or an
amendment of such prospectus or registration statement;
(g) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its securities holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but
not more than eighteen months, beginning with the first month of the
first fiscal quarter after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section ll(a) of the Securities Act;
(h) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of
such registration statement;
(i) cause all Registrable Securities included in a
registration statement to be listed on each securities exchange on
which similar securities issued by HRPT are then listed and, if not so
listed, but similar securities are then listed on the NASD automated
quotation system, to be listed on the NASD automated quotation system
and, if listed on the NASD automated quotation system, use its best
efforts to secure designation of all such Registrable Securities as a
NASDAQ national market system security within the meaning of Rule
11Aa2-1 of the SEC or failing that, at such time as HRPT becomes
eligible for such authorization, to secure NASDAQ authorization for
such Registrable Securities if available and, without limiting the
generality of the foregoing, to arrange for at least two market makers
to register as such with respect to such Registrable Securities with
the NASD; and
(j) enter into customary agreements (including underwriting
agreements in customary form but subject to the allocation of
Registration Expenses provided for in Section
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1.4) and take all such other actions reasonably requested by any Holder
of Registrable Securities in order to expedite or facilitate the
disposition of such Registrable Securities.
Each seller of Registrable Securities as to which any registration is being
effected shall furnish to HRPT such information regarding such seller and the
distribution of such securities as shall be required by law or by the Commission
in connection therewith.
5.3 Indemnification.
(a) Indemnification by HRPT. HRPT shall indemnify and hold
harmless the seller of any Registrable Securities covered by any
registration statement filed pursuant to Section 5.1, its directors,
partners, trustees and officers, each other person who participates as
an underwriter in the offering or sale of such securities and each
other person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act against any losses, claims,
damages, liabilities or expenses, joint or several, to which such
seller or Holder or any such director or officer or participating or
controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or related actions or proceedings) arise out of or are based
upon (x) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained in such
registration statement, or any amendment or supplement to such
registration statement, or any document incorporated by reference in
such registration statement, or (y) any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and HRPT will
reimburse such seller, Holder and each such director, trustee, officer,
participating person and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, liability, action or proceeding,
provided that HRPT shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense (or action or
proceeding in respect thereof) arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to
HRPT through an instrument duly executed by such seller or such Holder
or any such director, trustee, officer, participating person or
controlling person specifically stating that it is for use in the
preparation of such registration statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on
behalf of such seller or such Holder or any such director, officer,
participating person or controlling person and shall survive the
transfer of such securities by such seller. HRPT shall agree to make
provision for contribution relating to such indemnity as shall be
reasonably requested by any seller of Registrable Securities or the
underwriters.
(b) Indemnification by the Sellers. As a condition to
including any Registrable Securities in any registration statement
filed pursuant to Section 5.1, each prospective seller of such
securities hereby undertakes severally and not jointly, to indemnify
and hold harmless (in the same manner and to the same extent as set
forth in Section 5.3(a)) HRPT, each director of HRPT, each officer of
HRPT who shall sign such registration statement and each other person,
if any, who controls HRPT within the meaning of the Securities Act,
with respect to any untrue statement in or omission from such
registration statement, any preliminary prospectus, final prospectus or
summary prospectus included in such registration statement, or any
amendment or supplement to such registration statement, of a material
fact if such statement or omission was made in reliance upon and in
conformity with written information furnished to HRPT through an
instrument duly executed by such seller specifically stating that it is
for use in the preparation of
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such registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made by
or on behalf of HRPT or any such director, officer or controlling
person and shall survive the transfer of such securities by such
seller.
(c) Notice of Claims. etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in Sections 5.3(a) and (b),
such indemnified party will, if a claim is to be made against an
indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any
indemnified party to give notice shall not relieve the indemnifying
party of its obligations under Sections 5.3(a) or (b), except to the
extent that the indemnifying party is actually and materially
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified
party's reasonable judgment (i) a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such
claim, or (ii) the indemnified party has available to it reasonable
defenses which are different from or additional to those available to
the indemnifying party, the indemnifying party shall be entitled to
participate in and to assume the defense of such action, jointly with
any other indemnifying party similarly notified, to the extent that it
may wish, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action, the
indemnifying party shall not be liable to such indemnified party for
any legal or other expenses subsequently incurred by the latter in
connection with the defense of such action other than reasonable costs
of investigation. Notwithstanding the foregoing, in any such action,
any indemnified party shall have the right to retain its own counsel
but the fees and disbursements of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party shall have
failed to retain counsel for the indemnified party, or (ii) the
indemnifying party and such indemnified party shall have mutually
agreed to the retention of such counsel. It is understood that the
indemnifying party shall not, in connection with any action or related
actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such
jurisdiction to act as counsel for the indemnified parties, unless in
any indemnified party's reasonable judgment (i) a conflict of interest
between such indemnified party and any other indemnified party may
exist in respect of such claims, or (ii) the indemnified party has
available to it reasonable defenses which are different from or
additional to those available to another indemnified party. The
indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with
such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
No indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term the giving by the
claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that
specified in the Sections 5.3(a) and 5.3(b) (with appropriate
modifications) shall be given by HRPT and each seller of Registrable
Securities with respect to any required registration or other
qualification of such Registrable Securities under any federal or state
law or regulation of governmental authority other than the Securities
Act.
(e) Contribution. If the indemnification provided for in this
Section 5.3 is unavailable or insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages,
liabilities or expenses described as indemnifiable pursuant to Section
5.3(a) or 5.3(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party, as a result of such losses, claims,
damages, liabilities
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or expenses in such proportion as appropriate to reflect the relative
fault of HRPT, on the one hand, or such seller of Registrable
Securities, on the other hand, and to the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
any untrue statement or omission giving rise to such indemnification
obligation. HRPT and the Holders of Registrable Securities agree that
it would not be just and equitable if contributions pursuant to this
Section 5.3(e) were determined by pro rata allocation (even if the
Holders of Registrable Securities were treated as one entity for such
purpose) or by any other method of allocation which did not take
account of the equitable considerations referred to above in this
Section 5.3(e). No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
(f) Indemnification Payments. Periodic payments of amounts
required to be paid pursuant to this Section 5.3 shall be made during
the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
(g) Limitation on Seller's Payments. Notwithstanding any
provision of this Agreement to the contrary, the liability of any
seller of Registrable Securities under this Section 5.3 shall in no
event exceed the proceeds received by such seller from the sale of
Registrable Securities covered by the registration statement giving
rise to such liability.
5.4 Registration Expenses. HRPT shall bear all Registration
Expenses incurred in connection with the performance of its obligations under
Section 5.1 of this Agreement.
6. Rule 144. HRPT shall comply with the requirements of Rule 144 under
the Securities Act, as such Rule may be amended from time to time (or any
similar rule or regulation hereafter adopted by the Commission), regarding the
availability of current public information to the extent required to enable any
Holder of Registrable Securities to sell Registrable Securities without
registration under the Securities Act pursuant to Rule 144 (or any similar rule
or regulation). Upon the request of any Holder of Registrable Securities, HRPT
will deliver to such Holder a written statement as to whether it has complied
with such requirements.
7. Amendments and Waivers. This Agreement may be amended and HRPT may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, only if HRPT shall have obtained the written consent to such
amendment, action or omission to act, of the Holder or Holders of 51% or more of
Registrable Securities (and, in the case of any amendment, action or omission to
act which adversely affects any specific Holder of Registrable Securities or a
specific group of Holders of Registrable Securities, the written consent of each
such Holder or Holders of 51% or more of the Registrable Securities held by such
group). Each Holder of any Registrable Securities at the time shall be bound by
any consent authorized by this Section 7, whether or not such Registrable
Securities shall have been marked to indicate such consent.
8. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the Holder of such
Registrable Securities for purposes of any request or other action by any Holder
or Holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of Registrable Securities held by any
Holder or Holders of Registrable Securities contemplated by this Agreement. If
the beneficial owner of any Registrable Securities so elects, HRPT may require
assurances reasonably satisfactory to it of such owner's beneficial ownership of
such Registrable Securities.
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9. Successors in Interest. The parties anticipate the liquidation of
Holder immediately following the Effective Date. Contemporaneously therewith,
the former stockholders of Holder shall, by instrument reasonably acceptable to
HRPT, become parties to this Agreement.
10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties to this Agreement, whether so expressed or not, and, in
particular, shall inure to the benefit of and be enforceable by any Holder or
Holders of Registrable Securities.
11. Notices. All notices, communications and deliveries required or
permitted by this Agreement shall be made in writing signed by the Party making
the same, shall specify the Section of this Agreement pursuant to which it is
given or being made and shall be deemed given or made (i) on the date delivered
if delivered by telecopy or in person, (ii) on the third (3rd) business day
after it is mailed if mailed by registered or certified mail (return receipt
requested) (with postage and other fees prepaid) or (iii) on the day after it is
delivered, prepaid, to an overnight express delivery service that confirms to
the sender delivery on such day, as follows:
(a) if to any Holder of Registrable Securities, at the address
shown on the stock transfer books of HRPT unless such Holder has
advised HRPT in writing of a different address as to which notices
shall be sent under this Agreement, and
(b) if to HRPT, at 400 Centre Street, Newton, Massachusetts
02158, Attn: David J. Hegarty, President, Telecopy No.: (617) 332-2281,
with a copy to Sullivan & Worcester LLP, One Post Office Square,
Boston, Massachusetts 02109, Attn: Alexander A. Notopoulos, Jr.,
Telecopy No: (617) 338-2880,
or to such other representative or at such other address of a Party as such
Party hereto may furnish to the other Parties in writing. If notice is given
pursuant to this Section 10 of any assignment to a permitted successor or assign
of a Party hereto, the notice shall be given as set forth above to such
successor or assign of such Party.
12. Miscellaneous. HRPT shall not after the date of this Agreement
enter into any agreement with respect to its securities which is inconsistent
with or violates the rights granted to Holders of Registrable Securities in this
Agreement; provided, however, that HRPT shall be permitted to enter into
registration rights agreements with respect to Securities issued in connection
with acquisitions consummated after the date of this Agreement. This Agreement
embodies the entire agreement and understanding between HRPT and the other
parties to this Agreement relating to the subject-matter of this Agreement. This
Agreement shall be construed and enforced in accordance with and governed by the
law of the State of Delaware. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning of this
Agreement. This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
13. HRPT Limitation of Liability. The Declaration of Trust of HRPT, a
copy of which is duly filed with the Department of Assessments and Taxation of
the State of Maryland, provides that the name "Health and Retirement Properties
Trust" refers to the trustees under such Declaration of Trust collectively as
trustees, but not individually or personally, and that no trustee, officer,
shareholder, employee or agent of HRPT shall be held to any personal liability,
jointly or severally, for any obligation of, or claim against, HRPT. All persons
dealing with HRPT in any way shall look only to the assets of HRPT for the
payment of any sum or the performance of any obligation.
9
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective duly authorized officers as of the
date first above written.
HEALTH AND RETIREMENT PROPERTIES
TRUST
By:______________________________________
GOVERNMENT PROPERTY INVESTORS, INC.
By:_______________________________________
10
<PAGE>
Schedule 7.2(d)
VOTING AGREEMENT
This Agreement is entered into this _____ day of _________, 1997, by
and among Health and Retirement Properties Trust, a Maryland real estate
investment trust ("HRPT"), Rosecliff Realty, L.P. ("Rosecliff") and The 1818
Fund II, L.P. ("1818" and, collectively with Rosecliff, the "Principal
Shareholders").
R E C I T A L:
Pursuant to that certain Agreement of Merger, dated as of February 17,
1997 (the "Merger Agreement"), between HRPT and Government Property Investors,
Inc., a Delaware corporation ("GPI"), Government Property Holdings Trust, a
Maryland real estate investment trust ("GPH"), has of the date hereof merged
with and into HUB Acquisition Trust, a Maryland real estate investment trust
(the "Company"), and the subsidiaries of GPH have thereby become subsidiaries of
the Company (the "Acquisition").
Upon the consummation of the Acquisition, GPI will receive shares of
beneficial interest, par value $.01 per share, of HRPT (the "HRPT Common
Shares"), as consideration for shares of the capital stock of GPH held by GPI
immediately prior to the consummation of the Acquisition, and GPI will
thereafter liquidate and dissolve and as a result the former stockholders of
GPI, including the Principal Shareholders, will become shareholders of HRPT.
To induce HRPT to consummate the Acquisition, the Principal
Shareholders are willing to agree to the restrictions set forth herein with
respect to the transfer and voting of the HRPT Common Shares issued to the
Principal Shareholders pursuant to the Merger Agreement and the liquidation of
GPI.
NOW, THEREFORE, HRPT and the Principal Shareholders hereby agree as
follows:
1. Definitions. The capitalized terms set forth below (in their
singular and plural forms as applicable) shall have the meanings set forth
below. Other capitalized terms used but not defined herein shall have the
meanings specified in the Merger Agreement.
(a) "Affiliate": with respect to a specified Person, another
Person who, directly or indirectly, through one or more intermediaries, controls
or is controlled by or is under common control with the specified Person or is a
director, trustee, executive officer or general partner of the specified Person.
(b) "Change in Management": (i) a termination of the Advisory
Agreement, dated November 20, 1986, as in effect as of the date hereof,
<PAGE>
2
between HRPT and HRPT Advisors, Inc. and as amended from time to time hereafter
and (ii) a Change of Control of HRPT Advisors, Inc.
(c) "Change of Control": with respect to a specified Person, if
any other Person becomes the beneficial owner of more than fifty percent (50%)
of the voting equity of the specified Person and within 6 months thereafter,
individuals other than individuals who at the beginning of such period
constituted the entire Board of Directors or Trustees become a majority of the
Directors or Trustees; provided, in the case of HRPT Advisors, Inc., a change in
ownership following the death or legal incapacity of a shareholder as a result
of such shareholder's interest being held by his estate or legal representative,
shall not constitute a Change of Control.
(d) "Person": an individual, partnership, joint venture,
corporation, limited liability company, trust or any other form of business
organization.
(e) "Transfer": to transfer, sell, assign, pledge, hypothecate,
give, grant or create a security interest in or lien on, place in trust (voting
or otherwise), assign an interest in or in any other way encumber or dispose of,
directly or indirectly, and whether or not by operation of law or for value, any
of the HRPT Common Shares.
2. Restrictions on Transactions in HRPT Common Shares. Until the
occurrence of a Change in Management, unless otherwise approved by the Board of
Trustees of HRPT, each Principal Shareholder agrees that it will not (i)
Transfer any HRPT Common Shares now or hereafter held by it to any Person who,
to such Principal Shareholder's knowledge, holds directly, or is an Affiliate of
a Person who holds directly, 5% or more of the aggregate HRPT Common Shares at
the time outstanding or (ii) make directly or indirectly or participate in an
unsolicited offer to purchase any HRPT Common Shares.
3. Voting. Until the occurrence of a Change in Management, unless
otherwise approved by the Board of Trustees of HRPT, each Principal Shareholder
agrees that it will not (i) vote (or direct to be voted) any HRPT Common Shares
or any other shares of equity interest of HRPT as to which it has direct or
indirect voting power or control in favor of any transaction that could result
in a Change of Control of HRPT or (ii) present any shareholder proposal dealing
with a Change of Control of HRPT.
4. Legend. Each certificate representing HRPT Common Shares subject to
this Agreement shall have endorsed, stamped or written thereon a legend which
shall read substantially as follows:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN AN AGREEMENT
<PAGE>
3
BETWEEN THE ISSUER AND CERTAIN SHAREHOLDERS OF
THE ISSUER, A COPY OF WHICH WILL BE FURNISHED
WITHOUT CHARGE BY THE ISSUER TO THE HOLDER HEREOF
UPON WRITTEN REQUEST.
5. Termination. This Agreement shall terminate with respect to either
Principal Shareholder when such Principal Shareholder, together with its
Affiliates, owns less than twenty-five percent (25%) of the aggregate HRPT
Common Shares issued pursuant to the Merger Agreement.
6. Notices. All notices and other communications which by any provision
of this Agreement are required or permitted to be given shall be given in
writing and shall be (i) sent by nationally recognized overnight courier, (ii)
sent by telecopy, confirmed by sending a copy by nationally recognized overnight
courier at substantially the same time as such telecopy, or (iii) personally
delivered to the receiving party (which if other than an individual shall be an
officer or other responsible party of the receiving party). All such notices and
communications shall be mailed, sent or delivered as follows or to such other
person(s), facsimile number(s) or address(es) as the party to receive any such
communication or notice may have designated by written notice to the other
party:
A. If to Rosecliff:
Rosecliff Realty, L.P.
712 Fifth Avenue, 34th Floor
New York, New York 10019
Attn: Peter T. Joseph
B. If to 1818:
c/o Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005
Attn: Walter W. Grist
C. If to HRPT:
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
or to such other address as a party hereto shall specify in writing given in
accordance with this section.
7. Modifications. This Agreement constitutes the entire agreement
between the parties hereto with regard to the subject matter hereof, superseding
all
<PAGE>
4
prior understandings and agreements whether written or oral. This Agreement may
not be amended or revised except by a writing signed by the parties.
8. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns
but may not be assigned by any party without the prior written consent of the
other parties hereto.
9. Captions. Captions have been inserted solely for the convenience of
reference and in no way define, limit or describe the scope or substance of any
provision and shall not affect the validity of any other provision.
10. Governing Law. This Agreement shall be construed under and governed
by the laws of The Commonwealth of Massachusetts applicable to contracts made
and to be performed entirely in Massachusetts, without giving effect to the
provisions thereof relating to conflict of laws.
11. Specific Performance. Each Principal Shareholder recognizes and
agrees that HRPT's remedy at law for breach of Sections 2 and 3 of this
Agreement would be inadequate, and further agrees that, for breach of such
provisions, each aggrieved party shall be entitled to injunctive relief and to
enforce its rights by an action for specific performance.
12. Severability. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
13. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
<PAGE>
5
IN WITNESS WHEREOF, the undersigned have executed and delivered, or
caused to be executed and delivered by their officers hereunto duly authorized,
this Agreement as of the date first set forth above.
HEALTH AND RETIREMENT PROPERTIES TRUST
By:
Name:
Title:
ROSECLIFF REALTY, L.P.
By:
Name:
Title:
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
a general partner
By:
Name:
Title:
<PAGE>
SCHEDULE 7.2(d)
INFORMATION ACCESS AGREEMENT
This Agreement is entered into this ___ day of ________, 1997, by and
among Health and Retirement Properties Trust, a Maryland real estate investment
trust ("HRPT"), and Rosecliff Realty, L.P. ("Rosecliff") and The 1818 Fund II,
L.P. ("1818" and, collectively with Rosecliff, the "Principal Shareholders").
R E C I T A L:
Pursuant to that certain Agreement of Merger, dated as of February 17,
1997 (the "Merger Agreement"), between HRPT and Government Property Investors,
Inc., a Delaware corporation ("GPI"), Government Property Holdings Trust, a
Maryland real estate investment trust ("GPH"), has as of the date hereof merged
with and into HUB Acquisition Trust, a Maryland real estate investment trust
(the "Company"), and the subsidiaries of GPH have thereby become subsidiaries of
the Company (the "Acquisition").
Upon the consummation of the Acquisition, GPI will receive shares of
beneficial interest, par value $.01 per share, of HRPT (the "HRPT Common
Shares"), as consideration for shares of the capital stock of GPH held by GPI
immediately prior to the consummation of the Acquisition, and GPI will
thereafter liquidate and dissolve and as a result the former stockholders of
GPI, including the Principal Shareholders, will become shareholders of HRPT.
To induce the Principal Shareholders to approve the consummation of the
Acquisition, HRPT is willing to agree to make certain information available to
the Principal Shareholders and to provide access to HRPT's properties and
officers for a period following the Acquisition.
NOW, THEREFORE, HRPT and the Principal Shareholders hereby agree as
follows:
1. Definitions. The capitalized terms set forth below (in their
singular and plural forms as applicable) shall have the following meanings:
(a) "Affiliate": with respect to a specified Person, another
Person who, directly or indirectly, through one or more intermediaries, controls
or is controlled by or is under common control with the specified Person or is a
director, trustee, executive officer or general partner of the specified Person.
(b) "Term": a term commencing on the date hereof and expiring on
the third anniversary of the Closing (as defined in the Merger Agreement) of the
Acquisition.
<PAGE>
2
(c) "Person": an individual, partnership, joint venture,
corporation, limited liability company, trust or any other form of business
organization.
2. Access to Information. Solely for the purpose of enabling the
Principal Shareholders to maintain their investment in HRPT on behalf of their
respective partners and Affiliates, and without any intention of participation
in the formulation, determination or direction of the basic business decisions
of HRPT, HRPT will, upon the request of a Principal Shareholder during the Term:
(a) Permit the Principal Shareholders to inspect HRPT's properties
and provide them financial statements quarterly, and at least annually, business
plans, and financial projections of HRPT;
(b) Make appropriate officers of HRPT available periodically for
consultations with the Principal Shareholders with respect to matters relating
to the business and affairs of HRPT, including, without limitation, significant
changes in management personnel, entry into new lines of business, important
acquisitions or dispositions of properties, and the proposed compromise of
significant litigation; and
(c) Inform the Principal Shareholders with respect to any major or
significant corporate actions, including, without limitation, special dividends,
mergers, acquisitions or dispositions of assets, issuances of significant
amounts of debt or equity and material amendments to the declaration of trust or
by-laws of HRPT.
3. Confidentiality. The Principal Shareholders shall hold in confidence
all proprietary and confidential information (including all material non-public
information) of HRPT which may come into the Principal Shareholders' possession
or knowledge as a result of their receipt of information hereunder, exercising a
degree of care in maintaining such confidence as is used by the Principal
Shareholders to protect their own proprietary or confidential information that
they do not wish to disclose. In addition, in connection with and as a condition
of the delivery of material non-public information, the Principal Shareholders
may be obliged to execute and deliver an appropriate confidentiality agreement
to HRPT. The Principal Shareholders shall use all reasonable efforts to ensure
that their respective employees, agents and outside consultants similarly
maintain the confidentiality of such proprietary and confidential information of
HRPT.
4. Notices. All notices and other communications which by any provision
of this Agreement are required or permitted be given shall be given in writing
and shall be (i) sent by nationally recognized overnight courier, (ii) sent by
telecopy, confirmed by sending a copy by nationally recognized courier at
substantially the same time as such telecopy, or (iii) personally delivered to
the receiving party (which if other than an individual shall be an officer or
other
<PAGE>
3
responsible party of the receiving party). All such notices and communications
shall be mailed, sent or delivered as follows or to such other person(s),
facsimile number(s) or address(es) as the party to receive any such
communication or notice may have designated by written notice to the other
party:
A. If to Rosecliff:
Rosecliff Realty, L.P.
712 Fifth Avenue, 34th Floor
New York, New York 10019
Attn: Peter T. Joseph
B. If to 1818:
c/o Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005
Attn: Walter W. Grist
C. If to the Company or HRPT:
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
or to such other address as a party hereto shall specify in writing given in
accordance with this section.
5. Modifications. This Agreement constitutes the entire agreement
between the parties hereto with regard to the subject matter hereof, superseding
all prior understandings and agreements whether written or oral. This Agreement
may not be amended or revised except by a writing signed by the parties.
6. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns
but may not be assigned by any party without the prior written consent of the
other parties hereto.
7. Captions. Captions have been inserted solely for the convenience of
reference and in no way define, limit or describe the scope or substance of any
provision and shall not affect the validity of any other provision.
8. Governing Law. This Agreement shall be construed under and governed
by the laws of the Commonwealth of Massachusetts applicable to contracts made
and to be performed entirely in Massachusetts, without giving effect to the
provisions thereof relating to conflict of laws.
<PAGE>
4
9. Specific Performance. Each party recognizes and agrees that a remedy
at law for breach of this Agreement would be inadequate, and further agrees
that, for breach of this Agreement, each aggrieved party shall be entitled to
injunctive relief and to enforce its rights by an action for specific
performance.
10. Severability. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
11. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
<PAGE>
5
IN WITNESS WHEREOF, the undersigned have executed and delivered, or
caused to be executed and delivered, or caused to be executed and delivered by
their officers hereunto duly authorized this Agreement as of the date first set
forth above.
HEALTH AND RETIREMENT PROPERTIES TRUST
By:
Name:
Title:
ROSECLIFF REALTY, L.P.
By:
Name:
Title:
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
a general partner
By:
Name:
Title:
<PAGE>
SCHEDULE 7.2(i)
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made and entered into
__________, 1997, between GOVERNMENT PROPERTY INVESTORS, INC., a Delaware
corporation ("GPI"), and HEALTH AND RETIREMENT PROPERTIES TRUST, a Maryland real
estate investment trust ("HRPT").
RECITALS
A. HRPT and GPI have entered into an Agreement of Merger, dated
February 17, 1997 (the "Merger Agreement"), pursuant to which Government
Property Holdings Trust ("GPH") will be merged with and into Hub Acquisition
Trust ("Merger Sub").
B. Pursuant to the terms of the Merger Agreement, and as a condition to
HRPT's obligations under the Merger Agreement, GPI has agreed to provide certain
indemnification rights to HRPT.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms used but not otherwise
defined in this Agreement shall have the meanings given therefor in the
Merger Agreement.
2. Indemnification by GPI.
(a) Subject to the other provisions of this
Agreement, from and after the Closing, GPI shall indemnify and
hold harmless, HRPT and its subsidiaries and affiliates, each
of their respective officers, trustees, directors, employees,
agents and representatives, and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively,
the "Indemnified Parties"), against any losses, claims,
damages, liabilities or expenses whenever arising or incurred
(including, without limitation, amounts paid in settlement,
reasonable costs of investigation and reasonable attorneys'
fees and expenses) (collectively, "Losses") (x) arising out of
or relating to any breach of any representation or warranty
made by (i) GPI in the Merger Agreement, provided solely for
purposes of this Agreement, each representation and warranty
made by GPI shall be deemed to have been qualified by the
phrase "to the knowledge of GPI" (as defined in the Merger
Agreement), whether or not so qualified in the Merger
Agreement, or (ii) GPI in Sections 3 and 4 of the Registration
Rights Agreement and Section 6(b) of this Agreement or (y)
pursuant to Section 8.5 of the Merger Agreement.
(b) No Indemnified Party shall be entitled to make
any claim for indemnification pursuant to this Agreement after
December 31, 1997 (the "Claim Period").
(c) Indemnification Procedure.
<PAGE>
(i) Promptly after receipt by an Indemnified
Party of notice of the commencement of any
action or proceeding involving a claim to
which indemnification is being sought, such
Indemnified Party will, if a claim is to be
made against GPI, give written notice to GPI
of the commencement of such action or
proceeding; provided, however, that failure
so to notify GPI shall not relieve GPI from
any liability which GPI may have with
respect to such claim, except to the extent
that GPI is actually materially prejudiced
by such failure to give notice.
(ii) In case any such action is brought against
an Indemnified Party, unless in such
Indemnified Party's reasonable judgment a
conflict of interest between the Indemnified
Party and GPI may exist in respect of such
claim, GPI shall be entitled to assume and
control the defense of such action to the
extent that it may wish, with counsel
reasonably satisfactory to such Indemnified
Party, and after notice from GPI to such
Indemnified Party of its election so to
assume and control the defense of such
action, GPI shall not be liable to such
Indemnified Party for any legal or other
expenses subsequently incurred by the latter
in connection with the defense of such
action other than reasonable costs of
investigation. Notwithstanding the
foregoing, in any such action, any
Indemnified Party shall have the right to
retain its own counsel, but the fees and
disbursements of such counsel shall be at
the expense of such Indemnified Party unless
GPI shall have failed to retain counsel for
the Indemnified Party. It is understood that
GPI shall not, in connection with any action
or related actions in the same jurisdiction,
be liable for the fees and disbursements of
more than one separate firm qualified in
such jurisdiction to act as counsel for all
Indemnified Parties, unless in any such
Indemnified Party's reasonable judgment a
conflict of interest between such
Indemnified Party and any other Indemnified
Party may exist in respect of such claim.
GPI shall not be liable for any settlement
of any proceeding effected without the
written consent of GPI but if settled with
such consent or if there be a final judgment
for the plaintiff, GPI agrees to indemnify
the Indemnified Party from and against any
loss or liability by reason of such
settlement or judgment; GPI shall not,
without the consent of the Indemnified
Party, consent to entry of any judgment or
enter into any settlement which does not
include as an unconditional term the giving
by the claimant or plaintiff to such
Indemnified Party of a release from all
liability in respect to such claim or
litigation. Within five business days of the
final determination of any such settlement
or judgment, GPI shall deliver or shall
instruct the Escrow Agent to deliver to the
Indemnified Party HRPT Common Shares issued
in the Merger having a value,
-2-
<PAGE>
determined under Section 2(c)(iv),
sufficient to satisfy the amount of such
claim as finally determined.
(iii) If an Indemnified Party shall claim a right
to payment pursuant to this Agreement with
respect to which there has been no action or
proceeding involving such claim pursuant to
Section 2(c)(i) above, such Indemnified
Party shall send written notice of such
claim to GPI. Such notice shall specify the
basis for such claim. As promptly as
possible after the Indemnified Party has
given such notice, such Indemnified Party
and GPI shall establish the merits and
amount of such claim (by mutual agreement or
arbitration) and, within five business days
of the final determination of the merits and
amount of such claim, GPI shall deliver (or
shall instruct the Escrow Agent to deliver)
to the Indemnified Party the amount of such
claim as finally determined. HRPT Common
Shares issued in the Merger having a value,
determined under Section 2(c)(iv),
sufficient to satisfy the amount of such
claim as finally determined.
(iv) For purposes of Paragraphs 2(c)(ii) and
2(c)(iii), HRPT Common Shares issued GPI in
the Merger that are delivered in
satisfaction of a claim made hereunder shall
be valued at the greater of the closing sale
price for an HRPT Common Share as reported
by the NYSE for the trading day next prior
to delivery or the Merger Price.
3. Liability Limits.
(a) GPI shall have no liability for Losses until such
time as the aggregate of such Losses exceeds $1,500,000 (the
"Deductible") and thereafter, GPI shall indemnify the
Indemnified Parties for all Losses incurred in excess of the
Deductible, provided the limitation contained in this Section
3(a) shall not apply with respect to Losses arising under
Section 8.5 of the Merger Agreement, and provided further that
Losses pursuant to Section 8.5 of the Merger Agreement shall
not be taken into account in determining whether the
Deductible has been met.
(b) Solely for purposes of this Agreement, a Loss or
series of related Losses shall be deemed to have a Material
Adverse Effect if the amount of such Loss or series of related
Losses exceeds $250,000.
(c) In the case of all Premises (including the
College Park Premises and including Development Properties and
Contract Properties acquired after the Closing Date) if there
shall be a Material Adverse Effect and an Indemnified Party
(A) shall make a claim for a Loss with respect to which an
Indemnified Party is entitled to indemnification under Section
2 (a) resulting from (1) a reduction or offset of rent for a
period which is less than the remaining term of the lease or
(2) a tenant claim for one time refund of rent or other
amounts, then in either case, the amount of the Loss shall be
equal to such offset, reduction or tenant claim or (B) shall
make a claim for a Loss
-3-
<PAGE>
with respect to which an Indemnified Party is entitled to
indemnification under Section 2(a) resulting from a reduction
or offset of rent for a period equal to the remaining term of
the lease, then the amount of the Loss shall be equal to ten
(10) times the amount of such offset or reduction. In the case
of the College Park Premises, if either (1) a reduction in
rent during the extension period from the rent for such
extension period set out by the terms of the current lease
and/or (2) a reduction in the GSA buyout option price, as
contemplated by Section 2.B or 2.C of the Purchase and Sale
Agreement with respect to the College Park Premises, then the
amount of the Loss shall be equal to the present value of (1)
the ten (10) year stream of such reduction in rent during the
extension period plus (2) the reduction in the buyout option
price ((1) and (2) discounted to the date of the claim at a
discount rate of 10%).
(d) Notwithstanding the preceding, GPI's aggregate
liability for all Losses under this Agreement and, after the
Closing Date, under the Merger Agreement shall not exceed and
shall be payable solely from the Second Closing Consideration
(as adjusted). At the Second Closing, if any Indemnified Party
shall have made a claim hereunder within the Claim Period
which remains outstanding, HRPT shall deliver to _____________
as escrow agent (the "Escrow Agent") a number of HRPT Common
Shares having a value (based on the Merger Price) equal to the
amount of such claim.
4. Arbitration.
The Parties agree that any and all disputes or
disagreements arising out of or relating to this Agreement,
other than actions or claims for injunctive or other equitable
relief or claims raised in actions or proceedings brought by
third parties, shall be resolved through negotiations or, if
the dispute is not so resolved, through mediation and if
necessary binding arbitration conducted by
____________________, whose decision shall be binding on all
parties and not appealable. Any such mediation and/or
arbitration shall be conducted in _______________ pursuant to
the procedures set forth in Exhibit ___ attached hereto and
made a part hereof and the arbitration rules and procedures of
____________________.
5. Representations and Warranties of GPI.
GPI hereby represents and warrants to HRPT that:
(i) this Agreement has been duly authorized,
executed and delivered by GPI and
constitutes the legal, valid and binding
agreement of it, enforceable against GPI in
accordance with its terms, except as
enforceability may be limited by bankruptcy,
insolvency, reorganization, or other laws
affecting creditors' rights and remedies
generally and by general principles of
equity (regardless of whether such
enforceability is considered in a proceeding
in equity or at law); and
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<PAGE>
(ii) the execution, delivery and performance of
this Agreement and the consummation of the
transactions contemplated by this Agreement
will not violate or conflict with,
constitute a breach of or default under,
result in the loss of any material benefit
under, or permit the acceleration of or
entitle any party to accelerate any
obligation under or pursuant to any material
mortgage, lien, lease, agreement,
instrument, order, arbitration award,
judgment or decree to which GPI is a party
or by which GPI or any of GPI's assets are
bound.
6. Notices. All notices, communications and deliveries
required or permitted by this Agreement shall be made in writing signed
by the Party making the same, shall specify the Section of this
Agreement pursuant to which it is given or being made, and shall be
deemed given or made (i) on the date delivered if delivered by telecopy
or in person, (ii) on the third business day after it is mailed if
mailed by registered or certified mail (return receipt requested) (with
postage and other fees prepaid), or (iii) on the day after it is
delivered, prepaid, to an overnight express delivery service that
confirms to the sender delivery on such day, as follows:
To: Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: David J. Hegarty, President
Telecopy No.: (617) 332-2261
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Alexander A. Notopoulos, Jr.
Telecopy No.: (617) 338-2880
To GPI:
Government Property Investors, Inc.
1775 Pennsylvania Avenue, N.W., Suite 1000
Washington, D.C. 20006
Attn: Mark Levin
Telecopy No.: 202-296-8335
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
New York, New York
Attn: Nora Ann Wallace
Telecopy No.: 212-821-8111
-5-
<PAGE>
or to such other representative or at such other address of a Party as such
Party hereto may furnish to the other Parties in writing.
7. Time of the Essence; Computation of Time. Time is of the
essence for each and every provision of this Agreement. Whenever the
last day for the exercise of any privilege or the discharge of any duty
under this Agreement shall fall upon a Saturday, Sunday or any date on
which banks in Boston, Massachusetts are closed, the Party having such
privilege or duty may exercise such privilege or discharge such duty on
the next succeeding day which is a regular business day.
8. Successors in Interest. The parties anticipate the
liquidation of GPI immediately following the Effective Date. As a
condition of such liquidation and contemporaneously therewith, certain
holders of GPI Common Stock listed on Exhibit A shall, by instrument
reasonably acceptable to HRPT, severally assume and agree to pay,
perform and observe GPI's obligations under this Agreement in
accordance with their proportionate interests set forth opposite their
names on Exhibit A.
9. Captions. The titles and captions contained in this
Agreement are inserted in this Agreement only as a matter of
convenience and for reference and in no way define, limit, extend or
describe the scope of this Agreement or the intent of any provision of
this Agreement. Unless otherwise specified to the contrary, all
references to Sections are references to Sections of this Agreement.
10. Amendments. To the extent permitted by law, this Agreement
may be amended by a subsequent writing signed by all of the Parties.
11. Controlling Law; Integration; Waiver. This Agreement shall
be governed by and construed and enforced in accordance with the laws
of the Commonwealth of Massachusetts. This Agreement supersedes all
negotiations, agreements and understandings among the Parties with
respect to the subject matter of this Agreement and constitutes the
entire agreement among the Parties to this Agreement relating to the
subject matter of this Agreement. The failure of any Party at any time
or times to require performance of any provisions of this Agreement
shall no manner affect the right to enforce the same. No waiver by any
Party of any conditions, or of the breach of any term, provision,
warranty, representation, agreement or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed or construed as a further or continuing
waiver of any such condition or breach of any other term, provision,
warranty, representation, agreement or covenant contained in this
Agreement.
12. Sole Recourse. The Parties agree that the remedies set
forth in this Agreement shall be the sole recourse of the Indemnified
Parties for any and all Losses and any other breaches by GPI under this
Agreement and, after the Closing Date, under the Merger Agreement.
13. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining
-6-
<PAGE>
provisions of this Agreement, and any such prohibition or
unenforceability in any jurisdiction will not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent
permitted by law, the Parties waive any provision of law which renders
any such provision prohibited or unenforceable in any respect.
14. HRPT Limitation of Liability. The Declaration of Trust of
HRPT, a copy of which is duly filed with the Department of Assessments
and Taxation of the State of Maryland, provides that the name "Health
and Retirement Properties Trust" refers to the trustees under such
Declaration of Trust collectively as trustees, but not individually or
personally, and that no trustee, officer, shareholder, employee or
agent of HRPT shall be held to any personal liability, jointly or
severally, for any obligation of, or claim against, HRPT. All persons
dealing with HRPT in any way shall look only to the assets of HRPT for
the payment of any sum or the performance of any obligation.
EXECUTED under seal as of the date first above written.
HEALTH AND RETIREMENT PROPERTIES
TRUST
By: _________________________________
GOVERNMENT PROPERTY INVESTORS, INC.
By: _________________________________
-7-
<PAGE>
SCHEDULE 7.2(j)
SERVICE CONTRACT
THIS SERVICE CONTRACT is entered into as of __________ __, 1997, by and
between Government Property Investors, Inc. (the "Service Provider")
and_____________________ (the "Company").
R E C I T A L
Pursuant to that certain Agreement of Merger, dated as of February 17,
1997 (the "Merger Agreement"), between Health and Retirement Properties Trust
and the Service Provider, Government Property Holdings Trust ("GPH") has as of
the date hereof merged with and into HUB Acquisition Trust ("Merger Sub") and
the subsidiaries of GPH have thereby become subsidiaries of Merger Sub (the
"Acquisition").
Prior to the date hereof, the Service Provider rendered substantial and
valuable administrative and support services to the subsidiaries of GPH.
The Company will require the skills and services of certain employees
of the Service Provider in connection with their general business operations
after the date hereof.
The Service Provider is willing to provide such skills and services to
the Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the Company and the Service Provider,
intending to be legally bound, do hereby agree as follows:
1. Engagement. The Company hereby engages the Service Provider and the
Service Provider hereby accepts the engagement for the Term (hereafter defined)
and upon the terms and conditions herein set forth to provide to the Company,
administrative and support services in a manner consistent with past practice
with respect to the operation of the "Premises" (as defined in the Merger
Agreement) and from time to time requested by the Company.
2. Term. The engagement shall commence on the date hereof and expire on
July 31, 1997 (the "Term"). Upon expiration of the Term, all obligations as
between the parties shall terminate without recourse to one another under this
Agreement.
3. Performance of Services. The Service Provider shall perform services
under this Agreement directly through the employees listed on Exhibit A who
shall devote such time and attention as directed by the Company during usual
business hours as is reasonably necessary to support the business of the Company
and its affiliates. The Service Provider shall consult regularly with the
Company to monitor performance of the employees. The Company shall have the
right to decline to have any employee, whom it in good faith believes not to be
performing acceptably, continue to provide services under this Agreement.
<PAGE>
-2-
4. Confidentiality. The Service Provider shall hold in confidence all
proprietary and confidential information of the Company which may come into the
Service Provider's possession or knowledge as a result of its performance of
services hereunder, exercising a degree of care in maintaining such confidence
as is used by the Service Provider to protect its own proprietary or
confidential information that it does not wish to disclose. The Service Provider
shall use all reasonable efforts to ensure that its employees similarly maintain
the confidentiality of such proprietary and confidential information of the
Company.
5. Compensation. The Company shall compensate the Service Provider
during the Term by reimbursing it for (i) the compensation the Service Provider
is obligated to pay the employees listed on Exhibit A at the rates (together
with applicable employment taxes including FICA and FUTA) set forth therein, to
the extent that and so long as such employees continue to provide services under
Section 3, provided, however, that in no event shall the Company be responsible
for reimbursing the Service Provider for any severance costs or similar
expenses, (ii) rent payments in respect of the Service Provider's lease of its
office space in Washington, D.C. during the Term and (iii) other office expenses
relating to the provision of services hereunder; provided the aggregate
compensation to the Service Provider under this Agreement shall not exceed
$700,000. Reimbursement shall be made on a semi-monthly basis.
6. Notices. All notices hereunder, to be effective, shall be in writing
and shall be mailed by first class certified mail, postage prepaid, as follows:
(i) If to the Service Provider, addressed to it at:
1775 Pennsylvania Avenue, N.W., Suite 1000
Washington, D.C. 20006
Attention:
With a copy to:
Willkie Farr & Gallagher
One Citicorp Center
New York, New York 10022
Attention: Nora Ann Wallace
(ii) If to the Company, addressed to it at:
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attention:
With a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Alexander A. Notopoulos, Jr.
<PAGE>
-3-
7. Modifications. This Agreement, including the Exhibits hereto,
constitutes the entire agreement between the parties hereto with regard to the
subject matter hereof,superseding all prior understandings and agreements
whether written or oral. This Agreement may not be amended or revised except by
a writing signed by the parties.
8. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns
(including any successor to GPI upon its liquidation) but may not be assigned by
either party without the prior written consent of the other party.
9. Captions. Captions have been inserted solely for the convenience of
reference and in no way define, limit or describe the scope or substance of any
provision and shall not affect the validity of any other provision.
10. Governing Law. This Agreement shall be construed under and governed
by the laws of The Commonwealth of Massachusetts applicable to contracts made
and to be performed entirely in Massachusetts, without giving effect to the
provisions thereof relating to conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as a
sealed instrument as of the date first above written.
GOVERNMENT PROPERTY
INVESTORS, INC.
By:________________________
Name:
Title:
M&P PARTNERS, L.P.
By:________________________
Name:
Title:
<PAGE>
SCHEDULE 7.3(i)
NON-SOLICITATION AGREEMENT
This Agreement is entered into this ____ day of ___________, 1997, by
and among Health and Retirement Properties Trust, a Maryland real estate
investment trust ("HRPT"), HUB Acquisition Trust, a Maryland real estate
investment trust (the "Company"), and
(the "Affiliates" and each an "Affiliate").
R E C I T A L:
Pursuant to that certain Agreement of Merger, dated as of February 17,
1997 (the "Merger Agreement"), between HRPT and Government Property Investors,
Inc., a Delaware corporation ("GPI"), Government Property Holdings Trust, a
Maryland real estate investment trust ("GPH") has as of the date hereof merged
with and into the Company and the subsidiaries of GPH have thereby become
subsidiaries of the Company (the "Acquisition").
Upon the consummation of the Acquisition, GPI will receive shares of
beneficial interest, par value $.01 per share, of HRPT (the "HRPT Common
Shares"), as consideration for shares of the capital stock of GPH held by GPI
immediately prior to the consummation of the Acquisition.
The Affiliates are officers, directors or employees of GPI, one or more
GPI subsidiaries and/or shareholders of GPI actively engaged in the management
of the business of GPI. In connection with and to induce HRPT to consummate the
Acquisition, the Affiliates are willing to agree not to take certain action
which would interfere with or harm the business the subsidiaries of GPH which
have become subsidiaries of the Company and HRPT.
NOW THEREFORE, HRPT, the Company and the Affiliates hereby agree as
follows:
1. Definitions. Except as otherwise provided in this Agreement, the
capitalized terms set forth below (in their singular and plural forms as
applicable) shall have the following meanings:
(a) "Competitor": any Person engaged wholly or partly, in the
Business.
(b) "Business": the business of building, developing, leasing
and acting as administrator for real estate owned or leased to the
United States government through the General Services Administration
and other departments and agencies.
(c) "Person": an individual, partnership, partnership, joint
venture, limited liability company, trust, corporation or any other
form of business organization.
<PAGE>
-2-
2. Non-Solicitation. Affiliates each covenant and agree that for two
(2) years after the date of this Agreement, they will not, either directly or
indirectly, alone or in conjunction with any other Person (a) solicit any
employee, consultant, contractor or other personnel of the Company, to
terminate, alter or lessen their affiliation with the Company; or (b) solicit,
divert or appropriate any tenant or actively sought prospective tenant of the
Company for or on behalf of any Competitor.
3. Notices. All notices and other communications which by any provision
of this Agreement are required or permitted to be given shall be given in
writing and shall be (i) sent by nationally recognized overnight courier, (ii)
sent by telecopy, confirmed by sending a copy by nationally recognized overnight
courier at substantially the same time as such telecopy, or (iii) personally
delivered to the receiving party (which if other than an individual shall be an
officer or other responsible party of the receiving party). All such notices and
communications shall be mailed, sent or delivered as follows or to such other
person(s), facsimile number(s) or address(es) as the party to receive any such
communication or notice may have designated by written notice to the other
party:
A. If to any Affiliate, to the address set forth
opposite his or her name on Exhibit A hereto.
B. If to the Company or HRPT:
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
or to such other address as a party hereto shall specify in writing given in
accordance with this section.
4. Modifications. This Agreement constitutes the entire agreement
between the parties hereto with regard to the subject matter hereof, superseding
all prior understandings and agreements whether written or oral. This Agreement
may not be amended or revised except by a writing signed by the parties.
5. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of HRPT, the Company and their respective successors and
assigns but may not be assigned by any Affiliate.
6. Captions. Captions have been inserted solely for the convenience of
reference and in no way define, limit or describe the scope or substance of any
provision and shall not affect the validity of any other provision.
7. Governing Law. This Agreement shall be construed under and governed
by the laws of The Commonwealth of Massachusetts applicable to contracts made
and to be performed entirely in Massachusetts, without giving effect to the
provisions thereof relating to conflict of laws.
8. Specific Performance. Each Affiliate recognizes and agrees that
HRPT's and the Company's remedy at law for breach of Section 2 of this Agreement
would be inadequate, and further agrees that, for breach of such provision, each
aggrieved party
<PAGE>
-3-
shall be entitled to injunctive relief and to enforce its rights by an action
for specific performance.
9. Severability. If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
10. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed and delivered, or
caused to be executed and delivered by their officers hereunto duly authorized,
this Agreement as of the date first set forth above.
HEALTH AND RETIREMENT PROPERTIES TRUST
By:
Name:
Title:
HUB ACQUISITION TRUST
By:
Name:
Title:
[signature blocks for Affiliates to come]
<PAGE>
Exhibit A
Name Address
<PAGE>
Schedule 9.2
SECOND CLOSING ESCROW AGREEMENT
THIS SECOND CLOSING ESCROW AGREEMENT (this "Escrow Agreement") is made
as of _________ __, 19__ by and among Health and Retirement Properties Trust
("HRPT"), ____________________ (the "Successor"), and ____________________ (the
"Escrow Agent").
R E C I T A L:
HRPT and GPI entered into a Merger Agreement (the "Merger Agreement"),
an executed copy of which has been provided to the Escrow Agent, pursuant to
which Government Property Holdings Trust ("GPH") merged with and into HUB
Acquisition Trust ("Merger Sub") on the terms and conditions set forth in the
Merger Agreement.
To induce HRPT to consummate the transactions contemplated by the
Merger Agreement, GPI entered into an Indemnification Agreement with HRPT, and
the Successor subsequently entered into an Accession Agreement, executed copies
of which agreements have been provided to the Escrow Agent (such Indemnification
Agreement, as amended by such Accession Agreement, the "Indemnification
Agreement"), pursuant to which agreements the Successor agreed to indemnify HRPT
with respect to certain matters on the terms and conditions set forth in the
Indemnification Agreement.
HRPT has made a claim for Losses (as defined in the Indemnification
Agreement) which has not been resolved. Pursuant to the Indemnification
Agreement, the Successor has agreed to deposit an aggregate of _________ HRPT
Second Closing Shares (the "Escrowed Shares") into escrow upon execution of this
Escrow Agreement subject to the terms and conditions set forth in the
Indemnification Agreement and in this Escrow Agreement.
NOW, THEREFORE, the parties agree as follows:
Section 1. Defined Terms. Terms not otherwise defined herein shall have
the respective meanings prescribed therefor in the Merger Agreement and the
Indemnification Agreement.
Section 2. Appointment of Escrow Agent. HRPT and the Successor hereby
appoint the Escrow Agent as the escrow agent to hold the Escrowed Shares (as
defined below) in accordance with the terms and conditions of this Escrow
Agreement.
Section 3. Delivery and Receipt of Escrowed Shares. Simultaneously with
the execution of this Escrow Agreement, the Successor shall deliver to the
Escrow Agent certificates representing the Escrowed Shares together with undated
stock powers duly executed in blank. Receipt of the Escrowed Shares and the
related stock powers is hereby acknowledged by the Escrow Agent. Until
distributed and released in accordance with the terms and conditions of this
Escrow Agreement, the Escrow Agent shall hold in trust the Escrowed Shares and
the related stock powers. If the Escrow Agent should receive any cash or other
property in respect of the Escrowed Shares, the Escrow Agent shall invest and
reinvest such cash and the income therefrom in any money market fund,
substantially all of which is invested in direct obligations of the United
States of America or obligations the principal of and the interest on which are
unconditionally guaranteed by the United States of America and shall hold such
other property in trust subject to the terms and conditions hereinafter set
forth.
Section 4. Release of Escrowed Shares. The Escrowed Shares shall secure
the obligations of the Successor pursuant to the Indemnification Agreement and
in accordance with the terms of
<PAGE>
-2-
this Escrow Agreement. The Escrow Agent shall release the Escrowed Shares
pursuant to a joint direction in writing of HRPT and the Successor or pursuant
to the decision of an arbitrator pursuant to the arbitration proceedings set
forth in Section 4 of the Indemnification Agreement. For purposes of this
Section, each Escrowed Share shall be valued at the greater of the closing sale
price for an HRPT Common Share as reported on the NYSE for the trading day next
prior to delivery or the Merger Price.
Section 5. Termination of Escrow. The Escrow Agent shall distribute and
release any remaining Escrowed Shares (and, if applicable, any cash or other
property in respect of the Escrowed Shares, and any income therefrom, received
by the Escrow Agent) upon receipt of notice from HRPT and the Successor that no
claim for indemnification made on or before the expiration of the Claim Period
(as defined in the Indemnification Agreement) remains outstanding. Such notice
shall specify the name and address of each party to whom the remaining Escrowed
Shares (and, if applicable, such cash, property and income) shall be delivered.
Promptly after receipt of such notice, the Escrow Agent shall deliver the
certificates representing such Escrowed Shares (and, if applicable, such cash,
property and income) to each party so specified. Upon distribution and release
of such Escrowed Shares (and, if applicable, such cash, property and income),
this Escrow Agreement shall be deemed terminated and the Escrow Agent shall be
released and discharged from all further obligations hereunder.
Section 6. Duties of Escrow Agent. The acceptance by the Escrow Agent
of its duties as such under this Escrow Agreement is subject to the following
terms and conditions, which HRPT and the Successor hereby agree shall govern and
control with respect to the rights, duties, liabilities and immunities of the
Escrow Agent:
(a) The Escrow Agent shall not be liable for acting upon any
written notice, request, waiver, consent, receipt or other instrument or
document which the Escrow Agent in good faith believes to be genuine and what it
purports to be.
(b) It is understood and agreed that the duties of the Escrow
Agent hereunder are purely ministerial in nature and that it shall not be liable
for any error of judgment, fact or law, or any act done or omitted to be done,
except for its own willful misconduct, breach of fiduciary duty, bad faith or
gross negligence or that of its officers, directors, employees and agents. The
Escrow Agent's determination as to whether an event or condition has occurred,
or been met or satisfied, or as to whether a provision of this Escrow Agreement
has been complied with, or as to whether sufficient evidence of the event or
condition or compliance with the provision has been furnished to it, shall not
subject the Escrow Agent to any claim, liability or obligation whatsoever, even
if it shall be found that such determination was improper and incorrect,
provided, only, that the Escrow Agent and its officers, directors, employees and
agents shall not have been guilty of willful misconduct, breach of fiduciary
duty, bad faith or gross negligence in making such determination.
(c) The Escrow Agent may consult with, and obtain advice from,
legal counsel including its own officers, employees and partners in the event of
any dispute or question as to the construction of any of the provisions hereof
or its duties hereunder, and it shall incur no liability and shall be fully
protected in acting in good faith in accordance with the opinion and
instructions of such counsel.
(d) In the event of any disagreement or lack of agreement
between HRPT and the Successor of which the Escrow Agent has knowledge,
resulting or which might result in adverse claims or demands with respect to the
Escrowed Shares, the Escrow Agent shall be entitled, in its sole discretion, to
refuse to comply with any claims or demands on it with respect thereto until
such matter shall be resolved, and in so refusing, the Escrow Agent may elect to
make no delivery or other disposition of the Escrowed Shares, and in so doing
the Escrow Agent shall not be or become liable in any way to either HRPT or the
Successor for its failure or refusal to comply
<PAGE>
-3-
with such claims or demands, and it shall be entitled to continue so to refrain
from acting, and so to refuse to act, until all such claims or demands (i) shall
have been finally determined by a court of competent jurisdiction, or (ii) shall
have been resolved by the agreement of HRPT and the Successor and the Escrow
Agent shall have been notified thereof in writing.
(e) The Escrow Agent may resign at any time upon giving ten
(10) days' notice to HRPT and the Successor and may appoint a successor escrow
agent hereunder so long as such successor shall accept and agree to be bound by
the terms of this Escrow Agreement and shall be acceptable to HRPT and the
Successor. It is understood and agreed that the Escrow Agent's resignation shall
not be effective until a successor escrow agent agrees to be bound by the terms
of this Escrow Agreement.
Section 7. No Representations by Escrow Agent. The Escrow Agent makes
no representation as to the validity, value, genuineness, negotiability or
collectibility of any security or other document or instrument held by or
delivered to or by it.
Section 8. Obligations of Escrow Agent. The Escrow Agent shall be under
no obligation to institute or defend any actions, suits or legal proceedings in
connection herewith or take any other action likely to involve it in expense
unless first indemnified to its reasonable satisfaction.
Section 9. Expenses. The reasonable out-of-pocket expenses (including,
without limitation, reasonable legal fees and disbursements) incurred by the
Escrow Agent in the performance of its duties hereunder shall be reimbursed
one-half by the Successor and one-half by HRPT. Such reimbursement for
out-of-pocket expenses shall be made by cash payment to the Escrow Agent from
time to time upon its written request. The Escrow Agent shall have no right or
lien with respect to the Escrowed Shares for payment of such expenses. Except as
otherwise herein or in the Merger Agreement provided, each party shall pay its
own expenses incident to the negotiation, preparation, performance and
enforcement of this Escrow Agreement (including all fees and expenses of its
counsel, accountants and other consultants, advisors and representatives for all
activities of such persons undertaken pursuant to this Escrow Agreement), except
to the extent, if any, otherwise specifically set forth in this Agreement.
[Section 10. Escrow Agent Status. _____ hereby acknowledges that the
Escrow Agent is counsel to _____ and agrees that it will not seek to disqualify
the Escrow Agent from acting and continuing to act as counsel to _____ in the
event of a dispute hereunder or in the course of the defense or prosecution of
any claim relating to the transactions contemplated hereby or by the Merger
Agreement; provided, however, that in the event of a dispute, the Escrow Agent
shall (a) immediately seek to appoint a successor escrow agent, which shall be
acceptable to HRPT and the Shareholders, having no business relationships with
HRPT or the Shareholders and (b) immediately resign upon acceptance of such
appointment and agreement to be bound by the terms of this Escrow Agreement by
such successor escrow agent.]
Section 11. Assignment; Successors and Assigns. This Escrow Agreement
shall not be assignable by any party without the prior written consent of the
other parties.
Nothing in this Escrow Agreement expressed or implied is intended to or
shall be construed to confer upon or create in any Person (other than the
parties hereto and their permitted successors and assigns) any rights or
remedies under or by reason of this Agreement, including without limitation any
rights to enforce this Escrow Agreement.
Section 12. Specific Performance; Other Rights and Remedies. Each party
recognizes and agrees that the other party's remedy at law for any breach of the
provisions of this Escrow Agreement would be inadequate and agrees that for
breach of such provisions, such party shall, in addition to such other remedies
as may be available to it at law or in equity or as provided in this Escrow
Agreement, be entitled to injunctive relief and to enforce its rights by an
action for specific
<PAGE>
-4-
performance to the extent permitted by applicable law. Each party hereby waives
any requirement for security or the posting of any bond or other surety in
connection with any temporary or permanent award of injunctive, mandatory or
other equitable relief. Nothing herein contained shall be construed as
prohibiting either party from pursuing any other remedies available to it for
such breach or threatened breach, including without limitation the recovery of
damages.
Section 13. Entire Agreement. This Escrow Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements, arrangements, covenants, promises,
conditions, understandings, inducements, representations and negotiations,
expressed or implied, oral or written, between them as to such subject matter.
Section 14. Waivers; Amendments. Anything in this Escrow Agreement to
the contrary notwithstanding, amendments to and modifications of this Escrow
Agreement may be made, required consents and approvals may be granted,
compliance with any term, covenant, agreement, condition or other provision set
forth herein may be omitted or waived, either generally or in a particular
instance and either retroactively or prospectively with, but only with, the
written consent of the party entitled to the benefit thereof.
Section 15. Notices. All notices and other communications which by any
provision of this Escrow Agreement are required or permitted to be given shall
be given in writing and shall be (a) sent by nationally recognized overnight
courier service, (b) sent by telecopy confirmed by sending (by nationally
recognized overnight courier service) written confirmation at substantially the
same time, or (c) personally delivered to the receiving party. All such notices
and communications shall be mailed, sent or delivered as follows:
If to HRPT, at:
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attention: David J. Hegarty, President
Facsimile: 617-332-2261
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Alexander A. Notopoulos, Jr.
Facsimile: 617-338-2880
If to the Successor, at:
If to the Escrow Agent, at:
----------------------------------
----------------------------------
Attention:
Facsimile:
or to such other person(s) or facsimile number(s) or address(es) as the party to
receive any such communication or notice may have designated by written notice
to the other party.
<PAGE>
-5-
Section 16. Severability. If any provision of this Escrow Agreement
shall be held or deemed to be, or shall in fact be, invalid, inoperative,
illegal or unenforceable as applied to any particular case in any jurisdiction
or jurisdictions, or in all jurisdictions or in all cases, because of the
conflicting of any provision with any constitution or statute or rule of public
policy or for any other reason, such circumstance shall not have the effect of
rendering the provision or provisions in ques tion invalid, inoperative, illegal
or unenforceable in any other jurisdiction or in any other case or circumstance
or of rendering any other provision or provisions herein contained invalid,
inoperative, illegal or unenforceable to the extent that such other provisions
are not themselves actually in conflict with such constitution, statute or rule
of public policy, but this Escrow Agreement shall be reformed and construed in
any such jurisdiction or case as if such invalid, inoperative, illegal or
unenforceable provision had never been contained herein and such provision
reformed so that it would be valid, operative and enforceable to the maximum
extent permitted in such jurisdiction or in such case.
Section 17. Counterparts. This Escrow Agreement may be executed in
several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument, binding upon all
the parties hereto. In pleading or proving any provision of this Escrow
Agreement, it shall not be necessary to produce more than one of such
counterparts.
Section 18. Section Headings. The headings contained in this Escrow
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Escrow Agreement.
Section 19. Governing Law. The validity, interpretation, construction
and performance of this Escrow Agreement shall be governed by, and construed in
accordance with, the applicable laws of the Commonwealth of Massachusetts
applicable to contracts made and performed therein and, in any event, without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of domestic substantive laws of any other jurisdiction.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
HRPT:
HEALTH AND RETIREMENT PROPERTIES TRUST
By:_______________________
THE SUCCESSOR:
[signature blocks to come]
THE ESCROW AGENT:
---------------------------
as Escrow Agent
By:________________________
U.S. $250,000,000
THIRD AMENDED AND RESTATED
REVOLVING LOAN AGREEMENT
among
HEALTH AND RETIREMENT PROPERTIES TRUST,
as Borrower,
THE LENDERS NAMED HEREIN,
KLEINWORT BENSON LIMITED,
as Agent,
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent
and
NATWEST BANK N.A.
as Co-Agent
Dated as of March 15, 1996
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION PAGE
<S> <C>
SECTION 1. DEFINITIONS...........................................................................................2
1.1. Defined Terms......................................................................................2
1.2. Other Definitional Provisions.....................................................................26
1.3 Certain Calculations: Mark-to Market.............................................................26
SECTION 2. AMOUNT AND TERMS OF REVOLVING LOANS..................................................................27
2.1. Revolving Loans...................................................................................27
2.2. Notes; Maturity Date..............................................................................29
2.3. Procedure for Borrowing...........................................................................29
2.4. Interest..........................................................................................32
2.5. Duration of Interest Period; Notice of Continuation/Conversion....................................33
2.6. Fees..............................................................................................35
2.7. Termination or Reduction of Commitment............................................................35
2.8. Optional Prepayments; Mandatory Prepayments.......................................................35
2.9. Computation of Interest and Fees..................................................................37
2.10. Payments and Currency............................................................................37
2.11. Use of Proceeds..................................................................................39
2.12. Increased Costs..................................................................................39
2.13. Change in Law Rendering Eurodollar Loans or Alternate Rate Loans Unlawful;
Failure to Give Notice of Continuation........................................................42
2.14. Eurodollar Availability..........................................................................43
2.15. Indemnities......................................................................................44
2.16 Eligible Mortgages and Eligible Properties .......................................................45
SECTION 3. REPRESENTATIONS AND WARRANTIES.......................................................................45
3.1. Financial Condition...............................................................................45
3.2. No Material Adverse Effect........................................................................45
3.3. Existence; Compliance with Law....................................................................45
3.4. Operator, Advisor, Credit Support Obligors; Compliance with Law...................................46
3.5. Power; Authorization; Enforceable Obligations.....................................................46
3.6. No Legal Bar......................................................................................47
3.7. No Material Litigation............................................................................47
3.8. No Default........................................................................................47
3.9. Ownership of Mortgage Interests and Property; Liens...............................................47
3.10. No Burdensome Restrictions.......................................................................50
3.11. Taxes............................................................................................50
3.12. Federal Regulations..............................................................................50
3.13. Employees........................................................................................50
3.14. ERISA............................................................................................50
3.15. Status as REIT...................................................................................50
3.16. Restrictions on Incurring Indebtedness...........................................................51
3.17. Subsidiaries.....................................................................................51
3.18. Compliance with Environmental Laws...............................................................51
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3.19. Pollution; Hazardous Materials...................................................................51
3.20. Securities Laws..................................................................................52
3.21. Declaration of Trust, By-Laws, Advisory Contract, etc............................................52
3.22. Disclosures......................................................................................52
3.23. Medicare and Medicaid Certification..............................................................52
3.24. Offering, Etc., of Securities....................................................................52
SECTION 4. CONDITIONS PRECEDENT.................................................................................53
4.1. Conditions to Effectiveness.......................................................................53
4.2. Conditions Precedent to Loans.....................................................................54
SECTION 5. AFFIRMATIVE COVENANTS................................................................................55
5.1. Financial Statements..............................................................................55
5.2. Certificates; Other Information...................................................................56
5.3. Payment of Obligations............................................................................58
5.4. Conduct of Business and Maintenance of Existence..................................................58
5.5. Leases and Mortgage Interests; Credit Support Agreements..........................................58
5.6. Maintenance of Property, Insurance................................................................58
5.7. Inspection of Property; Books and Records; Discussions............................................59
5.8. Notices...........................................................................................59
5.9. Appraisals and Other Valuations...................................................................60
5.10. Meetings.........................................................................................60
5.11. REIT Requirements................................................................................61
5.12. Indemnification..................................................................................61
5.13. Changes in GAAP..................................................................................61
5.14. Clean-Down Period................................................................................62
5.15. Further Assurances; Restrictions on Negative Pledges.............................................62
5.16. Currency Arrangements............................................................................62
SECTION 6. NEGATIVE COVENANTS...................................................................................62
6.1. Financial Covenants...............................................................................62
6.2. Restricted Payments...............................................................................63
6.3. Merger; Sale of Assets; Termination and Other Actions............................................63
6.4. Transactions with Affiliates......................................................................64
6.5. Subsidiaries......................................................................................64
6.6. Accounting Changes................................................................................64
6.7. Change in Nature of Business......................................................................64
6.8. Indebtedness......................................................................................65
6.9. No Liens..........................................................................................66
6.10. Fiscal Year......................................................................................66
6.11. Chief Executive Office...........................................................................66
6.12. Amendment of Certain Agreements..................................................................66
6.13. Payments Not to Exceed Appraised Value.........................................................66
SECTION 7. EVENTS OF DEFAULT....................................................................................67
7.1. Events of Default.................................................................................67
7.2. Annulment of Acceleration.........................................................................70
7.3. Cooperation by Borrower...........................................................................70
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SECTION 8. THE AGENTS...........................................................................................71
8.1. Appointment of Agent and Administrative Agent.....................................................71
SECTION 9. SUBSIDIARY GUARANTIES................................................................................75
9.1 Guaranties.........................................................................................75
SECTION 10. GENERAL.............................................................................................77
10.1 CHOICE OF LAW.....................................................................................77
10.2 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; ETC.............................................77
10.3 Notices; Certain Payments.........................................................................78
10.4 No Waivers; Cumulative Remedies; Entire Agreement; Headings; Successors and
Assigns; Counterparts; Severability. ..........................................................79
10.5 Survival..........................................................................................81
10.6 Amendments and Waivers............................................................................81
10.7 Payment of Expenses and Taxes.....................................................................82
10.8 Adjustments; Setoff...............................................................................83
10.9 NONLIABILITY OF TRUSTEES..........................................................................84
EXHIBITS
EXHIBIT A - FORM OF PROMISSORY NOTE
EXHIBIT B - FORM OF NOTICE OF BORROWING
EXHIBIT C - FORM OF NOTICE OF CONTINUATION/CONVERSION
EXHIBIT D - FORM OF SUBORDINATION AGREEMENT
SCHEDULES
Schedule 1 - LENDERS' COMMITMENTS AND CERTAIN LENDING
OFFICES
Schedule 2 - PERMITTED EXCEPTIONS
Schedule 3 - AMOUNTS OWED UNDER THE EXISTING LOAN
AGREEMENT
Schedule 4 - BORROWER'S SUBSIDIARIES
Schedule 5 - MANDATORY LIQUID ASSET COSTS (FOR GBP LOANS)
Schedule 6 - NON-CURRENT MORTGAGE INTEREST AGREEMENTS
</TABLE>
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<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
THIRD AMENDED AND RESTATED REVOLVING LOAN AGREEMENT
DATED AS OF MARCH 15, 1996
This THIRD AMENDED AND RESTATED REVOLVING LOAN AGREEMENT is
dated as of March 15, 1996, among HEALTH AND RETIREMENT PROPERTIES TRUST, a real
estate investment trust formed under the laws of the State of Maryland
("Borrower"), the several lenders parties to this Agreement (each, together with
any additional lender or lenders pursuant to Section 10.4, a "Lender" and,
collectively, the "Lenders"), KLEINWORT BENSON LIMITED, a bank organized under
the laws of England, as agent for itself and the other Lenders (in such
capacity, together with any successor in such capacity in accordance with the
terms hereof, "Agent"), WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized
under the laws of the United States of America, as administrative agent, and
NATWEST BANK N.A. (formerly National Westminster Bank USA), a national banking
association, as co-agent (in such capacity, "Co-Agent"); and, in connection with
Section 9 and the guarantees given therein, HEALTH AND RETIREMENT PROPERTIES
INTERNATIONAL, INC., a Delaware corporation, CAUSEWAY HOLDINGS INC., a
Massachusetts corporation and SJO CORPORATION, a Massachusetts corporation, each
being a direct wholly-owned Subsidiary (as defined below) of Borrower.
WHEREAS, Borrower, Kleinwort Benson Limited, as agent, Wells
Fargo Bank, National Association, as administrative agent, NatWest Bank N.A., as
co-agent, Health and Retirement Properties International, Inc., as guarantor and
the lenders described therein are parties to that certain Second Amended and
Restated Revolving Loan Agreement dated as of March 15, 1995 (as such agreement
may have been amended, supplemented or modified from time to time prior to the
date hereof, the "Existing Loan Agreement");
WHEREAS, Borrower desires that Lenders extend the maturity
date under the Existing Loan Agreement, change the fees and interest rate
margins thereunder, permit investments in Clinics (as defined below) and make
certain other amendments to the Existing Loan Agreement and amend and restate it
in its entirety; and
WHEREAS, Lenders desire to make such extension, change the
fees and margins, permit such investments and make such amendments and such
amendment and restatement.
NOW, THEREFORE, the parties hereto hereby agree that the
Existing Loan Agreement be amended and restated in its entirety as follows:
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SECTION 1. DEFINITIONS
1.1. Defined Terms. As used in this Agreement:
"Acute Care Asset" means, in respect of any Property or
Mortgage Interest, that more than 50% of the licensed beds of the Property or,
in the case of a Mortgage Interest, of the Mortgaged Property covered thereby,
are designated for acute care.
"Adjusted Net Operating Cash Flow" means, in respect of a
Property that is a Medical Office Asset or a Clinic, the net result of (i)
aggregate lease payments made by the Operators(s) of the relevant Property
during the relevant period of determination, less (ii) direct costs of the
Borrower attributable to such Property for such period, provided that if either
(x) an Operator of the relevant Property has failed to exercise a renewal option
under the lease thereof prior to the expiration of that option (and no
replacement Lease with that or another Operator has been signed), or (y) an
Operator of the relevant Property is in default under any payment obligation or
in any material respect under any other Contractual Obligation between such
Operator and Borrower or any of its Subsidiaries, including without limitation
such Lease, any other Lease or any Mortgage Interest Agreement, or (z) a Credit
Support Obligor for the Lease of such Property is in default under any payment
obligation or in any material respect under any other Contractual Obligation of
such Credit Support Obligor to Borrower or any of its Subsidiaries, including
without limitation any Lease, Mortgage Interest, Mortgage Interest Agreement or
Credit Support Agreement, the lease payments made by the Operator referred to in
the preceding clause (x) or (y) and the lease payments made in respect of the
Property referred to in the preceding clause (z) during the relevant period of
determination shall not be included in Adjusted Net Operating Cash Flow.
"Adjusted Net Interest" means, in respect of a Mortgaged
Property that consists of a Medical Office Asset or a Clinic, the net result of
(i) aggregate interest payments made by the Mortgagor of the relevant Mortgaged
Property during the relevant period of determination less (ii) direct costs of
the Borrower attributable to such Mortgaged Property for such period, provided
that if either (y) the Mortgagor of the relevant Mortgaged Property is in
default under any payment obligation or in any material respect under any other
Contractual Obligation between such Mortgagor and Borrower or any of its
Subsidiaries, including without limitation the Mortgage Interest Agreement
related to such Mortgaged Property, any other Mortgage Interest Agreement or any
Lease or (z) a Credit Support Obligor for the Mortgage Interest Agreement of
such Mortgaged Property is in default under any payment obligation or in any
material respect under any other Contractual Obligation of such Credit Support
Obligor to Borrower or any of its Subsidiaries, including without limitation any
Lease, Mortgage Interest, Mortgage Interest Agreement or Credit Support
Agreement, the interest payments made by the Mortgagor referred to in the
preceding clause (y) and the interest payments made in respect of the Mortgaged
Property referred to in the preceding clause (z) during the relevant period of
determination shall not be included in Adjusted Net Interest.
"Administrative Agent" means Wells Fargo Bank, National
Association ("Wells") acting in its capacity as administrative agent in
connection with this Agreement; provided that with respect to Loans denominated
in GBP, "Administrative Agent" shall mean
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a Lender (the "GBP Agent") agreed to by Borrower, Agent and Wells and, in such
circumstances, references to "Administrative Agent" relating to Loans
denominated in GBP shall be read as references to the GBP Agent, while
references to "Administrative Agent" relating to Loans denominated in U.S.
Dollars or otherwise shall be read as references to Wells, and if such
circumstances are applicable the singular term "Administrative Agent" shall be
construed to include both Wells and the GBP Agent where appropriate (including,
without limitation, for purposes of the indemnifications given in Sections 8 and
10.7); and, in addition, "Administrative Agent" shall mean any successor to
either Wells or the GBP Agent in their respective capacities in accordance with
the terms hereof; provided further that in no event shall Wells be or be deemed
to be the GBP Agent or have any of its related duties unless Wells expressly
accepts such role.
"Advisor" means HRPT Advisors or such other Person as shall
act as an advisor to Borrower, whether pursuant to the Advisory Agreement, or an
agreement analogous to the Advisory Agreement, with the prior written consent of
Agent.
"Advisory Agreement" means the Advisory Agreement, dated as of
November 20, 1986, between Borrower and HRPT Advisors, as amended by an
Amendment Agreement, dated August 26, 1987, between Borrower and HRPT Advisors
and as amended by a Second Amendment Agreement, dated December 6, 1993, between
Borrower and HRPT Advisors, and as amended, supplemented or modified from time
to time in a manner not inconsistent with the terms hereof or of the
Subordination Agreement.
"Affiliate" means, with respect to a particular Person, (a)
any Person which, directly or indirectly, is in Control of, is Controlled by, or
is under common Control with such particular Person, or (b) any Person who is a
director or officer or trustee (i) of such particular Person, (ii) of any
Subsidiary of such particular Person or (iii) of any Person described in clause
(a) above.
"Agreement" means this Third Amended and Restated Revolving
Loan Agreement, as amended, supplemented or modified from time to time in
accordance herewith.
"Allowed Value" means, as of any date of determination, (i)
with respect to each Eligible Property or Property (as the context may require),
the lesser of (a) the acquisition cost to Borrower or to any of its Subsidiaries
of such Eligible Property or Property, (b) the Appraised Value of such Eligible
Property or Property as set forth in the then most recent Appraisal with respect
to such Eligible Property or Property less the value attributable to any capital
improvements made by the Operator of such Eligible Property or Property financed
by such Operator, and (c) the minimum purchase price (howsoever denominated)
that would be payable to Borrower or such Subsidiary by the Operator of such
Eligible Property or Property or any other Person if it purchased such Eligible
Property or Property on the date of determination pursuant to the exercise of
any right it may have (whether then or in the future exercisable) to purchase
such Eligible Property or Property (assuming in the case of any such right only
exercisable in the future that such right is exercisable on the date of
determination), and (ii) with respect to each Eligible Mortgage or Mortgage
Interest (as the context may require), the lesser of (a) the outstanding
principal
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amount due to Borrower or any of its Subsidiaries from the relevant Mortgagor in
respect of such Eligible Mortgage or Mortgage Interest, and (b) the Appraised
Value of the Mortgaged Property which is covered by the relevant Eligible
Mortgage or Mortgage Interest as set forth in the most recent Appraisal with
respect to such Eligible Mortgage or Mortgaged Property.
"Alternate GBP Rate" means the interest rate per annum
specified by Administrative Agent from time to time as the cost to Lenders of
funding affected Loans denominated in GBP as described in Section 2.13 or 2.14
(without reference to the Applicable Margin or the Mandatory Liquid Asset Costs
payable under Section 2.4(a)).
"Alternate GBP Rate Loans" means the portion of Loans (which
are denominated in GBP) the interest on which is computed by reference to the
Alternate GBP Rate.
"Alternate Rate", in respect of any Loan, means the rate or
rates of interest agreed pursuant to Section 2.13 or 2.14, as the case may be,
between Borrower and Lenders to be applicable to such Loan; provided that in the
absence of such agreement under the circumstances specified in Section 2.13 or
2.14, as the case may be, the Alternate Rate shall be equal to the Base Rate in
the case of Loans denominated in U.S. Dollars and shall be equal to the
Alternate GBP Rate in the case of Loans denominated in GBP.
"Alternate Rate Loans" means the portion of the Loans (which
may be denominated in U.S. Dollars or in GBP) the interest on which is computed
by reference to the Alternate Rate.
"Applicable Facility Fee Percentage" means with respect to the
facility fee payable under Section 2.6, the per annum percentage corresponding
to the lower of the ratings provided by Standard & Poor's Rating Group and
Moody's Investors Service in respect of the senior unsecured long-term
indebtedness of Borrower, as specified in the following table:
<TABLE>
<CAPTION>
A-/A3 BBB+/Baa1 BBB/Baa2 BBB-/Baa3 Lower than
Ratings or higher or higher or higher or higher BBB-/Baa3
<S> <C> <C> <C> <C> <C>
Facility Fee 0.200% 0.250% 0.250% 0.250% 0.375%
</TABLE>
Each change in the Applicable Facility Fee Percentage shall be
effective as of the date of the public announcement or publication by Standard &
Poor's Ratings Group or Moody's Investors Service, as the case may be, of a
change in Borrower's senior unsecured long-term indebtedness ratings.
"Applicable Margin" means, with respect to Base Rate Loans,
Alternate Rate Loans and Eurodollar Loans, the per annum percentage
corresponding to the lower of the ratings provided by Standard & Poor's Ratings
Group and Moody's Investors Service in respect of the senior unsecured long-term
indebtedness of Borrower, as specified in the following table:
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<TABLE>
<CAPTION>
A-/A3 Lower
Ratings or BBB+/Baa1 BBB/Baa2 BBB-/Baa3 than
higher or higher or higher or higher BBB-
/Baa3
<S> <C> <C> <C> <C> <C>
Applicable Margin for 0.000% 0.000% 0.000% 0.000% 0.250%
Base Rate Loans or
for Alternate Rate
Loans that are Base
Rate Loans
Applicable Margin for 0.375% 0.500% 0.750% 0.875% 1.250%
Euro Dollar Loans or
Alternate Rate Loans
that are not Base Rate
Loans
</TABLE>
Each change in the Applicable Margin shall be effective as of
the date of the public announcement or publication by Standard & Poor's Ratings
Group or Moody's Investors Service, as the case may be, of a change in
Borrower's senior unsecured long-term indebtedness ratings.
"Appraisal" means an appraisal using methodologies acceptable
to Agent and Administrative Agent at the time such appraisal is or was made and
performed by a Recognized Appraiser.
"Appraised Value" of any Facility shall mean (a) in the case
of any Fee Interest, the lesser of (i) the value placed upon such Facility
pursuant to the most recent Appraisal thereof based on a valuation of the Fee
Interest subject to the Lease(s) in respect of such Fee Interest and (ii) the
value placed upon such Facility pursuant to the most recent Appraisal thereof
based on a valuation of the Fee Interest free and clear of all Leases and
determined by discounting to present value the Facility's future projected net
cash flow, provided that in the case where the most recent Appraisal only values
the Fee Interest under either subclause (i) or subclause (ii) of this clause (a)
but not both, the Appraised Value shall mean the value so placed on the Fee
Interest under either subclause (i) or subclause (ii) of this clause (a),
whichever is applicable; (b) in the case of a Leasehold Interest, the lesser of
(i) the value placed upon such Facility pursuant to the most recent Appraisal
thereof based on a valuation of the Leasehold Interest subject to the Lease(s)
in respect of such Leasehold Interest and (ii) the value placed upon such
Facility pursuant to the most recent Appraisal thereof based on a valuation of
the Leasehold Interest free and clear of all Leases and determined by
discounting to present value the Facility's future projected net cash flow,
provided that in the case where the most recent Appraisal only values the
Leasehold Interest under either subclause (i) or subclause (ii) of this clause
(b) but not both, the Appraised Value shall mean the value so placed on the
Leasehold Interest under either subclause (i) or subclause (ii) of this clause
(b), whichever is applicable; and (c) in the case of a Mortgage
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Interest, the value placed upon the Mortgaged Property covered by such Mortgage
Interest pursuant to the most recent Appraisal thereof based on a valuation of
such Mortgaged Property free and clear of such Mortgage Interest and determined
by discounting to present value the future projected net cash flow of such
Mortgaged Property.
"Average Cost of Debt" means , in respect of Borrower, the
quotient (measured over the four most recent financial quarters of Borrower) of
(i) Interest Charges in respect of Indebtedness included in clauses (i)-(vi) of
the definition thereof set forth herein divided by (ii) the daily average
outstanding amount of Indebtedness included within such clauses.
"Base Rate" means a fluctuating interest rate per annum as
shall be in effect from time to time, which rate per annum shall at all times be
equal to the greater of:
(i) the prime rate of interest announced by
Administrative Agent from time to time, changing when
and as said prime rate changes; and
(ii) the sum of one-half of one percent (0.5%) and the
Federal Funds Rate in effect from time to time,
changing when and as such Federal Funds Rate changes.
"Base Rate Loans" means the portion of the Loans (which are
denominated in U.S. Dollars) the interest on which is computed by reference to
the Base Rate.
"Borrower" has the meaning set forth in the first paragraph of
this Agreement.
"Borrowing Date" means the Business Day specified in a Notice
of Borrowing as the date on which Borrower requests the Lenders to make Loans
hereunder.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York City or London, England are
authorized or required by law to remain closed or on which banks are not open
for dealings in U.S. Dollar and GBP deposits in the London interbank market.
"Capitalized Lease Obligation" means, as to any Person, any
obligation of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real or personal property which
obligation is required to be classified or accounted for as a capital lease
obligation on a balance sheet of such Person prepared in accordance with GAAP
and, for purposes of this Agreement, the amount of such obligation at any date
shall be the outstanding amount thereof at such date, determined in accordance
with GAAP and Section 1.3(a).
"Cash Flow" means, for any period and any Person in respect of
one or more Properties and/or Mortgaged Properties as to which such Person is
the Operator or Mortgagor thereof, the sum (without duplication of counting and
determined in accordance with Section
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1.3(a)) of (i) Income Before Extraordinary Items, (ii) Interest Charges payable
to Borrower, in the case of a Mortgaged Property, (iii) depreciation expenses,
(iv) amortization expenses, (v) other non-cash items reducing Income before
Extraordinary Items, (vi) all payments required to be made to Borrower or any of
its Subsidiaries under a Lease, including without limitation fixed rent,
participation rent and additional rent in respect of (a) operating expenses, (b)
taxes based on the ownership of real property, (c) insurance premiums and/or (d)
any other costs or expenses of the relevant lessor or sublessor, (vii)
subordinated expenses paid to any Affiliate of such Operator or such Mortgagor
relating to management, accounting or other similar fees, and (viii) to the
extent otherwise included in the calculation of Income Before Extraordinary
Items, any Restricted Payment, less non-cash items increasing Income Before
Extraordinary Items, in each case of such Person for such period attributable to
such Properties and/or Mortgaged Properties.
"Cash Flow Event" means in respect of a Property or Mortgaged
Property, that the Cash Flow of the Operator or Mortgagor thereof (as
applicable) over its four most recent financial quarters (or, (i) if financial
reporting for such Cash Flow is provided on an annual basis, over its last
reported financial year, or (ii) where Marriott International, Inc. is the
Operator or Mortgagor and financial reporting for such Cash Flow is not
otherwise required to be provided to Borrower or its Subsidiaries, over the last
reported financial year as certified by an officer of Marriott International,
Inc. in a certificate described in Section 5.2(b)(iii)), attributable to that
Property or Mortgaged Property is less than its Fixed Charges over the same
period for such Property or Mortgaged Property; provided that a Cash Flow Event
shall not be deemed to occur in respect of a Property or a Mortgaged Property
that is part of a group of Cross Guarantied Assets if the Cash Flow of the
Operators and Mortgagors determined on an aggregate basis over their respective
four most recent financial quarters (or last reported financial year or last
certified financial year, as the case may be), attributable to the relevant
group of Cross Guarantied Assets, is greater than or equal to their Fixed
Charges determined on an aggregate basis over the same period in respect of such
group of Cross Guarantied Assets.
"Clinic" means, in the case of a Property, a Property 50% or
more of the rentable area of which is leased for use in, or, in the case of a
Mortgaged Property, a Mortgaged Property 50% of the usable area of which is used
for, the provision of outpatient medical services directly to patients.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commission" means the United States Securities and Exchange
Commission or any successor to the responsibilities of such commission.
"Commitment" has the meaning set forth in Section 2.1(b).
"Commitment Period" means the period from and including the
date hereof to and including the Final Borrowing Date or such earlier date as
the Commitments shall terminate as provided herein.
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<PAGE>
"Common Shares" means Borrower's common shares of beneficial
interest, $0.01 par value.
"Contingent Obligation" means, as to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ( "primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the payment of, or the ability of
the primary obligor to make payment of, such primary obligation or (d) otherwise
to assure or hold harmless the owner of such primary obligation against loss in
respect thereof; provided that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation shall be determined in
accordance with Section 1.3(a) and shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Contractual Obligation" means, as to any Person, the
Certificate of Incorporation and By-Laws or other organizational or governing
documents of such Person, and any provision of any security issued by such
Person or of any agreement, instrument or undertaking to which such Person is a
party or by which it or any of its property is bound.
"Control" (including with correlative meanings the terms
"Controlling", "Controlled by" and "under common Control with"), as applied to
any Person, means the possession of the power, direct or indirect, (i) to vote
5% or more of the securities having ordinary voting power for the election of
directors or trustees of such Person, or (ii) to direct or cause the direction
of the management and policies of such Person whether by contract or otherwise.
"Credit Support Agreements" means each of the Lease
Guarantees, Mortgage Guarantees, Pledges and Sublease Agreements, and any other
agreements or instruments providing assurances in any form, in each case in
respect of any Person's obligations under a Lease or Mortgage Interest
Agreement.
"Credit Support Obligors" means the obligors in respect of the
Credit Support Agreements, and each of them.
"Cross Guarantied Assets" means a group of Properties and/or
Mortgage Interests as to which the various Operators and/or Mortgagors have
guarantied each other's obligations to Borrower and/or any of Borrower's
Subsidiaries and have agreed to cross-default such obligations and/or
cross-collateralize those obligations to the extent of any
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security or credit support that has been provided for such obligations or a
group of Properties and/or Mortgage Interests operated by a single Operator or
Mortgagor as to which such Operator or Mortgagor has agreed to cross-default all
of its obligations to Borrower and/or any of Borrower's Subsidiaries and to
cross-collateralize those obligations to the extent of any security or credit
support that has been provided for such obligations.
"Current" means, at any date of determination, in respect of
cash flow information of an Operator or Mortgagor required in a Real Property
Statement, (a) for a fiscal year of that Operator or Mortgagor, that such
information relates to its fiscal year then current or the fiscal year ended not
more than one hundred and fifty days prior thereto or (b) for a fiscal quarter
of that Operator or Mortgagor, that such information relates to its fiscal
quarter then current or a fiscal quarter ended not more than seventy five days
prior thereto.
"Declaration of Trust" means the Declaration of Trust
establishing Borrower, dated October 9, 1986, as amended and restated on July 1,
1994, as such Declaration of Trust may be further amended, supplemented or
modified from time to time.
"Default" means any of the events specified in Section 7.1,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"EBI" means, with respect to Borrower and its Subsidiaries,
for any period of time, without duplication of counting and determined in
accordance with Section 1.3(a), the sum of (i) the net income on a consolidated
basis (determined in accordance with GAAP for such period), plus (ii) any losses
for such period and reserves for such losses from the sale of real property
assets (on a tax effected basis) plus (iii) any non-cash extraordinary losses
and expenses and reserves for any non-cash extraordinary losses and expenses for
such period, minus (iv) any gains for such period from the sale of assets (on a
tax effected basis) outside the ordinary course of business, minus (v) any
extraordinary gains from such period, plus (vi) to the extent deducted from
gross income to calculate net income, Interest Charges of Borrower and its
Subsidiaries on a consolidated basis for such period.
"Effective Date" means the date when the conditions precedent
set forth in Section 4 are first satisfied, or are waived pursuant to Section
10.6.
"Eligible Mortgage" means each Mortgage Interest where (i) the
requirements of Section 2.16 in respect of such Mortgage Interest are met, (ii)
except in the case of Mortgaged Properties that consist of Medical Office Assets
or Clinics, the Mortgagor in respect of such Mortgage Interest is not in default
under any payment obligation or in any material respect under any other
Contractual Obligation between such Mortgagor and Borrower or any of its
Subsidiaries, including without limitation any Mortgage Interest Agreement, any
note payable by such Mortgagor to Borrower or any of its Subsidiaries or any
Lease, (iii) except in the case of Mortgaged Properties that consist of Medical
Office Assets or Clinics, there has been no Cash Flow Event with respect to such
Mortgaged Property , and in the case of Mortgaged Properties consisting of
Medical Office Assets or Clinics, the Notional Interest Cover Ratio is met, (iv)
except in the case of Mortgaged Properties that consist of Medical Office Assets
or Clinics, no Credit Support Obligor in
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respect of such Mortgage Interest is in default under any payment obligation or
in any material respect under any other Contractual Obligation of such Credit
Support Obligor to Borrower or any of its Subsidiaries, including without
limitation any Lease, Mortgage Interest Agreement or Credit Support Agreement,
and (v) such Mortgage Interest is not subject to a Lien otherwise permitted
pursuant to Section 6.9(i) or 6.9 (iv).
"Eligible Property" means each Property which is leased to an
Operator, provided (i) the requirements of Section 2.16 in respect of such
Property are met, (ii) except in the case of Properties consisting of Medical
Office Assets or Clinics, it is not a Property the Operator of which has failed
to exercise any renewal option under the Lease thereof prior to the expiration
of the option (and no replacement Lease with that or another Operator has been
signed), (iii) except in the case of Properties consisting of Medical Office
Assets or Clinics, such Operator is not in default under any payment obligation
or in any material respect under any other Contractual Obligation between such
Operator and Borrower or any of its Subsidiaries, including without limitation
such Lease, any other Lease or any Mortgage Interest Agreement, (iv) except in
the case of Properties consisting of Medical Office Assets or Clinics, there has
been no Cash Flow Event with respect to such Property, and in the case of
Properties consisting of Medical Office Assets or Clinics, the Notional Interest
Cover Ratio is met, (v) except in the case of Properties consisting of Medical
Office Assets or Clinics, no Credit Support Obligor for the Lease of such
Property is in default under any payment obligation or in any material respect
under any other Contractual Obligation of such Credit Support Obligor to
Borrower or any of its Subsidiaries, including without limitation any Lease,
Mortgage Interest Agreement or Credit Support Agreement, and (vi) such Property
is not subject to a Lien otherwise permitted pursuant to Section 6.9(i) or
6.9(iv).
"Environmental Laws" means all statutes, ordinances, orders,
rules and regulations having effect in any domestic or foreign jurisdiction
relating to environmental matters, including, without limitation, those relating
to fines, orders, injunctions, penalties, damages, contribution, cost recovery
compensation, losses or injuries resulting from the Release or threatened
Release of Hazardous Materials and to the generation, use, storage,
transportation, or disposal of Hazardous Materials, in any manner applicable to
Borrower or any Operator or Mortgagor or any of their respective Subsidiaries or
any of their respective properties, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
ss. 9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C. ss. 1801
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the
Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. ss. 2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. ss.
651 et seq.) and the Emergency Planning and Community Right-to-Know Act (42
U.S.C. ss. 11001 et seq.), each as amended or supplemented, and any analogous
future or present local, municipal, state and federal statutes and regulations
promulgated pursuant thereto, each as in effect as of the date of determination.
"Equivalent Amount" means the amount of a currency other than
U.S. Dollars that can be purchased with U.S. Dollars calculated on the basis of
Administrative Agent's spot rate of exchange for the purchase of such other
currency with U.S. Dollars on the date such calculation is to be made (such
calculation to be made on the occasions set forth in Section 1.3(b)).
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" means (i) any corporation which is an entity
under common control with Borrower within the meaning of Section 4001 of ERISA
or a member of a controlled group of corporations within the meaning of Section
414(b) of the Code of which Borrower is a member; (ii) any trade or business
(whether or not incorporated) which is a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the Code
of which Borrower is a member; and (iii) any member of an affiliated service
group within the meaning of Section 414(m) or (o) of the Code of which Borrower,
any corporation described in clause (i) above or any trade or business described
in clause (ii) above is a member.
"Eurodollar Loans" means the portion of the Loans (which may
be denominated in U.S. Dollars or in GBP) the interest on which is computed by
reference to the LIBO Rate.
"Event of Default" means any of the events specified in
Section 7.1, provided that any requirement for the giving of notice, the lapse
of time, or both, or any other condition, has been satisfied.
"Existing Loan Agreement" has the meaning set forth in the
introduction to this Agreement.
"Existing Loans" has the meaning set forth in Section 2.1(a).
"Excluded Taxes" means taxes upon any Lender's overall net
income imposed by the United States of America or any political subdivision or
taxing authority thereof or therein or by any jurisdiction in which the Lending
Office of any Lender is located or in which any Lender is organized or has its
principal or registered office, except taxes, duties or charges imposed pursuant
to Section 1, 2 and/or 39 of the Massachusetts General Laws, Chapter 63, as
currently in effect or as amended hereafter or any analogous provisions (or
provisions having an analogous effect) of the laws, rules or regulations (or
interpretations thereof) of Massachusetts or any other Governmental Authority.
"Facility" means each operating facility offering health care
or related services or rehabilitation or retirement services or other healthcare
related income producing real property interest (including, without limitation,
the Fee Interests and/or Leasehold Interests and/or Mortgage Interests
associated with such Facility) in which Borrower or any of its Subsidiaries has
acquired or will acquire an interest as owner, lessee or mortgagee, including
without limitation each Property and Mortgaged Property.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a day for which
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such rate is published, for the next preceding day for which it is published) by
the Federal Reserve Bank of New York.
"Fee Interests" means any land and any buildings, structures,
improvements and fixtures owned beneficially in fee simple by Borrower or any of
its Subsidiaries and equipment located thereon or used in connection therewith
and all personalty (including, without limitation, franchises) related thereto
and all other real estate interests, owned beneficially by Borrower or any of
its Subsidiaries.
"Final Borrowing Date" means the earlier of (i) March 15, 1999
and (ii) such date as the Commitments shall terminate as provided herein.
"Final Repayment Date" means the later of (i) the Termination
Date and (ii) such date as all Outstandings have been paid in full.
"Fixed Charges" means, for any period and any Person in
respect of one or more Properties and/or Mortgaged Properties as to which such
Person is the Operator or Mortgagor thereof, the sum (without duplication of
counting and determined in accordance with Section 1.3(a)) of (i) Interest
Charges, (ii) all payments required to be made as lessee or sublessee under the
terms of any Lease or other lease agreement, including without limitation fixed
rent, participation rent and additional rent in respect of (a) operating
expenses, (b) taxes based on the ownership of real property, (c) insurance
premiums and/or (d) any other costs or expenses of the relevant lessor or
sublessor, and (iii) scheduled payments of principal of Indebtedness or payments
of amounts equivalent to principal, in each case of such Person, for such period
and attributable to such Properties and/or Mortgaged Properties.
"GAAP" means, subject to the provisions of Section 1.2,
generally accepted accounting principles set forth in the Opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements by the Financial Accounting Standards Board or in
such other statement by such other entity as may be approved by a significant
segment of the accounting profession, which are applicable to the circumstances
as of the date in question; and the requirement that such principles be applied
on a consistent basis shall mean that the accounting principles observed in a
current period are comparable in all material respects to those applied in a
preceding period.
"GBP" shall mean the lawful currency from time to time of the
United Kingdom.
"General Corporate Loans" means Loans, the proceeds of which
are to be applied toward general corporate purposes of Borrower or its
Subsidiaries, as designated by Borrower pursuant to a Notice of Borrowing.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
Controlled (through stock or capital ownership or otherwise) by any of the
foregoing.
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"Hazardous Material" means (i) any chemical, material,
substance or waste defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
waste," "restricted hazardous waste," or "toxic substances" or any other
formulations intended to define, list or classify substances by reason of
deleterious properties under any applicable Environmental Laws, (ii) biomedical
waste, (iii) any oil, petroleum or petroleum derived substance, any drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, any flammable substances or explosives,
any radioactive materials, any toxic wastes or substances or any other materials
or pollutants which (a) pose a hazard to any property of Borrower or any
Operator or Mortgagor or any of their respective Subsidiaries or to Persons on
or about such property or (b) cause such property to be in violation of any
Environmental Laws, (iv) asbestos in any form which is or could become friable,
urea formaldehyde foam insulation, electrical equipment which contains any oil
or dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty parts per million, and (v) any other chemical, material, substance or
waste, exposure to which is prohibited, limited or regulated by any Governmental
Authority or may or could pose a hazard to the health and safety of the owners,
occupants or any Persons surrounding the Facilities.
"Hospitality Properties Trust" means Hospitality Properties
Trust, a real estate investment trust formed under the laws of the State of
Maryland.
"HRPT Advisors" means HRPT Advisors, Inc., a Delaware
corporation.
"IDFA Indebtedness" means the Indebtedness, in an aggregate
principal amount not to exceed $17,700,000 plus accrued interest thereon,
existing pursuant to (a) that certain Loan Agreement dated as of April 15, 1991
between the Illinois Development Finance Authority and Marriott Retirement
Communities, Inc. and relating to the Illinois Development Finance Authority
Revenue Refunding Bonds Series 1991A, and (b) that certain Loan Agreement dated
as of April 15, 1991 between the Illinois Development Finance Authority and
Marriott Retirement Communities, Inc. and relating to the Illinois Development
Finance Authority Revenue Refunding Bonds Series 1991B, which Indebtedness was
assumed by Borrower's wholly-owned Subsidiary Church Creek Corporation, a
Massachusetts corporation, pursuant to that certain Purchase Agreement dated
March 17, 1994 among HMC Retirement Properties, Inc., HMH Properties, Inc. and
Borrower and (without duplication) the letter of credit obligations with respect
to which such Indebtedness was guaranteed by Borrower.
"Income Before Extraordinary Items" means, for any period and
any Person in respect of one or more Properties and/or Mortgaged Properties as
to which such Person is the Operator or Mortgagor thereof, the net income (or
loss) of such Person for such period attributable to such Properties and/or
Mortgaged Properties, excluding any extraordinary items (net of taxes) and
including amounts paid or provided for income taxes or deferred income taxes by
or on behalf of such Person attributable to such Properties and/or Mortgaged
Properties, all as determined in conformity with GAAP and Section 1.3(a).
"Indebtedness" means, with respect to any Person, and without
duplication and determined in accordance with Section 1.3(a), (i) all
indebtedness, obligations and other
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liabilities (contingent or otherwise) of such Person for borrowed money or other
extensions of credit or evidenced by bonds, debentures, notes or similar
instruments (whether or not the recourse of the lender is to the whole of the
assets of such Person or to only a portion thereof), (ii) all reimbursement
obligations and other liabilities (contingent or otherwise) of such Person with
respect to letters of credit or bankers' acceptances issued for the account of
such Person or with respect to interest rate protection agreements or securities
repurchase agreements or currency exchange agreements or similar or analogous
hedging or derivative agreements or instruments, (iii) all obligations and other
liabilities (contingent or otherwise) of such Person with respect to any
conditional sale, installment sale or other title retention agreement, purchase
money mortgage or security interest, or otherwise to pay the deferred purchase
price of property or services (except trade accounts payable and accrued
expenses arising in the ordinary course of business) or in respect of any sale
and leaseback arrangement, (iv) all Capitalized Lease Obligations of such
Person, (v) all Contingent Obligations of such Person, (vi) all surety and other
bonds and deposits, and all obligations and other liabilities secured by a Lien
or other encumbrance on any asset of such Person (even though such Person has
not assumed or otherwise become liable for the payment thereof), and (vii) all
obligations to purchase, redeem or acquire any capital stock of such Person or
its Subsidiaries that, by its terms or by the terms of any security into which
it is convertible or exchangeable, is, or upon the happening of any event or the
passage of time would be, required to be redeemed or repurchased by such Person
or its Subsidiaries, including at the option of the holder, in whole or in part,
or has, or upon the happening of an event or passage of time would have, a
redemption or similar payment due, on or prior to the fifth anniversary of the
date hereof or, if later, the date which is two years after the due date for the
final repayment of the Loans as specified in any amendment of this Agreement.
"Independent Trustees" has the meaning set forth in the
Declaration of Trust.
"Insolvency Event", with respect to any Person, means that (i)
such Person shall have suspended or discontinued its business or commenced any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or such Person shall
have made a general assignment for the benefit of its creditors; or (ii) there
shall have been commenced against such Person any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall have been commenced against such Person any case, proceeding or
other action seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or any substantial part of its assets, which
results in the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days from the
entry thereof; or (iv) such Person shall have taken any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii) or (iii) above; or (v) such Person shall
generally not be paying, or shall have been unable to pay, or shall have
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admitted in writing its inability to pay, its debts as they become due.
"Interest Charges" of a Person for any period means the sum of
(i) the aggregate interest accrued and payable in cash, securities or otherwise
on all Indebtedness of such Person and its Subsidiaries, if any, on a
consolidated basis for such period, plus (ii) the aggregate amount of debt
discount or other amounts analogous to interest accruing during or attributable
to such period, whether or not payable during such period, including without
limitation all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and net costs
under (a)(i) interest rate swap agreements, interest rate collar agreements, and
(ii) other agreements or arrangements designed to protect such Person and/or its
Subsidiaries against fluctuations in interest rates; and (b) foreign exchange
contracts and other agreements or arrangements designed to protect such Person
and/or its Subsidiaries against fluctuations in currency values, all amounts
calculated above to be determined in conformity with GAAP and in accordance with
Section 1.3(a).
"Interest Payment Date" means, subject to Section 2.10 hereof,
(i) in the case of a Eurodollar Loan, the last day of each Interest Period (or
if any such day is not a Business Day, the next succeeding Business Day),
provided that in the case of each Interest Period of more than three months
duration, "Interest Payment Date" shall also include each date that is three
months, or an integral multiple thereof, after commencement of such Interest
Period; and (ii) in the case of an Alternate Rate Loan or Base Rate Loan, the
last Business Day of March, June, September and December of each year and the
date such Loan (or any portion thereof) is converted in accordance with the
terms hereof into a Base Rate Loan or Eurodollar Loan, in the case of an
Alternate Rate Loan, or an Alternate Rate Loan or Eurodollar Loan, in the case
of a Base Rate Loan.
"Interest Period" means with respect to each Eurodollar Loan,
and subject to Section 2.10 hereof, a one, two, three or six month period (or
such other period of less than six months as shall be agreed by all the Lenders)
as selected at the option of Borrower pursuant to a Notice of Borrowing or
Notice of Continuation; provided that:
(i) no Interest Period may be selected which expires later
than the Termination Date;
(ii) any Interest Period which begins on the last Business
Day of a calendar month (or on a day with respect to which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to the foregoing proviso, end on the
last Business Day of a calendar month;
(iii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Loan continued as such pursuant to a Notice
of Continuation, each successive Interest Period shall commence on the
day on which the next preceding Interest Period expires;
(iv) there shall be no more than eight Interest Periods
outstanding at any one time; and
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(v) in the event Borrower fails to specify an Interest
Period for any Loan in the applicable Notice of Borrowing or Notice of
Continuation, Borrower shall be deemed to have selected an Interest
Period of one month.
"Interest Rate Determination Date" means each date for
calculating the LIBO Rate for purposes of determining the interest rate in
respect of an Interest Period. For a Eurodollar Loan, the Interest Rate
Determination Date for such Loans denominated in U.S. Dollars shall be the
second Business Day prior to the first day of the related Interest Period, while
the Interest Rate Determination Date for such Loans denominated in GBP shall be
the first day of the related Interest Period.
"Kleinwort Benson" means Kleinwort Benson Limited, a bank
organized and existing under the laws of England.
"Lease Guarantees" means each guarantee, letter of credit or
other similar undertaking issued by any Person in respect of any of the
obligations of an Operator under a Lease.
"Lease Guarantors" means the obligors in respect of the Lease
Guarantees, and each of them.
"Leasehold Interests" means any leasehold estate in any land
and/or any buildings, structures, improvements and fixtures owned beneficially
by Borrower or any of its Subsidiaries and all equipment located thereon or used
in connection therewith and all personalty (including, without limitation,
franchises) related thereto, owned beneficially by Borrower or any of its
Subsidiaries.
"Leases" means any leases or subleases relating to the
Properties in respect of which Borrower of any of its Subsidiaries is the
lessor.
"Lender" has the meaning set forth in the first paragraph of
this Agreement.
"Lending Office" means the branch or Affiliate office or
offices of each Lender designated as the Lending Office(s) of such Lender on
Schedule 1 and each other branch or Affiliate office as such Lender may
designate as its Lending Office(s) from time to time by notice to Agent and
Borrower.
"LIBO Rate" means the average (expressed as a percentage and
rounded to the nearest one ten thousandth of one percent) of the offered rates,
if any, quoted by the Reference Banks to Administrative Agent in the London
interbank market for U.S. Dollar or GBP (as applicable) deposits of amounts
comparable to the principal amount of the Loans for which the LIBO Rate is being
determined with maturities comparable to the Interest Period for which such LIBO
Rate will apply as of approximately 11:00 A.M. (London time) on the Interest
Rate Determination Date for such Interest Period.
"Lien" means, as to any Person, any mortgage, lien (statutory
or otherwise), pledge, adverse claim, charge, security interest, assignment,
deposit agreement or other
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encumbrance in or on, or any interest or title of any vendor, lessor, lender or
other secured party to or of such Person under any conditional sale or other
title retention agreement or Capitalized Lease Obligation with respect to any
property or asset of such Person, or the signing or filing of a financing
statement which names such Person as debtor, or the signing of any security
agreement authorizing any other party as the secured party thereunder to file
any financing statement.
"Loan Agents" has the meaning set forth in Section 8.1(a).
"Loan Documents" means, collectively, this Agreement
(including, without limitation, the guaranties in Section 9), the Notes and any
other agreements, documents or instruments delivered pursuant to or in
connection with any of the foregoing, as such agreements, documents or
instruments may be amended, modified or supplemented from time to time.
"Loans" means the Existing Loans and the revolving loans made
or to be made to Borrower by the Lenders hereunder.
"MAC" means, with respect to any Property or Mortgage
Interest, any material adverse effect on or change in (a) the business,
operations, assets, prospects or financial condition or other condition of (i)
such Property or (ii) such Mortgage Interest or (iii) any Operator of such
Property or (iv) any Mortgagor of such Mortgage Interest or (v) any Credit
Support Obligor of such Property or Mortgage Interest, (b) Agent's,
Administrative Agent's or any Lender's rights and remedies under the Loan
Documents, or (c) the ability of (i) any Operator of such Property or (ii) any
Mortgagor of such Mortgage Interest or (iii) any Credit Support Obligor of such
Property or Mortgage Interest to perform its obligations under the Loan
Documents or under the Leases, the Mortgage Interest Agreements or the Credit
Support Agreements in respect of such Property or Mortgage Interest.
"Majority Lenders" means, at any particular time, Lenders
having more than 66-2/3% of the Commitments, or if the Commitments have been
terminated at such time, Lenders having more than 66-2/3% of the aggregate
principal amount of the Loans then outstanding.
"Mandatory Liquid Asset Costs" means, in relation to each
Lender which may be subject to such requirements, the additional cost to such
Lender of complying with the relative reserve asset ratio required by the Bank
of England from time to time (if any), expressed as a percentage per annum and
calculated as set forth in Schedule 5.
"Material Adverse Effect" means a material adverse effect on
or change in (a) the business, operations, assets, prospects or financial
condition or other condition of (i) Borrower and its Subsidiaries taken as a
whole or (ii) the Advisor or (iii) the Properties and Mortgage Interests taken
as a whole, (b) Agent's, Administrative Agent's or any Lender's rights and
remedies under the Loan Documents, (c) the ability of (i) Borrower or any of its
Subsidiaries or (ii) the Advisor to perform its respective obligations under the
Loan Documents, the Advisory Agreement, the Leases, the Mortgage Interest
Agreements or the
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Credit Support Agreements, or (d) the ability of the Operators, Mortgagors and
Credit Support Obligors (taken as a whole) to perform their obligations under
the Leases, the Mortgage Interest Agreements and the Credit Support Agreements
insofar as they relate to Eligible Properties and Eligible Mortgages.
"Medical Office Asset" means, in the case of a Property, other
than a Clinic, a Property 50% or more of the rentable area of which is leased to
one or more Operators for use as, or, in the case of a Mortgaged Property, other
than a Clinic, a Mortgaged Property 50% or more of the usable area of which is
used for, (i) offices for the practice of the medical profession (or
administrative functions related thereto), including offices of physicians or
physician practice groups, or (ii) medical research and development.
"Mortgage Guarantees" means each guarantee, letter of credit
or other similar undertaking issued by any Person in respect of any of the
obligations of a Mortgagor under a Mortgage Interest Agreement.
"Mortgage Guarantors" means the obligors in respect of the
Mortgage Guarantees, and each of them.
"Mortgage Interest" means any interest of Borrower or any of
its Subsidiaries as lender and as mortgagee or beneficiary, as applicable, in
respect of a loan secured in whole or in part by a Lien on any land or any
buildings, structures, improvements and fixtures (including any leasehold estate
with respect thereto).
"Mortgage Interest Agreement" means any agreement, note,
mortgage, deed of trust and/or other document creating, evidencing or securing a
Mortgage Interest.
"Mortgaged Property" means any land and any building,
structure, improvements and fixtures (including any leasehold estate with
respect thereto) with respect to which Borrower or any of its Subsidiaries has a
Mortgage Interest.
"Mortgagor" means, in the case of a Mortgage Interest, the
obligor or obligors in respect of such Mortgage Interest.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which Borrower or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make contributions.
"Multiple Employer Plan" means an employee benefit plan, other
than a Multiemployer Plan, subject to Title IV of ERISA to which Borrower or any
ERISA Affiliate, and at least one employer other than Borrower or an ERISA
Affiliate, is making or accruing an obligation to make contributions or, in the
event that any such plan has been terminated, to which Borrower or any ERISA
Affiliate made or accrued an obligation to make contributions during any of the
five plan years preceding the date of termination of such plan.
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"Net Mortgage Proceeds" means (a) any amounts paid, other than
scheduled repayments, by a Mortgagor to Borrower or any of its Subsidiaries
under an agreement, evidencing or securing any interest of Borrower or such
Subsidiary as lender and as mortgagee or beneficiary, as applicable, in respect
of a loan secured in whole or in part by a Lien on a Facility, in respect of
principal thereunder, plus (b) the gross proceeds received by or for the account
of Borrower or such Subsidiary of any sale or other disposition of any such
agreement, minus (c) the reasonable out-of-pocket fees and expenses (including
attorneys' fees and expenses) incurred by Borrower or such Subsidiary in
connection with such sale or other disposition.
"Net Property Proceeds" means (a) the gross proceeds received
by or for the account of Borrower or any of its Subsidiaries of any sale, lease
or other disposition of any Fee Interest or Leasehold Interest or termination or
substitution of any lease or sublease with respect to any Fee Interest or
Leasehold Interest of Borrower or any of its Subsidiaries, minus the reasonable
out-of-pocket fees and expenses (including attorneys' fees and expenses)
incurred by Borrower or such Subsidiary in connection with such sale or other
disposition, (b) all insurance proceeds paid and received by or for the account
of Borrower or such Subsidiary on account of the loss of or damage of any such
Fee Interest or Leasehold Interest, to the extent such proceeds are not applied
to the replacement or restoration of such assets and (c) all proceeds received
by or for the account of Borrower or such Subsidiary, arising from the taking by
condemnation or eminent domain of any such Fee Interest or Leasehold Interest,
to the extent such proceeds are not applied to the replacement or restoration of
such assets.
"Net Securities Proceeds" with respect to any private or
public offering of securities or any borrowing from one or more financial
institutions means the gross proceeds thereof received by or for the account of
Borrower net of (a) underwriting discounts and commissions and (b) reasonable
out-of-pocket fees and expenses incurred in connection with such offering or
borrowing; provided that such proceeds shall not include proceeds from
borrowings (or from refinancing of such borrowings) from financial institutions
which are applied substantially contemporaneously with the borrowing thereof to
the acquisition of one or more Facilities but no later than two Business Days
after such borrowing.
"Notes" has the meaning set forth in Section 2.2.
"Notice of Borrowing" means a notice substantially in the form
of Exhibit B hereto delivered by Borrower to Administrative Agent (with a copy
to Agent to follow) pursuant to Section 2.3 with respect to a proposed
borrowing.
"Notice of Continuation/Conversion" means a notice
substantially in the form of Exhibit C hereto delivered by Borrower to
Administrative Agent (with a copy to Agent to follow) pursuant to Section 2.5
with respect to a continuation or conversion of one or more Loans.
"Notional Interest Cover Ratio" means, in respect of a (a)
Property that is a Medical Office Asset or a Clinic, a ratio of (i) Adjusted Net
Operating Cash Flow in respect of such Medical Office Asset or Clinic (measured
over the four most recent financial quarters
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of Borrower or, if less, the number of full financial quarters of Borrower
during which the relevant Property has been a Property and annualized if
measured over less than four financial quarters), to (ii) a notional amount of
interest payable at a rate equal at all times to the Average Cost of Debt on a
notional amount of principal equal to 80% of the acquisition cost to Borrower of
such Medical Office Asset or Clinic (measured over the four most recent
financial quarters of Borrower), of at least 1.25:1 and (b) Mortgaged Property
that is a Medical Office Asset or a Clinic, a ratio of (i) Adjusted Net Interest
in respect of such Medical Office Asset or Clinic (measured over the four most
recent financial quarters of Borrower or, if less, the number of full financial
quarters of Borrower during which the relevant Mortgaged Property has been a
Mortgaged Property and annualized if measured over less than four financial
quarters), to (ii) a notional amount of interest payable at a rate equal at all
times to the Average Cost of Debt on a notional amount of principal equal to 80%
of the Indebtedness secured by such Medical Office Asset or Clinic (measured
over the four most recent financial quarters of Borrower), of at least 1.25:1.
"Operators" in respect of a Facility, means the lessee or
sublessee (other than Borrower or any of its Subsidiaries) thereof.
"Outstanding" means, when used with reference to the Notes as
of a particular time, all Notes theretofore issued as provided in this
Agreement, except (i) Notes theretofore reported as lost, stolen, damaged or
destroyed, or surrendered for transfer, exchange or replacement, in respect of
which replacement Notes have been issued, (ii) Notes theretofore paid in full,
and (iii) Notes theretofore duly cancelled by Borrower; and except that, for the
purpose of determining whether holders of the requisite principal amount of
Notes have made or concurred in any waiver, consent, approval, notice or other
communication or matter under this Agreement, Notes held or owned by Borrower or
any Affiliate of Borrower, shall not be deemed to be outstanding.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA, or any successor to the
responsibilities of such corporation.
"Permitted Exceptions" means those exceptions to title set
forth on Schedule 2.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"Plan" means an employee benefit plan, other than a
Multiemployer Plan, maintained for or covering any employees of Borrower or any
ERISA Affiliate and subject to Title IV of ERISA.
"Pledges" means any pledge or grant of a Lien to secure any of
the obligations of a Mortgagor under a Mortgage Interest Agreement, an Operator
under a Lease, a Mortgage Guarantor under a Mortgage Guarantee, a Lease
Guarantor under a Lease Guarantee or a Sublessee under a Sublease Agreement,
each as amended, supplemented or
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modified from time to time.
"Pledgors" means the obligors in respect of the Pledges, and
each of them.
"Preferred Shares" means Borrower's preferred shares of
beneficial interest authorized under the Declaration of Trust.
"Primary Credit Support Obligor" means each Credit Support
Obligor in respect of obligations of a Primary Operator/Mortgagor.
"Primary Operator/Mortgagor" means any Operator and/or
Mortgagor which is a lessee or sublessee with respect to Facilities and/or an
obligor or mortgagor with respect to Mortgage Interests or Facilities
representing, in aggregate, 10% or more of the aggregate Allowed Value of the
Properties and Mortgage Interests; provided that with respect to property
interests located in the United Kingdom, every Operator and every Mortgagor
shall be deemed to be a "Primary Operator/Mortgagor" .
"Process Agent" has the meaning set forth in Section 10.2.
"Property" or "Properties" means each of the Facilities in
which Borrower or any of its Subsidiaries has a Fee Interest or Leasehold
Interest.
"Pro Rata Share" means, with respect to each Lender as of the
date of determination, the percentage obtained by dividing (i) the Commitment of
that Lender as of such date by (ii) the Commitment of all Lenders as of such
date; provided that if the Commitments have been terminated at such time, such
Pro Rata Share shall be the percentage obtained by dividing (i) the aggregate
amount of the Loans outstanding from that Lender as of such date by (ii) the
aggregate amount of the Loans outstanding from all Lenders as of such date.
"Psychiatric Care Asset" means, in respect of any Property or
Mortgage Interest, that more than 50% of the licensed beds of the Property or,
in the case of a Mortgage Interest, of the Mortgaged Property covered thereby,
are designated for psychiatric treatment.
"Real Property" has the meaning set forth in Section 5.12.
"Real Property Permit" means, in respect of any Property or
Mortgaged Property, all certificates of occupancy, permits, licenses,
franchises, approvals and authorizations from all Governmental Authorities
having jurisdiction over such Property or Mortgaged Property or any portion
thereof, the absence of which could materially impair the use of such Property
or Mortgaged Property for the purposes for which it is currently used, and from
all insurance companies and fire rating and similar boards and organizations
required to have been issued to Borrower or any of its Subsidiaries or the
Operator (in the case of a Property) or the Mortgagor (in the case of a
Mortgaged Property) to enable such Property or Mortgaged Property or any portion
thereof to be lawfully occupied and used as currently so occupied or used.
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"Real Property Statement" means a certificate of a Responsible
Officer providing each of the following:
(i) a list of all Facilities owned by Borrower and its
Subsidiaries or in which Borrower or any such Subsidiary has an
interest at the date of such certificate, identifying the nature of
such interest and certifying the Appraised Value, if available, and
each of the other costs, values and prices referred to in the
definition of "Allowed Value" relating to each Facility;
(ii) specification in respect of each Facility of each of the
following:
(a) whether as of the date of such certificate such
Facility is an Eligible Property or a Mortgaged
Property covered by an Eligible Mortgage;
(b) in respect of each Eligible Property, the
acquisition cost of Borrower or any of its
Subsidiaries in respect of such Eligible Property;
and
(c) in respect of each Eligible Mortgage, the then
outstanding principal amount due to Borrower or any
of its Subsidiaries from the relevant Mortgagor in
respect of such Eligible Mortgage;
(iii) with respect to each such Eligible Property or Eligible
Mortgage, certification as to the ratio of (A) the Cash Flow of the
Operator or Mortgagor thereof (as applicable) over the four most recent
financial quarters (or, (y) if financial reporting for such Cash Flow
is provided on an annual basis, over its last reported financial year,
or (z) where Marriott International, Inc. is the Operator or Mortgagor
and financial reporting for such Cash Flow is not otherwise required to
be provided to Borrower or its Subsidiaries, over the last reported
financial year as certified by an officer of Marriott International,
Inc. in a certificate described in Section 5.2(b)(iii)) attributable to
that Eligible Property or Eligible Mortgage to its (B) Fixed Charges
over the same period for such Eligible Property or Eligible Mortgage
and, further, certification that, with respect to each Eligible
Property or Eligible Mortgage, the details of cash flows of the
Operator or Mortgagor thereof used by Borrower in its calculations are
Current; provided that if such Eligible Property or Eligible Mortgage
is part of a group of Cross Guarantied Assets, in addition to the
certification required for each individual Eligible Property or
Eligible Mortgage, Borrower also shall provide certification as to the
ratio of (A) the Cash Flow of the Operators or Mortgagors (as
applicable) for such group determined on an aggregate basis over their
respective four most recent financial quarters (or last reported
financial year or last certified financial year, as the case may be)
attributable to the group of Cross Guarantied Assets to (B) their Fixed
Charges over the same period for such group of Cross Guarantied Assets;
and
(iv) certification that there has been no MAC in any of the
circumstances set forth in Section 2.16(c), other than, in each case, a
MAC which has ceased to be in effect.
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"Recognized Appraiser" means a qualified and recognized
professional appraiser as may be selected or approved by Agent and
Administrative Agent with the consent of Borrower, which will not be
unreasonably withheld, having at least five years' prior experience in
performing real estate appraisals in the geographic area where the property
being appraised is located, having a recognized expertise in appraising
properties operated as health care or retirement facilities or hotel or other
lodging facilities; provided that if the property being appraised is located in
the United Kingdom, such appraiser will be selected or approved by Agent with
the consent of Borrower.
"Reference Banks" means Kleinwort Benson Limited and Wells
Fargo Bank, National Association.
"Rehabilitation Treatment Asset" means, in respect of any
Property or Mortgage Interest, that more than 50% of the licensed beds of the
Property or, in the case of a Mortgage Interest, of the Mortgaged Property
covered thereby, are designated for rehabilitation treatment.
"Release" means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal,
leaching or migration of any Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), or into or out of any Facility, including the movement of any
Hazardous Material through the air, soil, surface water, groundwater or
property.
"Reportable Event" means a "reportable event" within the
meaning of Section 4043 of ERISA (other than a "reportable event" for which the
30-day notice to PBGC requirement has been waived by regulation of PBGC).
"Requirement of Law" means, as to any Person, any law, treaty,
rule or regulation, or judgment, order, directive or other determination of any
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its properties or to which such Person
or any of its property is subject.
"Responsible Officer" means, with respect to any matter
(including financial matters), the president, chief executive officer, chief
financial officer, executive vice president or treasurer of Borrower.
"Restricted Payment" means (a) every dividend or other
distribution of assets, properties, cash, rights, obligations or securities
paid, made, declared or authorized by Borrower or any of its Subsidiaries (other
than to Borrower) or in respect of any of the Common Shares, the Preferred
Shares or other equity securities of Borrower, or any class of Borrower's equity
securities, or for the benefit of holders of any thereof in their capacity as
such and (b) every payment by or for the account of Borrower or any of its
Subsidiaries in connection with the redemption, purchase, retirement, defeasance
or other acquisition of any Common Shares, Preferred Shares or other equity
securities of Borrower or options, warrants or other rights to acquire any of
Borrower's equity securities and (c) every payment (i) of principal, interest,
fees or other amounts in respect of any Indebtedness of Borrower or any of
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its Subsidiaries to any Affiliate of Borrower (provided that "Restricted
Payment" shall not include or prohibit any such payment in respect of
intercompany Indebtedness of any of Borrower's Subsidiaries permitted under
Section 6.8(d)), (ii) in respect of the redemption, purchase, retirement,
defeasance, or other acquisition from an Affiliate of Borrower of any
Indebtedness of Borrower, or (iii) of fees in respect of advisory services
rendered to Borrower or any of its Subsidiaries by the Advisor and (d) every
direct or indirect investment by Borrower (by means of capital contribution,
advance, loan or otherwise) in an Affiliate or any Person which becomes an
Affiliate after or as a result of such investment (but not including investments
by Borrower in its direct wholly-owned Subsidiaries), and (e) every payment by
or for the account of Borrower or any of its Subsidiaries in connection with the
redemption, purchase, retirement, defeasance or other acquisition for value,
directly or indirectly, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, of Indebtedness which is subordinate in right of
payment to the Loans or the Notes.
"Solvent" means, with respect to any Person on a particular
date, that on such date (i) the fair value of the property of such Person is
greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person (whether or not required to be reflected
on a balance sheet prepared in accordance with GAAP), (ii) the present fair
salable value of the assets of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its debts as they
become absolute and matured, (iii) such Person is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (iv) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (v) such Person is not engaged in business or a transaction for
which such Person's property would constitute unreasonably small capital after
giving due consideration to the prevailing practice in the industry in which
such Person is engaged. In computing the amount of contingent liabilities at any
time, it is intended that such liabilities will be computed at the amount which,
in light of all the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or matured
liability.
"Specified Subordinated Indebtedness" means Indebtedness of
any Person, the terms of which prohibit the holder or any representative of the
holder from exercising any legal remedies or other creditor's rights (including
without limitation the filing of a petition in respect of such Person under the
U.S. Bankruptcy Code, 11 U.S.C. 101 et seq.) thereunder until all obligations
(contingent or otherwise) of such Person to Borrower under all Leases, Mortgage
Interest Agreements and Credit Support Agreements to which that Person is a
party have been indefeasibly satisfied in full.
"Sublease Agreement" means any agreement pursuant to which a
Person subleases all, or a material portion, of a Property from an Operator, as
such agreement is amended, supplemented or modified from time to time.
"Sublessees" means the sublessees in respect of the Sublease
Agreements, and each of them.
"Subordination Agreement" means the amended and restated
subordination agreement, dated as of June 15, 1994, among Administrative Agent,
the Advisor and
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Borrower an executed copy of which is annexed hereto as Exhibit D, as amended,
supplemented or modified from time to time in a manner not inconsistent with the
terms of the Existing Loan Agreement or hereof.
"Subsidiary" means, as to any Person, a corporation,
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly, through one
or more intermediaries, or both, by such Person.
"Tangible Net Worth" means, with respect to Borrower and its
Subsidiaries, the excess of total assets over total liabilities of such Persons
on a consolidated basis, such total assets and total liabilities each to be
determined in accordance with GAAP and Section 1.3(a), consistent with those
applied in the preparation of the financial statements referred to in Section
3.1; excluding, however, from the determination of total assets (i) goodwill,
organizational expenses, capitalized software, research and development
expenses, trademarks, trade names, copyrights, patents, patent applications,
licenses and rights in any thereof, and other similar intangibles, (ii) all
prepaid expenses, deferred charges or unamortized debt discount and expense,
(iii) all reserves carried and not deducted from assets, (iv) treasury stock and
shares of beneficial interest and capital stock, obligations or other securities
of, or capital contributions to, or investments in, any Subsidiary, (v)
securities, other than the shares of stock of Hospitality Properties Trust,
which are not readily marketable, (vi) cash held in a sinking or other analogous
fund established for the purpose of redemption, purchase, retirement,
defeasance, acquisition or prepayment of Common Shares, Preferred Shares or
other equity securities, capital stock or Indebtedness, (vii) any write-up in
the book value of any asset resulting from a revaluation thereof subsequent to
December 31, 1987, (viii) leasehold improvements not recoverable at the
expiration of a Lease (to the extent that the useful life of such improvements
is greater than the term of such Lease), and (ix) any items not included in
clauses (i) through (viii) above which are treated as intangibles in conformity
with GAAP.
"Termination Date" means March 15, 2000
"Termination Event" means (i) a Reportable Event or an event
described in Section 4062(e) of ERISA, or (ii) the withdrawal of Borrower or any
ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was
a "substantial employer", as such term is defined in Section 4001(a)(2) of
ERISA, or the incurrence of liability by Borrower or any ERISA Affiliate under
Section 4064 of ERISA upon the termination of a Multiple Employer Plan, (iii)
the filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under Section 4041 of ERISA, (iv) the institution of
proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, (v) the
withdrawal of Borrower or any ERISA Affiliate from any Multiemployer Plan, or
(vi) any other event or condition which might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan.
"Total Liabilities" of any Person means and includes, as of
any date as of
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which the amount thereof is to be determined, without duplication (i) all items
which in accordance with GAAP would be required to be included on the
liabilities side of a consolidated balance sheet of such Person at such date and
(ii) to the extent not otherwise included in (i) above, all Indebtedness of such
Person as of such date, determined on a consolidated basis and in accordance
with Section 1.3(a).
"Trigger Date" has the meaning set forth in Section 5.14.
"United Kingdom" means the United Kingdom of Great Britain and
Northern Ireland.
"U.S. Dollars" or "$" shall mean the lawful currency of the
United States of America.
1.2. Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the
meanings assigned to them herein when used in the Notes or any certificate or
other document made or delivered pursuant hereto, unless otherwise defined
therein.
(b) As used herein and in the Notes and other Loan Documents,
and any certificate or other document made or delivered pursuant hereto or
thereto, accounting terms not defined in Section 1.1, and accounting terms
partly defined in Section 1.1 to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
schedule and exhibit references are to this Agreement unless otherwise specified
and, where appropriate, the singular shall include the plural.
1.3 Certain Calculations: Mark-to Market
(a) Except in the circumstances set forth in Section 1.3(b),
for the purposes of determining the amount of outstanding Indebtedness, Total
Liabilities or any other indebtedness, obligations or liabilities of Borrower or
any of its Subsidiaries or any other Person, or the amount or value of any
investments or assets of or obligations owed to Borrower or any of its
Subsidiaries or any other Person, or the amount of any other item included in
income or cash flow statements of Borrower or any of its Subsidiaries or any
other Person (each of the foregoing being a "Calculation Item"), if such
Calculation Item is owed or otherwise recorded or measured in GBP or any other
currency other than U.S. Dollars, the amount or value of the Calculation Item
shall be calculated in U.S. Dollars and shall be the amount of U.S. Dollars that
can be purchased with GBP or such other currency calculated on the basis of
Administrative Agent's spot rate of exchange for the purchase of U.S. Dollars
with GBP or such other currency on the date such calculation is to be made;
provided that notwithstanding the continuous nature of certain representations
and covenants in this Agreement, unless requested to do so by Agent or
Administrative Agent or unless
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Borrower is aware of any material currency movement or other circumstance which
would be reasonably likely to have an effect on its ability to satisfy any such
representation or covenant, Borrower shall not be required to make such
calculation with respect to such representations and covenants at any time other
than in connection with the delivery of a Real Property Statement or the
delivery of the certificate of a Responsible Officer under Section 5.2(b);
provided further that even if not required to make such calculations, nothing in
this Section 1.3(a) shall be construed to in any way limit Borrower's
obligations to satisfy all such representations and covenants in accordance with
their terms.
(b) Administrative Agent shall calculate the Equivalent Amount
of Loans denominated in GBP: (i) after any Borrowing Date on which Loans are
made such that the aggregate principal amount of Loans outstanding exceeds 75%
of the Commitments and if requested by Agent or if Administrative Agent in the
reasonable exercise of its judgment considers it desirable to make such
calculation to monitor compliance by Borrower with the limits set forth in
Section 2.1, on the final Business Day of each Interest Period for each Loan
denominated in GBP or otherwise as often as Administrative Agent considers it
desirable or necessary to make such calculation and Administrative Agent shall
notify Borrower and Agent if, based on such calculation, Borrower is in
compliance with the requirements of Section 2.1 as to the maximum aggregate
outstanding principal amount of Loans denominated in GBP or whether prepayment
of the Loans is necessary as required by Section 2.8(e); (ii) on any proposed
Borrowing Date to determine whether, after giving effect to a proposed
borrowing, Borrower will be in compliance with such requirements of Section 2.1;
and (iii) on any proposed continuation/conversion date under Section 2.5 to
determine whether, after giving effect to such proposed continuation/conversion,
Borrower will be in compliance with such requirements of Section 2.1; provided
that any failure by Administrative Agent to make such calculations or provide
the information under this Section 1.3(b) shall not affect the obligations of
Borrower to comply with the limits set forth in Section 2.1 or otherwise to
satisfy all representations and covenants made by it in this Agreement.
SECTION 2. AMOUNT AND TERMS OF REVOLVING LOANS
2.1. Revolving Loans.
(a) Each Lender severally (and not jointly) agrees, subject to
the terms and conditions hereof, to continue the Existing Loans outstanding on
the Effective Date, to make Loans to Borrower from time to time during the
period from the Effective Date to and including the Final Borrowing Date, and to
maintain its Loans outstanding to Borrower on the Final Borrowing Date from such
date until the Termination Date, up to an aggregate amount (including, without
limitation, the amount of any Existing Loans) or the Equivalent Amount in GBP at
any one time not exceeding its Pro Rata Share of the aggregate Commitments (as
defined below) to be used for the purposes identified in Section 2.11 ; provided
that in no event shall the aggregate outstanding principal amount of Loans
denominated in GBP at any time exceed the Equivalent Amount of $100,000,000 (as
determined in accordance with Section 1.3(b)). Each Loan hereunder shall be made
by Lenders in accordance with their respective Pro Rata Share. Upon satisfaction
of the conditions set forth in Section 4, (i) all loans outstanding under the
Existing Loan Agreement
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as of, and at the time of, the Effective Date ("Existing Loans") and all rights
relating to the Existing Loans and all other rights arising under the Existing
Loan Agreement and all documents relating thereto, except to the extent
specifically amended and restated by this Agreement, shall be assigned (without
any further action or authorization being required) by the lenders under the
Existing Loan Agreement to the Lenders proportionately to their respective Pro
Rata Shares of the Commitments without recourse, representation or warranty
(except for representations and warranties made in this Section 2.1(a)) of any
nature, express or implied, by any such lender and such Existing Loans shall be
continued and deemed to be Loans for all purposes under this Agreement and (ii)
each Lender shall pay to Administrative Agent its Pro Rata Share of the Existing
Loans or, if less, the amount by which such Pro Rata Share exceeds its
outstanding Existing Loans (if any), for distribution to the lenders under the
Existing Loan Agreement that are not Lenders and to the other Lenders that have
funded such Loans, in accordance with their respective Commitments, and each
Lender's share of the Existing Loans shall be adjusted accordingly. In
connection with such assignment, each Lender shall be deemed to represent and
warrant to each other Lender that (i) it is, and will be on the Effective Date,
prior to the assignment of its interests pursuant to this Section 2.1(a), the
legal and beneficial owner of the interests being assigned and such interests
are, and will be on the Effective Date, free and clear of any adverse claim and
(ii) the total aggregate principal amount and accrued interest, fees and other
amounts due to such Lender under the Existing Loan Agreement on March 29, 1996
are as set forth on Schedule 3 annexed hereto. Any amounts of accrued interest,
commitment fees or other amounts (other than principal) owed (whether or not
presently due and payable) by Borrower to the lenders under or in respect of the
Existing Loans shall, as of the Effective Date, be deemed to be due and payable
to the lenders under the Existing Loan Agreement. The continuation of the
Existing Loans hereunder shall not be deemed to be a repayment thereof, and
Borrower shall not be required to deliver any notice of prepayment or notice of
borrowing or to satisfy any condition relating to minimum amounts of prepayments
or minimum amounts of borrowings hereunder with respect to such continuance of
the Existing Loans.
(b) Each Lender's commitment to make and maintain Loans to
Borrower pursuant to this Section 2.1 is herein called its "Commitment" and such
commitments of all Lenders in the aggregate are herein called the "Commitments".
The original amount of each Lender's Commitment is set forth opposite its name
on Schedule 1 annexed hereto and the aggregate original amount of the
Commitments is $250,000,000; provided that up to an Equivalent Amount of
$100,000,000 may be made in Loans denominated in GBP (as determined in
accordance with Section 1.3(b)); provided further that the amount of the
Commitments shall be reduced from time to time by the amount of any reductions
thereto made pursuant to Section 2.7 (with a proportionate reduction of the
amount of the Commitments otherwise available for the borrowing of Loans
denominated in GBP); provided further that Lenders shall have no obligation to
make or maintain Loans hereunder to the extent any such Loan would (i) cause the
aggregate amount of the Loans then outstanding to exceed the Commitments or (ii)
cause the aggregate amount of the General Corporate Loans then outstanding to
exceed 25% of the Commitments; and provided further that Lenders shall have no
obligation to make or maintain Loans denominated in GBP hereunder to the extent
any such Loan would cause the aggregate amount of the Loans denominated in GBP
then outstanding to exceed the Equivalent Amount of $100,000,000 (as determined
in accordance with Section 1.3(b)).
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(c) Each Lender's Commitment shall expire on the Termination
Date and all Loans and all other amounts owed hereunder with respect to the
Loans and the Commitments shall be paid in full no later than that date.
(d) Subject to the other terms and conditions hereof, Borrower
may borrow under this Section 2.1, repay Loans in accordance with Section 2.10
or prepay Loans in accordance with Section 2.8 and reborrow the amounts so
repaid under this Section 2.1.
2.2. Notes; Maturity Date. The Loans of each Lender pursuant
hereto shall be evidenced by, and be repayable with interest in accordance with
the terms of, a promissory note of Borrower substantially in the form of Exhibit
A, with appropriate insertions, payable to the order of such Lender in the
principal amount of the Commitment of such Lender (together with any
replacement, modification, renewal or substitution thereof, individually a
"Note" and collectively, the "Notes"), which shall be dated the Effective Date
and be duly completed, executed and delivered by Borrower. The Loans of each
Lender pursuant hereto shall be made and maintained by such Lender's Lending
Office(s) as designated by such Lender from time to time. All outstanding Loans
and each of the Notes shall mature and Borrower shall repay the outstanding
principal amount of such Loans and the Notes in full together with all unpaid
interest accrued thereon on the Termination Date (or earlier as hereinafter
provided) (or if such day is not a Business Day, the next preceding Business
Day) all in accordance with Section 2.10(b), and shall be subject to payment and
prepayment as provided in Section 2.8 hereof. Each Lender is authorized to
endorse at any time the date and amount of each Loan or conversion or
continuation thereof, the date and amount of each payment of principal with
respect to its Loans and whether its Loans are Base Rate Loans, Eurodollar Loans
or Alternate Rate Loans, on the schedule annexed to and constituting a part of
such Lender's Note, which endorsement shall constitute prima facie evidence of
the accuracy of the information endorsed.
2.3. Procedure for Borrowing.
(a) Whenever Borrower desires to borrow under Section 2.1, it
shall deliver both a Notice of Borrowing and a Real Property Statement to
Administrative Agent (with a copy of each to Agent) no later than 11:00 A.M.
(New York time) in the case of Base Rate Loans at least one Business Day and in
the case of Eurodollar Loans at least three Business Days in advance of the
proposed Borrowing Date. The Notice of Borrowing shall specify (i) the proposed
Borrowing Date (which shall be a Business Day), (ii) whether such Loans are to
be denominated in U.S. Dollars or, subject to the limit in Section 2.1, GBP,
(iii) the amount of the Loans requested (which amount shall be in a minimum
aggregate amount of $1,000,000 and integral multiples of $500,000 in excess of
that amount if the Loans are to be denominated in U.S. Dollars or a minimum
aggregate amount of GBP 1,000,000 and integral multiples of GBP 500,000 in
excess of that amount if the Loans are to be denominated in GBP), (iv) whether
such Loans will be Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans
are specified, the initial Interest Period requested for such Eurodollar Loans,
(v) Borrower's account at Administrative Agent to which the net proceeds of the
requested Loans are to be credited, (vi) whether the requested Loans (or any
portion thereof) are to be General Corporate Loans and, if only a portion
thereof are so designated, the amount of such portion, (vii) that the
representations and warranties contained in the Loan Documents are true, correct
and accurate in all material respects to the same extent as though
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made on and as of the date of such Notice of Borrowing unless stated in the
relevant Loan Document to relate to a specific earlier date, in which case such
representations and warranties shall be true, correct and complete in all
material respects as of such earlier date, (viii) that no event has occurred and
is continuing or would result from the proposed borrowing that would constitute
a Default or Event of Default, (ix) that the amount of the proposed borrowing
will not cause (A) the aggregate outstanding principal amount of the Loans to
exceed the Commitments currently in effect, (B) the aggregate amount of the
General Corporate Loans then outstanding to exceed 25% of the Commitments or (C)
the aggregate amount of the Loans denominated in GBP then outstanding to exceed
the Equivalent Amount of $100,000,000 (as determined in accordance with Section
1.3(b)), (x) that the proceeds of the proposed borrowing (other than any
proceeds of General Corporate Loans) shall be used to make payment on the
proposed Borrowing Date for the purchase price and costs of acquiring interests
in one or more Facilities due and payable on such Borrowing Date and (xi) with
respect to the amount of such Loans which will not be General Corporate Loans,
the following:
(x) the name of the proposed Operators and/or
Mortgagors (as applicable) of the Facility or Facilities to
which such borrowing relates and any Credit Support Obligors
in relation thereto;
(y) the name and location of such Facility or
Facilities, the Appraised Value(s) thereof and each of the
other costs, values and prices referred to in the definition
of "Allowed Value" therefor, and a description of the
interests of Borrower or any of its Subsidiaries therein to be
acquired with the proceeds of such borrowing; and
(z) if the proceeds of such Loan will be used to
acquire an interest in any Facility which interest is required
to be an Eligible Property or Eligible Mortgage included in
the calculation of Indebtedness permitted under Section 6.8(a)
after giving effect to such Loan, certification to that
effect.
In lieu of delivering the above-described Notice of Borrowing,
Borrower may give Administrative Agent telephonic notice (which
telephonic notice shall be followed immediately with a notice by
facsimile telecopy) by the time specified for a Notice of Borrowing
above; provided that such notice shall be promptly confirmed in writing
by delivery of a Notice of Borrowing and a Real Property Statement to
Administrative Agent and Agent on or before the applicable Borrowing
Date; provided further that in the event of a discrepancy between a
Notice of Borrowing and such telephonic notice, the telephonic notice
shall govern. Except as otherwise provided in Sections 2.13 and 2.14, a
Notice of Borrowing (or telephonic notice in lieu thereof as provided
above) shall be irrevocable, and Borrower shall be bound to make the
borrowing specified in such Notice of Borrowing (or telephonic notice
in lieu thereof as provided above) in accordance therewith.
None of Agent, Administrative Agent or any Lender shall incur
any liability to any Person (including Borrower or any of its Subsidiaries) in
acting upon any telephonic notice referred to above that Administrative Agent or
Agent believes in good faith to have been given by a duly authorized officer or
other Person authorized to borrow on behalf of
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Borrower or otherwise acting in good faith under this Section 2.3, and upon
funding of Loans by Lenders in accordance with this Agreement pursuant to any
such telephonic notice Borrower shall have effected the borrowing of such Loans
hereunder.
(b) All Loans under this Agreement shall be made by Lenders
simultaneously and proportionately to their respective Pro Rata Shares of the
Commitments, it being understood that no Lender shall be responsible for any
default by any other Lender in that other Lender's obligation to make Loans
requested hereunder nor shall the Commitment of any Lender to make Loans
requested hereunder be increased or decreased as a result of a default by any
other Lender in that other Lender's obligation to make Loans requested
hereunder. Promptly after receipt by Administrative Agent of a Notice of
Borrowing pursuant to Section 2.3(a) (or telephonic notice in lieu thereof
followed immediately with a notice by facsimile telecopy) and in any event not
later than 2:00 p.m. (New York time) on the preceding Business Day (in the case
of Base Rate Loans) or at least three Business Days (in the case of Eurodollar
Loans) in advance of the proposed Borrowing Date, Administrative Agent shall
notify each Lender of the relevant details of the proposed borrowing. Each
Lender shall make the amount of its Loan available to Administrative Agent, in
immediately available funds, at the account specified by Administrative Agent to
the Lenders, not later than 11:00 A.M. (New York time) on the Borrowing Date
specified in the applicable Notice of Borrowing. Upon satisfaction or waiver of
the applicable conditions precedent specified in Sections 4.1 and 4.2,
Administrative Agent shall make the proceeds of such Loans available to Borrower
on such Borrowing Date by causing an amount of immediately available funds equal
to the proceeds of all such Loans received by Administrative Agent from Lenders
to be credited to the account at Administrative Agent as specified by Borrower
in the Notice of Borrowing.
Unless Administrative Agent shall have been notified by any
Lender prior to the Borrowing Date for any Loans that such Lender does not
intend to make available to Administrative Agent the amount of such Lender's
Loan requested on such Borrowing Date (and any such notice shall be without
prejudice to any rights of Borrower against such Lender hereunder),
Administrative Agent may assume that such Lender has made such amount available
to Administrative Agent on such Borrowing Date and Administrative Agent may, in
its sole discretion, but shall not be obligated to, make available to Borrower a
corresponding amount on such Borrowing Date. If such corresponding amount is not
in fact made available to Administrative Agent by such Lender, Administrative
Agent shall be entitled to recover such corresponding amount on demand from such
Lender together with interest thereon, for each day from such Borrowing Date
until the date such amount is paid to Administrative Agent, at the Base Rate in
the case of Loans denominated in U.S. Dollars or at the Alternate GBP Rate in
the case of Loans denominated in GBP. If such Lender does not pay such
corresponding amount forthwith upon Administrative Agent's demand therefor,
Administrative Agent shall promptly notify Borrower and Borrower shall
immediately pay such corresponding amount to Administrative Agent together with
interest thereon, for each day from such Borrowing Date until the date such
amount is paid to Administrative Agent, at the Base Rate in the case of Loans
denominated in U.S. Dollars or at the Alternate GBP Rate in the case of Loans
denominated in GBP. Nothing in this Section 2.3 shall be deemed to relieve any
Lender from its obligation to fulfill its Commitments hereunder or to prejudice
any rights that Borrower may have against any Lender as a result of any default
by such Lender hereunder.
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2.4. Interest.
(a) Generally. Each Loan shall be a Eurodollar Loan or a Base
Rate Loan as selected by Borrower initially at the time a Notice of Borrowing is
given pursuant to Section 2.3(a) or as selected pursuant to Section 2.5 (or, in
the case of any Existing Loans, as in effect on the Effective Date), except for
any portion of a Eurodollar Loan which is converted to an Alternate Rate Loan
pursuant to Section 2.13 or 2.14. Loans shall bear interest on the unpaid
principal amount thereof from the date made (or, in the case of any Existing
Loans, from the Effective Date) to maturity (whether by accelerations or
otherwise), at the interest rates specified as follows:
(i) in the case of a Eurodollar Loan, at an
interest rate per annum for and during each Interest Period
equal to the LIBO Rate for such Interest Period plus the
Applicable Margin in effect from time to time;
(ii) in the case of the Base Rate Loan, at an
interest rate per annum equal to the Base Rate in effect from
time to time plus the Applicable Margin in effect from time to
time; and
(iii) in the case of an Alternate Rate Loan
(including any Alternate GBP Rate Loan), at an interest rate
per annum equal to the Alternate Rate in effect from time to
time plus the Applicable Margin in effect from time to time,
plus, in the case of any Loan denominated in GBP and made by a
Lender subject to such requirements, Mandatory Liquid Asset Costs.
Borrower shall pay interest on the unpaid principal amount of the Loans
outstanding from time to time, in arrears, (i) on each Interest Payment Date,
(ii) on the Termination Date, (iii) in the currency required by Section 2.10(b)
and (iv) in accordance with Section 2.4(b) (where applicable). In addition,
Borrower shall pay accrued interest on the principal amount of any Loans prepaid
in accordance with Section 2.8 on the date of any such prepayment.
(b) Default Interest. If Borrower shall default in the payment
of the principal of or interest on any portion of a Loan or any other amount
becoming due hereunder or under any of the Loan Documents, Borrower shall on
demand from time to time pay interest (to the extent permitted by law in the
case of interest on overdue interest) on such defaulted amount accruing from and
including the date of such default (without reference to any period of grace) up
to and including the date of actual payment (after as well as before judgment)
at a rate per annum which is the sum of (i) two percent (2%) plus (ii) the
greatest of the LIBO Rate, the Alternate Rate or the Base Rate plus (iii) the
Applicable Margin.
Interest under this Section 2.4(b) shall be payable upon demand.
(c) Interest Determination. Upon determining the LIBO Rate for
each Interest Period, the Alternate Rate for any period or the Base Rate in
effect from time to time, Administrative Agent shall promptly notify Borrower
and Lenders thereof by telephone (confirmed promptly in writing) or in writing.
Such determination shall, in the absence of manifest error, be conclusive and
binding upon Borrower and the Lenders.
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2.5. Duration of Interest Period; Notice of
Continuation/Conversion.
(a) Borrower may, pursuant to the applicable Notice of
Borrowing or Notice of Continuation/Conversion, as the case may be, select an
Interest Period to be applicable to each Eurodollar Loan.
(b) Subject to the provisions of Sections 2.13 and 2.14,
Borrower shall have the option (i) to convert at any time all or any part of
outstanding Base Rate Loans to Eurodollar Loans or (ii) upon the expiration of
any Interest Period applicable to Eurodollar Loans, to continue all or any
portion of such Loans as Eurodollar Loans or convert all or any portion of such
Loans to Base Rate Loans, as the case may be, and the succeeding Interest
Period(s) of such continued Loans shall commence on the most recent Interest
Payment Date therefor; provided that Loans may be continued as, or converted
into, Eurodollar Loans with a particular Interest Period only in an aggregate
amount equal to $1,000,000 and integral multiples of $500,000 in excess of that
amount if the Loans are to be denominated in U.S. Dollars or a minimum aggregate
amount of GBP 1,000,000 and integral multiples of GBP 500,000 in excess of that
amount if the Loans are to be denominated in GBP (but subject always to the
determinations described in Section 1.3(b) and the limits in Section 2.1 for
Loans denominated in GBP); provided further that Eurodollar Loans or any portion
thereof may only be converted into Base Rate Loans on the expiration date of the
Interest Period(s) applicable thereto; and provided further that (i) no event
has occurred and is continuing or would result from such Loan
continuation/conversion that would constitute a Default or Event of Default, and
(ii) the representations and warranties contained in Section 3 shall be true,
correct and complete in all material respects on and as of the proposed
continuation/ conversion date to the same extent as though made on and as of
that date unless stated in such section to relate to a specific earlier date, in
which case such representations and warranties shall be true, correct and
complete in all material respects as of such earlier date. All conversions and
continuations of Loans shall be made simultaneously and on a pro rata basis by
the Lenders in accordance with their respective Pro Rata Shares.
Borrower shall deliver a Notice of Continuation/ Conversion to
Administrative Agent (with a copy to Agent to follow) no later than 11:00 A.M.
(New York City time) at least three Business Days in advance of the proposed
continuation/ conversion date (in the case of a conversion to, or a continuation
of, Eurodollar Loans) or at least three Business Days in advance of the proposed
conversion date (in the case of a conversion to Base Rate Loans). A Notice of
Continuation/Conversion shall specify (i) the proposed continuation/conversion
date (which shall be a Business Day), (ii) the amount of the Loans to be
continued/ converted, (iii) the nature of the proposed continuation/ conversion,
(iv) in the case of a continuation of, or conversion to, Eurodollar Loans, the
requested Interest Period, (v) that the representations and warranties contained
in the Loan Documents are true, correct and accurate in all material respects to
the same extent as though made on and as of the date of such Notice of
Continuation/Conversion unless stated in such Loan Documents to relate to a
specific earlier date, in which case such representations and warranties shall
be true, correct and complete in all material respects as of such earlier date,
and (vi) that no event has occurred and is continuing or would result from the
proposed continuation/conversion that would constitute a Default or Event of
Default. In lieu of delivering the above-described Notice of
Continuation/Conversion, Borrower may give Administrative Agent telephonic
notice by the time specified for delivery of a Notice of
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Continuation/Conversion above (which telephonic notice shall be followed
immediately with a notice by facsimile telecopy); provided that in the event of
a discrepancy between a Notice of Continuation/Conversion and such telephonic
notice, such telephonic notice shall govern.
Promptly after receipt by Administrative Agent of a Notice of
Continuation/Conversion pursuant to this Section 2.5 (or telephonic notice
followed immediately with a notice by facsimile telecopy), and in any event not
later than 2:00 p.m. (New York time) at least three Business Days in advance of
the proposed continuation/conversion date, Administrative Agent shall notify
each Lender of the relevant details of the proposed continuation/conversion.
None of Agent, Administrative Agent or any Lender shall incur
any liability to any Person (including Borrower) in acting upon any telephonic
notice referred to above that Administrative Agent or Agent believes in good
faith to have been given by a duly authorized officer or other person authorized
to act on behalf of Borrower or for otherwise acting in good faith under this
Section 2.5, and upon the continuation and/or conversion (as applicable) of any
Loan in accordance with this Agreement pursuant to any such telephonic notice,
Borrower shall have effected a continuation and/or conversion (as applicable)
hereunder of such Loan.
Except as otherwise provided in Sections 2.13 and 2.14, a
Notice of Continuation/Conversion (or telephonic notice in lieu thereof) shall
be irrevocable from and after the giving thereof, and Borrower shall be bound to
effect a continuation and/or conversion (as applicable) in accordance therewith.
2.6. Fees.
(a) Borrower shall pay to Administrative Agent for the account
of each Lender, in accordance with its Pro Rata Share of the Commitments, a
facility fee in an amount equal to the Applicable Facility Fee Percentage of the
average daily balance of such Lender's Commitment in respect of each quarterly
period during the period from the date hereof to but excluding the Final
Borrowing Date. Borrower shall pay to Administrative Agent for the account of
each Lender, in accordance with its Pro Rata Share of the Commitments, a
facility fee in an amount equal to the Applicable Facility Fee Percentage of the
average daily balance of such Lender's Outstandings in respect of each quarterly
period during the period from the Final Borrowing Date to but excluding the
Final Repayment Date. Such fees shall be calculated quarterly and be payable in
arrears on (x) the last Business Day of March, June, September and December of
each year until the Final Repayment Date and (y) the Final Repayment Date, and
accrue from the Effective Date to and excluding the Final Repayment Date and be
payable in U.S. Dollars as required by Section 2.10(b).
(b) Borrower shall on the date this Agreement is delivered by
the parties hereto pay to Administrative Agent for the account of each Lender,
in accordance with its Pro Rata Share of the Commitments, an upfront fee in an
amount equal to 0.150% of the Commitments, all in accordance with the letter
agreement dated February 5, 1996 between Agent and Borrower.
(c) Borrower shall on the date this Agreement is delivered by
the parties
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hereto pay to Administrative Agent for Administrative Agent's own account and
the account of each Lender such fees in such amount as may have been agreed in
writing between Agent and Borrower.
(d) Borrower shall pay to Administrative Agent for its account
an annual administration fee payable in such amounts and according to such terms
as are set forth in a separate letter agreement between Administrative Agent and
Borrower, the first such payment to be due on the date this Agreement is
delivered by the parties hereto.
2.7. Termination or Reduction of Commitment. Borrower shall
have the right, upon not less than five Business Days' notice to Administrative
Agent, to terminate the Commitments or, from time to time, to reduce pro rata
the amount of the Commitments, to the extent, in either case, that the
Commitments are undrawn. Any such reduction shall be in an amount of $1,000,000
or any integral multiple thereof and shall reduce permanently the aggregate
amount of the Commitments then in effect, with a proportionate reduction of the
amount of the Commitments otherwise available for the borrowing of Loans
denominated in GBP.
2.8. Optional Prepayments; Mandatory Prepayments.
(a) Subject to Sections 2.8(f) and 2.15, Borrower may, at its
option, prepay any Loans on any Business Day in whole or in part, without
premium, upon at least three Business Days', in the case of Eurodollar Loans, or
one Business Day's, in the case of Base Rate Loans, prior written notice to
Administrative Agent, specifying the amount of prepayment. Each notice of
prepayment pursuant to this clause (a) shall be irrevocable and the payment
amount specified in such notice shall be due and payable on the date specified
in the currency required by Section 2.10(b), together with accrued interest to
such date on the Loans and all amounts (if any) payable pursuant to Section
2.15. Partial prepayments of the Loans pursuant to this clause (a) shall be in
an aggregate principal amount of $1,000,000 (or GBP 1,000,000) or integral
multiples of $500,000 (or GBP 500,000) in excess of that amount.
(b) In the event of any sale or other disposition of any
interest in any Facility, any Lease termination, or any other event giving rise
to Net Property Proceeds or Net Mortgage Proceeds, on the final Business Day of
the first Interest Period to expire after the closing of such sale or other
disposition or, if such closing occurs at a time when there are no Eurodollar
Loans outstanding, on the final Business Day of the month during which such
closing occurs, Borrower shall apply an amount equal to all of such Net Property
Proceeds and Net Mortgage Proceeds (other than any amount thereof required and
used to satisfy Indebtedness secured by a Lien, not inconsistent with the terms
of this Agreement, on the relevant Properties or Mortgage Interests) to the
prepayment of the Loans; provided that with respect to a particular transaction
or a related series of transactions giving rise to Net Property Proceeds or Net
Mortgage Proceeds, prepayment of the Loans shall be required from such Net
Property Proceeds or Net Mortgage Proceeds only to the extent that the same
exceed $5,000,000; provided further that no prepayment shall be required in
respect of Loans denominated in GBP to the extent the aggregate outstanding
principal amount of such Loans does not exceed the Allowed Value of Eligible
Properties and Eligible Mortgages in respect of Properties located in the United
Kingdom acquired with or funded with GBP.
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(c) In the event of any (i) public or private offering by or
on behalf of Borrower of debt or equity securities issued by Borrower or (ii)
incurrence by Borrower of Indebtedness to one or more financial institutions,
within thirty days after such offering or incurrence, Borrower shall apply all
Net Securities Proceeds arising from such offering or incurrence to the
prepayment of the Loans or, at the option of Borrower, to the prepayment of
other Indebtedness of Borrower outstanding on the Effective Date; provided
further that no prepayment shall be required in respect of Loans denominated in
GBP to the extent the aggregate outstanding principal amount of such Loans does
not exceed the Allowed Value of Eligible Properties and Eligible Mortgages in
respect of Properties located in the United Kingdom acquired with or funded with
GBP.
(d) The Loans shall be subject to certain mandatory
prepayments pursuant to and upon the occurrence of the events described in the
provisions of Sections 2.13 and 2.14.
(e) If at any time the principal balance of the Loans exceeds
the Commitments, Borrower shall promptly (and in any event no later than two
Business Days after becoming aware thereof) repay Loans to the extent necessary
to reduce the aggregate outstanding principal amount thereof to an amount that
is equal to or less than the Commitments. If at any time the principal balance
of the General Corporate Loans then outstanding exceeds 25% of the Commitments,
Borrower shall promptly (and in any event no later than two Business Days after
becoming aware thereof) repay General Corporate Loans to the extent necessary to
reduce the aggregate outstanding principal amount thereof to an amount that is
equal to or less than 25% of the Commitments. If at any time the principal
balance of the Loans denominated in GBP exceeds the Equivalent Amount of
$100,000,000 (as determined in accordance with Section 1.3(b)), Borrower shall
promptly (and in any event no later than two Business Days after becoming aware
thereof) repay Loans denominated in GBP to the extent necessary to reduce the
aggregate outstanding principal amount thereof to an amount that is equal to or
less than the Equivalent Amount in GBP of $100,000,000; provided that, so long
as no Default or Event of Default has occurred and is continuing, any such
repayment of the Loans denominated in GBP may be made at the end of the
applicable Interest Periods on condition that Borrower deposits with
Administrative Agent cash in an amount equal to the amount of the required
prepayment at the time otherwise required for prepayment (such amounts to be
held as cash collateral by Administrative Agent pending such repayment on terms
satisfactory to Agent, Administrative Agent and Borrower).
(f) Subject to the application of the payment provisions of
Section 2.10(a), any prepayments of the Loans pursuant to this Section, Sections
2.13 or 2.14, or any other provision of any Loan Document shall be applied first
to any amounts payable with respect thereto pursuant to Section 2.15, second to
the payment of accrued and unpaid interest on the principal amount of
outstanding General Corporate Loans up to and including the date of prepayment,
third, to the payment of accrued and unpaid interest on the principal amount of
all other outstanding Loans up to and including the date of prepayment, fourth
to the principal amount of such General Corporate Loans, and fifth to the
principal amount of all other outstanding Loans. Subject to the requirements of
the preceding sentence, Borrower may designate the application of any
prepayments, to be applied to principal on the Loans, to the Eurodollar Loans,
Base Rate Loans and/or Alternate Rate Loans, as it may select, provided that if
Borrower does not designate such application, such prepayments shall be applied
(x) first to outstanding Base Rate Loans, (y) second to outstanding Alternate
Rate
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Loans and (z) third to outstanding Eurodollar Loans.
2.9. Computation of Interest and Fees. Fees and other amounts
other than interest calculated on the basis of a rate per annum shall be
computed on the basis of a 360-day year for the actual days elapsed. Interest on
the Base Rate Loans and on the Alternate Rate Loans, in each case, calculated by
reference to the prime rate and interest on the Eurodollar Loans denominated in
GBP shall be computed on the basis of a 365-day year for the actual days
elapsed, while interest on the Eurodollar Loans denominated in U.S. Dollars and
interest on the Alternate Rate Loans and the Base Rate Loans, in each case,
where interest is not calculated by reference to the prime rate, shall be
computed on the basis of a 360-day year for the actual days elapsed.
2.10. Payments and Currency. (a) Except as contemplated by
this Agreement, the borrowing by Borrower from the Lenders, each payment
(including each prepayment) by Borrower on account of principal, interest and
fees required under Sections 2.6(a) and (b), and any reduction of the amount of
the Commitments of the Lenders hereunder, shall be made for the account of each
Lender according to its Pro Rata Share; provided that payments to the Lenders of
interest based upon the Alternate Rate shall be allocated appropriately to give
effect to differences among the Lenders' respective costs of funds. All payments
(including prepayments) by Borrower on account of principal, interest, fees,
costs, indemnities or other amounts payable hereunder or under any of the Loan
Documents shall be made to Administrative Agent for the account of the
applicable Lenders (except for fees required under Section 2.6(c) which shall be
only for the account of Administrative Agent and Agent, respectively) at the
account of Administrative Agent specified in Section 10.3(b) and in immediately
available funds in the currency required by Section 2.10(b). Each payment or
prepayment hereunder and under the Notes and the other Loan Documents shall be
made without set-off or counterclaim and free and clear of, and without
deduction for, any present or future withholding or other taxes, duties or
charges of any nature imposed on or attributable to such payments or prepayments
by or on behalf of any Governmental Authority, except for any Excluded Taxes. If
any such taxes (other than any Excluded Taxes), duties or charges (including,
without limitation, any tax, duty or charge imposed by Sections 1, 2 and/or 39
of the Massachusetts General Laws, Chapter 63, as currently in effect or as
amended hereafter or any analogous provisions (or provisions having an analogous
effect) of the laws, rules or regulations (or interpretations thereof) of
Massachusetts or any other Governmental Authority) are so levied or imposed on
or are attributable to any such payment or prepayment, Borrower will make
additional payments in such amounts as may be necessary so that the net amount
received by a Lender, after withholding or deduction for or on account of all
such taxes, duties or charges, will be equal to the amount provided for herein
or in such Lender's Note or in any of the other Loan Documents. Whenever any
taxes, duties or charges are payable by Borrower with respect to or attributable
to any payments or prepayments hereunder or under any of the Notes or any other
Loan Document, Borrower agrees to furnish promptly to Administrative Agent for
the account of the applicable Lender official receipts or copies thereof, if
reasonably available, evidencing payment of any such taxes, duties or charges so
withheld or deducted. If Borrower fails to pay any such taxes, duties or charges
when due to the appropriate taxing authority after receipt of notice that any
such taxes, duties or charges are due, or fails to remit to Administrative Agent
for the account of the applicable Lender the customary evidence of payment of
any such taxes, duties or charges so withheld or deducted, Borrower shall
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indemnify the affected Lender for any incremental taxes, duties, charges,
interest or penalties that may become payable by such Lender as a result of any
such failure. During the continuance of any Default, Administrative Agent may,
but shall be under no obligation to, apply all payments received by
Administrative Agent from Borrower pursuant to any of the Loan Documents in the
following order of payment regardless of the application designated by Borrower:
first to any interest owing under Section 2.4(b) or under any of the Loan
Documents other than interest owing on the Loans and the Notes referred to
below, second to any fees then payable to Agent, Administrative Agent or the
Lenders, third to any amounts owing pursuant to Section 10.7, fourth to any
amounts owing pursuant to Sections 2.13, 2.14 or 2.15, fifth to any other sums
(other than principal on the Loans and the Notes and interest thereon referred
to below) owing under any of the Loan Documents, sixth to any interest owing on
the Loans and Notes and seventh to the repayment of the principal of the Loans
and the Notes as designated by Administrative Agent; provided that if such
application is other than in accordance with any express designation by
Borrower, Administrative Agent shall promptly notify Borrower of such
application. Administrative Agent will distribute each payment to the applicable
Lenders promptly upon receipt thereof (and in any event on the same Business Day
as the date when received, if such payment is received at or prior to 12:00 noon
(New York time)). Each payment by Administrative Agent to a Lender shall be made
for the account of such Lender's Lending Office as designated by such Lender to
Administrative Agent in writing from time to time. Whenever any payment to be
made hereunder or under any Loan Document, including, without limitation, any
principal of or interest on any Loan, shall become due and payable, or whenever
the last day of any Interest Period would otherwise occur, on a day which is not
a Business Day, such payment shall be made and the last day of such Interest
Period shall occur on the next succeeding Business Day and such extension of
time shall in such case be included in computing interest on such payment;
provided that if such extension would cause any such payment to be made in the
next succeeding calendar month, or the last day of such Interest Period to occur
in the next succeeding calendar month, such payment shall be made, and the last
day of such Interest Period shall occur, on the next preceding Business Day.
(b) A repayment or prepayment of a Loan or any part of a Loan
is payable in the currency in which the Loan was denominated at the time at
which such Loan was made to Borrower by Lenders. Interest in respect of a Loan
is payable in the currency in which the principal portion of the respective Loan
in respect of which it is payable is denominated. Fees in respect of Commitments
or otherwise hereunder shall be payable in U.S. Dollars. Amounts payable in
respect of costs, expenses and taxes and the like are payable in the currency in
which they are incurred. Any other amount payable under this Agreement is,
except as otherwise provided in this Agreement, payable in U.S. Dollars.
2.11. Use of Proceeds. The proceeds of the Loans hereunder
shall be used by Borrower (either directly or indirectly through intercompany
advances of such proceeds as permitted under Section 6.8(d) to its Subsidiaries;
provided that, Church Creek Corporation may not receive any such proceeds) for
(a) the acquisition of Properties; (b) the acquisition or funding of Mortgage
Interests; and (c) the direct or indirect reimbursement of the issuing bank of
the letter of credit supporting the obligations of Church Creek Corporation in
respect of the IDFA Indebtedness; provided that the General Corporate Loans may
be used by Borrower and its Subsidiaries for their respective general corporate
purposes; provided further that the Existing Loans may be continued for the same
purposes as they were made
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under the Existing Loan Agreement, and shall not be treated as General Corporate
Loans.
2.12. Increased Costs.
(a) If any Requirement of Law or other event or condition, or
any amendment, modification or interpretation thereof (including, without
limitation, any request, recommendation, guideline or policy, whether or not
having the force of law, of or from any central bank or other Governmental
Authority), in any such case, adopted, effective, made or issued after the date
hereof (but in any event including, without limitation, Regulation D and Section
1, 2 and/or 39 of the Massachusetts General Laws, Chapter 63 as currently in
effect or as amended hereafter or any analogous provisions (or provisions having
an analogous effect) of the laws, rules or regulations (or interpretations
thereof) of Massachusetts or any other Governmental Authority) by any authority
charged with the administration or interpretation thereof:
(i) subjects Agent, Administrative Agent or any
Lender or any branch or Affiliate of Agent, Administrative Agent or
such Lender to any tax (except Excluded Taxes), fee, deduction, duty,
withholding, levy, impost or other charge or reduction of any nature,
on or with respect to, or which Agent, Administrative Agent or such
Lender in its sole discretion deems applicable or attributable to this
Agreement, any Note, any of the other Loan Documents, its Commitment or
its pro rata share of the Loans, or interest, fees or other amounts
attributable thereto or to any of the foregoing; or
(ii) changes the basis of taxation of payments to
any Lender or any branch or Affiliate of such Lender of principal of
and/or interest on such share of the Loans and/or other fees and
amounts payable hereunder or under any of the Loan Documents or with
respect hereto or thereto (including in any event imposition of or
change in any withholding taxes, but excluding any Excluded Taxes); or
(iii) imposes upon, modifies, requires, makes or
deems applicable to any Lender, or any of its branches or Affiliates,
any regular, special, supplementary or other reserve or deposit
requirement, insurance assessment or similar requirement against or
affecting any assets held by, or liabilities of, or deposits with or
for the account of, such Lender or such branch or Affiliate, with
respect to or which Agent or such Lender in its sole discretion deems
applicable or attributable to this Agreement, any Note, any of the
other Loan Documents, its Commitment or its pro rata share of the
Loans, or interest, fees or other amounts attributable thereto or to
any of the foregoing; or
(iv) imposes, modifies or deems applicable any
condition or requirement upon or causes in any manner the addition of
any supplement to, or increase of any kind to, the capital or cost base
of Agent, Administrative Agent or any Lender or such branch or
Affiliate, for extending or maintaining its Commitment or its pro rata
share of the Loans which results in an increase in the capital
requirement supporting such Commitment or its pro rata share of the
Loans, or imposes upon, modifies, requires, makes or deems applicable
to Agent, Administrative Agent or such Lender or any such branch or
Affiliate any capital requirement, increased capital
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requirement or similar requirement, with respect to or which Agent,
Administrative Agent or such Lender in its sole discretion deems
applicable or attributable to this Agreement, any Note, any of the
other Loan Documents, its Commitment or its pro rata share of the
Loans, or interest, fees or other amounts attributable thereto or to
any of the foregoing; or
(v) imposes upon Agent, Administrative Agent or any
Lender or any branch or Affiliate of Agent, Administrative Agent or
such Lender any other conditions with respect to, or allocable or
attributable in good faith by Agent, Administrative Agent or the Lender
to, this Agreement, any Note, any of the other Loan Documents or such
share of the Loans or its Commitment hereunder or such interest, fees
or other amounts;
and the result of any of the foregoing, based solely upon the good faith
determination and allocation by Agent, Administrative Agent or any Lender, as
the case may be, of costs, decreased benefits and/or reduced amount of payments,
is to increase the cost or decrease the benefit, in any way, to Agent,
Administrative Agent or such Lender, as the case may be, or any branch or
Affiliate of Agent, Administrative Agent or such Lender, as the case may be, of
funding or maintaining its Commitment or its share of the Loans hereunder, or to
reduce the amount of any payment (whether of principal, interest, or otherwise)
received or receivable by Agent, Administrative Agent or such Lender, as the
case may be, or any branch or Affiliate of Agent, Administrative Agent or such
Lender, as the case may be, or to require Agent, Administrative Agent or such
Lender, as the case may be, or any branch or Affiliate of Agent, Administrative
Agent or such Lender, as the case may be, to make any payment, then and in any
such case:
(1) Agent, Administrative Agent or such Lender, as the case
may be, shall promptly notify Borrower and the other Lenders in writing
of the happening of such event;
(2) Agent, Administrative Agent or such Lender, as the case
may be, shall promptly deliver to Borrower and the other Lenders a
certificate stating the change or event which has occurred or the
reserve or capital requirements or other conditions which have been
imposed on Agent, Administrative Agent or such Lender, as the case may
be, or branch or Affiliate of Agent, Administrative Agent or such
Lender, as the case may be, or the request, recommendation, guideline
or policy with which it has complied, together with the date thereof,
the amount of such increased cost, decreased benefit or reduction
payment; and
(3) Borrower shall pay Agent, Administrative Agent or such
Lender, as the case may be, promptly on demand such an amount or
amounts as:
(A) in the case of events referred to in clauses (i),
(ii), (iii) and (v) and, if applicable, clause (iv) above,
shall be sufficient to compensate it or such branch or
Affiliate for all such increased costs and/or payments and/or
decreased benefits, and/or reduced amount of payment; and/or
(B) in the case of events referred to in clause (iv)
above, shall be an
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amount equal to the reduction, as reasonably determined by
Agent, Administrative Agent or such Lender, as the case may
be, in the after-tax rate of return on Agent's, Administrative
Agent's or such Lender's capital resulting from any such
capital or increased capital or similar requirement, all as
certified by Agent, Administrative Agent or such Lender or
Lenders, as the case may be, in said written notice to
Borrower. Such certification shall be conclusive and binding
on Borrower absent manifest error.
The certificate of Agent, Administrative Agent or such Lender
as to the additional amounts payable pursuant to this Section 2.12 delivered to
Borrower shall constitute prima facie evidence of the amount thereof. Agent,
Administrative Agent and each Lender agree to use reasonable efforts, as
determined by Agent, Administrative Agent or such Lender, as the case may be, to
avoid or minimize the payment by Borrower of any additional amounts under this
Section 2.12. The protection provided by this Section 2.12 shall be available to
Agent, Administrative Agent and each Lender regardless of any possible
contention of invalidity or inapplicability of the Requirement of Law,
interpretation, recommendation, guideline, policy or event or condition which
has been imposed or has occurred. In the event that after Borrower shall have
paid any additional amount under this Section 2.12 with respect to the Loans
Agent, Administrative Agent or such Lender shall have successfully contested
such Requirement of Law, interpretation, recommendation, guideline, policy or
event or condition then, to the extent that Agent, Administrative Agent or such
Lender will be placed in the same position it was in prior to the incurrence of
the increased cost or reduction in amount received or receivable (on an
after-tax basis), but without giving effect to interest which may have been
earned on the additional amount paid by Borrower (but with interest to the
extent actually earned by Agent, Administrative Agent or such Lender, as the
case may be, on such amount as determined by Agent, Administrative Agent or such
Lender, as the case may be), Agent, Administrative Agent or such Lender, as the
case may be, shall refund to Borrower such additional amount (with such
interest, if any).
2.13. Change in Law Rendering Eurodollar Loans or Alternate
Rate Loans Unlawful; Failure to Give Notice of Continuation.
(a) Notwithstanding anything to the contrary herein contained,
in the event that any Requirement of Law or any change in any existing
Requirement of Law or in the interpretation thereof by any Governmental
Authority charged with the administration thereof, in any case adopted, issued
or effective after the date hereof, (i) shall make it unlawful for any Lender to
fund any portion of the Eurodollar Loans or to give effect to its obligations as
contemplated hereby with respect to its making or maintaining its pro rata share
of the Eurodollar Loans, or (ii) shall make it unlawful for any Lender to fund
any portion of the Alternate Rate Loans or to give effect to its obligations as
contemplated hereby with respect to its Commitment or making or maintaining its
pro rata share of the Alternate Rate Loans, such Lender shall, upon the
happening of such event, notify Agent, Administrative Agent, the other Lenders
and Borrower thereof in writing stating the reason therefor and the effective
date of such event, and (x) upon the effectiveness of any such event referred to
in clause (i) above, the obligation of such Lender to make or maintain its pro
rata share of the Eurodollar Loans to Borrower shall forthwith be suspended for
the duration of such illegality and during such illegality such Lender shall,
upon payment of any amounts owing under Section 2.15 with respect to such
conversion, convert its share of the Eurodollar
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Loans to Alternate Rate Loans or (upon effectiveness of any such event referred
to in clause (ii) and during the continuance of such event) Base Rate Loans in
the case of Loans denominated in U.S. Dollars or Alternate GBP Rate Loans in the
case of Loans denominated in GBP, and (y) upon the effectiveness of any such
event referred to in clause (ii), the obligation of such Lender to make or
maintain its pro rata share of the Alternate Rate Loans to Borrower shall
forthwith be suspended for the duration of such illegality and during such
illegality such Lender shall, upon payment of any amounts owing under Section
2.15 with respect to such conversion, convert its share of the Alternate Rate
Loans to Base Rate Loans in the case of Loans denominated in U.S. Dollars or
Alternate GBP Rate Loans in the case of Loans denominated in GBP. If and when
such illegality with respect thereto ceases to exist, such suspension shall
cease and such affected Lender shall similarly notify Agent, Administrative
Agent, the other Lenders and Borrower and the Alternate Rate Loan or Base Rate
Loan or Alternate GBP Rate Loan into which such share of the Eurodollar Loans or
Alternate Rate Loans (as applicable) was converted pursuant to this Section 2.13
shall be reconverted to a Eurodollar Loan or Alternate Rate Loan, respectively,
on the first day of the next succeeding Interest Period.
(b) If Borrower fails to give a valid Notice of
Continuation/Conversion in respect of any portion of a Eurodollar Loan which is
not repaid in accordance with the terms hereof at the end of the relevant
Interest Period in respect thereto, such portion shall be converted
automatically into Base Rate Loans in the case of Loans denominated in U.S.
Dollars or Alternate GBP Rate Loans in the case of Loans denominated in GBP;
provided that if Borrower subsequently gives a valid Notice of
Continuation/Conversion in respect of such Base Rate Loans or Alternate GBP Rate
Loans, such Loans shall be converted into Eurodollar Loans in accordance with
the requirements for a continuation/conversion under Section 2.5.
(c) If any Loan is converted to an Alternate Rate Loan
pursuant to this Section 2.13, Borrower and Lenders, acting through
Administrative Agent, shall enter into negotiations in good faith with a view to
agreeing upon a substitute basis for determining the rate or rates of interest
from time to time applicable to such Loan, which shall be acceptable to each
Lender, and the rate or rates so determined shall constitute the Alternate Rate
for that Loan from the date of such conversion. If, however, Borrower and
Majority Lenders fail to agree to such substitute basis within thirty (30) days
after such conversion, such Loan shall be deemed to have been converted to (i)
in the case of Loans denominated in U.S. Dollars, a Base Rate Loan, and (ii) in
the case of Loans denominated in GBP, an Alternate GBP Rate Loan effective (in
the case of clauses (i) and (ii)) from the date of such conversion.
2.14. Eurodollar Availability. (a) In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for any Eurodollar Loans, Administrative Agent shall have
determined (which determination shall, in the absence of manifest error, be
conclusive and binding upon Borrower) that U.S. Dollar or GBP (as the case may
be) deposits in the amount of the principal amount of the Eurodollar Loans which
is to have such Interest Period are not generally available in the London
interbank market, or that the rate at which such U.S. Dollar or GBP (as the case
may be) deposits are being offered will not accurately reflect the cost to any
of the Lenders of making or funding such principal amount of such Eurodollar
Loans during such Interest Period, or that reasonable means do not exist for
ascertaining the LIBO Rate, Administrative Agent
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shall, as soon as practicable thereafter, give written or telephonic notice
(which telephonic notice shall be followed immediately with a notice by
facsimile telecopy) of such determination to Agent, the Lenders and Borrower and
(i) such principal amount of such Eurodollar Loans shall automatically be
converted, as of the last day of the Interest Period during which such
determination is made, to Alternate Rate Loans subject to the last sentence of
this paragraph and (ii) any request by Borrower for such Eurodollar Loans
pursuant to Section 2.3 hereof shall thereupon, and until the circumstances
giving rise to such notice no longer exist (as notified by Administrative Agent
to Borrower and the Lenders), be deemed a request for the making of Alternate
Rate Loans. If at any time Administrative Agent shall have determined (which
determination shall, in the absence of manifest error, be conclusive and binding
upon Borrower) that any contingency has occurred which adversely affects the
London interbank market or that any Requirement of Law or any change in any
existing Requirement of Law or in the interpretation thereof or other
circumstance affecting the Lenders or the London interbank market makes the
funding of the Eurodollar Loans impracticable, Administrative Agent shall, as
soon as practicable thereafter, give written or telephonic notice (which
telephonic notice shall be followed immediately with a notice by facsimile
telecopy) of such determination to Agent, the Lenders and Borrower and (i) the
Eurodollar Loans shall automatically be converted, as of the last day of each
Interest Period during which such determination is made and in each case in
respect of the principal amount of the Eurodollar Loans having an Interest
Period ending on such date, to Alternate Rate Loans, subject to the last
sentence of this paragraph, and (ii) any request by Borrower for the Eurodollar
Loans pursuant to Section 2.3 hereof shall thereupon, and until the
circumstances giving rise to such notice no longer exist (as notified by
Administrative Agent to Borrower, Agent and the Lenders), be deemed a request
for the making of Alternate Rate Loans. If, in the circumstances specified in
this paragraph or in Section 2.13, Administrative Agent determines that no
reasonable alternate source of funding for the Eurodollar Loans, or no
reasonable basis for determining the Alternate Rate, is available or
practicable, Administrative Agent shall promptly so notify the other Lenders,
Agent and Borrower thereof and any notice of borrowing under Section 2.3 shall
be deemed rescinded and each principal amount of the Eurodollar Loans, if
outstanding, having an Interest Period then current, together with all interest
thereon, shall be due and payable by Borrower on the last day of the Interest
Period then applicable to it.
(c) If any Loan is converted to an Alternate Rate Loan
pursuant to this Section 2.14, Borrower and Lenders, acting through
Administrative Agent, shall enter into negotiations in good faith with a view to
agreeing upon a substitute basis for determining the rate or rates of interest
from time to time applicable to such Loan, which shall be acceptable to each
Lender, and the rate or rates so determined shall constitute the Alternate Rate
for that Loan from the date of such conversion. If, however, Borrower and
Majority Lenders fail to agree to such substitute basis within thirty (30) days
after such conversion, such Loan shall be deemed to have been converted to (i)
in the case of Loans denominated in U.S. Dollars, a Base Rate Loan, and (ii) in
the case of Loans denominated in GBP, an Alternate GBP Rate Loan, effective (in
the case of clauses (i) and (ii)) from the date of such conversion.
2.15. Indemnities. Borrower shall indemnify each Lender on
demand for, from and against any actual loss (including, without limitation, any
loss of anticipated profits) or expense (including but not limited to any loss
or expense sustained or incurred in liquidating or employing or redeploying
deposits from third parties acquired to effect or
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maintain any Loan or any portion thereof) which such Lender or its branch or
Affiliate may sustain or incur as a consequence of (i) any default in payment or
prepayment of the principal amount of any Loan or any portion thereof or
interest accrued thereon, as and when due and payable (at the due date thereof,
by irrevocable notice of payment or prepayment, or otherwise), (ii) the effect
of the occurrence of any Event of Default upon any Loan, (iii) the payment or
prepayment of any principal amount of any Loan or the conversion of any portion
of any Eurodollar Loan to Alternate Rate Loans or Base Rate Loans on any day
other than the last day of an Interest Period or the payment of any interest on
such Loan, or portion thereof, on a day other than an Interest Payment Date for
the Loan or (iv) any failure of Borrower to accept or make a borrowing of the
Loans or continue or convert a Loan after delivery of a notice requesting a Loan
under Section 2.3 or, as the case may be, a notice requesting a continuation or
conversion under Section 2.5 or any failure by Borrower to satisfy any of the
conditions precedent to the making of Loans hereunder after it has requested the
borrowing thereof (other than any such conditions that are waived in accordance
with the provisions hereof). The determination of each Lender of any amount
payable under this Section 2.15 shall, in the absence of manifest error, be
conclusive and binding upon Borrower.
2.16 Eligible Mortgages and Eligible Properties No Mortgage
Interest shall be an Eligible Mortgage and no Property shall be an Eligible
Property unless, on any relevant date, there has been no MAC in respect of such
(i) Property (or any Operator or Credit Support Obligor for the Lease thereof),
or (ii) Mortgaged Property (or any Mortgagor or Credit Support Obligor for the
Mortgage Interest Agreements in respect thereof), in each case since December
31, 1995 or, if later, the date on which Borrower or any of its Subsidiaries
acquired an interest in such Property or Mortgaged Property other than, in each
case, a MAC which has ceased to be in effect; provided that for the purposes of
this Section 2.16, failure to comply with clause (ii) of Section 5.5(a) in
connection with an Eligible Property or an Eligible Mortgage shall be deemed to
constitute a MAC in respect of such Eligible Property or Eligible Mortgage.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement
and to make the Loans herein provided for, Borrower hereby covenants, represents
and warrants to Agent, Administrative Agent and each Lender that:
3.1. Financial Condition. The balance sheet of Borrower and
its Subsidiaries (if any) as at December 31, 1991, December 31, 1992, December
31, 1993, December 31, 1994 and December 31, 1995 and the related consolidated
statements of income, stockholders' equity and cash flows for the fiscal years
ended on such dates, certified by Ernst & Young, copies of which have heretofore
been furnished to Agent, are complete and correct and present fairly the
financial condition of Borrower and its Subsidiaries (if any) on a consolidated
basis as at such dates, and stockholders' equity and cash flows for the fiscal
years then ended. All such financial statements, including the related schedules
and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed
therein). Borrower and its Subsidiaries have no material Contingent
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Obligation, contingent liabilities or liability for taxes, long-term lease or
unusual forward or long-term commitment, which is not reflected in the foregoing
statements or in the notes thereto.
3.2. No Material Adverse Effect. Since December 31, 1995 (a)
there has been no Material Adverse Effect, and no event has occurred and no
condition exists which could reasonably be expected to have a Material Adverse
Effect and (b) no dividends or other distributions have been declared the
payment of which could result in a Default or Event of Default nor have any
Common Shares, Preferred Shares or other equity securities of Borrower been
redeemed, retired, purchased or otherwise acquired for value by Borrower or any
of its Subsidiaries.
3.3. Existence; Compliance with Law. Borrower and each of its
Subsidiaries (a) is, in the case of Borrower, a real estate investment trust
duly organized, validly existing and in good standing under the laws of the
State of Maryland and, in the case of each such Subsidiary, a corporation duly
organized, validly and existing and in good standing under the laws of its
respective jurisdiction of incorporation, (b) has full power and authority and
the legal right to own its property, to lease (as lessee) the property that it
leases as lessee, to lease (as lessor) or sublease the property it owns and/or
leases (as lessee) and to conduct the business in which it is currently engaged,
(c) is duly qualified or licensed and is in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business require such qualification, and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith is
not reasonably likely to have, in the aggregate, a Material Adverse Effect.
3.4. Operator, Advisor, Credit Support Obligors; Compliance
with Law.
(a) To the best knowledge of Borrower, each Operator and
Mortgagor (i) has full power and authority and the legal right to own, lease (or
sublease) and operate (as applicable) the properties it operates and to conduct
the business in which it is currently engaged with respect to any Facility, (ii)
is duly qualified or licensed and is in good standing under the laws of each
jurisdiction where its ownership, lease (or sublease) or operation of any
Facility requires such qualification, and (iii) is in compliance with all
Requirements of Law applicable to the Facilities operated by it, or applicable
to the operation thereof except to the extent that the failure to comply
therewith is not reasonably likely to have, in the aggregate, a Material Adverse
Effect.
(b) To the best knowledge of Borrower, the Advisor (i) has
full power and authority and legal right to conduct the business in which it is
presently engaged and to perform its obligations under the Advisory Agreement,
(ii) is duly qualified or licensed and is in good standing under the laws of
each jurisdiction where the conduct of its business requires such qualification,
and (iii) is in compliance with all Requirements of Law except to the extent
that the failure to comply therewith is not reasonably likely to have, in the
aggregate, a Material Adverse Effect.
(c) To the best knowledge of Borrower, the Credit Support
Obligors (i) have full power and authority and legal right to conduct the
business in which they are presently engaged and to perform their obligations
under the Credit Support Agreements to which they
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are parties, and (ii) are in compliance with all Requirements of Law, except, in
the case of clauses (i) and (ii), to the extent that the failure to comply
therewith is not reasonably likely to have, in the aggregate, a Material Adverse
Effect.
3.5. Power; Authorization; Enforceable Obligations. Borrower
and each of its Subsidiaries has the power and authority and the legal right to
make, deliver and perform each of the Loan Documents to which it is a party and,
in the case of Borrower, to borrow hereunder; and Borrower has taken all
necessary action to authorize the borrowings hereunder, on the terms and
conditions of the Loan Documents, and Borrower and each of its Subsidiaries has
taken all necessary action to authorize the execution, delivery and performance
of each of the Loan Documents to which it is a party. No consent or
authorization of, filing with, or other act by or in respect of any Governmental
Authority is required in connection with the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of the Loan
Documents. This Agreement has been, and each other Loan Document will be, duly
executed and delivered on behalf of Borrower and each of its Subsidiaries which
is a party thereto and this Agreement constitutes, and each other Loan Document
when executed and delivered will constitute, a legal, valid and binding
obligation of Borrower and each of its Subsidiaries which is a party thereto
enforceable against Borrower and each of its Subsidiaries which is a party
thereto in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally.
3.6. No Legal Bar. The execution, delivery and performance of
this Agreement and the other Loan Documents, the borrowings hereunder and the
use of the proceeds thereof, will not violate any Requirement of Law or any
Contractual Obligation of Borrower or any of its Subsidiaries, and will not
result in, or require, the creation or imposition of any Lien on any of their
respective properties or revenues pursuant to any Requirement of Law or
Contractual Obligation.
3.7. No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the best knowledge and belief of Borrower, threatened by or against Borrower
or any of its Subsidiaries or against any of their respective properties or
revenues or, to the best knowledge and belief of Borrower, by or against any of
the Operators and Mortgagors or against any of their respective properties (a)
with respect to this Agreement or the other Loan Documents, the Leases, the
Mortgage Interest Agreements, or any of the transactions contemplated hereby or
thereby, or (b) relating to the Properties, the Mortgaged Properties or the
ownership or the operation thereof or the conduct of business thereon as
presently conducted, which, in the case of (a) or (b), is reasonably likely to
have, in the aggregate, a Material Adverse Effect.
3.8. No Default. Neither Borrower nor any of its Subsidiaries
is in default under or with respect to any Contractual Obligation in any respect
which could have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
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3.9. Ownership of Mortgage Interests and Property; Liens.
(a) In the case of a Mortgage Interest, Borrower or one of its
Subsidiaries has good record, marketable and indefeasible title to such Mortgage
Interest. In the case of a Property which is a Fee Interest, Borrower or one of
its Subsidiaries has good record, marketable and indefeasible fee simple
absolute title to such Fee Interest. In the case of a Property which is a
Leasehold Interest, Borrower or one of its Subsidiaries has good record and
marketable title to such Leasehold Interest. In the case of a Mortgage Interest
in respect of which all or any part of the Mortgaged Property is a fee interest
in land and/or buildings, structures, improvements and fixtures, the Mortgagor
with respect to such Mortgaged Property has good record, marketable and
indefeasible fee simple absolute title to such Mortgaged Property. In the case
of a Mortgage Interest in respect of which all or any part of the Mortgaged
Property is a leasehold estate, the Mortgagor with respect to such Mortgaged
Property has good record and marketable title to such leasehold estate. In each
of the cases described in this Section 3.9, such title shall be free and clear
of all Liens and other matters affecting title except for such other matters not
reasonably likely to have, in the aggregate, a Material Adverse Effect.
(b) The buildings, structures, and other improvements located
on each Facility are in good operating condition and repair (ordinary wear and
tear which are not such as to materially and adversely affect the operations of
the business conducted thereon, excepted), free of any material structural or
engineering defects known to Borrower or any of its Subsidiaries on the date
hereof and are suitable for their present uses, subject to such exceptions which
are not reasonably likely to have, in the aggregate, a Material Adverse Effect.
(c) All water, sewer, gas, electricity, telephone and other
utilities serving each Facility are supplied directly to such Facility by public
utilities and enter such Facility through adjoining public streets or, if they
pass through adjoining private land, do so in accordance with valid public
easements which inure to the benefit of Borrower or one of its Subsidiaries (in
the case of a Facility in which Borrower or such Subsidiary has a Fee Interest)
or a mortgagor's or beneficiary's benefit (in the case of a Facility in which
Borrower or such Subsidiary is a mortgagor or beneficiary, as applicable, of a
loan secured in whole or in part by a Lien on a Facility), subject to such
exceptions which are not reasonably likely to have, in the aggregate, a Material
Adverse Effect. All of such utilities are presently installed and operating and
are in good and safe condition, subject to such exceptions which are not
reasonably likely to have, in the aggregate, a Material Adverse Effect. All
material assessments for public improvements that have been made against the
Facilities have been paid or provided for, except that in the case of any
assessments that are payable in installments, all installments due as of the
date hereof have been paid or provided for, subject to such exceptions which are
not reasonably likely to have, in the aggregate, a Material Adverse Effect.
(d) None of Borrower or any of its Subsidiaries or to the best
knowledge and belief of Borrower, the Operators and Mortgagors, has received
notice of any pending, threatened or contemplated condemnation proceeding or
similar taking affecting the Facilities, or any portion thereof, or any sale or
other disposition of the Facilities or any portion thereof in lieu of
condemnation or similar taking, in each case, subject to such
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exceptions which are not reasonably likely to have, in the aggregate, a Material
Adverse Effect.
(e) All Real Property Permits from all Governmental
Authorities having jurisdiction over the Facilities or any portion thereof, the
absence of which could materially impair the use of any Facility for the
purposes for which it is currently used, and from all insurance companies and
fire rating and similar boards and organizations required to have been issued to
Borrower or any of its Subsidiaries or any Operators and Mortgagors of such
Facility, as the case may be, to enable such Facility or any portion thereof to
be lawfully occupied and used as currently so occupied or used have been issued
and are in full force and effect, subject to such exceptions which are not
reasonably likely to have, in the aggregate, a Material Adverse Effect. Neither
Borrower nor any of its Subsidiaries has received or been informed by a third
party, including the Operators and Mortgagors of the Facilities, of the receipt
by it of any notice from any Governmental Authority having jurisdiction over the
Facilities or any portion thereof or from any insurance company or fire rating
or similar board or organization threatening a suspension, revocation,
modification or cancellation of any Real Property Permit, subject to such
exceptions which are not reasonably likely to have, in the aggregate, a Material
Adverse Effect.
(f) Each of the Leases, Mortgage Interest Agreements and
Credit Support Agreements relating to Properties and Mortgage Interests
(including Properties which are not Eligible Properties and Mortgage Interests
which are not Eligible Mortgages) is in full force and effect and is a legally
valid and binding obligation of Borrower or its Subsidiaries and the other
parties thereto, subject to such exceptions which are not reasonably likely to
have, in the aggregate, a Material Adverse Effect. Neither Borrower nor any of
its Subsidiaries has mortgaged, pledged or otherwise encumbered any of the
Leases or Mortgage Interest Agreements or its right to obtain rental, interest
or other payments thereunder except for the Liens permitted by Section 6.9.
Neither Borrower nor any of its Subsidiaries has collected any rents becoming
due under any Lease more than 30 days in advance (except (i) an amount equal to
one month's instalment of rent under a Lease or (ii) in the case of a lease
acquired from Host Marriott Corporation and its Affiliates pursuant to the
transaction (or one on substantially similar terms) described in the Form S-3
Registration Statement of Borrower filed with the Commission on March 29, 1994,
an amount equal to no more than three months' instalment of rent under such
lease). All rent and other sums and charges payable by any Operator under each
Lease to which it is a party are current, no notice of default or termination
under any such Lease is outstanding, no termination event or condition or
uncured default on the part of an Operator exists under any Lease, and no event
of default has occurred which, with the giving of notice or the lapse of time or
both, would constitute such a default or termination event or condition or
uncured default on the part of Borrower or its Subsidiaries or the Operators (as
the case may be), subject to such exceptions which are not reasonably likely to
have, in the aggregate, a Material Adverse Effect. Except as set forth on
Schedule 6, all payments required from any Mortgagor under any Mortgage Interest
Agreement to which it is a party are current, no notice of default or
acceleration under any such Mortgage Interest Agreement is outstanding, no
default or condition or uncured default on the part of the Mortgagor exists
under any Mortgage Interest Agreement, and no event of default has occurred
which, with the giving of notice or the lapse of time or both, would constitute
such a default or termination event or condition or uncured default on the part
of the Mortgagor, subject to such exceptions which are not reasonably likely to
have, in the
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aggregate, a Material Adverse Effect. All payments required from any Credit
Support Obligor in respect of any Credit Support Agreement for the Lease of a
Property or for a Mortgage Interest are current, no notice of default or
acceleration under any such Credit Support Agreement is outstanding, and no
default or condition or uncured default on the part of such Credit Support
Obligor exists under any such Credit Support Agreement, subject to such
exceptions which are not reasonably likely to have, in the aggregate, a Material
Adverse Effect. As to all of the Leases, Borrower and each of its Subsidiaries
has performed all of its repair and maintenance obligations (if any) and, to the
best knowledge and belief of Borrower, each Operator and Mortgagor under each
Lease and Mortgage to which it is a party has performed all of its repair and
maintenance obligations, subject to such exceptions which are not reasonably
likely to have, in the aggregate, a Material Adverse Effect.
(g) Borrower and each of its Subsidiaries has good record and
marketable title in fee simple to or valid mortgage interests in all its real
property, other than the Properties and Mortgaged Properties, as to which
Borrower has made the representation set forth in subsection (a) of this Section
3.9, and good title to all its other property other than the Properties, and
none of such property is subject to any Lien for borrowed money as of the date
hereof, except for Liens permitted by Section 6.9.
3.10. No Burdensome Restrictions. No Contractual Obligation of
Borrower or any of its Subsidiaries or, to Borrower's best knowledge and belief,
of any of the Operators and Mortgagors and no Requirement of Law currently has a
Material Adverse Effect, or insofar as Borrower may reasonably foresee may have
a Material Adverse Effect.
3.11. Taxes. Borrower and each of its Subsidiaries has filed
or caused to be filed all tax returns which to the best knowledge and belief of
Borrower are required to be filed, and has paid or caused to be paid all taxes
shown to be due and payable on said returns or on any assessments made against
it or any of its property and all other taxes, fees or other charges imposed on
it or any of its property by any Governmental Authority (other than those the
amount or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of Borrower or such Subsidiary); and no tax
Liens have been filed and, to the knowledge of Borrower, no claims are being
asserted with respect to any such taxes, fees or other charges.
3.12. Federal Regulations. Neither Borrower nor any of its
Subsidiaries is engaged and nor will it engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect. No part
of the proceeds of the Loans hereunder will be used for "purchasing" or
"carrying" "margin stock" as so defined or for any purpose which violates, or
which would be inconsistent with, the provisions of the Regulations of such
Board of Governors. If requested by Agent, Borrower will furnish to Agent and
each Lender a statement in conformity with the requirements of Federal Reserve
Form U-1 referred to in said Regulation U to the foregoing effect.
3.13. Employees. Neither Borrower nor any of its Subsidiaries
has any
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employees and none of them has ever engaged any employees.
3.14. ERISA. No ERISA Affiliate has been, since July 1, 1974,
an "employer", as defined in Section 3(5) of ERISA, in respect of any Plan or
making contributions to any Multiemployer Plan.
3.15. Status as REIT. Borrower is organized in conformity with
the requirements for qualification as a real estate investment trust under the
Code. Borrower's failure to elect to be treated as a real estate investment
trust under the Code for its fiscal year ended December 31, 1986 has not had and
will not have any Material Adverse Effect. Borrower has met all of the
requirements for qualification as a real estate investment trust under the Code
for its fiscal years ended December 31, 1991, 1992, 1993, 1994 and 1995.
Borrower is in a position to qualify for its current fiscal year as a real
estate investment trust under the Code and its proposed methods of operation
will enable it to so qualify.
3.16. Restrictions on Incurring Indebtedness. Neither Borrower
nor any of its Subsidiaries is (a) an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended, or (b) a "holding company" as defined in, or
otherwise subject to, regulation under the Public Utility Holding Company Act of
1935. Neither Borrower nor any of its Subsidiaries is subject to regulation
under any federal or state statute or regulation which limits its ability to
incur the indebtedness or give the guaranties described in this Agreement.
3.17. Subsidiaries. Set forth on Schedule 4 annexed hereto is
a complete and accurate list of all of Borrower's Subsidiaries showing as of the
date hereof (as to each Subsidiary) the jurisdiction of its incorporation, the
number of shares of each class of capital stock authorized, and the number
outstanding, and the percentage of each class of capital stock owned by
Borrower, all of which capital stock is owned free and clear of all Liens; all
of the issued and outstanding shares of capital stock of such Subsidiaries have
been duly authorized and validly issued and are fully paid and non-assessable.
3.18. Compliance with Environmental Laws. Borrower and each of
its Subsidiaries and, to the best knowledge of Borrower, each Operator and each
Mortgagor of the Facilities is in compliance with all applicable statutes, laws,
rules, regulations and orders of all Governmental Authorities relating to
environmental protection, pollution control and Hazardous Materials and with
respect to the conduct of its business and the ownership of its properties,
except for such noncompliance which would not result in imposition of Liens,
fines, penalties, injunctive relief or other civil or criminal liabilities and
which, in the aggregate, could not have a Material Adverse Effect.
3.19. Pollution; Hazardous Materials. In connection with the
acquisition and ownership of its interests in the Properties and Mortgage
Interests, Borrower and each of its Subsidiaries has made and will continue to
make such inquiries, and has and will continue to cause such testing, surveying,
inspection or other action, with respect to each Facility as is necessary or
desirable in connection with Hazardous Materials which might be present in the
air, soil, surface water or groundwater at such Facility. Except for such
exceptions which are not reasonably likely to have, in the aggregate, a Material
Adverse Effect, there are not, and,
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to the knowledge of Borrower after diligent inquiry, were not previously, any
Hazardous Materials present in the air, soil, surface water or groundwater at
any Facility and no Hazardous Materials (except Hazardous Materials maintained
in accordance with all Requirements of Law and necessary for the business
operations of any such Facility as a health care facility, including, without
limitation, petroleum used for heating oil and certain medications) are used in
the operation of any Facility. Borrower is not aware of any claim or notice of
violation, alleged violation, noncompliance, liability or potential liability
relating to any Facility nor any judicial proceedings or governmental or
administrative actions pending or, to the knowledge of Borrower, threatened, to
which Borrower or any of its Subsidiaries would be named a party in connection
with any Facility which, if adversely determined, would be reasonably likely to
result in a Material Adverse Effect.
3.20. Securities Laws. None of the Common Shares, Preferred
Shares or other equity securities of Borrower has been issued in violation of
the Securities Act of 1933, as amended, or the securities or "blue sky" or other
applicable laws or regulations of any applicable jurisdiction.
3.21. Declaration of Trust, By-Laws, Advisory Contract, etc.
The copies of the Declaration of Trust and by-laws of Borrower and the Advisory
Agreement which have been furnished to Agent are true, correct and complete
copies thereof as in effect on the date of this Agreement.
3.22. Disclosures. The financial statements referred to in
Section 3.1 do not, nor does this Agreement, the other Loan Documents, or any
other written statement furnished by or on behalf of Borrower to any Lender in
connection with the transactions contemplated hereby or thereby, contain any
untrue statement of a material fact or omit a material fact necessary to make
the statement contained therein or herein not misleading.
3.23. Medicare and Medicaid Certification. Subject to such
exceptions which, in the aggregate, are not reasonably likely to have a Material
Adverse Effect, to the best knowledge of Borrower after reasonable
investigation, each Operator with respect to each of the Properties that it
operates, and each Mortgagor with respect to each of the Mortgaged Properties
that it owns, (a) is validly licensed under applicable law to operate such
Property or Mortgaged Property and to conduct the business in which it is
currently engaged, (b) has received any applicable certificate of need,
determination of need or similar approval, and any amendments or supplements,
and such approvals are in full force and effect, (c) (except in the case of
non-healthcare Properties and Mortgaged Properties, United Kingdom located
Properties or Mortgaged Properties or otherwise where participation in Medicare
or Medicaid is deemed undesirable in the reasonable business judgment of the
Operator or Mortgagor) is validly certified or approved for participation in
Medicare and Medicaid by the applicable federal and state authorities and is a
party to provider agreements with respect to its participation in Medicare and
Medicaid, which provider agreements are in full force and effect, in each case
only to the extent that such Property or Mortgaged Property is of a character
eligible for participation in Medicare or Medicaid, and (d) no proceedings have
been initiated or notices issued to suspend or revoke any such license,
approval, certification or provider agreement, except for notices of deficiency
which are issued and corrected in the ordinary course of business.
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3.24. Offering, Etc., of Securities. Neither Borrower nor any
agent with the authority of Borrower has offered any securities similar to the
Notes, nor solicited any offer to buy any such securities, in a manner which
would render the offering, sale or issuance of the Notes subject to the
registration requirements of the Securities Act of 1933, as amended.
SECTION 4. CONDITIONS PRECEDENT
4.1. Conditions to Effectiveness. This Agreement shall become
effective only upon satisfaction of all of the following conditions precedent:
(a) Note. Agent shall have received for the account of each
Lender a Note conforming to the requirements hereof and executed by a duly
authorized officer of Borrower.
(b) Legal Opinion. Agent shall have received, with a
counterpart for each Lender, a favorable opinion of Sullivan & Worcester, as
counsel to Borrower and its Subsidiaries and the Advisor, addressed to Agent and
the Lenders and dated the Effective Date, and in form and substance satisfactory
to Agent.
(c) Organizational Documents. Agent shall have received
certified copies of the Declaration of Trust for Borrower and Articles of
Organization or a Certificate of Incorporation for each Subsidiary of Borrower,
by-laws of Borrower and each of its Subsidiaries and all resolutions of the
Board of Trustees of Borrower and the board of directors of each of its
Subsidiaries approving this Agreement and the other Loan Documents to which each
is a party and the transactions contemplated hereby and thereby, and of all
documents evidencing other necessary corporate action and approvals, if any, of
Governmental Authorities with respect to this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby.
(d) Good Standing and Existence. Agent shall have received
certificates of the appropriate governmental officials of the State of Maryland
and of any other State where Borrower conducts business and the State of
incorporation of each of Borrower's Subsidiaries and of any other State where
such Subsidiary conducts business, each dated a recent date prior to the
Effective Date, to the effect that Borrower or such Subsidiary (as the case may
be) is validly existing and is in good standing with respect to payment of
franchise and similar taxes and is duly qualified to transact business therein.
(e) Advisory Agreement and Subordination Agreement. Agent
shall have received copies of the Advisory Agreement and the Subordination
Agreement each certified by a Responsible Officer.
(f) Debt Rating. Agent shall have received evidence that
Borrower's long-term unsecured senior debt is rated BBB- or higher by Standard &
Poor's Ratings Group or Baa3 or higher by Moody's Investors Service.
(g) Existing Loan Agreement
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(i) Borrower shall have paid all accrued interest,
fees, commissions and other amounts (other than
principal) accrued or owed under the Existing Loan
Agreement, whether or not presently due and payable.
(ii) No Default or Event of Default (both such terms
being used as defined in the Existing Loan Agreement)
shall have occurred and be continuing under the
Existing Loan Agreement.
(h) No Material Adverse Effect. No Material Adverse Effect
specified in clause (a)(i), (b), (c)(i) or (d) of the definition
thereof shall have occurred since December 31, 1995.
(i) Compensation. All obligations of Borrower to pay fees and
provide compensation and reimbursement of costs and expenses to Agent,
Administrative Agent and the Lenders or their designees as of the Effective Date
hereunder or otherwise in connection with the financing contemplated hereby
shall have been satisfied.
(j) Real Property Statement. Agent shall have received a Real
Property Statement dated the Effective Date.
(k) Additional Matters. Agent shall have received such other
approvals, opinions or documents as it may reasonably request and all documents
and legal matters in connection with the transactions contemplated by this
Agreement and the other Loan Documents shall be satisfactory in form and
substance to Agent and its counsel.
4.2. Conditions Precedent to Loans. The obligations of Lenders
to make Loans on each Borrowing Date and to continue any Existing Loans on the
Effective Date (which, for purposes of this Section 4.2 shall be deemed to be a
Borrowing Date) are subject to the following further conditions precedent:
(a) Representations and Warranties. The representations and
warranties made by Borrower herein or made by any Person in the other Loan
Documents or which are contained in any certificate, document or financial or
other statement furnished at any time under or in connection with any of the
Loan Documents, shall be true, correct and accurate in all material respects on
and as of the Borrowing Date for the Loan as if made on and as of such date
unless stated to relate to a specific earlier date, in which case such
representations and warranties shall be true, correct and complete in all
material respects as of such earlier dates.
(b) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such date either before or
after giving effect to the Loan to be made on the Borrowing Date.
(c) Legality of Loans. The making of the Loans hereunder by
the Lenders and the acquisition of the Notes shall be permitted as of the
Borrowing Date by all applicable Requirements of Law and shall not subject any
Lender to any penalty or other onerous condition in or pursuant to any such
Requirement of Law or result in a Material Adverse
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Effect.
(d) No Material Adverse Effect. No Material Adverse Effect
specified in clause (a)(i), (b), (c)(i) or (d) of the definition thereof shall
have occurred since December 31, 1994.
(e) Solvency. Both after and immediately before the making of
any Loans on the Borrowing Date, Borrower and each of its Subsidiaries shall be
Solvent.
(f) Borrowing Certificate. Administrative Agent shall have
received, with a counterpart for each Lender, a Notice of Borrowing, dated the
Borrowing Date, substantially in the form of Exhibit B, with appropriate
insertions and attachments satisfactory in form and substance to Agent and its
counsel, executed by a Responsible Officer; provided that while no Notice of
Borrowing shall be required with respect to any Existing Loans continued on the
Effective Date, on the Effective Date Agent shall have received a certificate of
a Responsible Officer certifying as to the matters set forth in clauses
(vi)-(viii) of the Notice of Borrowing with respect to such Existing Loans.
(g) Borrowing Limits. After the making of the Loans on any
Borrowing Date, the aggregate principal amount of all Loans outstanding shall
not exceed the Commitments, the aggregate principal amount of all General
Corporate Loans outstanding shall not exceed 25% of the Commitments and the
aggregate principal amount of all Loans outstanding denominated in GBP shall not
exceed the Equivalent Amount of $100,000,000 (as determined in accordance with
Section 1.3(b)) and Agent and Administrative Agent shall have received a
certificate dated as of a date not more than five (5) Business Days prior to the
relevant Borrowing Date to such effect.
(h) Real Property Statement. Administrative Agent shall have
received a Real Property Statement dated, or dated as of, the Borrowing Date.
SECTION 5. AFFIRMATIVE COVENANTS.
Borrower hereby agrees that, so long as the Commitments remain
in effect, any Note remains Outstanding and unpaid or any other amount is owing
to any Lender, Agent or Administrative Agent hereunder or under any other Loan
Document, Borrower shall (and shall cause each of its Subsidiaries to):
5.1. Financial Statements. Furnish to Administrative Agent,
with sufficient copies for each Lender:
(a) as soon as available, but in any event within ninety days
after the end of each fiscal year of Borrower and within one hundred thirty-five
days after the end of each fiscal year of each Primary Operator/Mortgagor and
Primary Credit Support Obligor, a copy of each of the following (except for any
thereof to the extent none of the related Leases, Mortgage Interest Agreements
or Credit Support Agreements requires the provision of any of the following to
Borrower or one of its Subsidiaries within such period, in respect of which
Borrower's obligation to furnish copies to each Lender shall be satisfied by
furnishing copies
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as soon as practicable after Borrower or such Subsidiary receives one or more
copies thereof): the audited balance sheet prepared on a consolidated basis
(and, if ever prepared on a consolidating basis, on a consolidating basis) for
Borrower and its Subsidiaries and on a consolidated basis for each Primary
Operator/Mortgagor and Primary Credit Support Obligor, each as at the end of
such year and the related statements or income, stockholders' equity and cash
flows for such year (on a consolidated basis (and, if ever prepared on a
consolidating basis, on a consolidating basis) for Borrower and its Subsidiaries
and on a consolidated basis for each Primary Operator/Mortgagor and Primary
Credit Support Obligor), setting forth in each case in comparative form the
figures for the previous year, certified without a "going concern" or like
qualification or exception, or qualification arising out of the scope of the
audit, by independent certified public accountants of nationally recognized
standing; and
(b) as soon as available, but in any event not later than
forty-five days after the end of each of the first three quarterly periods of
each fiscal year of Borrower and not later than seventy-five days after the end
of each of the first three quarterly periods of each fiscal year of each Primary
Operator/ Mortgagor and Primary Credit Support Obligor, copies of each of the
following (except for any thereof to the extent none of the related Leases,
Mortgage Interest Agreements or Credit Support Agreements requires the provision
of any of the following to Borrower or one of its Subsidiaries within such
period, in respect of which Borrower's obligation to furnish copies to each
Lender shall be satisfied by furnishing copies as soon as practicable after
Borrower or such Subsidiary receives one or more copies thereof): the unaudited
balance sheet prepared on a consolidated basis (and, if ever prepared on a
consolidating basis, on a consolidating basis) for Borrower and its Subsidiaries
and on a consolidated basis for each Primary Operator/Mortgagor and Primary
Credit Support Obligor, each as at the end of each such quarter and the related
unaudited statements of income, stockholders' equity and cash flows for such
quarterly period and the portion of the fiscal year through such date (on a
consolidated basis (and, if ever prepared on a consolidating basis, on a
consolidating basis) for Borrower and its Subsidiaries and on a consolidated
basis for each Primary Operator/Mortgagor and Primary Credit Support Obligor),
setting forth in each case in comparative form the figures for the previous
year, certified by a responsible officer of such entity as being fairly stated
and complete and correct in all material respects (subject to normal year-end
audit adjustments); all such financial statements referred to in clauses (a) and
(b) above to be complete and correct in all material respects and be prepared in
reasonable detail and in accordance with GAAP applied consistently throughout
the periods reflected therein (except as approved by such accountants or
officer, as the case may be, and disclosed therein).
5.2. Certificates; Other Information. Furnish to
Administrative Agent, with sufficient copies for each Lender:
(a) concurrently with the delivery of the financial statements
of Borrower and its Subsidiaries referred to in Section 5.1(a) above, a
certificate of Borrower's independent certified public accountants certifying
such financial statements of Borrower and its Subsidiaries stating that in
making the examination necessary therefor, no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
of Borrower and
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its Subsidiaries referred to in Sections 5.1(a) and (b) above, (i) a certificate
of a Responsible Officer (A) stating that, to the best of such officer's
knowledge, Borrower and each of its Subsidiaries during such period has observed
or performed all of its covenants and other agreements, and satisfied every
condition, contained in the Loan Documents to be observed, performed or
satisfied by it, and that such officer has obtained no knowledge of any Default
or Event of Default except as specified in such certificate, and (B) showing in
detail the calculations supporting such statement in respect of Sections 6.1(a),
6.1(b) and 6.1(c) and 6.8 (including, without limitation, certification and
details as to all Indebtedness of Borrower and its Subsidiaries, if any), (ii) a
Real Property Statement and (iii) with respect to each Property or Mortgaged
Property for which Marriott International, Inc. is the Operator or Mortgagor, a
certificate of a senior officer of Marriott International, Inc. as to the Cash
Flow and Fixed Charges of Marriott International, Inc. attributable to that
Property or Mortgaged Property for the last reported financial year of Marriott
International, Inc.;
(c) within forty-five days after the end of each calendar
quarter following the Effective Date, a written report signed by a Responsible
Officer describing in reasonable detail any acquisitions or dispositions of any
Fee Interests or Mortgage Interests by Borrower and its Subsidiaries or any
other material property of Borrower and its Subsidiaries which shall include,
without limitation (i) in the case of acquisitions of property, a description of
(A) the geographic area and type of property, (B) the current and anticipated
cash flow from the property, (C) the operators of such property and (D)
financing of the acquisition, (ii) with respect to dispositions of property, a
description of (A) the amount and use of proceeds from such disposition and (B)
the reasons for the disposition, and (iii) a copy of any appraisals of the
property acquired or disposed of;
(d) within 30 days prior to the first day of each fiscal year
of Borrower, a copy of the projections by Borrower of the operating budget and
cash flow of Borrower and its Subsidiaries for such fiscal year, such
projections to be accompanied by a certificate of a Responsible Officer to the
effect that such projections have been prepared on the same basis as the
financial statements of Borrower and its Subsidiaries then current and that such
officer has no reason to believe they are incorrect or misleading in any
material respect;
(e) promptly after the same are sent, copies of all financial
statements and reports which Borrower sends to its holders of Common Shares,
Preferred Shares or other equity securities, and promptly after the same are
filed by Borrower copies of all financial statements and reports which Borrower
or any of its Subsidiaries may make to, or file with, the Commission or any
successor or analogous Governmental Authority; and
(f) promptly, such additional financial and other information
respecting the financial or other condition of the Primary Operators/Mortgagors,
the Primary Credit Support Obligors, the Advisor or Borrower or any of its
Subsidiaries or the status or condition of the Facilities or the operation
thereof which Borrower is entitled to or can otherwise reasonably obtain as
Agent may from time to time reasonably request.
5.3. Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its Indebtedness and other obligations of whatever nature, except, in
the case of Indebtedness other than that described in Section 7.1(e), when the
amount or validity thereof is currently being contested
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in good faith by appropriate proceedings, and reserves in conformity with GAAP
with respect thereto have been provided on the books of Borrower and its
Subsidiaries.
5.4. Conduct of Business and Maintenance of Existence. (a)
Continue to engage in business of the same general type as now conducted by it
(except that Borrower and its Subsidiaries will not own, operate or finance
Psychiatric Care Assets and will not own, operate or finance hotels or other
lodging facilities; provided that nothing in this Section 5.4(a) shall prohibit
Borrower from indirectly owning hotels or other lodging facilities through
Borrower's ownership of shares in Hospitality Properties Trust, but only to the
extent that the same is permitted by Section 6.7 hereof); (b) preserve, renew
and keep in full force and effect its existence and take all reasonable action
to maintain all rights, privileges and franchises necessary or desirable in the
normal conduct of its business; and (c) comply with all Contractual Obligations
and Requirements of Law except to the extent that the failure to comply
therewith could not, in the aggregate, have a Material Adverse Effect.
5.5. Leases and Mortgage Interests; Credit Support Agreements.
(a) (i) Maintain the Leases, Mortgage Interests and Credit Support Agreements in
full force and effect and enforce the obligations of the Operators under the
Leases, the Mortgagors under the Mortgage Interests and the Credit Support
Obligors under the Credit Support Agreements in a timely manner and (ii) obtain
the consent of Agent in connection with any materially adverse change in or
waiver of any obligation of any Operator, Mortgagor or Credit Support Obligor
contained in, or any right or remedy of Borrower or any of its Subsidiaries
under, any Lease, Mortgage Interest Agreement or Credit Support Agreement,
including, without limitation, any renewal, amendment, modification or
termination thereof, except to the extent that the failure to comply with this
Section 5.5(a) could not, in the aggregate, have a Material Adverse Effect; and
(b) give notice to Agent of each waiver, renewal, amendment, modification or
termination of the Leases, Mortgage Interests and Credit Support Agreements in
respect of any Eligible Property or Eligible Mortgage, together with a copy of
such waiver, renewal, amendment, modification or termination.
5.6. Maintenance of Property, Insurance. Keep all property
useful and necessary in its business in good working order and condition;
maintain or cause the Operators of its Properties to maintain with financially
sound and reputable insurance companies insurance with respect to its property
and business of such a nature, with such terms and in such amounts, as is
customary in the case of business entities of established reputation engaged in
the same or similar business similarly situated against loss or damage of the
kinds and in the amounts customarily insured against and for by such business
entities, and to cause the Mortgagors of each of its Mortgaged Properties to
maintain comparable insurance. Borrower shall furnish to each Lender, upon
written request, full information as to the insurance carried.
5.7. Inspection of Property; Books and Records; Discussions.
Keep proper books of record and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities; and permit
representatives of Agent and/or Administrative Agent and, after the occurrence
of a Default, any Lender, to visit and inspect any of its properties and examine
and make abstracts from any of its books and records at any reasonable time and
as often as may reasonably be desired, and to discuss the business,
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operations, properties, prospects and financial and other condition of Borrower
and its Subsidiaries with officers and employees of Borrower or such
Subsidiaries and the Advisor and with its independent certified public
accountants.
5.8. Notices. Promptly, and in any event within ten Business
Days after an officer of Borrower obtains knowledge thereof, give notice to
Agent, Administrative Agent and each Lender:
(a) of the occurrence of any Default or Event of Default;
(b) of (i) any default or event of default or termination
under any Lease, Credit Support Agreement, Mortgage Interest Agreement or any
other Contractual Obligation of or in favor of Borrower or any of its
Subsidiaries which could have a Material Adverse Effect and (ii) any litigation,
investigation or proceeding which may exist at any time between Borrower or any
of its Subsidiaries or any Operator, Mortgagor or Credit Support Obligor and any
Governmental Authority or other Person, which if adversely determined could have
a Material Adverse Effect;
(c) of any litigation or proceeding affecting Borrower in
which the amount involved is $1,000,000 or more and is not fully covered by
insurance or in which injunctive or similar relief is sought;
(d) of the following events, as soon as possible and in any
event within 30 days after Borrower knows or has reason to know thereof
(provided that with respect to any Multiemployer Plan in which neither Borrower
nor any ERISA Affiliate is a substantial employer Borrower shall only be deemed
to have knowledge of facts concerning which it has actual knowledge): (i) the
occurrence or expected occurrence of any Reportable Event with respect to any
Plan, or (ii) the institution of proceedings or the taking or expected taking of
any other action by PBGC or Borrower or any ERISA Affiliate to terminate or
withdraw from any Plan, and in addition to such notice, deliver to each Lender
whichever of the following may be applicable: (A) a certificate of the chief
financial officer or treasurer of Borrower setting forth details as to such
Reportable Event and the action that Borrower or ERISA Affiliate proposes to
take with respect thereto, together with a copy of any notice of such Reportable
Event that may be required to be filed with PBGC, or (B) any notice delivered by
PBGC evidencing its intent to institute such proceedings or any notice to PBGC
that such Plan is to be terminated, as the case may be;
(e) of the adoption by Borrower or any ERISA Affiliate of any
Plan or of any Plans maintained by any Person that becomes an ERISA Affiliate
after the date hereof;
(f) of any proposed transaction or event which may give rise
to Net Property Proceeds, Net Mortgage Proceeds or Net Securities Proceeds in
excess of $5,000,000;
(g) of the occurrence or existence of any event or condition
which could reasonably be expected to have, or which has had, a Material Adverse
Effect; and
(h) of the occurrence or existence of any event or condition
which would cause any of the representations and warranties set forth in Section
3.9 to be untrue if
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repeated after the occurrence, or during the existence, of such event or
condition.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action Borrower proposes to take with respect thereto. For all
purposes of clause (d) of this Section, Borrower shall be deemed to have all
knowledge or knowledge of all facts attributable to the administrator of such
Plan.
5.9. Appraisals and Other Valuations. (a) From time to time
during the term of this Agreement, Agent may, in its sole discretion, order an
Appraisal of one or more of the Eligible Properties and/or Mortgaged Properties
covered by Eligible Mortgages. Any such Appraisal shall be at Borrower's cost if
(i) Agent shall have obtained a letter from an expert appraiser or evaluator of
real property, health care or retirement facilities to the effect that, or Agent
shall otherwise in good faith have determined that, facts or circumstances
exist, or changes in market conditions have occurred, as a result of which there
exists a reasonable possibility that Appraisals of the Eligible Properties and
Mortgaged Properties covered by Eligible Mortgages, might result in an aggregate
valuation thereof reflecting a material loss of value as compared to the value
thereof indicated in the certificate of a Responsible Officer delivered to Agent
pursuant to Section 4.1(j) or 4.2(h), or (ii) an Event of Default has occurred.
(b) In addition to the Appraisals referred to in Section
5.9(a), from time to time during the term of this Agreement, if so requested by
Agent, in its sole discretion, Borrower shall furnish to Administrative Agent,
with sufficient copies for each Lender, a certificate of a Responsible Officer
certifying as to the value of one or more of the Eligible Properties and/or
Mortgaged Properties covered by Eligible Mortgages.
5.10. Meetings. Within one hundred days after the end of each
fiscal year of Borrower, one or more Responsible Officers of Borrower shall
attend an annual informational meeting with the Lenders, for the purpose of
answering reasonable questions of any Lender, Agent and/or Administrative Agent
relating to the Facilities and/or the Loan Documents, to be held at Borrower's
cost and at such time and place to be determined by Agent as is reasonably
requested by Agent; provided that each Lender shall bear the costs of
transportation and accommodation for any of its representatives attending such
meeting.
5.11. REIT Requirements. Operate its business at all times so
as to satisfy or be deemed to have satisfied all requirements necessary to
qualify as a real estate investment trust under Section 856 through 860 of the
Code. Borrower will maintain adequate records so as to comply with all
record-keeping requirements relating to the qualification of Borrower as a real
estate investment trust as required by the Code and applicable regulations of
the Department of the Treasury promulgated thereunder and will properly prepare
and timely file with the Internal Revenue Service all returns and reports
required thereby. Borrower will request from its shareholders all shareholder
information required by the Code and applicable regulations of the Department of
Treasury promulgated thereunder.
5.12. Indemnification. Borrower agrees to indemnify, defend
(with counsel selected by Agent) and hold Agent, Administrative Agent, Lenders
and the directors, officers,
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shareholders, employees and agents of each of them harmless for, from and
against any claims (including without limitation third party claims for personal
injury or real or personal property damage), actions, administrative
proceedings, judgments, damages, punitive damages, penalties, fines, costs,
expenses disbursements, liabilities (including sums paid in settlements of
claims), obligations, interest or losses, including attorneys' fees, consultant
fees and expert fees, that arise at any time (including, without limitation, at
any time after the payment of the Notes) directly or indirectly from or in
connection with the presence, suspected presence, release or suspected release
of any Hazardous Material in the air, soil, surface water or groundwater at or
from the real property or any portion thereof with respect to a Facility, or any
other real property in which Borrower or any of its Subsidiaries has any
interest (all of the foregoing real property shall be referred to collectively
as the "Real Property"). Without limiting the generality of the foregoing, the
indemnification provided by this Section shall specifically cover (i) costs,
including capital, operating and maintenance costs, incurred in connection with
any investigation or monitoring of site conditions or any clean-up, remedial,
removal or restoration work required or performed by any federal, state or local
governmental agency or political subdivision or performed by any
non-governmental Person, including any Operator or Mortgagor of a Facility,
because of the presence, suspected presence, release or suspected release of
Hazardous Material in the air, soil, surface water or groundwater at or from the
Real Property; and (ii) costs incurred in connection with (A) Hazardous Material
present or suspected to be present in the air, soil, surface water or
groundwater at the Real Property before the date of this Agreement, or (B)
Hazardous Material that migrates, flows, percolates, diffuses or in any way
moves onto or under or from the Real Property after the date of this Agreement,
or (C) Hazardous Material present at the Real Property as a result of any
release, discharge, disposal, dumping, spilling or leaking (accidental or
otherwise) onto or from the Property before or after the date of this Agreement
by any Person.
5.13. Changes in GAAP. Borrower and the Lenders hereby agree
that in the event of a change in GAAP which would cause the financial covenants
set forth herein to provide less protection to the Lenders than presently
provided for hereunder, such financial covenants shall be reset, in good faith,
by the Majority Lenders to maintain the protection to the Lenders equivalent to
that in place prior to such change and Borrower agrees to execute one or more
amendments to this Agreement to effect such reset.
5.14. Clean-Down Period. If at any date of determination (the
"Trigger Date"), Loans are outstanding in an aggregate principal amount equal to
or greater than 66- 2/3% of the Commitments, Borrower shall prepay the Loans
within 12 months of the Trigger Date in an amount such that the aggregate
principal amount of the Loans outstanding for a period of 30 consecutive days
commencing on such prepayment date shall be equal to or less than $100,000,000.
5.15. Further Assurances; Restrictions on Negative Pledges.
(a) At any time upon the request of Agent, Borrower will,
promptly and at its expense, execute, acknowledge and deliver such further
documents and do such other acts and things as Agent may reasonably request to
provide for payment of the Loans made hereunder and interest thereon in
accordance with the terms of this Agreement.
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(b) If Borrower or any of its Subsidiaries shall agree to any
"negative pledge" or like agreement more restrictive (or otherwise more generous
to its beneficiaries) in its scope than Section 6.9, then, without any further
action being required, the provisions of such agreement relating to the
prohibition on Liens shall be deemed incorporated by reference (with appropriate
modifications as may be necessary) into this Agreement for the benefit of
Lenders.
5.16. Currency Arrangements. (a) Borrower shall at all times
maintain agreements or other arrangements, practices or procedures in form and
substance satisfactory to Agent which will protect Borrower and its Subsidiaries
against fluctuations in foreign currency values against the U.S. Dollar.
(b) Borrower shall only enter into interest rate and currency
exchange or similar or analogous arrangements as are (in Borrower's reasonable
judgment) necessary for the hedging or other protection to exposure of Borrower
and its Subsidiaries, and not those which are of a purely speculative nature.
SECTION 6. NEGATIVE COVENANTS.
Borrower hereby agrees that, so long as the Commitments remain
in effect or any Note remains Outstanding and unpaid or any other amount is
owing to any Lender, Agent or Administrative Agent hereunder or under any other
Loan Document, Borrower shall not (and shall not permit any of its Subsidiaries
to) directly or indirectly:
6.1. Financial Covenants.
(a) Tangible Net Worth. Suffer or permit Tangible Net Worth at
any time to be less than the aggregate of (i) $609,000,000, plus (ii) 75% of the
Net Securities Proceeds of all issues of any Common Shares, Preferred Shares or
other equity securities by Borrower in one or more transactions received after
the date hereof.
(b) Interest Coverage. Suffer or permit the ratio of EBI for
any fiscal quarter to the Interest Charges of Borrower and its Subsidiaries for
such quarter to be less than 3 to 1.
(c) Debt to Net Worth. Suffer or permit the ratio of the Total
Liabilities of Borrower and its Subsidiaries to Tangible Net Worth to be greater
than 1 to 1 at any time.
6.2. Restricted Payments.
(a) Declare, make or pay any Restricted Payment except where
(i) no Default or Event of Default is continuing either before or after giving
effect to such Restricted Payment, (ii) Borrower has sufficient funds or
availability under its credit facilities (including this Agreement) to pay the
next installment of interest payable in respect of the Loans and (iii)
immediately upon declaring, making or paying any such Restricted Payment a
Responsible Officer shall certify to Administrative Agent in writing that
Borrower is in compliance with each condition hereof with respect to the
declaration, making or payment, as the case may be, of such Restricted Payment;
or
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(b) directly or indirectly make any payment of Indebtedness of
Borrower or any of its Subsidiaries in contravention of the terms of any
agreement or instrument subordinating or purporting to subordinate any rights to
receive payments in respect of any Indebtedness of Borrower or such Subsidiary
to any rights to receive payments under this Agreement.
6.3. Merger; Sale of Assets; Termination and Other Actions.
(a) Cause to be organized or assist in organizing any Person under the laws of
any jurisdiction to acquire all or substantially all of its assets, terminate,
wind up, liquidate or dissolve its affairs or enter into any reorganization,
merger or consolidation or, in the case of Borrower, take any other action
whatsoever under or pursuant to Articles 6.15, 8.1, 8.2 and 8.5 of the
Declaration of Trust or agree to do any of the foregoing at any future time,
except that Borrower or any Subsidiary of Borrower other than Church Creek
Corporation may acquire all or substantially all of the assets of a Subsidiary
of Borrower and any Subsidiary of Borrower may reorganize, merge or consolidate
with Borrower (so long as Borrower is the surviving entity) or any other
Subsidiary of Borrower other than Church Creek Corporation, or (b) convey, sell,
lease or otherwise dispose of (i) any of the Properties, the Mortgage Interests
or its other interests in Facilities or (ii) any substantial part of its
property or assets (other than the Properties) or (iii) any shares of stock in
any of its Subsidiaries; except that the foregoing will be permitted in the case
of sub-clauses (i) and (ii) of this clause (b), but only if (A) the
consideration therefor shall be equal to the fair market value thereof (or, in
the case of a Mortgage Interest where the consideration is less than fair market
value, the Board of Trustees of Borrower or the board of directors of the
relevant Subsidiary of Borrower shall have determined that the consideration
received or to be received is in an amount consistent with the best financial
interests of Borrower or such Subsidiary, as the case may be) and no default
under any other provision hereof results therefrom or (B) such conveyance, sale,
lease or other disposition is pursuant to the exercise of an option contained in
a Lease, and, in either case, the proceeds of such disposition (whether received
by Borrower or one of its Subsidiaries) are used to prepay the Loans to the
extent required by Section 2.8(b).
6.4. Transactions with Affiliates. Enter into or be a party to
any transaction directly or indirectly with or for the benefit of any Affiliate
of Borrower, other than (i) in the ordinary course of business and (ii) for fair
consideration and on terms no less favorable to Borrower or any of its
Subsidiaries than are available in an arm's-length transaction from unaffiliated
third parties and (iii) if the Independent Trustees determine in their
reasonable good faith judgment that such transaction is in the best interests of
Borrower or such Subsidiary based on full disclosure of all relevant facts and
circumstances.
6.5. Subsidiaries. (a) Without the prior written consent of
Agent, create, or permit to exist, any Subsidiary other than (i) those named on
Schedule 4 and (ii) any Subsidiary (A) one hundred percent (100%) of all of the
equity interests (except directors' qualifying shares) and voting interests of
which are owned by Borrower, (B) which has no Indebtedness other than to
Borrower or another wholly-owned Subsidiary of Borrower, (C) which has agreed to
provide the guarantee set forth in Section 9 and (D) which is formed in the
ordinary course of Borrower's business and has the same business purpose as
Borrower, (b) sell or otherwise dispose of any of the capital stock owned by
Borrower in any Subsidiary or (c) permit any Subsidiary to issue any shares of
capital stock to any Person other than Borrower.
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6.6. Accounting Changes. Make any significant change in
accounting treatment and reporting practices, except as required by GAAP or with
which Borrower's independent certified public accountants have agreed. Borrower
will advise Agent sufficiently in advance of any proposed change to permit
representatives of Agent to discuss the proposed change with the officers of
Borrower.
6.7. Change in Nature of Business. Make any material change in
the nature of its business as presently conducted (where a "material change"
shall mean any change in the type of industry then invested in in accordance
with this Section 6.7, regardless of the amount or size of such new investment);
the business of Borrower and its Subsidiaries as presently conducted being the
business of acquiring and operating, and acquiring or funding Mortgage Interests
in, income producing real property interests and facilities which offer health
care or related services or rehabilitation or retirement services, and
activities incidental to any of the foregoing, but which shall not include any
acquisition, operating or funding either of Psychiatric Care Assets or of hotels
or other lodging facilities; provided that (i) such property interests and
facilities shall be located in either the United States of America or the United
Kingdom, (ii) the aggregate Allowed Value of all Properties and Mortgage
Interests located in the United Kingdom shall not exceed 10% of the aggregate
Allowed Value of all Properties and Mortgage Interests, (iii) Church Creek
Corporation shall not engage in any business or activities other than those
engaged in by it on the Effective Date, and activities incidental thereto and
(iv) Borrower may indirectly own interests in hotels or other lodging facilities
through Borrower's ownership of shares in Hospitality Properties Trust, provided
that (y) Borrower shall not increase its equity investment in or make any other
investment in or make any loans to, guaranties for the benefit of or other
support whatsoever to or for the benefit of Hospitality Properties Trust aside
from the aggregate of 4,000,000 shares (which shall be construed to include any
substitute or replacement shares) of stock of Hospitality Properties Trust
acquired by Borrower prior to or in connection with the initial public offering
of shares in Hospitality Properties Trust and (z) Hospitality Properties Trust
shall not be or become a Subsidiary of Borrower.
6.8. Indebtedness. (a) Suffer or permit the total Indebtedness
(determined without duplication) of Borrower and its Subsidiaries (other than
the IDFA Indebtedness, Indebtedness in the nature of bridge financings described
in the exception to Section 6.8(b) and Indebtedness described in Section
6.8(c)), at any time to be greater than 50% of the aggregate Allowed Value of
all Eligible Properties and all Eligible Mortgages.
(b) Incur any Indebtedness unless, in the case of Borrower,
the earliest date for any payment of principal or other settlement thereof is at
least three months after the Termination Date, except for (i) Borrower's
guaranty of the IDFA Indebtedness, the terms of which Indebtedness provide for
mandatory redemption prior to the Termination Date upon the occurrence of
certain extraordinary events, and (ii) Indebtedness of Borrower in the nature of
bridge financings to effect acquisitions of Fee Interests or Mortgage Interests
by Borrower so long as the final date for payment or other settlement of all
such bridge financing Indebtedness is less than one year from the date of its
incurrence or issuance and Borrower promptly commences (and diligently pursues)
the refinancing thereof; provided that, at any time either after total
Indebtedness in the nature of bridge financings exceeds $100,000,000 or would as
a result of any proposed further bridge financing exceed $100,000,000, not less
than thirty days prior to the incurrence or issuance of any additional
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bridge financing, Borrower shall provide Lenders with such details of the terms
and conditions thereof as Lenders (acting through Agent) may reasonably request
(and Borrower shall promptly advise Agent of any subsequent material changes to
such details), and if after a review of such details Majority Lenders (each in
its respective absolute discretion) determine that no further Loans may be made
and the Termination Date shall be brought forward to a date which is the earlier
of the maturity date for such additional bridge Indebtedness and a date eleven
months after the incurrence or issuance thereof, then, effective upon the
incurrence or issuance of such Indebtedness and without any further action being
required, no further Loans shall be made and the definition of "Termination
Date" shall be so amended; provided that if Majority Lenders (acting through
Agent) have not advised Borrower of such a determination within fifteen days of
receipt of all such details as they may have requested, then, subject to the
opportunity to review any subsequent material changes to the details provided
and to make a contrary determination based thereon, Majority Lenders shall be
deemed not to have made such a determination and no change to this Agreement
shall be effected pursuant to this Section 6.8(b).
(c) Suffer or permit the aggregate of Indebtedness which is
(i) secured by a Lien covering property or assets acquired by Borrower or any of
its Subsidiaries, (ii) Indebtedness of a Person acquired by Borrower or any of
its Subsidiaries or (iii) Indebtedness to which the assets of a Person acquired
by Borrower or any of its Subsidiaries are subject, which in the case of any of
clause (i), (ii) or (iii) is outstanding at the time of the relevant acquisition
and remains outstanding following such acquisition, to exceed $50,000,000 at any
time; provided that, in addition to Indebtedness otherwise permitted under this
Section 6.8(c), Borrower and Church Creek Corporation may suffer or permit to
exist the IDFA Indebtedness.
(d) In the case of Subsidiaries of Borrower, suffer or permit
to exist any Indebtedness, except for (i) intercompany Indebtedness owed to
Borrower which is incurred as the result of the direct or indirect advance by
Borrower of the proceeds of Loans and used for purposes described in Section
2.11 and (ii) in the case of Subsidiaries other than Church Creek Corporation,
the Contingent Obligations arising from the guarantees given under Section 9 and
(iii) in the case of Church Creek Corporation, the IDFA Indebtedness.
6.9. No Liens. Suffer or permit after the date hereof any Lien
on any Facility, Lease, Mortgage Interest, or Credit Support Agreement, except
(i) in the case of Borrower, Liens granted to secure Indebtedness in the nature
of bridge financings (but not any subsequent refinancing or any other
restructuring of such bridge financing) permitted under Section 6.8(b), so long
as such Liens are granted only on the properties or interests acquired with such
Indebtedness; provided that any such property or interest which is the subject
of such a Lien shall not be an Eligible Property or an Eligible Mortgage, (ii)
Permitted Exceptions, (iii) with respect to either (A) Properties that are not
Eligible Properties or (B) Mortgaged Properties that are subject to Mortgage
Interest Agreements which are not Eligible Mortgages only, Liens that are not
created or granted by Borrower or any of its Subsidiaries, which Liens, in the
aggregate, would not be reasonably likely to cause or create a Material Adverse
Effect and (iv) (A) Liens securing Indebtedness permitted by Section 6.8(c)
(other than the IDFA Indebtedness) so long as neither such Indebtedness nor such
Liens were incurred or granted in contemplation of such acquisition and such
Liens are granted only on the related properties or interests acquired by
Borrower or its Subsidiaries
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and (B) Liens existing on the Effective Date securing the IDFA Indebtedness and
any Liens in continuation thereof or replacement or substitution therefor so
long as the Allowed Value of the subject property or interest is not greater
than the Allowed Value on the Effective Date of the property or interest then
the subject of such permitted Liens; provided that any property or interest
which is the subject of a Lien permitted under this clause (iv) shall not be an
Eligible Property or an Eligible Mortgage.
6.10. Fiscal Year. Change the fiscal year end of Borrower or
any of its Subsidiaries from December 31 to any other date without the prior
written consent of Agent.
6.11. Chief Executive Office. Change the name of Borrower or
the chief executive office of Borrower unless Borrower has given Administrative
Agent at least 15 Business Days' prior written notice of any such change.
6.12. Amendment of Certain Agreements. Amend, supplement or
otherwise modify (a) the Advisory Agreement, or (b) the Declaration of Trust in
a manner which would be reasonably likely to cause a Material Adverse Effect, in
either case without the prior written consent of Agent.
6.13. Payments Not to Exceed Appraised Value. Pay
consideration in an amount greater than the Appraised Value for the acquisition
of any Facility or, in the case of a group of Facilities acquired in a single
transaction, the aggregate Appraised Value of such group of Facilities.
SECTION 7. EVENTS OF DEFAULT
7.1. Events of Default. Upon the occurrence of any of the
following events (each an "Event of Default"):
(a) Payments. Borrower shall fail to pay any principal of or
interest on any Note, or Borrower or any of its Subsidiaries shall fail to pay
any other amount payable hereunder, when due in accordance with the terms
thereof or hereof; or
(b) Representations and Warranties. Any representation or
warranty made or deemed made by Borrower or any of its Subsidiaries herein or by
any Person in any other Loan Document or which is contained in any certificate,
document or financial or other statement furnished at any time under or in
connection with this Agreement or any other Loan Document shall prove to have
been incorrect in any material respect on or as of the date made or deemed made;
or
(c) Certain Covenant Defaults. Borrower shall default in the
observance or performance of any agreement contained in Section 6 of this
Agreement, or the Advisor shall default in the observance or performance of any
material provision of the Subordination Agreement; or
(d) Certain Other Covenant Defaults. Borrower or any other
party to any of
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the Loan Documents (other than Agent, Administrative Agent and the Lenders
hereunder) shall default in the observance or performance of any other provision
of this Agreement or any of the other Loan Documents, and such default shall
continue unremedied for a period of 20 days; or
(e) Cross-Default. Borrower or any of its Subsidiaries shall
(i) default in any payment of principal of or interest on any Indebtedness
(other than the Notes) in respect of money borrowed or Capitalized Lease
Obligations or incurred for the deferred purchase price of property or services
or evidenced by a note, debenture or other similar written obligation to pay
money, or in the payment of any Contingent Obligation (other than the guarantees
of Subsidiaries of Borrower given in Section 9, which shall be subject to
Section 7.1(d)), beyond the period of grace (not to exceed 30 days), if any,
provided in the instrument or agreement under which such Indebtedness or
Contingent Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Contingent Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur, the effect of which default or other event is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Contingent Obligation (or a trustee or agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity or such
Contingent Obligation to become payable; or
(f) Qualification as REIT. Either Agent or the Majority
Lenders shall have determined in good faith, and shall have so given notice to
Borrower, that Borrower has at any time ceased to be in a position to qualify,
or has not qualified, as a real estate investment trust for any of the purposes
of the provisions of the Code applicable to real estate investment trusts;
provided that no Event of Default under this Section 7.1(f) shall be deemed to
have occurred and be continuing if, within 10 days after notice of any such
determination is given to Borrower, Borrower shall have furnished each Lender
with an opinion of Borrower's tax counsel (who shall be satisfactory to the
Majority Lenders provided that the Majority Lenders may not unreasonably
withhold their approval) to the effect that Borrower is then in a position to so
qualify, or has so qualified, as the case may be, which opinion shall not
contain any material qualification unsatisfactory to the Majority Lenders; or
(g) Insolvency, Etc. There shall be an Insolvency Event with
respect to Borrower or any of its Subsidiaries or the Advisor; or
(h) ERISA. (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan, (iii) a Termination Event shall occur or (iv) any other event or condition
shall occur or exist with respect to a Plan or a Multiemployer Plan; and in each
case in clauses (i) through (iv) above, such event or condition, together with
all other such events or conditions, if any, could subject Borrower or any of
its Subsidiaries to any tax, penalty or other liabilities in the aggregate
material in relation to the business, operations, property or financial or other
condition of Borrower and its Subsidiaries, taken as a whole; or
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(i) Certain Judgments. One or more judgments or decrees shall
be entered against Borrower or any of its Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance) of $1,000,000 or
more, and either (x) all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal or (y) funds in the amount of the
liability thereunder (not paid or fully covered by insurance) shall not have
been deposited in escrow with Agent upon terms and conditions satisfactory to
Agent, in each case under clause (x) or (y), within 60 days from the entry
thereof; or
(j) Certain Ownership of Borrower. Barry M. Portnoy and Gerard
M. Martin (or any Person in respect of which either or both of them own more
than 50% of the securities having ordinary voting power for the election of
directors) shall cease at any time to hold beneficially and of record, in the
aggregate, at least 750,000 shares of the issued and outstanding Common Shares
and each other class of equity securities of Borrower (adjusted for any
division, reclassification or stock dividend in respect of Common Shares) or
such lesser amount as shall be approved by Agent; or
(k) Change of Control of Advisor. Barry M. Portnoy and Gerard
M. Martin shall cease at any time to have the power to direct the management and
policies of HRPT Advisors; or
(l) Investment Grade Operators and Mortgagors. More than 50%
of the aggregate Allowed Value of the Properties and Mortgage Interests shall be
attributable to Properties and Mortgage Interests having the same "investment
grade Person" (or any of that Person's Affiliates; provided that for the
purposes of this Section 7.1(l), so long as there is no material change in their
practices and procedures in place at the Effective Date to provide for
arm's-length dealings, Marriott International, Inc. and its Affiliates and Host
Marriott Corporation and its Affiliates will not be treated as Affiliates of
each other) as Mortgagor or Operator thereof (with an "investment grade Person"
being one whose long-term senior debt is rated BBB- or higher by Standard &
Poor's Ratings Group or Baa3 or higher by Moody's Investors Service (or
similarly rated by any successor to either of such rating agencies)); or
(m) Operators and Mortgagors Generally. Except in the case of
Mortgagors or Operators which are "investment grade Persons" (as defined in
Section 7.1(l)), more than 40% of the aggregate Allowed Value of the Properties
and Mortgage Interests shall be attributable to Properties and Mortgage
Interests having the same Person (or any of that Person's Affiliates; provided
that for the purposes of this Section 7.1(m) so long as there is no material
change in their practices and procedures in place at the Effective Date to
provide for arm's-length dealings, Marriott International, Inc. and its
Affiliates and Host Marriott Corporation and its Affiliates will not be treated
as Affiliates of each other) as Mortgagor or Operator thereof; or
(n) Rehabilitation Treatment Assets. More than 40% of the
aggregate Allowed Value of the Properties and Mortgage Interests shall be
attributable to Properties and Mortgages consisting of Rehabilitation Treatment
Assets; or
(o) Acute Care Assets. More than 15% of the aggregate Allowed
Value of the Properties and Mortgage Interests shall be attributable to
Properties and Mortgages consisting of Acute Care Assets; or
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(p) Psychiatric Care Assets. Any of the aggregate Allowed
Value of the Properties and Mortgage Interests shall be attributable to
Properties or Mortgages consisting of Psychiatric Care Assets; or
(q) Hotels and Lodging Facilities. Any of the aggregate
Allowed Value of the Properties and Mortgage Interests shall be attributable to
Properties and Mortgages consisting of hotels or other lodging facilities; or
(r) Medical Office Assets. More than 15% of the aggregate
Allowed Value of the Properties and Mortgage Interests shall be attributable to
Medical Office Assets; or
(s) Clinics. More than 25% of the aggregate Allowed Value of
the Properties and Mortgage Interests shall be attributable to Clinics; or
(t) Advisor. HRPT Advisors shall cease to be the sole Advisor
to Borrower pursuant to and in accordance with the Advisory Agreement, without
Agent's prior written consent or the Advisory Agreement shall be materially
amended, supplemented or modified without Agent's prior written consent; or
(u) Loan Documents. From and after the Effective Date, any
guarantee given by a Subsidiary of Borrower in Section 9 or any Loan Document
shall be terminated or otherwise shall cease to be in full force and effect or
shall cease to give the Lenders the rights, powers and privileges purported to
be created thereby or any party thereto other than Agent and the Lenders shall
cease to be, or shall assert that it is not, bound thereby in accordance with
its terms;
then, and in any such event, (a) if such event is an Event of Default specified
in paragraph (g) above, automatically the Commitments shall immediately
terminate and the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement, the Notes and any other Loan Document shall
immediately become due and payable, and (b) if such event is any other Event of
Default, either or both of the following actions may be taken: (i) Agent may, or
upon the request of the Majority Lenders, Agent shall, by notice to Borrower,
declare the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and (ii) Agent may, or upon the request of the
Majority Lenders, Agent shall, by notice of default to Borrower, declare the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement, the Notes and any other Loan Document to be due and
payable forthwith, whereupon the same shall immediately become due and payable.
Except as expressly provided above in this Section, presentment, demand, protest
and all other notices of any kind are hereby expressly waived.
7.2. Annulment of Acceleration. If payment on the Loans and
the Notes is accelerated in accordance with Section 7.1 of this Agreement, then
and in every such case, the Majority Lenders may, by an instrument delivered to
Borrower (and to Agent and/or Administrative Agent, as applicable, to the extent
it is or they are not participating in the giving of notice) annul such
acceleration and the consequences thereof; provided that at the time such
acceleration is annulled:
(a) all arrears or interest on the Loans and the Notes and all
other sums
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payable in respect of the Loans and pursuant to this Agreement, the Notes and
each other Loan Document (except any principal of or interest or premium on the
Loans and the Notes and other sums which have become due and payable only by
reason of such acceleration) shall have been duly paid; and
(b) every other Default or Event of Default shall have been
duly waived or otherwise cured;
provided, further, that no such annulment shall extend to or affect any
subsequent Default or Event of Default or impair any right consequent thereon.
7.3. Cooperation by Borrower. To the extent that it lawfully
may, Borrower agrees that it will not (and that it will cause its Subsidiaries
not to) at any time insist upon or plead, or in any manner whatever claim or
take any benefit or advantage of any applicable present or future stay,
extension or moratorium law, which may affect observance or performance of the
provisions of this Agreement or of any Note or any other Loan Document.
SECTION 8. THE AGENTS
8.1. Appointment of Agent and Administrative Agent.
(a) Each Lender hereby irrevocably designates and appoints
Kleinwort Benson as Agent of such Lender and each of Wells Fargo Bank, National
Association and the GBP Agent (as defined in the definition of "Administrative
Agent"), as Administrative Agent of such Lender (with their respective functions
as set forth in the definition of "Administrative Agent") (the Agent and
Administrative Agent collectively being the "Loan Agents", and, for the purposes
of Sections 8.1(c), 8.1(g), 8.1(h) and 8.1(l), Co-Agent shall also be deemed to
be a "Loan Agent") under this Agreement and the Loan Documents and the other
documents or instruments delivered pursuant to or in connection herewith or
therewith and each such Lender hereby irrevocably authorizes each Loan Agent,
for such Lender, to take such action on behalf of each Lender under the
provisions of the Loan Documents and to exercise such powers and perform such
duties as are expressly delegated to such Loan Agent by the terms of the Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in the Loan Documents,
no Loan Agent shall have any duties or responsibilities other than those
expressly set forth in the Loan Documents, nor any fiduciary relationship with
any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into the Loan Documents or otherwise
exist against either Loan Agent.
(b) Each Loan Agent may execute any of its duties under the
Loan Documents by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. No Loan
Agent shall be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
(c) None of the Loan Agents nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully
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taken or omitted to be taken by it under or in connection with the Loan
Documents (except for its gross negligence or willful misconduct), or (ii)
responsible in any manner to any Lender for any recitals, statements,
representations or warranties made by Borrower or any of its Subsidiaries or any
other Person contained in the Loan Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by
either Loan Agent under or in connection with, the Loan Documents (including,
without limitation, any Appraisal or valuation or any certificate or other
report relating to the value of any Property or any Mortgage Interest), or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of the Loan Documents or otherwise or for any failure of Borrower or any of its
Subsidiaries or any other Person to perform its obligations under the Loan
Documents. The Loan Agents shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, the Loan Documents, or to inspect the
properties, books or records of Borrower or any of its Subsidiaries or any other
Person or to insure, protect or preserve any of the property of Borrower or any
of its Subsidiaries or any other Person.
(d) Each Loan Agent shall be entitled to rely, and shall be
fully protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation reasonably believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to Borrower or its Subsidiaries),
independent accountants and other experts selected by such or the other Loan
Agent. Each Loan Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with such Loan Agent.
(e) Each Loan Agent shall be fully justified in failing or
refusing to take any action under the Loan Documents unless it shall first
receive such advice or concurrence of the Majority Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. Each Loan Agent shall in all
cases be fully protected in acting, or in refraining from acting, under the Loan
Documents in accordance with a request of the Majority Lenders, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Notes.
(f) No Loan Agent shall be deemed to have knowledge or notice
of the occurrence of any Event of Default or event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default hereunder
unless such Loan Agent shall have received notice from the other Loan Agent, a
Lender or Borrower referring to this Agreement, describing such event, act or
condition or Event of Default and stating that such notice is a "notice of
default". In the event that a Loan Agent receives such a notice, such Loan Agent
shall give prompt notice thereof to the Lenders and (provided such notice is not
received from the other Loan Agent) to the other Loan Agent. Each Loan Agent
shall take such action with respect to the rights and remedies given to such
Loan Agent pursuant to the terms of the Loan Documents as shall be reasonably
directed by the Majority Lenders; provided that, unless and until such Loan
Agent shall have received such directions, such
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Loan Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, as it shall deem advisable in the best interests of the
Lenders.
(g) Each Lender expressly acknowledges that none of the Loan
Agents nor any of their officers, directors, employees, agents,
attorneys-in-fact or affiliates has made any representations or warranties to it
and that no act by either Loan Agent hereinafter taken or hereinbefore taken in
connection with the Existing Loan Agreement, including any review of the affairs
of Borrower or any of its Subsidiaries, shall be deemed to constitute any
representation or warranty by that Loan Agent to any Lender. Each Lender
represents to the Loan Agents that it has, independently and without reliance
upon either Loan Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of Borrower and its Subsidiaries, each Operator,
each Mortgagor and each Credit Support Obligor, and made its own decision to
make its loans hereunder and enter into this Agreement, and that it has
satisfied itself independently, without reliance on either of the Loan Agents or
any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates, as to the compliance of the transactions
contemplated hereby with all legal and regulatory requirements applicable to
such Lender. Each Lender expressly acknowledges that its representation in the
previous sentence shall not be restricted or construed in any way to import any
reliance on either Loan Agent or any other Lender as a result of any duties or
other actions which may have been undertaken by that Loan Agent or other Lender
in connection with the Existing Loan Agreement, and, where such Lender is itself
also a party to the Existing Loan Agreement, that such Lender's decision to make
its Loans hereunder and enter into this Agreement is made independently of its
decisions to enter into the Existing Loan Agreement and to make any loans
thereunder. Each Lender also represents that it will, independently and without
reliance upon either Loan Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement, and to make such investigation as it deems necessary to
inform itself as to the business, operations, property, financial and other
condition and creditworthiness of Borrower and its Subsidiaries, any Operator,
any Mortgagor or any Credit Support Obligor. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by that Loan
Agent hereunder, neither Loan Agent shall have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
operations, property, financial and other condition or credit-worthiness of
Borrower and its Subsidiaries which may come into its possession or the
possession of any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
(h) Each Lender agrees to indemnify, defend (with counsel
selected by each Loan Agent) and hold each Loan Agent in its capacity as such
(to the extent not reimbursed by Borrower and without limiting the obligation of
Borrower to do so), and such Loan Agent's respective officers, directors,
shareholders, employees and agents, ratably according to the aggregate loan
percentages set forth opposite its name on Schedule 1 hereto, harmless for, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including without limitation at any time
following the payment of the Notes) be imposed on, incurred by or asserted
against such Loan Agent in any way relating to or arising out of the Loan
Documents or the transactions contemplated thereby or any action taken or
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omitted by such Loan Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgements,
suits, costs, expenses or disbursements resulting primarily from such Loan
Agent's willful misconduct or gross negligence. The agreements in this Section
shall survive the payment of the Notes.
(i) Each Loan Agent and its affiliates may make loans to and
generally engage in any kind of business with Borrower or any of its
Subsidiaries as though such Loan Agent were not a Loan Agent hereunder. With
respect to its pro rata share of the Loan made or extended by it and any Note
issued to it, each Loan Agent shall have the same rights and powers under this
Agreement as any Lender and may exercise the same as though it were not a Loan
Agent. The terms "Lender" and "Lenders" shall include each Loan Agent in its
individual capacity.
(j) A Loan Agent may resign as Loan Agent upon 30 days'
written notice to the Lenders. In the event that a Loan Agent shall enter
receivership, then the Lenders (other than the Lender which is acting as such
Loan Agent, if applicable) may, by unanimous consent, remove such Loan Agent as
Loan Agent under this Agreement. If a Loan Agent shall resign as such Loan Agent
under this Agreement or a Loan Agent shall be removed, then the Majority Lenders
shall within 30 days of such resignation or removal or, in the absence of such
appointment, the resigning or removed Loan Agent shall, appoint a successor
agent for the Lenders, whereupon such successor agent shall succeed to the
rights, powers and duties of such Loan Agent, and the term "Agent" or
"Administrative Agent", as applicable, shall mean such successor agent effective
upon its appointment, and the former Loan Agent's rights, powers and duties as
Loan Agent shall be terminated, without any other or further act or deed on the
part of such former Loan Agent or any of the parties to this Agreement or any
holders of the Notes. After any retiring Loan Agent's resignation hereunder as
Loan Agent or any Loan Agent's removal, the provisions of this Section 8.1 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was a Loan Agent under this Agreement.
(k) Each Lender agrees to use its best efforts promptly upon
an officer responsible for the administration of this Agreement becoming aware
of any development or other information which may have a Material Adverse Effect
or MAC to notify the other Lenders of the same. Each Loan Agent agrees that it
shall promptly deliver to each Lender copies of all notices, demands, statements
and communications which such Loan Agent gives to Borrower, except for routine
notices of payment due under the Loan Documents and other miscellaneous notices,
demands, statements and communications, the failure of delivery of which to each
Lender shall not have a material adverse effect on any Lender. The foregoing
notwithstanding, no Loan Agent shall have any liability to any Lender, nor shall
a cause of action arise against any Loan Agent, as a result of the failure of
such Loan Agent to deliver to any Lender any notice, demand, statement or
communication required to be delivered by it under this Section 8.1(k), except
to the extent such failure is due to the gross negligence or wilful misconduct
of such Loan Agent.
(l) Each Loan Agent shall endeavor to exercise the same care
in administering the Loan Documents as it exercises with respect to similar
transactions in which it is involved and where no other co-lenders or
participants are involved; provided that the liability of such
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Loan Agent for failing to do so shall be limited as provided in the preceding
paragraphs of this Section 8.1.
(m) Each Lender agrees that, as between it and any Loan Agent,
any Loan Document or Appraisal, or other report or document with respect to
which the approval of such Lender is required hereunder, sent to it for review
shall be deemed consented to by it for purposes of any approval thereof by any
Loan Agent if such Lender does not give to such Loan Agent written notice of its
objection thereto within five Business Days of its receipt thereof. The
foregoing shall be for the benefit of such Loan Agent only and shall not be
deemed a consent under any other provision of this Agreement or to confer any
rights on Borrower or any of its Subsidiaries under this Agreement in any manner
whatsoever.
SECTION 9. SUBSIDIARY GUARANTIES
9.1 Guaranties.
In order to induce the Lenders to enter into this Agreement
and to make the Loans to Borrower hereunder, each Subsidiary of Borrower other
than Church Creek Corporation agrees as follows:
(a) Each such Subsidiary of Borrower hereby unconditionally
(subject to the next paragraph) and irrevocably guarantees, as primary obligor
and not merely as surety, the full and punctual payment (whether at stated
maturity, upon acceleration or otherwise) of the principal and interest
(including, without limitation, interest which, but for the filing of a petition
in bankruptcy with respect to Borrower would accrue hereunder) on all Loans made
to Borrower, and the full and punctual payment of all other amounts payable by
Borrower under this Agreement (including amounts that would become due but for
the operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code). Upon failure by Borrower to pay punctually any such amount,
each such Subsidiary shall forthwith on demand pay the amount not so paid as if
that Subsidiary instead of Borrower were expressed to be the principal obligor.
The obligations of each Subsidiary of Borrower under
this Section 9 shall be limited to a maximum aggregate amount equal to the
largest amount that would not render its obligations subject to avoidance as a
fraudulent transfer or conveyance under Section 548 of the United States
Bankruptcy Code or any applicable provisions of comparable state law, in each
case after giving effect to all other liabilities of the relevant Subsidiary
(contingent or otherwise) that are relevant under those laws.
In order to provide for just and equitable
contribution among the Subsidiaries of Borrower, each such Subsidiary agrees
that if any other Subsidiary makes payments under this Section 9 in an aggregate
amount in excess of the net value of the benefits received by such other
Subsidiary and its own Subsidiaries from extensions of credit under this
Agreement, then the Subsidiary which has made such excess payments shall have a
right of contribution against the other Subsidiaries of Borrower for such
excess. However, this right of contribution shall be subject to Section 9.1(e)
in all respects.
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Each Subsidiary of Borrower acknowledges that the
giving by it of this guarantee is a condition precedent to the making or
maintenance of the Loans to Borrower and also acknowledges that a portion of the
proceeds of the Loans may be advanced to it by Borrower, and accordingly the
obligations guaranteed are being incurred for, and will inure to, its benefit.
(b) The obligations of each Subsidiary of Borrower hereunder
shall be unconditional, irrevocable, direct and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged or otherwise
affected by (and, to the fullest extent permitted by law, each such Subsidiary
waives its rights in connection with):
(i) any extension, increase, renewal, settlement, compromise,
waiver or release in respect of any obligation of Borrower hereunder,
by operation of law or otherwise;
(ii) any modification or amendment of or supplement to this
Agreement;
(iii) any release, impairment, non-perfection or invalidity of
any direct or indirect security (if any) for any obligation of Borrower
under this Agreement;
(iv) any change in the trust existence, structure or ownership
of Borrower, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting Borrower or its assets or any resulting
release or discharge of any obligation of Borrower contained in the
Agreement;
(v) the existence of any claim, set-off or other rights which
such Subsidiary may have at any time against Borrower, any Lender or
any other Person, whether in connection herewith or any unrelated
transactions; provided that nothing herein shall prevent the assertion
of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against
Borrower for any reason of this Agreement, or any provision of
applicable law or regulation purporting to prohibit the payment by
Borrower of the principal or interest on any Loan or any other amount
payable by Borrower under this Agreement; or
(vii) any other act or omission to act or delay of any kind by
Borrower, any Lender or any other Person or any other circumstance
whatsoever which might, but for the provisions of this Section 9,
constitute a legal or equitable discharge of or defense to such
Subsidiary's obligations hereunder.
(c) Each such Subsidiary's obligations hereunder shall remain
in full force and effect until this Agreement shall have terminated and the
principal and interest on all Loans and all other amounts payable by Borrower
hereunder shall have been paid in full. Each such Subsidiary further agrees that
its guarantee hereunder shall continue to be effective or be reinstated, as the
case may be, if at any time payments, or any part thereof, of principal of or
interest on any obligation of Borrower is rescinded or must otherwise be
restored by Agent or any Lender upon the bankruptcy or reorganization of
Borrower or otherwise.
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(d) Each such Subsidiary irrevocably waives acceptance hereof,
presentment, demand, protest and any notice not provided for herein, as well as
any requirement that at any time any action be taken by any Person against
Borrower or any other Person.
(e) Each Subsidiary irrevocably waives any and all rights to
which it may be entitled, by operation of law or otherwise, upon making any
payment hereunder to be subrogated to the rights of the payee against Borrower
with respect to such payment or against any direct or indirect security
therefor, or otherwise to be reimbursed, indemnified or exonerated by or for the
account of Borrower in respect thereof.
SECTION 10. GENERAL
10.1 CHOICE OF LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONTRACTS UNDER AND SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
10.2 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; ETC.
NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT, THE NOTES OR ANY OTHER
LOAN DOCUMENT, EACH OF BORROWER AND EACH OF ITS SUBSIDIARIES HEREBY IRREVOCABLY
(a) SUBMITS TO THE NON-EXCLUSIVE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL
COURT IN THE STATE OF NEW YORK IN ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING
RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS; (b)
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT, ACTION OR OTHER LEGAL
PROCEEDING MAY BE HEARD AND DETERMINED IN, AND ENFORCED IN AND BY, ANY SUCH
COURT; (c) WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO VENUE IN
ANY SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM; (d) AGREES TO
SERVICE OF PROCESS IN ANY SUCH PROCEEDING BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, OR IN ANY OTHER MANNER PERMITTED BY LAW, TO ANY THEN ACTIVE
AGENT FOR SERVICE OF PROCESS ("PROCESS AGENT") AT ANY SPECIFIED ADDRESS OR TO
BORROWER AT ITS ADDRESS SET FORTH HEREIN OR TO SUCH OTHER ADDRESS OF WHICH
ADMINISTRATIVE AGENT (WITH A COPY TO AGENT TO FOLLOW) SHALL HAVE BEEN NOTIFIED
IN WRITING (SUCH SERVICE TO BE EFFECTIVE ON THE EARLIER OF RECEIPT THEREOF OR,
IN THE CASE OF SERVICE BY MAIL, THE 5TH DAY AFTER DEPOSIT OF SUCH SERVICE IN THE
MAILS AS AFORESAID), AND HEREBY WAIVES ANY CLAIM OF ERROR ARISING OUT OF SERVICE
OF PROCESS BY ANY METHOD PROVIDED FOR HEREIN OR ANY CLAIM THAT SUCH SERVICE WAS
NOT EFFECTIVELY MADE; (e) AGREES THAT THE FAILURE OF ITS PROCESS AGENT TO GIVE
ANY NOTICE OF ANY SUCH SERVICE OF PROCESS TO IT SHALL NOT IMPAIR OR AFFECT THE
VALIDITY OF SUCH SERVICE OR ANY JUDGMENT BASED THEREON; (f) TO THE
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EXTENT THAT BORROWER OR ANY SUCH SUBSIDIARY HAS ACQUIRED, OR HEREAFTER MAY
ACQUIRE, ANY IMMUNITY FROM JURISDICTION OF ANY SUCH COURT OR FROM LEGAL PROCESS
THEREIN, WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, SUCH
IMMUNITY; (g) WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN
CONNECTION WITH, OR WITH RESPECT TO, ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING
RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, (i)
ANY CLAIM THAT IT IS IMMUNE FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION
OR OTHERWISE) WITH RESPECT TO IT OR ANY OF ITS PROPERTY, (ii) ANY CLAIM THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, AND (iii) ANY
RIGHT TO A JURY TRIAL; AND (h) AGREES THAT AGENT AND EACH LENDER SHALL HAVE THE
RIGHT TO BRING ANY LEGAL PROCEEDINGS (INCLUDING A PROCEEDING FOR ENFORCEMENT OF
A JUDGMENT ENTERED BY ANY OF THE AFOREMENTIONED COURTS) AGAINST BORROWER OR SUCH
SUBSIDIARY IN ANY OTHER COURT OR JURISDICTION IN ACCORDANCE WITH APPLICABLE LAW.
NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF
AGENT AND EACH LENDER TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY
OTHER JURISDICTION OR THE RIGHT, IN CONNECTION WITH ANY LEGAL ACTION OR
PROCEEDING WHATSOEVER, TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW. EACH OF BORROWER AND EACH OF ITS SUBSIDIARIES HEREBY IRREVOCABLY DESIGNATES
THE FIRM OF SULLIVAN & WORCESTER, WITH OFFICES AT 767 THIRD AVENUE, NEW YORK,
NEW YORK 10017, ATTENTION: CHARLES M. DUBROFF, AS ITS PROCESS AGENT TO RECEIVE
SERVICE OF ANY AND ALL PROCESS AND DOCUMENTS ON ITS BEHALF IN ANY LEGAL
PROCEEDING IN THE STATE OF NEW YORK AND SUCH PROCESS AGENT, BY ITS
ACKNOWLEDGEMENT BELOW, IRREVOCABLY AGREES TO SO ACT AS PROCESS AGENT FOR SERVICE
OF PROCESS. IF SUCH PROCESS AGENT SHALL FOR ANY REASON FAIL TO ACT, OR BE
PREVENTED FROM ACTING, AS PROCESS AGENT, NOTICE THEREOF SHALL IMMEDIATELY BE
GIVEN TO AGENT BY REGISTERED OR CERTIFIED MAIL AND BORROWER AGREES (FOR ITSELF
AND ITS SUBSIDIARIES) PROMPTLY TO DESIGNATE ANOTHER PROCESS AGENT IN THE CITY OF
NEW YORK, SATISFACTORY TO AGENT UNDER THIS AGREEMENT, TO SERVE IN PLACE OF SUCH
PROCESS AGENT AND DELIVER TO AGENT WRITTEN EVIDENCE OF SUCH SUBSTITUTE PROCESS
AGENT'S ACCEPTANCE OF SUCH DESIGNATION. SUCH ACTING PROCESS AGENT SHALL
NEVERTHELESS CONTINUE TO SERVE AS PROCESS AGENT UNTIL ITS SUCCESSOR IS DULY
APPOINTED.
10.3 Notices; Certain Payments. (a) All notices, consents and
other communications to Borrower or any of its Subsidiaries, Agent,
Administrative Agent or any
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Lender relating hereto to be effective shall be in writing and shall be deemed
made (i) if by certified mail, return receipt requested, or facsimile, when
received, (ii) if by telex, when sent answerback received, and (iii) if by
courier, when receipted for, in each case addressed to them as follows or at
such other address as either of them may designate by written notice to the
other: (w) Borrower and its Subsidiaries: Health and Retirement Properties
Trust, 400 Centre Street, Newton, Massachusetts 02158, Attention: President and
Treasurer (telecopier no. (617) 332-2261) with a copy to Sullivan & Worcester,
One Post Office Square, Boston, Massachusetts 02109, Attention: Jennifer B.
Clark, Esq. (telecopier no. (617) 338-2880); (x) Agent: Kleinwort Benson
Limited, P.O. Box 560, 20 Fenchurch Street, London, EC3P 3DB, England,
Attention: Robin Tilbury, Loans Administration (telecopier no.
011-44-171-956-6105) with a copy to Kleinwort Benson (North America),
Incorporated, 200 Park Avenue, 25th Floor, New York, New York 10166, Attention:
Peter Kettle and Abbie Baynes (telecopier no. 1-212-983-5981); (y)
Administrative Agent: Wells Fargo Bank, National Association, Corporate Banking,
420 Montgomery Street, San Francisco, California 94163, Attention: (in the case
of a Notice of Borrowing) Lupe Barajas (telecopier no. 1-415-989-4319) or (in
all other cases) Brian O'Melveny (telecopier no. 1-415-421-1352); and (z) the
Lenders : to the addresses specified opposite such Lenders' respective names on
Schedule 1 hereto, with a copy to O'Melveny & Myers, 153 East 53rd Street, New
York, New York 10022, Attention: Christopher D. Hall, Esq. (telecopier no. (212)
326-2061).
(b) All payments on account of the Loans and the related Notes
pursuant hereto or pursuant to the other Loan Documents shall be made to the
Borrower's account with Administrative Agent at:
Wells Fargo Bank, N.A.
San Francisco, California
ABA No. 121000248
Account Name: Health and Retirement Properties Trust
Account No. 4518073184
together with irrevocable instructions to Administrative Agent to apply such
payments under this Agreement. Administrative Agent may by written notice to
Borrower specify or change its account and address for payment instructions
hereunder.
10.4 No Waivers; Cumulative Remedies; Entire Agreement;
Headings; Successors and Assigns; Counterparts; Severability. (a) No action,
failure, delay or omission by Agent, Administrative Agent or any Lender in
exercising any rights, powers, privileges and remedies under this Agreement, the
Notes or any other Loan Document, or otherwise, shall constitute a waiver of, or
impair, any of the rights, powers, privileges or remedies of Agent,
Administrative Agent or any Lender hereunder or thereunder.
(b) No single or partial exercise of any such right, power,
privilege or remedy shall preclude any other or further exercise thereof or the
exercise of any other right, power, privilege or remedy. Such rights, powers,
privileges and remedies are cumulative and not exclusive of any rights, powers,
privileges and remedies provided by law or otherwise available, including, but
not limited to, rights to specific performance (to the extent permitted by law)
or any covenant or agreement contained in this Agreement or any of the Loan
Documents. No waiver of any such right, power, privilege or remedy shall be
effective
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unless given in writing by the Majority Lenders or as otherwise provided in
Section 10.6. No waiver of any such right, power, privilege or remedy shall be
deemed a waiver of any other right, power, privilege or remedy hereunder or
thereunder. Every right, power, privilege and remedy given by this Agreement or
by applicable law to Agent, Administrative Agent or any Lender may be exercised
from time to time and as often as may be deemed expedient by Agent,
Administrative Agent or any Lender.
(c) This Agreement, the Notes and the other Loan Documents
constitute the entire agreement of the parties relating to the subject matter
hereof and thereof and there are no verbal agreements relating hereto or
thereto. Section headings herein shall have no legal effect.
(d) This Agreement, the Notes and the other Loan Documents
(including all covenants, representations, warranties, rights, powers,
privileges and remedies made or granted herein or therein) shall inure to the
benefit of, and be enforceable by, Agent, Administrative Agent and each Lender
and their respective successors and assigns, except as otherwise expressly
provided in this Agreement. Neither Borrower nor any of its Subsidiaries may
directly or indirectly assign or transfer (whether by agreement, by operation of
law or otherwise) any of its rights or obligations and liabilities hereunder
without the prior written consent of each Lender. Each of the Lenders may make,
carry or transfer its pro rata share of the Loans at, to or for the account of,
any of its branch offices or the office of one or more of its Affiliates.
Further, each Lender may sell participations in all or any part of its pro rata
share of the Loans or its Commitments or any other interest herein or in its
Notes to another bank or Person, or with the prior written consent of Agent and
Borrower (not to be unreasonably withheld; provided that Borrower's consent
shall not be required if an Event of Default has occurred and is continuing)
each Lender may assign its rights and delegate its obligations under this
Agreement and any of the other Loan Documents and with the prior written consent
of Agent and Borrower (not to be unreasonably withheld; provided that Borrower's
consent shall not be required if an Event of Default has occurred and is
continuing) may assign all or any part of its pro rata share of the Loans or its
Commitment or any other interest herein or in its Notes to another bank or other
Person in amounts not less than $5,000,000 (or any lesser amount in the case of
an assignment by one Lender to another Lender) to any one assignee, in which
event (i) in the case of an assignment, upon notice thereof by such Lender to
Borrower, Agent and Administrative Agent, the assignee shall have, to the extent
of such assignment (unless otherwise provided therein), the same rights and
benefits as it would have if it were such Lender hereunder and the holder of a
Note and to such extent shall be deemed a "Lender" for all purposes of this
Agreement and the other Loan Documents, and (ii) in the case of a participation,
the participant shall not have any rights under this Agreement or any Note or
any other Loan Document (the participant's rights against such Lender in respect
of such participation to be those set forth in the agreement executed by such
Lender in favor of the participant relating thereto). In the case of such a
participation, the terms of the agreement or agreements pursuant to which any
such participation is created shall not confer upon the participant any right to
vote its interest as a participant in respect of any matter relating to the
Loans other than (w) the extension of the maturity of any Note or the time of
payment of interest thereon, (x) the reduction of the rate of interest payable
hereunder, (y) the reduction of any other amount payable hereunder or (z) the
increase of such participant's share of the relevant Lender's Commitment
hereunder. Each Lender may furnish any information concerning Borrower and its
Subsidiaries, the
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Advisor, any Operator, any Mortgagor and any Credit Support Obligor in the
possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants). In the event that any Lender
shall assign or sell any of its Notes, such Lender shall at the time of such
assignment or sale give written notice to Agent, Administrative Agent and
Borrower of the name and address of the assignee (including the name of the
account officer if applicable).
(e) Each Lender agrees that such Lender shall not assign or
offer to assign interests in its Notes in such a manner which would require that
the Notes be registered under applicable securities laws. Each Lender represents
that it is acquiring its respective Note for investment and not with a view to
or for sale in connection with any distribution thereof within the meaning of
the Securities Act of 1933, as amended; provided that the disposition of the
Notes in accordance with the other provisions of this Section 10.4 shall at all
times remain within the Lenders' control.
(f) This Agreement may be executed in any number of separate
counterparts, each of which shall be deemed an original and all of which taken
together shall be deemed to constitute one and the same instrument.
(g) In the event any one or more of the provisions contained
in this Agreement or any Notes or any other Loan Documents should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall not
in any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal, or unenforceable provisions.
10.5 Survival. The obligations of Borrower under Sections 2.6,
2.10, 2.12, 2.13, 2.14, 2.15, 5.12 and 10.7 (and all other indemnification and
expense reimbursement obligations of Borrower under this Agreement) shall
survive the repayment of the Loans and the cancellation of the Notes and the
termination of the other obligations of Borrower hereunder and under the other
Loan Documents. All representations and warranties made hereunder and in any
document, certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
Notes and the funding of the Loans.
10.6 Amendments and Waivers. With the written consent of the
Majority Lenders, Agent and Borrower may, from time to time, enter into written
amendments, supplements or modifications hereto or to any of the other Loan
Documents and with the written consent of the Majority Lenders, Agent on behalf
of the Lenders may execute and deliver to Borrower a written instrument waiving,
on such terms and conditions as Agent may specify in such instrument, any of the
requirements of this Agreement or the Notes or any Default or Event of Default
and its consequences; provided that no such waiver and no such amendment,
supplement or modification shall (a) extend the maturity of any Note, or reduce
the rate or extend the time of payment of interest thereon, or reduce or
postpone the due date for the principal amount thereof or any other amount
payable in connection herewith, or change the amount or terms of any Lender's
Commitment or amend, modify or waive any provision of this Section or reduce the
percentage specified in the definition of Majority
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Lenders, or consent to the assignment or transfer by Borrower or any of its
Subsidiaries of any of its rights and obligations under this Agreement, in each
case without the written consent of all the Lenders, (b) amend, modify or waive
any provision of Section 8 or otherwise change any of the rights or obligations
of either or both of the Loan Agents under any of the Loan Documents without the
written consent of the affected Loan Agent or Loan Agents (as applicable) at the
time, (c) with respect to Section 6.7, amend, modify or waive (y) any provision
thereof in a manner which permits Borrower or any of its Subsidiaries to own,
operate, acquire or fund income producing real property interests or facilities
which do not offer health care or related services or rehabilitation or
retirement services, or incidental activities to any of the foregoing, or (z)
the proviso to Section 6.7, without, in the case of both clauses (y) and (z) of
this clause (c), the written consent of the Majority Lenders, Agent, Co-Agent
and Borrower (provided that any other type of amendment, modification or waiver
of Section 6.7 shall only require the written consent of the Majority Lenders,
Agent and Borrower) or (d) amend, modify or waive any provision of this Section
10.6 without the written consent of all Lenders. In the case of any waiver,
Borrower, Agent, Administrative Agent and the Lenders shall be restored to their
former position and rights hereunder and under the Outstanding Notes, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
10.7 Payment of Expenses and Taxes. Borrower agrees (a) to pay
or reimburse each of Agent and Administrative Agent on demand for all its
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
this Agreement, the Notes and any other Loan Documents or other documents
prepared in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to Agent and Administrative Agent, (b) to pay
or reimburse each Lender, Agent and Administrative Agent on demand for all its
costs and expenses incurred in connection with the enforcement or preservation
of any rights under this Agreement, the Notes, the other Loan Documents and any
such other documents, or the satisfaction or review of conditions precedent to
any borrowing other than that occurring on the Effective Date, including,
without limitation, reasonable fees and disbursements of counsel to Agent and
Administrative Agent and, in the case of enforcement or preservation of any
rights under this Agreement, counsel to the several Lenders, and (c) to pay,
indemnify, and to hold each Lender, Agent and Administrative Agent and their
respective officers, directors, employees and agents harmless for, from and
against, any and all recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, excise and other
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of, or consummation or administration of any of
the transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Agreement, the Notes,
the other Loan Documents and any such other documents, and (d) to pay,
indemnify, and hold each Lender, Agent and Administrative Agent and their
respective officers, directors, employees and agents harmless for, from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of, or in any other way arising out of or
relating to, this Agreement, the Notes, the other Loan Documents and any such
other documents, including, without limitation, any
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claim resulting or arising out of the presence of Hazardous Materials in any of
the Properties (all the foregoing, collectively, the "Indemnified Liabilities"),
provided that Borrower shall have no obligation hereunder with respect to
Indemnified Liabilities arising from (i) the willful misconduct of any such
Lender or (ii) legal proceedings commenced against any such Lender by any
security holder or creditor thereof arising out of and based upon rights
afforded any such security holder or creditor solely in its capacity as such.
10.8 Adjustments; Setoff.
(a) If any Lender (a "benefitted Lender") shall at any time
receive any payment of all or part of its Loan, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, pursuant to events or proceedings of the nature referred to in clause
(g) of Section 7.1, or otherwise) in a greater proportion than any such payment
to or collateral received by any other Lender, if any, in respect of such other
Lenders' Loan, or interest thereon, such benefitted Lender shall purchase for
cash from the other Lenders such portion of each such other Lender's Loan, or
shall provide such other Lenders with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably with
each of the Lenders; provided that if all or any portion of such excess payment
or benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest. Borrower expressly consents to the
foregoing arrangements and agrees that each Lender so purchasing a portion of
another Lender's Loan may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to
Borrower, any such notice being expressly waived by Borrower to the extent
permitted by applicable law, upon
(i) the filing of a petition under any of the provisions of
the federal bankruptcy act or amendments thereto, by or against;
(ii) the making of an assignment for the benefit of creditors
by;
(iii) the application for the appointment, or the appointment,
of any receiver of, or of any of the property of;
(iv) the issuance of any execution against any of the property
of;
(v) the issuance of a subpoena or order, in supplementary
proceedings, against or with respect to any of the property of; and/or
(vi) or the issuance of a warrant of attachment against any of
the property of;
Borrower to set off and apply against any indebtedness, whether matured or
unmatured, of Borrower to such Lender, any amount owing from such Lender to
Borrower, at or at any time
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after, the happening of any of the above-mentioned events, and the aforesaid
right of set off may be exercised by such Lender against Borrower or against any
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor of Borrower,
or against anyone else claiming through or against Borrower or such trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receiver, or execution, judgment or attachment creditor, notwithstanding the
fact that such right of set off shall not have been exercised by such Lender
prior to the making, filing or issuance, or service upon such Lender of, or of
notice of, any such petition; assignment for the benefit of creditors;
appointment or application for the appointment of a receiver; or issuance of
execution, subpoena or order of warrant. Each Lender agrees promptly to notify
Borrower, Agent and Administrative Agent after any such set off and application
made by such Lender, provided that the failure to give such notice shall not
affect the validity of such set off and application. The proceeds of any set off
or application pursuant to this subsection (b) of Section 10.8 shall be
distributed in accordance with the preceding subsection (a).
10.9 NONLIABILITY OF TRUSTEES. THE DECLARATION OF
TRUST ESTABLISHING BORROWER, DATED OCTOBER 9, 1986, A COPY OF
WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED
WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND,
PROVIDES THAT THE NAME "HEALTH AND RETIREMENT PROPERTIES TRUST" REFERS TO THE
TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF
BORROWER SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, BORROWER. ALL PERSONS DEALING WITH BORROWER, IN
ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF BORROWER FOR THE PAYMENT OF ANY SUM OR
THE PERFORMANCE OF ANY OBLIGATION.
[Remainder of page left blank intentionally]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in New York, New York by their
proper and duly authorized officers as of the day and year first above written.
HEALTH AND RETIREMENT
PROPERTIES TRUST
By: /s/ Ajay Saini
Name: Ajay Saini
Title: Treasurer
KLEINWORT BENSON LIMITED, as
Agent and as a Lender
By: /s/ Patrick F. Donelan
Name: Patrick F. Donelan
Title: Director
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Administrative Agent
and as a Lender
By: /s/ Brian S. O'Melveny
Name: Brian S. O'Melveny
Title: Vice President
NATWEST BANK N.A., as Co-Agent and
as a Lender
By: /s/ Alfred R. Bonfantini
Name: Alfred R. Bonfantini
Title: Vice President
FLEET BANK OF MASSACHUSETTS,
as a Lender
By: /s/ Ginger Stolzenthaler
Name: Ginger Stolzenthaler
Title: Vice President
S-1
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THE SUMITOMO BANK, LIMITED,
Chicago Branch, as a Lender
By: /s/ Daniel G. Eastman
Name: Daniel G. Eastman
Title: Vice President and Manager
By: /s/Stephen F. O'Sullivan
Name: Stephen F. O'Sullivan
Title: Ass't. Vice President
MITSUI LEASING (USA) INC., as a
Lender
By: /s/ Masato Utsumi
Name: Masato Utsumi
Title: President
BANK HAPOALIM B.M., as a Lender
By: /s/ Laura Anne Raffy
Name: Laura Anne Raffy
Title: Executive Vice President
By: /s/ Shaun Breidhart
Name: Shaun Breidhart
Title: Ass't. Vice President
DRESDNER BANK AG, New York
Branch and Grand Cayman Branch, as a
Lender
By: /s/ Andrew P. Nesi
Name: Andrew P. Nesi
Title: Vice President
By: /s/ Andrew E. Schroeder
Name: Andrew E. Schroeder
Title: Ass't. Vice President
CREDIT LYONNAIS Cayman Island
Branch, as a Lender
By: /s/ Farboud Tavangar
Name: Farboud Tavangar
Title: Authorized Signature
S-2
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BANK OF MONTREAL, as a Lender
By: /s/ Irene M. Geller
Name: Irene M. Geller
Title: Director
RIGGS NATIONAL BANK, as a Lender
By: /s/ David H. Olson
Name: David H. Olson
Title: Vice President
VIA BANQUE, as a Lender
By: /s/ Christel Prot
Name: Christel Prot
Title: Sous Directeur
By: /s/ P. Arnout
Name: P. Arnout
Title: Directeur
DG BANK
Deutsche Genossenschaftsbank, as a
Lender
By: /s/ Linda J. O'Connell
Name: Linda J. O'Connell
Title: Vice President
By:
Name:
Title:
S-3
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SOCIETY NATIONAL BANK, as a
Lender
By: /s/ Angela G. Mago
Name: Angela G. Mago
Title: Vice President
For the purposes of Section 9:
HEALTH AND RETIREMENT
PROPERTIES INTERNATIONAL, INC.
By: /s/ Ajay Saini
Name: Ajay Saini
Title: Treasurer
CAUSEWAY HOLDINGS INC.
By: /s/ Ajay Saini
Name: Ajay Saini
Title: Treasurer
SJO CORPORATION
By: /s/ Ajay Saini
Name: Ajay Saini
Title: Treasurer
S-4
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EXHIBIT A
[FORM OF PROMISSORY NOTE]
PROMISSORY NOTE
$___________ New York, New York
March ___, 1996
FOR VALUE RECEIVED, the undersigned, HEALTH AND RETIREMENT
PROPERTIES TRUST, a real estate investment trust organized under the laws of the
State of Maryland (the "Borrower"), hereby unconditionally promises to pay to
the order of ___________ (the "Lender") in lawful money of the United States of
America and in immediately available funds, the lesser of (a) ____________ or
(b) the unpaid outstanding principal amount from time to time of the Loans from
the Lender to the Borrower pursuant to the Loan Agreement hereinafter referred
to, on the Termination Date; provided that Loans denominated in GBP shall be
repaid in the currency required by and otherwise in accordance with and subject
to the terms of the Loan Agreement.
The undersigned further agrees to pay interest in like money
on the unpaid principal amount of such Loans (including, without limitation, any
interest accrued and unpaid as at the date of this Note) on the dates and at the
rate or rates and in the currency provided for in the Loan Agreement until paid
in full (both before and after judgment). The holder of this Note is authorized
to endorse from time to time the date and amount of the Loans, any conversions
or continuations thereof, each payment of principal with respect thereto and
whether such Loans are Base Rate Loans, Eurodollar Loans or Alternate Rate Loans
on the schedule annexed hereto and made a part hereof, or on a continuation
thereof which shall be attached hereto and made a part hereof, which
endorsements shall constitute prima facie evidence of the accuracy of the
information endorsed. Any failure to make any such endorsement, however, shall
not limit or otherwise affect the obligations of Borrower under this Note.
All payments of principal and interest hereunder shall be made
to the account of the Administrative Agent referred to below designated in or
pursuant to the Loan Agreement for payments thereunder for the benefit of the
Lender named herein.
This Note is one of the Notes referred to in the Third Amended
and Restated Revolving Loan Agreement dated as of March 15, 1996 among the
Borrower, the Lenders named therein, Kleinwort Benson Limited, as Agent, Wells
Fargo Bank, National Association, as Administrative Agent, and NatWest Bank
N.A., as Co-Agent (as the same may be or may have been amended, restated,
supplemented or otherwise modified from time to time, the "Loan Agreement"). The
holder of this Note is entitled to the benefits of the Loan Agreement. Terms
defined in the Loan Agreement and not otherwise defined herein are used herein
with the same meanings. Reference is made to the Loan Agreement for provisions
for the prepayment hereof and the acceleration of the maturity hereof.
The Borrower promises to pay all costs and expenses, including
reasonable attorneys' fees, incurred in the collection or enforcement of this
Note. The Borrower hereby waives diligence, presentment, protest, demand and
notice of every kind and, to the full
A-1
<PAGE>
extent permitted by law, the right to plead any statute of limitations as a
defense to any demand hereunder.
The Declaration of Trust of the Borrower provides that the
name "Health and Retirement Properties Trust" refers to the Trustees under the
Declaration of Trust (the "Trustees") collectively as Trustees, but not
individually or personally, and that no Trustee, officer, shareholder, employee
or agent of the Borrower shall be held to any personal liability, jointly or
severally, for any obligation of, as claims against, the Borrower.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
HEALTH AND RETIREMENT
PROPERTIES TRUST
By: __________________________________
Name: ____________________________
Title: ____________________________
A-2
<PAGE>
<TABLE>
<CAPTION>
Amount and Currency
Date of Loan, of Loan, Eurodollar, Base Amount of
Conversion or Conversion or Rate or Alternate Principal Notation
Continuation Continuation Rate Loan Repaid Made By
<S> <C> <C> <C> <C>
</TABLE>
A-3
<PAGE>
EXHIBIT B
[FORM OF NOTICE OF BORROWING]
NOTICE OF BORROWING
Pursuant to that certain Third Amended and Restated Revolving
Loan Agreement dated as of March 15, 1996 (such agreement, as it may be or may
have been amended, restated, supplemented or otherwise modified from time to
time, the "Loan Agreement"; capitalized terms used herein without definition
shall have the respective meanings assigned to those terms in the Loan
Agreement) among Health and Retirement Properties Trust (formerly known as
Health and Rehabilitation Properties Trust) ("Borrower"), the Lenders party
thereto, Kleinwort Benson Limited, as Agent, Wells Fargo Bank, National
Association, as Administrative Agent, and NatWest Bank N.A., as Co-Agent, this
certificate represents Borrower's Notice of Borrowing under Section 2.3(a) of
the Loan Agreement for the borrowing described below (the "Borrowing"). The
information relating to the Borrowing required by Section 2.3(a) of the Loan
Agreement is as follows:
(i) The proposed Borrowing Date is [date].
(ii) The proposed Borrowing is to be denominated in [U.S.$]
[GBP].
(iii) The proposed Borrowing is of $_________ [in Eurodollar
Loans] [and] [$__________ in Base Rate Loans].
[(iv) The initial Interest Period applicable to the Eurodollar
Loans, if applicable, is [one, two, three or six months][state other period].]
[(v) [$__________ of the proposed Borrowing of Eurodollar
Loans] [and] [$__________ of the proposed Borrowing of Base Rate Loans] shall be
General Corporate Loans.]
[(vi)] Borrower's representations and warranties contained in
the Loan Documents are true, correct and accurate in all material respects to
the same extent as though made on and as of the date hereof unless stated in the
relevant Loan Document to relate to a specific earlier date, in which case such
representations and warranties are true, correct and complete in all material
respects as of such earlier date.
[(vii)] No event has occurred and is continuing or would
result from the proposed Borrowing that would constitute a Default or Event of
Default.
[(viii)] The amount of the proposed Borrowing will not cause
the aggregate outstanding principal amount of the Loans to exceed the
Commitments currently in effect.
[(ix)] The amount of the proposed Borrowing will not cause the
aggregate amount of all General Corporate Loans outstanding to exceed 25% of the
Commitments currently in effect.
[(x) ]The amount of the proposed Borrowing will not cause the
aggregate
B-1
<PAGE>
amount of the Loans outstanding denominated in GBP to exceed the Equivalent
Amount of $100,000,000 (as determined in accordance with Section 1.3(b) of the
Loan Agreement).
[(xi)] The proceeds of the proposed Borrowing (other than any
proceeds in respect of General Corporate Loans) shall be used to make
payment on the proposed Borrowing Date for the purchase price and costs
of acquiring interests in one or more Facilities due and payable on
such Borrowing Date.
[(xii)] With respect to the proceeds of the proposed Borrowing
(other than any proceeds of General Corporate Loans):
(a) the name (s) of the proposed [Operators] [and/or
Mortgagors] of the Facility or Facilities to which such
Borrowing relates are ______________, and the name (s) of any
Credit Support Obligors in relation thereto are
___________;
(b) the name (s) and location (s) of such Facility or
Facilities are ___________;
(c) (1) [with respect to each Eligible Property or Property:
the Appraised Value (s) thereof in the most recent Appraisal
(s) are $__________; the acquisition costs to Borrower or to
one of its Subsidiaries therefor are $_____________; the value
(s) attributable to any capital improvements made and financed
by such Operators are $___________; and the minimum purchase
prices which would be payable to Borrower or such Subsidiary
by such Operators or any other Person if purchased on the date
of this Notice pursuant to the exercise of any right of
purchase are $_________;] and
[with respect to each Eligible Mortgage or Mortgage Interest:
the Appraised Value (s) of the Mortgaged Properties in the
most recent Appraisal (s) are $___________; and the
outstanding principal amounts due to Borrower or one of its
Subsidiaries from Mortgagors are: $____________;] and
(2) description of interests of Borrower or one of its
Subsidiaries to be acquired with proceeds of such Borrowing:
_________________________; and
(d) the proceeds of such Loan [will/will not] be used to
acquire an interest in any Facility which interest is required
to be an [Eligible Property] [Eligible Mortgage] included in
the calculation of Indebtedness permitted under Section 6.8(a)
after giving effect to such Loan.
[Borrower confirms to you pursuant to Section 2.3(a) of the
Loan Agreement that Borrower has irrevocably given telephonic notice of such
borrowing under the Loan Agreement pursuant to the telephone conversation on
[date] between ____________ and
__________.]
Please pay the proceeds of such Loans into the account whose
details are given below:
B-2
<PAGE>
DATED: HEALTH AND RETIREMENT PROPERTIES TRUST
By:
Its:
B-3
<PAGE>
EXHIBIT C
[FORM OF NOTICE OF CONTINUATION/CONVERSION]
NOTICE OF CONTINUATION/CONVERSION
Pursuant to that certain Third Amended and Restated Revolving
Loan Agreement dated as of March 15, 1996 (such agreement, as it may be or may
have been amended, restated, supplemented or otherwise modified from time to
time, the "Loan Agreement"; capitalized terms used herein without definition
shall have the respective meanings assigned to those terms in the Loan
Agreement) among Health and Retirement Properties Trust ("Borrower"), the
Lenders party thereto, Kleinwort Benson Limited, as Agent, Wells Fargo Bank,
National Association, as Administrative Agent, and NatWest Bank N.A., as
co-agent, this certificate represents Borrower's Notice of
Continuation/Conversion under Section 2.5(b) of the Loan Agreement for the Loans
specified below.
Borrower hereby requests to [continue as Eurodollar Loans
$__________ in aggregate principal amount of the outstanding Eurodollar Loans,
the current Interest Period of which ends on __________, 19__][and][convert to
[Base Rate Loans][Eurodollar Loans] $__________ in aggregate principal amount of
the outstanding [Eurodollar Loans, the current Interest Period of which ends on
__________][Base Rate Loans][Alternate Rate Loans]]. The date for such
[continuation] [and] [conversion] shall be . [The Interest Period for such
continued or converted (as applicable) Eurodollar Loans is requested to be [a
__________ month period][a __________ period, if agreed by all Lenders.]
Borrower hereby certifies that:
(i) No event has occurred and is continuing or would result
from the proposed Borrowing that would constitute a Default or Event of
Default.
(ii) Borrower's representations and warranties contained in
the Loan Documents are true, correct and accurate in all material
respects to the same extent as though made on and as of the date hereof
unless stated in the relevant Loan Document to relate to a specific
earlier date, in which case such representations and warranties are
true, correct and complete in all material respects as of such earlier
date.
C-1
<PAGE>
[Borrower confirms to you pursuant to Section 2.5(b) of the
Loan Agreement that Borrower has irrevocably given telephonic notice of such
continuation/conversion under the Loan Agreement pursuant to the telephone
conversation on [date] between ____________ and __________.]
DATED: HEALTH AND RETIREMENT PROPERTIES TRUST
By:
Its:
C-2
<PAGE>
SCHEDULE 1
LENDERS' COMMITMENTS
LENDER COMMITMENT
Kleinwort Benson Limited $ 10,000,000
Wells Fargo Bank, National Association $ 20,000,000
NatWest Bank N.A. $ 25,000,000
The Sumitomo Bank, Limited, Chicago Branch $ 20,000,000
Fleet Bank of Massachusetts $ 20,000,000
Bank Hapoalim B.M. $ 20,000,000
Dresdner Bank AG, New York Branch
and Grand Cayman Branch $ 20,000,000
Credit Lyonnais
Cayman Island Branch $ 20,000,000
Mitsui Leasing (USA) Inc. $ 12,500,000
Bank of Montreal $ 20,000,000
Riggs National Bank $ 12,500,000
Via Banque $ 20,000,000
DG Bank $ 15,000,000
Society National Bank $ 15,000,000
Total $ 250,000,000
-----------
CERTAIN LENDING OFFICES
Kleinwort Benson Limited
20 Fenchurch Street
London EC3P 3DB
Tel: (44) 171-623-8000
Fax: (44) 171-623-3598
Attn: Robin Tilbury
Wells Fargo Bank, National Association
Corporate Banking
S1-1
<PAGE>
420 Montgomery Street
San Francisco, California 94163
Tel: (415) 396-4065
Fax: (415) 421 1352
Attn: Brian O'Melveny
NatWest Bank N.A.
175 Water Street, 27th Floor
New York, New York 10038
Tel: (212) 602 2330
Fax: (212) 602 2671
Attn: Pauline T. McHugh
The Sumitomo Bank, Limited, Chicago Branch (USCBD)
233 S. Wacker Drive
Suite 5400
Chicago, Illinois 60606
Tel: (312) 993 6210
Fax: (312) 876 1995
Attn: VP + Manager - Operations
Fleet Bank of Massachusetts
75 State Street
Boston, Massachusetts 02109
Tel: (617) 346-1647
Fax: (617) 346-1634
Attn: Ginger Stolzenthaler
Mitsui Leasing (U.S.A.) Inc.
200 Park Avenue, Suite 3214
New York, New York 10166
Tel: (212) 557 0455
Fax: (212) 490 1684
Attn: Jeff Fishman
Bank Hapoalim B.M.
1177 Avenue of the Americas
New York, NY 10036
Tel: (212) 782 2187
Fax: (212) 782 2172
Attn: Shaun Breidbart
Dresdner Bank, New York Branch
and Grand Cayman Branch
75 Wall Street
S1-2
<PAGE>
New York, New York 10005-2889
Tel: (212) 429-2201
Fax: (212) 429-2129
Attn: Andrew Nesi
Credit Lyonnais
Cayman Island Branch
1301 Avenue of the Americas 20th Floor
New York, New York 10019
Tel: (212) 261 7748
Fax: (212) 261 3440
Attn: Francoise Giacalone
Bank of Montreal
115 S. La Salle Street, 12 West
Chicago, IL 60603
Tel: (312) 750-4368
Fax: (312) 750-4314
Attn: Irene Geller
Riggs National Bank
808 17th Street, NW
10th Floor
Washington, DC 20006
Tel: (202) 835-5105
Fax: (202) 835-5977
Attn: Dave Olson
Via Banque
10 Rue Volney
75002 Paris, France
Tel: 011-331-4926-2913
Fax: 011-331-4926-2993
Attn: Christel Prot
Society National Bank
127 Public Square, 6th Floor
Cleveland
OH 44114-1306
Tel: (216) 689-3247
S1-3
<PAGE>
Fax: (216) 689-5970
Attn: Angela Mago
S1-4
<PAGE>
SCHEDULE 2
PERMITTED EXCEPTIONS
1. Liens of landlords, mechanics, materialmen and other Liens imposed by
law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith; provided that, in each
case, any such Lien is not reasonably likely to cause a MAC; and
provided further that, in the case of any Liens being so contested, (v)
the amount secured thereby is not material in relation to the Allowed
Value of the affected Property or Mortgage Interest, (w) such Property
or any interest therein would not be in any danger of being sold,
forfeited or lost by reason of such contest; (y) no insurance coverage
required to be maintained pursuant to this Agreement shall be cancelled
or jeopardized as a result of the contest; and (z) if required by
Agent, Borrower shall have furnished to Agent a bond, or other security
satisfactory to Agent, to protect Lenders from any liability to which
it may be exposed as a result of such contest.
2. In the case of a Property, all Leases for such Property and the rights
of the Operators under such Leases and any Credit Support Agreements
relating to such Leases.
3. In the case of a Mortgaged Property, the Mortgaged Interest Agreements
for such Mortgaged Property and any Credit Support Agreements relating
thereto.
4. Liens for taxes, assessments, water rates, sewer or other governmental
charges or claims, the payment of which is not, at the time, due.
5. Easements, rights-of-way, rights of access, encroachments upon or by
any Property, in respect of which affirmative insurance, without
payment of additional premiums, has been provided by a reputable title
insurance company.
6. Easements, rights-of-way, restrictions, minor defects, encroachments or
irregularities in title and other similar charges or encumbrances that,
in respect of any Property, could not reasonably be likely to result in
a MAC.
7. Liens resulting from equipment financings or similar security
arrangements entered into by an Operator.
S2-1
<PAGE>
SCHEDULE 3
AMOUNTS OWED UNDER THE EXISTING LOAN AGREEMENT
Kleinwort Benson Limited
1. Aggregate principal amount of Existing
Loans outstanding on March 29, 1996 $5,600,000.00
-------------
2. Aggregate interest accrued (whether
or not due and payable) on March 29, 1996 $128,116.66
-----------
3. Aggregate commitment fee accrued (whether
or not due and payable) on March 29, 1996 $9,543.34
---------
Wells Fargo Bank, N.A.
1. Aggregate principal amount of Existing
Loans outstanding on March 29, 1996 $5,600,000.00
-------------
2. Aggregate interest accrued (whether
or not due and payable) on March 29, 1996 $28,116.66
----------
3. Aggregate commitment fee accrued (whether
or not due and payable) on March 29, 1996 $9,543.34
---------
NatWest Bank, N.A.
1. Aggregate principal amount of Existing
Loans outstanding on March 29, 1996 $7,000,000.00
-------------
2. Aggregate interest accrued (whether
or not due and payable) on March 29, 1996 $35,145.83
----------
3. Aggregate commitment fee accrued (whether
or not due and payable) on March 29, 1996 $11,929.16
----------
Fleet Bank of Massachusetts
S3-1
<PAGE>
1. Aggregate principal amount of Existing
Loans outstanding on March 29, 1996 $5,600,000.00
-------------
2. Aggregate interest accrued (whether
or not due and payable) on March 29, 1996 $28,116.66
----------
3. Aggregate commitment fee accrued (whether
or not due and payable) on March 29, 1996 $9,543.34
---------
The Sumitomo Bank, Limited, Chicago Branch
1. Aggregate principal amount of Existing
Loans outstanding on March 29, 1996 $5,600,000.00
-------------
2. Aggregate interest accrued (whether
or not due and payable) on March 29, 1996 $28,116.66
----------
3. Aggregate commitment fee accrued (whether
or not due and payable) on March 29, 1996 $9,543.34
---------
Mitsui Leasing (USA) Inc.
1. Aggregate principal amount of Existing
Loans outstanding on March 29, 1996 $3,500,000.00
-------------
2. Aggregate interest accrued (whether
or not due and payable) on March 29, 1996 $17,572.91
----------
3. Aggregate commitment fee accrued (whether
or not due and payable) on March 29, 1996 $5,964.58
---------
Bank Hapoalim B.M.
1. Aggregate principal amount of Existing
Loans outstanding on March 29, 1996 $5,600,000.00
-------------
2. Aggregate interest accrued (whether
or not due and payable) on March 29, 1996 $28,116.66
----------
3. Aggregate commitment fee accrued (whether
or not due and payable) on March 29, 1996 $9,543.34
---------
Dresdner Bank
1. Aggregate principal amount of Existing
S3-2
<PAGE>
Loans outstanding on March 29, 1996 $5,600,000.00
-------------
2. Aggregate interest accrued (whether
or not due and payable) on March 29, 1996 $28,116.66
----------
3. Aggregate commitment fee accrued (whether
or not due and payable) on March 29, 1996 $9,543.34
---------
Credit Lyonnais
1. Aggregate principal amount of Existing
Loans outstanding on March 29, 1996 $5,600,000.00
-------------
2. Aggregate interest accrued (whether
or not due and payable) on March 29, 1996 $28,116.66
----------
3. Aggregate commitment fee accrued (whether
or not due and payable) on March 29, 1996 $9,543.34
---------
Bank of Montreal
1. Aggregate principal amount of Existing
Loans outstanding on March 29, 1996 $2,800,000.00
-------------
2. Aggregate interest accrued (whether
or not due and payable) on March 29, 1996 $14,058.33
----------
3. Aggregate commitment fee accrued (whether
or not due and payable) on March 29, 1996 $4,771.67
---------
Riggs National Bank
1. Aggregate principal amount of Existing
Loans outstanding on March 29, 1996 $3,500,000.00
-------------
2. Aggregate interest accrued (whether
or not due and payable) on March 29, 1996 $17,572.91
----------
3. Aggregate commitment fee accrued (whether
or not due and payable) on March 29, 1996 $5,964.58
---------
Via Banque
1. Aggregate principal amount of Existing
Loans outstanding on March 29, 1996 $5,600,000.00
-------------
S3-3
<PAGE>
2. Aggregate interest accrued (whether
or not due and payable) on March 29, 1996 $28,116.66
----------
3. Aggregate commitment fee accrued (whether
or not due and payable) on March 29, 1996 $9,543.34
---------
DG Bank
1. Aggregate principal amount of Existing
Loans outstanding on March 29, 1996 $4,200,000.00
-------------
2. Aggregate interest accrued (whether
or not due and payable) on March 29, 1996 $21,087.50
----------
3. Aggregate commitment fee accrued (whether
or not due and payable) on March 29, 1996 $7,157.50
---------
Society National Bank
1. Aggregate principal amount of Existing
Loans outstanding on March 29, 1996 $4,200,000.00
-------------
2. Aggregate interest accrued (whether
or not due and payable) on March 29, 1996 $21,087.50
----------
3. Aggregate commitment fee accrued (whether
or not due and payable) on March 29, 1996 $7,157.50
---------
S3-4
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 4
BORROWER'S SUBSIDIARIES
Name of Jurisdiction of Shares Shares %
Subsidiary Incorporation Authorized Outstanding Owned
<S> <C> <C> <C> <C>
1. Church Creek Massachusetts 200,000 100 100%
Corporation common
stock
($0.01 par
value)
2. Health and Delaware 3,000 100 100%
Retirement common
Properties stock
International, ($0.01 par
Inc. value)
3. Causeway Holdings Inc. Massachusetts 200,000 100 100%
Common
Stock
($0.01 par
value)
4. SJO Corporation Massachusetts 200,000 100 100%
Common
Stock
($0.01 par
value)
</TABLE>
S4-1
<PAGE>
SCHEDULE 5
Calculation of the Mandatory Liquid Asset Costs
for any GBP Loans
(a) The Mandatory Liquid Asset Costs for a Loan if denominated in GBP for
each Interest Period for that Loan is calculated in accordance with the
following formula:
BY + L(Y-X) + S(Y-Z)% PER ANNUM
--------------------
100 - (B+S)
where on the day of the application of the formula:
B is the percentage of Agent's eligible liabilities which the
Bank of England then requires Agent to hold on a
non-interest-bearing deposit account in accordance with its
cash ratio requirements;
Y is the rate at which GBP deposits are offered by Agent to
leading banks in the London interbank market at or about 11.00
A.M. on that day for the relevant period;
L is the percentage of eligible liabilities which (as a result
of the requirements of the Bank of England) Agent maintains as
secured money with members of the London Discount Market
Association or in certain marketable or callable securities
approved by the Bank of England, which percentage shall (in
the absence of evidence that any other figure is appropriate)
be conclusively presumed to be 5 per cent.;
X is the rate at which secured GBP deposits may be placed by
Agent with members of the London Discount Market Association
at or about 11.00 A.M. on that day for the relevant period or,
if greater, the rate at which GBP bills of exchange (of a
tenor equal to the duration of the relevant period) eligible
for rediscounting at the Bank of England can be discounted in
the London Discount Market at or about 11.00 A.M. on that day;
S is the percentage for Agent's eligible liabilities which the
Bank of England requires Agent to place as a special deposit;
and
Z is the interest rate per annum allowed by the Bank of England
on special deposits.
(b) For the purposes of this Schedule:
(i) "eligible liabilities" and "special deposits" have the
meanings given to them at the time of application of the
formula by the Bank of England; and
(ii) "relevant period" in relation to each Interest Period means:
S5-1
<PAGE>
(A) if it is 3 months or less, that Interest Period, or
(B) if it is more than 3 months, 3 months.
(c) In the application of the formula, B, Y, L, X, S and Z are included in
the formula as figures and not as percentages, e.g. if B=0.5% and Y =
15%, BY is calculated as 0.5 x 15.
(d) The formula is applied on the first day of each relevant period. Each
amount is rounded up to the nearest one-sixteenth of one per cent.
(e) If Agent determines that a change in circumstances has rendered, or
will render, the formula inappropriate, Agent (after consultation with
the Lenders) shall notify Borrower of the manner in which the Mandatory
Liquid Asset Costs for such Loans will subsequently be calculated. The
manner of calculation so notified by Agent shall, in the absence of
manifest error, be binding on Borrower.
S5-2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 6
Health and Retirement Properties Trust
Properties Currently in Default
<S> <C> <C> <C>
Beverley Manor River Park Health Care Valley View Retirement North
1317 North 36th Street 1432 North Waco Street 9120 Woodman Avenue
Facility: St. Joseph, MO Wichita, KS Arieta, CA
Investment Type: Lease Mortgage Mortgage
Maturity: 4/30/01 8/10/95 12/01/96
Nature of Default: Non Monetary Monetary Monetary
Roof in disrepair
Current Amount to
Cure as of 2/29/96: Repair Roof 2,118,542.30 2,333,685.32
</TABLE>
S-6
October 21, 1996
Kleinwort Benson Limited, as Agent
Wells Fargo Bank, National Association,
as Administrative Agent
NatWest Bank N.A., as Co-Agent
c/o Kleinwort Benson Limited
20 Fenchurch Street
London EC3P 3DB
ENGLAND
Re: Third Amended and Restated Revolving Loan Agreement
Ladies and Gentlemen:
As you have been advised, Health and Retirement Properties Trust
("HRP"), the Borrower under the Third Amended and Restated Revolving Loan
Agreement, dated as of March 15, 1996 (the "Loan Agreement"), issued
US$240,000,000 aggregate principal amount of convertible subordinated debentures
on October 7, 1996. The Debentures consisted of three series: US$70,000,000
aggregate principal amount of 7.5% Convertible Subordinated Debentures due 2003,
Series A (the "Series A Debentures"); US$130,000,000 aggregate principal amount
of 7.5% Convertible Subordinated Debentures due 2003, Series B (the "Series B
Debentures"), and US$40,000,000 aggregate principal of 7.25% Convertible
Subordinated Debentures, due 2001 (the "7.25% Debentures"). The Debentures are
subordinate to debt of HRP incurred under the Loan Agreement.
The Series A Debentures mature on October 1, 2003 and the 7.25%
Debentures mature on October 1, 2001, which in each case is more than three
months after the Termination Date (as defined in the Loan Agreement), and
neither such series of Debentures provides for required principal payments prior
to maturity (other than by reason of an acceleration following default).
The Series B Debentures were offered and sold outside of the United
States pursuant to the provisions of Regulation S under the Securities Act of
1933, as amended. The Series B Debentures mature on October 1, 2003, which is
more than three months after the Termination Date, and do not provide for
required principal payments prior to maturity (other than by reason of an
acceleration following default), except as follows: As is customary for debt
offerings of this type in offshore transactions, the terms of the Series B
Debentures provide that if (a) HRP
<PAGE>
Kleinwort Benson Limited, as Agent
Wells Fargo Bank, National Association,
as Administrative Agent
NatWest Bank N.A., as Co-Agent
October 21, 1996
Page 2
determines that the payment of principal of, premium, if any, or interest on
Series B Debentures in bearer form ("Bearer Debentures") or related coupons
outside of the United States would under any United States law or regulation be
subject to a certification, identification or information reporting requirements
with regard to the nationality, residence or identity of the beneficial owner of
Bearer Debentures or coupons who is a United States alien (other than such a
requirement (i) that would not be applicable to a payment make by the Company or
its paying agent (A) directly to the beneficial owner or (B) to any custodian,
nominee or other agent of the beneficial owner, or (ii) that can be satisfied by
the custodian, nominee or other agent certifying that the beneficial owner is a
United States alien, provided in the cases referred to in clauses (i)(B) and
(ii) that payment to such a custodian, nominee or other agent is not otherwise
subject to such requirement), and (b) either (i) the certification,
identification or information reporting requirement cannot be fully satisfied by
the payment of United States withholding, backup withholding or similar taxes or
(ii) the Company has not agreed to pay additional amounts that are necessary to
"gross up" payments on the Bearer Debentures for such United States withholding,
backup withholding or similar taxes, then HRP may be required to redeem the
Bearer Debentures, in whole and not in part, at 100% of their principal amount,
plus accrued and unpaid interest, less applicable withholding taxes plus any
applicable additional payments (the "Contingent Tax Redemption").
As discussed with the Agent, HRP requests that for purposes of Section
6.8(b) of the Loan Agreement, "the earliest date for any payment of principal or
other settlement" of the Series B Debentures be deemed to be their October 1,
2003 maturity date, notwithstanding the Contingent Tax Redemption.
HRP would appreciate your confirmation of its understanding as set
forth above. Such confirmation will be considered by HRP to be effective as a
written consent given pursuant to Section 10.6 of the Loan Agreement and, as
such, will be considered to be effective when executed, in one or more
counterparts, by the Majority Lenders and the Agent.
Very truly yours,
HEALTH AND RETIREMENT PROPERTIES
TRUST
By: /s/ Barry M. Portnoy
Name: Barry M. Portnoy
Title: Managing Trustee
<PAGE>
Kleinwort Benson Limited, as Agent
Wells Fargo Bank, National Association,
as Administrative Agent
NatWest Bank N.A., as Co-Agent
October 21, 1996
Page 3
THE FOREGOING IS HEREBY CONFIRMED.
KLEINWORT BENSON LIMITED, as Agent and
as a Lender
By: /s/ Patrick F. Donelan
Name: Patrick F. Donelan
Title: Director
WELLS FARGO BANK, NATIONAL
ASSOCIATION
By:
Name:
Title:
FLEET BANK, N.A. (formerly Natwest Bank N.A.)
By: /s/ W. Wakefield Smith
Name: W. Wakefield Smith
Title: Vice President
FLEET NATIONAL BANK (successor to Fleet Bank
of Massachusetts)
By: /s/ Ginger Stolzenthaler
Name: Ginger Stolzenthaler
Title: Vice President
<PAGE>
Kleinwort Benson Limited, as Agent
Wells Fargo Bank, National Association,
as Administrative Agent
NatWest Bank N.A., as Co-Agent
October 21, 1996
Page 4
THE SUMITOMO BANK, LIMITED
Chicago Branch
By: /s/ Daniel G. Eastman
Name: Daniel G. Eastman
Title: Vice President and Manager
By: /s/ Alfred DeGemmis
Name: Alfred DeGemmis
Title: Vice President
MITSUI LEASING (USA) INC.
By: /s/ Seiichiro Nozaki
Name: Seiichiro Nozaki
Title: Senior Vice President
BANK HAPOALIM B.M.
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
Kleinwort Benson Limited, as Agent
Wells Fargo Bank, National Association,
as Administrative Agent
NatWest Bank N.A., as Co-Agent
October 21, 1996
Page 5
DRESDNER BANK AG, New York Branch
and Grand Cayman Branch
By: /s/ Andrew P. Nesi
Name: Andrew P. Nesi
Title: Vice President
By: /s/ B. C. Erickson
Name: B. C. Erickson
Title: Vice President
CREDIT LYONNAIS Cayman Island
Branch
By: /s/ Farboud Tavangar
Name: Farboud Tavangar
Title: Authorized Signature
BANK OF MONTREAL
By: /s/ Irene M. Geller
Name: Irene M. Geller
Title: Director
RIGGS NATIONAL BANK
By: /s/ Craig Havard
Name: Craig Havard
Title: Vice President
<PAGE>
Kleinwort Benson Limited, as Agent
Wells Fargo Bank, National Association,
as Administrative Agent
NatWest Bank N.A., as Co-Agent
October 21, 1996
Page 6
VIA BANQUE
By: /s/ Christel Prot
Name: Christel Prot
Title: Sous Directeur
By: /s/ P. Arnoult
Name: P. Arnoult
Title: Directeur
DG BANK
Deutsche Genossenschafts Bank
By: /s/ Linda J. O'Connell
Name: Linda J. O'Connell
Title: Vice President
By: /s/ Wolfgang Bollman
Name: Wolfgang Bollman
Title: Senior Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ Angela G. Mago
Name: Angela G. Mago
Title: Vice President
HEALTH AND RETIREMENT PROPERTIES TRUST
FIRST AMENDMENT TO
THIRD AMENDED AND RESTATED REVOLVING LOAN AGREEMENT
DATED AS OF DECEMBER 15, 1996
This FIRST AMENDMENT (this "Amendment") is dated as of December 15,
1996 among HEALTH AND RETIREMENT PROPERTIES TRUST, a real estate investment
trust formed under the laws of the State of Maryland ("Borrower"), the several
lenders listed on the signature pages hereof (the "Lenders"), KLEINWORT BENSON
LIMITED, a bank organized under the laws of England, as agent for itself and the
other Lenders (in such capacity, together with any successor in such capacity in
accordance with the terms of the Loan Agreement, as defined below, "Agent"),
WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the
United States of America, as administrative agent (in such capacity, together
with any successor in such capacity in accordance with the terms of the Loan
Agreement, "Administrative Agent"), and FLEET BANK N.A. (formerly NatWest Bank
N.A.), a national banking association, as co-agent (in such capacity, "Co-
Agent"), and is made with reference to the Third Amended and Restated Revolving
Loan Agreement dated as of March 15, 1996 (as amended from time to time, the
"Loan Agreement") among Borrower, the Lenders, Agent, Administrative Agent and
Co-Agent and, in connection with Section 9 and the guaranties given therein,
HEALTH AND RETIREMENT PROPERTIES INTERNATIONAL, INC., a Delaware corporation
("Retirement Properties"), CAUSEWAY HOLDINGS INC., a Massachusetts corporation
("Causeway"), SJO CORPORATION, a Massachusetts corporation ("SJO") and HUB
PROPERTIES TRUST, a Maryland real estate investment trust ("HUB"), each being a
direct wholly-owned Subsidiary of Borrower. Capital terms used herein without
definition shall have the same meanings herein as set forth in the Loan
Agreement.
WHEREAS, Borrower has advised Lenders that it wishes to amend certain
terms of the Loan Agreement;
WHEREAS, subject to the terms set forth herein, Lenders have agreed to
amend the Loan Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows :
<PAGE>
1. Amendments to Loan Agreement.
(a) Section 1.1 of the Loan Agreement is hereby amended by inserting
therein in proper alphabetical order the following new definition:
"Convertible Subordinated Debt" means, without duplication,
all Indebtedness of Borrower convertible only into common
shares of Borrower which has no scheduled date for the
maturity, redemption, sinking fund payment or other reduction
or payment of principal that is on or before the Termination
Date and which has terms for the acceleration and for
mandatory prepayment of principal that are satisfactory to
Agent, and the payment of which Indebtedness has been made
expressly subordinate to the payment of the Indebtedness under
this Agreement upon terms and conditions satisfactory to
Agent, including $240,000,000 aggregate principal amount of
convertible subordinated debentures issued on October 7,1 996
the terms and conditions of which are hereby approved by
Agent."
(b) Section 1.1 of the Loan Agreement is hereby amended by the
amendment and restatement of the definition of "Reference Banks" as follows:
"Reference Banks" means Dresdner Bank AG, New York Branch
and Cayman Island Branch and Wells Fargo Bank, National
Association"
(c) Section 6.8(a) of the Loan Agreement is hereby amended and restated
as follows:
"(a) Suffer or permit the total Indebtedness
(determined without duplication) of Borrower and its
Subsidiaries (other than the (i) IDFA Indebtedness, (ii)
Indebtedness in the nature of the bridge financings described
in the exception to Section 6.8(b), (iii) Indebtedness
described in Section 6.8(c) and (iv) Convertible Subordinated
Debt) at any time to be greater than 50% of the aggregate
Allowed Value of all Eligible Properties and all Eligible
Mortgages."
(d) Section 7.1(r) of the Loan Agreement is hereby amended by the
deletion of the figure "15" and the substitution therefor of the figure "30" .
2
<PAGE>
2. Conditions to Effectiveness.
Section 1 of this Amendment shall become effective only upon the prior
or concurrent satisfaction of the conditions that Borrower shall deliver to
Agent for Lenders (with sufficient originally executed copies for each Lender)
executed copies of this Amendment, executed by Borrower, Retirement Properties,
Causeway, SJO, Agent, Co-Agent and the Majority Leaders.
3. Representations and Warranties.
In order to induce Lenders and Agent to enter into this Amendment and
to amend the Loan Agreement in the manner provided herein, Borrower represents
and warrants to each Lender and Agent that the following statements are true,
correct and complete:
(a) Borrower has the power and authority to enter into this Amendment
and to carry out the transactions contemplated by, and perform its obligations
under, the Loan Agreement (as amended by this Amendment the "Amended
Agreement").
(b) The execution and delivery of this Amendment and the performance of
the Amended Agreement have been authorized by all necessary action on the part
of Borrower.
(c) The execution and delivery by Borrower of this Amendment and the
performance by Borrower of the Amended Agreement and the use of proceeds
thereunder do not violate any Requirement of Law or Contractual Obligation of
Borrower and will not result in, or require, the creation or imposition of any
Lien on any of its properties or revenues pursuant to any Requirement of Law or
Contractual Obligation of Borrower.
(d) This Amendment and the Amended Agreement have been duly executed
and delivered by Borrower and are the legally valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally.
(e) The representations and warranties contained in Section 3 of the
Loan Agreement are and will be true, correct and complete in all material
respects on and as of the effective date described in Section 2 to the same
extent as though made on and as of that date, except to the extent such
representations and warranties specifically
3
<PAGE>
relate to an earlier date, in which case they were true, correct and complete in
all material respects on and as of such earlier date.
(f) No event has occurred and is continuing or will result from the
consummation o the transactions described in or otherwise contemplated by this
Amendment that would constitute a Default or an Event of Default.
(g) The Declaration of Trust, By-Laws and other organizational
documents of Borrower have not been amended since March 15, 1996, and the copies
thereof delivered to Lenders under the Loan Agreement are true, correct and
complete copies thereof as in effect on the effective date described in Section
2.
4. Addition of HUB as Guarantor.
By execution and delivery of this Amendment, HUB hereby agrees to be
bound by the terms of Section 9 of the Loan Agreement as of the date of this
Amendment as if it were a party to the Loan Agreement.
5. Guarantors' Acknowledgment and Consent.
Each of Retirement Properties, Causeway, SJO and HUB (each a
"Subsidiary Guarantor") has guarantied the obligations of Borrower under Section
9 of the Loan Agreement.
Each Subsidiary Guarantor hereby acknowledges that it has reviewed the
terms and provisions of the Loan Agreement and this Amendment and consents to
the amendment of the provisions of the Agreement effected pursuant to this
Amendment. Each Subsidiary Guarantor hereby confirms that its guaranty under the
Loan Agreement will continue to guaranty to the fullest extent possible the
payments and performance of all obligations of Borrower now or hereafter
existing under or in respect of the Amended Agreement and the Notes defined
therein. Each Subsidiary Guarantor acknowledges and agrees that Section 9 of the
Loan Agreement shall continue in full force and effect and that all of its
obligations thereunder shall be valid and enforceable and shall not be impaired
or limited by the execution or effectiveness of this Amendment.
Each Subsidiary Guarantor acknowledges and agrees that (a)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Subsidiary Guarantor is not required by the terms of the Loan Agreement to
consent to the amendments to the Loan Agreement effected pursuant to this
Amendment and (b) nothing in the Loan Agreement or this Amendment shall be
deemed to require the consent of such Subsidiary Guarantor to any future
amendments or waivers to the Loan Agreement.
4
<PAGE>
6. Reference to and Effect on the Loan Agreement and Other Loan
Documents. Except as specifically amended hereby, the Loan Agreement and the
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
7. Fees and Expenses. Borrower agrees to pay to Agent on deemed all
reasonable costs, fees and expenses incurred by Agent (including, without
limitation, legal fees and expenses) with respect to this Amendment and the
documents and transactions contemplated hereby.
8. Execution in Counterparts. This Amendment may be executed in any
number of counterparts, and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts taken together shall constitute but one and
the same instrument.
9. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose or be given any substantive effect.
10. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
5
<PAGE>
11. Limitation of Amendment. Without limiting the generality of the
provisions of Section 10.4 of the Loan Agreement, the amendments set forth above
shall be limited precisely as written, and nothing in this Amendment shall be
deemed to prejudice any right or remedy that any Lender may now have (except to
the extent such right or remedy was based upon existing defaults that will not
exist after giving effect to this Amendment) or may have in the future under or
in connection with the Loan Agreement or any other instrument or agreement
referred to therein.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
HEALTH AND RETIREMENT
PROPERTIES TRUST
By: /s/ Ajay Saini
Name: Ajay Saini
Title: Treasurer
KLEINWORT BENSON LIMITED, as
Agent
By: /s/ Patrick F. Donelan
Name: Patrick F. Donelan
Title: Director
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Administrative Agent
and as a Lender
By: /s/ Edwin J. Sauve
Name: Edwin J. Sauve
Title: Vice President
FLEET BANK N.A. (formerly Nat West
Bank N.A.), as Co-Agent and as a Lender
By: /s/ Pauline McHugh
Name: Pauline McHugh
Title: Vice President
S-1
<PAGE>
FLEET NATIONAL BANK (successor to
Fleet Bank of Massachusetts), as a Lender
By: /s/ Ginger Stolzenthaler
Name: Ginger Stolzenthaler
Title: Vice President
THE SUMITOMO BANK, LIMITED
Chicago Branch, as a Lender
By: /s/ Daniel G. Eastman By: /s/ Alfred DeGemmis
Name: Daniel G. Eastman Name: Alfred DeGemmis
Title: Vice President & Manager Title: Vice President
MITSUI LEASING (USA) INC., as a
Lender
By: /s/ Seiichiro Nozaki
Name: Seiichiro Nozaki
Title: Senior Vice President
BANK HAPOALIM B.M., as a Lender
By: /s/ Shaun Breidhart
Name: Shaun Breidhart
Title: Ass't. Vice President
By: /s/ Conrad Wagner
Name: Conrad Wagner
Title: Exec. Vice President
DRESDNER BANK AG, New York
Branch and Grand Cayman Branch, as a
Lender
By: /s/ Andrew P. Nesi
Name: Andrew P. Nesi
Title: Vice President
By: /s/ B. Craig Erickson
Name: B. Craig Erickson
Title: Vice President
S-2
<PAGE>
CREDIT LYONNAIS, Cayman Island
Branch, as a Lender
By: /s/ Farboud Tavangar
Name: Farboud Tavangar
Title: Authorized Signature
BANK OF MONTREAL, as a Lender
By: /s/ Irene M. Geller
Name: Irene M. Geller
Title: Vice President
RIGGS BANK N.A., as a Lender
By: /s/ Craig Havard
Name: Craig Havard
Title: Vice President
S-3
<PAGE>
VIA BANQUE, as a Lender
By: /s/ Christel Prot
Name: Christel Prot
Title: Sous Directeur
By: /s/ P. Arnoult
Name: P. Arnoult
Title: Directeur
DG BANK, Deutsche
GenossenschaftsBank, as a Lender
By: /s/ Norah McCann
Name: Norah McCann
Title: Senior Vice President
By: /s/ Pamela D. Fogerty
Name: Pamela D. Fogerty
Title: Ass't Vice President
KEYBANK NATIONAL ASSOCIATION
(formerly Society National Bank), as a
Lender
By: /s/ Angela Mago
Name: Angela Mago
Title: Vice President
For the purposes of Section 9: HEALTH
AND RETIREMENT PROPERTIES
INTERNATIONAL, INC.
By: /s/ Ajay Saini
Name: Ajay Saini
Title: Treasurer
S-4
<PAGE>
CAUSEWAY HOLDINGS INC.
By: /s/ Ajay Saini
Name: Ajay Saini
Title: Treasurer
SJO CORPORATION
By: /s/ Ajay Saini
Name: Ajay Saini
Title: Treasurer
HUB PROPERTIES TRUST
By: /s/ Ajay Saini
Name: Ajay Saini
Title: Treasurer
S-5
Exhibit 23.1
We consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 333-02863) of Health and Retirement Properties Trust and in the
related Prospectus of our report dated February 6, 1997, with respect to the
consolidated financial statements of Health and Retirement Properties Trust
included in the Current Report on Form 8-K of Health and Retirement Properties
Trust dated February 17, 1997, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 27, 1997
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 333-02863) of Health and Retirement Properties Trust and in the
related Prospectus of our report dated January 31, 1997 (except for the last
paragraphs of Note 1 and Note 12, as to which the date is February 18, 1997),
with respect to the consolidated financial statements of Government Property
Investors, Inc. included in the Current Report on Form 8-K of Health and
Retirement Properties Trust dated February 17, 1997, filed with the Securities
and Exchange Commission.
/s/ Ernst & Young LLP
Washington, D.C.
February 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1996
<CASH> $21,853
<SECURITIES> 0
<RECEIVABLES> 161,817
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,005,739
<DEPRECIATION> (76,921)
<TOTAL-ASSETS> 1,229,522
<CURRENT-LIABILITIES> 18,319
<BONDS> 492,175
0
0
<COMMON> 669
<OTHER-SE> 707,379
<TOTAL-LIABILITY-AND-EQUITY> 1,229,522
<SALES> 120,183
<TOTAL-REVENUES> 120,183
<CGS> 3,776
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 29,161
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,545
<INCOME-PRETAX> 77,164
<INCOME-TAX> 77,164
<INCOME-CONTINUING> 77,164
<DISCONTINUED> 0
<EXTRAORDINARY> (3,910)
<CHANGES> 0
<NET-INCOME> 73,254
<EPS-PRIMARY> $1.11
<EPS-DILUTED> $1.12
</TABLE>
