HEALTH AND RETIREMENT PROPERTIES TRUST
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 1997
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
OF 1934
For the transition period from ______________ to ______________
Commission File Number 1-9317
HEALTH AND RETIREMENT PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland 04-6558834
(State or other jurisdiction of incorporation) (IRS Employer
Identification No.)
400 Centre Street, Newton, Massachusetts 02158
(Address of principal executive offices) (Zip Code)
617-332-3990
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Name of exchange on
Title of each class which registered
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Common Shares of Beneficial Interest New York Stock Exchange
7.25% Convertible Subordinated Debentures due 2001 New York Stock Exchange
7.5% Convertible Subordinated Debentures due 2003, Series A New York Stock Exchange
Remarketed Reset Notes New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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HEALTH AND RETIREMENT PROPERTIES TRUST
The aggregate market value of the voting stock of the registrant held
by non-affiliates was $1.9 billion based on the $19.6875 closing price per share
for such stock on the New York Stock Exchange on March 5, 1998. For purposes of
this calculation, 3,912,138 shares held by HRPT Advisors, Inc. (the "Advisor"),
including a total of 2,777,766 shares held by Advisor solely in its capacity as
voting Trustee under certain voting Trust agreements, 4,019,429 shares held by
Government Properties Investors, Inc. subject to certain voting agreements with
the Company and an aggregate of 30,550 shares held by the Trustees and executive
officers of the registrant, have been included in the number of shares held by
affiliates.
Number of the registrant's Common Shares of Beneficial Interest, $.01
par value ("Shares"), outstanding as of March 1, 1998: 104,467,050.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K is incorporated herein by
reference from the Company's definitive Proxy Statement for the annual meeting
of shareholders currently scheduled to be held on May 12, 1998. The financial
statements and financial statement schedules for Marriott International, Inc.
("Marriott") are incorporated herein by reference to Marriott's Annual Report on
Form 10-K for the year ended January 2, 1998, Commission file No. 1-12188.
CERTAIN IMPORTANT FACTORS
The Company's Annual Report on Form 10-K contains statements which
constitute forward looking statements within the meaning of the Securities
Litigation Reform Act of 1995. Those statements appear in a number of places in
this Form 10-K and include statements regarding the intent, belief or
expectations of the Company, its Trustees or its officers with respect to
expansion of the Company's portfolio, its ability to pay dividends, its tax
status as a real estate investment trust and the Company's access to debt or
equity capital markets or to other sources of funds and statements of
assumptions underlying such statements as to intent, belief or expectations.
Readers are cautioned that any such forward looking statements are not
guarantees of future performance and involve risks and uncertainties and that
actual results may differ materially from those contained in the forward looking
statements as a result of various factors. Such factors include the status of
the economy, compliance with and changes to regulations and payment and
reimbursement policies within the health care industry, competition within the
health care industry, and changes to federal, state and local legislation. The
accompanying information contained or incorporated by reference in this Annual
Report on Form 10-K, including under the heading "Business" and in the Company's
Current Report on Form 8-K dated February 27, 1998, under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", identifies other important factors that could cause such
differences.
THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE COMPANY, DATED JULY 1,
1994, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"),
IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE
STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND 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 THE COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY,
JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL
PERSONS DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF
THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
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HEALTH AND RETIREMENT PROPERTIES TRUST
1997 FORM 10-K ANNUAL REPORT
Table of Contents
Part I
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Page
Item 1. Business........................................................................ 1
Item 2. Properties...................................................................... 20
Item 3. Legal Proceedings............................................................... 22
Item 4. Submission of Matters to a Vote of Security Holders............................. 23
Part II
Item 5. Market for the Registrant's Common Stock and Related Stockholders Matters....... 23
Item 6. Selected Financial Data......................................................... 25
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................. 25
Item 8. Financial Statements and Supplementary Data..................................... 26
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.................................................................. 26
Part III
Item 10. Directors and Executive Officers of the Registrant.............................. *
Item 11. Executive Compensation.......................................................... *
Item 12. Security Ownership of Certain Beneficial Owners and Management.................. *
Item 13. Certain Relationships and Related Transactions.................................. *
* Incorporated by reference from the Company's Proxy
Statement for the Annual Meeting of Shareholders currently
scheduled to be held on May 12, 1998, to be filed pursuant
to Regulation 14A.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................. 26
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References in this Annual Report on Form 10-K to the "Company" or "HRP"
include consolidated subsidiaries, unless the context indicates otherwise.
PART I
Item 1. Business
The Company. Health and Retirement Properties Trust (the "Company") was
organized on October 9, 1986 as a Maryland real estate investment trust. The
Company invests in income producing real estate, including retirement
communities, assisted living centers, long-term care facilities, medical office
and other office buildings and office buildings leased to various agencies of
the United States Government. The facilities in which the Company has made
investments by mortgage, purchase/lease or merger transactions are hereinafter
referred to individually as a "Property" and collectively as "Properties".
As of December 31, 1997, the Company directly owned 183 Properties
representing an aggregate investment of $2.0 billion (at cost), had mortgage
investments in 34 Properties aggregating $104.3 million and had a 10.3% equity
investment in Hospitality Properties Trust ("HPT") of approximately $111.1
million (carrying value), for total real estate investments of approximately
$2.2 billion. The Properties are described in -"Business Developments Since
January 1, 1997" and "Properties".
Number of Total Investment
State Properties at December 31, 1997
- ----- ---------- --------------------
(in thousands)
Alaska ................................... 1 $ 1,000
Arizona .................................. 9 64,490
California ............................... 31 318,861
Colorado ................................. 11 52,434
Connecticut .............................. 9 96,476
District of Columbia ..................... 4 145,124
Florida .................................. 6 136,989
Georgia .................................. 5 15,181
Illinois ................................. 3 101,454
Iowa ..................................... 7 8,205
Kansas ................................... 4 7,544
Louisiana ................................ 1 19,185
Maryland ................................. 6 147,661
Massachusetts ............................ 30 203,016
Michigan ................................. 2 9,267
Missouri ................................. 3 11,424
Nebraska ................................. 10 10,733
New Hampshire ............................ 1 3,689
New Jersey ............................... 1 13,007
New Mexico ............................... 2 10,813
New York ................................. 5 164,848
North Carolina ........................... 6 15,944
Ohio ..................................... 4 17,712
Oklahoma ................................. 1 24,426
Pennsylvania ............................. 8 127,287
Rhode Island ............................. 1 8,100
South Dakota ............................. 3 7,589
Texas .................................... 12 112,635
Vermont .................................. 8 29,766
Virginia ................................. 5 81,703
Washington ............................... 4 40,548
West Virginia ............................ 1 4,792
Wisconsin ................................ 9 44,029
Wyoming................................... 4 17,379
----- ---------
Total..................................... 217 2,073,311
===
Investment in HPT......................... 111,134
---------
Total Investments......................... $2,184,445
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The Company's principal executive offices are located at 400 Centre
Street, Newton, Massachusetts 02158, and its telephone number is (617) 332-3990.
Investment Policy and Method of Operation. The Company's investment
goals are current income for distribution to shareholders, capital growth
resulting from appreciation in the residual value of owned Properties, and
preservation and protection of shareholders' capital. The Company's income is
derived primarily from rent and interest payments under its leases and
mortgages.
The Company's day to day operations are conducted by REIT Management
and Research, Inc. ("RMR"), the Company's investment manager. RMR provides
investment, management, property management and administrative services to the
Company. RMR originates and presents investment opportunities to the Company's
Board of Trustees (the "Trustees"). In evaluating potential investments, the
Company considers such factors as: the historical and projected rents received
and likely to be received from the property to meet operational needs and
financing obligations and to provide a competitive market return on investment
to the Company; the historic and expected operating expenses, including real
estate taxes, incurred and expected to be incurred at the properties; the
growth, tax and regulatory environments of the market in which the property is
located; the quality, experience, and credit worthiness of the property's
operator and tenants; an appraisal of the property, if available; occupancy and
demand for similar properties in the same or nearby markets; the construction
quality, physical condition and design of the property; the geographic area and
type of property; and the pricing of comparable properties as evidenced by
recent arms length market sales.
Prior to investing in properties, the Company obtains title commitments
or policies of title insurance insuring that the Company holds title to or has
mortgage interests in such properties, free of material liens and encumbrances.
The Company's investments are structured using leases with minimum
and/or additional rent and escalation provisions, loans with fixed or floating
rates, joint ventures and partnerships with affiliated or unaffiliated parties,
commitments or options to purchase interests in real estate, mergers or any
combination of the foregoing that will best suit the particular investment.
In connection with its current bank credit facility (the "Credit
Facility"), the Company has agreed to obtain lender approval before exceeding
investment concentrations based on certain criteria (see - "Borrowing Policy").
Among these are that no more than 40% of its investments be operated by any
single tenant or mortgagor, that investments in a) rehabilitation treatment, b)
acute care, c) medical office and clinic buildings, and d) investments in
government office properties not exceed 40%, 15%, 55% and 40%, respectively, of
total investments and that no new psychiatric care or hotel investments be made.
The Company is currently in discussions with its lenders to modify these
restrictions. In addition to these restrictions, the Trustees may establish
limitations as they deem appropriate from time to time. No limits, other than
those in connection with the Credit Facility, have been set on the number of
properties in which the Company will seek to invest, or on the concentration of
investments involving any one facility or geographical area; however, the
Trustees consider concentration of investments in determining whether to make
new or increase existing investments.
The Company's Declaration of Trust (the "Declaration") and operating
policies provide that any investment in facilities owned or operated by RMR,
persons expressly permitted under the Declaration to own more than 8.5% of the
Company's shares, or any company affiliated with any of the foregoing must be
approved by a majority of the Trustees not affiliated with any of the foregoing
(the "Independent Trustees").
The Company has in the past and may in the future consider, from time
to time, the acquisition of or merger with other companies engaged in the same
business as the Company; however, the Company has no present agreements or
understandings concerning any such acquisition or merger. The Company has no
present intention of investing in the securities of others for the purpose of
exercising control.
Borrowing Policy. In addition to the use of equity, the Company
utilizes short-term and long-term borrowings to finance investments. The Company
has a Credit Facility for an aggregate amount of $450 million. The Company is
currently in discussion with the lenders under the Credit Facility to amend the
Credit Facility, to modify certain covenants of the Company and to increase the
maximum principal amount that may be outstanding. No assurances can be given at
this time that the Company and such lenders will reach a final agreement as to
such changes. The Credit Facility (which is guaranteed by certain of the
Company's subsidiaries) is used for acquisition
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funding on an interim basis until equity or long term debt is raised, working
capital and general business purposes. Outstanding borrowings under the Credit
Facility at December 31, 1997 were $200 million.
The Company's borrowing guidelines established by its Trustees and
covenants in various debt agreements prohibit the Company from maintaining a
debt to equity ratio of greater than 1 to 1. At December 31, 1997, the Company's
debt to equity ratio was .62 to 1. The Declaration prohibits the Company from
incurring secured and unsecured indebtedness which in the aggregate exceeds 300%
of the net assets of the Company, unless approved by a majority of the
Independent Trustees. There can be no assurance that debt capital will in the
future be available at reasonable rates to fund the Company's operations or
growth.
Business Developments Since January 1, 1997
Investments
In February 1997, the Company entered into an agreement to acquire 30
office buildings containing 3.4 million square feet (the "Government Office
Properties"), substantially all of which are leased to various agencies of the
United States Government. As of December 31, 1997, the Company acquired 29
properties, one of which is under construction, and elected not to acquire one
property. Subsequent to December 31, 1997, one of the 29 properties was sold.
The Company's aggregate purchase price for the 29 properties (3.3 million square
feet) was approximately $439 million. The total purchase price for the
Government Office Properties was paid by the issuance of $77 million in shares,
the assumption of approximately $27 million of debt by subsidiaries of the
Company secured by mortgages on three acquired properties, and a net cash
payment of approximately $335 million, which was used in part to retire other
debt of the seller assumed by the Company as part of the acquisition transaction
and to pay closing costs.
During 1997, the Company purchased 42 medical and other office and
clinic buildings for an aggregate purchase price of approximately $525 million.
Acquisitions of facilities or buildings with a purchase price of at least $25
million included the following: (a) a first class office building in midtown
Manhattan containing approximately 420,368 square feet purchased in October 1997
for approximately $110 million (this building is 100% occupied under long term
leases to three tenants, with the majority of the building being leased to
Health Insurance Plan of Greater New York, a large not-for-profit health
maintenance organization); (b) two first class buildings containing
approximately 330,715 square feet plus two parking structures for approximately
1,700 cars located in West Los Angeles purchased in May 1997 for approximately
$109 million (these buildings are known as the Cedars Sinai Medical Towers and
Garages and are located adjacent to the Cedars Sinai Medical Center, an
investment grade rated not-for-profit hospital which is also the largest tenant
in these buildings); (c) an office complex in Austin, Texas containing five
commercial office properties, with approximately 441,145 square feet purchased
in December 1997 for $79 million; (d) a first class 25 story office tower
located in Philadelphia containing approximately 608,161 square feet purchased
in November 1997 for approximately $79 million (approximately 98% of this
building is leased on a long-term basis to SmithKline Beecham Corporation, an
investment grade rated international pharmaceutical manufacturer and
distributor); and (e) 20 medical office and clinic buildings containing
approximately 373,500 square feet located in central Massachusetts purchased in
May 1997 for approximately $47 million (these buildings are triple net leased on
a long term basis to a regional health maintenance organization that is
partially owned by Tenet Healthcare Corporation). Certain of these properties
are gross leased and the net operating income which the Company realizes from
these investments will depend upon the efficiency with which the Company is able
to operate these buildings.
In May 1997, the Company purchased for $14 million a 200-unit
retirement housing property located in Spokane, Washington. This property and
three other retirement housing properties (629 units) purchased for $87.5
million in December 1996 are all net leased to Brookdale Living Communities,
Inc. ("BLCI") for an initial term of 23 years plus renewal options totaling an
additional 50 years. During 1997, BLCI was recapitalized by two public offerings
of equity and as of December 31, 1997 had an equity market capitalization of
over $124 million.
During the period January 1, 1998 through March 5, 1998, the Company
acquired 11 medical and other office buildings for $91.7 million. This
acquisition was funded in part with borrowings under the Company's bank credit
facility.
During the period January 1, 1997 through March 5, 1998, the Company
received $69.6 million of regularly scheduled principal payments and prepayments
of mortgage loans.
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Financing
In October 1996, the Company sold three tranches of convertible
subordinated debentures totaling $240 million. All of these debentures are
convertible into common shares at a rate of $18 per share and are callable at
par by the Company at any time on or after October 1, 1999. During 1997, the
trading price of the Company's shares has averaged above $18 per share. Through
March 5, 1998, approximately $29.2 million of these debentures have been
converted into approximately 1.6 million common shares.
In March 1997, the Company issued 27,025,000 common shares in a public
offering. The gross proceeds of the offering were $510.1 million ($18.875 per
share), and the net proceeds to the Company were $483.2 million. Such net
proceeds were used to acquire the Government Office Properties. During February
1998, the Company issued an aggregate of 5,495,776 common shares in public
offerings and received net proceeds of $104.4 million, which were used to repay
amounts outstanding under the Company's Credit Facility, for acquisitions and
general business purposes.
In July 1997, the Company issued $200 million of Remarketed Reset Notes
due July 9, 2007 ("Reset Notes"). The net proceeds of that issuance
(approximately $199 million) were used to prepay other indebtedness of the
Company then due in 1999 ($125 million) and to reduce amounts outstanding under
the Company's Credit Facility. In February 1998, the Company issued an
additional $50 million aggregate principal amount of Reset Notes (the
"Additional Reset Notes"). Net proceeds from the offering of the Additional
Reset Notes were used to reduce amounts outstanding under the Company's bank
credit facility and for general business purposes. The Reset Notes currently
bear interest at a floating rate equal to three month LIBOR plus a spread of
.45% per annum. In July 1998, the Company will have the option to prepay the
Reset Notes or to have the Reset Notes remarketed and the interest rate reset on
either a floating or fixed rate basis.
In July 1997, the Company's $250 million unsecured revolving credit
facility with a syndicate of banks was increased to $450 million, and in March
1997, the term of the Credit Facility was extended to 2001. (See "--Borrowing
Policy" above.)
In December 1997, the Company issued $150 million of 6 3/4% Senior
Notes due 2002 (the "6 3/4% Notes") in a private placement to institutional
investors. The net proceeds from the offering (approximately $149 million) were
used to reduce amounts then outstanding under the Company's Credit Facility. The
Company has agreed with the initial purchasers of the 6 3/4% Notes to use its
best efforts to consummate an offer to exchange the 6 3/4% Notes for new notes
with terms substantially identical in all material respects to the 6 3/4% Notes,
which would be registered pursuant to the Securities Act.
Other Developments
Horizon/CMS Healthcare Corporation; HEALTHSOUTH Corporation; and
Integrated Health Services, Inc. As of December 31, 1997, the Company had
invested approximately $168 million, at cost, in properties that had been leased
by, mortgaged to or managed by Horizon/CMS Healthcare Corporation ("HHC"). In
October 1997, HHC merged into HEALTHSOUTH Corporation ("HEALTHSOUTH"). In return
for the Company's consent to this merger, HEALTHSOUTH agreed to guarantee
unconditionally all of the lease, mortgage and management obligations of HHC due
to the Company and to extend the terms of the management contracts of three
properties that were scheduled to expire during 1998 until 2001. In December
1997, HRP consented to the release of HEALTHSOUTH from the guarantee and to the
assignment of certain leases and mortgages from HEALTHSOUTH and its predecessor,
HHC, to Integrated Health Services, Inc. ("IHS") as part of a $1.2 billion
transaction between HEALTHSOUTH and IHS for nursing homes, specialty hospitals
and pharmacy services. In connection with this consent, IHS guaranteed leases,
mortgages and management obligations to HRP affecting the former HHC properties,
and the maturities of these leases, mortgages and management obligations, which
were previously scheduled for 2000, 2001 and 2005, were extended to 2006.
GranCare, Inc.; Living Centers of America, Inc.; and Paragon Health
Network, Inc. As of December 31, 1997, the Company had invested approximately
$98 million, at cost, in properties that had been leased to, or mortgaged by,
GranCare, Inc. ("GC"). In February 1997, GC distributed to its shareholders all
of its nursing home operations and merged its pharmacy business into Vitalink,
Inc. ("Vitalink"), another public company. Under the terms of the GC Vitalink
agreement, the GC nursing home operations became a new public company ("New
GC"), and certain subsidiaries of New GC remained tenants of and mortgagors to
the Company (the "Tenant
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Subsidiaries"). The Company consented to this GC Vitalink transaction on certain
terms and conditions, including: (i) all of the leases and mortgages between the
Company and the Tenant Subsidiaries being cross defaulted, cross collateralized,
cross secured and unconditionally guaranteed by New GC; (ii) Vitalink providing
a $15 million unconditional guarantee of the obligations due to the Company; and
(iii) GC paying an amendment fee to the Company. In October 1997, New GC merged
into Living Centers of America, Inc. ("LCA"), another public company. As part of
the New GC LCA transaction a large number of LCA and New GC shares were
repurchased, LCA was recapitalized by new investors, the combined New GC LCA
enterprise changed its name to Paragon Health Network, Inc. ("Paragon"), and
Paragon solicited the Company to release Vitalink from its guaranty obligations
to the Company. The Company consented to the New GC LCA Paragon transaction and
released Vitalink from its guaranty on certain terms and conditions, including:
(a) certain mortgage obligations totaling approximately $11.5 million due to the
Company being prepaid in full; (b) certain properties owned by the Company and
leased to the Tenant Subsidiaries being exchanged for other properties formerly
owned by LCA or the Tenant Subsidiaries, which properties were to be leased to
the Tenant Subsidiaries; (c) the term of certain leases being extended and all
renewal options for properties leased to the Tenant Subsidiaries being renewable
only on an all or none basis; (d) the rent payable to the Company being
increased; (e) all obligations with respect to all properties leased or financed
with the Tenant Subsidiaries being guaranteed by Paragon and the guaranty being
secured by a cash deposit of $15 million; (f) all obligations of the Tenant
Subsidiaries being subject to cross default and cross collateralization, and
guaranteed by New GC (now a subsidiary of Paragon); and (g) payment to the
Company of an amendment fee.
Community Care of America, Inc. and Integrated Health Services, Inc. As
of December 31, 1997, the Company had invested approximately $112 million, at
cost, in properties that had been operated by Community Care of America, Inc.
("CCA"). In September 1997, CCA was acquired by IHS. The Company consented to
IHS's acquisition of CCA on certain terms and conditions including: (i)
mortgages due to the Company totaling approximately $12.2 million being prepaid
in full; (ii) certain properties formerly leased to CCA being purchased from the
Company at their historical cost of approximately $33.5 million; (iii) the
extension of terms of certain remaining leases and mortgages; (iv) the remaining
leases and mortgages being subject to cross default and cross collateralization,
and unconditionally guaranteed by IHS; and (v) payment to the Company of an
amendment fee.
Marriott Spin Off and Merger. As of December 31, 1997, the Company had
invested approximately $326 million, at cost, in properties leased to a
subsidiary of Marriott International, Inc. ("Marriott"). In October 1997,
Marriott announced a plan to dividend to its shareholders a new company which
will own and operate Marriott's lodging and senior living businesses and to
merge the remaining company with Sodexho S.A. As a result of this spin off and
merger the Company's current guarantor was expected to have a negative net worth
and its obligations were not expected to be rated investment grade. Upon
learning of this planned transaction, the Company commenced negotiations with
Marriott and, as a result of those negotiations, an agreement has been entered
into that will be effective upon consummation of the Marriott spin off and
merger transaction. This agreement requires that the spin off entity created by
Marriott assume the guarantee obligations to the Company. The new spin off
entity is expected to be investment grade rated.
In May 1997, the Company filed a $1.0 billion Shelf Registration
Statement on Form S-3 (the "Shelf") that has been declared effective by the
Securities and Exchange Commission. At March 1, 1998, $539.7 million was
available to be drawn on the Shelf.
The Investment Manager
RMR is a Delaware corporation owned by Gerard M. Martin and Barry M.
Portnoy. RMR's principal executive offices are located at 400 Centre Street,
Newton, Massachusetts 02158, and its telephone number is (617) 332-3990. As of
January 1, 1998, the Company entered into separate investment advisor and
property management agreements with RMR. RMR provides investment, management,
property management services for some of the recently acquired Government
Properties and medical and other office buildings and administrative services to
the Company. In addition, an affiliate of RMR also provides garage management
services to the Company. During the three years ended December 31, 1997, such
services were provided by Advisor, and M&P Partners Limited Partnership ("M&P")
on similar terms. RMR also acts as the investment manager to HPT and has other
business interests. The Directors of RMR are Gerard M. Martin, Barry M. Portnoy
and David J. Hegarty. The officers of RMR are David J. Hegarty, President and
Secretary, John G. Murray, Executive Vice President, John Popeo, Treasurer, and
Ajay Saini, John A. Mannix, David Lepore and Thomas M. O'Brien, Vice Presidents.
Gerard M. Martin and Barry M. Portnoy are Managing Trustees of the Company and
David J. Hegarty and Ajay Saini are
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officers of the Company. The beneficial ownership of Advisor (which is the
General Partner of M&P) and M&P is the same as that of RMR and immediately prior
to January 1, 1998, the directors and officers of Advisor were the same as those
who currently hold positions with RMR.
Employees
As of March 5, 1998, the Company had no employees. RMR, which
administers the day-to-day operations of the Company, has 111 full-time
employees and three active directors.
Regulation and Reimbursement
Compliance with federal, state and local statutes and regulations
governing health care facilities is a prerequisite to continuation of the
Company's business. The health care industry depends significantly upon federal
and federal/state programs for revenues and, as a result, is vulnerable to the
budgetary policies of both the federal and state governments.
Certificates of Need. Certain of the Company's investments are in healthcare
properties which require certificates of need ("CONs") prior to expansion of
beds or services, certain capital expenditures, and in some states, a change in
ownership. CON requirements are not uniform throughout the United States.
Changes in CON requirements may affect competition, profitability of the
Properties and the Company's opportunities for investment in health care
facilities.
Federal Regulation. The Company's healthcare properties are affected by a number
of federal and state statutes and regulations including those related to
reimbursement under Medicare and Medicaid programs. Such laws, among other
things, limit reimbursement for capital costs and in some circumstances for
rental or lease expenses. Such laws also include federal and state anti-fraud
and anti-kickback statutes and regulations. The Balanced Budget Act of 1997
(Public Law 105-33) (the "BBA") directs the federal Department of Health and
Human Services ("HHS") to adopt a Medicare prospective payment system for
skilled nursing facilities which will include capital-related costs and which
will be phased in over four years beginning July 1, 1998. The BBA also increases
states' flexibility in establishing Medicaid rates for nursing facility
services, and strengthens the ability of HHS and the states to exclude providers
for health care-related offenses. An adverse determination concerning any
operator's licensure or eligibility for government reimbursement or its
compliance with applicable federal or state statutes on regulations could
materially and adversely affect such operator and its affiliates.
A number of legislative proposals that would affect major reforms of
the health care system have been introduced in Congress. Such proposals include
universal health coverage, employer mandated insurance, and a single government
health insurance plan. Following the failure of the Clinton administration's
proposed Health Security Act or other major health care reform legislation to
become law in 1994, legislative proposals for more incremental reforms have also
been introduced, such as group health insurance plans for small businesses,
health insurance industry reforms, and additional Medicare and Medicaid reforms
and cost containment measures, including proposals that Medicaid be administered
through block grants to the states and per capita limits on state Medicaid
spending. The Company cannot predict whether any such legislative proposals will
be adopted or, if adopted, what effect, if any, such proposals would have on the
business of the Company or its lessees or mortgagors.
Competition.
The Company competes with other real estate investment trusts in that
each is continually seeking attractive investment opportunities in health care
facilities and other types of real estate. The Company also competes with banks,
non-bank finance companies, leasing companies and insurance companies.
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FEDERAL INCOME TAX CONSIDERATIONS
The Company has elected to be taxed as a Real Estate Investment Trust
("REIT") under Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended and in effect from time to time (the "Code"), commencing with its
taxable year ending December 31, 1987. The Company believes it has been
organized and has operated in a manner that qualifies it to be taxed under the
Code as a REIT commencing with that taxable year, and the Company intends to
continue to operate in a manner to so qualify. No assurance can be given,
however, that the manner in which the Company has operated or will operate
qualified or will qualify the Company to be taxed as a REIT.
The Company has obtained legal opinions from its counsel Sullivan &
Worcester LLP that the Company has been organized in conformity with the
requirements for qualification as a REIT, has qualified as a REIT for its 1987,
1988, 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996 and 1997 taxable years, and
that its current and anticipated investments and its plan of operation will
enable it to continue to meet the requirements for qualification and taxation as
a REIT under the Code. These opinions are conditioned upon the assumption that
the leases, the Declaration and the Company's Bylaws, and all other legal
documents to which the Company is or has been a party have been and will be
complied with by all parties thereto, upon the accuracy and completeness of the
factual matters described in this Annual Report, and upon representations made
by the Company as to certain factual matters relating to the Company's
organization and operations and its expected manner of operation. In addition,
such opinions are based on the law then existing and in effect on the date
thereof. Opinions of counsel are not binding on the Internal Revenue Service
("IRS") or a court and there can be no assurance that the IRS or a court will
not take a position different from that expressed by counsel.
The Company's actual qualification and taxation as a REIT will depend
upon the Company's ability to meet on a continuing basis, through actual
operating results, asset composition, distribution levels, and diversity of
stock ownership, the various REIT qualification tests imposed under the Code,
discussed below. While the Company has represented that it has operated and will
operate in a manner so as to satisfy on a continuing basis the various REIT
qualification tests, Sullivan & Worcester LLP has not reviewed and will not
review compliance with these tests on a continuing basis, and no assurance can
be given that the Company has satisfied or will satisfy such tests on a
continuing basis. If the Company fails to qualify as a REIT in any year, it will
be subject to federal income taxation as if it were a domestic corporation, and
its shareholders will be taxed in the same manner as shareholders of ordinary
corporations. In such an event, the Company could be subject to potentially
significant tax liabilities, and therefore the amount of cash available for
distribution to its shareholders would be reduced or eliminated.
The following summary is based on existing law, is limited to investors
who will hold the Shares as "capital assets" within the meaning of Section 1221
of the Code (generally, property held for investment), is not exhaustive of all
possible tax considerations, and does not discuss any state, local, or foreign
tax considerations. Additionally, the following summary does not discuss the
particular tax consequences that might be relevant to holders of Shares who may
be subject to special rules under the federal income tax law, such as life
insurance companies, regulated investment companies, financial institutions,
brokers or dealers in securities or foreign currency, persons that have a
functional currency other than the U.S. dollar, persons who acquired Shares or
options to acquire Shares in connection with their employment or other
performance of services, persons subject to alternative minimum tax, persons who
hold Shares as part of a straddle, hedging transaction, or conversion
transaction or, except as specifically described herein, tax-exempt entities and
foreign persons. The sections of the Code that govern the federal income tax
qualification and treatment of a REIT and its shareholders are highly technical
and complex. The following summary is thus qualified in its entirety by the
applicable Code provisions, the rules and regulations promulgated thereunder,
and the administrative and judicial interpretations thereof, all of which are
subject to change, possibly with retroactive effect. Thus, no assurance can be
given that future legislative, judicial, or administrative actions or decisions
will not affect the accuracy of any statements in this summary. In addition, no
ruling has been or is expected to be sought from the IRS with respect to any
matter discussed herein, and there can be no assurance that the IRS or a court
will agree with the statements made herein. Accordingly, each shareholder is
urged to consult his own tax advisor with respect to the federal income tax and
other tax consequences of the purchase, holding and sale of Shares.
Taxation of the Company. If the Company qualifies for taxation as a
REIT and distributes to its shareholders at least 95% of its "real estate
investment trust taxable income" (determined by excluding any net capital gain
and before taking into account any dividends paid deduction), it generally will
not be subject to federal corporate income taxes on the amount distributed. This
deduction for dividends paid to shareholders substantially
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eliminates the federal "double taxation" on earnings (once at the corporate
level and again at the shareholder level) that generally results from an
investment in a corporation.
However, even if the Company qualifies for federal income taxation as a
REIT, it may be subject to federal tax in certain circumstances. First, the
Company will be taxed at regular corporate rates on any undistributed "real
estate investment trust taxable income," including undistributed net capital
gains. Second, under certain circumstances, the Company may be subject to the
corporate "alternative minimum tax" on its items of tax preference, if any.
Third, if the Company has (i) net income from the sale or other disposition of
"foreclosure property" (generally, property acquired by the Company through
foreclosure or otherwise after a default on a loan secured by the property or on
a lease of the property) that is held primarily for sale to customers in the
ordinary course of business or (ii) other nonqualifying income from foreclosure
property, then the Company will be subject to tax on such income at the highest
regular corporate rate (currently 35%). Fourth, if the Company has net income
from prohibited transactions (generally, certain sales or other dispositions of
inventory or property held primarily for sale to customers in the ordinary
course of business, other than foreclosure property), such income will be
subject to tax at a 100% rate. Fifth, if the Company should fail to satisfy the
75% gross income test or the 95% gross income test (discussed below), but
nonetheless maintains its qualification as a REIT because certain other
requirements are met, the Company will be subject to tax at a 100% rate on the
greater of the amount by which the Company fails the 75% or the 95% test,
multiplied by a fraction intended to reflect the Company's profitability. Sixth,
if the Company should fail to distribute for any calendar year at least the sum
of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT
capital gain net income for such year, and (iii) any undistributed taxable
income from prior periods, the Company will be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed.
Seventh, if the Company acquires any asset from a C corporation (generally, a
corporation subject to full corporate level tax) in a transaction in which the
basis of the asset in the Company's hands is determined by reference to the
basis of the asset in the hands of the C corporation, and if the Company
subsequently recognizes gain on the disposition of such asset during the
ten-year period beginning on the date on which the asset was acquired by the
Company, then the Company will pay tax at the highest regular corporate tax rate
(currently 35%) on the lesser of (i) the excess of the fair market value of the
asset over the Company's basis in the asset on the date acquired by the Company
and (ii) the gain recognized by the Company.
If the Company should invest in properties in foreign countries, the
Company's profits from such investments will generally be subject to tax in the
countries where such properties are located. The nature and amount of any such
taxation will depend on the laws of the countries where the properties are
located. If the Company satisfies the annual distribution requirements for
federal income tax qualification as a REIT and is therefore not subject to
federal corporate income tax on that portion of its ordinary income and capital
gain that is currently distributed to its shareholders, the Company will
generally not be able to recover the cost of any foreign tax imposed on profits
from its foreign investments by claiming foreign tax credits against its federal
income tax liability on such profits. Moreover, a REIT is not able to pass
through to its shareholders any foreign tax credits.
The Company's Wholly-Owned Subsidiaries. Section 856(i) of the Code
provides that a corporation that is a qualified REIT subsidiary (defined as any
corporation 100% of whose stock is held by the REIT at all times during the
period the corporation is in existence) shall not be treated as a separate
corporation, and all assets, liabilities, and items of income, deduction, and
credit of a qualified REIT subsidiary shall be treated as assets, liabilities
and items of income, deduction, and credit of the REIT. (For the Company's
taxable years commencing on or after January 1, 1998, a wholly-owned corporation
qualifies as a qualified REIT subsidiary even though there was a period of time
during which the Company did not own 100% of its stock; such corporation will be
treated for federal income tax purposes as though liquidated into the Company at
the time the Company acquired 100% ownership, and then reincorporated by the
Company as a qualified REIT subsidiary.) The Company believes that each of its
direct and indirect wholly-owned subsidiaries qualifies either as a qualified
REIT subsidiary within the meaning of Section 856(i) of the Code, or as a
noncorporate entity that for federal income tax purposes is not treated as
separate from its owner pursuant to Treasury Regulations under Section 7701 of
the Code. Thus, in applying all the federal income tax REIT qualification
requirements discussed herein, the Company's direct and indirect wholly-owned
subsidiaries are ignored, and all assets, liabilities, and items of income,
deduction and credit of those subsidiaries are treated as assets, liabilities
and items of income, deduction and credit of the Company.
The Company's Investments through Partnerships. The Company has
invested, and in the future may invest, in real estate through one or more
limited or general partnerships or limited liability companies that is treated
as a partnership for federal income tax purposes. In the case of a REIT that is
a partner in a partnership, Treasury Regulations provide that for purposes of
the REIT qualification requirements regarding income and assets discussed
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below, the REIT is deemed to own its proportionate share of the assets of the
partnership corresponding to the REIT's proportionate capital interest in such
partnership and is deemed to be entitled to the income of the partnership
attributable to such proportionate share. In addition, for these purposes, the
character of the assets and gross income of the partnership generally retain the
same character in the hands of the REIT. Accordingly, the Company's
proportionate share of the assets, liabilities, and items of income of each
partnership in which it is a partner are treated as assets, liabilities, and
items of income of the Company for purposes of the income tests and asset tests
discussed below. However, for purposes of the REIT's distribution requirement
discussed below, a REIT must take into account as a partner its distributive
share of the partnership's income as determined under the general federal income
tax rules governing partners and partnerships under Sections 701 et seq. of the
Code.
REIT Qualification Requirements--Generally. Section 856(a) of the Code
defines a REIT as a corporation, trust or association: (1) which is managed by
one or more trustees or directors; (2) the beneficial ownership of which is
evidenced by transferable shares or by transferable certificates of beneficial
interest; (3) which would be taxable, but for Sections 856 through 859 of the
Code, as a domestic corporation; (4) which is neither a financial institution
nor an insurance company subject to certain provisions of the Code; (5) the
beneficial ownership of which is held by 100 or more persons; (6) which is not
"closely held" as determined under the personal holding company stock ownership
test (as applied with modifications); and (7) which meets certain other tests
regarding income, assets, and distributions, as described below. Section 856(b)
of the Code provides that conditions (1) to (4), inclusive, must be met during
the entire taxable year and that condition (5) must be met during at least 335
days of a taxable year of 12 months, or during a proportionate part of a taxable
year of less than 12 months. It is the Company's belief and expectation that it
has had and will have at least 100 shareholders during the requisite period for
each of its taxable years since its election to be taxed as a REIT. There can,
however, be no assurance in this connection and, if the Company has fewer than
100 shareholders during the requisite period, condition (5) described above will
not be satisfied, and the Company would not qualify as a REIT during such
taxable year.
By reason of the "closely held" condition (6) above, the Company will
fail to qualify as a REIT for a taxable year if at any time during the last half
of such year more than 50% in value of its outstanding Shares is owned directly
or indirectly by five or fewer individuals. To help maintain conformity with
condition (6), the Declaration contains certain provisions restricting transfers
of Shares and giving the Trustees the power to redeem Shares involuntarily. For
its taxable years commencing on or after January 1, 1998, if the Company
complies with Treasury Regulations for ascertaining the ownership of its
outstanding Shares and does not know or, exercising reasonable diligence would
not have known, whether it failed condition (6), then the Company will be
treated as satisfying condition (6). Also, for its taxable years commencing on
or after January 1, 1998, the Company's failure to comply with the Treasury
Regulations for ascertaining ownership of its outstanding Shares may result in a
penalty of $25,000 ($50,000 for intentional violations). Accordingly, the
Company will, pursuant to the Treasury Regulations, request annually from record
holders of certain significant percentages of its Shares certain information
regarding the ownership of such Shares. Under the Declaration, shareholders are
required to respond to such requests for information.
The rule that an entity will fail to qualify as a REIT for a taxable
year if at any time during the last half of such year more than 50% in value of
its outstanding shares is owned directly or indirectly by five or fewer
individuals is relaxed in the case of certain pension trusts owning shares in a
REIT. Shares in a REIT held by such a pension trust are treated as held directly
by its beneficiaries in proportion to their actuarial interests in the pension
trust. Consequently, five or fewer pension trusts could own more than 50% of the
interests in an entity without jeopardizing its federal income tax qualification
as a REIT. However, as discussed below, if the REIT is a "pension- held REIT,"
each pension trust holding more than 10% of its shares (by value) generally will
be taxable on a portion of the dividends it receives from the REIT, based on the
ratio of the REIT's gross income for the year which would be unrelated trade or
business income if the REIT were a qualified pension trust to the REIT's total
gross income for the year.
To qualify as a REIT under the Code, the Company must elect to be so
treated and must meet other requirements, certain of which are summarized below,
including percentage tests relating to the sources of its gross income, the
nature of its assets, and the distribution of its income to shareholders. The
Company made such an election for 1987 (its first full year of operations), and
such election, assuming continuing compliance with the federal income tax
qualification tests discussed herein, continues in effect for subsequent years.
Income Tests. There are three gross income requirements, only two of
which apply to the Company for its taxable years commencing on or after January
1, 1998. First, at least 75% of the Company's gross income
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(excluding gross income from certain sales of property held primarily for sale)
must be derived directly or indirectly from investments relating to real
property (including "rents from real property"), mortgages on real property, or
shares in other REITs. When the Company receives new capital in exchange for its
Shares (other than dividend reinvestment amounts) or in a public offering of
five-year or longer debt instruments, income attributable to the temporary
investment of such new capital in stock or a debt instrument, if received or
accrued within one year of the Company's receipt of the new capital, is
qualifying income under the 75% test. Second, at least 95% of the Company's
gross income (excluding gross income from certain sales of property held
primarily for sale) must be derived from such real property investments,
dividends, interest, certain payments under interest rate swap or cap agreements
(and for the Company's taxable years commencing on or after January 1, 1998,
certain payments under options, futures contracts, forward rate agreements, or
similar financial instruments), and gain from the sale or disposition of stock,
securities, or real property, or from any combination of the foregoing. Third,
for the Company's taxable years ending on or before December 31, 1997,
short-term gain from the sale or other disposition of stock or securities
(including, without limitation, stock in other REITs), dispositions of interest
rate swap or cap agreements, and gain from certain prohibited transactions or
other dispositions of real property held for less than four years (apart from
involuntary conversions and sales of foreclosure property) must have represented
less than 30% of the Company's gross income. For purposes of these three gross
income rules, income derived from a "shared appreciation provision" in a
mortgage loan is generally treated as gain recognized on the sale of the
property to which it relates. Even though the Company does not own mortgage
loans that contain shared appreciation provisions, the Company may in the future
make such mortgage loans. The Company temporarily invests working capital in
short-term investments, including shares in other REITs. Although the Company
will use its best efforts to ensure that the income generated by its investments
will be of a type which satisfies the 75% and 95% gross income tests, there can
be no assurance in this regard.
In order to qualify as "rents from real property," several requirements
must be met. First, the amount of rent received generally must not be determined
from the income or profits of any person, but may be based on receipts or sales.
Second, the Code provides that rents will not qualify as "rents from real
property" in satisfying the gross income tests if the REIT owns 10% or more of
the tenant, whether directly or under certain attribution rules. The Company
intends not to lease property to any party if rents from such property would not
so qualify. Application of the 10% ownership rule is, however, dependent upon
complex attribution rules and upon circumstances beyond the control of the
Company. Ownership, directly or by attribution, by an unaffiliated third party
of more than 10% of the Shares and more than 10% of the stock of a lessee would
result in lessee rents not qualifying as "rents from real property." The
Declaration provides that transfers or purported acquisitions, directly or by
attribution, of Shares that could result in disqualification of the Company as a
REIT are null and void and permits the Trustees to repurchase Shares to the
extent necessary to maintain the Company's status as a REIT. Nevertheless, there
can be no assurance such provisions in the Declaration will be effective to
prevent the Company's REIT status from being jeopardized under the 10% lessee
affiliate rule. Furthermore, there can be no assurance that the Company will be
able to monitor and enforce such restrictions, nor will shareholders necessarily
be aware of shareholdings attributed to them under the attribution rules. Third,
in order for its rents to qualify as "rents from real property," the Company
must not manage the property or furnish or render services to the tenants of
such property, except through an independent contractor from whom the Company
derives no income. There is an exception to this rule permitting a REIT to
perform certain customary tenant services of the sort which a tax-exempt
organization could perform without being considered in receipt of "unrelated
business taxable income." For the Company's taxable years commencing on or after
January 1, 1998, a de minimis amount of noncustomary services will not
disqualify income as rents from real property so long as the value of the
impermissible services does not exceed 1% of the gross income of the property.
Fourth, if rent attributable to personal property leased in connection with a
lease of real property is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as "rents from real property." The portion of rental income treated as
attributable to personal property is determined according to the ratio of the
tax basis of the personal property to the total tax basis of the property which
is rented. Substantially all of the gross income of the Company has been and is
expected to be attributable to rental income. The Company believes that all or
substantially all such rents have qualified and will continue to qualify as
"rents from real property" for purposes of Section 856 of the Code, but if for
some reason a significant amount of such rents do not so qualify, it may be
difficult or impossible for the Company to meet the 95% or 75% gross income
tests and to qualify as a REIT for federal income tax purposes.
In order to qualify as mortgage interest on real property for purposes
of the 75% test, interest must derive from a mortgage loan secured by real
property with a fair market value at least equal to the amount of the loan. If
the amount of the loan exceeds the fair market value of the real property, the
interest will be treated as interest on a
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mortgage loan in a ratio equal to the ratio of the fair market value of the real
property to the total amount of the mortgage loan.
Any gain realized by the Company on the sale of any property held as
inventory or other property held primarily for sale to customers in the ordinary
course of business will be treated as income from a prohibited transaction that
is subject to a penalty tax at a 100% rate. This prohibited transaction income
also may have an adverse effect upon the Company's ability to satisfy the 75%
and 95% gross income tests for federal income tax qualification as a REIT. Under
existing law, whether property is held as inventory or primarily for sale to
customers in the ordinary course of a trade or business is a question of fact
that depends on all the facts and circumstances with respect to the particular
transaction. The Company intends to hold its real estate assets for investment
with a view to long-term appreciation, to engage in the business of developing,
owning and operating its existing real estate assets and acquiring, developing,
owning and operating other real estate assets, and to make occasional
dispositions of real estate assets as is consistent with the Company's
investment objectives. There can be no assurance, however, that the IRS might
not contend that one or more dispositions is subject to the 100% penalty tax.
If the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if (i) the Company's failure to meet such test was due to reasonable
cause and not due to willful neglect, (ii) the Company reported the nature and
amount of each item of its income included in the 75% or 95% gross income tests
(as the case may be) for such taxable year on a schedule attached to its return,
and (iii) any incorrect information on the schedule was not due to fraud with
intent to evade tax. No similar provision provides relief if the Company failed
the 30% gross income test for the taxable years such test was applicable, and it
is not possible to state whether in all circumstances the Company would be
entitled to the benefit of the relief provisions for the 75% and 95% gross
income tests. As discussed above, even if these relief provisions do apply, a
special tax equal to 100% is imposed upon the greater of the amount by which the
Company failed the 75% test or the 95% test, multiplied by a fraction intended
to reflect the Company's profitability.
Asset Tests. At the close of each quarter of the Company's taxable
year, it must also satisfy three tests relating to the nature of its assets.
First, at least 75% of the value of the Company's total assets must consist of
real estate assets (which for this purpose includes stock or debt instruments
held for not more than one year purchased with proceeds of a stock offering or a
long-term (at least five years) debt offering of the Company), cash, cash items,
shares in other REITs, and government securities. Second, not more than 25% of
the Company's total assets may be represented by securities (other than those
includable in the foregoing 75% asset class). Third, of the investments included
in the foregoing 25% asset class, the value of any one issuer's securities owned
by the Company may not exceed 5% of the value of the Company's total assets, and
the Company may not own more than 10% of any one issuer's outstanding voting
securities. President Clinton has proposed legislation that would expand this
last prohibition so that the Company would not be permitted to own more than
10%, either by vote or by value, of any one issuer's outstanding securities.
Where a failure to satisfy the foregoing asset tests results from an
acquisition of securities or other property during a quarter, the failure can be
cured by disposition of sufficient nonqualifying assets within 30 days after the
close of such quarter. The Company intends to maintain adequate records of the
value of its assets to maintain compliance with the foregoing asset tests, and
to take such action as may be required to cure any failure to satisfy the tests
within 30 days after the close of any quarter.
Annual Distribution Requirements. In order to qualify as a REIT, the
Company is required to distribute dividends (other than capital gain dividends)
to its shareholders each year in an amount at least equal to the excess of (A)
the sum of (i) 95% of the Company's "real estate investment trust taxable
income" (computed without regard to the dividends paid deduction and net capital
gain) and (ii) 95% of the net income (after tax), if any, from foreclosure
property, over (B) the sum of certain noncash income (e.g., certain imputed
rental income or certain income from transactions inadvertently failing to
qualify as like-kind exchanges). Such distributions must be paid in the taxable
year to which they relate, or in the following taxable year if declared before
the Company timely files its tax return for such earlier taxable year and if
paid on or before the first regular dividend payment after such declaration.
Also, dividends declared in October, November, or December and paid during the
following January will be treated as having been paid and received on December
31. A distribution which is not pro rata within a class of beneficial interest
in the Company entitled to a dividend, or which is not consistent with the
rights to distributions between classes of beneficial interests in the Company,
is a preferential dividend that is not taken into consideration for purposes of
the distribution requirement, and accordingly the payment of a preferential
dividend could affect the Company's ability to meet the distribution
requirement. Taking into account the Company's distribution policies
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(including its dividend reinvestment plan), the Company believes that it has not
made and expects that it will not make any such preferential dividend. The
distribution requirements may be waived by the IRS if the REIT establishes that
it failed to meet them by reason of distributions previously made to meet the
requirements of the 4% excise tax discussed below. To the extent that the
Company does not distribute all of its net capital gain and all of its "real
estate investment trust taxable income," as adjusted, it will be subject to tax
thereon.
In addition, the Company will be subject to a 4% excise tax to the
extent it fails within a calendar year to make "required distributions" to its
shareholders of 85% of its ordinary income and 95% of its capital gain net
income plus the excess, if any, of the "grossed up required distribution" for
the preceding calendar year over the amount treated as distributed for such
preceding calendar year. For this purpose, the term "grossed up required
distribution" for any calendar year is the sum of the taxable income of the
Company for the calendar year (without regard to the deduction for dividends
paid) and all amounts from earlier years that are not treated as having been
distributed under the provision.
It is possible that the Company, from time to time, may not have
sufficient cash or other liquid assets to meet the 95% distribution requirements
due to timing differences between (i) the actual receipt of income and actual
payment of deductible expenses or distributions and (ii) the inclusion of such
income and deduction of such expenses or distributions in arriving at "real
estate investment trust taxable income" of the Company. The problem of
inadequate cash to make required distributions could also occur as a result of
the repayment in cash of principal amounts due on the Company's outstanding
debt, particularly in the case of "balloon" repayments or as a result of capital
losses on short-term investments of working capital. Therefore, the Company
might find it necessary to arrange for short-term or possibly long-term
borrowing, or for new equity financing, to provide funds for required
distributions, or else its REIT status for federal income tax purposes could be
jeopardized. There can be no assurance that such borrowing or financing would be
available on favorable terms.
Under certain circumstances, the Company may be able to rectify a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to shareholders in a later year, which may be included in the
Company's deduction for dividends paid for the earlier year, although an
interest charge would be imposed upon the Company for the delay in distribution.
Although the Company may thus be able to avoid being taxed on amounts
distributed as deficiency dividends, the Company may in certain circumstances
remain liable for the 4% excise tax discussed above.
For its taxable years ending on or before December 31, 1997, the
Company was required to request annually from record holders of certain
significant percentages of its Shares certain information regarding the
ownership of such Shares, in order to qualify for the deduction for dividends
paid to its shareholders. As discussed above, for taxable years commencing on or
after January 1, 1998, the Company will continue to request such information in
order to comply with the REIT qualification requirement regarding ownership
concentration of its Shares.
Federal Income Tax Treatment of Leases. The availability to the Company
of, among other things, depreciation deductions with respect to the facilities
owned and leased by the Company will depend upon the treatment of the Company as
the owner of the facilities and the classification of the leases of the
facilities as true leases, rather than as sales or financing arrangements, for
federal income tax purposes. As to the approximately 2% of the Company's leased
facilities which constitutes personal property, it is not entirely clear that
the Company will be treated as the owner of such personal property and that the
leases will be treated as true leases with respect to such property. The Company
plans to insure its compliance with the 95% distribution requirement (and the
excise tax "required distribution" requirement) by making distributions on the
assumption that it is not entitled to depreciation deductions for the 2% of the
leased facilities which constitute personal property, but to perform all its tax
reporting by taking into account such depreciation.
In the case of certain sale-leaseback arrangements, the IRS could
assert that the Company realized prepaid rental income in the year of purchase
to the extent that the value of a leased property exceeds the purchase price
paid by the Company for that property. In litigated cases involving
sale-leasebacks which have considered this issue, courts have concluded that
buyers have realized prepaid rent where both parties acknowledged that the
purported purchase price for the property was substantially less than fair
market value and the purported rents were substantially less than the fair
market rentals. Because of the lack of clear precedent, complete assurance
cannot be given that the IRS could not successfully assert the existence of
prepaid rental income.
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Additionally, it should be noted that Section 467 of the Code
(concerning leases with increasing rents) would apply to the leases because many
of the leases provide for rents that increase from one period to the next.
Section 467 of the Code provides that in the case of a so-called "disqualified
leaseback agreement," rental income must be accrued at a constant rate. If such
constant rent accrual were required, the Company could recognize rental income
in excess of cash rents and, as a result, may fail to meet the 95% dividend
distribution requirement. "Disqualified leaseback agreements" include leaseback
transactions where a principal purpose for providing increasing rent under the
agreement is the avoidance of federal income tax. Because Section 467 of the
Code directs the Treasury to issue regulations providing that rents will not be
treated as increasing for tax avoidance purposes where the increases are based
upon a fixed percentage of lessee receipts, and because regulations proposed to
be effective for "disqualified leaseback agreements" entered into after June 3,
1996 adopt this rule, the additional rent provisions of the leases generally
should not cause the leases to be "disqualified leaseback agreements." In
addition, the legislative history of Section 467 of the Code indicates that the
Treasury should issue regulations under which leases providing for fluctuations
in rents by no more than a reasonable percentage from the average rent payable
over the term of the lease will be deemed not motivated by tax avoidance, and
the proposed regulations permit a 10% fluctuation.
Depreciation of Properties. For federal income tax purposes, the
Company generally depreciates its real property on a straight-line basis over 40
years and its personal property over 12 years.
Failure to Qualify. If the Company fails to qualify for federal income
taxation as a REIT in any taxable year, and any potentially applicable relief
provisions do not apply, the Company will be subject to tax on its taxable
income at regular corporate rates (plus any applicable minimum tax).
Distributions to shareholders in any year in which the Company fails to qualify
will not be deductible by the Company nor will they be required to be made. In
such event, to the extent of the Company's current and accumulated earnings and
profits, all distributions to shareholders will be taxable as ordinary income,
and subject to certain limitations in the Code will be eligible for the
dividends received deduction for corporations. Unless entitled to relief under
specific statutory provisions, the Company will also be disqualified from
federal income taxation as a REIT for the following four taxable years. It is
not possible to state whether in all circumstances the Company would be entitled
to statutory relief from such disqualification. Failure to qualify for even one
year could result in the Company's incurring substantial indebtedness (to the
extent borrowings are feasible) or liquidating substantial investments in order
to pay the resulting taxes.
Taxation of U.S. Shareholders--Generally. As used herein, the term
"U.S. Shareholder" means a beneficial holder of Shares that is for federal
income tax purposes (i) a citizen or resident of the United States, (ii) a
corporation or partnership (or other entity treated as a corporation or
partnership for federal income tax purposes) created or organized in or under
the laws of the United States or of any political subdivision thereof (unless
otherwise provided by Treasury Regulations), (iii) an estate the income of which
is subject to federal income taxation regardless of its source, or (iv) a trust
if a court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust (or certain electing
trusts in existence on August 20, 1996 to the extent provided in Treasury
Regulations). As used herein, the term "Non-U.S. Shareholder" means a beneficial
holder of Shares that is not a U.S. Shareholder.
As long as the Company qualifies as a REIT for federal income tax
purposes, distributions (including reinvestments pursuant to the Company's
dividend reinvestment plan) made to the Company's U.S. Shareholders out of
current or accumulated earnings and profits will be taken into account by them
as ordinary income (but will not be eligible for the dividends received
deduction for corporations). Distributions that are properly designated by the
Company as capital gain dividends will be taxed as long-term capital gains (as
discussed below) to the extent they do not exceed the Company's actual net
capital gain for the taxable year, although corporate U.S. Shareholders may be
required to treat up to 20% of any such capital gain dividend as ordinary income
pursuant to Section 291 of the Code. For the Company's taxable years commencing
on or after January 1, 1998, the Company may elect to retain amounts
representing its net capital gain income. In that case, the Company will be
taxed at regular corporate capital gains tax rates on such amounts, each U.S.
Shareholder will be taxed on its proportionate share of the net capital gains
retained by the Company as though such amount were distributed and designated a
capital gain dividend, and each such U.S. Shareholder will receive a credit for
a proportionate share of the tax paid by the Company. Additionally, each U.S.
Shareholder will increase the adjusted basis in its Shares by the excess of the
amount of its proportionate share of these net capital gains over its
proportionate share of the tax paid by the Company, and both the Company and its
corporate U.S. Shareholders will make commensurate adjustments in their
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respective earnings and profits for federal income tax purposes. If the Company
should elect to retain its net capital gain in this fashion, it will notify each
U.S. Shareholder of the relevant tax information within 60 days after the close
of the Company's taxable year.
For certain noncorporate U.S. Shareholders, long-term capital gains
taken into account after May 7, 1997 are taxed at varying maximum rates of 20%,
25%, or 28%, depending upon the type of property disposed of and the holding
period in such property at the time of disposition. If the Company designates a
dividend as a capital gain dividend for any taxable year of the Company ending
after May 7, 1997 (or elects to retain a portion of its net capital gain and
have such amount treated as a distributed and designated capital gain dividend
in the manner described above), the Company may also designate the portion of
such capital gain dividend which is taxed to certain noncorporate U.S.
Shareholders at the varying maximum rates of 20%, 25%, or 28%, based upon the
type and holding period of the property disposed of by the Company. If the
Company does not make such a designation, the entire capital gain dividend will
be treated as long-term capital gain subject to the maximum 28% rate to the
noncorporate U.S. Shareholders (without regard to the period for which the U.S.
Shareholder held its Shares).
For purposes of computing the Company's earnings and profits,
depreciation on real estate is generally computed on a straight-line basis over
40 years. Distributions in excess of current or accumulated earnings and profits
will not be taxable to a U.S. Shareholder to the extent that they do not exceed
the adjusted basis of the U.S. Shareholder's Shares, but will reduce the U.S.
Shareholder's basis in such Shares. To the extent that such distributions exceed
the adjusted basis of a U.S. Shareholder's Shares, they will be included in
income as long-term capital gain (or short-term capital gain if the shares have
been held for not more than one year), with such long-term gain taxed to certain
noncorporate U.S. Shareholders at varying maximum rates of 20% or 28% depending
upon the U.S. Shareholder's holding period in the Shares. U.S. Shareholders may
not include in their respective income tax returns any net operating losses or
capital losses of the Company.
Dividends declared by the Company in October, November or December of a
taxable year to shareholders of record on a date in such month, will be deemed
to have been received by such shareholders on December 31, provided the Company
actually pays such dividends during the following January. For tax purposes, the
Company's dividends paid in 1987, 1988, 1989, 1990, 1991, 1992, 1993, 1994,
1995, 1996 and 1997 aggregated $1.085, $.840, $1.13, $1.16, $1.22, $1.25, $1.29,
$1.32, $1.37, $1.41 and $1.45 respectively, of which $.289, $.065, $.332, $.267,
$.104, $.218, $.335, $.081, $.161, $.350 and $.252, respectively, represented a
return of capital.
The sale or exchange of Shares will result in recognition of gain or
loss to the U.S. Shareholder in an amount equal to the difference between the
amount realized and its adjusted basis in the Shares sold or exchanged. Such a
gain or loss will be capital gain or loss, and will be long-term capital gain or
loss if the U.S. Shareholder's holding period in the Shares exceeded one year.
Long-term capital gains may be taxed to certain noncorporate U.S. Shareholders
at varying maximum rates of 20% or 28% depending upon the U.S. Shareholder's
holding period in the Shares. In addition, any loss upon a sale or exchange of
Shares by a U.S. Shareholder who has held such Shares for not more than six
months (after applying certain rules), will generally be treated as a long-term
capital loss to the extent of distributions from the Company required to be
treated by such U.S. Shareholders as long-term capital gain (including, for this
purpose, amounts constructively distributed as long-term capital gain by the
Company electing to retain its net capital gain in the manner described above).
U.S. Shareholders (other than certain corporations) who borrow funds to
finance their acquisition of Shares in the Company could be limited in the
amount of deductions allowed for the interest paid on the indebtedness incurred
in such an arrangement. Under Section 163(d) of the Code, interest paid or
accrued on indebtedness incurred or continued to purchase or carry property held
for investment is generally deductible only to the extent of the investor's net
investment income. A U.S. Shareholder's net investment income will include
dividend distributions and, if an appropriate election is made, capital gain
dividend distributions it receives from the Company; however, distributions
treated as a nontaxable return of the U.S. Shareholder's basis will not enter
into the computation of net investment income. Under Section 469 of the Code,
U.S. Shareholders (other than certain corporations) generally will not be
entitled to deduct losses from so-called passive activities except to the extent
of their income from passive activities. For purposes of these rules,
distributions received by a U.S. Shareholder from the Company will not be
treated as income from a passive activity and thus will not be available to
offset a U.S. Shareholder's passive activity losses.
Tax preference and other items which are treated differently for
regular and alternative minimum tax purposes are to be allocated between a REIT
and its shareholders under regulations which are to be prescribed. It is
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possible that these regulations would require tax preference items to be
allocated to the Company's shareholders with respect to any accelerated
depreciation claimed by the Company; however, the Company has not claimed
accelerated depreciation with respect to its existing properties.
Taxation of Certain Tax-Exempt U.S. Shareholders. In Revenue Ruling
66-106, the IRS ruled that amounts distributed by a REIT to a tax-exempt
employees' pension trust did not constitute "unrelated business taxable income,"
even though the REIT may have financed certain of its activities with
acquisition indebtedness. Although Revenue Rulings are interpretive in nature
and subject to revocation or modification by the IRS, based upon Revenue Ruling
66-106 and the analysis therein, distributions made by the Company to U.S.
Shareholders that are qualified pension plans (including individual retirement
accounts) or certain other tax-exempt entities should not constitute unrelated
business taxable income, unless such U.S. Shareholder has financed the
acquisition of its Shares with "acquisition indebtedness" within the meaning of
the Code, or the Shares are otherwise used in an unrelated trade or business
conducted by the U.S. Shareholder.
Special rules apply to certain tax-exempt pension trusts (including
so-called 401(k) plans but excluding individual retirement accounts or
government pension plans) that own more than 10% by value of a "pension-held
REIT" at any time during a taxable year commencing after December 31, 1993. Such
a pension trust may be required to treat a certain percentage of all dividends
received from the pension-held REIT during the year as unrelated business
taxable income. Such percentage is equal to the ratio of the pension-held REIT's
gross income (less direct expenses related thereto) derived from the conduct of
unrelated trades or businesses (determined as if the pension-held REIT were a
tax-exempt pension fund), to the pension-held REIT's gross income (less direct
expenses related thereto) from all sources, except that such percentage shall be
deemed to be zero unless it would otherwise equal or exceed 5%. A REIT will be
treated as a pension-held REIT only if (i) the REIT is "predominantly held" by
tax-exempt pension trusts, and (ii) the REIT would otherwise fail to satisfy the
"closely held" ownership conditiondiscussed above if the stock or beneficial
interests in the REIT held by such tax-exempt pension trusts were viewed as held
by such tax-exempt pension trusts rather than their respective beneficiaries. A
REIT is predominantly held by tax-exempt pension trusts if at least one
tax-exempt pension trust holds more than 25% by value of the REIT's stock or
beneficial interests, or if one or more tax-exempt pension trusts (each owning
more than 10% by value of the REIT's stock or beneficial interests) own in the
aggregate more than 50% by value of the REIT's stock or beneficial interests.
Given the restrictions in its Declaration regarding ownership of its Shares, the
Company believes that it has not been, and expects that it will not be, a
pension-held REIT. However, because the Shares of the Company will be publicly
traded, no assurance can be given that the Company will not become a
pension-held REIT.
Taxation of Non-U.S. Shareholders. The rules governing the federal
income taxation of Non-U.S. Shareholders (generally, nonresident alien
individuals, foreign corporations, foreign partnerships, and foreign trusts and
estates) are highly complex, and the following discussion is intended only as a
summary of such rules. Non- U.S. Shareholders should consult with their own tax
advisors to determine the impact of federal, state, local, and foreign tax laws,
including any reporting requirements, with respect to their investment in the
Company. In general, a Non-U.S. Shareholder will be subject to regular federal
income tax in the same manner as a U.S. Shareholder with respect to its
investment in Shares if such investment is "effectively connected" with the
Non-U.S. Shareholder's conduct of a trade or business in the United States. In
addition, a corporate Non-U.S. Shareholder that receives income that is (or is
deemed) effectively connected with a trade or business in the United States may
also be subject to the 30% branch profits tax under Section 884 of the Code,
which is payable in addition to regular federal corporate income tax. The
following discussion addresses only Non-U.S. Shareholders whose investment in
Shares is not effectively connected with the conduct of a trade or business in
the United States.
A distribution by the Company to a Non-U.S. Shareholder that is not
attributable to gain from the sale or exchange by the Company of a United States
real property interest and that is not designated by the Company as a capital
gain dividend will be treated as an ordinary income dividend to the extent that
it is made out of current or accumulated earnings and profits. Generally, such a
dividend will be subject to federal income withholding tax on the gross amount
thereof at the rate of 30%, or such lower rate that may be specified by treaty
if the Non-U.S. Shareholder has in the manner prescribed by the IRS demonstrated
to the Company its entitlement to treaty benefits. A distribution of cash in
excess of the Company's earnings and profits will be treated first as a
nontaxable return of capital that will reduce a Non-U.S. Shareholder's basis in
its Shares (but not below zero) and then as gain from the disposition of such
Shares, the tax treatment of which is discussed below. A distribution in excess
of the Company's earnings and profits may be subject to 30% (or lower treaty
rate) withholding if at the time of the distribution it cannot be determined
whether the distribution will be in an amount in excess of the Company's current
and
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accumulated earnings and profits. If it is subsequently determined that such
distribution is, in fact, in excess of current and accumulated earnings and
profits, the Non-U.S. Shareholder may seek a refund from the IRS. The Company
expects to withhold federal income withholding tax at the rate of 30% on the
gross amount of any distributions on Shares made to a Non-U.S. Shareholder
unless a lower tax treaty applies and the required IRS form evidencing
eligibility for that reduced rate is filed with the Company.
For any year in which the Company qualifies as a REIT, distributions by
the Company that are attributable to gain from the sale or exchange of a United
States real property interest are taxed to a Non-U.S. Shareholder as if such
distributions were gains "effectively connected" with a trade or business in the
United States conducted by the Non-U.S. Shareholder. Accordingly, a Non-U.S.
Shareholder will be taxed on such amounts at the normal capital gain rates
applicable to a U.S. Shareholder (subject to any applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals). Such distributions may also be subject to a 30% branch profits tax
under Section 884 of the Code in the hands of a corporate Non-U.S. Shareholder
that is not entitled to treaty relief or exemption. The Company will be required
to withhold from distributions to Non-U.S. Shareholders, and remit to the IRS,
35% of the maximum amount of any distribution that could be designated as a
capital gain dividend. In addition, for purposes of this withholding rule, if
the Company designates prior distributions as capital gain distributions, then
subsequent distributions, up to the amount of such prior distributions, will be
treated as capital gain dividends. The amount of any tax withheld is creditable
against the Non-U.S. Shareholder's federal income tax liability, and any amount
of tax withheld in excess of that tax liability may be refunded provided that an
appropriate claim for refund is filed with the IRS.
Tax treaties may reduce the Company's withholding obligations. Under
certain treaties, however, rates below 30% generally applicable to dividends
from United States corporations may not apply to dividends from a REIT. If the
amount of tax withheld by the Company with respect to a distribution to a
Non-U.S. Shareholder exceeds such shareholder's federal income tax liability
with respect to such distribution, the Non-U.S. Shareholder may file for a
refund of such excess from the IRS. In this regard, it should be noted that the
35% withholding tax rate on capital gain dividends corresponds to the maximum
income tax rate applicable to corporate Non-U.S. Shareholders but is higher than
the 20%, 25%, and 28% maximum rates on capital gains generally applicable to
noncorporate Non-U.S. Shareholders. Treasury Regulations issued on October 6,
1997 (the "New Regulations") alter the withholding rules on dividends paid to a
Non-U.S. Shareholder, generally effective with respect to dividends paid after
December 31, 1998. Under the New Regulations, to obtain a reduced rate of
withholding under an income tax treaty, a Non-U.S. Shareholder generally will be
required to provide an Internal Revenue Service Form W-8 certifying such
Non-U.S. Shareholder's entitlement to benefits under the treaty. The New
Regulations also provide special rules to determine whether, for purposes of
determining the applicability of a tax treaty, dividends paid to a Non-U.S.
Shareholder that is an entity should be treated as paid to the entity or to
those holding an interest in that entity, and whether such entity or such
holders in the entity are entitled to benefits under the tax treaty. The New
Regulations also alter the information reporting and backup withholding rules
applicable to Non- U.S. Shareholders and, among other things, provide certain
presumptions under which a Non-U.S. Shareholder is subject to backup withholding
and information reporting until the Company receives certification from such
shareholder of its Non-U.S. Shareholder status.
If the Shares fail to constitute a "United States real property
interest" within the meaning of Section 897 of the Code, gain on sale of the
Shares by a Non-U.S. Shareholder generally will not be subject to federal income
taxation unless (i) investment in the Shares is effectively connected with the
Non-U.S. Shareholder's United States trade or business, in which case, as
discussed above, the Non-U.S. Shareholder would be subject to the same treatment
as U.S. Shareholders on such gain, or (ii) the Non-U.S. Shareholder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year, in which case the nonresident alien individual
will be subject to a 30% tax on such gain.
The Shares will not constitute a United States real property interest
if the Company is a "domestically controlled REIT." A domestically controlled
REIT is a REIT in which at all times during the preceding five-year period less
than 50% in value of its shares is held directly or indirectly by foreign
persons. It is believed that the Company has been and will continue to be a
domestically controlled REIT, and therefore that the sale of Shares by a
Non-U.S. Shareholder will not be subject to federal income taxation. However,
because the Shares are publicly traded, no assurance can be given that the
Company has been and will continue to be a domestically controlled REIT. If the
Company is not a domestically controlled REIT, whether a Non-U.S. Shareholder's
gain on sale of Shares would be subject to federal income tax as a sale of a
United States real property interest would depend upon whether the Shares were
"regularly traded" (as defined by applicable Treasury Regulations) on an
established
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securities market (e.g., the New York Stock Exchange, on which the Shares are
listed) and upon the size of the selling Non-U.S. Shareholder's interest in the
Company. If the gain on the sale of the Shares were subject to federal income
taxation, the Non-U.S. Shareholder would be subject to the same treatment as a
U.S. Shareholder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals). In any event, a purchaser of Shares from a Non-U.S.
Shareholder will not be required to withhold on the purchase price if the
purchased Shares are "regularly traded" on an established securities market or
if the Company is a domestically controlled REIT. Otherwise, the purchaser of
Shares may be required to withhold 10% of the purchase price paid to the
Non-U.S. Shareholder and to remit such amount to the IRS.
Shares owned or treated as owned by an individual who is not a citizen
or resident (as defined for United States federal estate tax purposes) of the
United States at the time of death will be includable in the individual's gross
estate for United States federal estate tax purposes unless an applicable estate
tax treaty provides otherwise.
Backup Withholding and Information Reporting Requirements. The Company
will report to its U.S. Shareholders and to the IRS the amount of dividends paid
during each calendar year and the amount of tax withheld, if any. Under the
backup withholding rules, a U.S. Shareholder may be subject to backup
withholding at the rate of 31% with respect to dividends paid unless the U.S.
Shareholder (a) is a corporation or comes within certain other exempt categories
and, when required, demonstrates that fact or (b) provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding rules and otherwise complies with applicable requirements of the
backup withholding rules. A U.S. Shareholder that does not provide the Company
with its correct taxpayer identification number may be subject to penalties
imposed by the IRS. In addition, the Company may be required to withhold a
portion of capital gain distributions to any U.S. Shareholder that fails to
certify its non-foreign status to the Company. Any amounts withheld under the
foregoing rules will be creditable against the U.S. Shareholder's federal income
tax liability provided that the required information is furnished to the IRS.
The Company will report to its Non-U.S. Shareholders and to the IRS the
amount of dividends paid during each calendar year and the amount of tax
withheld, if any. These information reporting requirements apply regardless of
whether withholding was reduced or eliminated by an applicable tax treaty.
Copies of these information returns may also be made available under the
provisions of a specific treaty or agreement to the tax authorities in the
country in which the Non-U.S. Shareholder resides. As discussed above,
withholding tax rates of 30% and 35% may apply to distributions on Shares to
Non-U.S. Shareholders, and the New Regulations will when effective alter the
information reporting and withholding rules applicable to Non-U.S. Shareholders.
Among other things, the New Regulations provide certain presumptions under which
a Non-U.S. Shareholder would be subject to backup withholding and information
reporting until the Company receives certification from such shareholder of its
Non-U.S. Shareholder status. As noted, the New Regulations are generally
effective with respect to dividends paid after December 31, 1998.
The payment of the proceeds from the disposition of Shares to or
through the United States office of a broker will generally be subject to
information reporting and backup withholding at a rate of 31% unless the owner,
under penalties of perjury, certifies, among other things, its status as a
Non-U.S. Shareholder, or otherwise establishes an exemption. The payment of the
proceeds from the disposition of Shares to or through a non-United States office
of a broker generally will not be subject to backup withholding and information
reporting. In the case of proceeds from a disposition of Shares paid to or
through a non-United States office of a United States broker or paid to or
through a non-United States office of a non-United States broker that is (i) a
"controlled foreign corporation" for federal income tax purposes or (ii) a
person 50% or more of whose gross income from all sources for a certain
three-year period was effectively connected with a United States trade or
business, (a) backup withholding will not apply unless the broker has actual
knowledge that the owner is not a Non-U.S. Shareholder, and (b) information
reporting will not apply if the broker has documentary evidence in its files
that the beneficial owner is a Non-U.S. Shareholder unless the broker has actual
knowledge to the contrary. Under the New Regulations (generally effective for
payments made after December 31, 1998), in the case of proceeds from a
disposition of Shares paid to or though a non-United States office of a United
States broker or paid to or through a non-United States office of a non-United
States broker that is (i) a "controlled foreign corporation" for federal income
tax purposes, (ii) a person 50% or more of whose gross income from all sources
for a certain three-year period was effectively connected with a United States
trade or business, (iii) a foreign partnership with one or more partners who are
United States persons and who in the aggregate hold more than 50% of the income
or capital interest in the partnership, or (iv) a foreign partnership engaged in
the conduct of a trade or business in the United States, (a) backup withholding
will not apply unless the broker has actual knowledge that the owner is not a
Non-U.S. Shareholder, and (b) information reporting will not apply if the
Non-U.S. Shareholder certifies its status as a Non-
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U.S. Shareholder and further certifies that it has not been, and at the time the
certificate is furnished reasonably expects not to be, present in the United
States for a period aggregating 183 days or more during each calendar year to
which the certification pertains.
Any amounts withheld from a payment to a Non-U.S. Shareholder will
generally be refunded (or credited against the Non-U.S. Shareholder's United
States federal income tax liability, if any), provided that the required
information is furnished to the IRS.
Other Tax Considerations. Holders of Shares should recognize that the
present federal income tax treatment of the Company may be modified by future
legislative, judicial, or administrative actions at any time, which may be
retroactive in effect, and, as a result, any such action or decision may affect
investments and commitments previously made. The rules dealing with federal
income taxation are constantly under review by persons involved in the
legislative process and by the IRS and the Treasury Department, resulting in
statutory changes as well as promulgation of new regulations, revisions to
existing regulations, and revised interpretations of established concepts. No
prediction can be made as to the likelihood of passage of any new tax
legislation or other provisions either directly or indirectly affecting the
Company or its shareholders. Revisions in federal income tax laws and
interpretations thereof could adversely affect the tax consequences of
investment in the Shares.
The Company and its shareholders may also be subject to state or local
taxation in various state or local jurisdictions, including those in which it or
they transact business or reside. The state and local tax treatment of the
Company and its shareholders may not conform to the federal income tax
consequences discussed above. Consequently, holders should consult their own tax
advisors regarding the effect of state and local tax laws on an investment in
the Shares.
THE FOREGOING IS A SUMMARY DESCRIPTION OF CERTAIN MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE TAXATION OF THE COMPANY AND ITS SHAREHOLDERS,
WITHOUT CONSIDERATION OF THE PARTICULAR FACTS AND CIRCUMSTANCES OF ANY
PARTICULAR SHAREHOLDER. IN PARTICULAR, IT DOES NOT ADDRESS THE STATE, LOCAL OR
FOREIGN TAX ASPECTS OF THE TAXATION OF THE COMPANY AND ITS SHAREHOLDERS. THE
DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND
PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND
COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE
COULD AFFECT THE CONTINUING VALIDITY OF THE DISCUSSION. THE COMPANY AND ITS
SHAREHOLDERS MAY ALSO BE SUBJECT TO STATE OR LOCAL TAXATION IN VARIOUS STATE OR
LOCAL JURISDICTIONS, INCLUDING THOSE IN WHICH IT OR THEY TRANSACT BUSINESS OR
RESIDE. EACH HOLDER OF SHARES OF THE COMPANY SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE TAXATION OF THE COMPANY AND
ITS SHAREHOLDERS, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL
AND FOREIGN TAX LAWS.
ERISA PLANS, KEOGH PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS
General Fiduciary Obligations. Fiduciaries of a pension, profit-sharing
or other employee benefit plan subject to Title I of the Employee Retirement
Income Security Act of 1974 ("ERISA") ("ERISA Plan") must consider whether their
investment in the Company's Shares satisfies the diversification requirements of
ERISA, whether the investment is prudent in light of possible limitations on the
marketability of the Shares, whether such fiduciaries have authority to acquire
such Shares under the appropriate governing instrument and Title I of ERISA, and
whether such investment is otherwise consistent with their fiduciary
responsibilities. Any ERISA Plan fiduciary should also consider ERISA's
prohibition on improper delegation of control over or responsibility for "plan
assets." Trustees and other fiduciaries of an ERISA plan may incur personal
liability for any loss suffered by the plan on account of a violation of their
fiduciary responsibilities. In addition, such fiduciaries may be subject to a
civil penalty of up to 20% of any amount recovered by the plan on account of
such a violation (the "Fiduciary Penalty"). Fiduciaries of any Individual
Retirement Account ("IRA") Keogh Plan or other qualified retirement plan not
subject to Title I of ERISA because it does not cover common law employees
("Non-ERISA Plan") should consider that such an IRA or non-ERISA Plan may only
make investments that are authorized by the appropriate governing instrument.
Fiduciary shareholders should consult their own legal advisers if they have any
concern as to whether the investment is inconsistent with any of the foregoing
criteria.
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Prohibited Transactions. Fiduciaries of ERISA Plans and persons making
the investment decision for an IRA or other Non-ERISA Plan should also consider
the application of the prohibited transaction provisions of ERISA and the Code
in making their investment decision. Sales and certain other transactions
between an ERISA Plan, IRA, or other Non-ERISA Plan and certain persons related
to it are prohibited transactions. The particular facts concerning the
sponsorship, operations and other investments of an ERISA Plan, IRA, or other
Non-ERISA Plan may cause a wide range of other persons to be treated as
disqualified persons or parties in interest with respect to it. A prohibited
transaction, in addition to imposing potential personal liability upon
fiduciaries of ERISA Plans, may also result in the imposition of an excise tax
under the Code or a penalty under ERISA upon the disqualified person or party in
interest with respect to the ERISA or Non-ERISA Plan or IRA. If the disqualified
person who engages in the transaction is the individual on behalf of whom an IRA
is maintained (or his beneficiary), the IRA may lose its tax-exempt status and
its assets may be deemed to have been distributed to such individual in a
taxable distribution (and no excise tax will be imposed) on account of the
prohibited transaction. Fiduciary shareholders should consult their own legal
advisers if they have any concern as to whether the investment is a prohibited
transaction.
Special Fiduciary and Prohibited Transactions Considerations. The
Department of Labor ("DOL"), which has certain administrative responsibility
over ERISA Plans as well as over IRAs and other Non-ERISA Plans, has issued a
regulation defining "plan assets." The regulation generally provides that when
an ERISA or Non-ERISA Plan or IRA acquires a security that is an equity interest
in an entity and that security is neither a "publicly offered security" nor a
security issued by an investment company registered under the Investment Company
Act of 1940, the ERISA or Non-ERISA Plan's or IRA's assets include both the
equity interest and an undivided interest in each of the underlying assets of
the entity, unless it is established either that the entity is an operating
company or that equity participation in the entity by benefit plan investors is
not significant.
The regulation defines a publicly offered security as a security that
is "widely held," "freely transferable" and either part of a class of securities
registered under the Securities Exchange Act of 1934, or sold pursuant to an
effective registration statement under the Securities Act of 1933 (provided the
securities are registered under the Securities Exchange Act of 1934 within 120
days after the end of the fiscal year of the issuer during which the offering
occurred). The Shares have been registered under the Securities Exchange Act of
1934.
The regulation provides that a security is "widely held" only if it is
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another. However, a security will not fail to be
"widely held" because the number of independent investors falls below 100
subsequent to the initial public offering as a result of events beyond the
issuer's control.
The regulation provides that whether a security is "freely
transferable" is a factual question to be determined on the basis of all
relevant facts and circumstances. The regulation further provides that, where a
security is part of an offering in which the minimum investment is $10,000 or
less, certain restrictions ordinarily will not, alone or in combination, affect
a finding that such securities are freely transferable. The restrictions on
transfer enumerated in the regulation as not affecting that finding include: any
restriction on or prohibition against any transfer or assignment which would
result in a termination or reclassification of the Company for Federal or state
tax purposes, or would otherwise violate any state or Federal law or court
order; any requirement that advance notice of a transfer or assignment be given
to the Company and any requirement that either the transferor or transferee, or
both, execute documentation setting forth representations as to compliance with
any restrictions on transfer which are among those enumerated in the regulation
as not affecting free transferability, including those described in the
preceding clause of this sentence; any administrative procedure which
establishes an effective date, or an event prior to which a transfer or
assignment will not be effective; and any limitation or restriction on transfer
or assignment which is not imposed by the issuer or a person acting on behalf of
the issuer. The Company believes that the restrictions imposed under the
Declaration on the transfer of Shares do not result in the failure of the Shares
to be "freely transferable." Furthermore, the Company believes that at present
there exist no other facts or circumstances limiting the transferability of the
Shares which are not included among those enumerated as not affecting their free
transferability under the regulation, and the Company does not expect or intend
to impose in the future (or to permit any person to impose on its behalf) any
limitations or restrictions on transferwhich would not be among the enumerated
permissible limitations or restrictions. However, the final regulation only
establishes a presumption in favor of a finding of free transferability, and no
guarantee can be given that the DOL or the Treasury Department will not reach a
contrary conclusion.
19
<PAGE>
Assuming that the Shares will be "widely held" and that no other facts
and circumstances exist which restrict transferability of the Shares, the
Company has received an opinion of counsel that the Shares should not fail to be
"freely transferable" for purposes of the regulation due to the restrictions on
transfer of the Shares under the Declaration and that under the regulation the
Shares are publicly offered securities and the assets of the Company will not be
deemed to be "plan assets" of any ERISA Plan, IRA or other Non-ERISA Plan that
invests in the Shares.
If the assets of the Company are deemed to be plan assets under ERISA,
(i) the prudence standards and other provisions of Part 4 of Title I of ERISA
would be applicable to investments made by the Company; (ii) the person or
persons having investment discretion over the assets of ERISA Plans which invest
in the Company would be liable under the aforementioned Part 4 of Title I of
ERISA for investments made by the Company which do not conform to such ERISA
standards unless the Advisor registers as an investment adviser under the
Investment Advisers Act of 1940 and certain other conditions are satisfied; and
(iii) certain transactions that the Company might enter into in the ordinary
course of its business and operation might constitute "prohibited transactions"
under ERISA and the Code.
Item 2. Properties
General. At December 31, 1997, approximately 14% of the Company's total
investments were in long-term care facilities, 32% were in medical and other
office buildings and clinics, 20% were in government office buildings, 21% were
in retirement and assisted living communities, 8% were in nursing homes with
subacute services and 5% were in hotels through the Company's equity investment
in HPT. The Company believes that the physical plant of each of the facilities
in which it has invested is suitable and adequate for its present and any
currently proposed uses. At December 31, 1997, the Company had real estate
investments totaling $2.1 billion (at cost) in 217 properties that were leased
to or operated by over approximately 350 tenants or mortgagors, plus a 10.3%
investment of approximately $111.1 million (carrying value) through HPT in 119
additional properties.
20
<PAGE>
The following table summarizes certain information about the Properties as of
December 31, 1997. All dollar figures are in thousands.
<TABLE>
<CAPTION>
REAL ESTATE OWNED:
Number of Number of Investment Minimum
Location Facilities Beds/Units Amount Rent/Interest (1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retirement and Assisted Living Facilities:
Arizona 3 481 $ 36,642 $ 3,061
California 1 402 31,791 3,319
Florida 5 1,527 131,989 9,986
Illinois 2 704 98,743 7,490
Maryland 1 351 33,080 4,054
New York 1 103 10,700 1,017
South Dakota 1 59 1,014 127
Texas 1 145 12,411 1,213
Virginia 3 848 57,662 5,817
Washington 1 200 14,350 1,363
Long-Term Care Facilities:
Arizona 3 320 6,220 821
California 9 1,140 27,105 4,716
Colorado 9 1,011 34,351 4,561
Connecticut 5 867 42,821 5,184
Georgia 4 401 12,307 1,352
Illinois 1 230 2,711 452
Iowa 7 375 8,205 941
Kansas 1 59 1,320 157
Missouri 2 215 3,788 572
Nebraska 1 80 1,934 229
New Hampshire 1 108 3,689 430
New Jersey 1 150 13,007 1,418
Ohio 2 400 9,872 1,283
South Dakota 2 302 6,575 855
Vermont 8 808 29,766 3,316
Washington 1 143 5,193 642
Wisconsin 7 920 31,680 5,118
Wyoming 3 243 7,247 825
Long-Term Care Facilities with Subacute Services:
Connecticut 4 660 51,290 6,470
Massachusetts 5 762 82,059 10,044
Pennsylvania 1 120 15,598 1,951
Medical and Other Office Buildings and Clinics:
California 13 -- 179,949 20,324
Colorado 1 -- 14,403 1,435
District of Columbia 2 -- 44,530 6,949
Maryland 1 -- 12,517 2,875
Massachusetts 25 -- 120,957 14,446
New York 3 -- 130,831 14,306
Pennsylvania 6 -- 108,799 13,740
Rhode Island 1 -- 8,100 750
Texas 5 -- 78,562 9,242
Virginia 1 -- 5,757 997
Government Office Buildings:
Alaska 1 -- 1,000 490
Arizona 3 -- 21,628 2,692
California 4 -- 65,141 8,480
Colorado 1 -- 3,680 1,361
District of Columbia 2 -- 100,594 13,959
21
<PAGE>
<CAPTION>
Number of Number of Investment Minimum
Location Facilities Beds/Units Amount Rent/Interest (1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Georgia 1 -- 2,874 447
Kansas 1 -- 5,701 1,432
Maryland 4 -- 102,064 13,052
Missouri 1 -- 7,636 934
New Mexico 2 -- 10,813 1,255
New York 1 -- 23,317 2,684
Oklahoma 1 -- 24,426 3,062
Texas 2 -- 16,411 3,500
Virginia 1 -- 18,284 2,118
Washington 2 -- 21,005 2,421
West Virginia 1 -- 4,792 624
Wyoming 1 -- 10,132 1,250
---------------------------------------------------------------------------
Total Real Estate 183 14,134 $1,969,023 $233,609
---------------------------------------------------------------------------
MORTGAGE AND NOTE INVESTMENTS:
Retirement and Assisted Living Facilities:
California 3 389 $ 8,408 $ 978
Florida 1 248 5,000 525
North Carolina 3 345 11,472 1,381
Long-Term Care Facilities:
California 1 299 6,242 821
Kansas 2 177 523 166
Michigan 1 153 4,239 524
Nebraska 9 610 8,799 871
North Carolina 3 294 4,472 489
Ohio* 2 338 7,840 1,095
Pennsylvania 1 120 2,890 358
Texas 4 390 5,251 480
Wisconsin 2 339 12,349 1,480
Long-Term Care Facilities with Subacute Services:
Connecticut -- -- 2,365 224
Louisiana 1 118 19,185 2,293
Michigan 1 189 5,028 622
Medical Office Buildings:
California* -- -- 225 19
---------------------------------------------------------------------------
Total Mortgages and Notes 34 4,009 $104,288 $ 12,326
---------------------------------------------------------------------------
<FN>
* Amounts represent or include notes receivable related to improvements to real estate owned.
(1) Amounts represent obligations due to the Company for properties owned during the 12 months ended December 31, 1997 and
annualized obligations due to the Company for properties acquired during 1997, at December 31, 1997.
</FN>
</TABLE>
Item 3. Legal Proceedings
As previously disclosed, in early 1995 the Company commenced an action
in Florida state court to collect on a secured indemnity agreement from a former
tenant and mortgagor, together with certain related parties (collectively,
the "Former Tenant"). In May 1995 the Former Tenant filed a counterclaim and
third-party complaint against the Company and others including Messrs. Martin
and Portnoy, Advisor and Sullivan & Worcester LLP, seeking, among other things,
to set aside the indemnity agreement and to recover substantial damages. After a
Massachusetts state court ordered the dispute to arbitration and a Florida court
stayed further proceedings pending arbitration, the Former Tenant brought a
separate action against the Company in the Federal District Court in
Massachusetts and realleged many of the same allegations made in the
counterclaims and third-party complaints
22
<PAGE>
previously brought by them in response to the Company's original action, and
adding allegations of violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and violations of 18
U.S.C ss. 1962 (RICO). In September 1996, the Federal Court in Massachusetts
ordered the case brought by the Former Tenant dismissed and all disputes between
the Former Tenant and the Company referred to arbitration. The arbitration is
proceeding. The amounts of damages claimed by the Former Tenant and creditors or
assignees of the former Tenant are material. The Company is pursuing its
indemnity claims against the Former Tenant and is defending the claims of the
Former Tenant in the arbitration proceedings. The Company intends to defend
itself in related actions brought and which may be brought, to attempt to
consolidate these cases in the pending arbitration proceeding or otherwise to
pursue such claims and rights which it may have. The outcome of these pending
claims and proceedings cannot be predicted.
The Declaration of Trust provides that Trustees, officers, employees
and agents of the Company shall be indemnified by the Company against any
losses, judgments, liabilities, expenses and amounts paid in settlement of any
claims asserted against them by reason of their status, provided that such
claims were not the result of willful misfeasance, bad faith, gross negligence
or reckless disregard of duty. Were Messrs. Martin and Portnoy to be held liable
in the proceedings described above, they may therefore have a claim for
indemnification from the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of shareholders during the fourth
quarter of the year covered by this Annual Report on Form 10-K.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
The Company's Shares are traded on the New York Stock Exchange (symbol:
HRP). The following table sets forth for the periods indicated the high and low
sale prices for the Shares as reported in the New York Stock Exchange Composite
Transactions reports.
High Low
---- ---
1996
First Quarter $ 17 3/8 16
Second Quarter 17 7/8 16 3/8
Third Quarter 18 1/8 16 3/8
Fourth Quarter 19 1/4 17 3/4
1997
First Quarter 20 5/8 18
Second Quarter 19 17 3/4
Third Quarter 19 1/8 17 5/8
Fourth Quarter 20 5/16 18 9/16
The closing price of the Shares on the New York Stock Exchange on March
5, 1998 was $19.6875.
As of January 22, 1998, there were approximately 5,711 holders of record of the
Shares and the Company estimates that as of such date there were in excess of
120,000 beneficial owners of the Shares.
23
<PAGE>
Dividends declared with respect to each period for the two most recent
fiscal years and the amount of such dividends and the respective annualized
rates are set forth in the following table.
Dividend Annualized
Per Share Dividend Rate
--------- -------------
1996
First Quarter $.35 $1.40
Second Quarter .35 1.40
Third Quarter .36 1.44
Fourth Quarter .36 1.44
1997
First Quarter .36 1.44
Second Quarter .36 1.44
Third Quarter .37 1.48
Fourth Quarter .37 1.48
All dividends declared have been paid. The Company intends to continue
to declare and pay future dividends on a quarterly basis.
In order to qualify for the beneficial tax treatment accorded to REITs
by Sections 856 through 860 of the Code, the Company is required to make
distributions to shareholders which annually will be at least 95% of the
Company's "real estate investment trust taxable income" (as defined in the
Code). All distributions will be made by the Company at the discretion of the
Trustees and will depend on the earnings of the Company, the cash flow available
for distribution, the financial condition of the Company and such other factors
as the Trustees deems relevant. The Company has in the past distributed, and
intends to continue to distribute, substantially all of its "real estate
investment trust taxable income" to its shareholders.
24
<PAGE>
Item 6. Selected Financial Data
Set forth below are selected financial data for the Company for the
periods and dates indicated. This data should be read in conjunction with, and
is qualified in its entirety by reference to, the financial statements and
accompanying notes included in Item 7 of the Company's Current Report on Form
8-K dated February 27, 1998. Amounts are in thousands, except per Share
information.
<TABLE>
<CAPTION>
Income Statement Data: Year Ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $208,863 $120,183 $113,322 $ 86,683 $ 56,485
Income before gain (loss) on sale of
properties and extraordinary items 112,204 77,164 61,760 57,878 37,738
Income before extraordinary items 115,102 77,164 64,236 51,872 37,738
Net income 114,000 73,254 64,236 49,919 33,417
Funds from operations (1) 146,312 99,106 84,638 71,851 46,566
Dividends declared (2) 144,271 94,299 83,954 76,317 44,869
Basic earnings per common share amounts:
Income before gain (loss) on sale of
properties and extraordinary items 1.22 1.16 1.04 1.10 1.10
Income before extraordinary items 1.25 1.16 1.08 .98 1.10
Net income 1.24 1.11 1.08 .95 .97
Funds from operations (1) 1.59 1.50 1.43 1.36 1.35
Dividends declared (2) 1.46 1.42 1.38 1.33 1.30
Weighted average shares outstanding 92,168 66,255 59,227 52,738 34,407
<CAPTION>
Balance Sheet Data: At December 31,
-----------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate properties, at cost $1,969,023 $1,005,739 $ 778,211 $ 673,083 $ 384,811
Real estate mortgages and notes 104,288 150,205 141,307 133,477 157,281
Investment in HPT 111,134 103,062 99,959 -- --
Total assets 2,135,963 1,229,522 999,677 840,206 527,662
Total indebtedness 787,879 492,175 269,759 216,513 73,000
Total shareholders' equity 1,266,260 708,048 685,592 602,039 441,135
<FN>
(1) The Company's Funds From Operations ("FFO") represents net income (computed in accordance with generally accepted
accounting principals ("GAAP")), before gain or loss on sale of properties and extraordinary items, depreciation and other
non-cash items and includes HRP's pro rata share of HPT's FFO. Management considers FFO to be a measure of the financial
performance of an equity REIT that provides a relevant basis for comparison among REITs. FFO does not represent cash flow
from operating activities (as determined in accordance with GAAP) and should not be considered as an alternative to net
income as an indicator of the Company's financial performance or to cash flows as a measure of liquidity.
(2) Amounts represent dividends declared with respect to the periods shown. Distributions in excess of net income generally
constitute a return of capital.
</FN>
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this item is incorporated herein by
reference to the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Item 5 of the Company's
Current Report on Form 8-K dated February 27, 1998.
25
<PAGE>
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated herein by
reference to the "consolidated financial statements of Health and Retirement
Properties Trust included in Item 7 of the Company's Current Report on Form 8-K
dated February 27, 1998. The financial statements and financial statement
schedules for Marriott are incorporated by reference to Marriott's Annual Report
on Form 10-K for the year ended January 2, 1998, Commission File No. 1-12188.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable
PART III
The information in Part III (Items, 10, 11, 12 and 13) is incorporated by
reference to the Company's definitive Proxy Statement, which will be filed not
later than 120 days after the end of the Company's fiscal year.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Index to Financial Statements and Financial Statement Schedules
<TABLE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
<S> <C>
Page
1) The following consolidated financial statements of Health and Retirement
Properties Trust are incorporated by reference to the Company's Current
Report on Form 8-K dated February 27, 1998, page references are to such
Current Report:
Report of Ernst & Young LLP, Independent Auditors F-1
Report of Arthur Andersen LLP, Independent Public Accountants F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996 F-3
Consolidated Statements of Income for the years ended December 31, 1997, 1996 and 1995 F-4
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1997, 1996,
and 1995 F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996, and 1995 F-6
Notes to Consolidated Financial Statements F-8
2) The following schedules are filed herewith:
III - Real Estate and Accumulated Depreciation S-1
IV - Mortgage Loans on Real Estate S-8
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, or are inapplicable, and therefore have
been omitted.
3) Exhibits:
3.1 Conformed copy of Amended and Restated Declaration of Trust as
amended by the amendment approved by the shareholders June 28,
1996 and filed with the Maryland Department of Assessments and
Taxation on July 9, 1996. (incorporated by reference to the
Company's Current Report on Form 8-K, dated July 10, 1996)
3.2 Amendment, effective March 3, 1997, to the Company's Amended and
Restated Declaration of Trust providing for an increase in the
authorized common shares of beneficial interest, $.01 par value
per share, from 100,000,000 to 125,000,000. (incorporated by
reference to the Company's Current Report on Form 8-K, dated March
3, 1997)
26
<PAGE>
3.3 Articles Supplementary to the Company's Amended and Restated
Declaration of Trust, as further amended, relating to the
Company's junior Participating Preferred Shares effective May 14,
1997. (incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997)
3.4 Amended and Restated Bylaws. (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1995)
4.1 Rights Agreement dated October 17, 1994 between the Company and
State Street Bank and Trust Company, as Rights Agent (including
the form of Articles Supplementary relating to the Junior
Participating Preferred Shares annexed as an exhibit thereto).
(incorporated by reference to the Company's Registration Statement
on Form 8-A dated October 24, 1994)
4.2 Form of Series B Note. (incorporated by reference to the Company's
Registration Statement on Form 8- A dated July 11, 1994)
4.3 Indenture, dated as of June 1, 1994, between the Company and
Shawmut Bank, N.A. (incorporated by reference to the Company's
Registration Statement on Form 8-A dated July 11, 1994)
4.4 Supplemental Indenture, dated as of June 29, 1994, between the
Company and Shawmut Bank, N.A. (incorporated by reference to the
Company's Registration Statement on Form 8-A dated July 11, 1994)
4.5 Indenture, dated as of September 20, 1996, between the Company and
Fleet National Bank ("Fleet"), as trustee. (incorporated by
reference to the Company's Registration Statement on Form S-3,
File No. 333- 02863)
4.6 First Supplemental Indenture, dated as of October 7, 1996, between
the Company and Fleet, as trustee, relating to the Company's 7.5%
Convertible Subordinated Debentures, due 2003, Series A, including
form thereof. (incorporated by reference to the Company's Current
Report on Form 8-K dated October 7, 1996)
4.7 Second Supplemental Indenture, dated as of October 7, 1996,
between the Company and Fleet, as trustee, relating to the
Company's 7.5% Convertible Subordinated Debentures, due 2003,
Series B, including form thereof. (incorporated by reference to
the Company's Current Report on Form 8-K dated October 7, 1996)
4.8 Third Supplemental Indenture, dated as of October 7, 1996, between
the Company and Fleet, as trustee, relating to the Company's 7.25%
Convertible Subordinated Debentures, due 2001, including form
thereof. (incorporated by reference to the Company's Current
Report on Form 8-K dated October 7, 1996)
4.9 Form of Global Note relating to the Remarketed Reset Notes due
July 9, 2007. (incorporated by reference to the Company's Current
Report on Form 8-K dated July 2, 1997)
4.10 Indenture, dated as of July 9, 1997, by and between the Company
and State Street Bank and Trust Company as Trustee. (filed
herewith)
4.11 Supplemental Indenture, dated July 9, 1997, by and between the
Company and State Street Bank and Trust Company as Trustee,
relating to the Remarketed Reset Notes due July 9, 2007. (filed
herewith)
4.12 Supplemental Indenture No. 2 dated as of February 23, 1998 between
the Company and State Street Bank and Trust Company pertaining to
$50,000,000 in principal amount of Remarketed Reset Notes Due July
9, 2007. (filed herewith)
4.13 Indenture dated as of December 18, 1997 by and between the Company
and State Street Bank and Trust Company, as Trustee. (incorporated
by reference to the Company's Current Report on Form 8-K dated
December 5, 1997)
27
<PAGE>
4.14 Supplemental Indenture dated as of December 18, 1997 by and
between the Company and State Street Bank and Trust Company, as
Trustee relating to the Company's 6 3/4% Senior Notes due 2002.
(incorporated by reference to the Company's Current Report on Form
8-K dated December 5, 1997)
4.15 Registration Rights Agreement dated as of December 18, 1997 by and
between the Company and Merrill Lynch & Co. (incorporated by
reference to the Company's Current Report on Form 8-K dated
December 5, 1997)
4.16 Supplemental Indenture No. 3 dated as of February 23, 1998 between
the Company and State Street Bank and Trust Company pertaining to
the Company's 6.7% Senior Notes due 2005. (filed herewith)
8.1 Opinion of Sullivan & Worcester, LLP as to certain tax matters.
(filed herewith)
9.1 Amended and Restated AMS Voting Trust Agreement. (incorporated by
reference to the Company's Registration Statement on Form S-11,
File No. 33-55684, dated December 23, 1992, and amendments
thereto)
10.1 Advisory Agreement, as amended.(+) (incorporated by reference to
the Company's Registration Statement on Form S-11, File No.
33-16799, dated August 27, 1987, and amendments thereto)
10.2 Second Amendment to the Advisory Agreement.(+) (incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993)
10.3 Third Amendment to Advisory Agreement by and between the Company
and the Advisor, dated June 26, 1997. (+) (incorporated by
reference to the Company's Current Report on Form 8-K, dated July
2, 1997)
10.4 Advisory Agreement by and between REIT Management and Research,
Inc. and the Company dated as of January 1, 1998. (+)
(incorporated by reference to the Company's Current Report on Form
8-K, dated February 11, 1998)
10.5 Agreement (for Property Management and Leasing Agent) between M&P
Partners Limited Partnership and various subsidiaries of the
Company, effective as of March 25, 1997, relating to properties
leased to Agencies of the United States Government. (incorporated
by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997)
10.6 Master Management Agreement by and among M&P Partners Limited
Partnership and the parties named therein dated as of December 31,
1997. (incorporated by reference to the Company's Current Report
on Form 8-K, dated February 11, 1998)
10.7 Master Management Agreement by and between various subsidiaries of
the Company and REIT Management and Research, Inc., dated as of
January 1, 1998. (incorporated by reference to the Company's
Current Report on Form 8-K, dated February 27, 1998)
10.8 Parking Operation Management Agreement by and between HUB
Properties Trust, a subsidiary of the Company, and REIT Management
and Research, Inc., dated as of January 1, 1998. (incorporated by
reference to the Company's Current Report on Form 8-K, dated
February 27, 1998)
10.9 Incentive Share Award Plan.(+) (incorporated by reference to the
Company's Registration Statement on Form S-11, File No. 33-55684,
dated December 23, 1992, and amendments thereto)
10.10 Master Lease Document. (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991)
10.11 AMS Properties Security Agreement. (incorporated by reference to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1991)
28
<PAGE>
10.12 AMS Subordination Agreement. (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1991)
10.13 AMS Guaranty. (incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1991)
10.14 AMS Pledge Agreement. (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991)
10.15 AMS Holding Co. Pledge Agreement. (incorporated by reference to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1991)
10.16 Amended and Restated Renovation Funding Agreement dated as of
January 13, 1992 between AMS Properties, Inc. and the Company.
(incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1991)
10.17 Amendment to AMS Transaction Documents. (incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1991)
10.18 GCI Master Lease Document. (incorporated by reference to the
Company's Registration Statement on Form S-11, File No. 33-55684,
dated December 23, 1992, and amendments thereto)
10.19 Amended and Restated HRP Shares Pledge Agreement. (incorporated by
reference to the Company's Registration Statement on Form S-11,
File no. 33-55684, dated December 23, 1992, and amendments
thereto)
10.20 Guaranty Cross-Default and Cross-Collateralization Agreement.
(incorporated by reference to the Company's Registration Statement
on Form S-11, File No. 33-55684, dated December 23, 1992, and
amendments thereto)
10.21 Connecticut Subacute Corporation II Lease Document Waterbury.
(incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1995)
10.22 Connecticut Subacute Corporation II Lease Document Cheshire.
(incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1995)
10.23 Connecticut Subacute Corporation II Lease Document New Haven.
(incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1995)
10.24 Vermont Subacute/New Hampshire Subacute Master Lease Agreement
(Chapple). (incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995)
10.25 Amended and Restated Agreement and Plan of Reorganization
(Chapple). (incorporated by reference to the Company's Annual
report on Form 10-K for the year ended December 31, 1995)
10.26 Purchase Option Agreement. (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1995)
10.27 Amended and Restated Promissory Note, dated July 29, 1996, from
Connecticut Subacute Corporation to the Company. (incorporated by
reference to the Company's Current Report on Form 8-K dated
October 1, 1996)
10.28 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. (incorporated by
reference to the Company's Current Report on Form 8-K, dated
February 17, 1997)
29
<PAGE>
10.29 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. (incorporated by
reference to the Company's Current Report on Form 8-K, dated
February 17, 1997)
10.30 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,
Kleinwort Benson Limited, as agent, Wells Fargo Bank, National
Association, as administrative agent, Natwest Bank, N.A., as
co-agent, et al. (incorporated by reference to the Company's
Current Report on Form 8-K, dated February 17, 1997)
10.31 Second Amendment and Waiver, dated as of March 19, 1997, 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, Dresdner Kleinwort Benson
North America LLC (as successor to Kleinwort Benson Limited), as
agent, Wells Fargo Bank, National Association, as administrative
agent, Fleet National Bank (as successor to Fleet Bank of
Massachusetts), as co-agent, et al. (incorporated by reference to
the Company's Current Report on Form 8-K dated March 20, 1997)
10.32 Third Amendment dated as of July 30, 1997 to the Third Amended and
Restated Revolving Loan Agreement by and among the Company, as
borrower, the lenders named therein, Kleinwort Benson North
America LLC (as successor to Kleinwort Benson Limited), as agent,
Wells Fargo Bank, National Association, as administrative agent,
and Fleet National Bank (as successor to NatWest Bank), as co-
agent. (incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997)
10.33 Fourth Amendment dated as of November 14, 1997 to the Third
Amendment and Restated Revolving Loan Agreement by and among the
Company, as borrower, the lenders named therein, Dresdner
Kleinwort Benson North America LLC, as agent, and Fleet National
Bank, as administrative agent. (filed herewith)
10.34 Merger Agreement dated February 17, 1997 between Health and
Retirement Properties Trust and Government Property Investors,
Inc. including forms to Escrow Agreement, Investment and
Registration Rights Agreement, Voting Agreement, Information
Access Agreement, Indemnification Agreement, Service Contract,
Non-Solicitation Agreement and Second Closing Escrow Agreement.
(incorporated by reference to the Company's Current Report on Form
8-K, dated February 17, 1997)
10.35 Amendment No. 1 to Agreement of Merger dated March 25, 1997
between the Company and Government Property Investors, Inc.
(incorporated by reference to the Company's Registration Statement
on Form S-3 (File No. 333-29675) filed with the Commission on June
20, 1997)
10.36 Remarketing Agreement (including form of Remarketing Underwriting
Agreement) relating to the Remarketed Reset Notes due July 9, 2007
by and between the Company and Merrill Lynch & Co., dated as of
July 2, 1997. (incorporated by reference to the Company's Current
Report on Form 8-K, dated July 2, 1997)
10.37 Purchase and Sale Agreement dated September 25, 1997 by and
between 7 West Associates LLC, as seller, and the Company, as
purchaser. (incorporated by reference to the Company's Current
Report on Form 8-K, dated October 1, 1997)
10.38 Contribution Agreement (and Escrow Instructions) with respect to
the acquisition of the Cedars-Sinai Medical Office Towers dated as
of April 20, 1997 by and between Medical Office Buildings, Ltd.,
as seller, and the Company, as buyer. (incorporated by reference
to the Company's Current Report on Form 8-K, dated October 1,
1997)
10.39 Purchase and Sale Agreement dated October 23, 1997 by and between
Franklin Office Associates, as seller, and the Company, as
purchaser. (incorporated by reference to the Company's Current
Report on Form 8-K, dated November 13, 1997)
10.40 Purchase and Sale Agreement dated November 24, 1997 by and between
Investors Life Insurance Company of North America and Family Life
Insurance Company, as seller and the Company, as purchaser.
(incorporated by reference to the Company's Current Report on Form
8-K, dated December 5, 1997)
30
<PAGE>
12.1 Statement regarding computation of ratio of earning to fixed
charges. (filed herewith)
21.1 Subsidiaries of the Registrant. (filed herewith)
23.1 Consent of Ernst & Young LLP. (filed herewith)
23.2 Consent of Arthur Andersen LLP. (filed herewith)
23.3 Consent of Sullivan & Worcester LLP. (included as part of Exhibit
8.1 hereto)
99.1 Current Report on Form 8-K dated February 27, 1998. (filed
herewith)
(+) Management contract or compensatory plan or arrangement.
(b) During the fourth quarter of 1997, the Company filed the following
Current Reports on Form 8-K:
(i) Current Report on Form 8-K dated October 1, 1997 relating to the
purchase of a 420,368 square foot office building located at 7
West 34th Street in New York City, New York from 7 West Associates
LLC, a wholly owned subsidiary of Orchard Properties, Inc., for
$110 million (Items 2 and 7), as amended by an Amendment dated
December 12, 1997.
(ii) Current Report on Form 8-K dated November 13, 1997 relating to the
purchase of an office building with approximately 608,161 square
foot located at One Franklin Plaza, in Philadelphia, Pennsylvania
from Franklin Office Associates for $75.5 million plus closing
costs in a negotiated arms-length transaction (Items 2 and 7), as
amended by an Amendment dated January 12, 1998.
(iii) CurrentReport on Form 8-K dated December 5, 1997 relating to (i)
the purchase of Bridgepoint Square, an office complex containing
five commercial office properties with approximately 441,145
square foot located in Austin, Texas, from Investors Life
Insurance Company of North America and Family Life Insurance
Company for $78 million plus closing costs in a negotiated
arms-length transaction and (ii) the completion of a private
placement of $150 million of 6 3/4% Senior Notes due 2002. (Items
2, 5 and 7), as amended by an Amendment dated January 23, 1998.
31
<PAGE>
<TABLE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(Dollars in thousands)
Initial Cost to Gross Amount Carried at Close of
Company Period 12/31/97
------------------ -------------------------
Costs Capitalized
Subsequent
Buildings to Buildings Accumulated Original
& Acquisi- & Depreciation Date Construction
Location State Land Equipment tion Land Equipment Total(1) (2) Acquired Date
- ------------------------------------------------------------------------------------------------------------------------------------
Retirement and Assisted Living Communities:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Scottsdale AZ $ 979 $ 8,807 $ 140 $ 990 $ 8,936 $ 9,926 $ 809 5/16/94 1990
Sun City AZ 1,174 10,569 173 1,189 10,727 11,916 949 6/17/94 1990
Mesa AZ 1,480 13,320 -- 1,480 13,320 14,800 347 12/27/96 1985
Laguna Hills CA 3,132 28,184 475 3,172 28,619 31,791 2,356 9/9/94 1975
Boca Raton FL 4,404 39,633 799 4,474 40,362 44,836 3,655 5/20/94 1994
Deerfield Beach FL 1,664 14,972 298 1,690 15,244 16,934 1,381 5/16/94 1986
Ft. Myers FL 2,349 21,137 419 2,385 21,520 23,905 1,816 8/16/94 1984
Palm Harbor FL 3,327 29,945 591 3,379 30,484 33,863 2,761 5/16/94 1992
Port St. Lucie FL 1,223 11,009 219 1,242 11,209 12,451 1,015 5/20/94 1993
Chicago IL 6,200 55,800 -- 6,200 55,800 62,000 1,453 12/27/96 1990
Arlington Heights IL 3,621 32,587 535 3,665 33,078 36,743 2,724 9/9/94 1986
Silver Spring MD 3,229 29,065 786 3,301 29,779 33,080 2,574 7/25/94 1992
Rochester NY 1,070 9,630 -- 1,070 9,630 10,700 251 12/27/96 1988
Huron SD 45 968 1 44 970 1,014 149 6/30/92 1968
Bellaire TX 1,223 11,010 178 1,238 11,173 12,411 1,012 5/16/94 1991
Arlington VA 1,859 16,734 295 1,885 17,003 18,888 1,470 7/25/94 1992
Charlottesville VA 2,936 26,422 472 2,976 26,854 29,830 2,377 6/17/94 1991
Virginia Beach VA 881 7,926 137 890 8,054 8,944 729 5/16/94 1990
Spokane WA 1,035 13,315 -- 1,035 13,315 14,350 224 5/7/97 1993
-------------------- -------- ------------------------------- ---------
Subtotal 41,831 381,033 5,518 42,305 386,077 428,382 28,052
-------------------- -------- ------------------------------- ---------
Long-Term Care Facilities:
Phoenix AZ 655 2,525 5 655 2,530 3,185 399 6/30/92 1963
Yuma AZ 223 2,100 4 223 2,104 2,327 326 6/30/92 1984
Yuma AZ 103 604 1 103 605 708 94 6/30/92 1984
Fresno CA 738 2,577 188 738 2,765 3,503 564 12/28/90 1968
Lancaster CA 601 1,859 1,029 601 2,888 3,489 524 12/28/90 1963
Newport Beach CA 1,176 1,729 1,223 1,176 2,952 4,128 508 12/28/90 1962
Palm Springs CA 103 1,264 982 103 2,246 2,349 369 12/28/90 1969
San Diego CA 1,114 1,073 480 1,114 1,553 2,667 320 12/28/90 1969
Stockton CA 382 2,750 4 382 2,754 3,136 429 6/30/92 1968
Tarzana CA 1,277 977 806 1,278 1,782 3,060 351 12/28/90 1969
Thousand Oaks CA 622 2,522 310 622 2,832 3,454 557 12/28/90 1965
Van Nuys CA 716 378 225 718 601 1,319 134 12/28/90 1969
S-1
<PAGE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(Dollars in thousands)
Initial Cost to Gross Amount Carried at Close of
Company Period 12/31/97
------------------ -------------------------
Costs Capitalized
Subsequent
Buildings to Buildings Accumulated Original
& Acquisi- & Depreciation Date Construction
Location State Land Equipment tion Land Equipment Total(1) (2) Acquired Date
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care Facilities - continued:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cannon City CO 292 6,228 -- 292 6,228 6,520 45 9/22/97 1970
Colorado Springs CO 246 5,236 -- 246 5,236 5,482 38 9/22/97 1972
Delta CO 167 3,570 -- 167 3,570 3,737 26 9/22/97 1963
Grand Junction CO 6 2,583 1,316 136 3,769 3,905 402 12/30/93 1978
Grand Junction CO 204 3,875 329 204 4,204 4,408 518 12/30/93 1968
Lakewood CO 232 3,766 724 232 4,490 4,722 846 12/28/90 1972
Littleton CO 185 5,043 349 185 5,392 5,577 1,069 12/28/90 1965
Cheshire CT 520 7,380 1,559 520 8,939 9,459 2,315 11/1/87 1963
Killingly CT 240 5,360 460 240 5,820 6,060 1,799 5/15/87 1972
New Haven CT 1,681 14,953 1,236 1,681 16,189 17,870 2,825 5/11/92 1971
Waterford CT 86 4,714 453 86 5,167 5,253 1,656 5/15/87 1965
Willimantic CT 134 3,566 479 166 4,013 4,179 1,192 5/15/87 1965
College Park GA 300 2,702 23 300 2,725 3,025 136 5/15/96 1985
Glenwood GA 174 1,564 3 174 1,567 1,741 72 5/15/96 1972
Dublin GA 442 3,982 80 442 4,062 4,504 193 5/15/96 1968
Marrietta GA 300 2,702 35 300 2,737 3,037 130 5/15/96 1969
Clarinda IA 77 1,453 293 77 1,746 1,823 200 12/30/93 1968
Council Bluffs IA 225 2,125 (1,133) 225 992 1,217 139 4/1/95 1963
Mediapolis IA 94 1,776 250 94 2,026 2,120 241 12/30/93 1973
Pacific Junction IA 32 368 (57) 32 311 343 25 4/1/95 1978
Winterset IA 111 2,099 492 111 2,591 2,702 296 12/30/93 1973
Nashville IL 75 2,556 80 75 2,636 2,711 530 12/28/90 1964
Ellinwood KS 130 1,420 (230) 130 1,190 1,320 96 4/1/95 1972
St. Joseph MO 111 1,027 195 111 1,222 1,333 124 6/4/93 1976
Tarkio MO 102 1,938 415 102 2,353 2,455 264 12/30/93 1970
Grand Island NE 119 1,331 484 119 1,815 1,934 105 4/1/95 1963
Rochester NH 466 3,219 4 466 3,223 3,689 238 1/30/95 1972
Burlington NJ 1,300 11,700 7 1,300 11,707 13,007 660 9/28/95 1994
Akron OH 330 5,370 727 330 6,097 6,427 1,966 5/15/87 1971
Grove City OH 332 3,081 32 332 3,113 3,445 352 6/4/93 1965
Huron SD 144 3,108 4 144 3,112 3,256 480 6/30/92 1968
Sioux Falls SD 253 3,062 4 253 3,066 3,319 475 6/30/92 1960
Barre VT 261 4,530 133 389 4,535 4,924 335 1/30/95 1979
S-2
<PAGE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(Dollars in thousands)
Initial Cost to Gross Amount Carried at Close of
Company Period 12/31/97
------------------ -------------------------
Costs Capitalized
Subsequent
Buildings to Buildings Accumulated Original
& Acquisi- & Depreciation Date Construction
Location State Land Equipment tion Land Equipment Total(1) (2) Acquired Date
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care Facilities - continued:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Barre VT 129 3,825 4 129 3,829 3,958 283 1/30/95 1972
Bennington VT 160 4,385 5 160 4,390 4,550 325 1/30/95 1971
Burlington VT 791 5,985 410 872 6,314 7,186 464 1/30/95 1968
Springfield VT 50 747 1 50 748 798 55 1/30/95 1976
Springfield VT 89 3,724 157 242 3,728 3,970 276 1/30/95 1971
St. Albans VT 154 710 1 154 711 865 53 1/30/95 1900
St. Johnsbury VT 95 3,416 4 95 3,420 3,515 253 1/30/95 1978
Seattle WA 256 4,869 68 256 4,937 5,193 632 11/1/93 1972
Brookfield WI 834 3,849 8,014 834 11,863 12,697 1,580 12/28/90 1954
Clintonville WI 49 1,625 88 30 1,732 1,762 339 12/28/90 1965
Clintonville WI 14 1,695 37 14 1,732 1,746 340 12/28/90 1960
Madison WI 144 1,633 109 144 1,742 1,886 341 12/28/90 1920
Milwaukee WI 277 3,883 -- 277 3,883 4,160 655 3/27/92 1969
Milwaukee WI 116 3,438 123 116 3,561 3,677 697 12/28/90 1960
Waukesha WI 68 3,452 2,232 68 5,684 5,752 883 12/28/90 1958
Laramie WY 191 3,632 200 191 3,832 4,023 475 12/30/93 1964
Worland WY 132 2,503 589 132 3,092 3,224 339 12/30/93 1970
-------------------- -------- ------------------------------- ---------
Subtotal 20,630 201,116 26,045 21,138 226,653 247,791 32,353
-------------------- -------- ------------------------------- ---------
Long-Term Care Facilities with Subacute Services:
Wallingford CT 557 11,043 2,374 557 13,417 13,974 3,894 12/23/86 1974
Waterbury CT 514 10,186 2,893 630 12,963 13,593 3,548 12/23/86 1971
Forestville CT 465 9,235 3,083 478 12,305 12,783 3,371 12/23/86 1972
Waterbury CT 1,003 9,023 914 1,003 9,937 10,940 1,727 5/11/92 1974
Boston MA 2,164 20,836 1,978 2,164 22,814 24,978 5,955 5/1/89 1968
Worcester MA 1,829 15,071 1,869 1,829 16,940 18,769 4,888 5/1/88 1970
Hyannis MA 829 7,463 -- 829 7,463 8,292 1,396 5/11/92 1972
Middleboro MA 1,771 15,752 -- 1,771 15,752 17,523 2,914 5/11/92 1975
North Andover MA 1,448 11,049 -- 1,448 11,049 12,497 2,067 5/11/92 1985
Canonsburg PA 1,499 13,493 606 1,518 14,080 15,598 3,094 3/1/91 1985
-------------------- -------- ------------------------------- ---------
Subtotal 12,079 123,151 13,717 12,227 136,720 148,947 32,854
-------------------- -------- ------------------------------- ---------
S-3
<PAGE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(Dollars in thousands)
Initial Cost to Gross Amount Carried at Close of
Company Period 12/31/97
------------------ -------------------------
Costs Capitalized
Subsequent
Buildings to Buildings Accumulated Original
& Acquisi- & Depreciation Date Construction
Location State Land Equipment tion Land Equipment Total(1) (2) Acquired Date
- ------------------------------------------------------------------------------------------------------------------------------------
Medical and Other Office Buildings and Clinics:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Anaheim CA 695 6,257 -- 695 6,257 6,952 78 12/5/97 1992
Anaheim CA 134 1,204 -- 134 1,204 1,338 15 12/5/97 1970
Anaheim CA 82 736 -- 82 736 818 9 12/5/97 1970
Los Angeles CA 10,131 99,569 -- 10,131 99,569 109,700 1,590 5/15/97 1979
San Diego CA 1,425 12,842 362 1,425 13,204 14,629 384 12/31/96 1985
San Diego CA 4,205 38,335 45 4,205 38,380 42,585 999 12/5/96 1985
Sacramento CA 644 3,206 77 644 3,283 3,927 277 12/18/95 1988
Aurora CO 1,440 12,963 -- 1,440 12,963 14,403 162 11/14/97 1993
Washington DC 2,485 22,696 773 2,485 23,469 25,954 764 9/3/96 1976
Washington DC 1,873 16,703 -- 1,873 16,703 18,576 211 12/19/97 1966
Boston MA 3,378 30,397 750 3,378 31,147 34,525 1,803 9/28/95 1985
Boston MA 1,447 13,028 39 1,447 13,067 14,514 748 9/28/95 1993
Boston MA 1,500 13,500 236 1,500 13,736 15,236 699 12/18/95 1988
Charlton MA 141 1,269 8 141 1,277 1,418 20 5/15/97 1988
Fitchburg MA 223 2,004 10 223 2,014 2,237 31 5/15/97 1994
Grafton MA 37 336 5 37 341 378 5 5/15/97 1930
Millbury MA 34 309 4 34 313 347 5 5/15/97 1950
Milford MA 144 1,297 9 144 1,306 1,450 20 5/15/97 1989
Northbridge MA 32 290 5 32 295 327 5 5/15/97 1962
Paxton MA 24 212 4 24 216 240 3 5/15/97 1984
Spencer MA 211 1,902 11 211 1,913 2,124 30 5/15/97 1992
Sturbridge MA 83 751 7 83 758 841 12 5/15/97 1986
Webster MA 315 2,834 14 315 2,848 3,163 44 5/15/97 1995
Westborough MA 166 1,498 8 166 1,506 1,672 23 5/15/97 1977
Westborough MA 396 3,562 15 396 3,577 3,973 56 5/15/97 1986
Westborough MA 42 381 5 42 386 428 6 5/15/97 1900
Westborough MA 24 216 4 24 220 244 3 5/15/97 1953
Westwood MA 303 2,740 50 303 2,790 3,093 78 11/26/96 1980
Westwood MA 537 4,960 -- 537 4,960 5,497 120 1/8/97 1977
Worcester MA 111 1,000 6 111 1,006 1,117 16 5/15/97 1986
Worcester MA 1,132 10,186 38 1,132 10,224 11,356 159 5/15/97 1989
Worcester MA 895 8,052 30 895 8,082 8,977 126 5/15/97 1990
Worcester MA 354 3,189 14 354 3,203 3,557 50 5/15/97 1985
Worcester MA 265 2,385 11 265 2,396 2,661 37 5/15/97 1972
S-4
<PAGE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(Dollars in thousands)
Initial Cost to Gross Amount Carried at Close of
Company Period 12/31/97
------------------ -------------------------
Costs Capitalized
Subsequent
Buildings to Buildings Accumulated Original
& Acquisi- & Depreciation Date Construction
Location State Land Equipment tion Land Equipment Total(1) (2) Acquired Date
- ------------------------------------------------------------------------------------------------------------------------------------
Medical and Other Office Buildings and Clinics - continued:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Worcester MA 158 1,417 7 158 1,424 1,582 22 5/15/97 1992
Baltimore MD -- 12,517 -- -- 12,517 12,517 156 11/18/97 1988
Brooklyn NY 775 7,054 2 775 7,056 7,831 272 6/6/96 1982
New York NY 44,000 66,928 -- 44,000 66,928 110,928 414 10/1/97 1989
White Plains NY 1,200 10,870 2 1,200 10,872 12,072 509 2/6/96 1995
Fort Washington PA 1,189 5,605 -- 1,189 5,605 6,794 41 9/22/97 1967
Fort Washington PA 1,877 8,869 -- 1,877 8,869 10,746 65 9/22/97 1960
Fort Washington PA 689 3,248 -- 689 3,248 3,937 24 9/22/97 1970
Horsham PA 747 3,664 -- 747 3,664 4,411 26 9/22/97 1983
King of Prussia PA 690 3,254 -- 690 3,254 3,944 27 9/22/97 1964
Philadelphia PA 7,897 71,070 -- 7,897 71,070 78,967 888 11/13/97 1987
Lincoln RI 810 7,290 -- 810 7,290 8,100 91 11/13/97 1997
Austin TX 2,319 20,869 -- 2,319 20,869 23,188 261 12/5/97 1996
Austin TX 1,642 14,654 -- 1,642 14,654 16,296 185 12/5/97 1997
Austin TX 1,403 12,626 -- 1,403 12,626 14,029 158 12/5/97 1997
Austin TX 1,226 11,035 -- 1,226 11,035 12,261 138 12/5/97 1997
Austin TX 1,220 11,568 -- 1,220 11,568 12,788 137 12/5/97 1986
Fairfax VA 569 5,122 66 569 5,188 5,757 134 12/3/96 1990
-------------------- -------- ------------------------------- ---------
Subtotal 103,319 598,469 2,617 103,319 601,086 704,405 12,136
-------------------- -------- ------------------------------- ---------
Government Office Buildings:
Petersburg AK 728 272 -- 728 272 1,000 60 3/25/97 1983
Phoenix AZ 2,657 11,562 -- 2,657 11,562 14,219 219 5/15/97 1997
Safford AZ 604 2,760 -- 604 2,760 3,364 50 3/25/97 1992
Tuscon AZ 727 3,318 -- 727 3,318 4,045 60 3/25/97 1993
Los Angeles CA 1,014 9,149 -- 1,014 9,149 10,163 108 7/11/97 1996
San Diego CA 4,058 18,527 -- 4,058 18,527 22,585 334 3/25/97 1996
San Diego CA 2,836 13,007 1,120 2,836 14,127 16,963 233 3/25/97 1996
San Diego CA 2,772 12,658 -- 2,772 12,658 15,430 228 3/25/97 1994
Golden CO 527 -- 3,153 527 3,153 3,680 -- 3/25/97 1997
Washington DC 11,414 52,185 60 11,414 52,245 63,659 939 3/25/97 1996
Washington DC 6,634 30,202 99 6,634 30,301 36,935 546 3/25/97 1989
Savannah GA 517 2,357 -- 517 2,357 2,874 42 3/25/97 1990
Kansas City KS 990 4,521 190 990 4,711 5,701 81 3/25/97 1990
College Park MD 8,957 40,899 -- 8,957 40,899 49,856 737 3/25/97 1994
S-5
<PAGE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(Dollars in thousands)
Initial Cost to Gross Amount Carried at Close of
Company Period 12/31/97
------------------ -------------------------
Costs Capitalized
Subsequent
Buildings to Buildings Accumulated Original
& Acquisi- & Depreciation Date Construction
Location State Land Equipment tion Land Equipment Total(1) (2) Acquired Date
- ------------------------------------------------------------------------------------------------------------------------------------
Government Office Buildings - continued:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gaithersburg MD 4,164 19,015 -- 4,164 19,015 23,179 342 3/25/97 1995
Germantown MD 2,191 10,004 -- 2,191 10,004 12,195 180 3/25/97 1995
Oxon Hill MD 3,024 13,810 -- 3,024 13,810 16,834 249 3/25/97 1992
Kansas City MO 1,372 6,264 -- 1,372 6,264 7,636 113 3/25/97 1995
Albuquerque NM 469 2,143 -- 469 2,143 2,612 39 3/25/97 1984
Sante Fe NM 1,474 6,727 -- 1,474 6,727 8,201 121 3/25/97 1987
Buffalo NY 4,187 19,117 13 4,187 19,130 23,317 344 3/25/97 1994
Oklahoma City OK 4,369 20,057 -- 4,369 20,057 24,426 359 3/25/97 1992
Houston TX 1,087 4,573 -- 1,087 4,573 5,660 89 3/25/97 1993
Waco TX 1,081 9,657 13 1,081 9,670 10,751 -- 12/23/97 1997
Falls Church VA 3,285 14,999 -- 3,285 14,999 18,284 270 3/25/97 1993
Richland WA 3,774 17,231 -- 3,774 17,231 21,005 310 3/25/97 1995
Falling Waters WV 861 3,931 -- 861 3,931 4,792 71 3/25/97 1993
Cheyenne WY 1,820 8,312 -- 1,820 8,312 10,132 150 3/25/97 1995
-------------------- -------- ------------------------------- ---------
Subtotal 77,593 357,257 4,648 77,593 361,905 439,498 6,274
-------------------- -------- ------------------------------- ---------
Total Real Estate $255,452 $1,661,026 $52,545 $256,582 $1,712,441 $1,969,023 $111,669
==================== ======== =============================== =========
<FN>
(1) Aggregate cost for federal income tax purposes is approximately $1,876,981.
(2) Depreciation is provided for on buildings and improvements for periods
ranging up to 40 years and on equipment up to 12 years.
</FN>
</TABLE>
S-6
<PAGE>
<TABLE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
SCHEDULE III - continued
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(Dollars in thousands)
Real Estate and Accumulated
Equipment Depreciation
--------------- ---------------
<S> <C> <C>
Balance at January 1, 1995 $ 673,083 $ 39,570
Additions 309,853 21,047
Disposals (24,376) (2,352)
Real estate investments of Hospitality Properties Trust (180,349) (2,410)
--------------- ---------------
Balance at December 31, 1995 778,211 55,855
Additions 227,528 21,066
--------------- ---------------
Balance at December 31, 1996 1,005,739 76,921
Additions 998,579 37,619
Disposals (35,295) (2,871)
--------------- ---------------
Balance at December 31, 1997 $ 1,969,023 $ 111,669
=============== ===============
</TABLE>
S-7
<PAGE>
<TABLE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
December 31, 1997
(Dollars in thousands)
Principal Amount of
(1) Loans Subject to
Face Carrying Delinquent
Final Value of Value Principal
Location Interest Rate Maturity Date Periodic Payment Terms Mortgage of Mortgage or Interest
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Farmington, MI 11.50% 1/1/06 Principal and interest, payable monthly in $4,239 $4,239 $ --
arrears. $3.8 million due at maturity.
Jacksonville, FL 10.50% 3/31/06 Interest only, payable monthly in arrears. 5,000 5,000 --
$5.0 million due at maturity.
Howell, MI 11.50% 1/1/06 Principal and interest, payable monthly in 5,028 5,028 --
arrears. $4.5 million due at maturity.
Medina, OH 8.50% 2/1/98 Principal and interest, payable monthly in 5,760 5,725 --
arrears. $5.8 million due at maturity.
Ainsworth, NE 9.00% 12/31/16 Interest only, payable monthly in arrears; 5,171 5,171 --
Ashland, NE principal and interest starting 1998.
Blue Hill, NE $2.8 million due at maturity.
Gretna, NE
Sutherland, NE
Waverly, NE
Aberdeen, NC 11.35% 4/30/07 Interest only, payable monthly in arrears; 11,472 11,472 --
King, NC $11.5 million repaid in January 1998.
New Bern, NC
Milwaukee, WI 11.50% 1/31/13 Principal and interest, payable monthly in 11,466 11,466 --
Pewaukee, WI arrears. $9.6 million due at maturity.
Torrance, CA 12.50% 12/31/02 Principal and interest, payable monthly in 12,240 12,240 --
Torrance, CA arrears. $11.7 million due at maturity.
Anaheim, CA
S-8
<PAGE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
December 31, 1997
(Dollars in thousands)
Principal Amount of
(1) Loans Subject to
Face Carrying Delinquent
Final Value of Value Principal
Location Interest Rate Maturity Date Periodic Payment Terms Mortgage of Mortgage or Interest
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Slidell, LA 11.00% 12/31/10 Principal and interest, payable monthly in 19,185 19,185 --
arrears. $13.9 million due at maturity.
15 Mortgages 8.02% - 13.75% 2/99-12/16 Interest only or principal and interest, 23,077 21,976 --
payable monthly in arrears.
----------------------------------------
$ 102,638 $ 101,502 $ --
========================================
<FN>
(1) Also represents cost for federal income tax purposes.
</FN>
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
SCHEDULE IV-continued
MORTGAGE LOANS ON REAL ESTATE
December 31, 1997
(Dollars in thousands)
Reconciliation of the carrying amount of mortgage loans at the beginning of the period:
<S> <C>
Balance at January 1, 1995 $ 125,791
New mortgage loans 40,064
Collections of principal, net of discounts (26,607)
-------------
Balance at December 31, 1995 139,248
New mortgage loans 5,918
Collections of principal, net of discounts (7,921)
-------------
Balance at December 31, 1996 137,245
New mortgage loans 1,520
Collections of principal, net of discounts (37,263)
-------------
Balance at December 31, 1997 $ 101,502
=============
</TABLE>
S-10
<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 and Chief Operating Officer
Dated: March 11, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons, or by their
attorney-in-fact, in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ David J. Hegarty President and Chief Operating Officer March 11, 1998
- ------------------------------------
David J. Hegarty
/s/ Ajay Saini Treasurer and Chief Financial Officer March 11, 1998
- ------------------------------------
Ajay Saini
/s/ Bruce M. Gans, M.D. Trustee March 11, 1998
- ------------------------------------
Bruce M. Gans, M.D.
/s/ Ralph J. Watts Trustee March 11, 1998
- ------------------------------------
Ralph J. Watts
/s/ Justinian Manning, C.P. Trustee March 11, 1998
- ------------------------------------
Rev. Justinian Manning, C.P.
/s/ Gerard M. Martin Trustee March 11, 1998
- ------------------------------------
Gerard M. Martin
/s/ Barry M. Portnoy Trustee March 11, 1998
- ------------------------------------
Barry M. Portnoy
</TABLE>
EXHIBIT 4.10
HEALTH AND RETIREMENT PROPERTIES TRUST
TO
STATE STREET BANK AND TRUST COMPANY
Trustee
Indenture
Dated as of July 9, 1997
Senior Debt Securities
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS1
PAGE
<S> <C> <C>
PARTIES..................................................................................................1
RECITALS.................................................................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions................................................................................1
"Act" ..............................................................................1
"Additional Amounts"...................................................................2
"Affiliate"............................................................................2
"Authenticating Agent".................................................................2
"Authorized Newspaper".................................................................2
"Bankruptcy Law" .......................................................................................2
"Bearer Security"......................................................................2
"Board" ..............................................................................2
"Board Resolution".....................................................................2
"Business Day".........................................................................2
"CEDEL" ..............................................................................2
"Commission"...........................................................................2
"Common Depositary"......................................................................................2
"Company"..............................................................................2
"Company Request" and "Company Order"....................................................................2
"Conversion Event".....................................................................3
"Corporate Trust Office"...............................................................3
"corporation"..........................................................................3
"coupon" ..............................................................................3
"Custodian" .......................................................................................3
"Declaration" .......................................................................................3
"Defaulted Interest"...................................................................3
"Dollar" or "$"........................................................................3
"DTC" ..............................................................................3
"ECU" ..............................................................................3
"Euroclear"............................................................................3
"European Communities".................................................................3
"European Monetary System".............................................................3
"Event of Default".....................................................................3
"Exchange Date" .......................................................................................3
"Foreign Currency".....................................................................3
"Funds from Operations"................................................................3
"GAAP" ..............................................................................3
"Government Obligations"...............................................................4
"Holder" ..............................................................................4
"Indenture"............................................................................4
"Indexed Security".....................................................................4
- --------
1 This Table of Contents shall not, for any purpose, be deemed to be part of this Indenture.
<PAGE>
"interest".............................................................................4
"Interest Payment Date"................................................................4
"Maturity".............................................................................4
"Officers' Certificate"................................................................4
"Opinion of Counsel"...................................................................4
"Original Issue Discount Security".....................................................4
"Outstanding"..........................................................................5
"Paying Agent".........................................................................5
"Person" ..............................................................................5
"Place of Payment".....................................................................6
"Predecessor Security".................................................................6
"Redemption Date"......................................................................6
"Redemption Price".....................................................................6
"Registered Security"..................................................................6
"Regular Record Date"..................................................................6
"Repayment Date".......................................................................6
"Responsible Officer"..................................................................6
"Security".............................................................................6
"Security Register" and "Security Registrar"...........................................6
"Significant Subsidiary"...............................................................6
"Special Record Date"..................................................................6
"Stated Maturity"......................................................................7
"Subsidiary"...........................................................................7
"Trust Indenture Act" or "TIA".........................................................7
"Trustee"..............................................................................7
"United States"........................................................................7
"United States person".................................................................7
"Yield to Maturity"....................................................................7
SECTION 102. Compliance Certificates and Opinions.......................................................7
SECTION 103. Form of Documents Delivered to Trustee.....................................................8
SECTION 104. Acts of Holders............................................................................8
SECTION 105. Notices, etc., to Trustee and Company......................................................9
SECTION 106. Notice to Holders; Waiver..................................................................9
SECTION 107. Effect of Headings and Table of Contents..................................................10
SECTION 108. Successors and Assigns....................................................................10
SECTION 109. Separability Clause.......................................................................10
SECTION 110. Benefits of Indenture.....................................................................10
SECTION 111. Governing Law.............................................................................10
SECTION 112. Legal Holidays............................................................................10
SECTION 113. No Personal Liability.....................................................................11
ARTICLE TWO
SECURITIES FORMS
SECTION 201. Forms of Securities.......................................................................11
SECTION 202. Form of Trustee's Certificate of Authentication...........................................11
SECTION 203. Securities Issuable in Global Form........................................................12
ARTICLE THREE
THE SECURITIES
-ii-
<PAGE>
SECTION 301. Amount Unlimited; Issuable in Series......................................................12
SECTION 302. Denominations.............................................................................15
SECTION 303. Execution, Authentication, Delivery and Dating............................................15
SECTION 304. Temporary Securities......................................................................17
SECTION 305. Registration, Registration of Transfer and Exchange.......................................18
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities..........................................21
SECTION 307. Payment of Interest; Interest Rights Preserved............................................21
SECTION 308. Persons Deemed Owners.....................................................................23
SECTION 309. Cancellation..............................................................................23
SECTION 310. Computation of Interest...................................................................24
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture...................................................24
SECTION 402. Application of Trust Funds................................................................25
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.........................................................................25
SECTION 502. Acceleration of Maturity; Rescission and Annulment........................................26
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee...........................27
SECTION 504. Trustee May File Proofs of Claim..........................................................28
SECTION 505. Trustee May Enforce Claims Without Possession of Securities or Coupons....................28
SECTION 506. Application of Money Collected............................................................29
SECTION 507. Limitation on Suits.......................................................................29
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium, if any, Interest and
Additional Amounts....................................................................29
SECTION 509. Restoration of Rights and Remedies........................................................30
SECTION 510. Rights and Remedies Cumulative............................................................30
SECTION 511. Delay or Omission Not Waiver..............................................................30
SECTION 512. Control by Holders of Securities..........................................................30
SECTION 513. Waiver of Past Defaults...................................................................30
SECTION 514. Waiver of Usury, Stay or Extension Laws...................................................30
SECTION 515. Undertaking for Costs.....................................................................31
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults........................................................................31
SECTION 602. Certain Rights of Trustee.................................................................31
SECTION 603. Not Responsible for Recitals or Issuance of Securities....................................32
SECTION 604. May Hold Securities.......................................................................32
SECTION 605. Money Held in Trust.......................................................................32
SECTION 606. Compensation and Reimbursement............................................................32
SECTION 607. Corporate Trustee Required; Eligibility; Conflicting Interests............................33
SECTION 608. Resignation and Removal; Appointment of Successor.........................................33
SECTION 609. Acceptance of Appointment by Successor....................................................34
SECTION 610. Merger, Conversion, Consolidation or Succession to Business...............................35
-iii-
<PAGE>
SECTION 611. Appointment of Authentication Agent.......................................................35
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders..............................................36
SECTION 702. Reports by Trustee........................................................................37
SECTION 703. Reports by Company........................................................................37
SECTION 704. Company to Furnish to Trustee Names and Addresses of Holders..............................37
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE
SECTION 801. Consolidations and Mergers of Company and Sales, Leases and Conveyances Permitted
Subject to Certain Conditions.........................................................37
SECTION 802. Rights and Duties of Successor Corporation................................................38
SECTION 803. Officers' Certificate and Opinion of Counsel..............................................38
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders........................................38
SECTION 902. Supplemental Indentures with Consent of Holders...........................................39
SECTION 903. Execution of Supplemental Indentures......................................................40
SECTION 904. Effect of Supplemental Indentures.........................................................40
SECTION 905. Conformity with Trust Indenture Act.......................................................40
SECTION 906. Reference in Securities to Supplemental Indentures........................................40
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, Interest and Additional Amounts...................41
SECTION 1002. Maintenance of Office or Agency..........................................................41
SECTION 1003. Money for Securities Payments to Be Held in Trust........................................42
SECTION 1004. Existence................................................................................43
SECTION 1005. Provision of Financial Information.......................................................43
SECTION 1006. Statement as to Compliance...............................................................43
SECTION 1007. Additional Amounts.......................................................................44
SECTION 1008. Waiver of Certain Covenants..............................................................44
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.................................................................44
SECTION 1102. Election to Redeem; Notice to Trustee....................................................44
SECTION 1103. Selection by Trustee of Securities to Be Redeemed........................................45
SECTION 1104. Notice of Redemption.....................................................................45
SECTION 1105. Deposit of Redemption Price..............................................................46
-iv-
<PAGE>
SECTION 1106. Securities Payable on Redemption Date....................................................46
SECTION 1107. Securities Redeemed in Part..............................................................47
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.................................................................47
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities....................................47
SECTION 1203. Redemption of Securities for Sinking Fund................................................47
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1301. Applicability of Article................................................................48
SECTION 1302. Repayment of Securities..................................................................48
SECTION 1303. Exercise of Option.......................................................................48
SECTION 1304. When Securities Presented for Repayment Become Due and Payable...........................49
SECTION 1305. Securities Repaid in Part................................................................49
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Applicability of Article; Company's Option to Effect Defeasance or Covenant
Defeasance............................................................................49
SECTION 1402. Defeasance and Discharge.................................................................50
SECTION 1403. Covenant Defeasance......................................................................50
SECTION 1404. Conditions to Defeasance or Covenant Defeasance..........................................50
SECTION 1405. Deposited Money and Government Obligations to Be Held in Trust; Other
Miscellaneous Provisions..............................................................52
ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. Purposes for Which Meetings May Be Called................................................52
SECTION 1502. Call, Notice and Place of Meetings.......................................................53
SECTION 1503. Persons Entitled to Vote at Meetings.....................................................53
SECTION 1504. Quorum; Action...........................................................................53
SECTION 1505. Determination of Voting Rights; Conduct and Adjournment of Meetings.......................54
SECTION 1506. Counting Votes and Recording Action of Meetings..........................................54
TESTIMONIUM.............................................................................................58
SIGNATURES AND SEALS....................................................................................58
ACKNOWLEDGMENTS.........................................................................................59
EXHIBIT A -- FORMS OF CERTIFICATION
</TABLE>
-vi-
<PAGE>
INDENTURE, dated as of July 9, 1997, between HEALTH AND RETIREMENT
PROPERTIES TRUST, a Maryland real estate investment trust (hereinafter called
the "Company"), having its principal office at 400 Centre Street, Newton,
Massachusetts 02158 and, State Street Bank and Trust Company, a Massachusetts
trust company, as Trustee hereunder (hereinafter called the "Trustee"), having
its initial Corporate Trust Office at Two International Place - 5th Floor,
Boston, Massachusetts 02110.
RECITALS OF THE COMPANY
The Company deems it necessary to issue from time to time for
lawful purposes its unsecured debt securities (hereinafter called the
"Securities") evidencing its unsecured indebtedness, and has duly authorized the
execution and delivery of this Indenture to provide for the issuance from time
to time of the Securities, unlimited as to principal amount, to bear interest at
the rates or formulas, to mature at such times and to have such other provisions
as shall be fixed as hereinafter provided.
This Indenture is subject to the provisions of the Trust
Indenture Act of 1939, as amended, that are deemed to be incorporated into this
Indenture by such Act, and shall, to the extent applicable, be governed by such
provisions.
All things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities or of a
series thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions. For all purposes of this Indenture,
except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the TIA,
either directly or by reference therein, have the meanings assigned to them
therein, and the terms "cash transaction" and "self-liquidating paper", as used
in TIA Section 311, shall have the meanings assigned to them in the rules of the
Commission adopted under the TIA;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(4) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Article Three, Article
Five, Article Six and Article Ten, are defined in those Articles.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
<PAGE>
"Additional Amounts" means any additional amounts which are
required by a Security or by or pursuant to a Board Resolution, under
circumstances specified therein, to be paid by the Company in respect of certain
taxes imposed on certain Holders and which are owing to such Holders.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any authenticating agent
appointed by the Trustee pursuant to Section 611.
"Authorized Newspaper" means a newspaper, printed in the
English language or in an official language of the country of publication,
customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays, and of general circulation in each place in
connection with which the term is used or in the financial community of each
such place. Whenever successive publications are required to be made in
Authorized Newspapers, the successive publications may be made in the same or in
different Authorized Newspapers in the same city meeting the foregoing
requirements and in each case on any Business Day.
"Bankruptcy Law" has the meaning specified in Section 501.
"Bearer Security" means any Security established pursuant to
Section 201 which is payable to bearer.
"Board" means the board of trustees of the Company or any
committee of that board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment
or any other particular location referred to in this Indenture or in the
Securities, means, unless otherwise specified with respect to any Securities
pursuant to Section 301, any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions in that Place of
Payment or particular location are authorized or required by law, regulation or
executive order to close.
"CEDEL" means CEDEL Bank, S.A., or its successor.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after execution of this instrument such Commission is
not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties on such date.
"Common Depositary" has the meaning specified in Section 304.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Company Request" and "Company Order" mean, respectively, a
written request or order signed in the name of the Company by the President or a
Vice President, and by its Treasurer, an Assistant Treasurer, the Secretary or
an Assistant Secretary, of the Company, and delivered to the Trustee.
2
<PAGE>
"Conversion Event" means the cessation of use of (i) a Foreign
Currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public institution
of or within the international banking community, (ii) the ECU both within the
European Monetary System and for the settlement of transactions by public
institutions of or within the European Communities or (iii) any currency unit
(or composite currency) other than the ECU for the purposes for which it was
established.
"Corporate Trust Office" means the office of the Trustee at
which, at any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at Two International
Place - 5th Floor, Boston, Massachusetts 02110.
"corporation" includes corporations, associations, companies
and business trusts.
"coupon" means any interest coupon appertaining to a Bearer
Security.
"Custodian" has the meaning specified in Section 501.
"Declaration" has the meaning specified in Section 113.
"Defaulted Interest" has the meaning specified in Section 307.
"Dollar" or "$" means a dollar or other equivalent unit in
such coin or currency of the United States of America as at the time shall be
legal tender for the payment of public and private debts.
"DTC" means The Depository Trust Company, or any successor
thereto.
"ECU" means the European Currency Unit as defined and revised
from time to time by the Council of the European Communities.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels Office, or its successor as operator of the Euroclear System.
"European Communities" means the European Economic Community,
the European Coal and Steel Community and the European Atomic Energy Community.
"European Monetary System" means the European Monetary System
established by the Resolution of December 5, 1978 of the Council of the European
Communities.
"Event of Default" has the meaning specified in Article Five.
"Exchange Date" has the meaning specified in Section 304.
"Foreign Currency" means any currency, currency unit or
composite currency, including, without limitation, the ECU, issued by the
government of one or more countries other than the United States of America or
by any recognized confederation or association of such governments.
"Funds from Operations" for any period means the consolidated
net income of the Company and its Subsidiaries for such period without giving
effect to depreciation and amortization, gains or losses from extraordinary
items, gains or losses on sales of real estate, gains or losses on investments
in marketable securities and any provision/benefit for income taxes for such
period, plus funds from operations of unconsolidated joint ventures, all
determined on a consistent basis in accordance with GAAP.
"GAAP" means generally accepted accounting principles in
effect from time to time as used in the United States applied on a consistent
basis.
3
<PAGE>
"Government Obligations" means securities which are (i) direct
obligations of the United States of America or the government which issued the
Foreign Currency in which the Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a Person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the Foreign
Currency in which the Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt; provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
"Holder" means, in the case of a Registered Security, the
Person in whose name a Security is registered in the Security Register and, in
the case of a Bearer Security, the bearer thereof and, when used with respect to
any coupon, shall mean the bearer thereof.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
and shall include the terms of particular series of Securities established as
contemplated by Section 301; provided, however, that, if at any time more than
one Person is acting as Trustee under this instrument, "Indenture" shall mean,
with respect to any one or more series of Securities for which such Person is
Trustee, this instrument as originally executed or as it may from time to time
be supplemented or amended by one or more applicable provisions hereof and shall
include the terms of the or those particular series of Securities for which such
Person is Trustee established as contemplated by Section 301, exclusive,
however, of any provisions or terms which relate solely to other series of
Securities for which such Person is Trustee, regardless of when such terms or
provisions were adopted, and exclusive of any provisions or terms adopted by
means of one or more indentures supplemental hereto executed and delivered after
such Person had become such Trustee but to which such Person, as such Trustee,
was not a party.
"Indexed Security" means a Security the terms of which provide
that the principal amount thereof payable at Stated Maturity may be more or less
than the principal face amount thereof at original issuance.
"interest", when used with respect to an Original Issue
Discount Security which by its terms bears interest only after Maturity, shall
mean interest payable after Maturity, and, when used with respect to a Security
which provides for the payment of Additional Amounts pursuant to Section 1007,
includes such Additional Amounts.
"Interest Payment Date", when used with respect to any
Security, means the Stated Maturity of an installment of interest on such
Security.
"Maturity", when used with respect to any Security, means the
date on which the principal of such Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, notice of redemption, notice of
option to elect repayment or otherwise.
"Officers' Certificate" means a certificate signed by the
President or a Vice President and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company (including counsel who is an employee of the
Company) and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant to
Section 502.
4
<PAGE>
"Outstanding", when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption or repayment at the option of the Holder money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holders of
such Securities and any coupons appertaining thereto; provided that, if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee has
been made;
(iii) Securities, except to the extent provided in Sections
1402 and 1403, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article Fourteen;
(iv) Securities which have been paid pursuant to Section 306
or in exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser in
whose hands such Securities are valid obligations of the Company; and
(v) Securities converted into Common Shares, Preferred Shares
or other securities of the Company pursuant to or in accordance with this
Indenture if the terms of such Securities provide for convertibility pursuant to
Section 301;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or are present at
a meeting of Holders for quorum purposes, and for the purpose of making the
calculations required by TIA Section 313, (i) the principal amount of an
Original Issue Discount Security that may be counted in making such
determination or calculation and that shall be deemed to be Outstanding for such
purpose shall be equal to the amount of principal thereof that would be (or
shall have been declared to be) due and payable, at the time of such
determination, upon a declaration of acceleration of the maturity thereof
pursuant to Section 502, (ii) the principal amount of any Security denominated
in a Foreign Currency that may be counted in making such determination or
calculation and that shall be deemed Outstanding for such purpose shall be equal
to the Dollar equivalent, determined pursuant to Section 301 as of the date such
Security is originally issued by the Company, of the principal amount (or, in
the case of an Original Issue Discount Security, the Dollar equivalent as of
such date of original issuance of the amount determined as provided in clause
(i) above) of such Security, (iii) the principal amount of any Indexed Security
that may be counted in making such determination or calculation and that shall
be deemed outstanding for such purpose shall be equal to the principal face
amount of such Indexed Security at original issuance, unless otherwise provided
with respect to such Security pursuant to Section 301, and (iv) Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means any Person authorized by the Company to
pay the principal of (and premium, if any) or interest on any Securities or
coupons on behalf of the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
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"Place of Payment", when used with respect to the Securities
of or within any series, means the place or places where the principal of (and
premium, if any) and interest on such Securities are payable as specified as
contemplated by Sections 301 and 1002.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security or a Security to which a
mutilated, destroyed, lost or stolen coupon appertains shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security or
the Security to which the mutilated, destroyed, lost or stolen coupon
appertains.
"Redemption Date", when used with respect to any Security to
be redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registered Security" shall mean any Security established
pursuant to Section 201 which is registered in the Security Register.
"Regular Record Date" for the interest payable on any Interest
Payment Date on the Registered Securities of or within any series means the date
specified for that purpose as contemplated by Section 301, whether or not a
Business Day.
"Repayment Date" means, when used with respect to any Security
to be repaid at the option of the Holder, the date fixed for such repayment by
or pursuant to this Indenture.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president (whether or not designated by a number or a word
or words added before or after the title "vice president"), the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer, the controller or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of such officer's knowledge and familiarity with the particular subject.
"Security" has the meaning stated in the first recital of this
Indenture and, more particularly, means any Security or Securities authenticated
and delivered under this Indenture; provided, however, that, if at any time
there is more than one Person acting as Trustee under this Indenture,
"Securities" with respect to the Indenture as to which such Person is Trustee
shall have the meaning stated in the first recital of this Indenture and shall
more particularly mean Securities authenticated and delivered under this
Indenture, exclusive, however, of Securities of any series as to which such
Person is not Trustee.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Significant Subsidiary" means any Subsidiary which is a
"significant subsidiary" (as defined in Article I, Rule 1-02 of Regulation S-X,
promulgated under the Securities Act of 1933, as amended) of the Company.
"Special Record Date" for the payment of any Defaulted
Interest on the Registered Securities of or within any series means a date fixed
by the Trustee pursuant to Section 307.
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"Stated Maturity", when used with respect to any Security or
any installment of principal thereof or interest thereon, means the date
specified in such Security or a coupon representing such installment of interest
as the fixed date on which the principal of such Security or such installment of
principal or interest is due and payable.
"Subsidiary" means a corporation a majority of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries of the Company. For the purposes of this definition,
"voting stock" means stock having voting power for the election of directors,
whether at all times or only so long as no senior class of stock has such voting
power by reason of any contingency.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939, as amended and as in force at the date as of which this Indenture was
executed, except as provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder;
provided, however, that if at any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any series shall mean only
the Trustee with respect to Securities of that series.
"United States" means, unless otherwise specified with respect
to any Securities pursuant to Section 301, the United States of America
(including the states and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction.
"United States person" means, unless otherwise specified with
respect to any Securities pursuant to Section 301, an individual who is a
citizen or resident of the United States, a corporation, partnership or other
entity created organized in or under the laws of the United States or an estate
or trust the income of which is subject to United States federal income taxation
regardless of its source.
"Yield to Maturity" means the yield to maturity, computed at
the time of issuance of a Security (or, if applicable, at the most recent
redetermination of interest on such Security) and as set forth in such Security
in accordance with generally accepted United States bond yield computation
principles.
SECTION 102. Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (including certificates
delivered pursuant to Section 1006) shall include:
(1) a statement that each individual signing such
certificate or opinion has read such condition or covenant and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether or
not such condition or covenant has been complied with; and
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(4) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee. In any
case where several matters are required to be certified by or covered by an
opinion of any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion as to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon an Opinion of Counsel, or a
certificate of or representations by counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the opinion, certificate or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such Opinion of Counsel, certificate or
representations may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company or any Subsidiary stating that the information as to such factual
matters is in the possession of the Company or such Subsidiary, unless such
counsel knows that the certificate or opinion or representations as to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders of the Outstanding Securities of
all series or one or more series, as the case may be, may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Holders in person or by agents duly appointed in writing. If Securities of
a series are issuable as Bearer Securities, any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders of Securities of such series may, alternatively, be
embodied in and evidenced by the record of Holders of Securities of such series
voting in favor thereof, either in person or by proxies duly appointed in
writing, at any meeting of Holders of Securities of such series duly called and
held in accordance with the provisions of Article Fifteen, or a combination of
such instruments and any such record. Except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
or record or both are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments and any such record
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments
or so voting at any such meeting. Proof of execution of any such instrument or
of a writing appointing any such agent, or of the holding by any Person of a
Security, shall be sufficient for any purpose of this Indenture and conclusive
in favor of the Trustee and the Company and any agent of the Trustee or the
Company, if made in the manner provided in this Section. The record of any
meeting of Holders of Securities shall be proved in the manner provided in
Section 1506.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other reasonable manner which the Trustee deems sufficient.
(c) The ownership of Registered Securities shall be proved by
the Security Register.
(d) The ownership of Bearer Securities may be proved by the
production of such Bearer Securities or by a certificate executed, as
depositary, by any trust company, bank, banker or other depositary, wherever
situated, if such certificate shall be deemed by the Trustee to be satisfactory,
showing that at the date therein mentioned
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such Person had on deposit with such depositary, or exhibited to it, the Bearer
Securities therein described; or such facts may be proved by the certificate or
affidavit of the Person holding such Bearer Securities, if such certificate or
affidavit is deemed by the Trustee to be satisfactory. The Trustee and the
Company may assume that such ownership of any Bearer Security continues until
(1) another certificate or affidavit bearing a later date issued in respect of
the same Bearer Security is produced, or (2) such Bearer Security is produced to
the Trustee by some other Person, or (3) such Bearer Security is surrendered in
exchange for a Registered Security, or (4) such Bearer Security is no longer
Outstanding. The ownership of Bearer Securities may also be proved in any other
manner which the Trustee deems sufficient.
(e) If the Company shall solicit from the Holders of
Registered Securities any request, demand, authorization, direction, notice,
consent, waiver or other Act, the Company may, at its option, in or pursuant to
a Board Resolution, fix in advance a record date for the determination of
Holders entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
Notwithstanding TIA Section 316(c), such record date shall be the record date
specified in or pursuant to such Board Resolution, which shall be a date not
earlier than the date 30 days prior to the first solicitation of Holders
generally in connection therewith and not later than the date such solicitation
is completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of Outstanding
Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Securities shall be computed as of such record date;
provided that no such authorization, agreement or consent by the Holders on such
record date shall be deemed effective unless it shall become effective pursuant
to the provisions of this Indenture not later than eleven months after the
record date.
(f) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee, any
Security Registrar, any Paying Agent, any Authenticating Agent or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
SECTION 105. Notices, etc., to Trustee and Company. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Department Re: Health and Retirement
Properties Trust Notes due 2007, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this Indenture or at any
other address previously furnished in writing to the Trustee by the
Company.
SECTION 106. Notice to Holders; Waiver. Where this Indenture
provides for notice of any event to Holders of Registered Securities by the
Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each such Holder affected by such event, at his address as
it appears in the Security Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. In any
case where notice to Holders of Registered Securities is given by mail, neither
the failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders of Registered Securities or the sufficiency of any notice to
Holders of Bearer Securities given as provided herein. Any notice mailed to a
Registered Holder in the manner herein prescribed shall be conclusively deemed
to have been received by such Holder, whether or not such Holder actually
receives such notice.
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If by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause it shall be impracticable to give
such notice by mail, then such notification to Holders of Registered Securities
as shall be made with the approval of the Trustee shall constitute a sufficient
notification to such Holders for every purpose hereunder.
Except as otherwise expressly provided herein or otherwise
specified with respect to any Securities pursuant to Section 301, where this
Indenture provides for notice to Holders of Bearer Securities of any event, such
notice shall be sufficiently given if published in an Authorized Newspaper in
The City of New York and in such other city or cities as may be specified in
such Securities on a Business Day, such publication to be not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. Any such notice shall be deemed to have been given on the date
of such publication or, if published more than once, on the date of the first
such publication.
If by reason of the suspension of publication of any
Authorized Newspaper or Authorized Newspapers or by reason of any other cause it
shall be impracticable to publish any notice to Holders of Bearer Securities as
provided above, then such notification to Holders of Bearer Securities as shall
be given with the approval of the Trustee shall constitute sufficient notice to
such Holders for every purpose hereunder. Neither the failure to give notice by
publication to any particular Holder of Bearer Securities as provided above, nor
any defect in any notice so published, shall affect the sufficiency of such
notice with respect to other Holders of Bearer Securities or the sufficiency of
any notice to Holders of Registered Securities given as provided herein.
Any request, demand, authorization, direction, notice, consent
or waiver required or permitted under this Indenture shall be in the English
language, except that any published notice may be in an official language of the
country of publication.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 107. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns. All covenants and
agreements in this Indenture by the Company shall bind its successors and
assigns, whether so expressed or not.
SECTION 109. Separability Clause. In case any provision in
this Indenture or in any Security or coupon shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 110. Benefits of Indenture. Nothing in this Indenture
or in the Securities or coupons, express or implied, shall give to any Person,
other than the parties hereto, any Security Registrar, any Paying Agent, any
Authenticating Agent and their successors hereunder and the Holders any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. Governing Law. This Indenture and the Securities
and coupons shall be governed by and construed in accordance with the law of The
Commonwealth of Massachusetts. This Indenture is subject to the provisions of
the TIA that are required to be part of this Indenture and shall, to the extent
applicable, be governed by such provisions.
SECTION 112. Legal Holidays. In any case where any Interest
Payment Date, Redemption Date, Repayment Date, sinking fund payment date, Stated
Maturity or Maturity of any Security shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or any
Security or coupon other than a provision in the Securities of any series which
specifically states that such provision shall apply in lieu hereof),
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payment of interest or any Additional Amounts or principal (and premium, if any)
or sinking fund payment need not be made at such Place of Payment on such date,
but may be made on the next succeeding Business Day at such Place of Payment
with the same force and effect as if made on the Interest Payment Date,
Redemption Date, Repayment Date or sinking fund payment date, or at the Stated
Maturity or Maturity; provided that no interest shall accrue on the amount so
payable for the period from and after such Interest Payment Date, Redemption
Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity, as
the case may be.
SECTION 113. No Personal Liability. THE AMENDED AND RESTATED
DECLARATION OF TRUST OF THE COMPANY DATED JULY 1, 1994, A COPY OF WHICH,
TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED IN THE
OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND,
PROVIDES THAT THE NAME "HEALTH AND 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 THE
COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL PERSONS DEALING WITH THE
COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE COMPANY FOR THE
PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
ARTICLE TWO
SECURITIES FORMS
SECTION 201. Forms of Securities. The Registered Securities,
if any, of each series and the Bearer Securities, if any, of each series and
related coupons shall be in substantially the forms as shall be established in
one or more indentures supplemental hereto or approved from time to time by or
pursuant to a Board Resolution in accordance with Section 301, shall have such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture or any indenture supplemental hereto,
and may have such letters, numbers or other marks of identification or
designation and such legends or endorsements placed thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange on which the Securities may be listed, or to conform to
usage.
Unless otherwise specified as contemplated by Section 301,
Bearer Securities shall have interest coupons attached.
The definitive Securities and coupons shall be printed,
lithographed or engraved or produced by any combination of these methods on a
steel engraved border or steel engraved borders or may be produced in any other
manner, all as determined by the officers of the Company executing such
Securities or coupons, as evidenced by their execution of such Securities or
coupons.
SECTION 202. Form of Trustee's Certificate of Authentication.
Subject to Section 611, the Trustee's certificate of authentication shall be in
substantially the following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
---------------------------------
as Trustee
By______________________________
Authorized Officer
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SECTION 203. Securities Issuable in Global Form. If Securities
of or within a series are issuable in global form, as specified in and as
contemplated by Section 301, then, notwithstanding clause (8) of Section 301 and
the provisions of Section 302, any such Security shall represent such of the
Outstanding Securities of such series as shall be specified therein and may
provide that it shall represent the aggregate amount of Outstanding Securities
of such series from time to time endorsed thereon and that the aggregate amount
of Outstanding Securities of such series represented thereby may from time to
time be increased or decreased to reflect exchanges. Any endorsement of a
Security in global form to reflect the amount, or any increase or decrease in
the amount, of Outstanding Securities represented thereby shall be made by the
Trustee in such manner and upon instructions given by such Person or Persons as
shall be specified therein or in the Company Order to be delivered to the
Trustee pursuant to Section 303 or 304. Subject to the provisions of Section 303
and, if applicable, Section 304, the Trustee shall deliver and redeliver any
Security in permanent global form in the manner and upon instructions given by
the Person or Persons specified therein or in the applicable Company Order. If a
Company Order pursuant to Section 303 or 304 has been, or simultaneously is,
delivered, any instructions by the Company with respect to endorsement or
delivery or redelivery of a Security in global form shall be in writing but need
not comply with Section 102 and need not be accompanied by an Opinion of
Counsel.
The provisions of the last sentence of Section 303 shall apply
to any Security represented by a Security in global form if such Security was
never issued and sold by the Company and the Company delivers to the Trustee the
Security in global form together with written instructions (which need not
comply with Section 102 and need not be accompanied by an Opinion of Counsel)
with regard to the reduction in the principal amount of Securities represented
thereby, together with the written statement contemplated by the last sentence
of Section 303.
Notwithstanding the provisions of Section 307, unless
otherwise specified as contemplated by Section 301, payment of principal of and
any premium and interest on any Security in permanent global form shall be made
to the Person or Persons specified therein.
Notwithstanding the provisions of Section 308 and except as
provided in the preceding paragraph, the Company, the Trustee and any agent of
the Company and the Trustee shall treat as the Holder of such principal amount
of Outstanding Securities represented by a permanent global Security (i) in the
case of a permanent global Security in registered form, the Holder of such
permanent global Security in registered form or (ii) in the case of a permanent
global Security in bearer form, Euroclear or CEDEL.
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series. The
aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There
shall be established in one or more Board Resolutions or pursuant to authority
granted by one or more Board Resolutions and, subject to Section 303, set forth,
or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of any series, any or all of the following, as applicable (each of
which (except for the matters set forth in clauses (1), (2) and (14) below), if
so provided, may be determined from time to time by the Company with respect to
unissued Securities of the series when issued from time to time):
(1) the title of the Securities of the series (which shall
distinguish the Securities of such series from all other series of
Securities);
(2) any limit upon the aggregate principal amount of the
Securities of the series that may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 304, 305, 306, 906, 1107
or 1305);
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(3) the date or dates, or the method by which such date or
dates will be determined, on which the principal of the Securities of
the series shall be payable;
(4) the rate or rates at which the Securities of the series
shall bear interest, if any, or the method by which such rate or rates
shall be determined, the date or dates from which such interest shall
accrue or the method by which such date or dates shall be determined,
the Interest Payment Dates on which such interest will be payable and
the Regular Record Date, if any, for the interest payable on any
Registered Security on any Interest Payment Date, or the method by
which such date shall be determined, and the basis upon which interest
shall be calculated if other than that of a 360-day year of twelve
30-day months;
(5) the place or places where the principal of, any premium
and interest on and any Additional Amounts payable in respect of,
Securities of the series shall be payable, any Registered Securities of
the series may be surrendered for registration of transfer, exchange or
conversion and notices or demands to or upon the Company in respect of
the Securities of the series and this Indenture may be served;
(6) the period or periods within which or the date or dates on
which, the price or prices at which, and other terms and conditions
upon which Securities of the series may be redeemed, in whole or in
part, at the option of the Company, if the Company is to have the
option;
(7) the obligation, if any, of the Company to redeem, repay or
purchase Securities of the series pursuant to any sinking fund or
analogous provision or at the option of a Holder thereof, and the
period or periods within which or the date or dates on which, the price
or prices at which, and other terms and conditions upon which
Securities of the series shall be redeemed, repaid or purchased, in
whole or in part, pursuant to such obligation;
(8) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which any Registered Securities
of the series shall be issuable and the denomination or denominations
in which any Bearer Securities of the series shall be
issuable;
(9) if other than Dollars, the Foreign Currency or Currencies
in which payment of the principal of (and premium, if any), interest,
if any, on, and Additional Amounts, if any, on the Securities of the
series shall be payable, in which the Securities of the series shall be
redeemed or purchased or in which the Securities of the series shall be
denominated;
(10) if other than the principal amount thereof, the portion
of the principal amount of Securities of the series that shall be
payable upon declaration of acceleration of the Maturity thereof
pursuant to Section 502 or, if applicable, the portion of the principal
amount of Securities of the series that is convertible in accordance
with the provisions of this Indenture, or the method by which such
portion shall be determined;
(11) whether the amount of payments of principal of (and
premium, if any) or interest, if any, on the Securities of the series
may be determined with reference to an index, formula or other method
(which index, formula or method may be based, without limitation, on
one or more currencies, currency units, composite currencies,
commodities, equity indices or other indices), and the manner in which
such amounts shall be determined;
(12) whether the principal of (and premium, if any) or
interest, if any on or Additional Amounts, if any, on the Securities of
the series are to be payable, at the election of the Company or a
Holder thereof, in a currency or currencies, currency unit or units or
composite currency or currencies other than that in which such
Securities are denominated or stated to be payable, the period or
periods within which, and the terms and conditions upon which, such
election may be made, and the time and manner of, and identity of the
exchange rate agent with responsibility for determining the exchange
rate between the currency or currencies, currency unit or units or
composite currency or currencies in which such Securities are
denominated or stated
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to be payable and the currency or currencies, currency unit or units or
composite currency or currencies in which such Securities are to be
paid;
(13) provisions, if any, granting special rights to the
Holders of Securities of the series upon the occurrence of such events
as may be specified;
(14) any deletions from, modifications of or additions to the
Events of Default or covenants of the Company set forth in this
Indenture with respect to Securities of the series (whether or not such
Events of Default or covenants are consistent with the Events of
Default or covenants set forth herein);
(15) whether Securities of the series are to be issuable as
Registered Securities, Bearer Securities (with or without coupons) or
both, any restrictions applicable to the offer, sale or delivery of
Bearer Securities and the terms upon which Bearer Securities of the
series may be exchanged for Registered Securities of the series and
vice versa (if permitted by applicable laws and regulations), whether
any Securities of the series are to be issuable initially in temporary
global form and whether any Securities of the series are to be issuable
in permanent global form with or without coupons and, if so, whether
beneficial owners of interests in any such permanent global Security
may exchange such interests for Securities of such series and of like
tenor of any authorized form and denomination and the circumstances
under which any such exchanges may occur, if other than in the manner
provided in Section 305, and, if Registered Securities of the series
are to be issuable as a global Security, the identity of the depositary
for such series;
(16) the date as of which any Bearer Securities of the series
and any temporary global Security representing Outstanding Securities
of the series shall be dated if other than the date of original
issuance of the first Security of the series to be issued;
(17) the Person to whom any interest on any Registered
Security of the series shall be payable, if other than the Person in
whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, the manner in which, or the Person to whom, any interest on
any Bearer Security of the series shall be payable, if otherwise than
upon presentation and surrender of the coupons appertaining thereto as
they severally mature, and the extent to which, or the manner in which,
any interest payable on a temporary global Security on an Interest
Payment Date will be paid if other than in the manner provided in
Section 304;
(18) the applicability, if any, of Sections 1402 and/or 1403
to the Securities of the series and any provisions in modification of,
in addition to or in lieu of any of the provisions of Article Fourteen;
(19) if the Securities of such series are to be issuable in
definitive form (whether upon original issue or upon exchange of a
temporary Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions,
then the form and/or terms of such certificates, documents or
conditions;
(20) if the Securities of the series are to be issued upon the
exercise of warrants, the time, manner and place for such Securities to
be authenticated and delivered;
(21) whether and under what circumstances the Company will pay
Additional Amounts as contemplated by Section 1007 on the Securities of
the series to any Holder who is not a United States person (including
any modification to the definition of such term) in respect of any tax,
assessment or governmental charge and, if so, whether the Company will
have the option to redeem such Securities rather than pay such
Additional Amounts (and the terms of any such option);
(22) the obligation, if any, of the Company to permit the
conversion of the Securities of such series into Common Shares or
Preferred Shares of the Company or other securities, as the case may
be, and the terms and conditions upon which such conversion shall be
effected (including, without limitation, the
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initial conversion price or rate, the conversion period, any adjustment
of the applicable conversion price and any requirements relative to the
reservation of such shares for purposes of conversion);
(23) the terms and conditions, if any, upon which payment of
the Securities of such series shall be subordinated to the Securities
of another series or other indebtedness of the Company (including,
without limitation, indebtedness which ranks senior to such Securities;
restrictions on payments to Holders of such Securities while a default
with respect to such senior indebtedness is continuing; restrictions,
if any, on payments to the Holders of such Securities following an
Event of Default; and any requirements for Holders of such Securities
to remit certain payments to the holders of such senior indebtedness);
(24) if the Securities of the series are to be guaranteed, the
term and conditions of such guarantee;
(25) if other than the Trustee, the identity of each Security
Registrar and/or Paying Agent for the series; and
(26) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any one series and the coupons appertaining
to any Bearer Securities of such series shall be substantially identical except,
in the case of Registered Securities, as to denominations and except as may
otherwise be provided in or pursuant to the Board Resolution establishing the
series (subject to Section 303) and set forth in an Officers' Certificate or in
any indenture supplemental hereto. All Securities of any one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the Holders, for issuances of additional
Securities of such series.
If any of the terms of the Securities of any series are
established by action taken pursuant to one or more Board Resolutions, a copy of
an appropriate record of such action(s) shall be certified by the Secretary or
an Assistant Secretary of the Company and delivered to the Trustee at or prior
to the delivery of the Officers' Certificate setting forth the terms of the
Securities of such series.
SECTION 302. Denominations. The Securities of each series
shall be issuable in such denominations as shall be specified as contemplated by
Section 301. With respect to Securities of any series denominated in Dollars, in
the absence of any such provisions, the Registered Securities of such series,
other than Registered Securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $1,000 and any integral
multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities and any coupons appertaining thereto shall be executed on behalf
of the Company by its President or one of its Vice Presidents, under its seal
reproduced thereon, and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities and
coupons may be manual or facsimile signatures of the present or any future such
authorized officer and may be imprinted or otherwise reproduced on the
Securities.
Securities or coupons bearing the manual or facsimile
signatures of individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and delivery
of such Securities or did not hold such offices at the date of such Securities
or coupons.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of any series,
together with any coupon appertaining thereto, executed by the Company to the
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities; provided, however, that,
in connection with its original issuance, no Bearer Security shall be mailed or
otherwise delivered to any location in the
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United States; and provided further that, unless otherwise specified with
respect to any series of Securities pursuant to Section 301, a Bearer Security
may be delivered in connection with its original issuance only if the Person
entitled to receive such Bearer Security shall have furnished a certificate in
the form set forth in Exhibit A-1 to this Indenture or such other certificate as
may be specified with respect to any series of Securities pursuant to Section
301, dated no earlier than 15 days prior to the earlier of the date on which
such Bearer Security is delivered and the date on which any temporary Security
first becomes exchangeable for such Bearer Security in accordance with the terms
of such temporary Security and this Indenture. If any Security shall be
represented by a permanent global Bearer Security, then, for purposes of this
Section and Section 304, the notation of a beneficial owner's interest therein
upon original issuance of such Security or upon exchange of a portion of a
temporary global Security shall be deemed to be delivery in connection with its
original issuance of such beneficial owner's interest in such permanent global
Security. Except as permitted by Section 306, the Trustee shall not authenticate
and deliver any Bearer Security unless all appurtenant coupons for interest then
matured have been detached and cancelled. If all the Securities of any series
are not to be issued at one time and if the Board Resolution or supplemental
indenture establishing such series shall so permit, such Company Order may set
forth procedures acceptable to the Trustee for the issuance of such Securities
and determining the terms of particular Securities of such series, such as
interest rate or formula, maturity date, date of issuance and date from which
interest shall accrue. In authenticating such Securities, and accepting the
additional responsibilities under this Indenture in relation to such Securities,
the Trustee shall be entitled to receive, and (subject to TIA Sections 315(a)
through 315(d)) shall be fully protected in relying upon,
(i) an Opinion of Counsel stating that
(a) the form or forms of such Securities and
any coupons have been established in conformity with the
provisions of this Indenture;
(b) the terms of such Securities and any
coupons have been established in conformity with the
provisions of this Indenture; and
(c) such Securities, together with any
coupons appertaining thereto, when completed by appropriate
insertions and executed and delivered by the Company to the
Trustee for authentication in accordance with this Indenture,
authenticated and delivered by the Trustee in accordance with
this Indenture and issued by the Company in the manner and
subject to any conditions specified in such Opinion of
Counsel, will constitute legal, valid and binding obligations
of the Company, enforceable in accordance with their terms,
subject to applicable bankruptcy, insolvency, reorganization
and other similar laws of general applicability relating to or
affecting the enforcement of creditors' rights generally and
to general equitable principles; and
(ii) an Officers' Certificate stating that all conditions
precedent provided for in this Indenture relating to the issuance of
the Securities have been complied with and that, to the best of the
knowledge of the signers of such certificate, no Event of Default with
respect to any of the Securities shall have occurred and be continuing.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties,
obligations or immunities under the Securities and this Indenture or otherwise
in a manner which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the
preceding paragraph, if all the Securities of any series are not to be issued at
one time, it shall not be necessary to deliver an Officers' Certificate
otherwise required pursuant to Section 301 or a Company Order, or an Opinion of
Counsel or an Officers' Certificate otherwise required pursuant to the preceding
paragraph at the time of issuance of each Security of such series, but such
order, opinion and certificates, with appropriate modifications to cover such
future issuances, shall be delivered at or before the time of issuance of the
first Security of such series.
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Each Registered Security shall be dated the date of its
authentication and each Bearer Security shall be dated as of the date specified
as contemplated by Section 301.
No Security or coupon shall be entitled to any benefit under
this Indenture or be valid or obligatory for any purpose unless there appears on
such Security or Security to which such coupon appertains a certificate of
authentication substantially in the form provided for herein duly executed by
the Trustee by manual signature of an authorized officer, and such certificate
upon any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder and is entitled to
the benefits of this Indenture. Notwithstanding the foregoing, if any Security
shall have been authenticated and delivered hereunder but never issued and sold
by the Company, and the Company shall deliver such Security to the Trustee for
cancellation as provided in Section 309 together with a written statement (which
need not comply with Section 102 and need not be accompanied by an Opinion of
Counsel) stating that such Security has never been issued and sold by the
Company, for all purposes of this Indenture such Security shall be deemed never
to have been authenticated and delivered hereunder and shall never be entitled
to the benefits of this Indenture.
SECTION 304. Temporary Securities. (a) Pending the preparation
of definitive Securities of any series, the Company may execute, and upon
Company Order the Trustee shall authenticate and deliver, temporary Securities
which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued, in registered form, or,
if authorized, in bearer form with one or more coupons or without coupons, and
with such appropriate insertions, omissions, substitutions and other variations
as the officers executing such Securities may determine, as conclusively
evidenced by their execution of such Securities. In the case of Securities of
any series, such temporary Securities may be in global form.
Except in the case of temporary Securities in global form
(which shall be exchanged in accordance with Section 304(b) or as otherwise
provided in or pursuant to a Board Resolution), if temporary Securities of any
series are issued, the Company will cause definitive Securities of that series
to be prepared without unreasonable delay. After the preparation of definitive
Securities of such series, the temporary Securities of such series shall be
exchangeable for definitive Securities of such series upon surrender of the
temporary Securities of such series at the office or agency of the Company in a
Place of Payment for that series, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Securities of any series
(accompanied by any non-matured coupons appertaining thereto), the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Securities of the same series of authorized
denominations; provided, however, that no definitive Bearer Security shall be
delivered in exchange for a temporary Registered Security; and provided further
that a definitive Bearer Security shall be delivered in exchange for a temporary
Bearer Security only in compliance with the conditions set forth in Section 303.
Until so exchanged, the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of such series.
(b) Unless otherwise provided in or pursuant to a Board
Resolution, this Section 304(b) shall govern the exchange of temporary
Securities issued in global form other than through the facilities of DTC. If
any such temporary Security is issued in global form, then such temporary global
Security shall, unless otherwise provided therein, be delivered to the London
office of a depositary or common depositary (the "Common Depositary"), for the
benefit of Euroclear and CEDEL, for credit to the respective accounts of the
beneficial owners of such Securities (or to such other accounts as they may
direct).
Without unnecessary delay but in any event not later than the
date specified in, or determined pursuant to the terms of, any such temporary
global Security (the "Exchange Date"), the Company shall deliver to the Trustee
definitive Securities, in aggregate principal amount equal to the principal
amount of such temporary global Security, executed by the Company. On or after
the Exchange Date, such temporary global Security shall be surrendered by the
Common Depositary to the Trustee, as the Company's agent for such purpose, to be
exchanged, in whole or from time to time in part, for definitive Securities
without charge, and the Trustee shall authenticate and deliver, in exchange for
each portion of such temporary global Security, an equal aggregate principal
amount of definitive Securities of the same series of authorized denominations
and of like tenor as the portion of such temporary global Security to be
exchanged.
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The definitive Securities to be delivered in exchange for any such temporary
global Security shall be in bearer form, registered form, permanent global
bearer form or permanent global registered form, or any combination thereof, as
specified as contemplated by Section 301, and, if any combination thereof is so
specified, as requested by the beneficial owner thereof; provided, however,
that, unless otherwise specified in such temporary global Security, upon such
presentation by the Common Depositary, such temporary global Security is
accompanied by a certificate dated the Exchange Date or a subsequent date and
signed by Euroclear as to the portion of such temporary global Security held for
its account then to be exchanged and a certificate dated the Exchange Date or a
subsequent date and signed by CEDEL as to the portion of such temporary global
Security held for its account then to be exchanged, each in the form set forth
in Exhibit A-2 to this Indenture or in such other form as may be established
pursuant to Section 301; and provided further that definitive Bearer Securities
shall be delivered in exchange for a portion of a temporary global Security only
in compliance with the requirements of Section 303.
Unless otherwise specified in such temporary global Security,
the interest of a beneficial owner of Securities of a series in a temporary
global Security shall be exchanged for definitive Securities of the same series
and of like tenor following the Exchange Date when the account holder instructs
Euroclear or CEDEL, as the case may be, to request such exchange on his behalf
and delivers to Euroclear or CEDEL, as the case may be, a certificate in the
form set forth in Exhibit A-1 to this Indenture (or in such other forms as may
be established pursuant to Section 301), dated no earlier than 15 days prior to
the Exchange Date, copies of which certificate shall be available from the
offices of Euroclear and CEDEL, the Trustee, any Authenticating Agent appointed
for such series of Securities and each Paying Agent. Unless otherwise specified
in such temporary global Security, any such exchange shall be made free of
charge to the beneficial owners of such temporary global Security, except that a
Person receiving definitive Securities must bear the cost of insurance, postage,
transportation and the like unless such Person takes delivery of such definitive
Securities in person at the offices of Euroclear or CEDEL. Definitive Securities
in bearer form to be delivered in exchange for any portion of a temporary global
Security shall be delivered only outside the United States.
Until exchanged in full as hereinabove provided, the temporary
Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of the same series and of like
tenor authenticated and delivered hereunder, except that, unless otherwise
specified as contemplated by Section 301, interest payable on a temporary global
Security on an Interest Payment Date for Securities of such series occurring
prior to the applicable Exchange Date shall be payable to Euroclear and CEDEL on
such Interest Payment Date upon delivery by Euroclear and CEDEL to the Trustee
of a certificate or certificates in the form set forth in Exhibit A-2 to this
Indenture (or in such other forms as may be established pursuant to Section
301), for credit without further interest on or after such Interest Payment Date
to the respective accounts of persons who are the beneficial owners of such
temporary global Security on such Interest Payment Date and who have each
delivered to Euroclear or CEDEL, as the case may be, a certificate dated no
earlier than 15 days prior to the Interest Payment Date occurring prior to such
Exchange Date in the form set forth as Exhibit A-1 to this Indenture (or in such
other forms as may be established pursuant to Section 301). Notwithstanding
anything to the contrary herein contained, the certifications made pursuant to
this paragraph shall satisfy the certification requirements of the preceding two
paragraphs of this Section 304 (b) and of the third paragraph of Section 303 of
this Indenture and the interests of the Persons who are the beneficial owners of
a temporary global Security with respect to which such certification was made
will be exchanged for definitive Securities of the same series and of like tenor
on the Exchange Date or the date of certification if such date occurs after the
Exchange Date, without further act or deed by such beneficial owners. Except as
otherwise provided in this paragraph, no payments of principal or interest owing
with respect to a beneficial interest in a temporary global Security will be
made unless and until such interest in such temporary global Security shall have
been exchanged for an interest in a definitive Security. Any interest so
received by Euroclear and CEDEL and not paid as herein provided shall be
returned to the Trustee prior to the expiration of two years after such Interest
Payment Date in order to be repaid to the Company.
SECTION 305. Registration, Registration of Transfer and
Exchange. The Company shall cause to be kept at the Corporate Trust Office of
the Trustee or in any office or agency of the Company in a Place of Payment a
register for each series of Securities (the registers maintained in such office
or in any such office or agency of the Company in a Place of Payment being
herein sometimes referred to collectively as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Registered Securities and of transfers of
Registered Securities. The Security Register shall be in written form or any
other form
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capable of being converted into written form within a reasonable time. The
Trustee, at its Corporate Trust Office, is hereby initially appointed "Security
Registrar" for the purpose of registering Registered Securities and transfers of
Registered Securities on such Security Register as herein provided. In the event
that the Trustee shall cease to be Security Registrar, it shall have the right
to examine the Security Register at all reasonable times.
Subject to the provisions of this Section 305, upon surrender
for registration of transfer of any Registered Security of any series at any
office or agency of the Company in a Place of Payment for that series, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Registered
Securities of the same series, of any authorized denominations and of a like
aggregate principal amount, bearing a number not contemporaneously outstanding,
and containing identical terms and provisions.
Subject to the provisions of this Section 305, at the option
of the Holder, Registered Securities of any series may be exchanged for other
Registered Securities of the same series, of any authorized denomination or
denominations and of a like aggregate principal amount, containing identical
terms and provisions, upon surrender of the Registered Securities to be
exchanged at any such office or agency. Whenever any such Registered Securities
are so surrendered for exchange, the Company shall execute, and the Trustee
shall authenticate and deliver, the Registered Securities which the Holder
making the exchange is entitled to receive. Unless otherwise specified with
respect to any series of Securities as contemplated by Section 301, Bearer
Securities may not be issued in exchange for Registered Securities.
If (but only if) permitted by the applicable Board Resolution
and (subject to Section 303) set forth in the applicable Officers' Certificate,
or in any indenture supplemental hereto, delivered as contemplated by Section
301, at the option of the Holder, Bearer Securities of any series may be
exchanged for Registered Securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor, upon surrender
of the Bearer Securities to be exchanged at any such office or agency, with all
unmatured coupons and all matured coupons in default thereto appertaining. If
the Holder of a Bearer Security is unable to produce any such unmatured coupon
or coupons or matured coupon or coupons in default, any such permitted exchange
may be effected if the Bearer Securities are accompanied by payment in funds
acceptable to the Company in an amount equal to the face amount of such missing
coupon or coupons, or the surrender of such missing coupon or coupons may be
waived by the Company and the Trustee if there is furnished to them such
security or indemnity as they may require to save each of them and any Paying
Agent harmless. If thereafter the Holder of such Security shall surrender to any
Paying Agent any such missing coupon in respect of which such a payment shall
have been made, such Holder shall be entitled to receive the amount of such
payment; provided, however, that, except as otherwise provided in Section 1002,
interest represented by coupons shall be payable only upon presentation and
surrender of those coupons at an office or agency located outside the United
States. Notwithstanding the foregoing, in case a Bearer Security of any series
is surrendered at any such office or agency in a permitted exchange for a
Registered Security of the same series and like tenor after the close of
business at such office or agency on (i) any Regular Record Date and before the
opening of business at such office or agency on the relevant Interest Payment
Date, or (ii) any Special Record Date and before the opening of business at such
office or agency on the related proposed date for payment of Defaulted Interest,
such Bearer Security shall be surrendered without the coupon relating to such
Interest Payment Date or proposed date for payment, as the case may be, and
interest or Defaulted Interest, as the case may be, will not be payable on such
Interest Payment Date or proposed date for payment, as the case may be, in
respect of the Registered Security issued in exchange for such Bearer Security,
but will be payable only to the Holder of such coupon when due in accordance
with the provisions of this Indenture. Whenever any Bearer Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
Notwithstanding the foregoing, except as otherwise specified
as contemplated by Section 301, any permanent global Security shall be
exchangeable only as provided in this paragraph. If the depositary for any
permanent global Security is DTC, then, unless the terms of such global Security
expressly permit such global Security to be exchanged in whole or in part for
definitive Securities, a global Security may be transferred, in whole but not in
part, only to a nominee of DTC, or by a nominee of DTC to DTC, or to a successor
to DTC for such global Security selected or approved by the Company or to a
nominee of such successor to DTC. If at any time DTC notifies the Company that
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it is unwilling or unable to continue as depositary for the applicable global
Security or Securities or if at any time DTC ceases to be a clearing agency
registered under the Securities Exchange Act of 1934, as amended, if so required
by applicable law or regulation, the Company shall appoint a successor
depositary with respect to such global Security or Securities. If (x) a
successor depositary for such global Security or Securities is not appointed by
the Company within 90 days after the Company receives such notice or becomes
aware of such unwillingness, inability or ineligibility, (y) an Event of Default
has occurred and is continuing and the beneficial owners representing a majority
in principal amount of the applicable series of Securities represented by such
global Security or Securities advise DTC to cease acting as depositary for such
global Security or Securities or (z) the Company, in its sole discretion,
determines at any time that all Outstanding Securities (but not less than all)
of any series issued or issuable in the form of one or more global Securities
shall no longer be represented by such global Security or Securities, then the
Company shall execute, and the Trustee shall authenticate and deliver,
definitive Securities of like series, rank, tenor and terms in definitive form
in an aggregate principal amount equal to the principal amount of such global
Security or Securities. If any beneficial owner of an interest in a permanent
global Security is otherwise entitled to exchange such interest for Securities
of such series and of like tenor and principal amount of another authorized form
and denomination, as specified as contemplated by Section 301 and provided that
any applicable notice provided in the permanent global Security shall have been
given, then without unnecessary delay but in any event no later than the
earliest date on which such interest may be so exchanged, the Company shall
execute, and the Trustee shall authenticate and deliver, definitive Securities
in aggregate principal amount equal to the principal amount of such beneficial
owner's interest in such permanent global Security. On or after the earliest
date on which such interests may be so exchanged, such permanent global Security
shall be surrendered for exchange by DTC or such other depositary as shall be
specified in the Company Order with respect thereto to the Trustee, as the
Company's agent for such purpose; provided, however, that no such exchanges may
occur during a period beginning at the opening of business 15 days before any
selection of Securities to be redeemed and ending on the relevant Redemption
Date if the Security for which exchange is requested may be among those selected
for redemption; and provided further that no Bearer Security delivered in
exchange for a portion of a permanent global Security shall be mailed or
otherwise delivered to any location in the United States. If a Registered
Security is issued in exchange for any portion of a permanent global Security
after the close of business at the office or agency where such exchange occurs
on (i) any Regular Record Date and before the opening of business at such office
or agency on the relevant Interest Payment Date, or (ii) any Special Record Date
and before the opening of business at such office or agency on the related
proposed date for payment of Defaulted Interest, interest or Defaulted Interest,
as the case may be, will not be payable on such Interest Payment Date or
proposed date for payment, as the case may be, in respect of such Registered
Security, but will be payable on such Interest Payment Date or proposed date for
payment, as the case may be, only to the Person to whom interest in respect of
such portion or such permanent global Security is payable in accordance with the
provisions of this Indenture.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for
registration of transfer or for exchange or redemption shall (if so required by
the Company or the Security Registrar) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 304, 906, 1107 or 1305 not involving any
transfer.
The Company or the Trustee, as applicable, shall not be
required (i) to issue, register the transfer of or exchange any Security if such
Security may be among those selected for redemption during a period beginning at
the opening of business 15 days before selection of the Securities to be
redeemed under Section 1103 and ending at the close of business on (A) if such
Securities are issuable only as Registered Securities, the day of the mailing of
the relevant notice of redemption and (B) if such Securities are issuable as
Bearer Securities, the day of the first publication of the
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relevant notice of redemption or, if such Securities are also issuable as
Registered Securities and there is no publication, the mailing of the relevant
notice of redemption, or (ii) to register the transfer of or exchange any
Registered Security so selected for redemption in whole or in part, except, in
the case of any Registered Security to be redeemed in part, the portion thereof
not to be redeemed, or (iii) to exchange any Bearer Security so selected for
redemption except that such a Bearer Security may be exchanged for a Registered
Security of that series and of like tenor; provided that such Registered
Security shall be simultaneously surrendered for redemption, or (iv) to issue,
register the transfer of or exchange any Security which has been surrendered for
repayment at the option of the Holder, except that portion, if any, of such
Security which is not to be so repaid.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security or a Security with a mutilated coupon appertaining to
it is surrendered to the Trustee or the Company, together with, in proper cases,
such security or indemnity as may be required by the Company or the Trustee to
save each of them or any agent of either of them harmless, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of the same series and principal amount, containing identical terms
and provisions and bearing a number not contemporaneously outstanding, with
coupons corresponding to the coupons, if any, appertaining to the surrendered
Security.
If there shall be delivered to the Company and to the Trustee
(i) evidence to their satisfaction of the destruction, loss or theft of any
Security or coupon, and (ii) such security or indemnity as may be required by
them to save each of them and any agent of either of them harmless, then, in the
absence of written notice to the Company or the Trustee that such Security or
coupon has been acquired by a bona fide purchaser, the Company shall execute and
upon its request the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security or in exchange for the Security to which a
destroyed, lost or stolen coupon appertains (with all appurtenant coupons not
destroyed, lost or stolen), a new Security of the same series and principal
amount, containing identical terms and provisions and bearing a number not
contemporaneously outstanding, with coupons corresponding to the coupons, if
any, appertaining to such destroyed, lost or stolen Security or to the Security
to which such destroyed, lost or stolen coupon appertains.
Notwithstanding the provisions of the previous two paragraphs,
in case any such mutilated, destroyed, lost or stolen Security or coupon has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, with coupons corresponding to the coupons, if
any, appertaining to such destroyed, lost or stolen Security or to the Security
to which such destroyed, lost or stolen coupon appertains, pay such Security or
coupon; provided, however, that payment of principal of (and premium, if any),
any interest on and any Additional Amounts with respect to, Bearer Securities
shall, except as otherwise provided in Section 1002, be payable only at an
office or agency located outside the United States and, unless otherwise
specified as contemplated by Section 301, any interest on Bearer Securities
shall be payable only upon presentation and surrender of the coupons
appertaining thereto.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series with its coupons, if any,
issued pursuant to this Section in lieu of any destroyed, lost or stolen
Security, or in exchange for a Security to which a destroyed, lost or stolen
coupon appertains, shall constitute an original additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen Security
and its coupons, if any, or the destroyed, lost or stolen coupon shall be at any
time enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities of that
series and their coupons, if any, duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities or
coupons.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Except as otherwise specified with respect to a series of Securities in
accordance with the provisions of Section 301, interest on any Registered
Security that
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is payable, and is punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest at the office or agency of the Company maintained
for such purpose pursuant to Section 1002; provided, however, that each
installment of interest on any Registered Security may at the Company's option
be paid by (i) mailing a check for such interest, payable to or upon the written
order of the Person entitled thereto pursuant to Section 308, to the address of
such Person as it appears on the Security Register or (ii) transfer to an
account maintained by the payee located inside the United States.
Unless otherwise provided as contemplated by Section 301 with
respect to the Securities of any series, payment of interest may be made, in the
case of a Bearer Security, by transfer to an account maintained by the payee
with a bank located outside the United States.
Unless otherwise provided as contemplated by Section 301,
every permanent global Security will provide that interest, if any, payable on
any Interest Payment Date will be paid to DTC, Euroclear and/or CEDEL, as the
case may be, with respect to that portion of such permanent global Security held
for its account by Cede & Co. or the Common Depositary, as the case may be, for
the purpose of permitting such party to credit the interest received by it in
respect of such permanent global Security to the accounts of the beneficial
owners thereof.
In case a Bearer Security of any series is surrendered in
exchange for a Registered Security of such series after the close of business
(at an office or agency in a Place of Payment for such series) on any Regular
Record Date and before the opening of business (at such office or agency) on the
next succeeding Interest Payment Date, such Bearer Security shall be surrendered
without the coupon relating to such Interest Payment Date and interest will not
be payable on such Interest Payment Date in respect of the Registered Security
issued in exchange for such Bearer Security, but will be payable only to the
Holder of such coupon when due in accordance with the provisions of this
Indenture.
Except as otherwise specified with respect to a series of
Securities in accordance with the provisions of Section 301, any interest on any
Registered Security of any series that is payable, but is not punctually paid or
duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered Holder thereof
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Registered
Securities of such series (or their respective Predecessor Securities)
are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Registered
Security of such series and the date of the proposed payment (which
shall not be less than 20 days after such notice is received by the
Trustee), and at the same time the Company shall deposit with the
Trustee an amount of money in the currency or currencies, currency unit
or units or composite currency or currencies in which the Securities of
such series are payable (except as otherwise specified pursuant to
Section 301 for the Securities of such series) equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit on
or prior to the date of the proposed payment, such money when deposited
to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted
Interest which shall not be more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder of Registered Securities of such series at his address
as it appears in the Security Register not less than 10 days prior to
such Special Record Date. The Trustee may, in its discretion, in the
name and at the expense of the Company, cause a similar notice to be
published at least once in an Authorized Newspaper in each Place of
Payment, but such publications shall not be a condition precedent to
the establishment of such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and
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the Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names the
Registered Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following
clause (2). In case a Bearer Security of any series is surrendered for
transfer or exchange at the office or agency in a Place of Payment for
such series after the close of business at such office or agency on any
Special Record Date and before the opening of business at such office
or agency on the related proposed date for payment of Defaulted
Interest, such Bearer Security shall be surrendered without the coupon
relating to such proposed date of payment and Defaulted Interest will
not be payable on such proposed date of payment in respect of the
Registered Security issued in exchange for such Bearer Security, but
will be payable only to the Holder of such coupon when due in
accordance with the provisions of this Indenture.
(2) The Company may make payment of any Defaulted
Interest on the Registered Securities of any series in any other lawful
manner not inconsistent with the requirements of any securities
exchange on which such Securities may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and
Section 305, each Security delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Security shall carry the
rights to interest accrued and unpaid, and to accrue, which were carried by such
other Security.
SECTION 308. Persons Deemed Owners. Prior to due presentment
of a Registered Security for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name
such Registered Security is registered as the owner of such Security for the
purpose of receiving payment of principal of (and premium, if any), and (subject
to Sections 305 and 307) interest on, such Registered Security and for all other
purposes whatsoever, whether or not such Registered Security is overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
Title to any Bearer Security and any coupons appertaining
thereto shall pass by delivery. The Company, the Trustee and any agent of the
Company or the Trustee may treat the Holder of any Bearer Security and the
Holder of any coupon as the absolute owner of such Security or coupon for the
purpose of receiving payment thereof or on account thereof and for all other
purposes whatsoever, whether or not such Security or coupon is overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
None of the Company, the Trustee, any Paying Agent or the
Security Registrar will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of a Security in global form or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Notwithstanding the foregoing, with respect to any global
Security, nothing herein shall prevent the Company, the Trustee, or any agent of
the Company or the Trustee, from giving effect to any written certification,
proxy or other authorization furnished by any depositary, as a Holder, with
respect to such global Security or impair, as between such depositary and owners
of beneficial interests in such global Security, the operation of customary
practices governing the exercise of the rights of such depositary (or its
nominee) as Holder of such global Security.
SECTION 309. Cancellation. All Securities and coupons
surrendered for payment, redemption, repayment at the option of the Holder,
registration of transfer or exchange or for credit against any sinking fund
payment shall, if surrendered to any Person other than the Trustee, be delivered
to the Trustee, and any such Securities and coupons and Securities and coupons
surrendered directly to the Trustee for any such purpose shall be promptly
cancelled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and may deliver to
the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the Company
has not issued and sold, and all Securities so delivered shall be promptly
cancelled by the Trustee.
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If the Company shall so acquire any of the Securities, however, such acquisition
shall not operate as a redemption or satisfaction of the indebtedness
represented by such Securities unless and until the same are surrendered to the
Trustee for cancellation. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. Cancelled Securities and coupons held by
the Trustee shall be destroyed by the Trustee and the Trustee shall deliver a
certificate of such destruction to the Company, unless by a Company Order the
Company directs their return to it.
SECTION 310. Computation of Interest. Except as otherwise
specified as contemplated by Section 301 with respect to Securities of any
series, interest on the Securities of each series shall be computed on the basis
of a 360-day year consisting of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture. This
Indenture shall upon Company Request cease to be of further effect with respect
to any series of Securities specified in such Company Request (except as to any
surviving rights of registration of transfer or exchange of Securities of such
series herein expressly provided for and any right to receive Additional
Amounts, as provided in Section 1007), and the Trustee, upon receipt of a
Company Order, and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture as to
such series when
(1) either
(A) all Securities of such series
theretofore authenticated and delivered and all coupons, if
any, appertaining thereto (other than (i) coupons appertaining
to Bearer Securities surrendered for exchange for Registered
Securities and maturing after such exchange, whose surrender
is not required or has been waived as provided in Section 305,
(ii) Securities and coupons of such series which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 306, (iii) coupons appertaining to
Securities called for redemption and maturing after the
relevant Redemption Date, whose surrender has been waived as
provided in Section 1106, and (iv) Securities and coupons of
such series for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(B) all Securities of such series and, in
the case of (i) or (ii) below, any coupons appertaining
thereto, not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at
their Stated Maturity within one
year, or
(iii) if redeemable at the option of the
Company, are to be called for
redemption within one year under
arrangements satisfactory to the
Trustee for the giving of notice of
redemption by the Trustee in the
name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the
Trustee as funds in trust for such purpose an amount in the
currency or currencies, currency unit or units or composite
currency or currencies in which the Securities of such series
are
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payable, sufficient to pay and discharge the entire
indebtedness on such Securities and such coupons not
theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any) and interest, and any
Additional Amounts with respect thereto, to the date of such
deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture as to such series have been complied with.
The obligations of the Company to the Trustee and any predecessor Trustee under
Section 606, the obligations of the Company to any Authenticating Agent under
Section 611 and, if money shall have been deposited with and held by the Trustee
pursuant to subclause (B) of clause (1) of this Section, the obligations of the
Trustee under Section 402 and the last paragraph of Section 1003 shall survive
the satisfaction and discharge of this Indenture.
SECTION 402. Application of Trust Funds. Subject to the
provisions of the last paragraph of Section 1003, all money deposited with the
Trustee pursuant to Section 401 shall be held in trust and applied by it, in
accordance with the provisions of the Securities, the coupons and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any), and any interest and Additional Amounts for whose payment such money has
been deposited with or received by the Trustee, but such money need not be
segregated from other funds except to the extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default. "Event of Default", wherever
used herein with respect to any particular series of Securities, means any one
of the following events (whatever the reason for such Event of Default and
whether or not it shall be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon or any
Additional Amounts payable in respect of any Security of that series or
of any coupon appertaining thereto, when such interest, Additional
Amounts or coupon becomes due and payable, and continuance of such
default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if
any, on) any Security of that series when it becomes due and payable at
its Maturity; or
(3) default in the deposit of any sinking fund payment, when
and as due by the terms of any Security of that series; or
(4) default in the performance of, or breach of, any covenant
of the Company in this Indenture (other than a covenant a default in
whose performance or whose breach is elsewhere in this Section
specifically dealt with or which has been expressly included in this
Indenture solely for the benefit of a series of Securities other than
that series), and continuance of such default or breach for a period of
60 days after there has been given, by registered or certified mail, to
the Company by the Trustee or to the Company and the Trustee by the
Holders of at least a majority in principal amount of the Outstanding
Securities of that series a
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written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder; or
(5) a default under any bond, debenture, note or other
evidence of indebtedness of the Company, or under any mortgage,
indenture or other instrument of the Company (including a default with
respect to Securities of any series other than that series) under which
there may be issued or by which there may be secured any indebtedness
of the Company (or by any Subsidiary, the repayment of which the
Company has guaranteed or for which the Company is directly responsible
or liable as obligor or guarantor), whether such indebtedness now
exists or shall hereafter be created, which default shall constitute a
failure to pay an aggregate principal amount exceeding $25,000,000 of
such indebtedness when due and payable after the expiration of any
applicable grace period with respect thereto and shall have resulted in
such indebtedness in an aggregate principal amount exceeding
$25,000,000 becoming or being declared due and payable prior to the
date on which it would otherwise have become due and payable, without
such indebtedness having been discharged, or such acceleration having
been rescinded or annulled, within a period of 10 days after there
shall have been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the Holders of at
least a majority in principal amount of the Outstanding Securities of
that series a written notice specifying such default and requiring the
Company to cause such indebtedness to be discharged or cause such
acceleration to be rescinded or annulled and stating that such notice
is a "Notice of Default" hereunder; or
(6) the Company or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors; or
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for all or substantially all of
either of its property, or
(C) orders the liquidation of the Company or any
Significant Subsidiary, and the order or decree remains
unstayed and in effect for 90 days; or
(8) any other Event of Default provided with respect to
Securities of that series.
As used in this Section 501, the term "Bankruptcy Law" means Title 11, U.S. Code
or any similar Federal or State law for the relief of debtors and the term
"Custodian" means any receiver, trustee, assignee, liquidator or other similar
official under any Bankruptcy Law.
SECTION 502. Acceleration of Maturity; Rescission and
Annulment. If an Event of Default with respect to Securities of any series at
the time Outstanding occurs and is continuing (other than an Event of Default
described in Section 501(6) or 501(7)), then and in every such case the Trustee
or the Holders of not less than a majority
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in principal amount of the Outstanding Securities of that series may declare the
principal (or, if any Securities are Original Issue Discount Securities or
Indexed Securities, such portion of the principal as may be specified in the
terms thereof) of all the Securities of that series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by the Holders), and upon any such declaration such principal or specified
portion thereof shall become immediately due and payable. If an Event of Default
described in Section 501(6) or 501(7) with respect to any series of Securities
at the time outstanding occurs, the principal amount of all of the Securities of
that series (or, in the case of any such Original Issue Discount Securities or
Indexed Securities, such portion of the principal as may be specified in the
terms thereof) will automatically, and without any action by the Trustee or any
Holder thereof, become immediately due and payable.
At any time after such a declaration of acceleration with
respect to Securities of any series has been made and before a judgment or
decree for payment of the money due has been obtained by the Trustee as
hereinafter in this Article provided, the Holders of a majority in principal
amount of the Outstanding Securities of that series, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay in the currency, currency unit or composite currency
in which the Securities of such series are payable (except as otherwise
specified pursuant to Section 301 for the Securities of such series):
(A) all overdue installments of interest on and any
Additional Amounts payable in respect of all Outstanding
Securities of that series and any related coupons,
(B) the principal of (and premium, if any, on) any
Outstanding Securities of that series which have become due
otherwise than by such declaration of acceleration and
interest thereon at the rate or rates borne by or provided for
in such Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue installments of interest and any
Additional Amounts at the rate or rates borne by or provided
for in such Securities, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel; and
(2) all Events of Default with respect to Securities of that
series, other than the nonpayment of the principal of (or premium, if
any) or interest on Securities of that series which have become due
solely by such declaration of acceleration, have been cured or waived
as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee. The Company covenants that if:
(1) default is made in the payment of any installment of
interest or Additional Amounts, if any, on any Security of any series
and any related coupon when such interest or Additional Amount becomes
due and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security of any series at its Maturity,
then the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities of such series and coupons, the whole
amount then due and payable on such Securities and coupons for principal (and
premium, if any) and interest and Additional Amounts thereon, with interest upon
any overdue principal (and premium, if any) and, to the extent that payment of
such interest shall be legally enforceable, upon any overdue installments of
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interest or Additional Amounts thereon, if any, at the rate or rates borne by or
provided for in such Securities, and, in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, and may prosecute such proceeding to judgment or final decree, and may
enforce the same against the Company or any other obligor upon such Securities
of such series and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon such Securities of such series, wherever situated.
If an Event of Default with respect to Securities of any
series occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of Securities of
such series and any related coupons by such appropriate judicial proceedings as
the Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Securities or
the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Securities of any series
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal of, or premium, if any, or
interest on, the Securities) shall be entitled and empowered, by intervention in
such proceeding or otherwise:
(i) to file and prove a claim for the whole amount,
or such lesser amount as may be provided for in the Securities of such
series, of principal (and premium, if any) and interest and Additional
Amount, if any, owing and unpaid in respect of the Securities and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(ii) to collect and receive any moneys or other
property payable or deliverable on any such claims and to distribute
the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) in any such judicial proceeding is hereby authorized by
each Holder of Securities of such series and coupons to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee and any predecessor Trustee, their agents and counsel, and any other
amounts due the Trustee or any predecessor Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder of
a Security or coupon any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or coupons or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder of a Security or coupon in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities or Coupons. All rights of action and claims under this Indenture or
any of the Securities or coupons may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or coupons or the production
thereof in any proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses,
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disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of Securities and coupons in respect of which
such judgment has been recovered.
SECTION 506. Application of Money Collected. Any money
collected by the Trustee pursuant to this Article shall be applied in the
following order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal (or premium, if any) or
interest and any Additional Amounts, upon presentation of the Securities or
coupons, or both, as the case may be, and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due to the Trustee and
any predecessor Trustee under Section 606;
SECOND: To the payment of the amounts then due and unpaid upon
the Securities and coupons for principal (and premium, if any) and
interest and any Additional Amounts payable, in respect of which or for
the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the aggregate amounts
due and payable on such Securities and coupons for principal (and
premium, if any), interest and Additional Amounts, respectively; and
THIRD: To the payment of the remainder, if any, to the
Company.
SECTION 507. Limitation on Suits. No Holder of any Security of
any series or any related coupon shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities
of that series;
(2) the Holders of not less than a majority in principal
amount of the Outstanding Securities of that series shall have made
written request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities of that
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all such
Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium, if any, Interest and Additional Amounts. Notwithstanding any
other provision in this Indenture, the Holder of any Security or coupon shall
have the right which is absolute and unconditional to receive payment of the
principal of (and premium, if any) and (subject to Sections 305 and 307)
interest on, and any Additional Amounts in respect of, such Security or payment
of such coupon on the respective due dates expressed in such Security or coupon
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
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SECTION 509. Restoration of Rights and Remedies. If the
Trustee or any Holder of a Security or coupon has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders of Securities and coupons shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
SECTION 510. Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities or coupons in the last paragraph of Section
306, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders of Securities or coupons is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 511. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder of any Security or coupon to exercise
any right or remedy accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders of Securities or
coupons, as the case may be.
SECTION 512. Control by Holders of Securities. The Holders of
not less than a majority in principal amount of the Outstanding Securities of
any series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee with respect to the Securities of
such series; provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might expose it
to personal liability or be unduly prejudicial to the Holders of
Securities of such series not joining therein.
SECTION 513. Waiver of Past Defaults. The Holders of not less
than a majority in principal amount of the Outstanding Securities of any series
may on behalf of the Holders of all the Securities of such series and any
related coupons waive any past default hereunder with respect to such series and
its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on or Additional Amounts payable in respect of any Security of
such series or any related coupons, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
SECTION 514. Waiver of Usury, Stay or Extension Laws. The
Company covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any usury, stay or extension law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully
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do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
SECTION 515. Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Security by his acceptance thereof shall
be deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Holder, or group
of Holders, holding in the aggregate more than a majority in principal amount of
the Outstanding Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or interest
on any Security on or after the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on or after the Redemption Date).
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults. Within 90 days after the
occurrence of any default hereunder with respect to the Securities of any
series, the Trustee shall transmit in the manner and to the extent provided in
TIA Section 313(c), notice of such default hereunder known to the Trustee,
unless such default shall have been cured or waived; provided, however, that,
except in the case of a default in the payment of the principal of (or premium,
if any) or interest on or any Additional Amounts or sinking fund installment
with respect to the Securities of such series, the Trustee shall be protected in
withholding such notice if and so long as Responsible Officers of the Trustee in
good faith determine that the withholding of such notice is in the interest of
the Holders of the Securities and coupons of such series; and provided further
that in the case of any default or breach of the character specified in Section
501(4) with respect to the Securities and coupons of such series, no such notice
to Holders shall be given until at least 60 days after the occurrence thereof.
For the purpose of this Section, the term "default" means any event which is, or
after notice or lapse of time or both would become, an Event of Default with
respect to the Securities of such series.
SECTION 602. Certain Rights of Trustee. Subject to the
provisions of TIA Section 315(a) through 315(d):
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, coupon or other paper or document
believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
(other than delivery of any Security, together with any coupons
appertaining thereto, to the Trustee for authentication and delivery
pursuant to Section 303 which shall be sufficiently evidenced as
provided therein) and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting to take any action hereunder,
the Trustee (unless other evidence be herein specifically prescribed)
may, in the absence of bad faith on its part, rely upon an Officers'
Certificate;
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(4) the Trustee may consult with counsel and the advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders of Securities of any series or any
related coupons pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, coupon or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and reasonably believed by it
to be authorized or within the discretion or rights or powers conferred
upon it by this Indenture.
The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers.
SECTION 603. Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Securities, except the
Trustee's certificate of authentication, and in any coupons shall be taken as
the statements of the Company, and neither the Trustee nor any Authenticating
Agent assumes any responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Securities or coupons, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Securities
and perform its obligations hereunder. Neither the Trustee nor the
Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.
SECTION 604. May Hold Securities. The Trustee, any Paying
Agent, Security Registrar, Authenticating Agent or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Securities and coupons and, subject to TIA Sections 310(b) and 311,
may otherwise deal with the Company with the same rights it would have if it
were not Trustee, Paying Agent, Security Registrar, Authenticating Agent or such
other agent.
SECTION 605. Money Held in Trust. Money held by the Trustee in
trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Company.
SECTION 606. Compensation and Reimbursement. The Company
agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
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(2) except as otherwise expressly provided herein, to
reimburse each of the Trustee and any predecessor Trustee upon its
request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify each of the Trustee and any predecessor
Trustee for, and to hold it harmless against, any loss, liability or
expense incurred without negligence or bad faith on its own part,
arising out of or in connection with the acceptance or administration
of the trust or trusts hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(6) or Section
501(7), the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable Federal or state bankruptcy,
insolvency or other similar law.
As security for the performance of the obligations of the
Company under this Section, the Trustee shall have a lien prior to the
Securities upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the payment of principal of (or premium, if any)
or interest on particular Securities or coupons.
The provisions of this Section shall survive the termination
of this Indenture.
SECTION 607. Corporate Trustee Required; Eligibility;
Conflicting Interests. There shall at all times be a Trustee hereunder which
shall be eligible to act as Trustee under TIA Section 310(a)(1) and shall have a
combined capital and surplus of at least $50,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or the
requirements of Federal, state, Territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 609.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series delivered to the Trustee and to the
Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
TIA Section 310(b) after written request therefor by the Company or by
any Holder of a Security who has been a bona fide Holder of a Security
for at least six months, or
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(2) the Trustee shall cease to be eligible under Section
607(a) and shall fail to resign after written request therefor by the
Company or by any Holder of a Security who has been a bona fide Holder
of a Security for at least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by or pursuant to a Board Resolution may
remove the Trustee and appoint a successor Trustee with respect to all
Securities, or (ii) subject to TIA Section 315(e), any Holder of a Security who
has been a bona fide Holder of a Security for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to all Securities and
the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any reason with respect to the Securities of one or more series, the Company, by
or pursuant to a Board Resolution, shall promptly appoint a successor Trustee or
Trustees with respect to the Securities of that or those series (it being
understood that any such successor Trustee may be appointed with respect to the
Securities of one or more or all of such series and that at any time there shall
be only one Trustee with respect to the Securities of any particular series).
If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to the Securities
of any series shall be appointed by Act of the Holders of a majority in
principal amount of the Outstanding Securities of such series delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or
the Holders of Securities and accepted appointment in the manner hereinafter
provided any Holder of a Security who has been a bona fide Holder of a Security
of such series for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to Securities of such series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
in the manner provided for notices to the Holders of Securities in Section 106.
Each notice shall include the name of the successor Trustee with respect to the
Securities of such series and the address of its Corporate Trust Office.
SECTION 609. Acceptance of Appointment by Successor. (a) In
case of the appointment hereunder of a successor Trustee with respect to all
Securities, every such successor Trustee shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, upon request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee, and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder, subject nevertheless to its claim, if any,
provided for in Section 606.
(b) In case of the appointment hereunder of a successor
Trustee with respect to the Securities of one or more (but not all) series, the
Company, the retiring Trustee and each successor Trustee with respect to the
Securities of one or more series shall execute and deliver an indenture
supplemental hereto, pursuant to Article Nine hereof, wherein each successor
Trustee shall accept such appointment and which (1) shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, each successor Trustee all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series to which
the appointment of such successor Trustee relates, (2) if the retiring Trustee
is not retiring with respect to all Securities, shall contain such
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provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series as to which the retiring Trustee is not
retiring shall continue to be vested in the retiring Trustee, and (3) shall add
to or change any of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-trustees of the same
trust and that each such Trustee shall be trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustee; and upon the execution and delivery of such supplemental indenture
the resignation or removal of the retiring Trustee shall become effective to the
extent provided therein and each such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates; but, on
request of the Company or any successor Trustee, such retiring Trustee shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder with respect to the Securities of
that or those series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company
shall execute any and all instruments for more fully and certainly vesting in,
and confirming to such successor Trustee all such rights, powers and trusts
referred to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless
at the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession
to Business. Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder;
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities or coupons shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities or coupons so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities or coupons. In case any Securities or coupons
shall not have been authenticated by such predecessor Trustee, any such
successor Trustee may authenticate and deliver such Securities or coupons, in
either its own name or that of its predecessor Trustee, with the full force and
effect which this Indenture provides for the certificate of authentication of
the Trustee.
SECTION 611. Appointment of Authentication Agent. At any time
when any of the Securities remain Outstanding, the Trustee may appoint an
Authenticating Agent or Agents with respect to one or more series of Securities
which shall be authorized to act on behalf of the Trustee to authenticate
Securities of such series issued upon exchange, registration of transfer or
partial redemption or repayment thereof, and Securities so authenticated shall
be entitled to the benefits of this Indenture and shall be valid and obligatory
for all purposes as if authenticated by the Trustee hereunder. Any such
appointment shall be evidenced by an instrument in writing signed by a
Responsible Officer of the Trustee, a copy of which instrument shall be promptly
furnished to the Company. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and, except as may otherwise be provided pursuant to Section 301, shall
at all times be a bank or trust company or corporation organized and doing
business and in good standing under the laws of the United States of America or
of any State or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by federal or state
authorities. If such Authenticating Agent publishes reports of condition at
least annually, pursuant to law or the requirements of the aforesaid supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In case at any time an
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Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent for any series of Securities may at
any time resign by giving written notice of resignation to the Trustee for such
series and to the Company. The Trustee for any series of Securities may at any
time terminate the agency of an Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee for such series may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve in the manner set forth in
Section 106. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from
time to time reasonable compensation including reimbursement of its reasonable
expenses for its services under this Section.
If an appointment with respect to one or more series is made
pursuant to this Section, the Securities of such series may have endorsed
thereon, in addition to or in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication substantially in the
following form:
This is one of the Securities of the series
designated therein referred to in the within-mentioned
Indenture.
-----------------------------------
as Trustee
By:_________________________________
as Authenticating Agent
By:__________________________________
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Securities or coupons, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any Authenticating Agent nor any Paying Agent nor any Security Registrar shall
be held accountable by reason of the disclosure of any information as to the
names and addresses of the Holders of Securities in accordance
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with TIA Section 312, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under TIA Section 312(b).
SECTION 702. Reports by Trustee. Within 60 days after May 15
of each year commencing with the first May 15 after the first issuance of
Securities pursuant to this Indenture, the Trustee shall transmit by mail to all
Holders of Securities as provided in TIA Section 313(c) a brief report dated as
of such May 15 if required by TIA Section 313(a).
SECTION 703. Reports by Company. The Company will:
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Company may
be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934; or, if the
Company is not required to file information, documents or reports
pursuant to either of such Sections, then it will file with the Trustee
and the Commission, in accordance with rules and regulations prescribed
from time to time by the Commission, such of the supplementary and
periodic information, documents and reports which may be required
pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(2) file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations; and
(3) transmit by mail to the Holders of Securities, within 30
days after the filing thereof with the Trustee, in the manner and to
the extent provided in TIA Section 313(c), such summaries of any
information, documents and reports required to be filed by the Company
pursuant to paragraphs (1) and (2) of this section as may be required
by rules and regulations prescribed from time to time by the
Commission.
SECTION 704. Company to Furnish to Trustee Names and Addresses
of Holders. The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not later than 25 days after the Regular
Record Date for interest for each series of Securities, a list, in such form as
the Trustee may reasonably require, of the names and addresses of the Holders of
Registered Securities of such series as of such Regular Record Date, or if there
is no Regular Record Date for interest for such series of Securities,
semiannually, upon such dates as are set forth in the Board Resolution or
indenture supplemental hereto authorizing such series, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the time
such list is furnished;
provided, however, that, so long as the Trustee is the Security Registrar, no
such list shall be required to be furnished.
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE
SECTION 801. Consolidations and Mergers of Company and Sales,
Leases and Conveyances Permitted Subject to Certain Conditions. The Company may
consolidate with, or sell, lease or convey all or substantially all of its
assets to, or merge with or into any other corporation; provided that in any
such case, (i) either the Company
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shall be the continuing corporation, or the successor corporation shall be a
corporation organized and existing under the laws of the United States or a
State thereof and such successor corporation shall expressly assume the due and
punctual payment of the principal of (and premium, if any) and any interest
(including all Additional Amounts, if any, payable pursuant to Section 1007) on
all of the Securities, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed by the Company by supplemental indenture, complying
with Article Nine hereof, satisfactory to the Trustee, executed and delivered to
the Trustee by such corporation and (ii) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Company or any Subsidiary as a result thereof as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of Default,
and no event which, after notice or the lapse of time, or both, would become an
Event of Default, shall have occurred and be continuing.
SECTION 802. Rights and Duties of Successor Corporation. In
case of any such consolidation, merger, sale, lease or conveyance and upon any
such assumption by the successor corporation, such successor corporation shall
succeed to and be substituted for the Company, with the same effect as if it had
been named herein as the party of the first part, and the predecessor
corporation, except in the event of a lease, shall be relieved of any further
obligation under this Indenture and the Securities. Such successor corporation
thereupon may cause to be signed, and may issue either in its own name or in the
name of the Company, any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor corporation, instead of the
Company, and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
Securities which previously shall have been signed and delivered by the officers
of the Company to the Trustee for authentication, and any Securities which such
successor corporation thereafter shall cause to be signed and delivered to the
Trustee for that purpose. All the Securities so issued shall in all respects
have the same legal rank and benefit under this Indenture as the Securities
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Securities had been issued at the date of the execution
hereof.
In case of any such consolidation, merger, sale, lease or
conveyance, such changes in phraseology and form (but not in substance) may be
made in the Securities thereafter to be issued as may be appropriate.
SECTION 803. Officers' Certificate and Opinion of Counsel. Any
consolidation, merger, sale, lease or conveyance permitted under Section 801 is
also subject to the condition that the Trustee receive an Officers' Certificate
and an Opinion of Counsel to the effect that any such consolidation, merger,
sale, lease or conveyance, and the assumption of the Company's obligations under
this Indenture by any successor corporation, complies with the provisions of
this Article and that all conditions precedent herein provided for relating to
such transaction have been complied with.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of
Holders. Without the consent of any Holders of Securities or coupons, the
Company, when authorized by or pursuant to a Board Resolution, and the Trustee,
at any time and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any of the
following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Securities contained; or
(2) to add to the covenants of the Company for the benefit of
the Holders of all or any series of Securities (and if such covenants
are to be for the benefit of less than all series of Securities,
stating that such covenants are expressly being included solely for the
benefit of such series) or to surrender any right or power herein
conferred upon the Company; or
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(3) to add any additional Events of Default for the benefit of
the Holders of all or any series of Securities (and if such Events of
Default are to be for the benefit of less than all series of
Securities, stating that such Events of Default are expressly being
included solely for the benefit of such series); provided, however,
that in respect of any such additional Events of Default such
supplemental indenture may provide for a particular period of grace
after default (which period may be shorter or longer than that allowed
in the case of other defaults) or may provide for an immediate
enforcement upon such default or may limit the remedies available to
the Trustee upon such default or may limit the right of the Holders of
a majority in aggregate principal amount of that or those series of
Securities to which such additional Events of Default apply to waive
such default; or
(4) to add to or change any of the provisions of this
Indenture to provide that Bearer Securities may be registrable as to
principal, to change or eliminate any restrictions on the payment of
principal of or any premium or interest on Bearer Securities, to permit
Bearer Securities to be issued in exchange for Registered Securities,
to permit Bearer Securities to be issued in exchange for Bearer
Securities of other authorized denominations or to permit or facilitate
the issuance of Securities in uncertificated form; provided, that any
such action shall not adversely affect the interests of the Holders of
Securities of any series or any related coupons in any material
respect; or
(5) to change or eliminate any of the provisions of this
Indenture; provided that any such change or elimination shall become
effective only when there is no Security Outstanding of any series
created prior to the execution of such supplemental indenture which is
entitled to the benefit of such provision; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any series
and any related coupons as permitted by Sections 201 and 301, including
the provisions and procedures relating to Securities convertible into
Common Shares or Preferred Shares of the Company, as the case may be;
or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee; or
(9) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture which shall not be
inconsistent with the provisions of this Indenture; provided such
provisions shall not adversely affect the interests of the Holders of
Securities of any series or any related coupons in any material
respect; or
(10) to supplement any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the
defeasance and discharge of any series of Securities pursuant to
Sections 401, 1402 and 1403; provided that any such action shall not
adversely affect the interests of the Holders of Securities of such
series and any related coupons or any other series of Securities in any
material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal amount
of all Outstanding Securities affected by such supplemental indenture, by Act of
said Holders delivered to the Company and the Trustee, the Company, when
authorized by or pursuant to a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Securities and any related coupons under this Indenture; provided, however, that
no such supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby:
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(1) change the Stated Maturity of the principal of (or
premium, if any, on) or any installment of principal of or interest on,
any Security; or reduce the principal amount thereof or the rate or
amount of interest thereon or any Additional Amounts payable in respect
thereof, or any premium payable upon the redemption thereof, or change
any obligation of the Company to pay Additional Amounts pursuant to
Section 1007 (except as contemplated by Section 801(i) and permitted by
Section 901(1)), or reduce the amount of the principal of an Original
Issue Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section
502 or the amount thereof provable in bankruptcy pursuant to Section
504, or adversely affect any right of repayment at the option of the
Holder of any Security, or change any Place of Payment where, or the
currency or currencies, currency unit or units or composite currency or
currencies in which, any Security or any premium or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption or repayment at the option of the
Holder, on or after the Redemption Date or the Repayment Date, as the
case may be), or
(2) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver with respect to such series (or
compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this
Indenture, or reduce the requirements of Section 1504 for quorum or
voting, or
(3) modify any of the provisions of this Section, Section 513
or Section 1008, except to increase the required percentage to effect
such action or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Security affected thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
A supplemental indenture which changes or eliminates any
covenant or other provision of this Indenture which has expressly been included
solely for the benefit of one or more particular series of Securities, or which
modifies the rights of the Holders of Securities of such series with respect to
such covenant or other provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
SECTION 903. Execution of Supplemental Indentures. In
executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modification thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and shall
be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article, this Indenture shall
be modified in accordance therewith and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder and of any
coupon appertaining thereto shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental
Indentures. Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall,
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in
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the opinion of the Trustee and the Company, to any such supplemental indenture
may be prepared and executed by the Company and authenticated and delivered by
the Trustee in exchange for Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, Interest
and Additional Amounts. The Company covenants and agrees for the benefit of the
Holders of each series of Securities that it will duly and punctually pay the
principal of (and premium, if any) and interest on and any Additional Amounts
payable in respect of the Securities of that series in accordance with the terms
of such series of Securities, any coupons appertaining thereto and this
Indenture. Unless otherwise specified as contemplated by Section 301 with
respect to any series of Securities, any interest due on and any Additional
Amounts payable in respect of Bearer Securities on or before Maturity, other
than Additional Amounts, if any, payable as provided in Section 1007 in respect
of principal of (or premium, if any, on) such a Security, shall be payable only
upon presentation and surrender of the several coupons for such interest
installments as are evidenced thereby as they severally mature. Unless otherwise
specified with respect to Securities of any series pursuant to Section 301, at
the option of the Company, all payments of principal may be paid by check to the
registered Holder of the Registered Security or other person entitled thereto
against surrender of such Security.
SECTION 1002. Maintenance of Office or Agency. If Securities
of a series are issuable only as Registered Securities, the Company shall
maintain in each Place of Payment for any series of Securities an office or
agency where Securities of that series may be presented or surrendered for
payment or conversion, where Securities of that series may be surrendered for
registration of transfer or exchange, and where notices and demands to or upon
the Company in respect of the Securities of that series and this Indenture may
be served. If Securities of a series are issuable as Bearer Securities, the
Company will maintain: (A) in the Borough of Manhattan, The City of New York, an
office or agency where any Registered Securities of that series may be presented
or surrendered for payment or conversion, where any Registered Securities of
that series may be surrendered for registration of transfer, where Securities of
that series may be surrendered for exchange, where notices and demands to or
upon the Company in respect of the Securities of that series and this Indenture
may be served and where Bearer Securities of that series and related coupons may
be presented or surrendered for payment or conversion in the circumstances
described in the following paragraph (and not otherwise); (B) subject to any
laws or regulations applicable thereto, in a Place of Payment for that series
which is located outside the United States, an office or agency where Securities
of that series and related coupons may be presented and surrendered for payment
(including payment of any Additional Amounts payable on Securities of that
series pursuant to Section 1007) or conversion; provided, however, that if the
Securities of that series are listed on the Luxembourg Stock Exchange or any
other stock exchange located outside the United States and such stock exchange
shall so require, the Company will maintain a Paying Agent for the Securities of
that series in Luxembourg or any other required city located outside the United
States, as the case may be, so long as the Securities of that series are listed
on such exchange; and (C) subject to any laws or regulations applicable thereto,
in a Place of Payment for that series located outside the United States an
office or agency where any Registered Securities of that series may be
surrendered for registration of transfer, where Securities of that series may be
surrendered for exchange and where notices and demands to or upon the Company in
respect of the Securities of that series and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of each such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, except that Bearer Securities of that series and the related coupons
may be presented and surrendered for payment (including payment of any
Additional Amounts payable on Bearer Securities of that series pursuant to
Section 1007) or conversion at the offices specified in the Security in London,
England, and the Company hereby appoints the same as its agent to receive such
respective presentations, surrenders, notices and demands, and the Company
hereby appoints the Trustee its agent to receive all such presentations,
surrenders, notices and demands.
Unless otherwise specified with respect to any Securities
pursuant to Section 301, no payment of principal, premium or interest on or
Additional Amounts in respect of Bearer Securities shall be made at any office
or agency of the Company in the United States or by check mailed to any address
in the United States or by transfer to an
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account maintained with a bank located in the United States; provided, however,
that, if the Securities of a series are payable in Dollars, payment of principal
of and any premium and interest on any Bearer Security (including any Additional
Amounts payable on Securities of such series pursuant to Section 1007) shall be
made at the office of the Company's Paying Agent in the City of Boston, if (but
only if) payment in Dollars of the full amount of such principal, premium,
interest or Additional Amounts, as the case may be, at all offices or agencies
outside the United States maintained for such purpose by the Company in
accordance with this Indenture, is illegal or effectively precluded by exchange
controls or other similar restrictions.
The Company may from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all of such purposes, and may from time to time
rescind such designation; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in accordance with the requirements set forth above for
Securities of any series for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency. Unless otherwise specified with
respect to any Securities pursuant to Section 301 with respect to a series of
Securities, the Company hereby designates as a Place of Payment for each series
of Securities the office or agency of the Company in the City of Boston, and
initially appoints the Trustee at its Corporate Trust Office as Paying Agent in
such city and as its agent to receive all such presentations, surrenders,
notices and demands.
Unless otherwise specified with respect to any Securities
pursuant to Section 302, if and so long as the Securities of any series (i) are
denominated in a Foreign Currency or (ii) may be payable in a Foreign Currency
or so long as it is required under any other provision of this Indenture, then
the Company will maintain with respect to each such series of Securities, or as
so required, at least one exchange rate agent.
SECTION 1003. Money for Securities Payments to Be Held in
Trust. If the Company shall at any time act as its own Paying Agent with respect
to any series of any Securities and any related coupons, it will, by no later
than 11:00 am (Boston time) on each due date of the principal of (and premium,
if any), or interest on or Additional Amounts in respect of, any of the
Securities of that series, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum in the currency or currencies, currency unit or
units or composite currency or currencies in which the Securities of such series
are payable (except as otherwise specified pursuant to Section 301 for the
Securities of such series) sufficient to pay the principal (and premium, if any)
or interest or Additional Amounts so becoming due until such sums shall be paid
to such Persons or otherwise disposed of as herein provided, and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for
any series of Securities and any related coupons, it will, on or before each due
date of the principal of (and premium, if any), or interest on or Additional
Amounts in respect of, any Securities of that series, deposit with a Paying
Agent a sum (in the currency or currencies, currency unit or units or composite
currency or currencies described in the preceding paragraph) sufficient to pay
the principal (and premium, if any) or interest or Additional Amounts, so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest or Additional Amounts and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will
(1) hold all sums held by it for the payment of principal of
(and premium, if any) or interest on Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities) in the making of any such
payment of principal (and premium, if any) or interest; and
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(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Except as otherwise provided in the Securities of any series,
any money deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the principal of (and premium, if any) or
interest on, or any Additional Amounts in respect of, any Security of any series
and remaining unclaimed for two years after such principal (and premium, if
any), interest or Additional Amounts has become due and payable shall be paid to
the Company upon Company Request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment of such
principal of (and premium, if any) or interest on, or any Additional Amounts in
respect of, such Security, without interest thereon, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in an
Authorized Newspaper, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 1004. Existence. Subject to Article Eight, the Company
will do or cause to be done all things necessary to preserve and keep in full
force and effect its existence, rights (declaration and statutory) and
franchises; provided, however, that the Company shall not be required to
preserve any right or franchise if the Board shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company.
SECTION 1005. Provision of Financial Information. Whether or
not the Company is subject to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, the Company will, to the extent permitted under the
Securities Exchange Act of 1934, as amended, file with the Commission the annual
reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Section 13 or 15(d) (the
"Financial Statements") if the Company were so subject, such documents to be
filed with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been required so to file such
documents if the Company were so subject.
The Company will also in any event (x) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders, as their names and
addresses appear in the Security Register, without cost to such Holders copies
of the annual reports and quarterly reports which the Company would have been
required to file with the Commission pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, if the Company were subject to such
Sections, and (ii) file with the Trustee copies of the annual reports, quarterly
reports and other documents which the Company would have been required to file
with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, if the Company were subject to such Sections and (y) if
filing such documents by the Company with the Commission is not permitted under
the Securities Exchange Act of 1934, as amended, promptly upon written request
and payment of the reasonable cost of duplication and delivery, supply copies of
such documents to any prospective Holder.
SECTION 1006. Statement as to Compliance. The Company will
deliver to the Trustee, within 120 days after the end of each fiscal year, a
brief certificate from the principal executive officer, principal financial
officer or principal accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants under this Indenture and,
in the event of any noncompliance, specifying such noncompliance and the nature
and status thereof. For purposes of this Section 1006, such compliance shall be
determined without regard to any period of grace or requirement of notice under
this Indenture.
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SECTION 1007. Additional Amounts. If any Securities of a
series provide for the payment of Additional Amounts, the Company will pay to
the Holder of any Security of such series or any coupon appertaining thereto
Additional Amounts as may be specified as contemplated by Section 301. Whenever
in this Indenture there is mentioned, in any context except in the case of
Section 502(1), the payment of the principal of or any premium or interest on,
or in respect of, any Security of any series or payment of any related coupon or
the net proceeds received on the sale or exchange of any Security of any series,
such mention shall be deemed to include mention of the payment of Additional
Amounts provided by the terms of such series established pursuant to Section 301
to the extent that, in such context, Additional Amounts are, were or would be
payable in respect thereof pursuant to such terms and express mention of the
payment of Additional Amounts (if applicable) in any provisions hereof shall not
be construed as excluding Additional Amounts in those provisions hereof where
such express mention is not made.
Except as otherwise specified as contemplated by Section 301,
if the Securities of a series provide for the payment of Additional Amounts, at
least 20 days prior to the first Interest Payment Date with respect to that
series of Securities (or if the Securities of that series will not bear interest
prior to Maturity, the first day on which a payment of principal and any premium
is made), and at least 10 days prior to each date of payment of principal and
any premium or interest if there has been any change with respect to the matters
set forth in the below-mentioned Officers' Certificate, the Company will furnish
the Trustee and the Company's principal Paying Agent or Paying Agents, if other
than the Trustee, with an Officers' Certificate instructing the Trustee and such
Paying Agent or Paying Agents whether such payment of principal of and any
premium or interest on the Securities of that series shall be made to Holders of
Securities of that series or any related coupons who are not United States
persons without withholding for or on account of any tax, assessment or other
governmental charge described in the Securities of the series. If any such
withholding shall be required, then such Officers' Certificate shall specify by
country the amount, if any, required to be withheld on such payments to such
Holders of Securities of that series or related coupons and the Company will pay
to the Trustee or such Paying Agent the Additional Amounts required by the terms
of such Securities. In the event that the Trustee or any Paying Agent, as the
case may be, shall not so receive the above-mentioned certificate, then the
Trustee or such Paying Agent shall be entitled (i) to assume that no such
withholding or deduction is required with respect to any payment of principal or
interest with respect to any Securities of a series or related coupons until it
shall have received a certificate advising otherwise and (ii) to make all
payments of principal and interest with respect to the Securities of a series or
related coupons without withholding or deductions until otherwise advised. The
Company covenants to indemnify the Trustee and any Paying Agent for, and to hold
them harmless against, any loss, liability or expense reasonably incurred
without negligence or bad faith on their part arising out of or in connection
with actions taken or omitted by any of them or in reliance on any Officers'
Certificate furnished pursuant to this Section or in reliance on the Company's
not furnishing such an Officers' Certificate.
SECTION 1008. Waiver of Certain Covenants. The Company may
omit in any particular instance to comply with any term, provision or condition
set forth in Sections 1004 or 1005, if before or after the time for such
compliance the Holders of at least a majority in principal amount of all
outstanding Securities of such series, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such term, provision or condition shall remain in full force
and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article. Securities of any
series which are redeemable before their Stated Maturity shall be redeemable in
accordance with their terms and (except as otherwise specified as contemplated
by Section 301 for Securities of any series) in accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee. The
election of the Company to redeem any Securities shall be evidenced by or
pursuant to a Board Resolution. In case of any redemption at the election of the
Company of less than all of the Securities of any series, the Company shall, at
least 45 days prior to the giving of the
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notice of redemption in Section 1104 (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Securities of such series to be redeemed. In the case of
any redemption of Securities prior to the expiration of any restriction on such
redemption provided in the terms of such Securities or elsewhere in this
Indenture, the Company shall furnish the Trustee with an Officers' Certificate
evidencing compliance with such restriction.
SECTION 1103. Selection by Trustee of Securities to Be
Redeemed. If less than all the Securities of any series issued on the same day
with the same terms are to be redeemed, the particular Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption Date by the
Trustee, from the Outstanding Securities of such series issued on such date with
the same terms not previously called for redemption, by such method as the
Trustee shall deem fair and appropriate and which may provide for the selection
for redemption of portions (equal to the minimum authorized denomination for
Securities of that series or any integral multiple thereof) of the principal
amount of Securities of such series of a denomination larger than the minimum
authorized denomination for Securities of that series.
The Trustee shall promptly notify the Company and the Security
Registrar (if other than itself) in writing of the Securities selected for
redemption and, in the case of any Securities selected for partial redemption,
the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities
shall relate, in the case of any Security redeemed or to be redeemed only in
part, to the portion of the principal amount of such Security which has been or
is to be redeemed.
SECTION 1104. Notice of Redemption. Notice of redemption shall
be given in the manner provided in Section 106 and as may be further specified
in an indenture supplemental hereto, not less than 30 days nor more than 60 days
prior to the Redemption Date, unless a shorter period is specified by the terms
of such series established pursuant to Section 301, to each Holder of Securities
to be redeemed, but failure to give such notice in the manner herein provided to
the Holder of any Security designated for redemption as a whole or in part, or
any defect in the notice to any such Holder, shall not affect the validity of
the proceedings for the redemption of any other such Security or portion
thereof.
Any notice that is mailed to the Holders of Registered
Securities in the manner herein provided shall be conclusively presumed to have
been duly given, whether or not such Holders receive such notice.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price, accrued interest to the Redemption
Date payable as provided in Section 1106, if any, and Additional
Amounts, if any,
(3) if less than all Outstanding Securities of any series are
to be redeemed, the identification (and, in the case of partial
redemption, the principal amount) of the particular Security or
Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the
notice which relates to such Security shall state that on and after the
Redemption Date, upon surrender of such Security, the holder will
receive, without charge, a new Security or Securities of authorized
denominations for the principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price and
accrued interest to the Redemption Date payable as provided in Section
1106, if any, will become due and payable upon each such Security, or
the portion thereof, to be redeemed and, if applicable, that interest
thereon shall cease to accrue on and after said date,
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(6) the Place or Places of Payment where such Securities,
together in the case of Bearer Securities with all coupons appertaining
thereto, if any, maturing after the Redemption Date, are to be
surrendered for payment of the Redemption Price and accrued interest,
if any, or for conversion,
(7) that the redemption is for a sinking fund, if such is the
case,
(8) that unless otherwise specified in such notice, Bearer
Securities of any series, if any, surrendered for redemption must be
accompanied by all coupons maturing subsequent to the Redemption Date
or the amount of any such missing coupon or coupons will be deducted
from the Redemption Price, unless security or indemnity satisfactory to
the Company, the Trustee for such series and any Paying Agent is
furnished,
(9) if Bearer Securities of any series are to be
redeemed and any Registered Securities of such series are not to be
redeemed, and if such Bearer Securities may be exchanged for Registered
Securities not subject to redemption on this Redemption Date pursuant
to Section 305 or otherwise, the last date, as determined by the
Company, on which such exchanges may be made,
(10) the CUSIP number of such Security, if any, and
(11) if applicable, that a Holder of Securities who desires to
convert Securities for redemption must satisfy the requirements for
conversion contained in such Securities, the then existing conversion
price or rate, and the date and time when the option to convert shall
expire.
Notice of redemption of Securities to be redeemed shall be
given by the Company or, at the Company's request, by the Trustee in the name
and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price. On or prior to
11:00 am (Boston time) on any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, which it may not do in the case of a sinking fund payment under
Article Twelve, segregate and hold in trust as provided in Section 1003) an
amount of money in the currency or currencies, currency unit or units or
composite currency or currencies in which the Securities of such series are
payable (except as otherwise specified pursuant to Section 301 for the
Securities of such series) sufficient to pay on the Redemption Date the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on, all the Securities or portions thereof which
are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified in the currency or currencies, currency unit or units or
composite currency or currencies in which the Securities of such series are
payable (except as otherwise specified pursuant to Section 301 for the
Securities of such series) (together with accrued interest, if any, to the
Redemption Date), and from and after such date (unless the Company shall default
in the payment of the Redemption Price and accrued interest) such Securities
shall, if the same were interest-bearing, cease to bear interest and the coupons
for such interest appertaining to any Bearer Securities so to be redeemed,
except to the extent provided below, shall be void. Upon surrender of any such
Security for redemption in accordance with said notice, together with all
coupons, if any, appertaining thereto maturing after the Redemption Date, such
Security shall be paid by the Company at the Redemption Price, together with
accrued interest, if any, to the Redemption Date; provided, however, that
installments of interest on Bearer Securities whose Stated Maturity is on or
prior to the Redemption Date shall be payable only at an office or agency
located outside the United States (except as otherwise provided in Section 1002)
and, unless otherwise specified as contemplated by Section 301, only upon
presentation and surrender of coupons for such interest; and provided further
that, except as otherwise provided with respect to Securities convertible into
Common Shares or Preferred Shares of the Company, installments of interest on
Registered Securities whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
307.
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If any Bearer Security surrendered for redemption shall not be
accompanied by all appurtenant coupons maturing after the Redemption Date, such
Security may be paid after deducting from the Redemption Price an amount equal
to the face amount of all such missing coupons, or the surrender of such missing
coupon or coupons may be waived by the Company and the Trustee if there be
furnished to them such security or indemnity as they may require to save each of
them and any Paying Agent harmless. If thereafter the Holder of such Security
shall surrender to the Trustee or any Paying Agent any such missing coupon in
respect of which a deduction shall have been made from the Redemption Price,
such Holder shall be entitled to receive the amount so deducted; provided,
however, that interest represented by coupons shall be payable only at an office
or agency located outside the United States (except as otherwise provided in
Section 1002) and, unless otherwise specified as contemplated by Section 301,
only upon presentation and surrender of those coupons.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate borne by
the Security.
SECTION 1107. Securities Redeemed in Part. Any Registered
Security which is to be redeemed only in part (pursuant to the provisions of
this Article or of Article Twelve) shall be surrendered at a Place of Payment
therefor (with, if the Company or the Trustee so requires, due endorsement by,
or a written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing) and the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge a new Security or
Securities of the same series, of any authorized denomination as requested by
such Holder in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article. The provisions of this
Article shall be applicable to any sinking fund for the retirement of Securities
of a series except as otherwise specified as contemplated by Section 301 for
Securities of such series.
The minimum amount of any sinking fund payment provided for by
the terms of Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any payment in excess of such minimum amount provided
for by the terms of such Securities of any series is herein referred to as an
"optional sinking fund payment". If provided for by the terms of any Securities
of any series, the cash amount of any mandatory sinking fund payment may be
subject to reduction as provided in Section 1202. Each sinking fund payment
shall be applied to the redemption of Securities of any series as provided for
by the terms of Securities of such series.
SECTION 1202. Satisfaction of Sinking Fund Payments with
Securities. The Company may, in satisfaction of all or any part of any mandatory
sinking fund payment with respect to the Securities of a series, (1) deliver
Outstanding Securities of such series (other than any previously called for
redemption) together in the case of any Bearer Securities of such series with
all unmatured coupons appertaining thereto and (2) apply as a credit Securities
of such series which have been redeemed either at the election of the Company
pursuant to the terms of such Securities or through the application of permitted
optional sinking fund payments pursuant to the terms of such Securities, as
provided for by the terms of such Securities, or which have otherwise been
acquired by the Company; provided that such Securities so delivered or applied
as a credit have not been previously so credited. Such Securities shall be
received and credited for such purpose by the Trustee at the applicable
Redemption Price specified in such Securities for redemption through operation
of the sinking fund and the amount of such mandatory sinking fund payment shall
be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund. Not
less than 60 days prior to each sinking fund payment date for Securities of any
series, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing mandatory sinking fund payment for
that series pursuant to the terms of that
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series, the portion thereof, if any, which is to be satisfied by payment of cash
in the currency or currencies, currency unit or units or composite currency or
currencies in which the Securities of such series are payable (except as
otherwise specified pursuant to Section 301 for the Securities of such series)
and the portion thereof, if any, which is to be satisfied by delivering and
crediting Securities of that series pursuant to Section 1202, and the optional
amount, if any, to be added in cash to the next ensuing mandatory sinking fund
payment, and will also deliver to the Trustee any Securities to be so delivered
and credited. If such Officers' Certificate shall specify an optional amount to
be added in cash to the next ensuing mandatory sinking fund payment, the Company
shall thereupon be obligated to pay the amount therein specified. Not less than
30 days before each such sinking fund payment date the Trustee shall select the
Securities to be redeemed upon such sinking fund payment date in the manner
specified in Section 1103 and cause notice of the redemption thereof to be given
in the name of and at the expense of the Company in the manner provided in
Section 1104. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Sections
1106 and 1107.
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1301. Applicability of Article. Repayment of
Securities of any series before their Stated Maturity at the option of Holders
thereof shall be made in accordance with the terms of such Securities, if any,
and (except as otherwise specified by the terms of such series established
pursuant to Section 301) in accordance with this Article.
SECTION 1302. Repayment of Securities. Securities of any
series subject to repayment in whole or in part at the option of the Holders
thereof will, unless otherwise provided in the terms of such Securities, be
repaid at a price equal to the principal amount thereof, together with interest,
if any, thereon accrued to the Repayment Date specified in or pursuant to the
terms of such Securities. The Company covenants that on or before the Repayment
Date it will deposit with the Trustee or with a Paying Agent (or, if the Company
is acting as its own Paying Agent, segregate and hold in trust as provided in
Section 1003) an amount of money in the currency or currencies, currency unit or
units or composite currency or currencies in which the Securities of such series
are payable (except as otherwise specified pursuant to Section 301 for the
Securities of such series) sufficient to pay the principal (or, if so provided
by the terms of the Securities of any series, a percentage of the principal) of,
and (except if the Repayment Date shall be an Interest Payment Date) accrued
interest on, all the Securities or portions thereof, as the case may be, to be
repaid on such date.
SECTION 1303. Exercise of Option. Securities of any series
subject to repayment at the option of the Holders thereof will contain an
"Option to Elect Repayment" form on the reverse of such Securities. In order for
any Security to be repaid at the option of the Holder, the Trustee must receive
at the Place of Payment therefor specified in the terms of such Security (or at
such other place or places of which the Company shall from time to time notify
the Holders of such Securities) not earlier than 60 days nor later than 30 days
prior to the Repayment Date (1) the Security so providing for such repayment
together with the "Option to Elect Repayment" form on the reverse thereof duly
completed by the Holder or by the Holder's attorney duly authorized in writing
or (2) a telegram, telex, facsimile transmission or a letter from a member of a
national securities exchange, or the National Association of Securities Dealers,
Inc. ("NASD"), or a commercial bank or trust company in the United States
setting forth the name of the Holder of the Security, the principal amount of
the Security, the principal amount of the Security to be repaid, the CUSIP
number, if any, or a description of the tenor and terms of the Security, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that the Security to be repaid, together with the duly completed form
entitled "Option to Elect Repayment" on the reverse of the Security, will be
received by the Trustee not later than the fifth Business Day after the date of
such telegram, telex, facsimile transmission or letter; provided, however, that
such telegram, telex, facsimile transmission or letter shall only be effective
if such Security and form duly completed are received by the Trustee by such
fifth Business Day. If less than the entire principal amount of such Security is
to be repaid in accordance with the terms of such Security, the principal amount
of such Security to be repaid, in increments of the minimum denomination for
Securities of such series, and the denomination or denominations of the Security
or Securities to be issued to the Holder for the portion of the principal amount
of such Security surrendered that is not to be repaid, must be specified. The
principal amount of any security providing for repayment at the option of the
Holder
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thereof may not be repaid in part if, following such repayment, the unpaid
principal amount of such Security would be less than the minimum authorized
denomination of Securities of the series of which such Security to be repaid is
a part. Except as otherwise may be provided by the terms of any Security
providing for repayment at the option of the Holder thereof, exercise of the
repayment option by the Holder shall be irrevocable unless waived by the
Company.
SECTION 1304. When Securities Presented for Repayment Become
Due and Payable. If Securities of any series providing for repayment at the
option of the Holders thereof shall have been surrendered as provided in this
Article and as provided by or pursuant to the terms of such Securities, such
Securities or the portions thereof, as the case may be, to be repaid shall
become due and payable and shall be paid by the Company on the Repayment Date
therein specified, and on and after such Repayment Date (unless the Company
shall default in the payment of such Securities on such Repayment Date) such
Securities shall, if the same were interest-bearing, cease to bear interest and
the coupons for such interest appertaining to any Bearer Securities so to be
repaid, except to the extent provided below, shall be void. Upon surrender of
any such Security for repayment in accordance with such provisions, together
with all coupons, if any, appertaining thereto maturing after the Repayment
Date, the principal amount of such Security so to be repaid shall be paid by the
Company, together with accrued interest, if any, to the Repayment Date;
provided, however, that coupons whose Stated Maturity is on or prior to the
Repayment Date shall be payable only at an office or agency located outside the
United States (except as otherwise provided in Section 1002) and, unless
otherwise specified pursuant to Section 301, only upon presentation and
surrender of such coupons; and provided further that, in the case of Registered
Securities, installments of interest, if any, whose Stated Maturity is on or
prior to the Repayment Date shall be payable (but without interest thereon,
unless the Company shall default in the payment thereof) to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.
If any Bearer Security surrendered for repayment shall not be
accompanied by all appurtenant coupons maturing after the Repayment Date, such
Security may be paid after deducting from the amount payable therefor as
provided in Section 1302 an amount equal to the face amount of all such missing
coupons, or the surrender of such missing coupon or coupons may be waived by the
Company and the Trustee if there be furnished to them such security or indemnity
as they may require to save each of them and any Paying Agent harmless. If
thereafter the Holder of such Security shall surrender to the Trustee or any
Paying Agent any such missing coupon in respect of which a deduction shall have
been made as provided in the preceding sentence, such Holder shall be entitled
to receive the amount so deducted; provided, however, that interest represented
by coupons shall be payable only at an office or agency located outside the
United States (except as otherwise provided in Section 1002) and, unless
otherwise specified as contemplated by Section 301, only upon presentation and
surrender of those coupons.
If the principal amount of any Security surrendered for
repayment shall not be so repaid upon surrender thereof, such principal amount
(together with interest, if any, thereon accrued to such Repayment Date) shall,
until paid, bear interest from the Repayment Date at the rate of interest or
Yield to Maturity (in the case of Original Issue Discount Securities) set forth
in such Security.
SECTION 1305. Securities Repaid in Part. Upon surrender of any
Registered Security which is to be repaid in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the Holder of such
Security, without service charge and at the expense of the Company, a new
Registered Security or Securities of the same series, of any authorized
denomination specified by the Holder, in an aggregate principal amount equal to
and in exchange for the portion of the principal of such Security so surrendered
which is not to be repaid.
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Applicability of Article; Company's Option to
Effect Defeasance or Covenant Defeasance. If, pursuant to Section 301, provision
is made for either or both of (a) defeasance of the Securities of or within a
series under Section 1402 or (b) covenant defeasance of the Securities of or
within a series under Section 1403,
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then the provisions of such Section or Sections, as the case may be, together
with the other provisions of this Article (with such modifications thereto as
may be specified pursuant to Section 301 with respect to any Securities), shall
be applicable to such Securities and any coupons appertaining thereto, and the
Company may at its option by Board Resolution, at any time, with respect to such
Securities and any coupons appertaining thereto, elect to have Section 1402 (if
applicable) or Section 1403 (if applicable) be applied to such Outstanding
Securities and any coupons appertaining thereto upon compliance with the
conditions set forth below in this Article.
SECTION 1402. Defeasance and Discharge. Upon the Company's
exercise of the above option applicable to this Section with respect to any
Securities of or within a series, the Company shall be deemed to have been
discharged from its obligations with respect to such Outstanding Securities and
any coupons appertaining thereto on the date the conditions set forth in Section
1404 are satisfied (hereinafter, "defeasance"). For this purpose, such
defeasance means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by such Outstanding Securities and any
coupons appertaining thereto, which shall thereafter be deemed to be
"Outstanding" only for the purposes of Section 1405 and the other Sections of
this Indenture referred to in clauses (A) and (B) below, and to have satisfied
all of its other obligations under such Securities and any coupons appertaining
thereto and this Indenture insofar as such Securities and any coupons
appertaining thereto are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of such Outstanding Securities and any
coupons appertaining thereto to receive, solely from the trust fund described in
Section 1404 and as more fully set forth in such Section, payments in respect of
the principal of (and premium, if any) and interest, if any, on such Securities
and any coupons appertaining thereto when such payments are due, (B) the
Company's obligations with respect to such Securities under Sections 305, 306,
1002 and 1003 and with respect to the payment of Additional Amounts, if any, on
such Securities as contemplated by Section 1007, (C) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and (D) this Article Fourteen.
Subject to compliance with this Article Fourteen, the Company may exercise its
option under this Section notwithstanding the prior exercise of its option under
Section 1403 with respect to such Securities and any coupons appertaining
thereto.
SECTION 1403. Covenant Defeasance. Upon the Company's exercise
of the above option applicable to this Section with respect to any Securities of
or within a series, the Company shall be released from its obligations under
Sections 1004 and 1005 and, if specified pursuant to Section 301, its
obligations under any other covenant, with respect to such Outstanding
Securities and any coupons appertaining thereto on and after the date the
conditions set forth in Section 1404 are satisfied (hereinafter, "covenant
defeasance"), and such Securities and any coupons appertaining thereto shall
thereafter be deemed to be not "Outstanding" for the purposes of any direction,
waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in connection with Sections 1004 and 1005 or such other covenant, but
shall continue to be deemed "Outstanding" for all other purposes hereunder. For
this purpose, such covenant defeasance means that, with respect to such
Outstanding Securities and any coupons appertaining thereto, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such Section or such other covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such Section or such other covenant or by reason of reference in any such
Section or such other covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a default or an Event
of Default under Section 501(4) or 501(9) or otherwise, as the case may be, but
except as specified above, the remainder of this Indenture and such Securities
and any coupons appertaining thereto shall be unaffected thereby.
SECTION 1404. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of Section 1402 or Section
1403 to any Outstanding Securities of or within a series and any coupons
appertaining thereto:
(a) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee satisfying
the requirements of Section 607 who shall agree to comply with the
provisions of this Article Fourteen applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities and any coupons appertaining thereto, (1) an
amount in such currency, currencies or currency unit in which such
Securities and any coupons appertaining thereto are then specified as
payable at Stated
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Maturity) which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment of principal of
(and premium, if any) and interest, if any, on such Securities and any
coupons appertaining thereto, or (2) Government Obligations applicable
to such Securities and coupons appertaining thereto (determined on the
basis of the currency, currencies or currency unit in which such
Securities and coupons appertaining thereto are then specified as
payable at Stated Maturity) which through the scheduled payment of
principal and interest in respect thereof in accordance with their
terms will provide, not later than one day before the due date of any
payment of principal of (and premium, if any) and interest, if any, on
such Securities and any coupons appertaining thereto, money in an
amount, or (3) a combination thereof in an amount, sufficient, in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, (i) the
principal of (and premium, if any) and interest, if any, on such
Outstanding Securities and any coupons appertaining thereto on the
Stated Maturity of such principal or installment of principal or
interest and (ii) any mandatory sinking fund payments or analogous
payments applicable to such Outstanding Securities and any coupons
appertaining thereto on the day on which such payments are due and
payable in accordance with the terms of this Indenture and of such
Securities and any coupons appertaining thereto.
(b) Such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under, this
Indenture or any other material agreement or instrument to which the
Company is a party or by which it is bound.
(c) No Event of Default or event which with notice or
lapse of time or both would become an Event of Default with respect to
such Securities and any coupons appertaining thereto shall have
occurred and be continuing on the date of such deposit or, insofar as
Sections 501(6) and 501(7) are concerned, at any time during the period
ending on the 91st day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period).
(d) In the case of an election under Section 1402,
the Company shall have delivered to the Trustee an Opinion of Counsel
stating that (i) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (ii) since the
date of execution of this Indenture, there has been a change in the
applicable Federal income tax law, in either case to the effect that,
and based thereon such opinion shall confirm that, the Holders of such
Outstanding Securities and any coupons appertaining thereto will not
recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such defeasance had not occurred.
(e) In the case of an election under Section 1403,
the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that the Holders of such Outstanding Securities and any
coupons appertaining thereto will not recognize income, gain or loss
for Federal income tax purposes as a result of such covenant defeasance
and will be subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
covenant defeasance had not occurred.
(f) The Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent to the defeasance under Section 1402 or the
covenant defeasance under Section 1403 (as the case may be) have been
complied with and an Opinion of Counsel to the effect that either (i)
as a result of a deposit pursuant to subsection (a) above and the
related exercise of the Company's option under Section 1402 or Section
1403 (as the case may be), registration is not required under the
Investment Company Act of 1940, as amended, by the Company, with
respect to the trust funds representing such deposit or by the Trustee
for such trust funds or (ii) all necessary registrations under said Act
have been effected.
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(g) Notwithstanding any other provisions of this
Section, such defeasance or covenant defeasance shall be effected in
compliance with any additional or substitute terms, conditions or
limitations which may be imposed on the Company in connection therewith
pursuant to Section 301.
SECTION 1405. Deposited Money and Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the
last paragraph of Section 1003, all money and Government Obligations (or other
property as may be provided pursuant to Section 301) (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this Section 1405, the "Trustee") pursuant to Section 1404 in
respect of any Outstanding Securities of any series and any coupons appertaining
thereto shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and any coupons appertaining thereto and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities and any coupons appertaining
thereto of all sums due and to become due thereon in respect of principal (and
premium, if any) and interest and Additional Amounts, if any, but such money
need not be segregated from other funds except to the extent required by law.
Unless otherwise specified with respect to any Security
pursuant to Section 301, if, after a deposit referred to in Section 1404(a) has
been made, (a) the Holder of a Security in respect of which such deposit was
made is entitled to, and does, elect pursuant to Section 301 or the terms of
such Security to receive payment in a currency or currency unit other than that
in which the deposit pursuant to Section 1404(a) has been made in respect of
such Security, or (b) a Conversion Event occurs in respect of the currency or
currency unit in which the deposit pursuant to Section 1404(a) has been made,
the indebtedness represented by such Security and any coupons appertaining
thereto shall be deemed to have been, and will be, fully discharged and
satisfied through the payment of the principal of (and premium, if any), and
interest, if any, on such Security as the same becomes due out of the proceeds
yielded by converting (from time to time as specified below in the case of any
such election) the amount or other property deposited in respect of such
Security into the currency or currency unit in which such Security becomes
payable as a result of such election or Conversion Event based on the applicable
market exchange rate for such currency or currency unit in effect on the second
Business Day prior to each payment date, in the case of such an election, or,
the applicable market exchange rate in effect for such currency or currency unit
(as nearly as feasible), in the case of such Conversion Event.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the Government
Obligations deposited pursuant to Section 1404 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of such Outstanding Securities and any
coupons appertaining thereto.
Anything in this Article to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or Government Obligations (or other property and any proceeds
therefrom) held by it as provided in Section 1404 which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect a
defeasance or covenant defeasance, as applicable, in accordance with this
Article.
ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. Purposes for Which Meetings May Be Called. A
meeting of Holders of Securities of any series may be called at any time and
from time to time pursuant to this Article to make, give or take any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be made, given or taken by Holders of Securities
of such series.
52
<PAGE>
SECTION 1502. Call, Notice and Place of Meetings. (a) The
Trustee may at any time call a meeting of Holders of Securities of any series
for any purpose specified in Section 1501, to be held at such time and at such
place in the City of Boston, or in London as the Trustee shall determine. Notice
of every meeting of Holders of Securities of any series, setting forth the time
and the place of such meeting and in general terms the action proposed to be
taken at such meeting, shall be given, in the manner provided in Section 106,
not less than 21 nor more than 180 days prior to the date fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board
Resolution, or the Holders of at least 25% in principal amount of the
Outstanding Securities of any series shall have requested the Trustee to call a
meeting of the Holders of Securities of such series for any purpose specified in
Section 1501, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have made the
first publication of the notice of such meeting within 21 days after receipt of
such request or shall not thereafter proceed to cause the meeting to be held as
provided herein, then the Company or the Holders of Securities of such series in
the amount above specified, as the case may be, may determine the time and the
place in the City of Boston, or in London for such meeting and may call such
meeting for such purposes by giving notice thereof as provided in subsection (a)
of this Section.
SECTION 1503. Persons Entitled to Vote at Meetings. To be
entitled to vote at any meeting of Holders of Securities of any series, a Person
shall be (1) a Holder of one or more Outstanding Securities of such series, or
(2) a Person appointed by an instrument in writing as proxy for a Holder or
Holders of one or more Outstanding Securities of such series by such Holder or
Holders. The only Persons who shall be entitled to be present or to speak at any
meeting of Holders of Securities of any series shall be the Persons entitled to
vote at such meeting and their counsel, any representatives of the Trustee and
its counsel and any representatives of the Company and its counsel.
SECTION 1504. Quorum; Action. The Persons entitled to vote a
majority in principal amount of the Outstanding Securities of a series shall
constitute a quorum for a meeting of Holders of Securities of such series;
provided, however, that if any action is to be taken at such meeting with
respect to a consent or waiver which this Indenture expressly provides may be
given by the Holders of not less than a specified percentage in principal amount
of the Outstanding Securities of a series, the Persons entitled to vote such
specified percentage in principal amount of the Outstanding Securities of such
series shall constitute a quorum. In the absence of a quorum within 30 minutes
after the time appointed for any such meeting, the meeting shall, if convened at
the request of Holders of Securities of such series, be dissolved. In any other
case the meeting may be adjourned for a period of not less than 10 days
determined by the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period of not less than 10 days
as determined by the chairman of the meeting prior to the adjournment of such
adjourned meeting. Notice of the reconvening of any adjourned meeting shall be
given as provided in Section 1502(a), except that such notice need be given only
once not less than five days prior to the date on which the meeting is scheduled
to be reconvened. Notice of the reconvening of any adjourned meeting shall state
expressly the percentage, as provided above, of the principal amount of the
Outstanding Securities of such series which shall constitute a quorum.
Except as limited by the proviso to Section 902, any
resolution presented to a meeting or adjourned meeting duly reconvened at which
a quorum is present as aforesaid may be adopted by the affirmative vote of the
Holders of a majority in principal amount of the Outstanding Securities of that
series; provided, however, that, except as limited by the proviso to Section
902, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action which this Indenture
expressly provides may be made, given or taken by the Holders of a specified
percentage, which is less than a majority, in principal amount of the
Outstanding Securities of a series may be adopted at a meeting or an adjourned
meeting duly reconvened and at which a quorum is present as aforesaid by the
affirmative vote of the Holders of such specified percentage in principal amount
of the Outstanding Securities of that series.
Any resolution passed or decision taken at any meeting of
Holders of Securities of any series duly held in accordance with this Section
shall be binding on all the Holders of Securities of such series and the related
coupons, whether or not present or represented at the meeting.
53
<PAGE>
Notwithstanding the foregoing provisions of this Section 1504,
if any action is to be taken at a meeting of Holders of Securities of any series
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that this Indenture expressly provides may be made, given
or taken by the Holders of a specified percentage in principal amount of all
Outstanding Securities affected thereby, or of the Holders of such series and
one or more additional series:
(i) there shall be no minimum quorum requirement for such
meeting; and
(ii) the principal amount of the Outstanding Securities of
such series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into
account in determining whether such request, demand, authorization,
direction, notice, consent, waiver or other action has been made, given
or taken under this Indenture.
SECTION 1505. Determination of Voting Rights; Conduct and
Adjournment of Meetings. (a) Notwithstanding any provisions of this Indenture,
the Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Holders of Securities of a series in regard to proof of the
holding of Securities of such series and of the appointment of proxies and in
regard to the appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as it shall deem
appropriate. Except as otherwise permitted or required by any such regulations,
the holding of Securities shall be proved in the manner specified in Section 104
and the appointment of any proxy shall be proved in the manner specified in
Section 104 or by having the signature of the Person executing the proxy
witnessed or guaranteed by any trust company, bank or banker authorized by
Section 104 to certify to the holding of Bearer Securities. Such regulations may
provide that written instruments appointing proxies, regular on their face, may
be presumed valid and genuine without the proof specified in Section 104 or
other proof.
(b) The Trustee shall, by an instrument in writing appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Holders of Securities as provided in Section 1502(b), in which
case the Company or the Holders of Securities of the series calling the meeting,
as the case may be, shall in like manner appoint a temporary chairman. A
permanent chairman and a permanent secretary of the meeting shall be elected by
vote of the Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting.
(c) At any meeting each Holder of a Security of such series or
proxy shall be entitled to one vote for each $1,000 principal amount of the
Outstanding Securities of such series held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Security challenged as not Outstanding and ruled by the chairman of the meeting
to be not Outstanding. The chairman of the meeting shall have no right to vote,
except as a Holder of a Security of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly
called pursuant to Section 1502 at which a quorum is present may be adjourned
from time to time by Persons entitled to vote a majority in principal amount of
the Outstanding Securities of such series represented at the meeting, and the
meeting may be held as so adjourned without further notice.
SECTION 1506. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of Securities
of any series shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities of such series or of their
representatives by proxy and the principal amounts and serial numbers of the
Outstanding Securities of such series held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record, at least in duplicate, of
the proceedings of each meeting of Holders of Securities of any Series shall be
prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
fact, setting forth a copy of the notice of the meeting and showing that said
notice was given as
54
<PAGE>
provided in Section 1502 and, if applicable, Section 1504. Each copy shall be
signed and verified by the affidavits of the permanent chairman and secretary of
the meeting and one such copy shall be delivered to the Company and another to
the Trustee to be preserved by the Trustee, the latter to have attached thereto
the ballots voted at the meeting. Any record so signed and verified shall be
conclusive evidence of the matters therein stated.
This Indenture may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ Ajay Saini
Title: Treasurer
[SEAL]
Attest:
/s/ David J. Hegarty
Title: President
STATE STREET BANK AND TRUST COMPANY
By: /s/ James E. Mogavero
Title: Assistant Vice President
[SEAL]
Attest:
/s/ Michael T. Quaile
Title: Assistant Secretary
55
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) ss:
COUNTY OF SUFFOLK )
On the 9th day of July, 1997, before me personally came Ajay Saini, to
me known, who, being by me duly sworn, did depose and say that he is the
Treasurer of HEALTH AND RETIREMENT PROPERTIES TRUST, one of the persons
described in and which executed the foregoing instrument; that he/she knows the
seal of said trust; that the seal affixed to said instrument is such seal; that
it was so affixed by authority of the Board of said trust, and that he/she
signed his/her name thereto by like authority.
[Notarial Seal]
/s/ Laura A. Morgan
Notary Public
COMMISSION EXPIRES 2/7/2003
COMMONWEALTH OF MASSACHUSETTS )
) ss:
COUNTY OF SUFFOLK )
On the 9th day of July, 1997, before me personally came James
E. Mogavero, to me known, who, being by me duly sworn, did depose and say that
he/she is a Assistant Vice President of State Street Bank, one of the persons
described in and which executed the foregoing instrument; that he/she knows the
seal of said corporation; that the seal affixed to said instrument is such seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he/she signed his/her name thereto by likely authority.
[Notarial Seal]
/s/ Linda M. Byrne
Notary Public
COMMISSION EXPIRES 6/26/2003
56
<PAGE>
EXHIBIT A
FORMS OF CERTIFICATION
EXHIBIT A-1
FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED
TO RECEIVE BEARER SECURITY OR TO OBTAIN INTEREST
PAYABLE PRIOR TO THE EXCHANGE DATE
[Insert title or sufficient description of Securities to be delivered]
This is to certify that, as of the date hereof, and except as
set forth below, the above-captioned Securities held by you for our account (i)
are owned by person(s) that are not citizens or residents of the United States,
domestic partnerships, domestic corporations or any estate or trust the income
of which is subject to United States federal income taxation regardless of its
source ("United States person(s)"), (ii) are owned by United States person(s)
that are (a) foreign branches of United States financial institutions (financial
institutions, as defined in United States Treasury Regulations Section
2.165-12(c)(1)(v) are herein referred to as "financial institutions") purchasing
for their own account or for resale, or (b) United States person(s) who acquired
the Securities through foreign branches of United States financial institutions
and who hold the Securities through such United States financial institutions on
the date hereof (and in either case (a) or (b), each such United States
financial institutions hereby agrees, on its own behalf or through its agent,
that you may advise Health and Rehabilitation Properties Trust or its agent that
such financial institutions will comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) are owned by United States or
foreign financial institution(s) for purposes of resale during the restricted
period (as defined in United States Treasury Regulations Section 1.163-
5(c)(1)(i)(D)(7), and, in addition, if the owner is a United States or foreign
financial institutions described in clause (iii) above (whether or not also
described in clause (i) or (ii)), this is to further certify that such financial
institutions has not acquired the Securities for purposes of resale directly or
indirectly to a United States person or to a person within the United States or
its possessions.
As used herein, "United States" means the United States of
America (including the States and the District of Columbia); and its
"possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American
Samoa, Wake Island and the Northern Mariana Islands.
We undertake to advise you promptly by tested telex on or
prior to the date on which you intend to submit your certification relating to
the above-captioned Securities held by you for our account in accordance with
your Operating Procedures if any applicable statement herein is not correct on
such date, and in the absence of any such notification it may be assumed that
this certification applies as of such date.
This certificate excepts and does not relate to (U.S.$)
_______________ of such interest in the above-captioned Securities in respect of
which we are not able to certify and as to which we understand an exchange for
an interest in a Permanent Global Security or an exchange for and delivery of
definitive Securities (or, if relevant, collection of any interest) cannot be
made until we do so certify.
We understand that this certificate may be required in
connection with certain tax legislation in the United States. If administrative
or legal proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
Dated: , 19
A-1
<PAGE>
[To be dated no earlier than the 15th day prior to (i) the Exchange Date or (ii)
the relevant Interest Payment Date occurring prior to the Exchange Date, as
applicable]
[Name of Person Making Certification]
(Authorized
Signatory)
Name:
Title:
A-2
<PAGE>
EXHIBIT A-2
FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR
AND CEDEL S.A. IN CONNECTION WITH THE EXCHANGE OF
A PORTION OF A TEMPORARY GLOBAL SECURITY OR TO
OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE
CERTIFICATE
[Insert title or sufficient description of Securities to be delivered]
This is to certify that, based solely on written
certifications that we have received in writing, by tested telex or by
electronic transmission from each of the persons appearing in our records as
persons entitled to a portion of the principal amount set forth below (our
"Member Organizations") substantially in the form attached hereto, as of the
date hereof, [U.S.$) principal amount of the above-captioned Securities (i) is
owned by person(s) that are not citizens or residents of the United States,
domestic partnerships, domestic corporations or any estate or trust the income
of which is subject to United States Federal income taxation regardless of its
source ("United States person(s)"), (ii) is owned by United States person(s)
that are (a) foreign branches of United States financial institutions (financial
institutions, as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v)
are herein referred to as "financial institutions") purchasing for their own
account or for resale, or (b) United States person(s) who acquired the
Securities through foreign branches of United States financial institutions and
who hold the Securities through such United States financial institutions on the
date hereof (and in either case (a) or (b), each such financial institutions
will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder), or
(iii) is owned by United States or foreign financial institution(s) for purposes
of resale during the restricted period (as defined in United States Treasury
Regulations Section 1.163-5(c)(2)(i)(D)(7)), and, to the further effect, that
financial institutions described in clause (iii) above (whether or not also
described in clause (i) or (ii)) have certified that they have not acquired the
Securities for purposes of resale directly or indirectly to a United States
person or to a person within the United States or its possessions.
As used herein, "United States" means the United States of
America (including the States and the District of Columbia); and its
"possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American
Samoa, Wake Island and the Northern Mariana Islands.
We further certify that (i) we are not making available
herewith for exchange (or, if relevant, collection of any interest) any portion
of the temporary global Security representing the above-captioned Securities
excepted in the above-referenced certificates of Member Organizations and (ii)
as of the date hereof we have not received any notification from any of our
Member Organizations to the effect that the statements made by such Member
Organizations with respect to any portion of the part submitted herewith for
exchange (or, if relevant, collection of any interest) are no longer true and
cannot be relied upon as of the date hereof.
We understand that this certification is required in
connection with certain tax legislation in the United States. If administrative
or legal proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
Date: 19
[To be dated no earlier than the Exchange Date
or the relevant Interest Payment Date occurring
prior to the Exchange Date, as applicable]
[Morgan Guaranty Trust Company
New York, Brussels Office,]
as Operator of the Euroclear System
[Cedel S.A.]
A-3
EXHIBIT 4.11
SUPPLEMENTAL INDENTURE
by and between
HEALTH AND RETIREMENT PROPERTIES TRUST
and
STATE STREET BANK AND TRUST COMPANY
July 9, 1997
HEALTH AND RETIREMENT PROPERTIES TRUST
$200,000,000 Remarketed Reset Notes due July 9, 2007
<PAGE>
This SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") made and
entered into as of July 9, 1997 between Health and Retirement Properties Trust,
a Maryland real estate investment trust (the "Company"), and State Street Bank
and Trust Company, a national banking association (the "Trustee").
WITNESSETH THAT:
WHEREAS, the Company and the Trustee have executed and delivered an
Indenture, dated as of July 9, 1997 (the "Indenture"), relating to the Company's
issuance, from time to time, of various series of debt securities; and
WHEREAS, the Company has determined to issue debt securities known as
its $200,000,000 Remarketed Reset Notes due July 9, 2007 (the "Notes"); and
WHEREAS, the Indenture provides that certain terms and conditions for
each series of debt securities issued by the Company thereunder may be set forth
in an indenture supplemental to the Indenture;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
ARTICLE ONE
DEFINED TERMS
Section 101. The following definitions supplement, and, to the extent
inconsistent with, replace the definitions in Section 101 of the Indenture:
"Acquired Debt" means Debt of a Person (i) existing at the time such
Person becomes a Subsidiary or (ii) assumed in connection with the acquisition
of assets from such Person, in each case, other than Debt incurred in connection
with, or in contemplation of, such Person's becoming a Subsidiary or such
acquisition. Acquired Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Subsidiary.
"Alternate Spread" means the percentage equal to LIBOR for the
Quarterly Period beginning on the Commencement Date of the relevant Subsequent
Spread Period.
"Annual Service Charge" as of any date means the maximum amount which
is expensed in any 12-month period for interest on Debt of the Company and its
Subsidiaries.
"Business Day" means any day other than a Saturday or Sunday or a day
on which banking institutions in The City of New York are required or authorized
to close and, in the case of Notes in the Floating Rate Mode, that is also a
London Business Day.
<PAGE>
"Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participation or other ownership
interests (however designated) of such Person and any rights (other than debt
securities convertible into or exchangeable for capital stock), warrants or
options to purchase any thereof.
"Commencement Date" means the first date of a Subsequent Spread Period.
"Consolidated Income Available for Debt Service" for any period means
Earnings from Operations of the Company and its Subsidiaries plus amounts which
have been deducted, and minus amounts which have been added, for the following
(without duplication): (i) interest on Debt of the Company and its Subsidiaries,
(ii) provision for taxes of the Company and its Subsidiaries based on income,
(iii) amortization of debt discount and deferred financing costs, (iv)
provisions for gains and losses on properties and property depreciation and
amortization, (v) the effect of any noncash charge resulting from a change in
accounting principles in determining Earnings from Operations for such period
and (vi) amortization of deferred charges.
"Debt" of the Company or any Subsidiary means, without duplication, any
indebtedness of the Company or any Subsidiary, whether or not contingent, in
respect of (i) borrowed money or evidenced by bonds, notes, debentures or
similar instruments, (ii) indebtedness for borrowed money secured by any
Encumbrance existing on property owned by the Company or any Subsidiary, (iii)
the reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued (other than letters of credit issued to
provide credit enhancement or support with respect to other indebtedness of the
Company or any Subsidiary otherwise reflected as Debt hereunder) or amounts
representing the balance deferred and unpaid of the purchase price of any
property or services, except any such balance that constitutes an accrued
expense or trade payable, or all conditional sale obligations or obligations
under any title retention agreement, (iv) the principal amount of all
obligations of the Company or any Subsidiary with respect to redemption,
repayment or other repurchase of any Disqualified Stock, or (v) any lease of
property by the Company or any Subsidiary as lessee which is reflected on the
Company's consolidated balance sheet as a capitalized lease in accordance with
GAAP, to the extent, in the case of items of indebtedness under (i) through
(iii) above, that any such items (other than letters of credit) would appear as
a liability on the Company's consolidated balance sheet in accordance with GAAP,
and also includes, to the extent not otherwise included, any obligation by the
Company or any Subsidiary to be liable for, or to pay, as obligor, guarantor or
otherwise (other than for purposes of collection in the ordinary course of
business), Debt of another Person (other than the Company or any Subsidiary) (it
being understood that Debt shall be deemed to be incurred by the Company or any
Subsidiary whenever the Company or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Disqualified Stock" means, with respect to any Person, any Capital
Stock of such Person which by the terms of such Capital Stock (or by the terms
of any security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for common
stock or shares), (ii) is convertible into or exchangeable or exercisable for
Debt or Disqualified Stock,
2
<PAGE>
or (iii) is redeemable at the option of the holder thereof, in whole or in part
(other than Capital Stock which is redeemable solely in exchange for common
stock or shares), in each case on or prior to the stated maturity of the Notes.
"Duration/Mode Determination Date" means the fifteenth calendar date
prior to the Commencement Date of each Subsequent Spread Period on which the
character and duration of the interest rate on the Notes as well as the
redemption type (and any other relevant terms) for the Subsequent Spread Period
will be agreed to by the Company and the Remarketing Underwriter.
"Earnings from Operations" for any period means net earnings excluding
gains and losses on sales of investments, as reflected in the financial
statements of the Company and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
"Encumbrance" means any mortgage, lien, charge, pledge or security
interest of any kind.
"Initial Quarterly Period" is defined in the third paragraph of Section
201(c) hereof.
"Initial Spread" means the Spread applicable during the Initial Spread
Period.
"Initial Spread Period" means the one-year period from and including
July 9, 1997 to but excluding July 9, 1998 during which the interest rate on the
Notes will be reset quarterly and will equal LIBOR plus the Initial Spread.
"Interest Payment Date" means any date interest is paid on the Notes.
"Interest Reset Date" means the first day of a Quarterly Period.
"LIBOR Determination Date" means the second London Business Day
preceding each Interest Reset Date, on which the Rate Agent will determine LIBOR
applicable for a Quarterly Period.
"LIBOR" means, with respect to determining the interest rate on Notes
in the Floating Rate Mode, the offered rate for three-month deposits in U.S.
Dollars of not less than U.S. $1,000,000, commencing on the second London
Business Day immediately following such LIBOR Determination Date, which appears
on Telerate Page 3750 as of approximately 11:00 a.m., London time, on such LIBOR
Determination Date. With respect to a LIBOR Determination Date on which no rate
appears on Telerate Page 3750 as of approximately 11:00 a.m., London time, on
such LIBOR Determination Date, the Rate Agent shall request the principal London
offices of each of four major reference banks in the London interbank market
selected by the Rate Agent to provide the Rate Agent with a quotation of the
rate at which three-month deposits in U.S. Dollars, commencing on the second
London Business Day immediately following such LIBOR Determination Date, are
offered by it to prime banks in the London
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interbank market as of approximately 11:00 a.m., London time, on such LIBOR
Determination Date and in a principal amount equal to an amount of not less than
U.S. $1,000,000 that is representative for a single transaction in such market
at such time. If at least two such quotations are provided, LIBOR for such LIBOR
Determination Date will be the arithmetic mean of such quotations as calculated
by the Rate Agent. If fewer than two quotations are provided, LIBOR for such
LIBOR Determination Date will be the arithmetic mean of the rates quoted as of
approximately 11:00 a.m., New York City time, on such LIBOR Determination Date
by three major banks in The City of New York selected by the Rate Agent (after
consultation with the Company) for loans in U.S. Dollars to leading European
banks, having a three-month maturity commencing on the second London Business
Day immediately following such LIBOR Determination Date and in a principal
amount equal to an amount of not less than U.S. $1,000,000 that is
representative for a single transaction in such market at such time; provided,
however, that if the banks selected as aforesaid by the Rate Agent are not
quoting as mentioned in this sentence, LIBOR for such LIBOR Determination Date
will be LIBOR determined with respect to the immediately preceding LIBOR
Determination Date, or in the case of the first LIBOR Determination Date, LIBOR
for the Initial Quarterly Period.
"London Business Day" means any day on which dealings in deposits in
U.S. Dollars are transacted in the London interbank market.
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Note, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of such dollar if such redemption or accelerated
payment had not been made, determined by discounting, on a semiannual basis,
such principal and interest at the Reinvestment Rate (determined on the third
Business Day preceding the date such notice of redemption is given or
declaration of acceleration is made) from the respective dates on which such
principal and interest would have been payable if such redemption or accelerated
payment had not been made, over (ii) the aggregate principal amount of the Notes
being redeemed or paid. For purposes of this Supplemental Indenture and the
Notes, references in the Indenture to the payment of the principal (and premium,
if any) and interest on the Notes shall be deemed to include the payment of the
Make-Whole Amount, if any, due upon redemption with respect to the Notes.
"Make-Whole Redemption" means redemption at a redemption price equal to
the sum of (i) the principal amount of the Notes being redeemed plus accrued
interest thereon, if any, to the redemption date and (ii) the Make-Whole Amount,
if any, with respect to such Notes.
"Par Redemption" means redemption at a redemption price equal to 100%
of the principal amount thereof, plus accrued interest thereon, if any, to the
redemption date.
"Premium Redemption" means redemption at a redemption price or prices
greater than 100% of the principal amount thereof, plus accrued interest
thereon, if any, to the redemption date, as determined on the Duration/Mode
Determination Date.
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"Quarterly Period" means the period from and including the most recent
Interest Payment Date to which interest has been paid to but excluding the next
Interest Payment Date.
"Rate Agent" means the nationally recognized broker-dealer selected by
the Company as its agent to determine (i) LIBOR and the interest rate on the
Notes for any Quarterly Period and/or (ii) the yield to maturity on the
applicable United States Treasury security that is used in connection with the
determination of the applicable Fixed Rate, and the ensuing applicable Fixed
Rate.
"Record Date" means the fifteenth calendar day, whether or not a
Business Day, next preceding the applicable Interest Payment Date.
"Reinvestment Rate" means .25% (twenty-five one hundredths of one
percent) plus the yield on treasury securities at constant maturity under the
heading "Week Ending" published in the Statistical Release under the caption
"Treasury Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Remarketing Underwriter" means the nationally recognized broker-dealer
selected by the Company to act as Remarketing Underwriter.
"Remarketing Underwriting Agreement" means the agreement entered into
by the Company and the Remarketing Underwriter in the event the Company and the
Remarketing Underwriter agree on the Spread on the Spread Determination Date
with respect to any Subsequent Spread Period.
"Secured Debt" means Debt secured by any mortgage, lien, charge, pledge
or security interest of any kind.
"Spread" refers to the percentage that, added to LIBOR (when in the
Floating Rate Mode) or the comparable Treasury rate (when in the Fixed Rate
Mode), equals the interest rate payable on the Notes.
"Spread Determination Date" is the tenth calendar day prior to the
Commencement Date of such Subsequent Spread Period on which the Spread for each
Subsequent Spread Period will be established by 3:00 p.m., New York City time.
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"Statistical Release" means the statistical release designated "H.
15(519)" or any successor publication which is published weekly by the Federal
Reserve System and which establishes yields on actively traded United States
government securities adjusted to constant maturities or, if such statistical
release is not published at the time of any determination under this
Supplemental Indenture, then such other reasonably comparable index which shall
be designated by the Rate Agent, after consultation with the Company.
"Subsequent Spread" means the Spread determined by agreement between
the Remarketing Underwriter and the Company to result in a rate which will
enable 100% of tendered Notes to be remarketed.
"Subsequent Spread Period" means one or more periods of at least six
months and not more than nine years (or any integral multiple of six months
therein), designated by the Company, commencing on a January 9 or July 9 (or as
otherwise specified by the Company and the Remarketing Underwriter on the
applicable Duration/Mode Determination Date in connection with the establishment
of each Subsequent Spread Period) through and including July 9, 2007.
"Subsidiary" means any corporation or other entity of which a majority
of (i) the voting power of the voting equity securities or (ii) the outstanding
equity interests of which are owned, directly or indirectly, by the Company or
one or more other Subsidiaries of the Company. For the purposes of this
definition, "voting equity securities" means equity securities having voting
power for the election of directors, whether at all times or only so long as no
senior class of security has such voting power by reason of any contingency.
"Telerate Page 3750" means the display designated on page "3750" on the
Telerate Service (or such other page as may replace the 3750 page on that
service or such other service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank offered
rates for U.S. Dollar deposits).
"Tender Date" is defined in Section 201(e) hereof.
"Tender Notice" is defined in Section 201(e) hereof.
"Total Assets" as of any date means the sum of (i) the Undepreciated
Real Estate Assets and (ii) all other assets of the Company and its Subsidiaries
determined in accordance with GAAP (but excluding accounts receivable and
intangibles).
"Total Unencumbered Assets" means the sum of (i) those Undepreciated
Real Estate Assets not subject to an Encumbrance for borrowed money and (ii) all
other assets of the Company and its Subsidiaries not subject to an Encumbrance
for borrowed money determined in accordance with GAAP (but excluding accounts
receivable and intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost
(original cost plus capital improvements) of real estate assets of the Company
and its Subsidiaries on such date,
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before depreciation and amortization determined on a consolidated basis in
accordance with GAAP.
"Unsecured Debt" means Debt which is not secured by any of the
properties of the Company or any Subsidiary.
ARTICLE TWO
TERMS OF THE NOTES
Section 201. Pursuant to Section 301 of the Indenture, the Notes shall
have the following terms and conditions:
(a) Title; Limitation on Aggregate Principal Amount. The Notes shall be
known as the Company's $200,000,000 Remarketed Reset Notes due July 9, 2007. The
Notes will be limited to an aggregate principal amount of $200,000,000.
(b) Principal Repayment; Currency. The stated maturity of the Notes is
July 9, 2007, provided, however, the Notes may be earlier redeemed at the option
of the Company as provided in paragraph (d) below. The principal of each Note
payable on the maturity date shall be paid against presentation and surrender
thereof at the corporate trust office of the Trustee, located initially at Two
International Place, Boston, Massachusetts 02110, in such coin or currency of
the United States of America as at the time of payment is legal tender for the
payment of public or private debts. The Company will not pay Additional Amounts
(as defined in the Indenture) on the Notes.
(c) Interest Payments. During the Initial Spread Period, the interest
rate on the Notes will be reset on each Interest Reset Date, and will equal
LIBOR plus the Initial Spread. The Initial Spread is .45%. After the Initial
Spread Period, unless notice of redemption of the Notes as a whole has been
given, the duration, redemption dates, redemption type, redemption prices (if
applicable), Commencement Date, Interest Payment Date and interest rate mode
will be agreed to by the Company and the Remarketing Underwriter by 3:00 p.m.,
New York City time, on each applicable Duration/Mode Determination Date and the
Spread will be agreed to by the Company and the Remarketing Underwriter by 3:00
p.m., New York City time, on the corresponding Spread Determination Date.
Interest on the Notes during each Subsequent Spread Period shall be payable, as
applicable, either (i) at a floating interest rate (such Notes being in the
"Floating Rate Mode", and such interest rate being a "Floating Rate") or (ii) at
a fixed interest rate (such Notes being in the "Fixed Rate Mode" and such
interest rate being a "Fixed Rate"), in each case as determined by the
Remarketing Underwriter and the Company in accordance with a Remarketing
Agreement between the Remarketing Underwriter and the Company (the "Remarketing
Agreement").
After the Initial Spread Period, the Spread applicable to each
Subsequent Spread Period will be determined on each subsequent Spread
Determination Date which precedes the beginning of the corresponding Subsequent
Spread Period, pursuant to agreement between the Company
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and the Remarketing Underwriter (except as otherwise provided below), and the
interest rate mode used for each Subsequent Spread Period may be a Floating Rate
Mode or a Fixed Rate Mode, at the discretion of the Company and the Remarketing
Underwriter. If the Company and the Remarketing Underwriter are unable to agree
on the Spread for any Subsequent Spread Period, (1) the Subsequent Spread Period
will be one year, (2) the Notes will be reset to the Floating Rate Mode, (3) the
Spread for such Subsequent Spread Period will be the Alternate Spread and (4)
the Notes will be redeemable at the option of the Company, in whole or in part,
upon at least five Business Days' notice given by no later than the fifth
Business Day after the relevant Spread Determination Date, at a redemption price
equal to 100% of the principal amount thereof, together with accrued interest to
the redemption date, except that the Notes may not be redeemed prior to the
Tender Date or later than the last day of such one-year Subsequent Spread
Period. During the Initial Spread Period, interest on the Notes will be payable
in Dollars quarterly in arrears on October 9, 1997, January 9, 1998, April 9,
1998 and July 9, 1998 (or, if not a Business Day, on the next succeeding
Business Day except as described herein). After the Initial Spread Period, (i)
if the Notes are in the Floating Rate Mode, interest on the Notes will be
payable, unless otherwise specified on the applicable Duration/Mode
Determination Date, quarterly in arrears on each January 9, April 9, July 9 and
October 9, during the applicable Subsequent Spread Period, or (ii) if the Notes
are in the Fixed Rate Mode, interest on the Notes will be payable, unless
otherwise specified on the applicable Duration/Mode Determination Date,
semiannually in arrears on each January 9 and July 9 beginning on the
Commencement Date and for the duration of the applicable Subsequent Spread
Period. Interest on the Notes is payable to the persons in whose names the Notes
are registered at the close of business on the applicable Record Date next
preceding the applicable Interest Payment Date.
Interest on the Notes will accrue from and including each Interest
Payment Date (or in the case of the Initial Quarterly Period, July 9, 1997) to
but excluding the next succeeding Interest Payment Date or maturity date, as the
case may be. The Initial Quarterly Period will be the period from and including
July 9, 1997 to but excluding the first Interest Payment Date (October 9, 1997)
(the "Initial Quarterly Period"). Thereafter, each Quarterly Period during the
Initial Spread Period or any Subsequent Spread Period will be from and including
the most recent Interest Payment Date to which interest has been paid to but
excluding the next Interest Payment Date.
Payment of interest on the Notes shall be made by the Trustee to or at
the direction of The Depository Trust Company or its nominee, Cede & Co., who
will in turn immediately credit the account of the Remarketing Underwriter.
If any Interest Payment Date (other than at maturity), redemption date,
Interest Reset Date, Duration/Mode Determination Date, Spread Determination
Date, Commencement Date or Tender Date would otherwise be a day that is not a
Business Day, such Interest Payment Date, redemption date, Interest Reset Date,
Duration/Mode Determination Date, Spread Determination Date, Commencement Date
or Tender Date will be postponed to the next succeeding day that is a Business
Day, except that if such Business Day is in the next succeeding calendar month,
such Interest Payment Date, redemption date, Interest Reset Date, Commencement
Date or Tender Date shall be the next preceding Business Day. If the maturity
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date for the Notes falls on a day that is not a Business Day, the related
payment of principal and interest will be made on the next succeeding Business
Day as if it were made on the date such payment was due, and no interest will
accrue on the amounts so payable for the period for the period from and after
such dates.
If the Notes are in the Floating Rate Mode, such Notes will bear
interest at a rate per annum (computed on the basis of the actual number of days
elapsed over a 360-day year) equal to LIBOR for the applicable Quarterly Period
plus the applicable Spread, as agreed to by the Company and the Remarketing
Underwriter, and such interest rate will be reset quarterly. If the Notes are in
the Fixed Rate Mode, interest will equal the applicable Spread, as agreed to by
the Company and the Remarketing Underwriter, plus the applicable Treasury rate,
computed on the basis of a 360-day year of twelve 30-day months. Interest in the
Fixed Rate Mode will accrue from and including each Interest Payment Date to but
excluding the next succeeding Interest Payment Date or maturity date, as the
case may be. If any Interest Payment Date or any redemption date in the Fixed
Rate Mode falls on a day that is not a Business Day (in either case, other than
any Interest Payment Date or redemption date that falls on a Commencement Date,
in which case such Commencement Date will be postponed to the next day that is a
Business Day), the related payment of principal and interest will be made on the
next succeeding Business Day as if it were made on the date such payment was
due, and no interest will accrue on the amounts so payable for the period from
and after such date.
Unless the Company shall have otherwise provided pursuant to Section 4
of the Remarketing Agreement, dated as of July 2, 1997 between the Company and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), the Rate Agent will be Merrill Lynch.
All percentages resulting from any calculation in respect of a Note
will be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point, with five one-millionths of a percentage point rounded upward,
and all dollar amounts used in or resulting from such calculation in respect of
a Note will be rounded to the nearest cent (with one-half cent rounded upward).
Unless notice of redemption of the Notes as a whole has been given, the
Company will cause a notice to be given to holders of Notes on the New York
Business Day (as defined below) following the Spread Determination Date for each
Subsequent Spread Period in the manner described below, specifying (1) the
duration of such Subsequent Spread Period, (2) the mode (i.e., Fixed Rate Mode
or Floating Rate Mode), (3) the Commencement Date, (4) any redemption dates, (5)
any redemption type (i.e., par, premium or make-whole), (6) any redemption
prices, (7) the Spread for such Subsequent Spread Period, (8) the identity of
the Remarketing Underwriter, if applicable, and (9) any other relevant
provisions. The term "New York Business Day" means any day other than a Saturday
or Sunday or a day on which banking institutions in The City of New York are
required or authorized to close.
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(d) Prepayment at the Option of the Company; Redemption. The Notes are
not redeemable prior to July 9, 1998. On that date and thereafter, the Notes may
be redeemable, at the option of the Company, on those Interest Payment Dates
that are specified as redemption dates by the Company on the applicable
Duration/Mode Determination Date, in whole or in part, upon notice thereof given
at any time during the 45 calendar day period ending on the tenth calendar day
prior to the redemption date (provided that notice of any partial redemption
must be given to the Noteholders at least 15 calendar days prior to the
redemption date), in accordance with the redemption type selected on the
Duration/Mode Determination Date. The redemption type to be chosen by the
Company and the Remarketing Underwriter on the Duration/Mode Determination Date
may be one of the following: (i) Par Redemption; (ii) Premium Redemption; or
(iii) Make-Whole Redemption.
(e) Tender at Option of Beneficial Owners. The Company will request,
not later than seven nor more than 15 calendar days prior to any Spread
Determination Date, that The Depository Trust Company ("DTC") notify its
Participants of such Spread Determination Date and of the procedures that must
be followed if any beneficial owner of a Note wishes to tender such Note as
described herein. If the Company and the Remarketing Underwriter agree on the
Spread on the Spread Determination Date with respect to any Subsequent Spread
Period, each Note may be tendered to the Remarketing Underwriter for purchase
from the tendering Noteholder at 100% of its principal amount and for
remarketing by the Remarketing Underwriter on the calendar day (or if such day
is not a Business Day, on the next succeeding Business Day except as otherwise
provided herein) immediately following the end of each Subsequent Spread Period
(the "Tender Date"). In the case of the Initial Spread Period, the Notes may be
tendered on July 9, 1998. Notice of a beneficial owner's election to tender to
the Remarketing Underwriter, which notice is irrevocable (the "Tender Notice"),
must be received by the Remarketing Underwriter during the period commencing on
the calendar day following the Spread Determination Date (or, if not a Business
Day, on the next succeeding Business Day) and ending at 5:00 p.m., New York City
time, on the fifth calendar day following the relevant Spread Determination
Date. The obligation of the Remarketing Underwriter to purchase tendered Notes
from the tendering Noteholders will be subject to certain conditions and
termination events as provided in the Remarketing Underwriting Agreement. If,
pursuant to those certain conditions or termination events set forth in the
Remarketing Underwriting Agreement, the Remarketing Underwriter does not
purchase all Notes on the relevant Tender Date, for which a Tender Notice shall
have been given, (1) all Tender Notices relating thereto will be null and void,
(2) none of the Notes for which such Tender Notices shall have been given will
be purchased by the Remarketing Underwriter on such Tender Date, (3) the
Subsequent Spread Period will be one year, which Subsequent Spread Period shall
be deemed to have commenced on the applicable Commencement Date, (4) the Notes
will be reset to the Floating Rate Mode, (5) the Spread for such Subsequent
Spread Period will be the Alternate Spread and (6) the Notes will be redeemable
at the option of the Company, in whole or in part, upon at least ten Business
Days' notice given by no later than the fifth Business Day following the
relevant Tender Date on the date set forth in such notice, which shall be no
later than the last day of such one-year Subsequent Spread Period, at a
redemption price equal to 100% of the principal amount thereof, together with
accrued interest to the redemption date. No beneficial owner of any Note shall
have any rights or claims against the Company or the Remarketing
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Underwriter as a result of the Remarketing Underwriter not purchasing such
Notes, except as provided in clause (5) of the preceding sentence.
If the Remarketing Underwriter does not purchase all Notes tendered for
purchase on any Tender Date, it will promptly notify the Company and the
Trustee. As soon as practicable after receipt of such notice, the Company will
cause a notice to be given to holders of the Notes specifying (1) the one-year
duration of the Subsequent Spread Period, (2) that the Notes will be reset to
the Floating Rate Mode, (3) the Spread for such Subsequent Spread Period (which
shall be the Alternate Spread) and (4) LIBOR for the initial Quarterly Period of
such Subsequent Spread Period.
(f) Form of Notes. The Notes shall be issued by the Company in
registered form as set forth in Exhibit A attached hereto and all of the terms
and provisions thereof are incorporated herein by reference. The Notes will be
issued in the form of single fully registered global security without coupons
(the "Global Note") which will be deposited with, or on behalf of, DTC, and
registered in the name of DTC's nominee, Cede & Co. Except under the
circumstance described below, the Notes will not be issuable in a definitive
form. Unless and until it is exchanged in whole or in part for the individual
notes represented thereby, a Global Note may not be transferred except as a
whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or by DTC or any nominee of DTC to a successor depository or any
nominee of such successor.
So long as DTC or its nominee is the registered owner of such Global
Note, DTC or such nominee, as the case may be, will be considered the sole owner
or holder of the Notes represented by such Global Note for all purposes under
this Supplemental Indenture. Except as described below, owners of beneficial
interest in Notes evidenced by a Global Note will not be entitled to have any of
the individual Notes represented by such Global Note registered in their names,
will not receive or be entitled to receive physical delivery of any such Notes
in definitive form and will not be considered the owners or holders thereof
under the Indenture or this Supplemental Indenture.
If DTC is at any time unwilling, unable or ineligible to continue as
depository and a successor depository is not appointed by the Company within 90
days, the Company will issue individual Notes in exchange for the Global Note
representing such Notes. In addition, the Company may at any time and in its
sole discretion, subject to certain limitations set forth in the Indenture,
determine not to have any of such Notes represented by one or more Global Notes
and in such event will issue individual Notes in exchange for the Global Note or
Notes representing such debt Securities. Individual Notes so issued will be
issued in denominations of $1,000 and integral multiples thereof and will be
issued in registered form only, without coupons.
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(g) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted by
any standard form of telecommunication. Notices to the Company shall be directed
to it at 400 Centre Street, Newton, Massachusetts 02158, Attention: David J.
Hegarty, President; notices to the Trustee shall be directed to it at Two
International Place, Boston, Massachusetts 02110, Attention:
Corporate Trust Division.
ARTICLE THREE
ADDITIONAL COVENANTS
Section 301. In addition to the covenants of the Company set forth in
Article Ten of the Indenture, for the benefit of the holders of the Notes:
(a) Limitations on Incurrence of Debt. (i) The Company will not, and
will not permit any Subsidiary to, incur any Debt if, immediately after giving
effect to the incurrence of such additional Debt and the application of the
proceeds thereof, the aggregate principal amount of all outstanding Debt of the
Company and its Subsidiaries on a consolidated basis determined in accordance
with GAAP is greater than 60% of the sum ("Adjusted Total Assets") of (without
duplication) (i) the Total Assets of the Company and its Subsidiaries as of the
end of the calendar quarter covered in the Company's Annual Report on Form 10-K,
or the Quarterly Report on Form 10-Q, as the case may be, most recently filed
with the Securities and Exchange Commission (or, if such filing is not permitted
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
the Trustee) prior to the incurrence of such additional Debt and (ii) the
purchase price of any real estate assets or mortgages receivable acquired, and
the amount of any securities offering proceeds received (to the extent that such
proceeds were not used to acquire real estate assets or mortgages receivable or
used to reduce Debt), by the Company or any Subsidiary since the end of such
calendar quarter, including those proceeds obtained in connection with the
incurrence of such additional Debt.
(ii) In addition to the foregoing limitations on the incurrence of
Debt, the Company will not, and will not permit any Subsidiary to, incur any
Secured Debt if, immediately after giving effect to the incurrence of such
additional Secured Debt and the application of the proceeds thereof, the
aggregate principal amount of all outstanding Secured Debt of the Company and
its Subsidiaries on a consolidated basis is greater than 40% of Adjusted Total
Assets.
(iii) In addition to the foregoing limitations on the Incurrence of
Debt, the Company will not, and will not permit any Subsidiary to, incur any
Debt if the ratio of Consolidated Income Available for Debt Service to the
Annual Service Charge for the four consecutive fiscal quarters most recently
ended prior to the date on which such additional Debt is to be incurred shall
have been less than 1.5x, on a pro forma basis after giving effect thereto and
to the application of the proceeds therefrom, and calculated on the assumption
that (i) such Debt and any other Debt incurred by the Company and its
Subsidiaries since the first day of such four-quarter period and the application
of the proceeds therefrom, including to refinance other Debt,
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had occurred at the beginning of such period; (ii) the repayment or retirement
of any other Debt by the Company and its Subsidiaries since the first date of
such four-quarter period had been repaid or retired at the beginning of such
period (except that, in making such computation, the amount of Debt under any
revolving credit facility shall be computed based upon the average daily balance
of such Debt during such period); (iii) in the case of Acquired Debt or Debt
incurred in connection with any acquisition since the first day of such
four-quarter period, the related acquisition had occurred as of the first day of
such period with appropriate adjustments with respect to such acquisition being
included in such pro forma calculation; and (iv) in the case of any acquisition
or disposition by the Company or its Subsidiaries of any asset or group of
assets since the first day of such four-quarter period, whether by merger, stock
purchase or sale, or asset purchase or sale, such acquisition or disposition or
any related repayment of Debt had occurred as of the first day of such period
with the appropriate adjustments with respect to such acquisition or disposition
being included in such pro forma calculation.
(b) Maintenance of Total Unencumbered Assets. The Company and its
Subsidiaries will maintain Total Unencumbered Assets of not less than 200% of
the aggregate outstanding principal amount of the Unsecured Debt of the Company
and its Subsidiaries on a consolidated basis.
(c) Applicability of Discharge, Defeasance and Covenant Defeasance
Provisions. The Discharge, Defeasance and Covenant Defeasance provisions in
Article Fourteen of the Indenture will apply to the Notes.
ARTICLE FOUR
ADDITIONAL EVENTS OF DEFAULT
For purposes of this Supplemental Indenture and the Notes, in addition
to the Events of Default set forth in Section 501 of the Indenture, it shall
also constitute an "Event of Default" if an event of default under any bond,
debenture, note or other evidence of indebtedness of the Company (including an
event of default with respect to any other series of securities), or under any
mortgage, indenture or other instrument of the Company under which there may be
issued or by which there may be secured or evidenced any indebtedness of the
Company (or by any Subsidiary, the repayment of which the Company has guaranteed
or for which the Company is directly responsible or liable as obligor or
guarantor), whether such indebtedness now exists or shall hereafter be created,
shall happen and shall result in an aggregate principal amount exceeding
$20,000,000 becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, without such indebtedness
having been discharged, or such acceleration having been rescinded or annulled,
within a period of ten days after there shall have been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the Trustee
by the holders of at least 25% in principal amount of the outstanding Notes, a
written notice specifying such default and requiring the Company to cause such
indebtedness to be discharged or cause such acceleration to be rescinded or
annulled and stating that such notice is a "Notice of Default" hereunder.
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ARTICLE FIVE
EFFECTIVENESS
This Supplemental Indenture shall be effective for all purposes as of
the date and time this Supplemental Indenture has been executed and delivered by
the Company and the Trustee in accordance with Article Nine of the Indenture. As
supplemented hereby, the Indenture is hereby confirmed as being in full force
and effect.
ARTICLE SIX
MISCELLANEOUS
Section 601. In the event any provision of this Supplemental Indenture
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision
hereof or any provision of the Indenture.
Section 602. To the extent that any terms of the Notes are inconsistent
with the terms of the Indenture, the terms of the Notes shall govern and
supersede such inconsistent terms.
Section 603. This Supplemental Indenture shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts.
Section 604. This Supplemental Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
14
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused
this Supplemental Indenture to be executed as an instrument under seal in their
respective corporate names and attested by their duly authorized officers, all
as of the date first above written.
(SEAL) HEALTH AND RETIREMENT PROPERTIES TRUST
Attest:
By: /s/ Ajay Saini
Name: Ajay Saini
Title: Treasurer
/s/ David J. Hegarty
Name: David J. Hegarty
Title: President
(SEAL) STATE STREET BANK AND TRUST COMPANY
Attest:
By: /s/ James E. Mogavero
Name: James E. Mogavero
Title: Assistant Vice President
/s/ Michael Quaile
Name: Michael Quaile
Title: Assistant Secretary
15
EXHIBIT 4.12
SUPPLEMENTAL INDENTURE NO. 2 DATED AS OF FEBRUARY 23, 1998
(Supplementing the Supplemental Indenture dated as of July 9, 1997)
by and between
HEALTH AND RETIREMENT PROPERTIES TRUST
and
STATE STREET BANK AND TRUST COMPANY
HEALTH AND RETIREMENT PROPERTIES TRUST
Remarketed Reset Notes due July 9, 2007
<PAGE>
This SUPPLEMENTAL INDENTURE NO. 2 (this "Supplement") made and entered
into as of February 23, 1998 between HEALTH AND RETIREMENT PROPERTIES TRUST, a
Maryland real estate investment trust (the "Company"), and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts trust company, as Trustee (the "Trustee").
WITNESSETH THAT:
WHEREAS, the Company and the Trustee have executed and delivered an
Indenture, dated as of July 9, 1997 (the "Indenture"), relating to the Company's
issuance, from time to time, of various series of debt securities; and
WHEREAS, the Company and the Trustee have executed and delivered a
Supplemental Indenture, dated as of July 9, 1997 (the "Supplemental Indenture
No. 1") to the Indenture pursuant to which the Company has issued a series (the
"Series") of debt securities known as the Company's "$200,000,000 Remarketed
Reset Notes due July 9, 2007" (the "Reset Notes"); and
WHEREAS, the Company has determined to issue an additional $50,000,000
of Reset Notes pursuant to the Indenture and Supplemental Indenture No. 1, and
proposes to supplement Supplemental Indenture No. 1 to provide for such
issuance; and
NOW, THEREFORE, THIS SUPPLEMENT WITNESSETH:
ARTICLE 1
SUPPLEMENT
Pursuant to Section 301 of the Indenture, the Series is hereby reopened
to increase the maximum principal amount thereof by $50,000,000 to $250,000,000.
Henceforth the Series shall be known as the Company's Remarketed Reset Notes due
July 9, 2007.
ARTICLE 2
EFFECTIVENESS
This Supplement shall be effective for all purposes as of the date and
time this Supplement has been executed and delivered by the Company and the
Trustee in accordance with Article Nine of the Indenture. As supplemented
hereby, Supplemental Indenture No. 1 is hereby confirmed as being in full force
and effect.
ARTICLE 3
MISCELLANEOUS
Section 3.1 In the event any provision of this Supplement shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provision hereof or any
provision of the Indenture.
Section 3.2 This Supplement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.
Section 3.3 This Supplement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same instrument.
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused
this Supplement to be executed as an instrument under seal in their respective
corporate names and attested by their duly authorized officers, all as of the
date first above written.
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ Ajay Saini
Ajay Saini
Treasurer
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Robert L. Bice II
Name: Robert L. Bice II
Title: Vice President
-2-
EXHIBIT 4.16
SUPPLEMENTAL INDENTURE NO. 3
by and between
HEALTH AND RETIREMENT PROPERTIES TRUST
and
STATE STREET BANK AND TRUST COMPANY
as of February 23, 1998
SUPPLEMENTAL TO THE INDENTURE DATED AS OF JULY 9, 1997
------------------------------------
HEALTH AND RETIREMENT PROPERTIES TRUST
$100,000,000 6.70% Senior Notes due 2005
<PAGE>
This SUPPLEMENTAL INDENTURE NO. 3 (this "Supplemental Indenture") made
and entered into as of February 23, 1998 between HEALTH AND RETIREMENT
PROPERTIES TRUST, a Maryland real estate investment trust (the "Company"), and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company, as Trustee
(the "Trustee").
WITNESSETH THAT:
WHEREAS, the Company and the Trustee have executed and delivered an
Indenture dated as of July 9, 1997 (the "Indenture"), relating to the Company's
issuance, from time to time, of various series of debt securities; and
WHEREAS, the Company has determined to issue debt securities known as
its $100,000,000 6.70% Senior Notes due 2005; and
WHEREAS, the Indenture provides that certain terms and conditions for
each series of debt securities issued by the Company thereunder may be set forth
in an indenture supplemental to the Indenture;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
ARTICLE 1
DEFINED TERMS
Section 1.1 The following definitions supplement, and, to the extent
inconsistent with, replace the definitions in Section 101 of the Indenture:
"Acquired Debt" means Debt of a Person (i) existing at the time such
Person becomes a Subsidiary or (ii) assumed in connection with the acquisition
of assets from such Person, in each case, other than Debt incurred in connection
with, or in contemplation of, such Person's becoming a Subsidiary or such
acquisition. Acquired Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Subsidiary.
"Annual Debt Service" as of any date means the maximum amount which is
expensed in any 12- month period for interest on Debt of the Company and its
Subsidiaries.
"Business Day" means any day other than a Saturday or Sunday or a day
on which banking institutions in The City of New York or in the city in which
the Corporate Trust Office of the Trustee is located, are required or authorized
to close.
"Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participation or other ownership
interests (however designated) of such Person and any rights (other than debt
securities convertible into or exchangeable for capital stock), warrants or
options to purchase any thereof.
"Consolidated Income Available for Debt Service" for any period means
Earnings from Operations of the Company and its Subsidiaries plus amounts which
have been deducted, and minus amounts which have been added, for the following
(without duplication): (i) interest on Debt of the Company and its Subsidiaries,
(ii) provision for taxes of the Company and its Subsidiaries based on income,
(iii) amortization of debt discount and deferred financing costs, (iv)
provisions for gains and losses on properties and property depreciation and
amortization, (v) the effect of any noncash charge resulting from a change in
accounting principles in determining Earnings from Operations for such period
and (vi) amortization of deferred charges.
<PAGE>
"Debt" of the Company or any Subsidiary means, without duplication, any
indebtedness of the Company or any Subsidiary, whether or not contingent, in
respect of (i) borrowed money or evidenced by bonds, notes, debentures or
similar instruments, (ii) indebtedness for borrowed money secured by any
Encumbrance existing on property owned by the Company or any Subsidiary, (iii)
the reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued (other than letters of credit issued to
provide credit enhancement or support with respect to other indebtedness of the
Company or any Subsidiary otherwise reflected as Debt hereunder) or amounts
representing the balance deferred and unpaid of the purchase price of any
property or services, except any such balance that constitutes an accrued
expense or trade payable, or all conditional sale obligations or obligations
under any title retention agreement, (iv) the principal amount of all
obligations of the Company or any Subsidiary with respect to redemption,
repayment or other repurchase of any Disqualified Stock, or (v) any lease of
property by the Company or any Subsidiary as lessee which is reflected on the
Company's consolidated balance sheet as a capitalized lease in accordance with
GAAP, to the extent, in the case of items of indebtedness under (i) through
(iii) above, that any such items (other than letters of credit) would appear as
a liability on the Company's consolidated balance sheet in accordance with GAAP,
and also includes, to the extent not otherwise included, any obligation by the
Company or any Subsidiary to be liable for, or to pay, as obligor, guarantor or
otherwise (other than for purposes of collection in the ordinary course of
business), Debt of another Person (other than the Company or any Subsidiary) (it
being understood that Debt shall be deemed to be incurred by the Company or any
Subsidiary whenever the Company or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Disqualified Stock" means, with respect to any Person, any Capital
Stock of such Person which by the terms of such Capital Stock (or by the terms
of any security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for common
stock or shares), (ii) is convertible into or exchangeable or exercisable for
Debt or Disqualified Stock, or (iii) is redeemable at the option of the holder
thereof, in whole or in part (other than Capital Stock which is redeemable
solely in exchange for common stock or shares), in each case on or prior to the
Stated Maturity of the Notes.
"Earnings from Operations" for any period means net earnings excluding
gains and losses on sales of investments, extraordinary items and property
valuation losses, as reflected in the financial statements of the Company and
its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.
"Encumbrance" means any mortgage, lien, charge, pledge or security
interest of any kind.
"Interest Payment Date" means any date on which interest is due and
payable on the Notes in accordance with the terms thereof.
"Issuance Date" means the closing date for the sale and original
issuance of the Notes.
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Note, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of such dollar if such redemption or accelerated
payment had not been made, determined by discounting, on a semiannual basis,
such principal and interest at the Reinvestment Rate (determined on the third
Business Day preceding the date such notice of redemption is given or
declaration of acceleration is made) from the respective dates on which such
principal and interest would have been payable if such redemption or accelerated
payment had not been made, over (ii) the aggregate principal amount of the Notes
being redeemed
-2-
<PAGE>
or paid. For purposes of this Supplemental Indenture and the Notes, references
in the Indenture to the payment of the principal (and premium, if any) and
interest on the Notes shall be deemed to include the payment of the Make-Whole
Amount, if any, due upon redemption with respect to the Notes.
"Notes" means the Company's $100,000,000 aggregate principal amount of
6.70% Senior Notes, due 2005, issued under this Indenture, as amended or
supplemented from time to time.
"Record Date" means the fifteenth calendar day, whether or not a
Business Day, next preceding the applicable Interest Payment Date.
"Reinvestment Rate" means a rate per annum equal to the sum of 0.25%
(twenty-five one hundredths of one percent) plus the yield on treasury
securities at constant maturity under the heading "Week Ending" published in the
Statistical Release under the caption "Treasury Constant Maturities" for the
maturity (rounded to the nearest month) corresponding to the remaining life to
maturity, as of the payment date of the principal being redeemed or paid. If no
maturity exactly corresponds to such maturity, yields for the two published
maturities most closely corresponding to such maturity shall be calculated
pursuant to the immediately preceding sentence and the Reinvestment Rate shall
be interpolated or extrapolated from such yields on a straight-line basis,
rounding in each of such relevant periods to the nearest month. For purposes of
calculating the Reinvestment Rate, the most recent Statistical Release published
prior to the date of determination of the Make-Whole Amount shall be used.
"SEC" means the Securities and Exchange Commission.
"Secured Debt" means Debt secured by any mortgage, lien, charge, pledge
or security interest of any kind.
"Securities Act" means the Securities Act of 1933, as amended.
"Statistical Release" means the statistical release designated "H.
15(519)" or any successor publication which is published weekly by the Federal
Reserve System and which establishes yields on actively traded United States
government securities adjusted to constant maturities or, if such statistical
release is not published at the time of any determination under this
Supplemental Indenture, then any publicly available source of similar market
data which shall be designated by the Company.
"Subsidiary" means any corporation or other entity of which a majority
of (i) the voting power of the voting equity securities or (ii) the outstanding
equity interests of which are owned, directly or indirectly, by the Company or
one or more other Subsidiaries of the Company. For the purposes of this
definition, "voting equity securities" means equity securities having voting
power for the election of directors, whether at all times or only so long as no
senior class of security has such voting power by reason of any contingency.
"Total Assets" as of any date means the sum of (i) the Undepreciated
Real Estate Assets and (ii) all other assets of the Company and its Subsidiaries
determined in accordance with GAAP (but excluding accounts receivable and
intangibles).
"Total Unencumbered Assets" means the sum of (i) those Undepreciated
Real Estate Assets not subject to an Encumbrance for borrowed money and (ii) all
other assets of the Company and its Subsidiaries not subject to an Encumbrance
for borrowed money determined in accordance with GAAP (but excluding accounts
receivable and intangibles).
-3-
<PAGE>
"Undepreciated Real Estate Assets" as of any date means the cost
(original cost plus capital improvements) of real estate assets of the Company
and its Subsidiaries on such date, before depreciation and amortization
determined on a consolidated basis in accordance with GAAP.
"Unsecured Debt" means Debt which is not secured by any of the
properties of the Company or any Subsidiary.
ARTICLE 2
TERMS OF THE NOTES
Section 2.1 Pursuant to Section 301 of the Indenture, the Notes shall
have the following terms and conditions:
(a) Title; Limitation on Aggregate Principal Amount; Form of Notes. The
Notes shall be known as the Company's $100,000,000 6.70% Senior Notes due 2005.
The Notes will be limited to an aggregate principal amount of $100,000,000. The
Notes (together with the Trustee's certificate of authentication) shall be
substantially in the form of Exhibit A hereto, which is hereby incorporated in
and made a part of this Supplemental Indenture.
The Notes will be issued in the form of single fully registered global
security without coupons (the "Global Note") which will be deposited with, or on
behalf of, The Depository Trust Company ("DTC"), and registered in the name of
DTC's nominee, Cede & Co. Except under the circumstance described below, the
Notes will not be issuable in a definitive form. Unless and until it is
exchanged in whole or in part for the individual notes represented thereby, the
Global Note may not be transferred except as a whole by DTC to a nominee of DTC
or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any nominee
of DTC to a successor depository or any nominee of such successor.
So long as DTC or its nominee is the registered owner of such Global
Note, DTC or such nominee, as the case may be, will be considered the sole owner
or holder of the Notes represented by such Global Note for all purposes under
this Supplemental Indenture. Except as described below, owners of beneficial
interest in Notes evidenced by the Global Note will not be entitled to have any
of the individual Notes represented by such Global Note registered in their
names, will not receive or be entitled to receive physical delivery of any such
Notes in definitive form and will not be considered the owners or holders
thereof under the Indenture or this Supplemental Indenture.
If DTC is at any time unwilling, unable or ineligible to continue as
depository and a successor depository is not appointed by the Company within 90
days, the Company will issue individual Notes in exchange for the Global Note
representing such Notes. In addition, the Company may at any time and in its
sole discretion, subject to certain limitations set forth in the Indenture,
determine not to have any of such Notes represented by one or more Global Notes
and in such event will issue individual Notes in exchange for the Global Note or
Notes representing such debt Securities. Individual Notes so issued will be
issued in denominations of $1,000 and integral multiples thereof and will be
issued in registered form only, without coupons.
(b) Principal Repayment; Currency. The Stated Maturity of the Notes is
February 23, 2005, provided, however, the Notes may be earlier redeemed at the
option of the Company as provided in paragraph (c) below. The principal of each
Note payable on its maturity date shall be paid against presentation and
surrender thereof at the Corporate Trust Office of the Trustee, located
initially at Two International Place, Boston, Massachusetts 02110, in such coin
or currency of the United States of America as at the time of
-4-
<PAGE>
payment is legal tender for the payment of public or private debts. The Company
will not pay Additional Amounts (as defined in the Indenture) on the Notes.
(c) Redemption at the Option of the Company; Acceleration. The Notes
will be subject to redemption at any time at the option of the Company, in whole
or in part, upon not less than 30 nor more than 60 days' notice to each Holder
of Notes to be redeemed at its address appearing in the Security Register, at a
price equal to the sum of (i) the principal amount of the Notes being redeemed,
plus accrued and unpaid interest to but excluding the applicable redemption date
and (ii) the Make-Whole Amount. Upon the acceleration of the Notes in accordance
with Section 502 of the Indenture, the principal amount of the Notes, plus
accrued and unpaid interest thereon and the Make-Whole Amount shall become due
and payable immediately.
(d) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted by
any standard form of telecommunication. Notices to the Company shall be directed
to it at 400 Centre Street, Newton, Massachusetts 02158, Attention: David J.
Hegarty, President; notices to the Trustee shall be directed to it at Two
International Place, Boston, Massachusetts 02110, Attention: Corporate Trust
Department, Re: Health and Retirement Properties Trust 6.70% Senior Notes due
2005.
(e) Global Note Legend. The Global Note shall bear the following legend
on the face thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
ARTICLE 3
ADDITIONAL COVENANTS
Section 3.1 In addition to the covenants of the Company set forth in
Article Ten of the Indenture, for the benefit of the holders of the Notes:
(a) Limitations on Incurrence of Debt.
(i) The Company will not, and will not permit any Subsidiary
to, incur any Debt if, immediately after giving effect to the
incurrence of such additional Debt and the application of the proceeds
thereof, the aggregate principal amount of all outstanding Debt of the
Company and its Subsidiaries on a consolidated basis determined in
accordance with GAAP is greater than 60% of the sum ("Adjusted Total
Assets") of (without duplication) (i) the Total Assets of the Company
and its Subsidiaries as of the end of the calendar quarter covered in
the Company's Annual Report on Form 10-K, or the Quarterly Report on
Form 10-Q, as the case may be, most recently filed with the Securities
and Exchange Commission (or, if such filing is not permitted under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
the Trustee) prior to the incurrence of such additional Debt and (ii)
the purchase price of any real estate assets or mortgages receivable
-5-
<PAGE>
acquired, and the amount of any securities offering proceeds received
(to the extent that such proceeds were not used to acquire real estate
assets or mortgages receivable or used to reduce Debt), by the Company
or any Subsidiary since the end of such calendar quarter, including
those proceeds obtained in connection with the incurrence of such
additional Debt.
(ii) In addition to the foregoing limitations on the
incurrence of Debt, the Company will not, and will not permit any
Subsidiary to, incur any Secured Debt if, immediately after giving
effect to the incurrence of such additional Secured Debt and the
application of the proceeds thereof, the aggregate principal amount of
all outstanding Secured Debt of the Company and its Subsidiaries on a
consolidated basis is greater than 40% of Adjusted Total Assets.
(iii) In addition to the foregoing limitations on the
Incurrence of Debt, the Company will not, and will not permit any
Subsidiary to, incur any Debt if the ratio of Consolidated Income
Available for Debt Service to the Annual Debt Service for the four
consecutive fiscal quarters most recently ended prior to the date on
which such additional Debt is to be incurred shall have been less than
1.5x, on a pro forma basis after giving effect thereto and to the
application of the proceeds therefrom, and calculated on the assumption
that (i) such Debt and any other Debt incurred by the Company and its
Subsidiaries since the first day of such four-quarter period and the
application of the proceeds therefrom, including to refinance other
Debt, had occurred at the beginning of such period; (ii) the repayment
or retirement of any other Debt by the Company and its Subsidiaries
since the first date of such four-quarter period had been repaid or
retired at the beginning of such period (except that, in making such
computation, the amount of Debt under any revolving credit facility
shall be computed based upon the average daily balance of such Debt
during such period); (iii) in the case of Acquired Debt or Debt
incurred in connection with any acquisition since the first day of such
four-quarter period, the related acquisition had occurred as of the
first day of such period with appropriate adjustments with respect to
such acquisition being included in such pro forma calculation; and (iv)
in the case of any acquisition or disposition by the Company or its
Subsidiaries of any asset or group of assets since the first day of
such four-quarter period, whether by merger, stock purchase or sale, or
asset purchase or sale, such acquisition or disposition or any related
repayment of Debt had occurred as of the first day of such period with
the appropriate adjustments with respect to such acquisition or
disposition being included in such pro forma calculation.
(b) Maintenance of Total Unencumbered Assets. The Company and its
Subsidiaries will maintain Total Unencumbered Assets of not less than 200% of
the aggregate outstanding principal amount of the Unsecured Debt of the Company
and its Subsidiaries on a consolidated basis.
(c) Applicability of Discharge, Defeasance and Covenant Defeasance
Provisions. The Discharge, Defeasance and Covenant Defeasance provisions in
Article Fourteen of the Indenture will apply to the Notes.
ARTICLE 4
ADDITIONAL EVENTS OF DEFAULT
For purposes of this Supplemental Indenture and the Notes, in addition
to the Events of Default set forth in Section 501 of the Indenture, it shall
also constitute an "Event of Default" if an event of default under any bond,
debenture, note or other evidence of indebtedness of the Company (including an
event of default with respect to any other series of securities), or under any
mortgage, indenture or other instrument of the Company under which there may be
issued or by which there may be secured or evidenced any indebtedness of the
Company (or by any Subsidiary, the repayment of which the Company has guaranteed
or for which the Company is directly responsible or liable as obligor or
guarantor), whether such indebtedness now exists
-6-
<PAGE>
or shall hereafter be created, shall happen and shall result in an aggregate
principal amount exceeding $20,000,000 becoming or being declared due and
payable prior to the date on which it would otherwise have become due and
payable, without such indebtedness having been discharged, or such acceleration
having been rescinded or annulled, within a period of ten days after there shall
have been given, by registered or certified mail, to the Company by the Trustee
or to the Company and the Trustee by the holders of at least 25% in principal
amount of the outstanding Notes, a written notice specifying such default and
requiring the Company to cause such indebtedness to be discharged or cause such
acceleration to be rescinded or annulled and stating that such notice is a
"Notice of Default" hereunder.
ARTICLE 5
EFFECTIVENESS
This Supplemental Indenture shall be effective for all purposes as of
the date and time this Supplemental Indenture has been executed and delivered by
the Company and the Trustee in accordance with Article Nine of the Indenture. As
supplemented hereby, the Indenture is hereby confirmed as being in full force
and effect.
ARTICLE 6
MISCELLANEOUS
Section 6.1 In the event any provision of this Supplemental Indenture
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision
hereof or any provision of the Indenture.
Section 6.2 To the extent that any terms of the Notes are inconsistent
with the terms of the Indenture, the terms of the Notes shall govern and
supersede such inconsistent terms.
Section 6.3 This Supplemental Indenture shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts.
Section 6.4 This Supplemental Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
-7-
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused this
Supplemental Indenture to be executed as an instrument under seal in their
respective corporate names as of the date first above written.
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ Ajay Saini
Ajay Saini
Treasurer
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Robert L. Bice II
Name: Robert L. Bice II
Title: Vice President
-8-
<PAGE>
EXHIBIT A
(Face of Note)
6.70% Senior Notes due 2005
No. $__________
HEALTH AND RETIREMENT PROPERTIES TRUST
promises to pay to _______________________________________ or registered
assigns, the principal sum of _____________________________________ Dollars on
February 23, 2005.
Interest Payment Dates: February 23 and August 23.
Record Dates: February 8 and August 8.
CUSIP No.: 422169AM4
HEALTH AND RETIREMENT PROPERTIES TRUST
By:____________________________________
Name:
Title:
[SEAL]
Dated:
This is one of the Notes referred to in the within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY, as Trustee
By:
Authorized Signatory
A - 1
<PAGE>
(Back of Note)
HEALTH AND RETIREMENT PROPERTIES TRUST
6.70% Senior Notes due 2005
Capitalized terms used herein have the meanings assigned to them in the
Indenture (as defined below) unless otherwise indicated.
1. Interest. Health and Retirement Properties Trust, a Maryland real
estate investment trust (the "Company"), promises to pay interest on the
principal amount of this Note at the rate and in the manner specified below.
The Company shall pay in cash interest on the principal amount of this
Note at the rate per annum of 6.70%. The Company will pay interest semi-annually
in arrears on February 23 and August 23 of each year, commencing on August 23,
1998 or if any such day is not a Business Day (as defined in the Indenture), on
the next succeeding Business Day (each an "Interest Payment Date"), to Holders
of record on the immediately preceding February 8 and August 8.
Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Interest shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of the
original issuance of the Notes.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the record date next preceding the Interest Payment
Date, even if such Notes are canceled after such record date and on or before
such Interest Payment Date. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. The Company, however, may pay principal, premium, if
any, and interest by check payable in such money. It may mail an interest check
to a Holder's registered address.
3. Indenture. The Company issued the Notes under an Indenture dated as
of July 9, 1997, as supplemented by a Supplemental Indenture dated as of
February 23, 1998 (the "Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are
subject to all such terms, and Holders of the Notes are referred to the
Indenture and such act for a statement of such terms. The terms of the Indenture
shall govern any inconsistencies between the Indenture and the Notes. The Notes
are unsecured general obligations of the Company limited to $100,000,000 in
aggregate principal amount.
4. Optional Redemption. The Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at a redemption price equal to the sum of (i) the
principal amount of the Notes being redeemed, plus accrued and unpaid interest
to but excluding the applicable redemption date and (ii) the Make-Whole Amount.
As used herein the term "Make-Whole Amount" means, in connection with
any optional redemption or accelerated payment of any Note, the excess, if any,
of (i) the aggregate present value as of the date of such redemption or
accelerated payment of each dollar of principal being redeemed or paid and the
amount of interest (exclusive of interest accrued to the date of redemption or
accelerated payment) that would have been payable in respect of such dollar if
such redemption or accelerated payment had not been made, determined by
discounting, on a semiannual basis, such principal and interest at the
Reinvestment Rate (as defined
A - 2
<PAGE>
herein) (determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Notes being redeemed or paid.
As used herein the term "Reinvestment Rate" means a rate per annum
equal to the sum of 0.25% (twenty-five one hundredths of one percent) plus the
yield on treasury securities at constant maturity under the heading "Week
Ending" published in the Statistical Release (as defined herein) under the
caption "Treasury Constant Maturities" for the maturity (rounded to the nearest
month) corresponding to the remaining life to maturity, as of the payment date
of the principal being redeemed or paid. If no maturity exactly corresponds to
such maturity, yields for the two published maturities most closely
corresponding to such maturity shall be calculated pursuant to the immediately
preceding sentence and the Reinvestment Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding in each of such
relevant periods to the nearest month. For purposes of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole Amount shall be used.
As used herein the term "Statistical Release" means the statistical
release designated "H. 15(519)" or any successor publication which is published
weekly by the Federal Reserve System and which establishes yields on actively
traded United States government securities adjusted to constant maturities or,
if such statistical release is not published at the time of any determination
under the Supplemental Indenture, then such other reasonably comparable index
which shall be designated by the Company.
5. Mandatory Redemption. The Company shall not be required to make
sinking fund or redemption payments with respect to the Notes.
6. Notice of Redemption. Notice of redemption shall be mailed at least
30 days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at its registered address. Notes may be redeemed in part
but only in whole multiples of $1,000, unless all of the Notes held by a Holder
are to be redeemed. On and after the redemption date, interest ceases to accrue
on Notes or portions of them called for redemption.
7. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples thereof. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not exchange or register the transfer of any Note or portion of a Note
selected for redemption. Also, it need not exchange or register the transfer of
any Notes for a period of 15 days before the mailing of a notice of redemption
of Notes, or during the period between a record date and the corresponding
Interest Payment Date.
8. Defaults and Remedies. In case an Event of Default (as defined in
the Indenture) with respect to the Notes shall have occurred and be continuing,
the principal hereof may be declared, and upon such declaration shall become,
due and payable, in the manner, with the effect and subject to the provisions
provided in the Indenture.
9. Actions of Holders. The Indenture contains provisions permitting the
holders of not less than a majority of the aggregate principal amount of the
outstanding Notes, on behalf of the holders of all such Notes at a meeting duly
called and held as provided in the Indenture, to make, give or take any request,
demand, authorization, direction, notice, consent, waiver or other action
provided in the Indenture to be made, given or taken by the holders of the
Notes, including without limitation, waiving (a) compliance by the Company with
certain provisions of the Indenture, and (b) certain past defaults under the
Indenture and their
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<PAGE>
consequences. Any resolution passed or decision taken at any meeting of the
holders of the Notes in accordance with the provisions of the Indenture shall be
conclusive and binding upon such holders and upon all future holders of this
Note and other Notes issued upon the registration of transfer hereof or in
exchange heretofore or in lieu hereof
10. Persons Deemed Owners. The Company, the Trustee, and any agent of
the Company or the Trustee may deem and treat the Person in whose name this Note
is registered on the Security Register as its absolute owner for all purposes.
11. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
12. Governing Law. THE INTERNAL LAW OF THE COMMONWEALTH OF
MASSACHUSETTS SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE AND THE NOTES.
13. No Personal Liability. THE AMENDED AND RESTATED DECLARATION OF
TRUST OF THE COMPANY, DATED JULY 1, 1994, A COPY OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT
THE NAME "HEALTH AND 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 THE COMPANY
SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL PERSONS DEALING WITH THE
COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE COMPANY FOR THE
PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to:
Health and Retirement Properties Trust
400 Centre Street
Newton, MA 02158
Telecopier No.: (617) 332-2261
Attention: President
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<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee:
Exhibit 8.1
SULLIVAN & WORCESTER LLP
One Post Office Square
Boston, Massachusetts 02109
March 11, 1998
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Ladies and Gentlemen:
In connection with the filing by Health and Retirement Properties
Trust, a Maryland real estate investment trust (the "Company"), of its Annual
Report on Form 10-K for the year ended December 31, 1997 (the "Form 10-K"),
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
following opinion is furnished to you to be filed with the Securities and
Exchange Commission (the "SEC") as Exhibit 8.1 to the Form 10-K.
We have acted as counsel for the Company in connection with the
preparation of its Form 10-K, and we have examined originals or copies,
certified or otherwise identified to our satisfaction, of corporate records,
certificates and statements of officers and accountants of the Company and of
public officials, and such other documents as we have considered relevant and
necessary in order to furnish the opinion hereinafter set forth. Specifically,
and without limiting the generality of the foregoing, we have reviewed: (i) the
declaration of trust, as amended and restated, and the by-laws of the Company;
and (ii) the sections in the Company's Form 10-K captioned "Federal Income Tax
Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement
Accounts." With respect to all questions of fact on which such opinions are
based, we have assumed the accuracy and completeness of and have relied on the
information set forth in the Form 10-K and in the documents incorporated therein
by reference, and on representations made to us by the officers of the Company.
We have not independently verified such information; nothing has come to our
attention, however, which would lead us to believe that we are not entitled to
rely on such information.
The opinion set forth below is based upon the Internal Revenue Code of
1986, as amended, the Treasury Regulations issued thereunder, published
administrative interpretations thereof, and judicial decisions with respect
thereto, all as of the date hereof (collectively the "Tax Laws"), and upon the
Employee Retirement Income Security Act of 1974, as amended,
<PAGE>
Health and Retirement Properties Trust
March 11, 1998
Page 2
the Department of Labor regulations issued thereunder, published administrative
interpretations thereof, and judicial decisions with respect thereto, all as of
the date hereof (collectively, the "ERISA Laws"). No assurance can be given that
the Tax Laws or the ERISA Laws will not change. In preparing the discussions
with respect to the matters in the sections of the Form 10-K captioned "Federal
Income Tax Considerations" and "ERISA Plans, Keogh Plans and Individual
Retirement Accounts," we have made certain assumptions and expressed certain
conditions and qualifications therein, all of which assumptions, conditions and
qualifications are incorporated herein by reference.
Based upon and subject to the foregoing, we are of the opinion that the
discussions in the sections of the Form 10-K captioned "Federal Income Tax
Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement
Accounts," in all material respects are accurate and fairly summarize the Tax
Laws issues and ERISA Laws issues addressed therein, and hereby confirm that the
opinions of counsel referred to in said sections represent our opinions on the
subject matter thereof.
We hereby consent to the incorporation of this opinion by reference as
an exhibit to the Form 10-K and to the reference to our firm therein. In giving
such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or under the rules and regulations of the SEC promulgated
thereunder.
Very truly yours,
/s/ Sullivan & Worcester LLP
SULLIVAN & WORCESTER LLP
EXHIBIT 10.33
EXECUTION COPY
U.S. $450,000,000
FOURTH AMENDMENT TO
THIRD AMENDED AND RESTATED REVOLVING LOAN AGREEMENT
among
HEALTH AND RETIREMENT PROPERTIES TRUST,
as Borrower,
THE LENDERS NAMED HEREIN,
DRESDNER KLEINWORT BENSON NORTH AMERICA LLC,
as Agent,
FLEET NATIONAL BANK,
as Administrative Agent
Dated as of November 14, 1997
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
FOURTH AMENDMENT TO
THIRD AMENDED AND RESTATED REVOLVING LOAN AGREEMENT
DATED AS OF NOVEMBER 14, 1997
This FOURTH AMENDMENT (this "Amendment") is dated as of November 14,
1997 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"), DRESDNER KLEINWORT
BENSON NORTH AMERICA LLC (as successor to Kleinwort Benson Limited), a limited
liability company organized under the laws of Delaware, 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"), and FLEET NATIONAL BANK (as successor to Fleet Bank of Massachusetts)
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 is made with reference to the Third Amended and Restated Revolving
Loan Agreement dated as of March 15, 1996, as amended by a First Amendment dated
as of December 15, 1996, a Second Amendment and Waiver dated as of March 19,
1997 and a Third Amendment dated as of July 30, 1997 (as amended to date and
from time to time hereafter, the "Loan Agreement") among Borrower, the Lenders,
Agent, Administrative Agent and Co-Agents referred to therein and, in connection
with Section 9 of the Loan Agreement and the guaranties given therein, HEALTH
AND RETIREMENT PROPERTIES INTERNATIONAL, INC., a Delaware corporation and a
direct wholly-owned Subsidiary of Borrower ("Retirement Properties"), CAUSEWAY
HOLDINGS INC., a Massachusetts corporation and a direct wholly-owned Subsidiary
of Borrower ("Causeway"), SJO CORPORATION, a Massachusetts corporation and a
direct wholly-owned Subsidiary of Borrower ("SJO"), HUB PROPERTIES TRUST, HUB
ACQUISITION TRUST, and HUB LA PROPERTIES TRUST, each a Maryland real estate
investment trust and each a direct wholly-owned Subsidiary of Borrower (the
"Trust Subsidiaries"), HUB REALTY FUNDING, INC., HUB MANAGEMENT, INC., HUB
REALTY COLLEGE PARK, INC., HUB REALTY I, INC., HUB REALTY IV., INC. and HUB
REALTY GOLDEN, INC., each a Delaware corporation and a wholly-owned Subsidiary
of Borrower (the "Delaware Subsidiaries"), and HUB REALTY COLLEGE PARK I, LLC, a
Maryland limited liability company and a wholly-owned Subsidiary of Borrower
(the "LLC"). Capitalized terms used herein without definition shall have the
same meanings herein as set forth in the Loan Agreement.
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<PAGE>
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:
1. Amendments to Loan Agreement.
(a) Section 1.1 of the Loan Agreement is hereby amended by the
amendment and restatement of the definition of "Facility" as follows:-
""Facility" means each (i) operating facility offering health
care or related services or rehabilitation or retirement
services or other health care 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, and (ii) facility comprising
office or similar administrative type space (including,
without limitation, the Fee Interest and/or Leasehold
Interests associated with such facility) in which Borrower or
any of its Subsidiaries has acquired an interest as owner or
lessee and which facility is leased or subleased by Borrower
or any of its Subsidiaries to a Government Agency or, in the
case of a Medical Office Asset, for medical research and
development or, in the case of a Fee or Mortgage Interest
described in Section 6.7(vi), for any business purpose,
including, without limitation, in the case of both (i) and
(ii), each Property and Mortgaged Property.
(b) Section 6.7 of the Loan Agreement is hereby amended by deleting the
word "and" immediately before (v) in the text thereof and replacing it with a
comma, deleting the period at the end thereof and adding the following proviso
at the end thereof:-
", and (vi) notwithstanding the preceding provisions of this
Section 6.7, Borrower shall not be deemed to have made any
material change in the nature of its business as presently
conducted to the extent that the Borrower directly, or
indirectly through a Subsidiary, acquires or operates, or
acquires or funds a Mortgage Interest in, income producing
real property interests and facilities not heretofore
described in this Section 6.7 if such real property interests
or Mortgage Interests (i) valued at cost as of
2
<PAGE>
the date of their respective acquisitions, do not in the
aggregate exceed 10% of the aggregate Allowed Value of the
Properties and Mortgage Interests of the Borrower and its
Subsidiaries on a consolidated basis determined (x) at the
time of such acquisition or (y) if a facility is at the time
of its acquisition of a type heretofore described in this
Section 6.7 but is thereafter converted to a type not
heretofore so described, on the date of such conversion, and
(ii) are not treated by the Borrower as Eligible Properties or
Eligible Mortgages, as the case may be, for any purpose of
this Agreement."
(c) Sections 7.1 (r) and (s) of the Loan Agreement are hereby amended
and restated as follows:
"(r) Medical Office Assets and Clinics. More than 55% of the
aggregate Allowed Value of the Properties and Mortgage
Interests shall be attributable to Medical Office Assets
and/or Clinics; or"
(d) Sections 7.1 (t), (u) and (v) are hereby renumbered as Sections 7.1
(s), (t) and (u), respectively.
2. Conditions to Effectiveness.
Section 1 of this Amendment shall become effective immediately 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, the Trust Subsidiaries, the Delaware Subsidiaries and
the LLC, Agent, Co-Agent(s) and the Majority Lenders.
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.
3
<PAGE>
(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 (i) do not violate any Requirement of Law or Contractual Obligation
of Borrower, (ii) 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 and (iii) do not require the consent of
any third party.
(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 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) After giving effect to this Amendment, no event has occurred and is
continuing or will result from the consummation of 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 May 14, 1997, 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. Guarantors' Acknowledgement and Consent.
Each of Retirement Properties, Causeway, SJO, the Trust Subsidiaries,
the Delaware Subsidiaries and the LLC (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
payment 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
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<PAGE>
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.
5. 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.
6. Fees and Expenses. Borrower agrees to pay to Agent on demand 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.
7. 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.
8. 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.
9. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
10. 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.
5
<PAGE>
11. Acknowledgment. Borrower acknowledges that there are no existing
claims, defenses, personal or otherwise, or rights of set off whatsoever with
respect to the Amended Agreement or any of the other Loan Documents.
12. NONLIABILITY OF TRUSTEES.
(a) 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.
(b) THE DECLARATIONS OF TRUST ESTABLISHING HUB PROPERTIES TRUST DATED
SEPTEMBER 12, 1996, HUB ACQUISITION TRUST DATED MARCH 14, 1997 AND HUB LA
PROPERTIES TRUST DATED MAY 12, 1997, A COPY OF EACH OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE "TRUST SUBSIDIARIES DECLARATIONS"), IS DULY FILED WITH
THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES
THAT THE NAMES "HUB PROPERTIES TRUST", "HUB ACQUISITION TRUST" AND "HUB LA
PROPERTIES TRUST" REFER TO THE RESPECTIVE TRUSTEES UNDER THE RESPECTIVE TRUST
SUBSIDIARIES DECLARATIONS COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF ANY
OF THE TRUST SUBSIDIARIES SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SUCH TRUST SUBSIDIARY. ALL
PERSONS DEALING WITH EACH TRUST SUBSIDIARY, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF SUCH TRUST SUBSIDIARY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF
ANY OBLIGATION.
[Remainder of page intentionally left blank]
6
<PAGE>
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
DRESDNER KLEINWORT BENSON
NORTH AMERICA LLC, as Agent
By: /s/
Name:
Title Executive Vice President
By: /s/
Name:
Title
DRESDNER BANK AG, New York Branch,
as a Lender
By: /s/ Felix K. Camacho
Name: Felix K. Camacho
Title Assistant Treasurer
By: /s/ Robert Grella
Name: Robert Grella
Title Vice President
S - 1
<PAGE>
FLEET NATIONAL BANK, as
Administrative Agent and as a Lender
By: /s/ Ginger Stolzenthaler
Name: G. Stolzenthaler
Title Senior Vice President
BANK OF MONTREAL, as a Co-Agent and
as a Lender
By: /s/ Jeff Forsythe
Name: Jeff Forsythe
Title Director
CIBC INC., as a Co-Agent and as a Lender
By: /s/ Timothy E. Doyle
Name: Timothy E. Doyle
Title Managing Director CIBC Oppenheimer
Corp as Agent
CITICORP REAL ESTATE, INC., as a Co-
Agent and as a Lender
By: /s/ Susan McManigal
Name: Susan McManigal
Title Attorney-In-Fact
CREDIT LYONNAIS, Cayman Island
Branch, as a Co-Agent and as a Lender
By: /s/ Farboud Tavangar
Name: Farboud Tavangar
Title First Vice President
S - 2
<PAGE>
FIRST UNION NATIONAL BANK, as a
Co-Agent and as a Lender
By: /s/ Joseph H. Towell
Name: Joseph H. Towell
Title Senior Vice President
KEY CORPORATE CAPITAL INC., as a
Co-Agent and as a Lender
By: /s/ Angela G. Mago
Name: Angela G. Mago
Title Vice President
SOCIETE GENERALE, as a Co-Agent and
as a Lender
By: /s/ Sedare Coradin
Name: Sedare Coradin
Title Vice President
THE SUMITOMO BANK, LIMITED, as a
Lender
By: /s/D.G. Eastman
Name: D.G. Eastman
Title Vice President and manager
By: /s/ Alfred DoGermanis
Name: Alfred DoGermanis
Title Vice President
S - 3
<PAGE>
ABBEY NATIONAL TREASURY
SERVICES PLC, as a Lender
By: /s/ R. Gambel
Name: R. Gambel
Title Asset Backed Securities
VIA BANQUE, as a Lender
By: /s/ C. Prot
Name: C. Prot
Title Senior Directory
By: /s/ P. Arnout
Name: P. Arnout
Title Director
RIGGS BANK N.A., as a Lender
By: /s/
Name:
Title
THE BANK OF NEW YORK, as a Lender
By: /s/ David C. Judge
Name: David C. Judge
Title Vice President
S - 4
<PAGE>
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., New York Branch, as a
Lender
By: /s/ Hiroshi Kitada
Name: Hiroshi Kitada
Title Deputy General Manager
THE BANK OF NOVA SCOTIA, New York
Agency, as a Lender
By: /s/ Chistopher I. Grant
Name: Chistopher I. Grant
Title Senior Relationship Manager
BANQUE NATIONAL DE PARIS, as a
Lender
By: /s/ Katherine Wolfe
Name: Katherine Wolfe
Title Vice President
By: /s/ Charles H. Day
Name: Charles H. Day
Title Assistant Vice President
DG BANK, DEUTSCHE
GENOSSENSCHAFTSBANK, Cayman
Island Branch, as a Lender
By: /s/ Linda J. O'Connell
Name: Linda J. O'Connell
Title Vice President
By: /s/ Karen A. Brinkman
Name: Karen A. Brinkman
Title Vice President
S - 5
<PAGE>
SIGNET BANK, as a Lender
By: /s/ Frieda M.A. McWilliams
Name: Frieda M.A. McWilliams
Title Vice President
MITSUI LEASING (U.S.A.) INC., as a
Lender
By: /s/ Yuichi Kamizawa
Name: Yuichi Kamizawa
Title Vice President
ARAB AMERICAN BANK, as a Lender
By: /s/ Peter Rivera
Name: Peter Rivera
Title Assistant Vice President
By: /s/ William G. Reynolds
Name: William G. Reynolds
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
S - 6
<PAGE>
SJO CORPORATION
By: /s/ Ajay Saini
Name: Ajay Saini
Title Treasurer
HUB PROPERTIES TRUST
By: /s/ Ajay Saini
Name: Ajay Saini
Title Treasurer
HUB ACQUISITION TRUST
By: /s/ Ajay Saini
Name: Ajay Saini
Title Treasurer
HUB LA PROPERTIES TRUST
By: /s/ Ajay Saini
Name: Ajay Saini
Title Treasurer
HUB REALTY FUNDING, INC.
By: /s/ Ajay Saini
Name: Ajay Saini
Title Treasurer
HUB MANAGEMENT, INC.
By: /s/ Ajay Saini
Name: Ajay Saini
Title Treasurer
S - 7
<PAGE>
HUB REALTY COLLEGE PARK, INC.
By: /s/ Ajay Saini
Name: Ajay Saini
Title Treasurer
HUB REALTY I, INC.
By: /s/ Ajay Saini
Name: Ajay Saini
Title Treasurer
HUB REALTY IV, INC.
By: /s/ Ajay Saini
Name: Ajay Saini
Title Treasurer
HUB REALTY GOLDEN, INC.
By: /s/ Ajay Saini
Name: Ajay Saini
Title Treasurer
HUB REALTY COLLEGE PARK I,
LLC
By: /s/ Ajay Saini
Name: Ajay Saini
Title Treasurer
S - 8
<TABLE>
<CAPTION>
Exhibit 12.1
HEALTH AND RETIREMENT PROPERTIES TRUST
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands, except ratio amounts)
For the Years Ended December 31,
----------------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income before gain on sale of properties
and extraordinary items $112,204 $77,164 $61,760 $57,878 $37,738
Fixed charges 38,564 23,279 26,218 10,096 6,529
Adjusted Earnings $150,768 $100,443 $87,978 $67,974 $44,267
================ ================= ================ =============== =============
Fixed Charges:
Interest expense $36,766 $22,545 $24,274 $8,965 $6,217
Amortization of deferred financing costs 1,798 734 1,944 1,131 312
Total Fixed Charges $38,564 $23,279 $26,218 $10,096 $6,529
================ ================= ================ =============== =============
Ratio of Earnings to Fixed Charges 3.9x 4.3x 3.4x 6.7x 6.8x
================ ================= ================ =============== =============
</TABLE>
Exhibit 21.1
HEALTH AND RETIREMENT PROPERTIES TRUST
SUBSIDIARIES OF THE REGISTRANT
Causeway Holdings, Inc.
SJO Corporation
Health & Retirement Properties International, Inc.
Church Creek Corporation
Idemnity Collection Corporation
HUB Properties Trust
HUB LA Properties Trust
HUB Acquisition Trust
HUB Realty Funding, Inc. (formerly Rosecliff Realty Funding, Inc.)
HUB Management, Inc. (formerly Government Property Investors Management, Inc.)
HUB Realty College Park, Inc. (formerly Rosecliff Realty College Park, Inc.)
HUB Realty Richland, Inc. (formerly Rosecliff Realty Richland, Inc.)
HUB Realty Buffalo, Inc. (formerly Rosecliff Realty Buffalo, Inc.)
HUB Realty Golden, Inc. (formerly Rosecliff Realty Golden, Inc.)
HUB Realty Kansas City, Inc. (formerly Rosecliff Kansas City, Inc.)
HUB Realty III, Inc. (formerly Rosecliff Realty III, Inc. merged into HUB
Acquisition Trust 1/98)
HUB RI Properties Trust
HUB Woodmont Investment Trust
HUB Woodmont LLC
EPA Golden, L.P.
HUB LA Limited Partnership
HUB Realty College Park I, LLC
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in Post-Effective Amendment No. 1
to the Registration Statement (Form S-3 No. 33-62135) of Health and Retirement
Properties Trust and in the related Prospectus, in the Registration Statement
(Form S-3 No. 333- 26887) of Health and Retirement Properties Trust and in the
related prospectus; and in the Registration Statement (Form S-3 No. 333-34823)
of Health and Retirement Properties Trust and in the related Prospectus of our
report dated February 9, 1998, with respect to the consolidated financial
statements of Health and Retirement Properties Trust incorporated by reference
in this Annual Report (Form 10-K) for the year ended December 31, 1997.
Our audits also included the financial statement schedules of Health and
Retirement Properties Trust listed in Item 14(a). These schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, the financial statement schedules
referred to above, when considered in relation to the basic financial statements
taken as a whole, present fairly in all material respects the information set
forth therein.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
March 9, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated February 3, 1998 included in Marriott International, Inc.'s annual
report on Form 10-K for the year ended January 2, 1998 (File No. 1-12188) into
Health and Retirement Properties Trust's Form 10-K, and into the Health and
Retirement Properties Trust's previously filed Registration Statements File Nos.
33-62135, 333-26887 and 333-34823.
/s/ ARTHUR ANDERSEN LLP
Washington, D.C.
March 5, 1998
EXHIBIT 99.1
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 27, 1998
HEALTH AND RETIREMENT PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland 1-9317 04-6558834
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
400 Centre Street, Newton, MA 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
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following information is provided in connection with the financial
statements filed as Item 7 to this Current Report and should be read in
conjunction with the financial statements and notes thereto included elsewhere
herein.
Results of Operations
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Total revenues for the year ended December 31, 1997 increased to $208.9
million from $120.2 million for the year ended December 31, 1996. Rental income
increased by $90.0 million and interest and other income decreased by $1.3
million. Rental income increased because of new real estate investments in 1997,
and partly as a result of the Company's increased investments in "gross leased"
real estate assets as compared to "net leased" assets during the 1997 period as
compared to the 1996 period. As the Company's investment in such "gross leased"
assets increases, the Company anticipates rental income and the corresponding
operating expenses from such leases to increase during subsequent periods.
Interest and other income decreased primarily as a result of prepayments and
repayments of mortgage investments, which was offset, in part, by an increase in
earnings on the Company's short-term investments in the 1997 period compared to
the 1996 period.
Total expenses for the year ended December 31, 1997 increased to $114.5
million from $55.5 million for the year ended December 31, 1996. Operating
expenses increased by $23.0 million as a result of the Company's increased
investment in "gross leased" real estate assets during the 1997 period as
compared to the 1996 period. Interest expense increased by $14.2 million due to
higher borrowings during the 1997 period. Depreciation and amortization, and
general and administrative expenses increased by $17.2 million and $4.6 million,
respectively, primarily as a result of new real estate investments in 1997 and
1996.
Net income increased to $114.0 million, or $1.24 per basic share for the
1997 period, from $73.3 million, or $1.11 per basic share for the 1996 period.
Net income increased primarily as a result of new investments in 1997 and 1996.
In addition, net income increased as a result of a $2.9 million gain on sale of
properties, the recognition of a $9.3 million gain on equity transaction of the
Company's formerly wholly owned subsidiary Hospitality Properties Trust ("HPT")
during the 1997 period compared to a $3.6 million gain in the 1996 period, and
by an extraordinary loss of $1.1 million during the 1997 period compared to a
$3.9 million extraordinary loss during the 1996 period, both resulting from the
early extinguishment of debt. 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.
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 HPT's equity transaction, 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, 1997, were $146.3 million, or $1.59 per basic share, versus $99.1
million, or $1.50 per basic share, in 1996. Funds from operations for 1997
increased $47.2 million, or 47.6%, over the prior year. The increase is the
result of new investments in 1997 and 1996. Dividends declared for the years
ended December 31, 1997 and 1996 were $144.3 million, or $1.46 per basic share,
and $94.3 million, or $1.42 per basic share, respectively. Dividends in excess
of net income constitute a return of capital. For 1997, the return of capital
portion reported was 17.4% of dividends and the long-term capital gain portion
was 1.7% 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.
1
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Cash flows provided by (used for) operating, investing and financing
activities were $185.7 million, ($815.2) million and $630.0 million,
respectively, for the year ended December 31, 1997 and $98.3 million, ($235.3)
million and $140.2 million, respectively, for the year ended December 31, 1996.
The increases in all three categories are primarily the result of new real
estate investments in 1997.
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 HPT. During 1995, HPT completed its initial public offering
and 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 which 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.
Net income for 1996 increased to $73.3 million, or $1.11 per basic share,
from $64.2 million, or $1.08 per basic 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.
Cash flows 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.
Liquidity and Capital Resources
Total assets of the Company increased to $2.1 billion at December 31, 1997
from $1.2 billion as of December 31, 1996. The increase is primarily
attributable to the Company's new real estate investments during 1997.
During 1997, the Company acquired three nursing properties, one retirement
community, 22 medical and other office buildings and 20 medical clinics for an
aggregated amount of $554.8 million and provided debt financing and improvement
funding totaling $4.8 million to its existing properties. These transactions
were funded by borrowing on the Company's revolving credit facility and
available cash. In addition, the Company sold 14 nursing properties for $33.5
million, which resulted in a gain of $2.9 million. During 1997, the Company
received regularly scheduled principal payments and prepayment on real estate
mortgages of approximately $49.5 million.
In February 1997, the Company agreed to acquire 30 office buildings (the
"Government Properties") leased to various agencies of the United States
Government. As of December 31, 1997, the Company had completed the purchase of
29 of the Government Properties for $439.5 million and elected not to acquire
one of the Government Properties under development. The acquisition of the
Government Properties was funded, in part, with the proceeds from the issuance
of the Company's common shares pursuant to a public offering, the issuance of
4,019,429 common shares of the Company in a private placement and the assumption
of $27.6 million of debt. Subsequently, in January 1998, the Company sold one of
the Government Properties for $5.7 million; no gain or loss was recognized on
the sale of this property.
2
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
Management's Discussion and Analysis of Financial Condition and Results of
Operations
At December 31, 1997, the Company owned 4.0 million, or 10.3%, of the
common shares of beneficial interest of HPT with a carrying value of $111.1
million and a market value of $131.5 million. During December 1997, HPT
completed a public stock offering of 12.0 million common shares of beneficial
interest at a per share price of $33.0625 for total consideration of
approximately $396.8 million. As a result of this transaction, the Company's
ownership percentage in HPT was reduced from 14.9% to 10.3% and the Company
realized a gain of $9.3 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. These amounts are not included in the Company's calculation of
FFO.
In March 1997, the Company issued 27,025,000 common shares and received net
proceeds of $483.2 million. The proceeds were used to acquire the Government
Properties.
In March 1997, the Company extended and modified its $250.0 million
unsecured revolving bank credit facility. Subsequently, in July 1997, the
Company expanded the credit facility to $450.0 million. The revolving bank
credit facility matures in 2001 and bears interest at LIBOR plus a premium.
During July 1997, the Company issued senior unsecured Remarketed Reset
Notes (the "Notes") totaling $200.0 million. The Notes are due in 2007 and the
initial interest rate is LIBOR plus a premium, reset quarterly. In July 1998,
these Notes may be prepaid without a premium, or the interest rate and interest
period on these Notes may be fixed for the balance of the term or a lesser
period at the Company's option and the Notes will be remarketed. Proceeds from
the issuance of the Notes were used to prepay $125.0 million of the Company's
Floating Rate Senior Notes, Series B, due 1999 and $75.0 million outstanding
under the Company's revolving bank credit facility. In connection with this
refinancing, the Company recognized an extraordinary loss of $1.1 million from
the write-off of unamortized deferred financing costs.
In December 1997, the Company issued unsecured Senior Notes totaling $150.0
million. The notes bear interest at 6.75% and mature in 2002. Net proceeds from
the notes were used for general business purposes and to repay $140.0 million
then outstanding under the Company's revolving bank credit facility.
At December 31, 1997, the Company had $22.4 million of cash and cash
equivalents and had drawn $200.0 million of the $450.0 million revolving bank
credit facility. In addition, in May 1997, the Company filed a $1.0 billion
Shelf Registration Statement (the "Shelf") that has been declared effective by
the Securities and Exchange Commission. At December 31, 1997, $800.0 million was
available to be drawn on the Shelf.
As of December 31, 1997, the Company had commitments to provide improvement
financing to existing properties and to purchase ten medical and other office
buildings totaling approximately $92.1 million. The Company intends to fund
these commitments with a combination of cash on hand, amounts available under
its existing credit facility, proceeds of mortgage prepayments, if any, and/or
proceeds of other financings such as the possible issuance of additional
securities. In January and February 1998, the Company acquired ten medical and
other office buildings for $81.6 million with available cash and by borrowing on
the Company's revolving bank credit facility.
During February 1998, the Company issued 5,495,776 common shares, issued
additional Notes totaling $50.0 million and issued 6.7% unsecured Senior Notes
due 2005 totaling $100.0 million. Net proceeds of $253.3 million were used to
repay amounts outstanding under the Company's revolving credit facility and for
general business purposes.
The Company continues to seek new investments to expand and diversify its
portfolio of 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. As of December 31, 1997, the
Company's debt as a percentage of total book capitalization was approximately
38%. 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.
3
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Impact of Inflation
Management believes that the Company may not be adversely affected by
modest 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 fixed rent terms. In the health care and hotel industries, inflation usually
increases the lessees' revenues, thereby increasing the Company's additional
rent or interest.
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" and the
ability to access capital markets depends upon various factors over which the
Company and/or the Company's lessees 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 in 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.
The Company's Year 2000 initiative is being managed by the Company to
minimize any adverse effect on the Company's business operations and is
scheduled to be completed in 1999. While the Company believes its planning
efforts are adequate to address its Year 2000 concerns, there can be no
guarantee that the systems of other companies on which the Company's systems and
operations rely will be converted on a timely basis and will not have a material
effect on the Company. The cost of the Year 2000 initiatives is not expected to
be material to the Company's results of operations or financial position.
4
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
<TABLE>
<CAPTION>
Item 7. Financial Statements and Exhibits
(a) Financial Statements
<S> <C>
Report of Ernst & Young LLP, Independent Auditors...............................................F-1
Report of Arthur Andersen LLP, Independent Public Accountants...................................F-2
Consolidated Balance Sheets for the years ended December 31, 1997 and 1996......................F-3
Consolidated Statements of Income for each of the three years in the
period ended December 31, 1997..............................................................F-4
Consolidated Statements of Shareholders_ Equity for each of the three years in the
period ended December 31, 1997..............................................................F-5
Consolidated Statements of Cash Flows for each of the three years in the period
ended December 31, 1997.....................................................................F-6
Notes to Consolidated Financial Statements......................................................F-8
</TABLE>
(c) Exhibits
10.1 Master Management Agreement by and between Health and
Retirement Properties Trust and REIT Management and Research,
Inc., dated as of January 1, 1998
10.2 Parking Operation Management Agreement by and between HUB
Properties Trust, a subsidiary of Health and Retirement
Properties Trust, and REIT Management and Research, Inc.,
dated as of January 1, 1998
23. Consent of Ernst & Young LLP
27. Financial Data Schedule
5
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Trustees and Shareholders of Health and Retirement Properties Trust
We have audited the accompanying consolidated balance sheets of Health and
Retirement Properties Trust as of December 31, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1997. 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 10.3% and 14.9% interest as
of December 31, 1997 and 1996, respectively) 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, 1997 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
February 9, 1998
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders of
Hospitality Properties Trust
We have audited the consolidated balance sheet of Hospitality Properties
Trust (the "Company") as of December 31, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity and cash flows (not
separately presented herein) for the years ended December 31, 1997, 1996 and the
period from February 7, 1995 (inception) to December 31, 1995. 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, 1997 and 1996 and the results of its
operations and its cash flows for the years ended December 31, 1997 and 1996,
and for the period from February 7, 1995 (inception) to December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Washington, D.C.
January 16, 1998
F-2
<PAGE>
<TABLE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
December 31,
-------------------------------------
1997 1996
-------------------------------------
<S> <C> <C>
ASSETS
Real estate properties, at cost (including properties leased to
affiliates with a cost of $112,075 and $109,843, respectively):
Land $ 256,582 $ 93,522
Buildings and improvements 1,712,441 912,217
----------- -----------
1,969,023 1,005,739
Less accumulated depreciation 111,669 76,921
----------- -----------
1,857,354 928,818
Real estate mortgages and notes, net (including note from an affiliate
of $2,365) 104,288 150,205
Investment in Hospitality Properties Trust 111,134 103,062
Cash and cash equivalents 22,355 21,853
Interest and rents receivable 20,455 11,612
Deferred interest and finance costs, net, and other assets 20,377 13,972
----------- -----------
$ 2,135,963 $ 1,229,522
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank notes payable $ 200,000 $ 140,000
Senior notes payable, net 349,900 124,385
Mortgage notes payable 26,329 --
Convertible subordinated debentures 211,650 227,790
Accounts payable and accrued expenses 27,865 10,711
Deferred rents 30,089 7,608
Security deposits 18,767 8,387
Due to affiliates 5,103 2,593
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:
125,000,000 shares and 100,000,000 shares authorized,
respectively, 98,853,170 shares and 66,888,917 shares
issued and outstanding, respectively 988 669
Additional paidin capital 1,371,236 795,263
Cumulative net income 420,298 306,298
Dividends (526,262) (394,182)
----------- -----------
Total shareholders' equity 1,266,260 708,048
----------- -----------
$ 2,135,963 $ 1,229,522
=========== ===========
</TABLE>
See accompanying notes
F-3
<PAGE>
<TABLE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Year Ended December 31,
-----------------------------------
1997 1996 1995
--------- ---------- ---------
<S> <C> <C> <C>
Revenues:
Rental income $ 188,000 $ 98,039 $ 90,246
Interest and other income 20,863 22,144 23,076
--------- --------- ---------
Total revenues 208,863 120,183 113,322
--------- --------- ---------
Expenses:
Operating expenses 26,765 3,776 644
Interest 36,766 22,545 24,274
Depreciation and amortization 39,330 22,106 22,849
General and administrative 11,670 7,055 6,914
--------- --------- ---------
Total expenses 114,531 55,482 54,681
--------- --------- ---------
Income before equity in earnings of Hospitality Properties Trust,
gain on sale of properties and extraordinary items 94,332 64,701 58,641
Equity in earnings of Hospitality Properties Trust 8,590 8,860 3,119
Gain on equity transaction of Hospitality Properties Trust 9,282 3,603 --
--------- --------- ---------
Income before gain on sale of properties and
extraordinary items 112,204 77,164 61,760
Gain on sale of properties, net 2,898 -- 2,476
--------- --------- ---------
Income before extraordinary items 115,102 77,164 64,236
Extraordinary items - early extinguishment of debt (1,102) (3,910) --
--------- --------- ---------
Net income $ 114,000 $ 73,254 $ 64,236
========= ========= =========
Weighted average shares outstanding 92,168 66,255 59,227
========= ========= =========
Basic and diluted earnings per common share:
Income before gain on sale of properties and
extraordinary items $1.22 $1.16 $1.04
===== ===== =====
Income before extraordinary items $1.25 $1.16 $1.08
===== ===== =====
Net income $1.24 $1.11 $1.08
===== ===== =====
</TABLE>
See accompanying notes
F-4
<PAGE>
<TABLE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
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, 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
Issuance of shares to
acquire real estate 3,985,028 40 76,521 -- -- 76,561
Issuance of shares 27,025,000 270 482,883 -- -- 483,153
Conversion of convertible
subordinated debentures 910,379 9 15,756 -- -- 15,765
Stock grants 43,846 -- 813 -- -- 813
Net income -- -- -- 114,000 -- 114,000
Dividends -- -- -- -- (132,080) (132,080)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1997 98,853,170 $ 988 $ 1,371,236 $ 420,298 $ (526,262) $ 1,266,260
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes
F-5
<PAGE>
<TABLE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Year Ended December 31,
-----------------------------------
1997 1996 1995
-----------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 114,000 $ 73,254 $ 64,236
Adjustments to reconcile net income to cash
provided by operating activities:
Gain on sale of properties (2,898) -- (2,476)
Equity in earnings of Hospitality Properties Trust (8,590) (8,860) (3,119)
Gain on equity transaction of Hospitality Properties Trust (9,282) (3,603) --
Dividends from Hospitality Properties Trust 9,800 9,360 960
Extraordinary items 1,102 3,910 --
Depreciation 37,619 21,265 21,048
Amortization 1,711 841 1,801
Amortization of deferred interest costs 699 1,444 1,529
Change in assets and liabilities:
Increase in interest and rents receivable and other assets (5,273) (7,839) (1,639)
Increase (decrease) in accounts payable and
accrued expenses 10,832 6,033 (11,427)
Increase in deferred rents 22,481 689 6,919
Increase in security deposits 10,380 1,001 3,586
Increase in due to affiliates 3,119 823 843
--------- --------- ---------
Cash provided by operating activities 185,700 98,318 82,261
--------- --------- ---------
Cash flows from investing activities:
Real estate acquisitions and improvements (548,465) (225,428) (267,470)
Acquisition of business, less cash acquired (337,400) -- --
Investments in mortgage loans (520) (17,191) (24,375)
Proceeds from repayment of notes and mortgage loans, net of discounts 48,245 8,091 38,107
Proceeds from sale of real estate 22,898 -- 5,000
Proceeds from Hospitality Properties Trust
initial public offering -- -- 60,000
Loans to affiliate -- (800) (1,565)
--------- --------- ---------
Cash used for investing activities (815,242) (235,328) (190,303)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of common shares 483,153 6,990 97,944
Proceeds from borrowings 784,900 481,000 219,000
Payments on borrowings (501,261) (247,070) (166,000)
Deferred finance costs incurred (4,668) (7,320) (1,666)
Dividends paid (132,080) (93,377) (80,473)
--------- --------- ---------
Cash provided by financing activities 630,044 140,223 68,805
--------- --------- ---------
Increase (decrease) in cash and cash equivalents 502 3,213 (39,237)
Cash and cash equivalents at beginning of period 21,853 18,640 57,877
--------- --------- ---------
Cash and cash equivalents at end of period $ 22,355 $ 21,853 $ 18,640
========= ========= =========
Supplemental cash flow information:
Interest paid $ 34,425 $ 19,662 $ 22,783
========= ========= =========
</TABLE>
See accompanying notes
F-6
<PAGE>
<TABLE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Year Ended December 31,
----------------------------------------------------
1997 1996 1995
----------------------------------------------------
<S> <C> <C> <C>
Non-cash investing activities:
Real estate acquisitions $ (11,616) $ -- $ (24,444)
Exchange of real estate 11,616 -- --
Acquisition of business, less cash acquired:
Real estate acquisitions $ 439,498 $ -- $ --
Working capital, other than cash 2,051 -- --
Liabilities assumed (27,588) -- --
Net cash used to acquire business (337,400) -- --
----------------------------------------------------
Issuance of shares $ 76,561 $ -- $ --
====================================================
Sale of real estate -- -- 19,500
Investment in real estate mortgages -- -- (19,500)
Investment in Hospitality Properties Trust -- -- (100,000)
Non-cash financing activities:
Issuance of common shares $ 16,578 $ 12,597 $ 24,838
Conversion of convertible subordinated debentures, net (15,765) (11,867) --
</TABLE>
See accompanying notes
F-7
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization
Health and Retirement Properties Trust, a Maryland real estate investment
trust (the "Company"), was organized on October 9, 1986. As of December 31,
1997, the Company had investments in 217 properties located in 33 states and the
District of Columbia. The properties include 92 long-term care facilities, 58
medical office and other office buildings and clinics, 29 government office
buildings, 26 retirement and assisted living communities and 12 nursing homes
with subacute services. In addition, at December 31, 1997, the Company had a
10.3% equity investment in Hospitality Properties Trust ("HPT"). At December 31,
1997, HPT owned 119 hotels in 30 states.
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 reflecting changes in the value of
the Company's ownership stake 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 and market 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, 1997 and 1996 was $1.8 million and $1.2
million, respectively.
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.
Earnings Per Common Share. Basic earnings per common share is computed
using the weighted average number of shares outstanding during the period. At
December 31, 1997 and 1996, $211.7 million and $227.8 million of convertible
securities were convertible into 11.8 million and 12.7 million shares of the
Company, respectively. Basic earnings per share equals diluted earnings per
share as the effect of these convertible securities is anti-dilutive to diluted
earnings per share. Supplemental income per share for the years ended December
31, 1997, and 1995 was $1.25 and $1.11, respectively, based on the assumption
that the issuance of shares in the Company's public offerings during 1997 and
1995, 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
New Accounting Pronouncements. The Financial Accounting Standards Board has
issued Financial Accounting Standards Board Statement No. 128, "Earnings Per
Share" ("FAS 128"), Statement No. 129 "Disclosure of Information about Capital
Structure" ("FAS 129"), Statement No. 130, "Reporting Comprehensive Income"
("FAS 130") and Statement No. 131 "Disclosures About Segments of an Enterprise
and Related Information" ("FAS 131"). FAS 128 and FAS 129 were adopted for the
Company's 1997 financial statements. The adoption of each of these statements
had no impact on the Company's financial statements. FAS 130 and FAS 131 must be
adopted for the Company's 1998 financial statements. The Company anticipates
that FAS 130 and FAS 131 will have no impact on the Company's financial
condition or results of operations.
Note 3. Real Estate Properties
In February 1997, the Company agreed to acquire 30 office buildings (the
"Government Properties") leased to various agencies of the United States
Government through the acquisition of Government Properties Investors, Inc.
("GPI"). The acquisition was accounted for as a purchase and the net assets and
results of operations have been included in the consolidated financial
statements since the date of acquisition. As of December 31, 1997, the Company
completed the purchase of 29 of the Government Properties for approximately
$439.5 million and elected not to acquire one of the Government Properties. The
acquisition of the Government Properties was funded, in part, with the proceeds
from the issuance of the Company's common shares pursuant to a public offering,
the issuance of 4,019,429 common shares of the Company in a private placement
and the assumption of $27.6 million of debt.
In September 1997, the Company sold 14 nursing properties for $33.5 million
and purchased three nursing properties which were mortgage financed by the
Company for $15.7 million. In connection with the sale of the nursing
properties, the company recognized a gain of $2.9 million.
Also during the year ended December 31, 1997, the Company acquired one
retirement community, 22 medical and other office buildings and 20 medical
clinics for an aggregate amount of approximately $539.1 million in 13 separate
transactions. In addition, the Company funded improvements to its existing
properties of approximately $4.3 million.
In January and February 1998, the Company acquired seven medical and other
office buildings for $71.6 million. In addition, the Company sold one of the
Government Properties for $5.7 million. No gain or loss was recognized on the
sale of this property.
The Company's real estate properties are leased on a gross lease, modified
gross lease or triple net lease basis, pursuant to noncancellable, fixed term
operating leases expiring from 1998 to 2022. Generally, the Company's triple net
leases to a single tenant are cross-collateralized, cross-defaulted and
cross-guaranteed and generally provide for renewal terms at existing rates
followed by several market rate renewal terms. The triple net leases generally
require the lessee to provide all property management services. The Company's
gross leases and modified gross leases require the Company to provide certain
property management services. The Government Properties and certain medical and
other office properties owned by the Company are managed by M&P Partners Limited
Partnership ("M&P"), an affiliate of the Company.
The future minimum lease payments to be received by the Company during the
current terms of the leases as of December 31, 1997, are approximately $223.6
million in 1998, $216.5 million in 1999, $208.8 million in 2000, $199.1 million
in 2001, $185.4 million in 2002 and $1.4 billion thereafter.
Note 4. Investment in Hospitality Properties Trust
At December 31, 1997, the Company owned 4,000,000 common shares of
beneficial interest of HPT with a carrying value of $111.1 million and a market
value, based on quoted market prices, of $131.5 million. HPT is a real estate
investment trust which invests principally in income producing hotel real
estate. The Company's percentage of ownership of HPT as of December 31, 1997 was
10.3%. During December 1997, HPT completed a public stock offering of common
F-9
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
shares. As a result of this transaction, the Company's ownership percentage in
HPT was reduced from 14.9% to 10.3% in 1997 and the Company realized a gain of
$9.3 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.
Summarized financial data of HPT is as follow (dollars in thousands, except per
share amounts):
<TABLE>
<CAPTION>
February 7, 1995
(inception) to
December 31, Year Ended December 31, December 31,
----------------------------- --------------------------
1997 1996 1997 1996 1995
----------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real estate
properties, net $1,207,868 $816,469 Revenues $114,132 $ 82,629 $ 23,642
Other assets, net 105,388 55,134 Expenses 54,979 30,965 12,293
-------------------------- ----------------------------------------
$1,313,256 $871,603 Net income $ 59,153 $ 51,664 $ 11,349
========================== ========================================
Security deposits $ 146,662 $ 81,360 Average shares 27,530 23,170 4,515
========================================
Other liabilities 158,701 145,035 Net income per share $2.15 $2.23 $2.51
========================================
Shareholders'
equity 1,007,893 645,208
--------------------------
$1,313,256 $871,603
==========================
</TABLE>
Note 5. Real Estate Mortgages and Notes Receivable, Net
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1996
(dollars in thousands)
----------------------------
<S> <C> <C>
Mortgage notes receivable, net of discounts of $209 and
$1,574, respectively, and net of reserves of $927 and
$1,743, respectively, due February 1998 through
December 2016 $ 40,301 $ 58,750
Mortgage notes receivable due December 2010 19,185 19,358
Mortgage notes receivable, repaid in 1997 -- 15,444
Mortgage notes receivable due December 2002 12,240 12,309
Mortgage notes receivable due January 2013 11,466 11,500
Mortgage notes receivable, repaid in January 1998 11,472 11,500
Mortgage note receivable, repaid in 1997 -- 10,000
Mortgage notes receivable due December 2016 7,063 8,634
Other collateralized notes receivable due January 1999 196 345
Loan to an affiliate due June 1998 2,365 2,365
-------- --------
$104,288 $150,205
======== ========
</TABLE>
During 1997, the Company received regularly scheduled principal payments of
$1.2 million and prepayments of mortgages secured by 19 nursing facilities of
$48.3 million. The Company also provided improvement financing for existing
mortgaged properties of $0.5 million.
At December 31, 1997, the interest rates on the mortgages and notes
receivable ranged from 8.02% to 13.75% per annum.
In January and February 1998, the Company received $20.1 million from the
repayment of mortgage loans secured by three retirement facilities and two
nursing facilities.
F-10
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Shareholders' Equity
During 1997, the Company issued 27,025,000 common shares in a public
offering, raising net proceeds of approximately $483.2 million, issued 3,985,028
common shares in a private placement for the purchase of real estate, issued
910,379 common shares in exchange for the conversion of $16.1 million of its
convertible subordinated debentures due 2003 and issued 32,846 common shares to
HRPT Advisors, Inc., (the "Advisor") an affiliate, as the incentive fee earned
for the year ended December 31, 1996. In January 1998, the Company issued 34,401
common shares in connection with the purchase of real estate.
In January 1998, the Company declared a dividend of $.37 to be distributed
on February 20, 1998. Dividends per share paid by the Company for 1997, 1996 and
1995 were $1.45, $1.41 and $1.37, respectively.
The Company adopted a Shareholders Rights Plan ("Rights"). Each Right
entitles the holder to purchase or to receive securities or other assets of the
Company, upon the occurrence of certain events. The Rights expire on October 17,
2004 and are redeemable at the Company's option at any time.
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 1997, 1996 and 1995, 9,500, 7,250 and 8,500 shares, respectively, were
granted to officers of the Company and certain employees of the Advisor. In
addition, 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, 1997, 856,944 shares of
the Company's common shares remain reserved for issuance under the Award Plan.
Note 7. Commitments and Contingencies
At December 31, 1997, the Company had total commitments aggregating $92.1
million to fund or finance improvements to certain properties leased or
mortgaged by the Company and to purchase ten medical and other office buildings.
The medical and other office buildings were purchased for $71.6 million in
January and February 1998.
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.
Lessee's and mortgagors' of the Company's long-term care facilities and
nursing facilities are dependent upon 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 8. Transactions with Affiliates
As of January 1, 1998, the Company entered into an agreement with REIT
Management and Research, Inc. ("RMR"), an affiliate of the Company, and the
Advisor. RMR provides investment, management, property management services for
some of the recently acquired Government Properties and medical and other office
buildings and administrative services to the Company. During the three years
ended December 31, 1997, such services were provided by the Advisor and M&P on
similar terms. RMR is owned by Gerard M. Martin and Barry M. Portnoy, who also
serve as Managing Trustees of the Company. RMR is compensated at an annual rate
equal to .7% of the Company's real estate investments up to $250.0 million and
.5% of such investments thereafter plus property management fees equal to three
percent of gross rents from the managed properties. RMR is also entitled to an
incentive fee comprised of restricted shares of the Company's common stock based
on a formula. Incentive fees paid to the Advisor for the years ended December
31, 1997, 1996 and 1995 were $1.0 million, $0.6 million and $0.6 million, which
represent approximately 52,316, 32,846 and 35,560 common shares, respectively.
At December 31, 1997, the Advisor owned 1,082,056 common shares.
F-11
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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"). The Subacute Entities are lessees of the Company. The
Company has extended a $4.0 million line of credit to CSC. At December 31, 1997
and 1996, there was $2.4 million outstanding under this agreement. The lease and
mortgage transactions with the Subacute Entities 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.
Amounts resulting from transactions with affiliates included in the
accompanying statements of income, shareholders' equity and cash flows are as
follows:
Years Ended December 31,
-------------------------------
1997 1996 1995
(dollars in thousands)
-------------------------------
Investment advisory fees earned by the Advisor $ 8,620 $ 5,349 $ 5,763
Dividends paid to the Advisor 1,557 1,467 1,383
Rent and interest income from Subacute Entities 13,616 12,981 12,015
Management fees earned by M&P 2,382 371 56
Note 9. Indebtedness
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1996
(dollars in thousands)
---------------------------
<S> <C> <C>
$450,000 unsecured revolving bank credit facility, due March 2001, at
LIBOR plus a premium $200,000 $140,000
Senior Notes, Series B, repaid in 1997 -- 125,000
Senior Notes, due 2002 at 6.75% 150,000 --
Remarketed Reset Notes, due 2007 at LIBOR plus 0.45% 200,000 --
Mortgage Notes Payable, due 2008 at 8.00% 13,958 --
Mortgage Notes Payable, due 2009 at 7.66% 12,371 --
Convertible Subordinated Debentures, due 2003 at 7.50% 171,650 187,790
Convertible Subordinated Debentures, due 2001 at 7.25% 40,000 40,000
---------------------------
787,979 492,790
Less unamortized discounts (100) (615)
---------------------------
$787,879 $492,175
===========================
</TABLE>
In March 1997, the Company extended and modified its $250.0 million
unsecured revolving bank credit facility. Subsequently, in July 1997, the
Company expanded the credit facility to $450.0 million. The credit facility
matures in 2001 and bears interest at LIBOR plus a premium. The rate was 6.8% at
December 31, 1997.
During July 1997, the Company issued senior unsecured Remarketed Reset Notes
totaling $200.0 million. The notes are due in 2007 and the initial interest rate
is LIBOR plus a premium. The rate was 6.2% at December 31, 1997. Proceeds from
F-12
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the issuance of the notes were used to prepay $125.0 million of the Company's
Floating Rate Senior Notes, Series B, due 1999 and approximately $75.0 million
outstanding under the Company's bank credit facility. In connection with this
refinancing, the Company recognized an extraordinary loss of $1.1 million from
the early extinguishment of debt as a result of the write-off of unamortized
issuance costs associated with the prepaid debt.
In December 1997, the Company issued unsecured Senior Notes totaling $150.0
million, at a discount (.067%). The notes bear interest at 6.75% and mature in
2002. Net proceeds from the notes were used to repay $140.0 million then
outstanding under the Company's bank credit facility and for general business
purposes.
During 1997, approximately $16.1 million of the Convertible Subordinated
Debentures (the "Debentures") due 2003 had been converted into 910,379 common
shares of the Company. The Debentures are callable in October 1999 and are
convertible at any time into common shares of the Company at $18 per share.
During January 1998, approximately $.8 million of the Debentures due 2003 were
converted into 31,387 common shares of the Company.
At December 31, 1997, three properties with an aggregate net book value of
$41.5 million were secured by mortgages due in 2008 and 2009.
The required principal payments due during the next five years are $1.5
million in 1998, $1.7 million in 1999, $1.8 million in 2000, $241.9 million in
2001, $152.1 million in 2002 and $389.0 million thereafter.
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, senior notes,
mortgage notes payable, convertible debentures, accounts payable and other
accrued expenses, letter of credit and security deposits. Except as follows, the
fair values of the financial instruments were not materially different from
their carrying values at December 31, 1997:
Carrying Amount Fair Value
(dollars in thousands)
--------------------------------
Real estate mortgages and notes $104,288 $110,140
Investment in HPT 111,134 131,500
Senior notes, mortgage notes payable
and convertible debentures 587,879 591,190
Commitments -- 92,096
Letter of credit -- 1,653
The fair values of the real estate mortgages, senior notes, mortgage notes
payable and 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 quoted per share price of $32.875 at December 31, 1997.
The fair value of the commitments and letter of credit represents the actual
amounts committed.
F-13
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Concentration of Credit Risk
The Company's assets are primarily invested in income producing 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 and Real Estate Equity Earnings, Rent and
Properties, Net Mortgage Interest Revenue
----------------------------- -----------------------------
December 31, 1997 Year Ended December 31, 1997
(dollars in thousands) (dollars in thousands)
----------------------------- -----------------------------
Amount % of Total Amount % of Total
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
United States Government $ 433,223 21% $ 43,388 20%
Marriott International, Inc. 299,893 15 30,365 14
Integrated Health Services, Inc. 172,834 8 27,041 13
Other 1,166,826 56 112,281 53
----------------------------- -----------------------------
$2,072,776 100% $213,075 100%
============================= =============================
<CAPTION>
Equity Investment, Notes,
Mortgages and Real Estate Equity Earnings, Rent and
Properties, Net Mortgage Interest Revenue
----------------------------- -----------------------------
December 31, 1997 Year Ended December 31, 1997
(dollars in thousands) (dollars in thousands)
----------------------------- -----------------------------
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
GranCare, Inc. 87,184 7 15,491 13
Other 673,674 57 63,047 50
----------------------------- -----------------------------
$1,182,085 100% $125,242 100%
============================= =============================
</TABLE>
F-14
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Selected Quarterly Financial Data (Unaudited)
The following is a summary of the unaudited quarterly results of operations of
the Company for 1997 and 1996. The amounts are in thousands except for per share
amounts.
<TABLE>
<CAPTION>
1997
-----------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 35,884 $ 52,507 $ 57,304 $ 63,168
Income before equity in earnings of HPT, gain on equity
transaction of HPT, gain on sale of properties and
extraordinary items 17,143 25,669 26,186 25,334
Equity in earnings and gain on equity transaction of HPT 2,256 2,189 2,238 11,189
Income before gain on sale of properties and
extraordinary items 19,399 27,858 28,424 36,523
Gain on sale of properties -- -- 2,898 --
Income before extraordinary items 19,399 27,858 31,322 36,523
Extraordinary items - early extinguishment of debt -- -- (1,102) --
Net income 19,399 27,858 30,220 36,523
Per share data:
Income before equity in earnings of HPT, gain on equity
transaction of HPT, gain on sale of properties and
extraordinary items .24 .26 .26 .26
Income before gain on sale of properties and
extraordinary items .27 .28 .29 .37
Income before extraordinary items .27 .28 .32 .37
Net income .27 .28 .31 .37
<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 transaction of HPT 2,092 5,839 2,301 2,231
Income before extraordinary items 18,212 22,462 18,458 18,032
Extraordinary items - early extinguishment of debt (2,443) -- -- (1,467)
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>
F-15
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13. Pro Forma Information (Unaudited)
The following unaudited condensed Pro Forma Statements of Income assumes
the acquisition of GPI described in Note 3 had occurred on January 1, 1996.
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,
------------------------------------------------
1997 1996
---- ----
(dollars in thousands, except per share amounts)
------------------------------------------------
<S> <C> <C>
Total revenues $221,051 $176,125
Income before extraordinary items $119,988 $102,711
Net income $118,886 $ 98,801
Income before extraordinary items per basic share $1.29 $1.46
Net income per basic share $1.28 $1.41
</TABLE>
F-16
<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/ Ajay Saini
Ajay Saini, Treasurer and Chief Financial Officer
Date: February 27, 1998
