SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT
TO RULE 13d-2(a)
(Amendment _______)*
SENIOR HOUSING PROPERTIES TRUST
(Name of Issuer)
COMMON SHARES OF BENEFICIAL INTEREST, $0.01 PAR VALUE
(Title of Class of Securities)
81721M 10 9
(CUSIP Number)
David J. Hegarty
HRPT Properties Trust
400 Centre Street
Newton, MA 02458
(617) 332-3990
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
September 21, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
|_|.
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 9 Pages)
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 81721M 10 9 Page 2 of 9 Pages
1 NAMES OF REPORTING PERSONS
OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
HRPT Properties Trust I.R.S. ID No. 04-6558834
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |_|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) |_|
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland
7 SOLE VOTING POWER
NUMBER OF
SHARES 26,000,000
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
8 SHARED VOTING POWER
9 SOLE DISPOSITIVE POWER
26,000,000
10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
26,000,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |_|
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
100%
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 81721M 10 9 Page 3 of 9 Pages
1 NAMES OF REPORTING PERSONS
OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
REIT Management & Research, Inc. I.R.S. ID No. 04-3402206
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |_|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) |_|
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
8 SHARED VOTING POWER
9 SOLE DISPOSITIVE POWER
10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
26,000,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |_|
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
100%
14 TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 81721M 10 9 Page 4 of 9 Pages
Item 1. Security and Issuer.
The class of equity securities to which this statement relates is the
Common Shares of Beneficial Interest, par value $0.01 (the "Shares"), of Senior
Housing Properties Trust, a Maryland real estate investment Trust ("SNH"), with
its principal executive offices located at 400 Centre Street, Newton,
Massachusetts 02458.
Item 2. Identity and Background.
The persons filing this statement are HRPT Properties Trust, a Maryland
real estate investment trust ("HRP"), and REIT Management & Research, Inc., a
Delaware corporation ("RMR").
HRP's principal business is to operate as a real estate investment
trust. The principal office of HRP is located at 400 Centre Street, Newton,
Massachusetts 02458. The trustees of HRP are Patrick F. Donelan, Rev. Justinian
Manning, C.P., Bruce M. Gans, M.D., Barry M. Portnoy and Gerard M. Martin. The
executive officers of HRP are David J. Hegarty, President, Chief Operating
Officer and Secretary, Ajay Saini, Treasurer and Chief Financial Officer, John
A. Mannix, Executive Vice President and David M. Lepore, Senior Vice President.
RMR's principal business is providing advisory services to real estate
investment trusts such as SNH and others. The principal office of RMR is located
at 400 Centre Street, Newton, Massachusetts 02458. The directors of RMR are
David J. Hegarty, Gerard M. Martin and Barry M. Portnoy. The executive officers
of RMR are David J. Hegarty, President and Secretary, John G. Murray, Executive
Vice President, John A. Mannix, Vice President, Thomas M. O'Brien, Vice
President, Ajay Saini, Vice President, David M. Lepore, Vice President, Jennifer
Clark, Vice President and John Popeo, Treasurer. Each of Messrs. Martin and
Portnoy own 50% of the outstanding capital stock of RMR.
Each of the individuals listed above (i) except for Ajay Saini, is a
United States citizen, (ii) except for Mr. Donelan and Rev. Manning, has a
business address at 400 Centre Street, Newton, Massachusetts 02458 and (iii)
except for Mr. Donelan, Dr. Gans and Rev. Manning, is principally employed by
RMR in the capacity specified above. Mr. Saini is a citizen of the Republic of
India and a resident of the United States. Mr. Hegarty also serves as the
President, Secretary and Chief Operating Officer of SNH. Mr. Saini also serves
as the Treasurer and Chief Financial Officer of SNH. Mr. Donelan is a Director
of Dresdner Kleinwort Benson and has a business address at P.O. Box 18075,
Riverbank House, 2 Swan Lane, London, United Kingdom. Dr. Gans is the Senior
Vice President for Continuing Care and Chairman of Physical Medicine and
Rehabilitation of Long Island Medical Center and has
<PAGE>
SCHEDULE 13D
CUSIP No. 81721M 10 9 Page 5 of 9 Pages
a business address of 270-05 76th St., Suite E101, New Hyde Park, NY. Rev.
Manning is the pastor of St. Gabriel's parish at 201 Washington Street,
Brighton, Massachusetts 02135.
Neither HRP, RMR nor any of the individuals specified above has, during
the last five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or been party to any civil proceeding which
resulted in a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
HRPT Properties Trust, a Maryland real estate investment trust ("HRP"),
acquired 26,374,760 Shares in connection with the formation of SNH for
$263,747.60. On September 21, 1999, HRP contributed 374,760 Shares to SNH, which
were returned to the status of authorized but unissued shares.
Item 4. Purpose of Transaction.
The transactions which may require the filing of this statement are
described in Item 3 above and Item 5 below. The transactions were entered into
principally for investment purposes.
On or shortly after October 12, 1999, HRP will distribute to its
shareholders 13,190,763 Shares of its subsidiary, SNH, as a special distribution
(the "Spin-Off"). SNH owns 93 senior housing properties that cost $770 million,
which HRP previously owned. The record date for the Spin-Off is October 8, 1999
(the "Record Date"). HRP shareholders will receive one Share for every 10 shares
of HRP that they own on the Record Date. The Shares to be distributed in the
Spin-Off have been registered under the Securities Act of 1933, as amended, and
separately listed on the New York Stock Exchange under the symbol "SNH." The
foregoing assumes that 131.9 million HRP shares will be outstanding on the
Record Date.
RMR will enter into an agreement to provide advisory services to SNH
(the "Advisory Agreement"). Pursuant to the terms of the Advisory Agreement, RMR
will be paid a base fee in cash and may earn an incentive fee payable in Shares.
Although HRP and RMR have no present intention to do so, they may make purchases
of Shares from time to time, in the open market or in private transactions,
depending on their respective analysis of HPT's business, prospects and
financial condition, the market for such stock, other investment and business
opportunities available to them, general economic and stock market conditions,
proposals from time to time sought by or presented to them and other factors.
HRP and RMR each intends to closely monitor their investments and may from time
to time take advantage of opportunities presented to them. HRP and RMR may in
the future also formulate plans or proposals
<PAGE>
SCHEDULE 13D
CUSIP No. 81721M 10 9 Page 6 of 9 Pages
regarding SNH, including possible future plans or proposals concerning events or
transactions of the kind described in paragraphs (a) through (j) below.
Depending upon HRP's and RMR's continuing review of their investments
and various other factors, including those mentioned above, HRP and/or RMR may
(subject to any applicable securities laws and lock-up arrangements) decide to
sell all or any part of the Shares, although they have no current plans to do
so.
Subject to the occurrence of the Spin-Off, David Hegarty and Ajay Saini
will resign their positions as officers of, and Bruce M. Gans, M.D. will resign
his position as a Trustee of, HRP. Messrs. Hegarty and Saini will continue to
serve as officers of RMR and SNH after the Spin-Off. Dr. Gans has been elected
as a Trustee of SNH subject to the occurrence of the Spin-Off and effective as
of the date the shares of SNH are distributed to the HRP shareholders (the
"Distribution Date").
To fill the vacancies created by the resignations of Messrs. Hegarty
and Saini, John A. Mannix has been elected President, Chief Operating Officer
and Secretary and John Popeo has been elected Treasurer and Chief Financial
Officer of HRP, subject to the occurrence of the Spin-Off and effective as of
the Distribution Date. The vacancy created by the resignation of Dr. Gans as a
Trustee of HRP has not yet been filled.
Except as set forth in this Item 4, neither HRP nor RMR has any plans
or proposals which related to or would result in:
(a) The acquisition by any person of additional securities of SNH, or
the disposition of securities of SNH;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving SNH or any of its subsidiaries;
(c) A sale or transfer of a material amount of assets of SNH or any of
its subsidiaries;
(d) Any further change in the present board of trustees or management
of SNH including any plans or proposals to change the number or terms of
trustees or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or distribution
policy of SNH;
(f) Any other material change in SNH's business or corporate structure;
<PAGE>
SCHEDULE 13D
CUSIP No. 81721M 10 9 Page 7 of 9 Pages
(g) Changes in SNH's declaration of trust, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of SNH by any person;
(h) Causing a class of securities of SNH to be delisted from a national
securities exchange or to cease to be authorized to be quoted in an inter-dealer
quotation system of a registered national securities association;
(i) A class of equity securities of SNH becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934; or
(j) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
(a) HRP currently holds 26,000,000 Shares, or 100% of the issued and
outstanding Shares. RMR, as HRP's investment advisor, may under applicable
regulatory definitions be deemed to beneficially own HRP's 26,000,000 Shares.
RMR, however, expressly disclaims any beneficial ownership of HRP's 26,000,000
Shares.
(b) HRP has sole power to vote or dispose of its 26,000,000 Shares.
(c) Except as disclosed in Item 3 above, no transactions in Shares have
been effected during the past sixty days by HRP or RMR.
(d) No other person is known to have the right to receive or the power
to direct the receipt of distributions from, or the proceeds from the sale of
securities covered by this statement.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Pursuant to the Transaction Agreement, to be entered into by and
between HRP and SNH, HRP will agree during the period ending on the first
anniversary of the completion of the Spin-Off that it will not sell, transfer or
otherwise dispose of any of the Shares owned by it at the completion of the
Spin-Off (after giving effect to the Spin-Off) without the prior approval of a
majority of SNH's independent trustees.
The SNH Advisory Agreement requires RMR to use its best efforts to
present to SNH a continuing and suitable investment program consistent with the
investment policies and objectives of SNH. The SNH Advisory Agreement provides
for an annual advisory fee based upon SNH's average invested capital, and an
annual incentive fee based upon increases in
<PAGE>
SCHEDULE 13D
CUSIP No. 81721M 10 9 Page 8 of 9 Pages
SNH's funds from operations. The annual incentive fee, if any, payable to RMR
will be paid in Shares.
The initial term of the SNH Advisory Agreement expires on December 31,
1999 and renewal or extension of the term thereof will be subject to the
periodic approval of a majority of SNH's independent trustees.
Item 7. Material to be Filed as Exhibits.
The following documents are filed as exhibits to this statement:
99.1 Joint Filing Agreement, dated as of September 29, 1999, by and
between HRP and RMR.
99.2 Form of Transaction Agreement by and between HRP and SNH.
99.3 Form of Advisory Agreement by and between SNH and RMR.
<PAGE>
SCHEDULE 13D
CUSIP No. 81721M 10 9 Page 9 of 9 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
September 29, 1999 HRPT PROPERTIES TRUST
By: /s/ David J. Hegarty
David J. Hegarty, President
September 29, 1999 REIT MANAGEMENT & RESEARCH, INC.
By: /s/ David J. Hegarty
David J. Hegarty, President
EXHIBIT 99.1
AGREEMENT
Pursuant to Rule 13d-1(k)(1) under the Securities Exchange Act of 1934,
the undersigned hereby agree that only one statement containing the information
required by Schedule 13D (or any amendment thereof) need be filed on their
behalf with respect to the beneficial ownership of any equity securities of
Senior Housing Properties Trust, a Maryland real estate investment trust
("SNH"), or any subsequent acquisitions or dispositions of equity securities of
SNH by either of the undersigned.
Dated: September 29, 1999 HRPT PROPERTIES TRUST
By: /s/ David J. Hegarty
David J. Hegarty, President
REIT MANAGEMENT & RESEARCH, INC.
By: /s/ David J. Hegarty
David J. Hegarty, President
EXHIBIT 99.2
FORM OF
TRANSACTION AGREEMENT
by and between
HRPT PROPERTIES TRUST
and
SENIOR HOUSING PROPERTIES TRUST
---------------------------
__________ __, 1999
---------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
SECTION 1 DEFINITIONS...........................................................................................1
SECTION 2 TRANSFERS; DISTRIBUTION.............................................................................6
2.1 Transfer of Senior Properties..........................................................6
2.2 Transfer of Capital Stock; Promissory Notes............................................6
2.3 The Distribution.......................................................................7
2.4 Representations; No Implied Representations, etc.......................................8
SECTION 3 POST-DISTRIBUTION COVENANTS. ......................................................................10
3.1 Operations and Investments of HRPT and Senior Housing.................................10
3.2 Cooperation, Exchange of Information, and Retention
of Records............................................................................10
3.3 Repayment of Senior Housing Formation Debt............................................11
3.4 Covenants to Maintain REIT Qualification..............................................12
3.5 Transfer of Senior Housing Shares.....................................................12
SECTION 4 DISTRIBUTION DATE ALLOCATIONS.........................................................................13
4.1 GAAP Allocations. ...................................................................13
4.2 Cash Allocations. ...................................................................13
4.3 No Other Prorations. ................................................................13
SECTION 5 SURVIVAL; INDEMNIFICATION..........................................................................14
5.1 Indemnification by HRPT...............................................................14
5.2 Indemnification by Senior Housing.....................................................14
5.3 Indemnification Procedures............................................................14
5.4 Certain Limitations, Etc..............................................................16
5.5 Priority of Section 6. ..............................................................16
SECTION 6 TAX MATTERS..........................................................................................16
6.1 General Responsibility for Taxes......................................................16
6.2 Allocation of Certain Taxes Among Taxable Periods.....................................17
6.3 Filing and Payment Responsibility.....................................................17
6.4 Refunds and Credits...................................................................18
6.5 Tax Contests..........................................................................18
6.6 Resolution of Disputes................................................................19
<PAGE>
SECTION 7 MISCELLANEOUS........................................................................................19
7.1 Arbitration...........................................................................19
7.2 Confidentiality.......................................................................19
7.3 Notices...............................................................................19
7.4 Waivers, Etc..........................................................................20
7.5 Assignment; Successors and Assigns....................................................21
7.6 Severability..........................................................................21
7.7 Counterparts, Etc.....................................................................21
7.8 Governing Law.........................................................................21
7.9 Expenses..............................................................................21
7.10 Section and Other Headings............................................................22
7.11 Exculpation...........................................................................22
</TABLE>
EXHIBIT A Form of Promissory Note
SCHEDULE I Description of Premises
SCHEDULE II Description of Tenant Leases
SCHEDULE III Description of Transferred Subsidiaries
-ii-
<PAGE>
TRANSACTION AGREEMENT
TRANSACTION AGREEMENT made __________ __, 1999, by and between HRPT
PROPERTIES TRUST, a Maryland real estate investment trust (including its
successors and permitted assigns, "HRPT"), and SENIOR HOUSING PROPERTIES TRUST,
a Maryland real estate investment trust (including its successors and permitted
assigns,"Senior Housing") and currently a wholly-owned subsidiary of HRPT.
RECITAL
HRPT is a real estate investment trust which, indirectly through
subsidiaries, owns a diversified portfolio of office buildings and senior
housing properties. The board of trustees of HRPT has determined that it is in
the best interests of HRPT and its shareholders to separate the ownership of the
office building and the senior housing properties and in order to effect such
separation, to transfer all of the stock of HRPT subsidiaries holding senior
housing properties to Senior Housing, to accept $200,000,000 of indebtedness of
Senior Housing and certain of its subsidiaries as partial consideration for such
transfers, and to distribute a majority of the outstanding common shares of
beneficial interest of Senior Housing held by HRPT to the holders of common
shares of beneficial interest of HRPT as a special distribution. As part of this
separation transaction and distribution, HRPT and Senior Housing will assume
certain obligations under this Agreement.
NOW, THEREFORE, it is agreed:
SECTION 1 DEFINITIONS.
Capitalized terms used in this Agreement shall have the meanings set
forth below:
1.1 "Action": any litigation or legal or other actions, arbitrations,
counterclaims, investigations, proceedings, requests for material information by
or pursuant to the order of any Governmental Authority, or suits, at law or in
arbitration or equity commenced by any Person.
1.2 "Advisor": with respect to HRPT or Senior Housing at any time, the
Entity at that time serving as advisor to such party, which for both parties is
initially Reit Management & Research, Inc., a Delaware corporation.
1.3 "Affiliate": with respect to any Person, any other Person
controlling, controlled by or under common control with, such Person, with
"control" for such purpose with respect to a corporation, real estate investment
or business trust or similar entity, meaning the possession of the
<PAGE>
power to vote or direct the voting of a majority of the voting securities of, or
other voting interests in, such Person which are entitled to elect directors,
trustees or similar officials of such Person.
1.4 "Agent": State Street Bank & Trust Company, the distribution agent
appointed by HRPT to distribute the Senior Housing Common Shares to holders of
HRPT Common Shares pursuant to the Distribution.
1.5 "Agreement": this Transaction Agreement, together with the
Schedules and Exhibit hereto.
1.6 "Code": the United States Internal Revenue Code of 1986, as from
time to time in effect, and any successor law, and any reference to any
statutory provision shall be deemed to be a reference to any successor statutory
provision.
1.7 "Commission": the United States Securities and Exchange Commission.
1.8 "Contract": any lease, contract, instrument, license, agreement,
sales order, purchase order, open bid or other obligation or commitment (whether
or not written) and all rights therein.
1.9 "Covered Liabilities": the meaning given in Section 5.1.
1.10 "Deferred Payment": the meaning given in subsection 2.2(b).
1.11 "Deferred Payment Due Date": the meaning given in subsection
2.2(b).
1.12 "Distribution": the distribution of a number of Senior Housing
Common Shares by HRPT to holders of HRPT Common Shares equal to one tenth
(1/10th) of the number of HRPT Common Shares which are issued and outstanding on
the Record Date.
1.13 "Distribution Date": the date determined by the HRPT Board or an
authorized committee thereof as the date on which the Distribution shall be
effected, which Distribution Date is contemplated to occur on or about August
__, 1999.
1.14 "Effective Date": the date on which the Senior Housing
Registration Statement is declared effective by the Commission.
1.15 "Entity": a real estate investment trust, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
1.16 "GAAP": generally accepted accounting principles as in effect from
time to time in the United States of America.
-2-
<PAGE>
1.17 "Governmental Authority": any nation or government, any state or
other political subdivision thereof, any federal, state, local or foreign Entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including any government authority,
agency, department, board, commission, or instrumentality of the United States,
any State of the United States or political subdivision thereof, and any
tribunal or arbitral authority of competent jurisdiction, and any
self-regulatory organization.
1.18 "HRPT": the meaning given in the preamble to this Agreement.
1.19 "HRPT Assets": the assets of HRPT and its Subsidiaries (not
including any assets and properties held by Senior Housing and the Transferred
Subsidiaries on the Distribution Date), including all assets of HRPT and its
Affiliates relating to the HRPT Retained Business.
1.20 "HRPT Board": the HRPT Board of Trustees.
1.21 "HRPT Common Shares": the common shares of beneficial interest,
$.01 par value, of HRPT.
1.22 "HRPT Group": HRPT and each Entity whose income is included on the
federal Income Tax Return Form 1120-REIT with HRPT as the parent; provided
Senior Housing and the Transferred Subsidiaries shall only be included thereon
through the Distribution Date.
1.23 "HRPT Indemnified Parties": the meaning given to such term in
Section 5.2.
1.24 "HRPT Retained Business": the businesses conducted by HRPT and its
Subsidiaries pursuant to or utilizing the HRPT Assets, including the
acquisition, development, ownership and leasing of real estate assets; provided,
however, that the HRPT Retained Business shall not in any event include the
Senior Housing Business.
1.25 "Income Taxes": any and all Taxes to the extent based upon or
measured by net income (regardless of whether denominated as an "income tax," a
"franchise tax" or otherwise), imposed by any Taxing Authority, together with
any related interest, penalties or other additions thereto.
1.26 "Independent Trustee": with respect to HRPT or Senior Housing, as
applicable, a Trustee of such party who is not an employee, executive officer,
director (or comparable official) or Affiliate of its respective Advisor.
1.27 "Liability": any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including all costs
and expenses relating thereto, and including those debts, liabilities and
obligations arising under any law, rule, regulation, Action, threatened Action,
order
-3-
<PAGE>
or consent decree of any Governmental Authority or any award of any arbitrator
of any kind, and those arising under any contract, commitment or undertaking.
1.28 "Managing Trustee": with respect to HRPT or Senior Housing, as
applicable, a Trustee of such party who is not an Independent Trustee.
1.29 "Office Properties": office buildings, warehouses or malls,
including medical office properties and clinical laboratory buildings, and in
each case whether occupied by a single tenant or multiple tenants, whether
leased to private tenants or Governmental Authorities, and whether of single
purpose or mixed use.
1.30 "Other Taxes": all Taxes other than Income Taxes.
1.31 "Person": any natural individual or any Entity.
1.32 "Premises": the land, improvements and fixtures owned by the
Transferred Subsidiaries (including those described in Schedule I) together with
any personal property owned by the Transferred Subsidiaries and used in
connection therewith.
1.33 "Record Date": the date determined by the HRPT Board or an
authorized committee thereof as the record date for the Distribution, which
Record Date is contemplated to occur on or about ____________, 1999.
1.34 "Retained Liability": all of the Liabilities arising out of or in
connection with the HRPT Assets or the HRPT Retained Business, all of the
Liabilities of HRPT in connection with the Actions which are pending on the
Distribution Date and all other Liabilities of HRPT and its Subsidiaries not
constituting Senior Housing Liabilities.
1.35 "Securities Act": the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as from time to time in effect.
1.36 "Senior Housing": the meaning given in the preamble to this
Agreement.
1.37 "Senior Housing Assets": the assets held by Senior Housing and the
Transferred Subsidiaries on and after the Distribution Date.
1.38 "Senior Housing Board": the Senior Housing Board of Trustees.
1.39 "Senior Housing Business": the business conducted by Senior
Housing and its Subsidiaries after the Distribution Date, including pursuant to
or utilizing the Senior Housing Assets and the acquisition, development,
ownership and leasing of Senior Properties.
-4-
<PAGE>
1.40 "Senior Housing Common Shares": the common shares of beneficial
interest, $.01 par value, of Senior Housing.
1.41 "Senior Housing Credit Facility": the meaning given in Section
2.3.
1.42 "Senior Housing Group": Senior Housing and each Entity whose
income is included in the federal Income Tax Return Form 1120-REIT with Senior
Housing as the parent.
1.43 "Senior Housing Indemnified Parties": the meaning given such term
in Section 5.1.
1.44 "Senior Housing Liability": all Liabilities arising out of or in
connection with any of the Senior Housing Assets or the Senior Housing Business,
excluding (i) liabilities arising out of or in connection with the HRPT Assets
or the HRPT Retained Business and (ii) the liabilities in connection with
Actions which are pending on the Distribution Date.
1.45 "Senior Housing Registration Statement": the registration
statement on Form S-11 filed by Senior Housing under the Securities Act in
connection with the Distribution.
1.46 "Senior Properties": senior apartments, congregate communities,
assisted living properties, nursing homes or other healthcare properties, but
excluding medical office properties, medical clinics and clinical laboratory
buildings.
1.47 "Separate Counsel": the meaning given in subsection 5.3(b).
1.48 "Subsidiary": with respect to any Person, any Entity (i) a
majority of the voting securities of, or other voting interests in, such Entity
which are entitled to elect directors, trustees or similar officials of such
Entity, or (ii) a majority of the equity interests of such Entity, of which is
owned directly or indirectly by such Person or any Subsidiary of such Person.
1.49 "Subsidiary Shares": the meaning given in subsection 2.2(a).
1.50 "Taxes": any net income, gross income, gross receipts, sales, use,
excise, franchise, transfer, payroll, premium, property or windfall profits tax,
alternative or add-on minimum tax, or other tax, fee or assessment, together
with any interest and any penalty, addition to tax or other additional amount
imposed by any Taxing Authority, whether any such tax is imposed directly or
through withholding.
1.51 "Taxing Authorities": the United States Internal Revenue Service
(or any successor authority) and any other domestic or foreign Governmental
Authority responsible for the administration of any Tax.
1.52 "Tax Contests": the meaning given in Section 6.5.
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1.53 "Tax Returns": all returns, reports, estimates, information
statements, declarations and other filings relating to, or required to be filed
by any taxpayer in connection with, its liability for, or its payment or receipt
of any refund of, any Tax.
1.54 "Tenant Leases": the leases or mortgages of the Premises
identified in Schedule II.
1.55 "Third-Party Claim": any Action by or before any Governmental
Authority asserted by a Person other than any party hereto or their respective
Affiliates which gives rise to a right of indemnification hereunder.
1.56 "Transferred Subsidiaries": those Subsidiaries of HRPT identified
on Schedule III.
SECTION 2 TRANSFERS; DISTRIBUTION.
2.1 Transfer of Senior Properties. Prior to the execution of this
Agreement and pursuant to various assignment and assumption agreements, deeds
and other documents of conveyance, HRPT transferred title to the Premises, all
Tenant Leases and all Contracts, assets and liabilities (other than indebtedness
for borrowed money) related to the ownership, operation and leasing of the
Premises, to the Transferred Subsidiaries as a capital contribution.
2.2 Transfer of Capital Stock; Promissory Notes. HRPT and Senior
Housing agree and, by its joinder to this Agreement below, SPTMRT Properties
Trust (which is a Transferred Subsidiary), agrees to effect the following
transactions:
(a) As of 9:00 a.m., Boston time, on the Effective Date, HRPT
will transfer to Senior Housing, free and clear of all liens or other
encumbrances, all of the issued and outstanding capital stock
(collectively, the "Subsidiary Shares") of (i) SPTMRT Properties Trust,
which transfer shall be partially in consideration of the deferred
payments described in clauses (b) and (c) below and otherwise shall be
a contribution by HRPT to the capital of Senior Housing, and (ii) each
of the other Transferred Subsidiaries, which transfer shall be a
contribution by HRPT to the capital of Senior Housing, in each case by
delivery to Senior Housing of all certificates representing the
Subsidiary Shares, together with stock powers duly executed in blank;
(b) in partial consideration for the transfer to Senior
Housing of the Subsidiary Shares issued by SPTMRT Properties Trust,
Senior Housing agrees (i) to pay to HRPT the aggregate sum of two
hundred million dollars ($200,000,000) (the "Deferred Payment"),
payable on the 10th day following the Distribution Date and in any
event on December 31, 1999 (the earlier of such dates, the "Deferred
Payment Due Date") and prepayable at any time prior to the Deferred
Payment Due Date together with accrued and unpaid interest on the
portion thereof prepaid, and (ii) to pay interest on the unpaid
Deferred
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Payment from the Effective Date to (but excluding) the date of payment
thereof, payable on the Deferred Payment Due Date and thereafter on
demand, at a rate per annum determined for each day equal to HRPT's
weighted average effective interest rate on its indebtedness for money
borrowed on such day (as determined by HRPT in good faith), but in no
event exceeding the maximum rate permitted by law;
(c) as a condition to Senior Housing's acceptance of the
Subsidiary Shares issued by SPTMRT Properties Trust, SPTMRT Properties
Trust agrees to assume and agrees to pay, as a primary obligor and not
as a guarantor, the Deferred Payment by delivery to HRPT on the
Effective Date of a promissory note, bearing interest, maturing on the
date and otherwise on the terms and conditions contained in the form of
promissory note attached to this Agreement as Exhibit A; and
(d) on the Effective Date, HRPT will make a contribution to
the capital of Senior Housing in the amount of $1,000,000 plus an
amount equal to (i) $169,500 times (ii) the number of days from and
including July 1, 1999 to and excluding the Distribution Date.
2.3 The Distribution. On the Distribution Date, subject to the
conditions set forth in this Agreement, HRPT shall deliver to the Agent a share
certificate representing a number of whole and fractional Senior Housing Common
Shares equal to one tenth (1/10th) the number of HRPT Common Shares issued and
outstanding on the Record Date, and shall instruct the Agent to distribute, on
or as soon as practicable on or following the Distribution Date, to holders of
record of HRPT Common Shares on the Record Date, one tenth (1/10th) of a Senior
Housing Common Share for each HRPT Common Share owned of record by such holder.
In addition, HRPT shall authorize the Agent to perform such withholding in
respect of the Distribution as may be required by Taxing Authorities. Senior
Housing agrees to provide all share certificates that the Agent requires in
order to effect the Distribution and any such associated withholding.
In no event shall the Distribution occur unless the following
conditions shall have been satisfied:
(a) the transactions contemplated by Sections 2.1 and 2.2
shall have been consummated in all material respects;
(b) the Senior Housing Registration Statement shall have been
declared effective by the Commission and listing of the Senior Housing
Common Shares for trading on the New York Stock Exchange shall have
been approved by the Exchange;
(c) Senior Housing shall have entered into a secured revolving
credit facility with one or more commercial banks or other
institutional lenders with availability of not less than $350,000,000
(the "Senior Housing Credit Facility"); and
(d) Ernst & Young LLP shall have delivered to the HRPT Board
and the Senior Housing Board a letter dated the Effective Date, in form
and substance reasonably
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satisfactory to each of them containing statements and information of
the type ordinarily included in accountants' "comfort letters" to
underwriters in a public offering of securities with respect to
financial statements and certain financial information and data
contained in the Senior Housing Registration Statement and prospectus
contained therein;
provided, however, that any such condition may be waived by the HRPT Board and
the Senior Housing Board in their sole discretion.
2.4 Representations; No Implied Representations, etc..
(a) Each of HRPT and Senior Housing represents and warrants to
the other that (i) it is duly authorized to enter into and perform this
Agreement and has duly executed and delivered this Agreement, and (ii)
this Agreement constitutes its valid and binding obligation,
enforceable in accordance with its terms, subject to (A) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement generally of creditors' rights and remedies, (B)
general principles of equity (regardless of whether considered in a
proceeding at law or in equity), including the discretion of any court
of competent jurisdiction in granting specific performance or other
equitable relief, and (C) an implied duty to take action and make
determinations on a reasonable basis and in good faith.
(b) HRPT hereby represents and warrants to Senior Housing that
(i) each Transferred Subsidiary is a real estate investment trust duly
formed and validly existing under the laws of the State of Maryland,
(ii) the Subsidiary Shares have been duly authorized and issued and are
fully paid and nonassessable, and (iii) immediately prior to the
contribution of the Subsidiary Shares to Senior Housing on the
Effective Date pursuant to Section 2.2, the Subject Shares will be
owned by HRPT free of any adverse claims (within the meaning of Article
8 of the Uniform Commercial Code as in effect in Massachusetts) and
will constitute all of the issued and outstanding shares of capital
stock of each Transferred Subsidiary, and no Person other than Senior
Housing will have any option or other right to acquire shares of
capital stock of any Transferred Subsidiary.
(c) Senior Housing represents and warrants to HRPT (i) that it
is aware that the offering and sale of the Subsidiary Shares pursuant
to this Agreement has not been and will not be registered under the
Securities Act and (ii) that Senior Housing is acquiring the Subsidiary
Shares without a view to any distribution thereof which would require
registration under the Securities Act.
(d) EACH OF HRPT AND SENIOR HOUSING ACKNOWLEDGES AND AGREES
THAT NEITHER OF THEM HAS MADE AND NEITHER OF THEM IS MAKING ANY EXPRESS
OR IMPLIED REPRESENTATIONS OR WARRANTIES WHATSOEVER (INCLUDING ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR
PURPOSE, EACH OF WHICH IS HEREBY EXPRESSLY DISCLAIMED) IN CONNECTION
WITH THIS AGREEMENT OR THE
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TRANSACTIONS CONTEMPLATED HEREBY. Without limiting the generality of
the foregoing, each of HRPT and Senior Housing acknowledges and agrees
that neither of them is making any representation or warranty of any
nature, express or implied, as to (i) the value or freedom from
encumbrance of, or any other matter concerning, the Subsidiary Shares,
the Transferred Subsidiaries or their properties, assets or
liabilities, or the properties, assets or liabilities of any party to
this Agreement, (ii) any past, present or future income, expenses or
results of operations or cash flow of the Premises or the Transferred
Subsidiaries, any projections, the financial viability of the Premises
or the Transferred Subsidiaries, the creditworthiness of any tenants
under the Tenant Leases or any guarantor thereof (it being acknowledged
by Senior Housing that some of such tenants or guarantors or their
parent companies have recently had materially adverse changes in
financial position and are or may be in financial distress or in
bankruptcy proceedings), or the completeness or accuracy of any books
or records of HRPT or any Transferred Subsidiary pertaining to the
Premises; (iii) the validity or binding effect or enforceability of any
Tenant Leases or Contracts, (iv) the legal sufficiency of any
instrument conveying title to any asset transferred pursuant to this
Agreement or any related agreement, including the transfer of the
Premises and Tenant Leases to the Transferred Subsidiaries, or (v) the
Premises or matters affecting the Premises, including physical
condition, title to or the boundaries of the real property constituting
the Premises, pest control matters, soil conditions, environmental
matters, compliance with building, health, safety, environmental, land
use and zoning laws, regulations and orders (including compliance with
the Americans with Disabilities Act or any related regulations),
absence of hazardous materials, operation of mechanical systems,
equipment and fixtures, suitability of soil or geology, absence of
defects, structural and other engineering characteristics, quality of
construction, traffic patterns, market data, economic conditions or
projections, and any other information pertaining to the Premises or
the market and physical environments in which they are located. SENIOR
HOUSING ACKNOWLEDGES AND AGREES THAT THE PREMISES WERE TRANSFERRED TO
THE TRANSFERRED SUBSIDIARIES "AS IS, WHERE IS, WITH ALL FAULTS."
(e) Without limiting the provisions of subsection 2.4(d)
above, Senior Housing, for itself and its subsidiaries (including the
Transferred Subsidiaries) and its and their successors and assignees,
hereby releases HRPT and its subsidiaries, shareholders, officers,
employees, agents, successors and assigns from and waives all claims
and liability against HRPT and its subsidiaries, shareholders,
officers, employees, agents, successors and assigns connected with or
arising out of any structural, physical, or environmental condition in,
at, about or under the Premises and further releases HRPT and its
subsidiaries, shareholders, officers, employees, agents, successors and
assigns from and waives all claims and liability against HRPT and its
subsidiaries, shareholders, officers, employees, agents, successors and
assigns attributable to the structural, physical and environmental
condition and quality of the Premises, including the presence,
discovery or removal of any hazardous materials in, at, about or under
any of the Premises, or for, connected with or arising out of any and
all claims or causes of action based upon CERCLA (Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, and as may be further amended from
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time to time), or any other federal or state laws or regulations
relating to environmental matters in, at, about or under any of the
Premises Property. As between HRPT, on the one hand, and the respective
Transferred Subsidiaries which own the Premises, on the other, each
Transferred Subsidiary assumes responsibility and liability for all
obligations (past, present or future) attributable to any hazardous
materials in, at, about or under the Premises which it owns at the
Effective Date or the Distribution Date, which responsibilities and
liabilities will be retained by such Transferred Subsidiary when its
Subsidiary Shares are transferred by HRPT to Senior Housing.
(f) For purposes of this Section 2.4, the term "hazardous
material" shall mean any asbestos or asbestos-containing material or
any substance, chemical, waste, oil or other petroleum product or
material that is or becomes regulated by any federal, state or local
governmental authority because of its toxicity, infectiousness,
radioactivity, explosiveness, ignitability, corrosiveness or
reactivity.
(g) Notwithstanding anything herein to the contrary, the
acknowledgments and agreements of the parties set forth in this Section
2.4 shall survive the Distribution Date and the repayment of the
Deferred Payment and shall be enforceable at any time.
SECTION 3 POST-DISTRIBUTION COVENANTS.
3.1 Operations and Investments of HRPT and Senior Housing. HRPT and
Senior Housing hereby acknowledge and agree that for so long as (a) HRPT owns
10% or more of the Senior Housing Common Shares, (b) the Advisor or an Affiliate
thereof serves as advisor for both HRPT and Senior Housing, or (c) any Managing
Trustee of Senior Housing is also a Managing Trustee of HRPT, HRPT will not make
any investment (which may include, without limitation, fee interests in the
underlying property or leaseholds, joint ventures, mortgages and other real
estate interests) in a Senior Property without the prior approval of a majority
of Senior Housing's Independent Trustees and Senior Housing will not make any
investment in an Office Property without the prior approval of a majority of
HRPT's Independent Trustees. In any case where an investment is both a Senior
Property and an Office Property, such investment shall be classified as either
one or the other based on its overriding character as determined by rentable
square footage (excluding common areas). Nothing in this Section 3.1 shall apply
to any investment of HRPT in Senior Properties existing on the Distribution
Date.
3.2 Cooperation, Exchange of Information, and Retention of Records.
(a) Upon reasonable request prior to and after the
Distribution Date, HRPT (on behalf of the HRPT Group) and Senior
Housing (on behalf of the Senior Housing Group) shall promptly provide,
and shall cause their respective Affiliates to provide, the requesting
party with such cooperation and assistance, documents and other
information, without charge, as may be necessary or reasonably helpful
in connection with (i) the consummation
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of the transactions contemplated by this Agreement and the preservation
for each party and for the Transferred Subsidiaries, to the extent
reasonably feasible, the benefits of this Agreement (including, in the
case of Senior Housing and the Transferred Subsidiaries, the economic
and operational benefits of the Senior Housing Assets), (ii) the
continued qualification of each of HRPT and Senior Housing as a REIT
under the Code, including the enforcement of the ownership limitations
and other provisions of their respective declarations of trust relating
to the preservation of the status of each of HRPT and Senior Housing as
a REIT under the Code, (iii) each party's preparation and filing of any
original or amended Tax Return, (iv) the conduct of any audit, appeal,
protest or other examination or any judicial or administrative
proceeding involving to any extent Taxes or Tax Returns within the
scope of this Agreement, and (v) the verification of an amount payable
hereunder to, or receivable hereunder from, the other party. Each party
shall make its officers and facilities available on a mutually
convenient basis to facilitate such cooperation.
(b) HRPT and Senior Housing shall retain or cause to be
retained all books, records and other documents within its possession
relating to the Premises, the Tenant Leases or the Contracts or
otherwise to the Transferred Subsidiaries or their properties, assets
or liabilities, and all Tax Returns, and all books, records, schedules,
workpapers, and other documents relating thereto, which Tax Returns and
other materials are within the scope of this Agreement, until the
expiration of the later of (i) all applicable statutes of limitations
(including any waivers or extensions thereof), and (ii) any retention
period required by law or pursuant to any record retention agreement.
The parties hereto shall provide at least thirty (30) days prior
written notice of any intended destruction of the documents referred to
in the preceding sentence. A party giving such a notification shall not
dispose of any of the foregoing materials without first allowing the
other party a reasonable opportunity to copy them at such other party's
expense.
3.3 Repayment of Senior Housing Formation Debt.
(a) As soon as practicable after the Distribution, but not
later than the Deferred Payment Date, Senior Housing shall pay or cause
SPTMRT Properties Trust to pay the Deferred Payment in full, together
with all accrued and unpaid interest thereon, in accordance with the
terms hereof and of any promissory notes evidencing the Deferred
Payments. Senior Housing represents and warrants to HRPT that, after
giving effect to the Distributions and the consummation of the
transactions contemplated by Sections 2.1 and 2.2, Senior Housing will
have the right to borrow at least $200,000,000 under the Senior Housing
Credit Facility and agrees to maintain that borrowing availability
until the Deferred Payment and all accrued interest thereon has been
paid in full; provided that the obligations of Senior Housing and
SPTMRT Properties Trust to pay the Deferred Payment and interest
thereon shall not be limited to amounts available to be borrowed under
the Senior Housing Credit Facility and shall not be conditioned on the
availability of funds thereunder.
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(b) In the event that any portion of the Deferred Payment and
all accrued interest thereon remains unpaid on the Deferred Payment
Date, Senior Housing agrees to cause SPTMRT Properties Trust to, and by
its joinder to this Agreement below, SPTMRT Properties Trust agrees to,
secure the obligations of Senior Housing and of SPTMRT Properties Trust
to pay the Deferred Payment and all interest accrued or to accrue
thereon within 10 days following the Deferred Payment Date (and in any
event by December 31, 1999) with a perfected, first mortgage lien on
the Premises owned by SPTMRT Properties Trust on the Effective Date and
perfected first assignments of and security interests in all Tenant
Leases, all Contracts and other personal property, fixtures and other
assets and rights related to the ownership, operation and leasing of
these Premises, pursuant to any mortgages, assignments, securities
agreements, financing statements and other security documents which may
reasonably be requested by HRPT from time to time. Senior Housing and,
by its joinder to this Agreement below, SPTMRT Properties Trust
acknowledges and agrees that the performance of its obligations under
this Section 3.3 may be necessary for HRPT's continuing qualification
as a REIT under the Code, that monetary damages would be insufficient
to compensate HRPT for a breach by Senior Housing or SPTMRT Properties
Trust of these obligations and, accordingly, that HRPT shall be
entitled, to the extent permitted by law, to request and obtain
specific performance of the obligations of Senior Housing and SPTMRT
Properties Trust under this Section 3.3 and to injunctive relief
requiring such performance.
3.4 Covenants to Maintain REIT Qualification. For so long as HRPT owns
more than 9.8% of the outstanding Senior Housing Common Shares or 9.8% by value
of the outstanding equity of Senior Housing, (a) HRPT will not acquire or own
more than 9.8% of the equity (measured by vote, value, capital interests or
profits interests) of any tenant of any member of the Senior Housing Group, (b)
HRPT will not consent to any Person owning more than 9.8% of the outstanding
beneficial interests in HRPT if the effect of such ownership would result in
rents received by any member of the Senior Housing Group to not qualify as
"rents from real property" within the meaning of Section 856(d) of the Code, and
(c) HRPT will not take any other action which, in the reasonable judgment of the
Senior Housing Board, would reasonably be expected to have an adverse impact on
the ability of Senior Housing to qualify as a "real estate investment trust"
under Sections 856 through 860 of the Code. For so long as HRPT owns more than
9.8% of the outstanding Senior Housing Common Shares or 9.8% by value of the
outstanding equity of Senior Housing, (a) Senior Housing will not acquire or own
more than 9.8% of the equity (measured by vote, value, capital interests or
profits interests) of any tenant of any member of the HRPT Group, and (b) Senior
Housing will not take any other action which, in the reasonable judgment of the
HRPT Board, would reasonably be expected to have an adverse impact on the
ability of HRPT to qualify as a "real estate investment trust" under Sections
856 through 860 of the Code.
3.5 Transfer of Senior Housing Shares. During the period ending on the
first anniversary of the Distribution Date, HRPT will not sell, transfer or
otherwise dispose of any of the Senior Housing common shares owned by it on the
Distribution Date (after giving effect to the Distribution) without the prior
approval of a majority of the Senior Independent Trustees.
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SECTION 4 DISTRIBUTION DATE ALLOCATIONS.
4.1 GAAP Allocations. For accounting purposes, all items of income and
expense relating to the Transferred Subsidiaries shall be allocated to HRPT in
respect of periods prior to (but excluding) the Distribution Date, and to Senior
Housing for all periods commencing on and after the Distribution Date.
4.2 Cash Allocations. Notwithstanding the provisions of subsection 4.1,
the parties agree that:
(a) Except as otherwise provided in subsection 4.2(c) below,
HRPT shall be entitled to receive and retain all cash and cash
equivalents (including the proceeds of checks received or in process of
collection and of tenant security deposits) of the Transferred
Subsidiaries at the time of the Distribution, regardless of whether
such cash or cash equivalents represent the proceeds of payments in
respect of the Premises, the Tenant Leases or the Contracts which
relate to periods which fall in whole or in part on or after the
Distribution Date (and Senior Housing acknowledges that the Transferred
Subsidiaries will declare a dividend of such cash and cash equivalents
payable to HRPT as holder of record of the Subsidiary Shares prior to
the Distribution Date, even though such dividend may be payable on or
after the Distribution Date);
(b) Senior Housing and the Transferred Subsidiaries shall be
entitled to receive and retain all payments in respect of the Premises,
the Tenant Leases and the Contracts which are received by the
Transferred Subsidiaries from and after the Distribution Date,
regardless of whether the payment relates to periods which fall in
whole or in part prior to the Distribution Date; and
(c) Senior Housing and the Transferred Subsidiaries shall be
entitled to retain, and HRPT shall transfer to Senior Housing or the
applicable Transferred Subsidiaries, any tenant, guarantor or similar
deposits which are required pursuant to a Tenant Lease or a Contract to
be maintained in a segregated escrow account, and thereafter Senior
Housing or the applicable Transferred Subsidiary shall agree to hold
and maintain such deposits in accordance with the applicable Tenant
Lease or Contract. Any tenant, guarantor or similar deposits pursuant
to any Tenant Lease or Contract which are not required to be maintained
in a segregated escrow account will be retained by HRPT, but Senior
Housing or the applicable Transferred Subsidiary will assume any
obligations to return or repay such deposits in accordance with the
applicable Tenant Lease or Contract.
4.3 No Other Prorations. Except as expressly provided in Section 4.1,
4.2 or 6, there shall be no proration, as between HRPT and its Subsidiaries
(exclusive of Senior Housing and the Transferred Subsidiaries), on the one hand,
and Senior Housing and the Transferred Subsidiaries, on the other, in respect of
rents, common area maintenance charges or other fixed or unfixed charges
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payable under the Tenant Leases, fuel, electric, water or other utility costs,
municipal assessments or governmental license or permit fees, real estate Taxes
or assessments, water rates or charges, sewer Taxes or rents, or any other item
of income or expense relating to the Premises (or for any adjustments arrearages
therein or refunds thereof). No insurance policies of HRPT or its Subsidiaries
are to be transferred to Senior Housing and the Transferred Subsidiaries, and no
apportionment of the premiums therefor shall be made.
SECTION 5 SURVIVAL; INDEMNIFICATION.
5.1 Indemnification by HRPT. From and after the Distribution Date, HRPT
shall indemnify and hold harmless Senior Housing, its Subsidiaries (including
the Transferred Subsidiaries), each of their respective directors, trustees,
officers, employees and agents, and each of the heirs, executors, successors and
assigns of any of the foregoing (collectively, the "Senior Housing Indemnified
Parties") from and against any and all damages, claims, losses, expenses, costs,
obligations and liabilities, including liabilities for all reasonable
attorneys', accountants', and experts' fees and expenses, including those
incurred to enforce the terms of this Agreement (collectively, "Covered
Liabilities"), suffered, directly or indirectly, by any Senior Housing
Indemnified Party by reason of, or arising out of:
(a) any breach of any covenant or agreement of HRPT contained
in this Agreement; or
(b) any Retained Liability.
5.2 Indemnification by Senior Housing. From and after the Distribution
Date, Senior Housing shall indemnify and hold harmless HRPT, its Subsidiaries,
each of their respective directors, trustees, officers, employees and agents,
and each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "HRPT Indemnified Parties") from and against any and all
Covered Liabilities suffered, directly or indirectly, by any HRPT Indemnified
Party by reason of, or arising out of:
(a) any breach of any covenant or agreement of Senior Housing
contained in this Agreement; or
(b) any Senior Housing Liability.
5.3 Indemnification Procedures.
(a) If any indemnified party receives notice of the assertion
of any Third-Party Claim with respect to which an indemnifying party is
obligated under this Agreement to provide indemnification, such
indemnified party shall give such indemnifying party written notice
thereof (together with a copy of such Third-Party Claim, process or
other legal pleading) promptly after becoming aware of such Third-Party
Claim; provided, however, that
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the failure of any indemnified party to give notice as provided in this
Section 5.3 shall not relieve any indemnifying party of its obligations
under this Section 5, except to the extent that such indemnifying party
is actually prejudiced by such failure to give notice. Such notice
shall describe such Third-Party Claim in reasonable detail.
(b) An indemnifying party, at such indemnifying party's own
expense and through counsel chosen by such indemnifying party (which
counsel shall be reasonably acceptable to the indemnified party), may
elect to defend any Third-Party Claim. If an indemnifying party elects
to defend a Third-Party Claim, then, within ten (10) business days
after receiving notice of such Third-Party Claim (or sooner, if the
nature of such Third-Party claim so requires), such indemnifying party
shall notify the indemnified party of its intent to do so, and such
indemnified party shall cooperate in the defense of such Third-Party
Claim (and pending such notice and assumption of defense, an
indemnified party may take such steps to defend against such
Third-Party Claim as, in such indemnified party's good-faith judgment,
are appropriate to protect its interests). The indemnifying party shall
pay such indemnified party's reasonable out-of-pocket expenses incurred
in connection with such cooperation. After notice from an indemnifying
party to an indemnified party of its election to assume the defense of
a Third-Party Claim, such indemnifying party (i) shall not be liable to
such indemnified party under this Section 5 for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than those expenses referred to in the
preceding sentence, and (ii) shall keep the indemnified party
reasonably informed of the status of the defense of such Third-Party
Claim; provided, however, that such indemnified party shall have the
right to employ one law firm as counsel, together with a separate local
law firm in each applicable jurisdiction ("Separate Counsel"), to
represent such indemnified party in any action or group of related
actions (which firm or firms shall be reasonably acceptable to the
indemnifying party) if, in such indemnified party's reasonable judgment
at any time, either a conflict of interest between such indemnified
party and such indemnifying party exists in respect of such claim, or
there may be defenses available to such indemnified party which are
different from or in addition to those available to such indemnifying
party and the representation of both parties by the same counsel would
be inappropriate, and in that event (i) the reasonable fees and
expenses of such Separate Counsel shall be paid by such indemnifying
party (it being understood, however, that the indemnifying party shall
not be liable for the expenses of more than one Separate Counsel
(excluding local counsel) with respect to any Third-Party Claim (even
if against multiple indemnified parties), and (ii) each of such
indemnifying party and such indemnified party shall have the right to
conduct its own defense in respect of such claim. If an indemnifying
party elects not to defend against a Third-Party Claim, or fails to
notify an indemnified party of its election as provided in this Section
5.3 within the period of ten (10) (or, if applicable, fewer) business
days described above, the indemnified party may defend, compromise, and
settle such Third-Party Claim and shall be entitled to indemnification
hereunder (to the extent permitted hereunder); provided, however, that
no such indemnified party may compromise or settle any such Third-Party
claim without the prior written consent of the indemnifying party,
which consent shall not be unreasonably
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withheld or delayed. Notwithstanding the foregoing, the indemnifying
party shall not, without the prior written consent of the indemnified
party, (i) settle or compromise any Third-Party Claim or consent to the
entry of any judgment which does not include as an unconditional term
thereof the delivery by the claimant or plaintiff to the indemnified
party of a written release from all liability in respect of such
Third-Party Claim, or (ii) settle or compromise any Third-Party Claim
in any manner that would reasonably be expected to have a material
adverse effect on the indemnified party.
5.4 Certain Limitations, Etc.
(a) The amount of any Covered Liabilities for which
indemnification is provided under this Agreement shall be net of any
amounts actually recovered by the indemnified party from third parties
(including amounts actually recovered under insurance policies) with
respect to such Covered Liabilities. Any indemnifying party hereunder
shall be subrogated to the rights of the indemnified party upon payment
in full of the amount of the relevant indemnifiable loss. An insurer
who would otherwise be obligated to pay any claim shall not be relieved
of the responsibility with respect thereto or, solely by virtue of the
indemnification provision hereof, have any subrogation rights with
respect thereto. If any indemnified party recovers an amount from a
third party in respect of an indemnifiable loss for which
indemnification is provided in this Agreement after the full amount of
such indemnifiable loss has been paid by an indemnifying party or after
an indemnifying party has made a partial payment of such indemnifiable
loss and the amount received from the third party exceeds the remaining
unpaid balance of such indemnifiable loss, then the indemnified party
shall promptly remit to the indemnifying party the excess of (i) the
sum of the amount theretofore paid by such indemnifying party in
respect of such indemnifiable loss plus the amount received from the
third party in respect thereof, less (ii) the full amount of such
Covered Liabilities.
(b) NO REMEDY UNDER THIS AGREEMENT OR AT LAW OR IN EQUITY
SHALL INCLUDE, PROVIDE FOR OR PERMIT THE PAYMENT OF MULTIPLE,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY EQUITABLE
EQUIVALENT THEREOF OR SUBSTITUTE THEREFOR.
5.5 Priority of Section 6. As to the Tax matters addressed in Section
6, including the indemnification for Taxes and the control and conduct of Tax
Contests, the provisions of Section 6 shall be the exclusive governing
provisions.
SECTION 6 TAX MATTERS.
6.1 General Responsibility for Taxes.
(a) All federal Income Taxes of the HRPT Group shall be borne
by, shall be the responsibility of, and shall be paid by HRPT, and all
federal Income Taxes of the Senior
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<PAGE>
Housing Group shall be borne by, shall be the responsibility of, and
shall be paid by Senior Housing. For purposes of federal Income Taxes,
items of income, gain, loss, deduction, expenditure, and credit shall
be allocated and apportioned between the HRPT Group and the Senior
Housing Group in the following manner. Any item relating to the Senior
Housing Assets or the Senior Housing Business shall be: (i) allocated
exclusively to the HRPT Group if such item is in respect of a period
ending before the Distribution Date; (ii) allocated exclusively to the
Senior Housing Group if such item is in respect of a period commencing
after the Distribution Date; and (iii) apportioned between the HRPT
Group and the Senior Housing Group in a manner consistent with (A)
applicable Tax laws, (B) the continued qualification of both HRPT and
Senior Housing as REITs under the Code, and (C) commercially reasonable
pro rations of items between buyers and sellers of real estate, if such
item is in respect of a period that includes the Distribution Date.
(b) For any state or local Income Tax that follows Section
856(i) of the Code (i) such state and local Income Taxes of the HRPT
Group shall be borne by, shall be the responsibility of, and shall be
paid by HRPT, and (ii) such state and local Income Taxes of the Senior
Housing Group shall be borne by, shall be the responsibility of, and
shall be paid by Senior Housing. For purposes of such state and local
Income Taxes, items of income, gain, loss, deduction, expenditure, and
credit shall be allocated and apportioned between the HRPT Group and
the Senior Housing Group in the same manner as Section 6.1(a).
(c) HRPT shall hold Senior Housing harmless from and against
all Taxes which are to be borne by HRPT under Section 6.1. Senior
Housing shall hold HRPT harmless from and against all Taxes which are
to be borne by Senior Housing under Section 6.1.
6.2 Allocation of Certain Taxes Among Taxable Periods. HRPT and Senior
Housing agree that if Senior Housing or any member of the Senior Housing Group
is permitted but not required under any applicable Tax law, including applicable
state and local Income Tax laws, to treat the day before the Distribution Date
or the Distribution Date as the last day of a Taxable period, HRPT and Senior
Housing shall cooperate so that such day will be treated as the last day of a
Taxable period.
6.3 Filing and Payment Responsibility.
(a) From and after the Distribution Date, each of HRPT (on
behalf of the HRPT Group) and Senior Housing (on behalf of the Senior
Housing Group) shall cause to be prepared and filed such Tax Returns as
the HRPT Group and the Senior Housing Group, respectively, are required
to file with applicable Taxing Authorities. Each of HRPT (on behalf of
the HRPT Group) and Senior Housing (on behalf of the Senior Housing
Group) agree that, except as required by applicable law, they will not
take positions in any such Tax Return that are inconsistent with (i)
the description of federal Income Tax consequences in the Senior
Housing Registration Statement and (ii) any other Tax Return, whether
filed on behalf of the HRPT Group or the Senior Housing Group,
previously or substantially
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<PAGE>
contemporaneously filed with such Tax Return. In particular, the
parties will use all reasonable business efforts to cooperate with one
another in valuing the individual assets comprising the Senior Housing
Assets on the Distribution Date, to the extent such valuations are
necessary for Tax purposes.
(b) To the extent that either of the HRPT Group or the Senior
Housing Group bears responsibility pursuant to Section 6.1 for some or
all of a Tax which is to be paid with a Tax Return for which the other
bears preparation and filing responsibility pursuant to Section 6.3,
then (i) the party bearing responsibility for some or all of such Tax
shall have the right to review and comment upon such Tax Return at
least fifteen (15) days before such Tax Return must be filed, and (ii)
the party bearing responsibility for some or all of such Tax shall pay
over by wire transfer the amount of such Tax for which it is
responsible to the party filing such Tax Return at least three (3) days
before such Tax Return must be filed, and (iii) the party responsible
for preparing and filing such Tax Return will file such Tax Return on
or before its due date and pay over to the applicable Taxing Authority
the amount of Tax due with such Tax Return.
6.4 Refunds and Credits. Any refunds or credits of Taxes shall be for
the account of the party bearing responsibility for such Taxes under Section
6.1. Each of HRPT and Senior Housing agrees that if as the result of any audit
adjustment made by any Taxing Authority with respect to a Tax to be borne by the
other party under Section 6.1, any member of the HRPT Group or the Senior
Housing Group, respectively, receives a Tax benefit in the form of a cash refund
or in the form of a credit applicable against Tax liabilities to be borne by
such benefited party under this Section 6, then the benefited party shall notify
the other party of the same within ten (10) days of, as applicable, receiving
the cash refund or filing the Tax Return in which such credit is utilized, and
then pay over immediately to such other party the amount of such Tax refund or
credit.
6.5 Tax Contests. If either HRPT (on behalf of the HRPT Group) or
Senior Housing (on behalf of the Senior Housing Group) becomes aware of any
audit, pending or threatened assessment, official inquiry, examination or
proceeding ("Tax Contests") that could result in an official determination with
respect to Taxes due or payable the responsibility for any portion of which
rests with the other party, such party shall promptly so notify the other party
in writing. The party bearing greater responsibility for the Taxes contested in
a Tax Contest shall bear the costs (including attorneys' and accountants' fees,
but excluding the contested Taxes) of such Tax Contest, and shall control and
conduct such Tax Contest in a reasonable manner after consulting in good faith
with the other party. The other party shall supply the party controlling the Tax
contest with such powers of attorney and assistance as may be reasonably
requested. The responsibility for any additional liability for Taxes resulting
from a Tax Contest shall be allocated and apportioned between the HRPT Group and
the Senior Housing Group in accordance with Section 6.1. Except to the extent in
conflict with the provisions of this Section 6, the provisions of Section 5.3
shall be applicable to Tax Contests.
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<PAGE>
6.6 Resolution of Disputes. At the request of either HRPT or Senior
Housing, any disputes between HRPT (on behalf of the HRPT Group) and Senior
Housing (on behalf of the Senior Housing Group) with respect to matters governed
by this Section 6 shall be resolved through an arbitration by a firm of
independent certified public accountants, mutually agreed upon by HRPT and
Senior Housing and having no material relationship with either HRPT or Senior
Housing, whose determination shall be final and binding on both parties. The
cost of such firm shall be borne equally by HRPT and Senior Housing.
SECTION 7 MISCELLANEOUS.
7.1 Arbitration. The Parties agree that any and all disputes and
disagreements arising out of or relating to this Agreement, other than actions
or claims for injunctive relief or claims raised in actions or proceedings
brought by third parties and other than disputes under Section 6 as to which
either party elects to apply the provisions of Section 6.6, shall be resolved
through negotiations or, if the dispute is not so resolved, through binding
arbitration conducted in Boston, Massachusetts under the J.A.M.S./Endispute
Comprehensive Arbitration Rules and Procedures, with the following amendments to
those rules. First, the parties agree that in no event shall the arbitration
from commencement to issuance of an award take longer than 180 days. Second, the
parties agree that the arbitration tribunal shall consist of three arbitrators
and that the Parties elect not to have the optional appeal procedure provided
for in Rule 23. Third, in lieu of the depositions permitted in Rule 15(E) and
(F) the parties agree that the only depositions shall be a single deposition to
last no longer than one six-hour day that each party may take of the opposing
party or an individual under the control of the opposing party. Judgment on the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
7.2 Confidentiality. Each party hereto shall use its reasonable
business efforts to maintain the confidentiality of any information concerning
the other party or any Subsidiary of the other party provided to or discovered
by it or its representatives and which is not otherwise available on a
nonconfidential basis to such party and shall not (except as may otherwise be
required by applicable law or the rules and regulations of the New York Stock
Exchange) disclose such information, subject to the provisions of this Section,
to anyone other than those people who have a need to know such information in
connection with the conduct of such party's business, including its attorneys,
accountants and other representatives and agents or during the course of or in
connection with any Action based upon or in connection with the subject matter
of this Agreement.
7.3 Notices.
(a) Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same
shall be delivered either in hand, by telecopier with written
confirmation of receipt, or by mail or Federal Express or similar
expedited commercial carrier, addressed to the recipient of the notice,
postpaid and registered or certified with
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<PAGE>
return receipt requested (if by mail), or with all freight charges
prepaid (if by Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement
upon the date of acknowledged receipt, in the case of a notice by
telecopier, and, in all other cases, upon the date of receipt or
refusal, except that whenever under this Agreement a notice is either
received on a day which is not a business day or is required to be
delivered on or before a specific day which is not a business day, the
day of receipt or required delivery shall automatically be extended to
the next business day.
(c) All such notices shall be addressed,
If to Senior Housing, to:
Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attn: President
Telecopier No. (617) 332-2261
If to HRPT, to:
HRPT Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attn: President
Telecopier No. (617) 332-2261
(d) By notice given as herein provided, the parties hereto and
their respective successor and assigns shall have the right from time
to time and at any time during the term of this Agreement to change
their respective addresses effective upon receipt by the other parties
of such notice and each shall have the right to specify as its address
up to two other addresses within the United States of America.
7.4 Waivers, Etc. No provision of this Agreement may be waived except
by a written instrument signed by the party waiving compliance. No waiver by any
party hereto of any of the requirements hereof or of any of such party's rights
hereunder shall release the other parties from full performance of their
remaining obligations stated herein. No failure to exercise or delay in
exercising on the part of any party hereto any right, power or privilege of such
party shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, power or privilege by such party.
This Agreement may not be amended, nor shall any waiver, change, modification,
consent
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<PAGE>
or discharge be effected, except by an instrument in writing executed by or on
behalf of the party against whom enforcement of any amendment, waiver, change,
modification, consent or discharge is sought.
7.5 Assignment; Successors and Assigns. This Agreement and all rights
and obligations hereunder shall not be assignable by any party without the
written consent of the other parties, except to a successor to such party by
merger or consolidation or an assignee of substantially all of the assets of
such party. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
This Agreement is not intended and shall not be construed to create any rights
in or to be enforceable in any part by any other Person.
7.6 Severability. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
7.7 Counterparts, Etc. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof. This Agreement may not be amended or modified in any
respect other than by the written agreement of all of the parties hereto.
7.8 Governing Law. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of The Commonwealth of
Massachusetts applicable to contracts between residents of Massachusetts which
are to be performed entirely within Massachusetts.
7.9 Expenses. HRPT agrees to pay and to hold Senior Housing harmless
from and against (a) all costs, expenses and fees (including in each case the
reasonable fees and disbursements of counsel), whether incurred by HRPT, Senior
Housing or a Transferred Subsidiary, incident to (i) the drafting, preparation,
execution and delivery of this Agreement and all other agreements, instruments
and other documents entered into by HRPT, Senior Housing or the Transferred
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<PAGE>
Subsidiaries in connection herewith or in connection with the Distribution or
consummation of the other transactions contemplated hereby, (ii) the
preparation, printing, filing and distribution under the Securities Act of the
Senior Housing Registration Statement (including financial statements and
exhibits), each preliminary prospectus and prospectus in connection therewith
and all amendments and supplements to any of them, (iii) the registration or
qualification of the Senior Housing Common Shares for offer and sale under the
securities, Blue Sky or real estate syndication laws of the several states in
connection with the Distribution, (iv) the initial listing of the Senior Housing
Common Shares on the New York Stock Exchange and (v) furnishing such copies of
the Senior Housing Registration Statement, the final prospectus contained
therein and all amendments and supplements thereto as may be requested for use
by tranferors thereof who are required to deliver a prospectus in connection
with the Distribution, (b) the fees and expenses of the Agent in connection with
the Distribution, (c) all costs, expenses and fees (including any up-front or
structuring fees, any mortgage recording fees or taxes and all costs the
reasonable fees and disbursements of counsel for Senior Housing and for any
lenders or agents), in connection with or incident to the establishment of, or
the drafting, preparation, execution and delivery of any and all agreements,
instruments and other documents entered into by Senior Housing or any
Transferred Subsidiaries in connection with, the Senior Housing Credit Facility,
and (d) all real property transfer Taxes, including Taxes levied upon the
transfer of equity in an Entity owning real estate assets, and all excise,
sales, use, value added, registration stamp, recording, documentary,
conveyancing, franchise, property, transfer, gains and similar Taxes, levies,
charges and fees, including any deficiencies, interest, penalties, additions to
Tax or additional amounts excluding any Income Taxes, incurred in connection
with the transactions contemplated by this Section 7.9. HRPT and Senior Housing
shall take all reasonable actions in making efforts to minimize the amount of
Transfer Taxes, and shall cooperate with one another in providing any
appropriate exemption certifications or other similar documentation.
7.10 Section and Other Headings; Interpretation. The headings contained
in this Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement. The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Section, subsection, Schedule and Exhibit references are to
this Agreement, unless otherwise specified. The words "including" and "include"
shall be deemed to be followed by the words "without limitation."
7.11 Exculpation. THE DECLARATIONS OF TRUST ESTABLISHING HRPT, SENIOR
HOUSING AND SPTMRT PROPERTIES TRUST, COPIES OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE "DECLARATIONS"), ARE DULY FILED WITH THE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDE THAT THE NAMES "HRPT
PROPERTIES TRUST," "SENIOR HOUSING PROPERTIES TRUST" AND "SPTMRT PROPERTIES
TRUST" REFER TO THE TRUSTEES UNDER EACH DECLARATION COLLECTIVELY AS TRUSTEES,
BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER,
EMPLOYEE OR AGENT OF HRPT, SENIOR HOUSING OR SPTMRT PROPERTIES TRUST, AS THE
CASE MAY BE, SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
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SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HRPT, SENIOR HOUSING OR
SPTMRT PROPERTIES TRUST, AS THE CASE MAY BE. ALL PERSONS DEALING WITH HRPT,
SENIOR HOUSING OR SPTMRT PROPERTIES TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF HRPT, SENIOR HOUSING OR SPTMRT PROPERTIES TRUST, AS THE CASE MAY BE,
FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. THE PROVISIONS
OF THIS SECTION 7.11 SHALL SURVIVE THE DISTRIBUTION OF SENIOR HOUSING COMMON
SHARES.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
HRPT PROPERTIES TRUST
By:___________________________________
Title:
SENIOR HOUSING PROPERTIES TRUST
By:___________________________________
Title:
THE PROVISIONS OF SECTIONS 2.2 AND 3.3 APPLICABLE TO THE UNDERSIGNED ARE HEREBY
ACCEPTED AND AGREED TO:
SPTMRT PROPERTIES TRUST
By:___________________________________
Title:
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<PAGE>
EXHIBIT A TO
TRANSACTION AGREEMENT
Form of
Promissory Note
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAW.
PROMISSORY NOTE
$__________ [DATE]
__________, Massachusetts
FOR VALUE RECEIVED, SPTMRT PROPERTIES TRUST, a Maryland real estate
investment trust (the "Maker"), by this promissory note (this "Note"), promises
unconditionally to pay to HRPT PROPERTIES TRUST, a Maryland real estate
investment trust ("HRPT") or registered assigns (the "Holder") the principal sum
of __________________________________________ DOLLARS ($___________), on the
Deferred Payment Date (as defined below), together with any accrued but unpaid
interest on the principal amount from time to time outstanding hereunder as set
forth below.
This Note shall bear interest on the principal amount from time to time
outstanding hereunder from the date hereof to and including the date on which
the principal amount outstanding hereunder is repaid in full, payable on the
Deferred Payment Due Date and thereafter on demand, at a rate per annum
determined for each day equal to HRPT's weighted average effective interest rate
on its indebtedness for money borrowed on such day (as determined by HRPT in
good faith), but in no event exceeding the maximum rate permitted by law.
The Maker may prepay principal of this Note in part or in whole from
time to time without premium or penalty, but together with accrued and unpaid
interest on the principal amount prepaid.
This Note is made by the Maker pursuant to the terms of the Transaction
Agreement, dated as of __________, 1999 (as amended from time to time, the
"Transaction Agreement"), between HRPT and Senior Housing Properties Trust, a
Maryland real estate investment trust. As used herein, the term "Deferred
Payment Date" means the earlier to occur of (i) the 10th day following the
Distribution Date (as such term is defined in the Transaction Agreement) and
(ii) December 31, 1999.
<PAGE>
All payments of principal, interest and other amounts payable on or in
respect of this Note or the indebtedness evidenced hereby shall be made to the
Holder at such places within the United States of America as the Holder shall
from time to time designate in lawful money of the United States of America.
Payments hereunder shall be made in immediately available funds.
Without limitation of any other right or remedy of the Holder hereunder
or under the Transaction Agreement, if the Maker shall fail to pay the entire
principal amount of this Note on or prior to the Deferred Payment Date, then
without further demand from the Holder, the Maker shall within 10 days following
the Deferred Payment Date (and in any case by December 31, 1999) secure its
obligations under this Note with a perfected, first mortgage lien on the
Premises (as defined in the Transaction Agreement) owned by the Maker and
perfected first assignments of and security interests in all of the Maker's
Tenant Leases and Contracts (as defined in the Transaction Agreement) and all of
its other personal property, fixtures and other assets and rights related to the
ownership, operation and leasing of the Premises, pursuant to such mortgages,
assignments, securities agreements, financing statements and other security
documents which may reasonably be requested by the Holder from time to time.
If the Maker shall (i) dissolve or take any action of its shareholders
or board of trustees to dissolve, (ii) commence or consent to any case or
proceeding under any federal or state bankruptcy, insolvency or reorganization
law or any proceeding for appointment of a trustee, receiver, custodian or
similar official with respect to the Maker, (iii) be subject to any case or
proceeding under any federal or state bankruptcy, insolvency or reorganization
law, or proceeding for appointment of a trustee, receiver, custodian or similar
official with respect to the Maker, that continues for at least sixty (60) days,
(iv) make an assignment for the benefit of creditors, or (v) admit in writing
its inability to pay, or fail to pay, its debts as they mature, the entire
unpaid principal of, and accrued and unpaid interest on, this Note shall
automatically, without any requirement of notice or action by the Holder, become
immediately due and payable.
The Maker will pay on demand all costs of collection, including all
court costs and reasonable attorney's fees paid or incurred by the Holder in
enforcing this Note upon default.
All Makers, sureties, guarantors and endorsers hereof, by executing or
endorsing this Note or by entering into or executing any agreement to pay any of
the indebtedness evidenced hereby, waive (to the fullest extent permitted by
law) all requirements of diligence in collection, presentment, notice of
non-payment, protest, notice of protest, suit and all other conditions precedent
or suretyship defenses in connection with the collection and enforcement of this
Note or any guaranty of the indebtedness evidenced hereby.
The terms of this Note and the performance and observance by the Maker
of any term of this Note may only be waived by a written instrument duly
executed by or on behalf of the Holder. The failure of the Holder to exercise
any of his rights, remedies, powers or privileges hereunder in any instance
shall not constitute a waiver thereof in that or any other instance.
A-2
<PAGE>
This Note may be assigned in whole or, with the prior written consent
of the Maker, in part (provided that any such consent shall not be required if
such assignment occurs after the Deferred Payment Date and the unpaid principal
amount assigned is at least $10,000,000), but any assignee shall take subject to
any and all defenses available to the Maker whether at law or in equity. The
Maker shall keep a register at its principal place of business in the United
States and shall provide for the registration of this Note and of transfers
hereof. Upon surrender of this Note for registration of transfer, the Maker
shall execute and deliver in the name of the designated assignee or assignees
and, in the case of a partial assignment, in the name of the Holder, one or more
new notes containing identical terms and provisions as this Note and in an
aggregate principal amount equal to the then unpaid principal balance hereof.
This Note is delivered in and shall be governed by and interpreted and
determined in accordance with the laws of The Commonwealth of Massachusetts.
THE DECLARATION OF TRUST ESTABLISHING SPTMRT PROPERTIES TRUST, 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 "SPTMRT 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
SPTMRT PROPERTIES TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SPTMRT PROPERTIES TRUST. ALL
PERSONS DEALING WITH SPTMRT PROPERTIES TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF SPTMRT PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE
OF ANY OBLIGATION.
WITNESS the execution hereof under seal, as of the day and year first
above written.
SPTMRT PROPERTIES TRUST
By:___________________________________
Title:
A-3
EXHIBIT 99.3
FORM OF
ADVISORY AGREEMENT
THIS AGREEMENT is entered into effective as of ____________, 1999, by
and among Senior Housing Properties Trust, a Maryland real estate investment
trust (the "Company"), Reit Management & Research, Inc., a Delaware corporation
(the "Advisor"), and, solely with respect to certain non-competition covenants
in Section 14 of this Agreement, Barry M. Portnoy and Gerard M. Martin.
WHEREAS, the Advisor is a corporation organized for the purpose of
providing management and administrative services with respect to the ownership
of real property and interests in real property;
WHEREAS, in connection with its investments, the Company desires to
make use of the advice and assistance of the Advisor and information available
to the Advisor, and to have the Advisor undertake the duties and
responsibilities hereinafter set forth, on behalf of and subject to the
supervision of the Company's Board of Trustees (the "Trustees"), all as provided
herein;
WHEREAS, the Advisor is willing to render such services, subject to the
supervision of the Trustees, on the terms and conditions hereinafter set forth;
and
WHEREAS, the Company has qualified and intends to continue to qualify
as a real estate investment trust as defined in the Internal Revenue Code of
1986, as amended (said Code, as in effect from time to time, together with any
regulations and rulings thereunder, being hereinafter referred to as the
"Internal Revenue Code").
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto agree as follows:
1. General Duties of the Advisor. The Advisor shall use its best
efforts to present to the Company a continuing and suitable investment program
consistent with the investment policies and objectives of the Company. Subject
to the supervision of the Trustees and under their direction, and consistent
with the provisions of the Declaration of Trust, the Advisor shall:
(a) serve as the Company's investment advisor, with its
obligations to include providing research and economic and statistical
data in connection with the Company's investments and recommending
changes in the Company's investment policies, when appropriate;
(b) investigate and evaluate investment, financing and
refinancing opportunities and make recommendations concerning these
opportunities to the Trustees;
<PAGE>
(c) manage the Company's short-term investments, including the
acquisition and sale of money market instruments in accordance with the
Company's policies;
(d) administer the day-to-day operations of the Company;
(e) investigate, negotiate and enter into appropriate contracts
on behalf of the Company with individuals, corporations and other
entities (i) for the purchase, lease or servicing of real estate and
related interests and otherwise in furtherance of the investment
activities of the Company and (ii) for the financing and refinancing of
investments and otherwise in furtherance of the financing activities of
the Company;
(f) upon request of the Trustees, act as attorney-in-fact or
agent in acquiring and disposing of investments and funds of the
Company and in handling, prosecuting and settling any claims of the
Company;
(g) obtain for the Company, when appropriate, the services of
property managers or management firms to perform customary property
management services with regard to the real estate properties owned by
or in the possession of the Company, and perform such supervisory or
monitoring services on behalf of the Company with respect to the
activities of those property managers or management firms as would be
performed by a prudent owner, including but not limited to supervising
the activities of property managers or management firms, visiting the
properties, participating in property management budgeting, reviewing
the accounting of property income and expenses, reporting on the
financial status of the properties and reviewing and approving
marketing plans, but excluding the actual on-site property management
functions performed by said property managers or management firms;
(h) obtain for the Company other services as may be required for
other activities relating to the investment portfolio of the Company;
(i) administer the day-to-day bookkeeping and accounting
functions as are required for the proper management of the assets of
the Company, contract for audits and prepare or cause to be prepared
reports as may be required by any governmental authority in connection
with the ordinary conduct of the Company's business, including without
limitation, periodic reports, returns or statements required under the
Securities Exchange Act of 1934, as amended, the Internal Revenue Code,
the securities and tax statutes of any jurisdiction in which the
Company is obligated to file such reports, or the rules and regulations
promulgated under any of the foregoing;
(j) provide office space, office equipment and the use of
accounting or computing equipment when required, and provide personnel
necessary for the performance of the foregoing services; and
(k) from time to time, or at any time requested by the Trustees,
make reports to the Trustees of its performance of the foregoing
services to the Company.
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<PAGE>
In performing its services under this Agreement, the Advisor may
utilize facilities, personnel and support services of various of its Affiliates
(as defined below). The Advisor shall be responsible for paying such Affiliates
for their personnel and support services and facilities out of its own funds.
Notwithstanding the above, the Company may request, and will pay for the direct
costs of, services provided by Affiliates of the Advisor provided that such
request is approved by a majority vote of the Trustees who are not Affiliates of
the Advisor (the "Independent Trustees").
As used in this Agreement, the term "Affiliate" means, as to the
Advisor, (i) any other Person (as defined below) directly or indirectly
controlling, controlled by or under common control with the Advisor, (ii) any
other Person that owns beneficially, directly or indirectly, five percent (5%)
or more of the outstanding capital stock, shares or equity interests of the
Advisor, or (iii) any officer, director, trustee, employee or general partner of
the Advisor or of any Person controlling, controlled by or under common control
with the Advisor. The term "Person" means and includes individuals,
corporations, limited partnerships, general partnerships, limited liability
companies, joint stock companies or associations, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts and
other entities.
2. Bank Accounts. The Advisor shall establish and maintain one or more
bank accounts in its own name or in the name of the Company, and shall collect
and deposit into the account or accounts and disburse therefrom any monies on
behalf of the Company; provided that no funds in any account shall be commingled
with any funds of the Advisor or any other Person. The Advisor shall from time
to time render an appropriate accounting of collections and payments to the
Trustees and to the auditors of the Company.
3. Records. The Advisor shall maintain appropriate books of account and
records relating to services performed pursuant to this Agreement, which books
of account and records shall be available for inspection by representatives of
the Company upon reasonable notice during ordinary business hours.
4. Information Furnished Advisor. The Trustees shall at all times keep
the Advisor fully informed with regard to the investment policies of the
Company, the capitalization policy of the Company, and generally the Trustees'
then-current intentions as to the future of the Company. In particular, the
Company shall notify the Advisor promptly of its intention to sell or otherwise
dispose of any of the Company's investments or to make any new investment. The
Company shall furnish the Advisor with a certified copy of all financial
statements, a signed copy of each report prepared by independent certified
public accountants and other information with regard to its affairs as the
Advisor may from time to time reasonably request. The Company shall retain legal
counsel and accountants to provide legal and accounting advice and services as
the Advisor or the Trustees shall deem necessary or appropriate to adequately
perform the functions of the Company, and shall have legal or accounting
opinions and advice as the Advisor shall reasonably request.
5. REIT Qualification. Anything else in this Agreement to the contrary
notwithstanding, the Advisor shall refrain from any action (including, without
limitation, the furnishing or rendering of services to tenants of property or
managing real property) which, in its judgment made in good faith, or in the
judgment of the Trustees as transmitted to the Advisor in writing, would (a)
adversely
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affect the status of the Company as a real estate investment trust as defined
and limited in the Internal Revenue Code or which would make the Company subject
to the Investment Company Act of 1940, as amended, or (b) violate any law, rule,
regulation or statement of policy or any governmental body or agency having
jurisdiction over the Company or over its securities, or (c) otherwise not be
permitted by the Declaration of Trust or Bylaws of the Company, as in effect
from time to time, except if the action shall be ordered by the Trustees, in
which event the Advisor shall promptly notify the Trustees of the Advisor's
judgment that the action would adversely affect the Company's status or violate
any law, rule or regulation or the Declaration of Trust or Bylaws of the Company
and shall refrain from taking the action pending further clarification or
instructions from the Trustees. In addition, the Advisor shall take affirmative
steps which, in its judgment made in good faith, or in the judgment of the
Trustees as transmitted to the Advisor in writing, would prevent or cure any
action described in (a), (b) or (c) above.
6. Self-Dealing. Neither the Advisor nor any Affiliate of the Advisor
shall, directly or indirectly, sell any property or assets to the Company or
purchase any property or assets from the Company, lease any property from the
Company or borrow any money from the Company, except as approved by a majority
of the Independent Trustees. In addition, except as otherwise provided in
Sections 1, 9 or 10 hereof, or except as approved by a majority of the
Independent Trustees, neither the Advisor nor any Affiliate of the Advisor shall
receive any commission or other remuneration, directly or indirectly, in
connection with the activities of the Company or any joint venture or
partnership in which the Company is a party. The foregoing prohibitions shall
not apply to the leases affecting three nursing homes between the Company and an
Affiliate of the Advisor, which leases were entered into by the Company's
predecessor in interest prior to the date of this Agreement.
7. No Partnership or Joint Venture. The Company and the Advisor are not
partners or joint venturers with each other and neither the terms of this
Agreement nor the fact that the Company and the Advisor have joint interests in
any one or more investments shall be construed so as to make them such partners
or joint venturers or impose any liability on either of them.
8. Fidelity Bond. The Advisor shall not be required to obtain or
maintain a fidelity bond in connection with the performance of its services
hereunder.
9. Compensation. The Advisor shall be paid an advisory fee (the
"Advisory Fee") for the services rendered by it to the Company pursuant to this
Agreement. The Advisory Fee for each full fiscal year of the Company shall equal
the sum of one-half of one percent (0.5%) of the Annual Average Transferred
Assets (as defined below), plus seven-tenths of one percent (0.7%) of the Annual
Average Invested Capital (as defined below) up to $250,000,000, plus one-half of
one percent (0.5%) of the Annual Average Invested Capital equal to or exceeding
$250,000,000. The Advisory Fee shall be prorated for any partial fiscal year of
the Company during the term of this Agreement. In addition, the Advisor shall be
paid an annual incentive fee (the "Incentive Fee") for each fiscal year of the
Company, commencing with the Company's fiscal year ending December 31, 2000,
consisting of a number of shares of the Company's common shares of beneficial
interest ("Common Shares") with an aggregate value (determined as provided
below) equal to fifteen percent (15%) of the product of (i) the weighted average
Common Shares of the Company outstanding on
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a diluted basis during such fiscal year and (ii) the excess if any of FFO Per
Share (as defined below) for such fiscal year over the FFO Per Share for the
preceding fiscal year; provided however, in no event shall the Incentive Fee
payable in respect of any fiscal year exceed $.02 multiplied by the weighted
average number of Common Shares outstanding on a diluted basis during such
fiscal year. (The Advisory Fee and Incentive Fee are hereinafter collectively
referred to as the "Fees"). No Incentive Fee shall be payable for the Company's
fiscal year ending December 31, 1999.
For purposes of this Agreement: "Annual Average Transferred Assets" of
the Company, for any fiscal year, means the daily weighted average during such
fiscal year (or, in the case of the Company's fiscal year ending December 31,
1999, during the period commencing with the date hereof and ending on December
31, 1999) of the aggregate book value of the Transferred Assets, before
depreciation, reserves for bad debts and other similar noncash items. "Annual
Average Invested Capital" of the Company, for any fiscal year, means the daily
weighted average during such fiscal year (or, in the case of the Company's
fiscal year ending December 31, 1999, during the period commencing with the date
hereof and ending on December 31, 1999) of the aggregate book value of the
consolidated assets of the Company, excluding the Transferred Assets, invested,
directly or indirectly, in equity interests in and loans secured by real estate
and personal property owned in connection with such real estate, before
depreciation, reserves for bad debts and other similar noncash items. "FFO Per
Share," for any fiscal year, means (i) the Company's consolidated net income,
computed in accordance with generally accepted accounting principles, before
gain or loss on sale of properties and extraordinary items, depreciation and
other non-cash items, including the Company's pro rata share of the funds from
operations (determined in accordance with this clause) for such fiscal year of
(A) any unconsolidated subsidiary and (B) any entity for which the Company
accounts by the equity method of accounting, divided by (ii) the weighted
average number of Common Shares outstanding on a diluted basis during such
fiscal year; "Transferred Assets" means the assets owned by the Company and its
subsidiaries on the date hereof. FFO Per Share for the Company's fiscal year
ending December 31, 1999 shall be calculated on a pro forma basis adjusted as if
the transactions described in the notes to the unaudited pro forma consolidated
financial statements of the Company contained in the Company's Registration
Statement No. 333-69703 filed with the Securities and Exchange Commission (as
amended through the date hereof) had occurred as of January 1, 1999.
The Advisory Fee shall be computed and paid by the Company on a year to
date basis within thirty (30) days following the end of each fiscal month. These
computations shall be based upon the Company's monthly or quarterly financial
statements, as the case may be, and shall be in reasonable detail. The Incentive
Fee shall be computed and paid by the Company within thirty (30) days following
the public availability of the Company's annual audited financial statements for
each fiscal year. A copy of the computations shall promptly be delivered to the
Advisor accompanied by payment of the Fees shown thereon to be due and payable.
The aggregate Fees paid for each fiscal year shall be subject to
adjustment as of the end of each that year. On or before the 30th day after
public availability of the Company's annual audited financial statements for
each fiscal year, the Company shall deliver to the Advisor an Officer's
Certificate (a "Certificate") reasonably acceptable to the Advisor and certified
by an authorized officer of the Company setting forth (i) the Annual Average
Transferred Assets, the Annual Average
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Invested Capital and FFO Per Share for the Company's fiscal year ended upon the
immediately preceding December 31, and (ii) the Company's computation of the
Fees payable for the fiscal year. The Certificate shall be accompanied by an
examination of the calculation of Annual Average Invested Capital and FFO Per
Share by the Company's independent certified public accountants.
If the aggregate Fees payable for any fiscal year as shown in the
Certificate exceed the aggregate amounts previously paid by the Company, the
Company shall pay the deficit to the Advisor at the time of delivery of the
Certificate.
If the aggregate Fees payable for any fiscal year as shown in the
Certificate are less than the aggregate amounts previously paid by the Company,
the Company shall specify in the Certificate whether the Advisor should (i)
refund to the Company an amount equal to the difference or (ii) grant the
Company a credit against the Fees next coming due in the amount of the
difference until that amount has been fully paid or otherwise discharged.
Payment of the Incentive Fee shall be made by issuance of Common
Shares. The number of shares to be issued in payment of the Incentive Fee shall
be the whole number of shares (disregarding any fraction) equal to the value of
the Incentive Fee, as provided above, divided by the average closing price of
the Common Shares on the New York Stock Exchange during the month before the end
of the fiscal year for which the computation is made.
10. Compensation for Additional Services. If, and to the extent that,
the Company shall request the Advisor to render services on behalf of the
Company other than those required to be rendered by the Advisor in accordance
with the terms of this Agreement, those additional services shall be compensated
separately on terms to be agreed upon between the Advisor and the Company from
time to time. In addition, the Company may make awards to the employees of the
Advisor and others under the Company's 1999 Incentive Share Award Plan.
11. Expenses of the Advisor. Without regard to the compensation
received by the Advisor from the Company pursuant to this Agreement, the Advisor
shall bear the following expenses incurred in connection with the performance of
its duties under this Agreement:
(a) employment expenses of the personnel employed by the
Advisor, including but not limited to, salaries, wages, payroll taxes
and the cost of employee benefit plans;
(b) fees and travel and other expenses paid to directors,
officers and employees of the Advisor, except fees and travel and other
expenses of persons who are Trustees or officers of the Company
incurred in their capacities as Trustees or officers of the Company;
(c) rent, telephone, utilities, office furniture, equipment and
machinery (including computers, to the extent utilized) and other
office expenses of the Advisor, except to the extent those expenses may
relate solely to an office maintained by the Company separate from the
office of the Advisor, if any; and
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<PAGE>
(d) miscellaneous administrative expenses incurred in
supervising, monitoring and inspecting real property and other
investments of the Company or relating to performance by the Advisor of
its obligations hereunder.
12. Expenses of the Company. Except as expressly otherwise provided in
this Agreement, the Company shall pay all its expenses not payable by the
Advisor, and, without limiting the generality of the foregoing, it is
specifically agreed that the following expenses of the Company shall be paid by
the Company and shall not be paid by the Advisor:
(a) the cost of borrowed money;
(b) taxes on income and taxes and assessments on real
property, if any, and all other taxes applicable to the Company;
(c) legal, auditing, accounting, underwriting, brokerage,
listing, reporting, registration and other fees, and printing,
engraving and other expenses and taxes incurred in connection with the
issuance, distribution, transfer, trading, registration and stock
exchange listing of the Company's securities, including transfer
agent's, registrar's and indenture trustee's fees and charges;
(d) expenses of organizing, restructuring, reorganizing or
terminating the Company, or of revising, amending, converting or
modifying the Company's organizational documents;
(e) fees and travel and other expenses paid to Trustees and
officers of the Company in their capacities as such (but not in their
capacities as officers or employees of the Advisor) and fees and travel
and other expenses paid to advisors, contractors, mortgage servicers,
consultants, and other agents and independent contractors employed by
or on behalf of the Company;
(f) Expenses directly connected with the acquisition,
disposition or ownership of real estate interests or other property
(including the costs of foreclosure, insurance premiums, legal
services, brokerage and sales commissions, maintenance, repair,
improvement and local management of property), other than expenses with
respect thereto of employees of the Advisor, to the extent that those
expenses are to be borne by the Advisor pursuant to Section 11 above;
(g) all insurance costs incurred in connection with the
Company (including officer and trustee liability insurance) or in
connection with any officer and trustee indemnity agreement to which
the Company is a party;
(h) expenses connected with payments of dividends or interest
or contributions in cash or any other form made or caused to be made by
the Trustees to holders of securities of the Company;
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<PAGE>
(i) all expenses connected with communications to holders of
securities of the Company and other bookkeeping and clerical work
necessary to maintaining relations with holders of securities,
including the cost of printing and mailing certificates for securities
and proxy solicitation materials and reports to holders of the
Company's securities;
(j) legal, accounting and auditing fees and expenses; and
(k) expenses relating to any office or office facilities
maintained by the Company separate from the office of the Advisor.
13. Limits of Advisor Responsibility. The Advisor assumes no
responsibility other than to render the services described herein in good faith
and shall not be responsible for any action of the Trustees in following or
declining to follow any advice or recommendation of the Advisor. The Advisor,
its shareholders, directors, officers, employees, agents and Affiliates will not
be liable to the Company, its shareholders, or others, except by reason of acts
constituting bad faith, willful or wanton misconduct or gross negligence. The
Company shall reimburse, indemnify and hold harmless the Advisor, its
shareholders, directors, officers and employees, agents and Affiliates for and
from any and all expenses, losses, damages, liabilities, demands, charges and
claims of any nature whatsoever in respect of or arising from any acts or
omissions of the Advisor undertaken in good faith and in accordance with the
standard set forth above pursuant to the authority granted to it by this
Agreement.
14. Other Activities of the Advisor and its Stockholders. Nothing
herein shall prevent the Advisor from engaging in other activities or businesses
or from acting as advisor to any other Person (including other real estate
investment trusts) even though that Person has investment policies and
objectives similar to those of the Company; provided, however, that neither the
Advisor nor Barry M. Portnoy or Gerard M. Martin shall provide advisory services
to, make competitive direct investment in or, in the case of Messrs. Portnoy and
Martin, serve as a director or officer of, any other real estate investment
trust which is principally engaged in the business of ownership of senior
apartments, congregate communities, assisted living or nursing home properties
without the consent of the Independent Trustees. The Advisor shall be free from
any obligation to present to the Company any particular investment opportunity
which comes to the Advisor. In addition, except as expressly provided herein,
nothing herein shall prevent any stockholder or Affiliate of the Advisor from
engaging in any other business or from rendering services of any kind to any
other corporation, partnership or other entity (including competitive business
activities). Without limiting the foregoing provisions, the Advisor agrees, upon
the request of any Trustee of the Company, to disclose certain investment
information concerning the Advisor or certain of its Affiliates, provided,
however, that the disclosure shall be required only if it does not constitute a
breach of any fiduciary duty or obligation of Advisor.
Directors, officers, employees and agents of the Advisor or of its
Affiliates may serve as Trustees, officers, employees, agents, nominees or
signatories of the Company. When executing documents or otherwise acting in
capacities for the Company, these persons shall use their respective titles in
the Company.
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<PAGE>
15. Term, Termination. This Agreement shall continue in force and
effect until December 31, 1999 (the "Initial Term"), and is renewable
periodically thereafter by the Company, if a majority of the Independent
Trustees determine that the Advisor's performance has been satisfactory.
Paragraph 18 hereof shall govern the rights, liabilities and
obligations of the parties upon termination of this Agreement; and, except as
provided in paragraph 18, a termination shall be without further liability of
either party to the other than for breach or violation of this Agreement prior
to termination.
16. Assignment. The Company may terminate this Agreement at any time in
the event of its assignment by the Advisor except an assignment to a
corporation, partnership, trust, or other successor entity which may take over
the property and carry on the affairs of the Advisor; provided that, following a
permitted assignment, the persons who controlled the operations of the Advisor
immediately prior to the assignment shall control the operation of the
successor, including the performance of its duties under this Agreement, and
this successor shall be bound by the same restrictions by which the Advisor was
bound prior to such assignment. A permitted assignment or any other assignment
of this Agreement by the Advisor shall bind the assignee hereunder in the same
manner as the Advisor is bound hereunder. This Agreement shall not be assignable
by the Company without the prior written consent of the Advisor, except in the
case of any assignment by the Company to a trust, corporation, partnership or
other entity which is the successor to the Company, in which case the successor
shall be bound hereby and by the terms of said assignment in the same manner and
to the same extent as the Company is bound hereby.
17. Default, Bankruptcy, Etc. of the Advisor. At the sole option of the
Company, this Agreement may be terminated immediately by written notice from the
Trustees to the Advisor if any of the following events shall have occurred:
(a) the Advisor shall have violated any provision of this
Agreement and, after written notice from the Trustees of the violation,
shall have failed to cure the default within thirty (30) days;
(b) a petition shall have been filed against the Advisor for an
involuntary proceeding under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, and that petition shall
not have been dismissed within ninety (90) days of filing; or a court
having jurisdiction shall have appointed a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Advisor for any substantial portion of its property, or ordered the
winding up or liquidation of its affairs, and that appointment or order
shall not have been rescinded or vacated within ninety (90) days of the
appointment or order; or
(c) the Advisor shall have commenced a voluntary proceeding
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall have made any general assignment for the
benefit of creditors, or shall have failed generally to pay its debts
as they became due.
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The Advisor agrees that, if any of the events specified in paragraphs
(b) or (c) of this Section 17 occur, it will give written notice thereof to the
Trustees within seven (7) days following the occurrence of the event.
18. Action Upon Termination. From and after the effective date of any
termination of this Agreement pursuant to Sections 15, 16 or 17 hereof, the
Advisor shall be entitled to no compensation for services rendered hereunder for
the remainder of the then-current term of this Agreement but shall be paid, on a
pro rata basis, all compensation due for services performed prior to
termination, including, without limitation, a pro rata portion of the then
current year's Incentive Fee. Upon termination, the Advisor immediately shall:
(a) pay over to the Company all monies collected and held for
the account of the Company by it pursuant to this Agreement, after
deducting therefrom any accrued and unpaid Fees (including, without
limitation, a pro rata portion of the then current year's Incentive
Fee, and reimbursements for its expenses to which it is then entitled);
(b) deliver to the Trustees a full and complete accounting,
including a statement showing all sums collected by it and a statement
of all sums held by it for the period commencing with the date
following the date of its last accounting to the Trustees; and
(c) deliver to the Trustees all property and documents of the
Company then in its custody or possession.
The amount of Fees paid to the Advisor upon termination shall be
subject to adjustment pursuant to the following mechanism. On or before the 30th
day after public availability of the Company's annual audited financial
statements for the fiscal year in which termination occurs, the Company shall
deliver to the Advisor a Certificate reasonably acceptable to the Advisor and
certified by an authorized officer of the Company setting forth (i) the Annual
Average Invested Capital and FFO Per Share for the Company's fiscal year ended
upon the immediately preceding December 31, and (ii) the Company's computation
of the Fees (including, without limitation, a pro rata portion of the then
current year's Incentive Fee) payable upon the date of termination. The
Certificate shall be accompanied by a review of the calculation of Annual
Average Invested Capital and FFO Per Share by the Company's independent
certified public accountants.
If the annual Fees owed upon termination as shown in the Certificate
exceed the Fees paid by the Company upon termination, the Company shall include
its check for the deficit and deliver the same to the Advisor with the
Certificate.
The Incentive Fee for any partial fiscal year will be determined by
multiplying the Incentive Fee for such year (assuming this Agreement were in
effect for the entire year) by a fraction, the numerator of which is the number
of days in the portion of such year during which this Agreement was in effect,
and the denominator of which shall be 365.
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If the annual Fees owed upon termination as shown in the Certificate
are less than the Fees paid by the Company upon termination, the Advisor shall
remit to the Company its check in an amount equal to the difference.
19. Trustee Action. Wherever action on the part of the Trustees is
contemplated by this Agreement, action by a majority of the Trustees, including
a majority of the Independent Trustees, shall constitute the action provided for
herein.
20. Arbitration. The Company and the Advisor agree that any and all
disputes and disagreements arising out of or relating to this Agreement, other
than actions or claims for injunctive relief or claims raised in actions or
proceedings brought by third parties, shall be resolved through negotiations or,
if the dispute is not so resolved, through binding arbitration conducted in
Boston, Massachusetts under the J.A.M.S./Endispute Comprehensive Arbitration
Rules and Procedures, with the following amendments to those rules. First, the
parties agree that in no event shall the arbitration from commencement to
issuance of an award take longer than 180 days. Second, the parties agree that
the arbitration tribunal shall consist of three arbitrators and that the parties
elect not to have the optional appeal procedure provided for in Rule 23. Third,
in lieu of the depositions permitted in Rule 15(E) and (F), the parties agree
that the only depositions shall be a single deposition to last no longer than
one six-hour day that each party may take of the opposing party or an individual
under the control of the opposing party. Judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
21. TRUSTEES AND SHAREHOLDERS NOT LIABLE. THE DECLARATION OF TRUST OF
THE COMPANY, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS, IS DULY FILED IN THE
OFFICE OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND PROVIDES
THAT THE NAME SENIOR HOUSING PROPERTIES TRUST REFERS TO THE TRUSTEES
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY. 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.
22. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving the notice, report or other communication is accepted by the party to
whom it is given, and shall be given by being delivered at the following
addresses to the parties hereto:
If to the Company:
Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attention: President
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If to the Advisor:
Reit Management & Research, Inc.
400 Centre Street
Newton, Massachusetts 02458
Attention: President
Such notice shall be effective upon its receipt by the party to whom it
is directed. Either party hereto may at any time give notice to the other party
in writing of a change of its address for purposes of this paragraph 21.
23. Amendments. The Agreement shall not be amended, changed, modified,
terminated, or discharged in whole or in part except by an instrument in writing
signed by each of the parties hereto, or by their respective successors or
assigns, or otherwise as provided herein.
24. Successors and Assigns. This Agreement shall be binding upon any
successors or permitted assigns of the parties hereto as provided herein.
25. Governing Law. The provisions of this Agreement shall be governed
by and construed in accordance with the laws of The Commonwealth of
Massachusetts.
26. Captions. The captions included herein have been inserted for ease
of reference only and shall not be construed to affect the meaning, construction
or effect of this Agreement.
27. Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof and supersedes
and cancels any pre-existing agreements with respect to its subject matter.
28. Attorneys' Fees. If any legal action is brought for the enforcement
of this Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action in addition
to any other relief to which it or they may be entitled.
29. Survival. The provisions of Sections 13, 14, 18, 20, 21, 22 and 28
of this Agreement shall survive the termination hereof.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, under seal, as of the day and year
first above written.
SENIOR HOUSING PROPERTIES TRUST
By:_________________________________
Its:
REIT MANAGEMENT & RESEARCH, INC.
By:_________________________________
Its:
Solely as to Section 14 hereof:
------------------------------------
Barry M. Portnoy
------------------------------------
Gerard M. Martin
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