Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------
HEALTH AND RETIREMENT PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 6798 04-6558834
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
400 CENTRE STREET, NEWTON, MA 02158
(617) 332-3990
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------
David J. Hegarty
President
Health and Retirement Properties Trust
400 Centre Street
Newton, MA 02158
(617) 332-3990
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
--------------------
Copy to:
Alexander A. Notopoulos, Jr., Esq.
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
(617) 338-2800
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
----------------------
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to Amount to be Proposed Maximum Proposed Maximum Amount of
be Registered Registered Offering Price Per Unit Aggregate Offering Price Registration Fee(1)
- ---------------------------------- ----------------- ---------------------------- --------------------------- -------------------
6 3/4% Senior Notes Due 2002 $150,000,000 -- $150,000,000 $44,250
================================== ================= ============================ =========================== ===================
<FN>
(1) Pursuant to Rule 457(f)(2) of the Securities Act of 1933, as amended, the
registration fee has been estimated based on the book value of the
securities to be received by the Registrant in exchange for the securities
to be issued hereunder in the Exchange Offer described herein.
</FN>
----------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
will file a further amendment which specifically states that the Registration
Statement will thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement will
become effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities of laws of any such State.
SUBJECT TO COMPLETION, DATED MARCH 12, 1998
OFFER TO EXCHANGE
all outstanding
6 3/4% Senior Notes Due 2002
which have not been registered under the Securities Act of
1933
for
6 3/4% Senior Notes Due 2002
which have been so registered
of
Health and Retirement Properties Trust
-------------------
The Exchange Offer will expire at 5:00 p.m.,
New York City Time on ______________,
1998, unless extended
--------------------------------------------
Health and Retirement Properties Trust, a Maryland real estate
investment trust (the "Company" or "HRP"), hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (the "Letter of Transmittal"), to exchange its 6 3/4%
Senior Notes Due 2002 (the "New Notes"), in an offering which has been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which this Prospectus constitutes a
part, for an equal principal amount of its outstanding 6 3/4% Senior Notes due
2002 (the "Old Notes"), of which an aggregate of $150,000,000 in principal
amount is outstanding as of the date hereof (the "Exchange Offer"). The New
Notes and the Old Notes are sometimes referred to herein collectively as the
"Notes." The form and terms of the New Notes will be the same as the form and
terms of the Old Notes except that the New Notes will not bear legends
restricting the transfer thereof. The New Notes will be obligations of the
Company entitled to the benefits of the Indenture and the Supplemental
Indenture, each dated as of December 18, 1997 (collectively, the "Indenture"),
by and between the Company and State Street Bank and Trust Company, as trustee
(the "Trustee"), relating to the Notes. See "Description of the New Notes."
Following the completion of the Exchange Offer, none of the New Notes will be
entitled to any rights under the Registration Rights Agreement, dated as of
December 18, 1997 (the "Registration Rights Agreement"), including, but not
limited to, contingent increases in the interest rate provided for pursuant
thereto.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------
The date of this Prospectus is _____________, 1998.
The Company will accept for exchange any and all Old Notes that are
validly tendered on or prior to 5:00 p.m., New York City time, on the date the
Exchange Offer expires, which will be ______________, 1998 unless the Exchange
Offer is extended (the "Expiration Date"). Tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. The
Exchange Offer is not conditioned upon any minimum principal amount of Old Notes
being tendered for exchange.
The Old Notes were initially represented by a single, permanent global
note (the "Global Note"), which was deposited with the Trustee, as custodian for
The Depository Trust Company ("DTC"), and registered in the name of Cede & Co.,
DTC's nominee, for credit to an account of a direct or indirect participant in
DTC. The New Notes exchanged for the Old Notes that are represented by the
Global Note will continue to be represented by a permanent global note in
definitive, fully registered form, registered in the name of a nominee of DTC
and deposited with the Trustee as custodian, unless the beneficial holders
thereof request otherwise. See "Description of the New Notes--Book Entry
System." Notes may be tendered only in denominations of $100,000 and integral
multiples of $1,000 in excess thereof.
Interest on the New Notes will be payable semi-annually in arrears on
June 18 and December 18 of each year (each an "Interest Payment Date"),
commencing June 18, 1998 to the person in whose name the applicable New Note is
registered at the close of business on the date (whether or not a business day)
15 calendar days preceding the applicable Interest Payment Date or December 18,
2002 (the "Maturity Date"). Interest on the New Notes will accrue from the most
recent date to which interest has been paid on the Old Notes or, if no interest
has been paid, from December 18, 1997. Accordingly, interest that has accrued
since the last Interest Payment Date or December 18, 1997 (as the case may be)
on the Old Notes accepted for exchange will cease to be payable upon issuance of
the New Notes. Untendered Old Notes that are not exchanged for New Notes
pursuant to the Exchange Offer will remain outstanding and continue to bear
interest at a rate of 6 3/4% per annum after the Expiration Date.
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by a holder thereof (other than (i) a
broker-dealer who acquires such New Notes directly from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act
or (ii) a person that is an affiliate of the Company (within the meaning of Rule
405 under the Securities Act)) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that the holder
is acquiring the New Notes in the ordinary course of such holder's business and
is not participating, and has no arrangement or understanding with any person to
participate, in the distribution of the New Notes. Holders of Old Notes wishing
to accept the Exchange Offer must represent to the Company that such conditions
have been met. Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed for a period of
at least 120 days after the consummation of the Exchange Offer to make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the
Old Notes or the New Notes. The Company does not intend to list the New Notes on
any securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the New
Notes will develop. To the extent that a market for the New Notes develops, the
market value of the New Notes will depend on market conditions (such as yields
on alternative investments), general economic conditions, the Company's
financial condition and other conditions. Such conditions might cause the New
Notes, to the extent that they are actively traded, to trade at a significant
discount from the face value.
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter is
being used in connection with the Exchange Offer.
ii
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT
ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY
WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO,
ANY PERSON, SECURITY, OR TRANSACTION, IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE
MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT, ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
--------------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements, and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements, and other information concerning the Company can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the
Commission's Regional Offices at Seven World Trade Center, 13th Floor, New York,
New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a site on
the Internet's World Wide Web at http://www.sec.gov that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission, including the Company on and after August
14, 1996. In addition, reports, proxy statements and other information
concerning the Company may also be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on
Form S-4 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the New Notes
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits thereto, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the New
Notes offered hereby, reference is hereby made to the Registration Statement,
including the exhibits thereto, which is available for inspection and copying as
set forth above. Statements contained in this Prospectus as to the contents of
any contract or other document referred to herein or therein are not necessarily
complete (although to the extent of the provisions referred to herein, such
statements are complete in all material respects), and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated herein by reference: (i) Current Reports on Form
8-K dated February 11, 1998, February 12, 1998, February 17, 1998, February 18,
1998, February 19, 1998 and February 27, 1998, (ii) Annual Report on Form 10-K
for the year ended December 31, 1997 and (iii) the consolidated financial
statements of Marriott International, Inc. ("MII"), Commission No. 1-12188, at
and for the fiscal year ended January 2, 1998, as contained in MII's Annual
Report on Form 10-K for the year ended January 2, 1998. All documents filed by
the Company pursuant to Section 13(a),
iii
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the initial
Registration Statement and prior to the effectiveness of the Registration
Statement and subsequent to the date of this Prospectus shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date any such document is filed.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein) modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon written or oral request of such person, by
first class mail or other equally prompt means within one business day of
receipt of such request, a copy of any or all of the documents that are
incorporated by reference herein, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference into such documents).
Requests should be directed to Health and Retirement Properties Trust, 400
Centre Street, Newton, Massachusetts 02158, Attention: Investor Relations
(617-332-3990). In order to ensure timely delivery of such documents, any
request should be made before ___________, 1998.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR
BOTH TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF
TRANSMITTAL, OR BOTH TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
FORWARD LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS FORWARD LOOKING STATEMENTS. SUCH STATEMENTS
ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE ANTICIPATED OR PROJECTED. PROSPECTIVE PURCHASERS
ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING STATEMENTS
WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO
PUBLISH REVISED FORWARD LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES
AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF PRESENTLY UNANTICIPATED
EVENTS.
iv
TABLE OF CONTENTS
Page
Prospectus Summary...........................................................1
Use of Proceeds..............................................................8
The Exchange Offer...........................................................8
Description of the New Notes................................................15
Description of the Indenture................................................22
Certain Federal Income Tax Considerations...................................28
Plan of Distribution........................................................30
Transfer Restrictions.......................................................30
Legal Matters...............................................................31
Experts.....................................................................31
Unaudited Pro Forma Consolidated Financial Statements......................F-1
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial statements
appearing elsewhere or incorporated by reference in this Prospectus. References
in this Prospectus Summary to the "Company" or "HRP" include consolidated
subsidiaries unless the context indicates otherwise.
The Company
The Company is one of the largest publicly traded REITs in the United
States with an equity market capitalization of approximately $2.0 billion at
December 31, 1997. The Company has investments of approximately $2.2 billion in
217 properties located in 33 states and the District of Columbia. The Company
principally invests in healthcare related real estate and office buildings
leased to various agencies of the United States Government. In addition,
approximately 5% of the Company's assets, at cost, is an equity investment in
Hospitality Properties Trust ("HPT"), a New York Stock Exchange listed REIT
formed by the Company which invests in hotels.
The principal executive offices of the Company are located at 400
Centre Street, Newton, MA 02158. Its telephone number is (617) 332-3990.
Summary of the Terms of the Exchange Offer
The Exchange Offer The Company is offering to exchange $100,000 in
principal amount (and integral multiples of $1,000
in excess thereof) of New Notes for each $100,000
in principal amount (and any integral multiples of
$1,000 in excess thereof) of Old Notes that are
validly tendered pursuant to the Exchange Offer.
The Company will issue the New Notes promptly
after the Expiration Date. As of the date of this
Prospectus, $150,000,000 in aggregate principal
amount of Old Notes are outstanding.
Resale The Company believes, based on no-action letters
issued by the Commission to third parties, that
the New Notes issued pursuant to the Exchange
Offer generally will be freely transferable by the
holders thereof without registration or any
prospectus delivery requirement under the
Securities Act, except that a "dealer" or any of
the Company's "affiliates," as such terms are
defined under the Securities Act, that exchanges
Old Notes held for its own account may be required
to deliver copies of this Prospectus in connection
with any resale of the New Notes issued in
exchange for such Old Notes. See "The Exchange
Offer--General" and "Plan of Distribution."
Expiration Date The Exchange Offer will expire at 5:00 p.m., New
York City time, on ___________, 1998, unless
extended, in which case the term "Expiration Date"
means the latest date and time to which the
Exchange Offer is extended. The Company will
accept for exchange any and all Old Notes that are
validly tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the Expiration
Date.
Accrued Interest on the New
Notes and the Old Notes Each New Note will bear interest from the
last Interest Payment Date on which interest was
paid on the Old Notes, or if interest has not yet
been paid on the Old Notes, from December 18,
1997. Such interest will be paid with the first
interest payment on the New Notes. Accordingly,
interest which has accrued since the last Interest
Payment Date or December 18, 1997 (as the case may
be) on the Old Notes accepted for exchange will
cease to be payable upon issuance of the New
Notes. Untendered Old Notes that are not exchanged
for New Notes
pursuant to the Exchange Offer will continue to
bear interest at a rate of 6 3/4% per annum after
the Expiration Date.
Termination The Company may terminate the Exchange Offer if it
determines that its ability to proceed with the
Exchange Offer could be materially impaired due to
any legal or governmental action, any new law,
statute, rule or regulation or any interpretation
by the staff of the Commission of any existing
law, statute, rule or regulation. Holders of Old
Notes will have certain rights against the Company
under the Registration Rights Agreement should the
Company fail to consummate the Exchange Offer. See
"The Exchange Offer--Termination." No federal or
state regulatory requirements must be complied
with or approvals obtained in connection with the
Exchange Offer, other than applicable requirements
under federal and state securities laws.
Procedures for Tendering
Old Notes Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with such Old Notes and any other required
documentation to State Street Bank and Trust
Company, as Exchange Agent (the "Exchange Agent"),
at the address set forth herein and therein, or
effect a tender of Old Notes pursuant to the
procedure for book-entry transfer as provided for
herein. By executing the Letter of Transmittal,
each holder will represent to the Company that,
among other things, the New Notes acquired
pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person
receiving such New Notes, whether or not such
person is the holder, that neither the holder nor
any such other person has an arrangement or
understanding with any person to participate in
the distribution of such New Notes and, except as
otherwise disclosed in writing to the Company,
that neither the holder nor any such other person
is an "affiliate," as defined in Rule 405 under
the Securities Act, of the Company. Certain
brokers, dealers, commercial banks, trust
companies and other nominees may effect tenders by
book-entry transfer, including an Agent's Message
(defined below) in lieu of a Letter of
Transmittal. See "The Exchange Offer -- Procedures
for Tendering."
Special Procedures for
Beneficial Owners Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender such Old Notes in the
Exchange Offer should contact such registered
holder promptly and instruct such registered
holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender
on such owner's own behalf, such owner must, prior
to completing and executing the Letter of
Transmittal and delivering his Old Notes, either
make appropriate arrangements to register
ownership of the Old Notes in such owner's name or
obtain a properly completed bond power from the
registered holder. The transfer of record
ownership may take considerable time and may not
be able to be completed prior to the Expiration
Date.
Guaranteed Delivery
Procedures Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date must
tender their Old Notes
2
according to the guaranteed delivery procedures
set forth in "The Exchange Offer--Guaranteed
Delivery Procedures."
Withdrawal Rights Tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time,
on the Expiration Date.
Acceptance of Old Notes
and Delivery of New Notes Subject to certain conditions (as summarized above
in "Termination" and described more fully in "The
Exchange Offer--Termination"), the Company will
accept for exchange any and all Old Notes that are
validly tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the Expiration
Date. The New Notes issued pursuant to the
Exchange Offer will be delivered promptly
following the Expiration Date. See "The Exchange
Offer--General."
Certain Federal Income
Tax Considerations The exchange pursuant to the Exchange Offer should
generally not be a taxable event for federal
income tax purposes. For a discussion of certain
federal income tax considerations relating to the
exchange of the Old Notes for the New Notes, see
"Certain Federal Income Tax Considerations."
Exchange Agent The Trustee is also the Exchange Agent. The
mailing address of the Exchange Agent and address
for deliveries by registered or certified mail is:
State Street Bank and Trust Company, Corporate
Trust Department, Two International Place, Boston,
Massachusetts 02110, Attention: Sandy Wong. Hand
deliveries or overnight deliveries should be
directed to State Street Bank and Trust Company,
Corporate Trust Department, Two International
Place, Boston, Massachusetts 02110, Attention:
Sandy Wong. For information with respect to the
Exchange Offer, the telephone number for the
Exchange Agent is (617) 664- 5590.
Use of Proceeds There will be no cash proceeds payable to the
Company from the issuance of the New Notes
pursuant to the Exchange Offer. The net proceeds
received by the Company from the sale of the Old
Notes were used to reduce indebtedness outstanding
under the Company's $450 million bank credit
facility and for general business purposes. See
"Use of Proceeds."
Summary of the Terms of the New Notes
The Exchange Offer applies to an aggregate principal amount of
$150,000,000 of the Old Notes. The form and terms of the New Notes will be the
same as the form and terms of the Old Notes, except that the New Notes will not
bear legends restricting the transfer thereof. All capitalized terms used herein
and not defined herein have the meanings provided for in "Description of the New
Notes" and "Description of the Indenture." The New Notes will be obligations of
the Company entitled to the benefits of the Indenture. See "Description of New
Notes."
Issuer....................... Health and Retirement Properties Trust.
Securities Offered........... $150,000,000 aggregate principal amount of 6 3/4%
Senior Notes due 2002.
Maturity..................... The New Notes will mature on December 18, 2002,
unless previously redeemed.
3
Interest Payment Dates....... Interest on the New Notes will be payable
semi-annually in arrears on June 18 and December
18 of each year, commencing June 18, 1998.
Ranking...................... The New Notes will be senior unsecured obligations
of the Company, and will rank equally with the
Company's other unsecured and unsubordinated
indebtedness. The New Notes will be effectively
subordinated to mortgages and other secured
indebtedness of the Company and to indebtedness
and other liabilities of any subsidiary of the
Company.
Optional Redemption.......... Until the date that is three months prior to their
stated maturity date, the New Notes will be
redeemable, at the option of the Company, in whole
or in part, at a redemption price equal to the sum
of (i) the principal amount of the New Notes being
redeemed, plus accrued and unpaid interest to but
excluding the redemption date and (ii) the
Make-Whole Amount. On and after such date, the New
Notes will be redeemable, at the option of the
Company, in whole or in part, at a redemption
price equal to the principal amount of the New
Notes being redeemed, plus accrued and unpaid
interest to but excluding the redemption date.
Limitations on Incurrence
of Debt............... The New Notes will contain various covenants
including the following:
(1) Neither the Company nor any Subsidiary (as
defined) may incur any Debt (as defined) if, after
giving effect thereto, the aggregate principal
amount of all outstanding Debt of the Company and
its Subsidiaries on a consolidated basis is
greater than 60% of the sum ("Adjusted Total
Assets") of (i) the Total Assets (as defined) of
the Company and its Subsidiaries as of the end of
the most recent calendar quarter and (ii) the
purchase price of any real estate assets or
mortgages receivable acquired, and the amount of
any securities offering proceeds received (to the
extent that such proceeds were not used to acquire
real estate assets or mortgages receivable or used
to reduce Debt), by the Company or any Subsidiary
since the end of such calendar quarter, including
those proceeds obtained in connection with the
incurrence of such additional Debt.
(2) Neither the Company nor any Subsidiary may
incur any Secured Debt if, after giving effect
thereto, the aggregate principal amount of all
outstanding Secured Debt of the Company and its
Subsidiaries on a consolidated basis is greater
than 40% of the Company's Adjusted Total Assets.
(3) Neither the Company nor any Subsidiary may
incur any Debt, if, after giving effect thereto,
the ratio of Consolidated Income Available for
Debt Service (as defined) to the Annual Debt
Service (as defined) for the four consecutive
fiscal quarters most recently ended prior to the
date on which such additional Debt is to be
incurred shall have been less than 1.5x on a pro
forma basis after giving effect to certain
assumptions.
4
(4) The Company and its Subsidiaries will maintain
Total Unencumbered Assets of not less than 200% of
the aggregate outstanding principal amount of the
Unsecured Debt (as defined) of the Company and its
Subsidiaries on a consolidated basis.
For a more complete description of the terms and
definitions used in the foregoing summary of
Limitations on Incurrence of Debt, see
"Description of the New Notes--Certain Covenants."
Registration Rights.......... Pursuant to the Registration Rights Agreement
entered into by the Company and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (the "Initial
Purchaser") concurrently with the closing of the
offering of the Old Notes, the Company agreed to
use its best efforts to (i) file within 105 days
of the original issuance of the Old Notes (the
"Issue Date"), a registration statement under the
Securities Act (the "Exchange Offer Registration
Statement") with respect to the Exchange Offer;
(ii) cause the Exchange Offer Registration
Statement to be declared effective within 150 days
of the Issue Date; and (iii) cause the Exchange
Offer to be consummated within the sooner to occur
of 45 days after the effective date of the
Exchange Offer Registration Statement or 180 days
after the Issue Date. In certain circumstances,
the Company will agree to file a shelf
registration statement (the "Shelf Registration
Statement") for resales of the Old Notes by the
holders thereof. If the Company does not comply
with its obligations under the Registration Rights
Agreement, the Company will be required to pay
Liquidated Damages to the holders of the Old
Notes. See "The Exchange Offer; General."
5
Selected Financial Data
Set forth below are selected financial data for the Company for the
periods and dates indicated. This data should be read in conjunction with, and
its qualified in its entirety by reference to, the financial statements and
accompanying notes included in Item 7 of the Company's Current Report on Form
8-K dated February 27, 1998. Amounts are in thousands, except for per share
information.
Income Statement Data: Year Ended December 31,
-----------------------------------------------------------------------------
1997 1996 1995 1994 1993
---------------- --------------- -------------- --------------- -------------
Total Revenues $208,863 $120,183 $113,322 $ 86,683 $ 56,485
Income before gain (loss) on sale of
properties and extraordinary items 112,204 77,164 61,760 57,878 37,738
Income before extraordinary items 115,102 77,164 64,236 51,872 37,738
Net income 114,000 73,254 64,236 49,919 33,417
Funds from operations(1) 146,312 99,106 84,638 71,851 46,566
Dividends declared(2) 144,271 94,299 83,954 76,317 44,869
Basic earnings per common share amounts:
Income before gain (loss) on sale of
properties and extraordinary items 1.22 1.16 1.04 1.10 1.10
Income before extraordinary items 1.25 1.16 1.08 .98 1.10
Net income 1.24 1.11 1.08 .95 .97
Funds from operations(1) 1.59 1.50 1.43 1.36 1.35
Dividends declared(2) 1.46 1.42 1.38 1.33 1.30
Weighted average shares outstanding 92,168 66,255 59,227 52,738 34,407
Balance Sheet Data: At December 31,
-----------------------------------------------------------------------------
1997 1996 1995 1994 1993
---------------- --------------- -------------- --------------- -------------
Real estate properties, at cost $1,969,023 $1,005,739 $ 778,211 $ 673,083 $ 384,811
Real estate mortgages and notes 104,288 150,205 141,307 133,477 157,281
Investment in HPT 111,134 103,062 99,959 -- --
Total assets 2,135,963 1,229,522 999,677 840,206 527,662
Total indebtedness 787,879 492,175 269,759 216,513 73,000
Total shareholders' equity 1,266,260 708,048 685,592 602,039 441,135
<FN>
(1) The Company's Funds From Operations ("FFO") represents net income (computed in accordance with
generally accepted accounting principles ("GAAP")), before gain or loss on sale of properties and
extraordinary items, depreciation and other non-cash items and includes HRP's pro rata share of HPT's
FFO. Management considers FFO to be a measure of the financial performance of an equity REIT that
provides a relevant basis for comparison among REITs. FFO does not represent cash flow from operating
activities (as determined in accordance with GAAP) and should not be considered as an alternative to net
income as an indicator of the Company's financial performance or to cash flows as a measure of liquidity.
(2) Amounts represent dividends declared with respect to the period shown.
Distribution in excess of net income generally constitute a return of
capital.
</FN>
6
Ratio of Earnings to Fixed Charges
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the periods indicated:
For the year ended December 31,
---------- -----------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Ratio of earnings to fixed charges 3.9x 4.3x 3.4x 6.7x 6.8x
The ratios of earnings to fixed charges presented above were computed
by dividing the Company's earnings by fixed charges. For this purpose, earnings
have been calculated by adding fixed charges to income before income taxes,
extraordinary items and gain or loss on the disposition of real property. Fixed
charges consist of interest costs, whether expensed or capitalized, the interest
component of rental expense, if any, amortization of debt discounts and deferred
financing costs, whether expensed or capitalized. To date, the Company has not
issued any Preferred Shares; therefore, the ratio of earnings to combined fixed
charges and Preferred Shares distributions are the same as the ratios of
earnings to fixed charges presented above.
7
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
New Notes offered hereby. In consideration for issuing the New Notes as
contemplated in this Prospectus, the Company will receive in exchange Old Notes
in like principal amount, the terms of which are identical to the New Notes. The
Old Notes surrendered in exchange for New Notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of the New Notes will not result in
any increase in the indebtedness of the Company.
The net proceeds to the Company from the sale of the Old Notes was
approximately $149 million. The net proceeds were used in December 1997 to
reduce amounts outstanding under the Company's $450 million unsecured revolving
credit facility with a syndicate of banks (the "Bank Credit Facility"), and for
general business purposes. Outstanding amounts under the Company's Bank Credit
Facility bear interest, at the Company's option, at LIBOR plus a margin or
prime, and the Bank Credit Facility expires in 2001. At December 10, 1997, the
effective interest rate on outstanding amounts under the Bank Credit Facility
was 6.55% per annum, and at March 5, 1998 such effective interest rate was 6.4%
per annum.
THE EXCHANGE OFFER
General
In connection with the sale of the Old Notes, the Company entered into
the Registration Rights Agreement, which requires the Company to file with the
Commission a registration statement under the Securities Act with respect to an
issue of senior notes of the Company with terms identical to the Old Notes
(except with respect to restrictions on transfer) and to use its best efforts to
cause such registration statement to become effective under the Securities Act
by no later than May 15, 1998 and, upon the effectiveness of such registration
statement, to offer to the holders of the Old Notes the opportunity, for a
period of not less than 20 business days (or longer if required by applicable
law) from the date the notice of the Exchange Offer is mailed to holders of the
Old Notes, to exchange their Old Notes for a like principal amount of New Notes.
The Exchange Offer is being made pursuant to the Registration Rights Agreement
to satisfy the Company's obligations thereunder.
Under existing interpretations of the staff of the Commission
enunciated in no-action letters issued to third parties, the New Notes would, in
general, be freely transferable after the Exchange Offer without further
registration under the Securities Act by holders thereof (other than (i) a
broker-dealer who acquires such New Notes directly from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act
or (ii) a person that is an affiliate of the Company within the meaning of Rule
405 under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangements with any person to participate in the distribution
of such New Notes. Eligible holders wishing to accept the Exchange Offer must
represent to the company that such conditions have been met. Each broker-dealer
that receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes.
In the event that (i) the Exchange Offer is not consummated within the
earlier of 45 days of the effective date of the Exchange Offer Registration
Statement or 180 days after the Issue Date; or (ii) in the case of any holder of
Old Notes that participates in the Exchange Offer, such holder does not receive
freely tradeable New Notes on the date of such exchange, the Company will, at
its own expense, (a) as promptly as practicable, file a shelf registration
statement, (b) use its best efforts to cause such Shelf Registration Statement
to be declared effective under the Securities Act as promptly as practicable
after the filing of such Shelf Registration Statement and (c) use its best
efforts to keep effective such Shelf Registration Statement in order to permit
the prospectus forming a part thereof to be usable by holders of Old Notes for a
period of two years after the effective date of the Shelf Registration Statement
(or, the shorter period provided by Rule 144(k) under the Securities Act) or
such shorter period that will terminate when all the Old Notes covered by the
Shelf Registration Statement have been sold pursuant to the Shelf Registration
Statement.
8
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal, the Company will
accept all Old Notes validly tendered prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $100,000 in principal amount of New
Notes (and integral multiples of $1,000 in excess thereof) in exchange for an
equal principal amount of outstanding Old Notes tendered and accepted in the
Exchange Offer. Holders may tender some or all of their Old Notes pursuant to
the Exchange Offer in any denomination of $100,000 or in integral multiples of
$1,000 in excess thereof.
The form and terms of the New Notes will be the same as the form and
terms of the Old Notes except that the New Notes will not bear legends
restricting the transfer thereof. The New Notes will evidence the same debt as
the Old Notes. The New Notes will be issued under and entitled to the benefits
of the Indenture.
As of the date of this Prospectus, $150,000,000 million aggregate
principal amount of the Old Notes are outstanding and CEDE & Co., the nominee of
DTC, is the only registered holder thereof. In connection with the issuance of
the Old Notes, the Company arranged for the Old Notes to be eligible for trading
in the Private Offering, Resale and Trading through Automated Linkages (PORTAL)
Market, the National Association of Securities Dealers' screen based, automated
market trading of securities eligible for resale under Rule 144A, and to be
issued and transferable in book-entry form through the facilities of DTC. The
New Notes will also be issuable and transferable in book-entry form through DTC.
This Prospectus, together with the accompanying Letter of Transmittal,
is being sent to all registered holders as of ____________, 1998 (the "Record
Date").
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. See "Exchange Agent." The Exchange Agent will act as agent for
the tendering holders of Old Notes for the purpose of receiving New Notes from
the Company and delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
The Company will pay all charges and expenses, other than certain
applicable taxes, in connection with the Exchange Offer. See "Fees and
Expenses."
Holders of Old Notes do not have any appraisal or dissenters' rights
under applicable Maryland law or the Indenture in connection with the Exchange
Offer. The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Exchange Act and the rules and regulations of the Commission thereunder.
Old Notes that are not tendered for exchange in the Exchange Offer will remain
outstanding and continue to accrue interest, but will not be entitled to any
rights or benefits under the Registration Rights Agreement.
Each holder of Old Notes who wishes to exchange Old Notes for New Notes
in the Exchange Offer will be required to make certain representations,
including that (i) it is neither an affiliate of the Company nor a broker-dealer
tendering Old Notes acquired directly from the Company for its own account, (ii)
any New Notes to be received by it were acquired in the ordinary course of its
business and (iii) at the time of commencement of the Exchange Offer, it has no
arrangement with any person to participate in the distribution (within the
meaning of the Securities Act) of the New Notes. In addition, in connection with
any resales of New Notes, any broker-dealer (a "Participating Broker-Dealer")
who acquired Old Notes for its own account as a result of market-making
activities or other trading activities must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of the New
Notes. See "Plan of Distribution." The Commission has taken the position, in
no-action letters issued to third parties, that Participating Broker-
8
Dealers may fulfill their prospectus delivery requirements with respect to the
New Notes (other than a resale of an unsold allotment from the original sales of
Old Notes) with this Prospectus. Under the Registration Rights Agreement, the
Company is required to allow Participating Broker-Dealers (and other persons, if
any, subject to similar prospectus delivery requirements) to use this Prospectus
in connection with the resale of such New Notes, provided, however, the Company
shall not be required to amend or supplement such prospectus for a period
exceeding 120 days after the effectiveness of the Exchange Offer Registration
Statement.
If (a) the Company fails to consummate the Exchange Offer on or before
the 45th day after the effective date of the Registration Statement or 180 days
after the Issue Date or (b) either the Exchange Offer Registration Statement or
the Shelf Registration Statement is declared effective but thereafter ceases to
be effective in connection with resales of Old Notes or New Notes during the
period specified in the Registration Rights Agreement (each such event referred
to in clauses (a) and (b) above a "Registration Default"), then the Company will
pay to each holder of the Old Notes, accruing from the date of the first such
Registration Default (or if such Registration Default has been cured, from the
date of the next Registration Default), liquidated damages ("Liquidated
Damages") in an amount equal to 0.50% per annum of the principal amount of the
Old Notes held by such holder. Following the cure of all Registration Defaults,
the accrual of Liquidated Damages will cease.
If the Exchange Offer is consummated in accordance with the provisions
of the Registration Rights Agreement described above, the Company will not be
required to file a Shelf Registration Statement to register any outstanding Old
Notes, and the interest rate on such Old Notes will remain at its initial level
of 6 3/4% per annum. The Exchange Offer shall be deemed to have been consummated
upon the Company's having exchanged, pursuant to the Exchange Offer, New Notes
for all Old Notes that have been properly tendered and not withdrawn by the
Expiration Date. In such event, holders of Old Notes not participating in the
Exchange Offer who are seeking liquidity in their investment would have to rely
on exemptions to registration requirements under the securities laws, including
the Securities Act.
Based on no-action letters issued by the staff of the Commission to
third parties, the Company believes that the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such New
Notes. Any holder of Old Notes who tenders in the Exchange Offer for the purpose
of participating in a distribution of the New Notes cannot rely on such
interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes.
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean 5:00 p.m. New York City time, on
_________, 1998 unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date to
which the Exchange Offer is extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old
Notes, to extend the Exchange Offer or to terminate the Exchange Offer and to
refuse to accept Old Notes not previously accepted, if any of the conditions set
forth herein under "Termination" shall have occurred and shall not have been
waived by the Company (if permitted to be waived by the Company), by giving oral
or written notice of such delay, extension or termination to the Exchange Agent,
and (ii) to amend the terms of the Exchange Offer in any manner deemed by it to
be advantageous to the holders of the Old Notes. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof. If the Exchange Offer is amended in
10
a manner determined by the Company to constitute a material change, the Company
will promptly disclose such amendment in a manner reasonably calculated to
inform the holders of the Old Notes of such amendment.
Without limiting the manner in which the Company may choose to make
public announcements of any delay in acceptance, extension, termination or
amendment of the Exchange Offer, the Company shall have no obligation to
publish, advertise, or otherwise communicate any such public announcement, other
than by making a timely release to the Dow Jones News Service.
Interest on the New Notes
The New Notes will bear interest from the last Interest Payment Date on
which interest was paid on the Old Notes, or if interest has not yet been paid
on the Old Notes, from December 18, 1997. Such interest will be paid with the
first interest payment on the New Notes. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the New Notes.
The New Notes will bear interest at a rate of 6 3/4% per annum.
Interest on the New Notes will be payable semi-annually, in arrears on each
Interest Payment Date following the consummation of the Exchange Offer.
Untendered Old Notes that are not exchanged for New Notes pursuant to the
Exchange Offer will continue to bear interest at a rate of 6 3/4% per annum
after the Expiration Date.
Procedures for Tendering
To tender in the Exchange Offer, a holder must complete, sign and date
the Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile or an Agent's Message
(defined below) in lieu thereof, together with the Old Notes (unless the
book-entry transfer procedures described below are used) and any other required
documents, to the Exchange Agent for receipt prior to 5:00 p.m., New York City
time, on the Expiration Date.
The term "Agent's Message" means a message, transmitted by DTC's
Book-Entry Transfer Facility system to, and received by, the Exchange Agent and
forming a part of a Book-Entry Confirmation, which states that DTC's Book-Entry
Transfer Facility system has received an express acknowledgment from the
participant in DTC's Book-Entry Transfer Facility system tendering Old Notes
which are the subject of such Book-Entry Confirmation that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal, and
that the Company may enforce such agreement against such participant. The term
"Book-Entry Confirmation" means a timely confirmation of book-entry transfer of
Old Notes to the Exchange Agent's account at DTC's Book-Entry Transfer Facility
system.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account in
accordance with DTC's procedure for such transfer. Although delivery of Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at DTC, an Agent's Message must be transmitted to and received by the
Exchange Agent on or prior to the Expiration Date at one of its addresses set
forth in this Prospectus, or the Letter of Transmittal (or facsimile thereof),
with any required signature guarantees and any other required documents, must be
transmitted to and received or confirmed by the Exchange Agent at its addresses
set forth in this Prospectus prior to 5:00 p.m., New York City time, on the
Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. All references in this
Prospectus to deposit or delivery of Old Notes shall be deemed to include DTC's
book-entry delivery method.
The tender by a holder of Old Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its
address set forth herein. Holders may also request that their respective
brokers, dealers, commercial banks, trust companies or nominees effect such
tender for such holders.
11
The method of delivery of Old Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the holders. Instead of delivery by mail, it is recommended that holders use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Company.
Only a holder of Old Notes may tender such Old Notes in the Exchange
Offer. The term "holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder or any person whose Old Notes are held of record by DTC who desires to
deliver such Old Notes by book-entry transfer at DTC.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such holder's
name or obtain a properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution") that is a participant
in a recognized medallion signature guarantee program unless the Old Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by appropriate bond powers which authorize such person
to tender the Old Notes on behalf of the registered holder, in either case
signed as the name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
submit evidence satisfactory to the Company of their authority to so act with
the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the absolute right to waive any irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Old Notes nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such irregularities have
been cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost by the Exchange Agent to the
tendering holder of such Old Notes unless otherwise provided in the Letter of
Transmittal as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
(a) purchase or make offers for any Old Notes that remain outstanding subsequent
to the Expiration Date, or, as set forth under "Termination," to terminate
12
the Exchange Offer and (b) to the extent permitted by applicable law, purchase
Old Notes in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers may differ from the terms of the
Exchange Offer.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available, or (ii) who cannot deliver their Old Notes, the
Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Date, or if such holder cannot complete the procedure
for book-entry transfer on a timely basis, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder of the Old
Notes, the certificate number or numbers of such Old Notes and the
principal amount of Old Notes tendered, stating that the tender is
being made thereby, and guaranteeing that, within three business days
after the Expiration Date, the Letter of Transmittal (or facsimile
thereof), together with the certificate(s) representing the Old Notes
(unless the book-entry transfer procedures are to be used) to be
tendered in proper form for transfer and any other documents required
by the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal
(or facsimile thereof), together with the certificate(s) representing
all tendered Old Notes in proper form for transfer (or confirmation of
a book-entry transfer into the Exchange Agent's account at DTC of Old
Notes delivered electronically) and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within three
business days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to holders who wish to tender their Old Notes according to the
guaranteed delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
permit the Trustee with respect to the Old Notes to register the transfer of
such Old Notes into the name of the Depositor withdrawing the tender and (iv)
specify the name in which any such Old Notes are to be registered, if different
from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such withdrawal notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer, and no New Notes will be issued
with respect thereto unless the Old Notes so withdrawn are validly retendered.
Any Old Notes that have been tendered but which are not accepted for exchange
will be returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "Procedures for Tendering" at any time prior to
the Expiration Date.
13
Termination
Notwithstanding any other term of the Exchange Offer, the Company will
not be required to accept for exchange, or exchange New Notes for any Old Notes
not theretofore accepted for exchange, and may terminate or amend the Exchange
Offer as provided herein before the acceptance of such Old Notes if: (i) any
action or proceeding is instituted or threatened in any court or by or before
any governmental agency with respect to the Exchange Offer, which, in the
Company's judgment, might materially impair the Company's ability to proceed
with the Exchange Offer or (ii) any law, statute, rule or regulation is
proposed, adopted or enacted, or any existing law, statute, rule or regulation
is interpreted by the staff of the Commission in a manner, which, in the
Company's judgment, might materially impair the Company's ability to proceed
with the Exchange Offer.
If the Company determines that it may terminate the Exchange Offer, as
set forth above, the Company may (i) refuse to accept any Old Notes and return
any Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes, or (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn. If such waiver constitutes a material change in the
Exchange Offer, the Company will disclose such change by means of a supplement
to this Prospectus that will be distributed to each registered holder of Old
Notes, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period.
Exchange Agent
State Street Bank and Trust Company has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance and requests
for additional copies of this Prospectus or of the Letter of Transmittal should
be directed to the Exchange Agent addressed as follows:
By Hand: By Mail or Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department
Two International Place Two International Place
Boston, Massachusetts 02110 Boston, Massachusetts 02110
Attention: Sandy Wong Attention: Sandy Wong
Facsimile Transmission:
(617) 664-5290
Fees and Expenses
The expenses of soliciting tenders pursuant to the Exchange Offer will
be borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or by telephone.
The Company will not make any payments to brokers, dealers or other
persons soliciting acceptances of the Exchange Offer. The Company, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, Letters of Transmittal
and related documents to the beneficial owners of the Old Notes and in handling
or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company.
14
The Company will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes not tendered or accepted for exchange are to
be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Old Notes tendered, or if tendered Old
Notes are registered in the name of any person other than the person signing the
Letter of Transmittal, or if a transfer tax is imposed for any reason other than
the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
Accounting Treatment
The New Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in the Company's accounting records on
the date of the exchange. Accordingly, no gain or loss for accounting purposes
will be recognized by the Company upon the consummation of the Exchange Offer.
The expenses of the Exchange Offer will be amortized by the Company over the
term of the New Notes under generally accepted accounting principles.
DESCRIPTION OF THE NEW NOTES
The New Notes are to be issued under an Indenture and a Supplemental
Indenture, each dated as of December 18, 1997 (collectively, the "Indenture"),
between the Company and State Street Bank and Trust Company (the "Trustee"). The
terms of the New Notes include those stated in the Indenture and those made a
part of the Indenture by reference to the Trust Indenture Act of 1939 (the
"Trust Indenture Act"). The New Notes are subject to all such terms, and holders
of the Old Notes and the New Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The Indenture has been filed with the
Commission and is incorporated by reference herein and is available for
inspection at the corporate trust office of the Trustee at Two International
Place, Boston, Massachusetts 02110. The statements made hereunder relating to
the Indenture and the New Notes to be issued thereunder are summaries of certain
provisions thereof, do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all provisions of the Indenture and
such New Notes. All section references appearing herein are to sections of the
Indenture, and capitalized terms used but not defined herein shall have the
respective meanings set forth in the Indenture.
General
The New Notes will be limited to an aggregate principal amount of
$150,000,000 and will mature, unless previously redeemed, on December 18, 2002.
The New Notes will be issued in registered form, without coupons, and in
denominations of $100,000 and integral multiples of $1,000 in excess thereof.
The New Notes will be senior unsecured obligations of the Company and will rank
equally with each other and with all other unsecured and unsubordinated
indebtedness of the Company from time to time outstanding. The New Notes will be
effectively subordinated to mortgages and other secured indebtedness of the
Company and to indebtedness and other liabilities of any Subsidiaries (as
defined below). Accordingly, such prior indebtedness will have to be satisfied
in full before holders of the New Notes will be able to realize any value from
the secured or indirectly held properties.
As of March 1, 1998, the total outstanding indebtedness of the Company
and its Subsidiaries (including net borrowings made for acquisitions during the
period of October 1, 1997 through March 1, 1998 under the Bank Credit Facility)
was approximately $758 million, of which approximately 97% was unsecured, and
the indebtedness of the Company's Subsidiaries was $26 million. In addition, the
Company's Subsidiaries (with certain exceptions) are guarantors of the Company's
Bank Credit Facility. The Bank Credit Facility is currently an unsecured
revolving credit facility in the amount of $450 million. The Company and its
Subsidiaries may incur additional indebtedness, including secured indebtedness,
subject to the provisions described below under "--Certain
Covenants--Limitations on Incurrence of Debt."
15
Except as described under "--Merger, Consolidation or Sale" and
"--Certain Covenants" below, the Indenture does not contain any other provisions
that would limit the ability of the Company to incur indebtedness or that would
afford holders of the New Notes protection in the event of (i) a highly
leveraged or similar transaction involving the Company or any affiliate of the
Company, (ii) a change of control, or (iii) a reorganization, restructuring,
merger or similar transaction involving the Company that may adversely affect
the holders of the New Notes. In addition, subject to the limitations set forth
under "--Merger, Consolidation or Sale" and "--Certain Covenants" below, the
Company may, in the future, enter into certain transactions such as the sale of
all or substantially all of its assets or the merger or consolidation of the
Company that would increase the amount of the Company's indebtedness or
substantially reduce or eliminate the Company's assets, which may have an
adverse effect on the Company's ability to service its indebtedness, including
the New Notes. The Company and its management have no present intention of
engaging in a highly leveraged or similar transaction involving the Company.
Interest
Interest on the New Notes will accrue at the rate of 6 3/4% per annum.
Interest on the New Notes will be payable semi-annually in arrears on June 18
and December 18 commencing on June 18, 1998 (each, an "Interest Payment Date"),
and on the date of maturity or earlier redemption of the New Notes, as the case
may be (the "Maturity Date"). The interest so payable will be paid to the person
(the "Holder") in whose name the applicable New Note is registered at the close
of business on the date (whether or not a Business Day) 15 calendar days
preceding the applicable Interest Payment Date or the Maturity Date (each, a
"Regular Record Date"). Interest on the New Notes will accrue from the most
recent date to which the interest has been paid or, if no interest has been
paid, from the date of original issuance. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months. The New Notes will be
payable both as to principal and interest at the corporate trust office of the
Trustee, initially at Two International Place, Boston, Massachusetts 02110, or,
at the option of the Company, payment of interest may be made by check mailed to
the Holders of New Notes at their addresses set forth in the register of Holders
of New Notes.
Optional Redemption of New Notes
Until the third month prior to their stated Maturity Date, the New
Notes will be subject to redemption at any time at the option of the Company, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at 100%
of the outstanding principal amount thereof, plus accrued and unpaid interest to
but excluding the applicable redemption date, plus the Make-Whole Amount. On and
after the third month prior to the stated Maturity Date for the New Notes, the
New Notes will be subject to redemption at any time at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at 100% of the outstanding principal amount thereof, plus accrued and
unpaid interest to but excluding the applicable redemption date.
The Company is not required to make sinking fund or redemption payments
with respect to the New Notes.
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any New Notes, the excess, if any, of (i) the
aggregate present value as of the date of such redemption or accelerated payment
of each dollar of principal being redeemed or paid and the amount of interest
(exclusive of interest accrued to the date of redemption or accelerated payment)
that would have been payable in respect of such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the New Notes being redeemed or paid.
"Reinvestment Rate" means 0.25% (twenty-five one hundredths of one
percent) plus the yield on treasury securities at constant maturity under the
heading "Week Ending" published in the Statistical Release under the caption
"Treasury Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity
16
shall be calculated pursuant to the immediately preceding sentence and the
Reinvestment Rate shall be interpolated or extrapolated from such yields on a
straight-line basis, rounding in each of such relevant periods to the nearest
month. For purposes of calculating the Reinvestment Rate, the most recent
Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated "H.
15(519)" or any successor publication which is published weekly by the Federal
Reserve System and which establishes yields on actively traded United States
government securities adjusted to constant maturities or, if such statistical
release is not published at the time of any determination under the Indenture,
then any publicly available source of similar market data which shall be
designated by the Company.
Certain Covenants
Existence. Except as permitted under "--Merger, Consolidation or Sale"
below, the Company will be required to do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any right or franchise if it
determines that the preservation thereof is no longer desirable in the conduct
of its business.
Provision of Financial Information. Whether or not the Company is
subject to Section 13 or 15(d) of the Exchange Act, the Company will, to the
extent permitted under the Exchange Act, file with the Commission the annual
reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Section 13 or 15(d) (the
"Financial Statements") if the Company were so subject, such documents to be
filed with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been so required to file if the
Company were so subject. The Company will also in any event (i) within 15 days
of each Required Filing Date (a) transmit by mail to all Holders of the New
Notes, as their names and addresses appear in the Company's register of holders
of New Notes, without cost to the Holders, copies of the annual reports and
quarterly reports which the Company would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Company
were subject to such Sections, and (b) file with the Trustee copies of the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act if the Company were subject to such Sections, and (ii) if
filing such documents by the Company with the Commission is not permitted under
the Exchange Act, promptly upon written request and payment of the reasonable
cost of duplication and delivery, supply copies of such documents to any
prospective holder of the New Notes.
Limitations on Incurrence of Debt. The Company will not, and will not
permit any Subsidiary to, incur any Debt (as defined below) if, immediately
after giving effect to the incurrence of such additional Debt and the
application of the proceeds thereof, the aggregate principal amount of all
outstanding Debt of the Company and its Subsidiaries on a consolidated basis
determined in accordance with GAAP is greater than 60% of the sum ("Adjusted
Total Assets") of (without duplication) (i) the Total Assets (as defined below)
of the Company and its Subsidiaries as of the end of the calendar quarter
covered in the Company's Annual Report on Form 10-K, or the Quarterly Report on
Form 10-Q, as the case may be, most recently filed with the Commission (or, if
such filing is not permitted under the Exchange Act, with the Trustee) prior to
the incurrence of such additional Debt and (ii) the purchase price of any real
estate assets or mortgages receivable acquired, and the amount of any securities
offering proceeds received (to the extent that such proceeds were not used to
acquire real estate assets or mortgages receivable or used to reduce Debt), by
the Company or any Subsidiary since the end of such calendar quarter, including
those proceeds obtained in connection with the incurrence of such additional
Debt.
In addition to the foregoing limitations on the incurrence of Debt, the
Company will not, and will not permit any Subsidiary to, incur any Secured Debt
(as defined below) if, immediately after giving effect to the incurrence of such
additional Secured Debt and the application of the proceeds thereof, the
aggregate principal amount of all outstanding Secured Debt of the Company and
its Subsidiaries on a consolidated basis is greater than 40% of Adjusted Total
Assets.
17
In addition to the foregoing limitations on the Incurrence of Debt, the
Company will not, and will not permit any Subsidiary to, incur any Debt if the
ratio of Consolidated Income Available for Debt Service (as defined below) to
the Annual Debt Service (as defined below) for the four consecutive fiscal
quarters most recently ended prior to the date on which such additional Debt is
to be incurred shall have been less than 1.5x, on a pro forma basis after giving
effect thereto and to the application of the proceeds therefrom, and calculated
on the assumption that (i) such Debt and any other Debt incurred by the Company
and its Subsidiaries since the first day of such four-quarter period and the
application of the proceeds therefrom, including to refinance other Debt, had
occurred at the beginning of such period; (ii) the repayment or retirement of
any other Debt by the Company and its Subsidiaries since the first date of such
four-quarter period had been repaid or retired at the beginning of such period
(except that, in making such computation, the amount of Debt repaid under any
revolving credit facility shall be computed based upon the average daily balance
of such Debt during such period); (iii) in the case of Acquired Debt (as defined
below) or Debt incurred in connection with any acquisition since the first day
of such four-quarter period, the related acquisition had occurred as of the
first day of such period with appropriate adjustments with respect to such
acquisition being included in such pro forma calculation; and (iv) in the case
of any acquisition or disposition by the Company or its Subsidiaries of any
asset or group of assets since the first day of such four-quarter period,
whether by merger, stock purchase or sale, or asset purchase or sale, such
acquisition or disposition or any related repayment of Debt had occurred as of
the first day of such period with the appropriate adjustments with respect to
such acquisition or disposition being included in such as adjusted calculation.
Maintenance of Total Unencumbered Assets. The Company and its
Subsidiaries will maintain Total Unencumbered Assets (as defined below) of not
less than 200% of the aggregate outstanding principal amount of the Unsecured
Debt (as defined below) of the Company and its Subsidiaries on a consolidated
basis.
As used herein:
"Acquired Debt" means Debt of a Person (i) existing at the time such
Person becomes a Subsidiary or (ii) assumed in connection with the acquisition
of assets from such Person, in each case, other than Debt incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary or such
acquisition. Acquired Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Subsidiary.
"Annual Debt Service" as of any date means the maximum amount which is
expensed in any 12-month period for interest on Debt of the Company and its
Subsidiaries.
"Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participation or other ownership
interests (however designated) of such Person and any rights (other than debt
securities convertible into or exchangeable for capital stock), warrants or
options to purchase any thereof.
"Consolidated Income Available for Debt Service" for any period means
Earnings from Operations (as defined below) of the Company and its Subsidiaries
plus amounts which have been deducted, and minus amounts which have been added,
for the following (without duplication): (i) interest on Debt of the Company and
its Subsidiaries, (ii) provision for taxes of the Company and its Subsidiaries
based on income, (iii) amortization of debt discount and deferred financing
costs, (iv) provisions for gains and losses on properties and property
depreciation and amortization, (v) the effect of any noncash charge resulting
from a change in accounting principles in determining Earnings from Operations
for such period and (vi) amortization of deferred charges.
"Debt" of the Company or any Subsidiary means, without duplication, any
indebtedness of the Company or any Subsidiary, whether or not contingent, in
respect of (i) borrowed money or evidenced by bonds, notes, debentures or
similar instruments, (ii) indebtedness for borrowed money secured by any
encumbrance existing on property owned by the Company or any Subsidiary, (iii)
the reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued (other than letters of credit issued to
provide credit enhancement or support with respect to other indebtedness of the
Company or any Subsidiary otherwise reflected as Debt hereunder) or amounts
representing the balance deferred and unpaid of the purchase price of any
property or services, except any such balance that constitutes an accrued
expense or trade payable, or all conditional sale obligations or obligations
under any title retention agreement, (iv) the principal amount of all
obligations of the
18
Company or any Subsidiary with respect to redemption, repayment or other
repurchase of any Disqualified Stock, or (v) any lease of property by the
Company or any Subsidiary as lessee which is reflected on the Company's
consolidated balance sheet as a capitalized lease in accordance with GAAP, to
the extent, in the case of items of indebtedness under (i) through (iii) above,
that any such items (other than letters of credit) would appear as a liability
on the Company's consolidated balance sheet in accordance with GAAP, and also
includes, to the extent not otherwise included, any obligation by the Company or
any Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise
(other than for purposes of collection in the ordinary course of business), Debt
of another Person (other than the Company or any Subsidiary) (it being
understood that Debt shall be deemed to be incurred by the Company or any
Subsidiary whenever the Company or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Disqualified Stock" means, with respect to any Person, any Capital
Stock of such Person which by the terms of such Capital Stock (or by the terms
of any security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for common
stock or shares), (ii) is convertible into or exchangeable or exercisable for
Debt or Disqualified Stock, or (iii) is redeemable at the option of the holder
thereof, in whole or in part (other than Capital Stock which is redeemable
solely in exchange for common stock or shares), in each case on or prior to the
stated maturity of the New Notes.
"Earnings from Operations" for any period means net earnings excluding
gains and losses on sales of investments, extraordinary items and property
valuation losses, as reflected in the financial statements of the Company and
its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.
"Secured Debt" means Debt secured by any mortgage, lien, charge, pledge
or security interest of any kind.
"Subsidiary" means any corporation or other entity of which a majority
of (i) the voting power of the voting equity securities or (ii) the outstanding
equity interests of which are owned, directly or indirectly, by the Company or
one or more other Subsidiaries of the Company. For the purposes of this
definition, "voting equity securities" means equity securities having voting
power for the election of directors, whether at all times or only so long as no
senior class of security has such voting power by reason of any contingency.
"Total Assets" as of any date means the sum of (i) the Undepreciated
Real Estate Assets and (ii) all other assets of the Company and its Subsidiaries
determined in accordance with GAAP (but excluding accounts receivable and
intangibles).
"Total Unencumbered Assets" means the sum of (i) those Undepreciated
Real Estate Assets not subject to an encumbrance for borrowed money and (ii) all
other assets of the Company and its Subsidiaries not subject to an encumbrance
for borrowed money determined in accordance with GAAP (but excluding accounts
receivable and intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost
(original cost plus capital improvements) of real estate assets of the Company
and its Subsidiaries on such date, before depreciation and amortization
determined on a consolidated basis in accordance with GAAP.
"Unsecured Debt" means Debt which is not secured by any of the
properties of the Company or any Subsidiary.
Merger, Consolidation or Sale
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other entity,
provided that (i) either the Company shall be the continuing entity, or the
successor entity (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received the transfer of such
assets is a Person organized and existing under the laws of the United States or
any state thereof and shall expressly assume the due and punctual payment of the
principal of (and premium or Make-
19
Whole Amount, if any) and any interest on all of the New Notes and the due and
punctual performance and observance of all of the covenants and conditions
contained in the Indenture to be performed by the Company; (ii) immediately
after giving effect to such transaction and treating any indebtedness which
becomes an obligation of the Company or any Subsidiary as a result thereof as
having been incurred by the Company or such Subsidiary at the time of such
transaction, no Event of Default under the Indenture, and no event which after
notice or the lapse of time, or both, would become such an Event of Default,
shall have occurred and be continuing; and (iii) an Officers' Certificate and
legal opinion covering such conditions shall be delivered to the Trustee.
Events of Default, Notice and Waiver
The Indenture provides that the following events are "Events of
Default" with respect to the New Notes: (i) default for 30 days in the payment
of any installment of interest payable on any New Note when due and payable;
(ii) default in the payment of the principal of (or premium or Make-Whole
Amount, if any, on) any New Note when due and payable; (iii) default in the
performance, or breach, of any covenant of the Company contained in the
Indenture (other than a covenant added to the Indenture solely for the benefit
of a series of Debt Securities (as defined) other than the New Notes), which
continues for 60 days after written notice as provided in the Indenture; (iv)
default under any bond, debenture, note, mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company (or by any Subsidiary, the
repayment of which the Company has guaranteed or for which the Company is
directly responsible or liable as obligor or guarantor) having an aggregate
principal amount outstanding of at least $20,000,000, whether such indebtedness
now exists or shall hereafter be incurred or created, which default shall have
resulted in such indebtedness becoming or being declared due and payable prior
to the date on which it would otherwise have become due and payable, without
such indebtedness having been discharged or such acceleration having been
rescinded or annulled within a period of 10 days after written notice to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 25% in principal amount of the outstanding New Notes, as provided in the
Indenture; or (v) certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the Company or any
Significant Subsidiary or for all or substantially all of either of its
property. "Significant Subsidiary" means any Subsidiary which is a "significant
subsidiary" (within the meaning of Regulation S-X, promulgated under the
Securities Act) of the Company.
See "Description of Indenture--Events of Default, Notice and Waiver"
below for a description of rights, remedies and other matters relating to Events
of Default.
Discharge, Defeasance and Covenant Defeasance
The provisions of the Indenture relating to defeasance and covenant
defeasance described under "Description of Indenture--Discharge, Defeasance and
Covenant Defeasance" below will apply to the New Notes.
Book-Entry System
Old Notes were represented initially by a permanent global certificate
in fully registered form without interest coupons (the "Global Note") and were
registered in the name of a nominee of DTC and deposited with DTC or its
custodian. The Global Note was subject to certain restrictions on transfer.
Beneficial interests in the Global Note may be transferred to a person who takes
delivery in the form of an interest in a single global certificate in fully
registered form without interest coupons, whether before, on or after such 40th
day, only upon receipt by the Trustee of a written certification from the
transferor to the effect that such transfer is being made in accordance with
Rule 903 or 904 of Regulation S or Rule 144 under the Securities Act (an
"Unrestricted Global Note Certification"). Any beneficial interest in one of the
global notes that is transferred to a person who takes delivery in the form of
an interest in the other global note will, upon transfer, cease to be an
interest in such global note and will become an interest in the other global
note and, accordingly, will thereafter be subject to all transfer restrictions
and other procedures and restrictions applicable to beneficial interests in such
other global note for as long as it remains such an interest.
The Global Note, to the extent directed by the holders thereof in their
Letters of Transmittal, will be exchanged through book-entry electronic transfer
for a Global Note (the "New Global Note") in definitive fully-
20
registered form without interest coupons registered in the name of a nominee of
DTC and held by the Trustee as custodian. Except in the limited circumstances
described below, owners of beneficial interests in the New Global Note will not
be entitled to receive physical delivery of Notes.
Upon the issuance of the New Global Note, DTC or its custodian will
credit, in its internal system, the respective principal amount of the
individual beneficial interests represented by the New Global Note to the
accounts of persons who have accounts with DTC. Ownership of beneficial interest
in the New Global Note will be limited to persons who have accounts with DTC
("DTC Participants") or persons who hold interests through DTC Participants.
Ownership of beneficial interests in the New Global Note will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by DTC or its nominee (with respect to interests of DTC Participants) and the
records of DTC Participants (with respect to interests of persons other than DTC
Participants).
Investors may hold their interests in the New Global Note through
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear") or Citibank, N.A., as depositary for Cedel S.A.
("Cedel"), if they are participants in such systems, or indirectly through
organizations that are participants in such systems. Investors may also hold
such interests through organizations other than Euroclear and Cedel that are
participants in the DTC system. Euroclear and Cedel will hold interests in the
New Global Note on behalf of their account holders through customers' securities
accounts in their respective names on the books of their respective
depositaries, which in turn will hold such interests in the New Global Note in
customers' securities accounts in the depositaries' names on the books of DTC.
Investors may also hold their interests in the New Global Note directly through
DTC, if they are DTC Participants, or indirectly through organizations which are
DTC Participants.
Payments of the principal of and interest on the New Global Note will
be made to DTC or its nominee as the registered owner thereof. The Company will
not have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the New
Global Note or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any
payment of principal or interest in respect of the New Global Note representing
any New Notes held by it or its nominee, will credit DTC Participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of the New Global Note as shown on the records of DTC or
its nominee. The Company also expects that payments by DTC Participants to
owners of beneficial interests in the New Global Note held through such DTC
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such DTC Participants.
If DTC is at any time unwilling or unable to continue as depositary or
is ineligible to act as depositary and a successor depositary is not appointed
by the Company within 90 days after the Company is notified by DTC or becomes
aware of such condition, the Company will issue New Notes in definitive form in
exchange for the New Global Note representing the New Notes.
Individual definitive New Notes will not be eligible for clearing and
settlement through Euroclear, Cedel or DTC.
Same-Day Settlement and Payment
All payments of principal and interest in respect of the New Notes will
be made by the Company in immediately available funds.
21
DESCRIPTION OF INDENTURE
The New Notes will be issued pursuant to the Indenture and the
supplement relating thereto, which was entered into between the Company and the
Trustee. The Indenture provides for the issuance of multiple series of debt
securities, including the New Notes (each "Debt Securities") in accordance with
the terms thereof and the applicable supplemental indenture. The statements made
hereunder relating to the Indenture and the Debt Securities to be issued
thereunder are summaries and do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all provisions of the
Indenture and such Debt Securities. Terms of the supplemental indenture with
respect to the New Notes, certain of which are described above under
"Description of the New Notes," supersede conflicting provisions of the
Indenture described below, insofar as applicable to the New Notes. The
description of certain provisions of the Indenture described below does not
purport to be complete, and reference is made to the definitive Indenture and
the supplemental indenture relating to the New Notes, copies of which are
available upon request from the Company.
General
The Debt Securities may be issued without limit as to aggregate
principal amount, in one or more series, in each case as established from time
to time in or pursuant to authority granted by a resolution of the Board of
Trustees of the Company or as established in one or more indentures supplemental
to the Indenture. All Debt Securities of one series need not be issued at the
same time and, unless otherwise provided, a series may be reopened, without the
consent of the holders of the Debt Securities of such series, for issuances of
additional Debt Securities of such series.
It is anticipated that any Indenture will provide that the Company may,
but need not, designate more than one Trustee thereunder, each with respect to
one or more series of Debt Securities. Any Trustee under the Indenture may
resign or be removed with respect to one or more series of Debt Securities, and
a successor Trustee may be appointed to act with respect to such series. In the
event that two or more persons are acting as Trustee with respect to different
series of Debt Securities, each such Trustee shall be a trustee of a trust under
the Indenture separate and apart from the trust administered by any other
Trustee, and, except as otherwise indicated herein, any action described herein
to be taken by the Trustee may be taken by each such Trustee with respect to,
and only with respect to, the one or more series of Debt Securities for which it
is Trustee under the Indenture.
Except as described under "Description of the New Notes--Certain
Covenants" and "Description of New Notes--Merger, Consolidation or Sale," and
"The Exchange Offer," the Indenture does not contain any other provisions that
limit the ability of the Company to incur indebtedness or that afford holders of
the Debt Securities protection in the event of a highly leveraged or similar
transaction involving the Company. However, restrictions on ownership and
transfers of the Company's capital stock, designed to preserve its status as a
REIT, may act to prevent or hinder a change of control.
Denominations, Interest, Registration and Transfer
Any interest not punctually paid or duly provided for on any interest
payment date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the holder on the applicable regular record
date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the holder of such Debt Security not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the Indenture.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the Trustee. In addition,
subject to certain limitations imposed upon Debt Securities issued in book-entry
form, the Debt Securities of any series may be surrendered for conversion or
registration of transfer thereof at the corporate trust office of the Trustee.
Every Debt Security surrendered for conversion, registration of transfer or
22
exchange shall be duly endorsed or accompanied by a written instrument of
transfer. No service charge will be made for any registration of transfer or
exchange of any Debt Securities, but the Trustee or the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. The Company may at any time rescind the
designation of any transfer agent designated by the Company with respect to any
series of Debt Securities or approve a change in the location through which any
such transfer agent acts, except that the Company will be required to maintain a
transfer agent in each place of payment for such series. The Company may at any
time designate transfer agents in addition to the Trustee with respect to any
series of Debt Securities.
Neither the Company nor the Trustee shall be required to (i) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
(a) if such Debt Securities are issuable only as registered securities, the day
of the mailing of the relevant notice of redemption and (b) if such Debt
Securities are issuable as bearer securities, the day of the first publication
of the relevant notice of redemption or, if such Debt Securities are also
issuable as registered securities and there is no publication, the mailing of
the relevant notice of redemption, or (ii) to register the transfer of or
exchange any registered security so selected for redemption in whole or in part,
except, in the case of any registered security to be redeemed in part, the
portion thereof not to be redeemed, or (iii) to exchange any bearer security so
selected for redemption except that such a bearer security may be exchanged for
a registered security of that series and like tenor; provided that such
registered security shall be simultaneously surrendered for redemption, or (iv)
to issue, register the transfer of or exchange any Debt Security which has been
surrendered for repayment at the option of the holder, except the portion, if
any, of such Debt Security not to be so repaid.
Events of Default, Notice and Waiver
The Indenture will provide that the following events are "Events of
Default" with respect to any series of Debt Securities issued thereunder: (a)
default for 30 days in the payment of any installment on any Debt Security of
such series; (b) default in the payment of the principal of (or premium, if any,
on) any Debt Security of such series at its maturity; (c) default in making any
sinking fund payments as required for any Debt Security of such series; (d)
default in the performance of any other covenant of the Company contained in the
Indenture (other than a covenant added to the Indenture solely for the benefit
of a series of Debt Securities issued thereunder other than such series), such
default having continued for 60 days after written notice as provided in the
Indenture; (e) default in the payment of an aggregate principal amount exceeding
$20,000,000 of any evidence of indebtedness of the Company or any mortgage,
indenture or other instrument under which such indebtedness is issued or by
which such indebtedness is secured, such default having occurred after the
expiration of any applicable grace period and having resulted in the
acceleration of the maturity of such indebtedness, but only if such indebtedness
is not discharged or such acceleration is not rescinded or annulled; (f) certain
events of bankruptcy, insolvency or reorganization, or court appointment of a
receiver, liquidator or trustee of the Company or any Significant Subsidiary (as
hereinafter defined) or any of their respective property; and (g) any other
event of default provided with respect to a particular series of Debt
Securities. The term "Significant Subsidiary" means each significant subsidiary
(as defined in Regulation S-X promulgated under the Securities Act) of the
Company.
If an Event of Default (other than an Event of Default described in
clause (f) above) under the Indenture with respect to Debt Securities of any
series at the time outstanding occurs and is continuing, then in every such case
the Trustee or the holders of not less than a majority in principal amount of
the outstanding Debt Securities of that series may declare the principal amount
(or, if the Debt Securities of that series are Debt Securities that provide for
less than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof (an "Original Issue Discount Security") or
indexed securities, such portion of the principal amount as may be specified in
the terms thereof) of all of the Debt Securities of that series to be due and
payable immediately by written notice thereof to the Company (and to the Trustee
if given by the holders). If an Event of Default described in clause (f) above
with respect to the Debt Securities of any series at the time outstanding shall
occur, the principal amount of all the Debt Securities of that series (or, in
the case of any such Original Issue Discount Security or other Debt Security,
such specified amount) will automatically, and without any action by the Trustee
or any holder of such series of Debt Securities, become immediately due and
payable. However, at any time after such a declaration of acceleration with
respect to Debt Securities of such series (or of all Debt Securities then
outstanding under the
23
Indenture, as the case may be) has been made, but before a judgment or decree
for payment of the money due has been obtained by the Trustee, the holders of
not less than a majority in principal amount of outstanding Debt Securities of
such series (or of all Debt Securities then outstanding under the Indenture, as
the case may be) may rescind and annul such declaration and its consequences if
(i) the Company shall have deposited with the Trustee all required payments of
the principal of (and premium, if any) and interest on the Debt Securities of
such series (or of all Debt Securities then outstanding under the Indenture, as
the case may be), plus certain fees, expenses, disbursements and advances of the
Trustee, and (ii) all Events of Default, other than the non-payment of
accelerated principal (or specified portion thereof), or premium, if any, or
interest on the Debt Securities of such series (or of all Debt Securities then
outstanding under the Indenture, as the case may be) have been cured or waived
as provided in the Indenture. The Indenture will also provide that the holders
of not less than a majority in principal amount of the outstanding Debt
Securities of any series (or of all Debt Securities then outstanding under the
Indenture, as the case may be) may waive any past default with respect to such
series and its consequences, except a default (i) in the payment of the
principal of (or premium, if any) or interest on any Debt Security of such
series or (ii) in respect of a covenant or provision contained in the Indenture
that cannot be modified or amended without the consent of the holder of each
outstanding Debt Security affected thereby.
The Trustee will be required to give notice to the holders of Debt
Securities within 90 days of a default under the Indenture unless such default
has been cured or waived; provided, however, that the Trustee may withhold
notice to the holders of any series of Debt Securities of any default with
respect to such series (except a default in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or in the
payment of any sinking fund installment in respect of any Debt Security of such
series) if specified responsible officers of the Trustee consider such
withholding to be in the interest of such holders.
The Indenture will provide that no holders of Debt Securities of any
series may institute any proceedings, judicial or otherwise, with respect to the
Indenture or for any remedy thereunder, except in the case of failure of the
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an event of default from the holders of not
less than a majority in principal amount of the outstanding Debt Securities of
such series, as well as an offer of reasonable indemnity. This provision will
not prevent, however, any holder of Debt Securities from instituting suit for
the enforcement of payment of the principal of (and premium, if any) and
interest on such Debt Securities at the respective due dates thereof.
Subject to provisions in the Indenture relating to its duties in case
of default, the Trustee will not be under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any holders
of any series of Debt Securities then outstanding under the Indenture, unless
such holders shall have offered to the Trustee reasonable security or indemnity.
The holders of not less than a majority in principal amount of the outstanding
Debt Securities of any series (or of all Debt Securities then outstanding under
the Indenture, as the case may be) shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or of exercising any trust or power conferred upon the Trustee.
However, the Trustee may refuse to follow any direction which is in conflict
with any law or the Indenture, which may involve the Trustee in personal
liability or which may be unduly prejudicial to the holders of Debt Securities
of such series not joining therein.
The Company will be required to deliver to the Trustee annually a
certificate, signed by one of several specified officers of the Company, stating
whether or not such officer has knowledge of any default under the Indenture
and, if so, specifying each such default and the nature and status thereof.
Modification of the Indenture
Modifications and amendments of the Indenture will be permitted to be
made only with the consent of the holders of not less than a majority in
principal amount of all outstanding Debt Securities or series of outstanding
Debt Securities which are affected by such modification or amendment; provided,
however, that no such modification or amendment may, without the consent of the
holder of each such Debt Security affected thereby, (i) change the stated
maturity of the principal of, or any installment of interest (or premium, if
any) on any such Debt Security; (ii) reduce the principal amount of, or the rate
or amount of interest on, or any premium payable on redemption of, any such Debt
Security, or reduce the amount of principal of an Original Issue Discount
Security that would be due
24
and payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the holder
of any such Debt Security; (iii) change the place of payment, or the coin or
currency, for payment of principal of, premium, if any, or interest on any such
Debt Security; (iv) impair the right to institute suit for the enforcement of
any payment on or with respect to any such Debt Security; (v) reduce the
above-stated percentage of outstanding Debt Securities of any series necessary
to modify or amend the Indenture, to waive compliance with certain provisions
thereof or certain defaults and consequences thereunder or to reduce the quorum
or voting requirements set forth in the Indenture; or (vi) modify any of the
foregoing provisions or any of the provisions relating to the waiver of certain
past defaults or certain covenants, except to increase the required percentage
to effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the holder of such Debt Security.
The Indenture will provide that the holders of not less than a majority
in principal amount of a series of outstanding Debt Securities have the right to
waive compliance by the Company with certain covenants relating to such series
of Debt Securities in the Indenture.
Modifications and amendments of the Indenture will be permitted to be
made by the Company and the Trustee thereunder without the consent of any holder
of Debt Securities for any of the following purposes: (i) to evidence the
succession of another person to the Company as obligor under the Indenture; (ii)
to add to the covenants of the Company for the benefit of the holders of all or
any series of Debt Securities or to surrender any right or power conferred upon
the Company in the Indenture; (iii) to add events of default for the benefit of
the holders of all or any series of Debt Securities; (iv) to add or change any
provisions of the Indenture to facilitate the issuance of, or to liberalize
certain terms of, Debt Securities in bearer form, or to permit or facilitate the
issuance of Debt Securities in uncertificated form; provided that such action
shall not adversely affect the interests of the holders of the Debt Securities
in any material respect; (v) to change or eliminate any provisions of the
Indenture; provided that any such change or elimination shall become effective
only when there are no Debt Securities outstanding of any series created prior
thereto which are entitled to the benefit of such provision; (vi) to secure the
Debt Securities; (vii) to establish the form or terms of Debt Securities of any
series, including the provisions and procedures, if applicable, for the
conversion of such Debt Securities into common shares or preferred shares;
(viii) to provide for the acceptance of appointment by a successor Trustee or
facilitate the administration of the trusts under the Indenture by more than one
Trustee; (ix) to cure any ambiguity, defect or inconsistency in the Indenture;
provided that such action shall not adversely affect the interests of holders of
Debt Securities of any series in any material respect; or (x) to supplement any
of the provisions of the Indenture to the extent necessary to permit or
facilitate defeasance and discharge of any series of such Debt Securities;
provided that such action shall not adversely affect the interests of the
holders of the Debt Securities of any series in any material respect.
The Indenture will provide that in determining whether the holders of
the requisite principal amount of outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (ii) the principal amount
of a Debt Security denominated in a foreign currency that shall be deemed
outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above), (iii) the
principal amount of an indexed security that shall be deemed outstanding shall
be the principal face amount of such indexed security at original issuance,
unless otherwise provided with respect to such indexed security in the
Indenture, and (iv) Debt Securities owned by the Company or any other obligor
upon the Debt Securities or any affiliate of the Company or of such other
obligor shall be disregarded.
The Indenture will contain provisions for convening meetings of the
holders of Debt Securities of a series. A meeting may be called at any time by
the Trustee, and also, upon request, by the Company or the holders of at least
25% in principal amount of the outstanding Debt Securities of such series, in
any such case, upon notice given as provided in the Indenture. Except for any
consent that must be given by the holder of each Debt Security affected by
certain modifications and amendments of the Indenture, any resolution presented
at a meeting or adjourned meeting duly reconvened at which a quorum is present
may be adopted by the affirmative vote of the holders of a
25
majority in principal amount of the outstanding Debt Securities of that series;
provided, however, that, except as referred to above, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the holders of a
specified percentage, which is less than a majority, in principal amount of the
outstanding Debt Securities of a series may be adopted at a meeting or adjourned
meeting duly reconvened at which a quorum is present by the affirmative vote of
the holders of such specified percentage in principal amount of the outstanding
Debt Securities for that series. Any resolution passed or decision taken at any
meeting of holders of Debt Securities of any series duly held in accordance with
the Indenture will be binding on all holders of Debt Securities of that series.
The quorum at any meeting called to adopt a resolution, and at any reconvened
meeting, will be persons holding or representing a majority in principal amount
of the outstanding Debt Securities of a series; provided, however, that if any
action is to be taken at such meeting with respect to a consent or waiver which
may be given by the holders of not less than a specified percentage in principal
amount of the outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, the Indenture will provide
that if any action is to be taken at a meeting of holders of Debt Securities of
any series with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that the Indenture expressly provides
may be made, given or taken by the holders of such series and one or more
additional series: (i) there shall be no minimum quorum requirement for such
meeting and (ii) the principal amount of the outstanding Debt Securities of such
series that vote in favor of such request, demand, authorization, direction,
notice, consent, waiver or other action shall be taken into account in
determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
Indenture.
Discharge, Defeasance and Covenant Defeasance
The Company may discharge certain obligations to holders of any series
of Debt Securities that have not already been delivered to the Trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the Trustee, in trust, funds in such currency or
currencies, currency unit or units or composite currency or currencies in which
such Debt Securities are payable in an amount sufficient to pay the entire
indebtedness on such Debt Securities in respect of principal (and premium, if
any) and interest to the date of such deposit (if such Debt Securities have
become due and payable) or to the stated maturity or redemption date, as the
case may be.
The Indenture may provide that, if certain provisions thereof are made
applicable to the Debt Securities of or within a series pursuant to the
Indenture, the Company may elect either (i) to defease and be discharged from
any and all obligations with respect to such Debt Securities (except for the
obligation to pay additional amounts, if any, upon the occurrence of certain
events of tax, assessment or governmental charge with respect to payments on
such Debt Securities and the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of such Debt
Securities and to hold moneys for payment in trust) ("defeasance") or (ii) to be
released from its obligations with respect to such Debt Securities under certain
sections of the Indenture (including the restrictions described under
"Description of the New Notes--Certain Covenants") and, if provided pursuant to
the Indenture, its obligations with respect to any other covenant, and any
omission to comply with such obligations shall not constitute a default or an
event of default with respect to such Debt Securities ("covenant defeasance"),
in either case upon the irrevocable deposit by the Company with the Trustee, in
trust, of an amount, in such currency or currencies, currency unit or units of
composite currency or currencies in which such Debt Securities are payable at
stated maturity, or Government Obligations (as defined below), or both,
applicable to such Debt Securities which through the scheduled payment of
principal and interest, in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any) and interest on
such Debt Securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled dates therefor.
Such a trust may be established only if, among other things, the
Company has delivered to the Trustee an opinion of counsel (as specified in the
Indenture) to the effect that the holders of such Debt Securities will not
recognize income, gain or loss for U.S. federal income tax purposes as a result
of such defeasance or covenant
26
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred.
"Government Obligations" means securities which are (i) direct
obligations of the United States of America or the government which issued the
foreign currency in which the Debt Securities of a particular series are
payable, for the payment of which its full faith and credit is pledged or (ii)
obligations of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the foreign currency in which the Debt Securities of a particular series are
payable, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America or such other government,
which, in either case, are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank or
trust company as custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such Government Obligation
held by such custodian for the account of the holder of a depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligations or the specific payment of interest on or principal of the
Government Obligations evidenced by such depository receipt.
Unless otherwise provided in the applicable supplement indenture for
any series of Debt Securities (other than the New Notes), if after the Company
has deposited funds and/or Government Obligations to effect defeasance or
covenant defeasance with respect to Debt Securities of any series, (i) the
holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the Indenture or the terms of such Debt Security to receive payment
in a currency, currency unit or composite currency other than that in which such
deposit has been made in respect of such Debt Security, or (ii) a Conversion
Event (as defined below) occurs in respect of the currency, currency unit or
composite currency in which such deposit has been made, the indebtedness
represented by such Debt Security shall be deemed to have been, and will be,
fully discharged and satisfied through the payment of the principal of (and
premium, if any) and interest on such Debt Security as they become due out of
the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of (i) a currency, currency unit or composite
currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public
institutions of or within the international banking community, (ii) the ECU both
within the European Monetary System and for the settlement of transactions by
public institutions of or within the European Communities or (iii) any currency
unit or composite currency other than the ECU for the purposes for which it was
established. Unless otherwise provided in the applicable supplemental indenture
for any series of Debt Securities (other than the New Notes), all payments of
principal of (and premium, if any) and interest on any Debt Security that is
payable in a foreign currency that ceases to be used by its government of
issuance shall be made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to
any Debt Securities and such Debt Securities are declared due and payable
because of the occurrence of any event of default other than the event of
default described in clause (d) under "--Events of Default, Notice and Waiver"
above with respect to certain sections of the Indenture (which sections would no
longer be applicable to such Debt Securities) or described in clause (g) under
"--Events of Default, Notice and Waiver" with respect to any other covenant as
to which there has been covenant defeasance, the amount in such currency,
currency unit or composite currency in which such Debt Securities are payable,
and Government Obligations on deposit with the Trustee, will be sufficient to
pay amounts due on such Debt Securities at the time of their stated maturity but
may not be sufficient to pay amounts due on such Debt Securities at the time of
the acceleration resulting from such event of default. However, the Company
would remain liable to make payment of such amounts due at the time of
acceleration.
The applicable supplemental indenture for any series of Debt Securities
(other than the New Notes) may further describe the provisions, if any,
permitting such defeasance or covenant defeasance, including any modifications
to the provisions described above, with respect to the Debt Securities of or
within a particular series.
27
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary, which describes the principal United States
Federal income tax consequences resulting from the exchange of Old Notes for New
Notes and the ownership and disposition of New Notes, is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change (including changes in effective dates) or possible differing
interpretations. The following discussion deals only with Notes held as capital
assets and does not purport to deal with persons in special tax situations, such
as financial institutions, banks, insurance companies, regulated investment
companies, dealers in securities or currencies, persons holding Notes as a hedge
against currency risks or as a position in a "straddle" for tax purposes, or
persons whose functional currency is not the United States dollar. It also does
not deal with holders of the Notes other than original purchasers of the Old
Notes. Persons considering owning the Notes should consult their own tax
advisors concerning the application of United States Federal income tax laws to
their particular situations as well as any consequences of the purchase,
ownership and disposition of the Notes arising under the laws of any other
taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Note that is for United States Federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation or partnership (or other
entity treated as a corporation or partnership for United States Federal income
tax purposes) created or organized in or under the laws of the United States or
of any political subdivision thereof (unless otherwise provided by Treasury
Regulations), (iii) an estate the income of which is subject to United States
Federal income taxation regardless of its source, (iv) a trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust (or certain electing
trusts in existence on August 20, 1996 to the extent provided in Treasury
Regulations), or (v) any other person whose income or gain in respect of a Note
is effectively connected with the conduct of a United States trade or business.
As used herein, the term "non-U.S. Holder" means a beneficial owner of a Note
that is not a U.S. Holder.
EACH HOLDER IS STRONGLY URGED TO CONSULT ITS TAX ADVISERS REGARDING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF EXCHANGING OLD NOTES FOR
NEW NOTES AND HOLDING AND DISPOSING OF THE NEW NOTES.
Exchange Offer
An exchange of Old Notes for New Notes pursuant to the Exchange Offer
should be regarded for Federal income tax purposes as a nontaxable continuation
of the Old Notes, and a holder should have the same adjusted basis and holding
period in the New Notes upon receipt as it had in the Old Notes immediately
before the exchange.
The Notes
For U.S. Federal income tax purposes, each Note will be treated as
indebtedness issued by the Company.
U.S. Holders
Interest. Interest on a Note will generally be includible in the gross
income of a U.S. Holder as ordinary interest income at the time the interest is
received or when it accrues in accordance with the U.S. Holder's regular method
of tax accounting. Such interest will be treated as U.S. source income for U.S.
Federal income tax purposes.
Disposition. A U.S. Holder will recognize taxable gain or loss on the
sale, exchange, redemption, retirement or other disposition of a Note in an
amount equal to the difference between the amount realized from such disposition
(other than amounts attributable to accrued interest which would otherwise be
taxable as ordinary interest income) and the U.S. Holder's adjusted tax basis in
the Note. Such gain or loss generally will be capital gain or loss, and will be
long-term capital gain or loss if the U.S. Holder has held the Note for more
than one year at the time of disposition; preferential rates of tax may apply to
gains recognized by noncorporate U.S. Holders upon the disposition of Notes held
for more than eighteen months.
28
Gain or Income Received by a Foreign Corporation. A foreign corporation
whose income or gain in respect of a Note is effectively connected with the
conduct of a United States trade or business, in addition to being subject to
regular U.S. Federal income tax, may be subject to a branch profits tax equal to
30% of its "effectively connected earnings and profits" within the meaning of
the Internal Revenue Code of 1986, as amended (the "Code"), for the taxable
year, as adjusted for certain items, unless it qualifies for a lower rate under
an applicable tax treaty (as modified by the branch profits tax rules).
Non-U.S. Holders
Generally, a non-U.S. Holder will not be subject to United States
Federal income taxes on payments of principal, premium, if any, or interest on a
Note, or on any gain upon disposition or retirement of a Note, if (i) such
non-U.S. Holder does not own 10% or more of the shares of beneficial interest of
the Company and (ii) the last United States payor in the chain of payment (the
"Withholding Agent") has received in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years, a statement
signed by the beneficial owner of the Note under penalties of perjury certifying
that such owner is not a U.S. Holder and providing the name and address of the
beneficial owner. The statement may be made on an Internal Revenue Service
("IRS") Form W-8 or a substantially similar form, and the beneficial owner must
inform the Withholding Agent of any change in the information on the statement
within 30 days of such change. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However, in
such case, the signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the organization
or institution. Interest received or gain recognized by a non-U.S. Holder which
does not qualify for exemption from taxation will be subject to United States
Federal income tax and withholding tax at a rate of 30% unless reduced or
eliminated by applicable tax treaty.
Treasury Regulations issued on October 6, 1997 (the "New Regulations")
alter the withholding rules on interest paid to a non-U.S. Holder of a Note. The
New Regulations are generally effective with respect to interest paid after
December 31, 1998. Withholding will generally be excused under the New
Regulations if the non-U.S. Holder owns less than 10% of the shares of
beneficial interest of the Company and if such non-U.S. Holder executes a
necessary IRS Form W-8. Moreover, under the New Regulations, to obtain a reduced
rate of withholding under an income tax treaty, a non-U.S. Holder generally will
be required to provide an IRS Form W-8 certifying such non-U.S. Holder's
entitlement to benefits under the treaty. The New Regulations also provide
special rules to determine whether, for purposes of determining the
applicability of a tax treaty, interest paid to a non-U.S. Holder that is an
entity should be treated as paid to the entity or to those holding the ownership
interests in that entity, and whether such entity or such holders in the entity
are entitled to benefits under the tax treaty. The New Regulations also alter
the information reporting and backup withholding rules applicable to non-U.S.
Holders and, among other things, provide certain presumptions under which a
non-U.S. Holder is subject to backup withholding and information reporting until
certification of non-U.S. status is received from such non-U.S. Holder. The
foregoing is not intended to be a complete discussion of the New Regulations,
and non-U.S. Holders are urged to consult their tax advisors with respect to the
effect of the New Regulations on an investment in the Notes.
The Notes will not be includible in the estate of a non-U.S. Holder for
United States estate tax purposes unless the individual owns directly or
indirectly 10% or more of the shares of beneficial interest of the Company or,
at the time of such individual's death, payments in respect of the Notes would
have been effectively connected with the conduct by such individual of a trade
or business in the United States.
Backup Withholding
Backup withholding of United States Federal income tax at a rate of 31%
may apply to payments made in respect of the Notes to registered owners who are
not "exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the
29
preceding section would establish an exemption from backup withholding for those
non-U.S. Holders who are not exempt recipients.
In addition, upon the sale of a Note by or through a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment
to a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed for a period of at least 120 days
after the consummation of the Exchange Offer to make this Prospectus, as amended
or supplemented, available to any broker-dealer for use in connection with any
such resale. In addition, until __________, 1998, all dealers effecting
transactions in the New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own accounts
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of at least 120 days after the consummation of the
Exchange Offer, the Company will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter to Transmittal. The
Company has agreed to pay all expenses incident to the Exchange Offer (including
the expenses of any special counsel for the holders of the Old Notes) other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the Old Notes participating in the Exchange Offer (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
TRANSFER RESTRICTIONS
Unless and until an Old Note is exchanged for a New Note pursuant to
the Exchange Offer, its will bear the following legend on the face thereof:
30
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND SUCH SECURITY MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO THE
COMPANY, (2) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904
OF REGULATION S UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (5) IN A TRANSACTION OTHERWISE EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY OTHER APPLICABLE LAW.
TRANSFERS AND EXCHANGES OF THIS SECURITY ARE SUBJECT TO RESTRICTIONS AS
PROVIDED IN THE INDENTURE.
The New Notes will not contain such restrictive legends or be otherwise
subject to the restrictions on their transfer, except that the New Global Notes
shall bear the following legend on the face thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
LEGAL MATTERS
Certain legal matters with respect to the New Notes will be passed upon
for the Company by Sullivan & Worcester LLP, Boston, Massachusetts. Sullivan &
Worcester LLP will rely, as to all matters of Maryland law, upon the opinion of
Piper & Marbury L.L.P., Baltimore, Maryland. Barry M. Portnoy was a partner in
the firm of Sullivan & Worcester LLP until March 31, 1997 and is a Managing
Trustee of the Company and of HPT, a director and 50% shareholder of HRPT
Advisors, Inc. ("Advisors") and REIT Management & Research, Inc., the Company's
investment advisor ("RMR"), and a director and/or significant shareholder of
certain lessees of the Company. Sullivan & Worcester LLP represents HPT,
Advisors, RMR, certain of such lessees and certain of their affiliates on
various matters.
EXPERTS
The consolidated financial statements of the Company included in the
Company's Current Report on Form 8-K dated February 27, 1998 and incorporated by
reference in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference, which, as to the years 1996 and 1997, are based in part on the report
of Arthur Andersen LLP, independent public accountants. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
reports given upon the authority of such firms as experts in accounting and
auditing.
The consolidated financial statements of Marriott International, Inc.
incorporated by reference in this Prospectus and elsewhere in the registration
statement to the extent and for the periods indicated in their reports, have
been audited by Arthur Andersen LLP, independent public accountants, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
31
-------------------------
THE AMENDED AND RESTATED DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED
JULY 1, 1994, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF THE COMPANY SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE
COMPANY. ALL PERSONS DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO
THE ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
32
INDEX TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Introduction to Unaudited Pro Forma Consolidated Financial Statements...........................................F-2
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1997..........................................F-3
Unaudited Pro Forma Consolidated Statement of Income for the year ended December 31, 1997.......................F-4
Notes to Unaudited Pro Forma Consolidated Financial Statements..................................................F-5
F-1
HEALTH AND RETIREMENT PROPERTIES TRUST
Unaudited Pro Forma Consolidated Financial Statements
The following unaudited pro forma consolidated balance sheet as of
December 31, 1997 and the consolidated statement of income for the year ended
December 31, 1997, present the consolidated financial position and the results
of operations of Health and Retirement Properties Trust and consolidated
subsidiaries (the "Company") as if the transactions described in the notes to
unaudited financial statements were consummated on January 1, 1997. Additional
information with respect to such transactions is provided in the Company's
Annual Report on Form 10-K for its fiscal year ended December 31, 1997 (and in
materials incorporated by reference therein), which is incorporated by reference
into this Prospectus. These unaudited pro forma consolidated financial
statements should be read in connection with, and are qualified in their
entirety by reference to, the separate consolidated financial statements of the
Company for the year ended December 31, 1997, included in the Company's Current
Report on Form 8-K dated February 27, 1998, which is incorporated by reference
into this Prospectus. These unaudited pro forma consolidated financial
statements are not necessarily indicative of the financial position and the
expected results of operations of the Company for any future period. Differences
could result from, among other considerations, future changes in the Company's
portfolio of investments, changes in interest rates, changes in the capital
structure of the Company, delays in the acquisition of certain properties and
changes in property level operating expenses.
F-2
Health and Retirement Properties Trust
Pro Forma Consolidated Balance Sheets
December 31, 1997
(dollars in thousands)
(unaudited)
Recent
Historical Acquisitions (A) Pro Forma
------------ ----------------- ---------
ASSETS
Real estate properties, at cost: $1,969,023 $ 91,712 $2,060,735
Less accumulated depreciation 111,669 -- 111,669
---------- ---------- ----------
1,857,354 91,712 1,949,066
Real estate mortgages, net 104,288 -- 104,288
Investment in Hospitality Properties Trust 111,134 -- 111,134
Other assets 63,187 (46,712) 16,475
---------- ---------- ----------
$2,135,963 45,000 2,180,963
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank notes payable $ 200,000 $ 45,000 $ 245,000
Senior notes and bonds payable, net 349,900 -- 349,900
Mortgage notes payable 26,329 -- 26,329
Convertible subordinated debentures 211,650 -- 211,650
Other liabilities 81,824 81,824
Shareholders' equity 1,266,260 1,266,260
---------- ---------- ----------
$2,135,963 $ 45,000 $2,180,963
========== ========== ==========
See accompanying notes to unaudited pro forma financial statements
F-3
Health and Retirement Properties Trust
Pro Forma Consolidated Statements of Income
Year Ended December 31, 1997
(amounts in thousands, except per share data)
(unaudited)
Second Third
Quarter Quarter West
Acquisitions Acquisitions 34th
Historical GPI(B) CSMC(C) (D) (D) Street (E)
----------- ---------- ---------- ----------- ------------- -----------
Revenues:
Rental Income $188,000 $ 11,959 $ 6,831 $ 2,948 $ 3,179 $ 10,771
Interest Income 20,863 (366) -- -- -- --
-------- -------- -------- -------- -------- --------
Total revenues 208,863 11,593 6,831 2,948 3,179 10,771
-------- -------- -------- -------- -------- --------
Expenses:
Operating 26,765 2,053 1,910 -- 954 3,641
Interest 36,766 (1,216) 3,232 1,087 1,463 2,876
Depreciation and amortization 39,330 4,156 1,119 627 501 1,869
General and administrative 11,670 2,105 249 139 111 415
-------- -------- -------- -------- -------- --------
Total expenses 114,531 7,098 6,510 1,853 3,029 8,801
-------- -------- -------- -------- -------- --------
Income before equity in earnings of
Hospitality Properties Trust and
before extraordinary item 94,332 4,495 321 1,095 150 1,970
Equity in earnings of Hospitality
Properties Trust 8,590
Gain on equity transaction of
Hospitality Properties Trust 9,282 - -
-------- -------- -------- -------- -------- --------
Net income before extraordinary item $112,204 $ 4,495 $ 321 $ 1,095 $ 150 $ 1,970
-------- -------- -------- -------- -------- --------
Average shares outstanding 92,168
Basic and diluted earnings per commonshare:
Net income before extraordinary item $ 1.22
Fourth
Quarter
Franklin Bridgepoint Acquisitions Recent
Plaza (F) Square (G) (D) Acquisitions (H) Pro Forma
---------- -------------- ------------- ---------------- ------------
Revenues:
Rental Income $ 9,614 $ 5,599 $ 8,461 $ 13,102 $260,464
Interest Income -- -- -- 20,497
-------- -------- -------- -------- --------
Total revenues 9,614 5,599 8,461 13,102 280,961
-------- -------- -------- -------- --------
Expenses:
Operating 4,904 2,162 2,634 3,931 48,954
Interest 2,486 3,216 4,338 2,925 57,173
Depreciation and amortization 1,334 1,175 1,269 2,064 53,444
General and administrative 296 262 283 46 15,576
-------- -------- -------- -------- --------
Total expenses 9,020 6,815 8,524 8,966 175,147
-------- -------- -------- -------- --------
Income before equity in earnings of
Hospitality Properties Trust and
before extraordinary item 594 (1,216) (63) 4,136 105,814
Equity in earnings of Hospitality
Properties Trust - 8,590
Gain on equity transaction of
Hospitality Properties Trust - - - 9,282
-------- -------- -------- -------- --------
Net income before extraordinary ite$ $ 594 $ (1,216) $ (63) $ 4,136 $123,686
-------- -------- -------- -------- --------
Average shares outstanding 98,838
Basic and diluted earnings per
common share
Net income before extraordinary item $ 1.25
See accompanying notes to unaudited pro forma financial statements
F-4
Notes to Unaudited Pro Forma Consolidated Financial Statements
Pro Forma Balance Sheet Adjustments at December 31, 1997.
A. Represents the Company's acquisitions, during January 1998 and February
1998 of two medical office properties and three commercial office
properties located in Pennsylvania, a commercial office property located in
Texas, a medical office property located in Massachusetts, a commercial
office property located in Maryland and three medical office properties
located in Florida (collectively, "Recent Acquisitions"). The Recent
Acquisitions were funded with available cash and by drawings under the
Company's existing revolving line of credit.
Pro Forma Statement of Income Adjustments for the Year Ended December 31, 1997.
B. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition of the government office properties ("Government
Office Properties") from Government Property Investors, Inc. Also reflects
the decrease in interest expense arising from the Company's issuance of its
common shares of beneficial interest in a March 1997 offering, the proceeds
of which were used in part to repay amounts then outstanding under the
Company's revolving line of credit, net of an increase in interest expense
related to the Company's assumption of certain debt in connection with the
acquisition of the Government Office Properties.
C. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition of two medical office properties and two parking
structures located in Los Angeles, California, as well as the increase in
interest expense due to the use of the Company's revolving line of credit
to fund this acquisition.
D. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition of a) a 200 unit retirement housing property located
in Spokane, Washington and 20 medical office clinics and ancillary
structures located in Massachusetts during the second quarter, b) three
medical and two commercial office buildings located in Pennsylvania during
the third quarter and c) a medical office property located in Colorado, a
medical office property located in Maryland, a medical office property
located in Rhode Island, three medical office properties located in
California, and a medical office property located in Washington, D.C.
during the third quarter, as well as the increase in interest expense due
to the use of the Company's revolving line of credit to fund these
acquisitions.
E. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition of West 34th Street in New York City, as well as the
increase in interest due to the use of the Company's revolving line of
credit to fund the acquisition.
F. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition of Franklin Plaza in Philadelphia, Pennsylvania, as
well as the increase in interest expense due to the use of the Company's
revolving line of credit to fund the acquisition.
G. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition of Bridgepoint Square, Austin, Texas. Bridgepoint
Square consists of five properties, of which one property was under
construction at September 30, 1997 and one property was completed in July
1997. Also represents the increase in interest expense due to the use of
the Company's revolving line of credit to fund the acquisition.
H. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's Recent Acquisitions as well as the increase in interest due to
the use of the Company's revolving line of credit to fund these
acquisitions.
F-5
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 7.4 of the Company's Amended and Restated Declaration of Trust,
filed as an Exhibit to the Company's Current Report on Form 8-K dated July 10,
1996, which provides for indemnification of Trustees and officers of the
Company, is hereby incorporated by reference.
Item 21. Exhibits
4.1 - Indenture, dated as of December 18, 1997, between the Company and State Street Bank and Trust
Company, as trustee. (Filed herewith as Exhibit 4.1)
4.2 - Supplemental Indenture, dated as of December 18, 1997, between the Company and State Street Bank and
Trust Company, as trustee. (Filed herewith as Exhibit 4.2)
4.3 - Registration Rights Agreement dated as of December 18, 1997 by and between the Company and Merrill
Lynch & Co. (Incorporated by reference to the Company's Current Report on Form 8-K, dated
December 5, 1997)
5.1 - Opinion of Sullivan & Worcester LLP (Filed herewith as Exhibit 5.1)
5.2 - Opinion of Piper & Marbury L.L.P. (Filed herewith as Exhibit 5.2)
8 - Opinion of Sullivan & Worcester LLP re: tax matters (Filed herewith as Exhibit 8)
12 - Statement Regarding Computation of Ratios of Earnings to Fixed
Charges (Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997)
23.1 - Consent of Ernst & Young LLP (Filed herewith as Exhibit 23.1)
23.2 - Consent of Arthur Andersen LLP (Filed herewith as Exhibit 23.2)
23.3 - Consent of Arthur Andersen LLP (Filed herewith as Exhibit 23.3)
23.4 - Consent of Sullivan & Worcester LLP (Included in Exhibits 5.1 and 8)
23.5 - Consent of Piper & Marbury L.L.P. (Included in Exhibit 5.2)
24 - Powers of Attorney (Included at Page II-4)
25.1 - Statement of Eligibility of Trustee on Form T-1 (Filed herewith as Exhibit 25.1)
99.1 - Form of Letter of Transmittal (Filed herewith as Exhibit 99.1)
99.2 - Form of Notice of Guaranteed Delivery (Filed herewith as Exhibit 99.2)
Item 22. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
(Section 230.424(b) of 17 C.F.R.) if, in the aggregate, the
changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and
II-1
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in the periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
and Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the Securities
offered herein, and the offering of such Securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the Securities being registered which remain unsold at the
termination of the offering.
(4) That, for the purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
of 1934 that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating
to the Securities offered herein, and the offering of such Securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is part of this
Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the Registrant
undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form;
(6) That every prospectus: (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements
of Section 10(a)(3) of the Securities Act and is used in connection
with an offering of securities subject to Rule 145, will be filed as a
part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of
this form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through
the date of responding to the request.
(8) To supply by means of a post-effective amendment, all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the Registration
Statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant pursuant to the provisions described under Item 15 of this
registration statement, or otherwise (other than insurance), the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in
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connection with the Securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such Act and will
be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Newton,
Commonwealth of Massachusetts, on March 11, 1998.
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ David J. Hegarty
David J. Hegarty
President and Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-4 relating to the New Notes has been
signed below by the following persons in the capacities and on the dates
indicated; and each of the undersigned officers and trustees of Health and
Retirement Properties Trust, hereby severally constitute and appoint David J.
Hegarty, Ajay Saini, Gerard M. Martin and Barry M. Portnoy, and each of them, to
sign for him, and in his name in the capacity indicated below, this Registration
Statement for the purpose of registering such securities under the Securities
Act of 1933, as amended, and any and all amendments thereto, hereby ratifying
and confirming our signatures as they may be signed by our attorneys to such
Registration Statement and any and all amendments thereto.
Signature Title Date
/s/ David J. Hegarty President and Chief Operating March 11, 1998
David J. Hegarty Officer (principal executive officer)
/s/ Ajay Saini Treasurer and Chief Financial March 11, 1998
Ajay Saini Officer
/s/ Bruce M. Gans, M.D. Trustee March 11, 1998
Bruce M. Gans, M.D.
/s/ Rev. Justinian Manning, C.P. Trustee March 11, 1998
Rev. Justinian Manning, C.P.
/s/ Gerard M. Martin Managing Trustee March 11, 1998
Gerard M. Martin
/s/ Barry M. Portnoy Managing Trustee March 11, 1998
Barry M. Portnoy
/s/ Ralph J. Watts Trustee March 11, 1998
Ralph J. Watts
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