SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15() OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 13, 2001
SENIOR HOUSING PROPERTIES TRUST
(Exact name of registrant as specified in charter)
MARYLAND 001-15319 04-3445278
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
400 CENTRE STREET, 02458
NEWTON, MASSACHUSETTS (Zip code)
(Address of principal executive offices)
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Registrant's telephone number, including area code: 617-796-8350
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including with respect to our pending acquisition of 31 senior living properties from Crestline Capital Corporation and the pending spin-off of our subsidiary, Five Star Quality Care, Inc. Such forward-looking statements are not guarantees and involve risks and uncertainties. Actual results may differ materially from those contained in or implied by the forward-looking statements as a result of various factors. Such factors include, without limitation, that we may not complete the Five Star spin-off on contemplated terms and that we may not acquire the Crestline properties because of Crestline's or our failure to satisfy conditions to the closing. The information contained in our Annual Report on Form 10-K, including information contained in "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our Current Reports on Form 8-K dated September 21, 2001, October 3, 2001, as amended, and November 5, 2001 also identifies important factors that could cause such differences.
Item 5. Other Items
On December 13, 2001, we agreed to sell $200 million aggregate principal amount of our 8 5/8% Senior Notes due 2012 in a public offering. We expect to issue and deliver these notes on or about December 20, 2001. The price to the public in the offering was 99.163% of the principal amount. We intend to use the $194.3 million of expected net proceeds to partially fund our previously announced planned acquisition of 31 senior living properties and for general business purposes, including other acquisitions.
This report does not constitute an offer to sell or the solicitation of an offer to buy notes, and there shall not be any offer, solicitation of an offer to buy or sale of the notes in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful.
We have previously reported our issuance of 14,047,000 common shares of beneficial interest, the pending spin-off of our subsidiary, Five Star Quality Care, Inc., our pending acquisition of 31 properties from Crestline Capital Corporation, and related pending transactions. Additional pro forma financial information with respect to these transactions and our sale of notes is contained in Item 7 of this Report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
1.1 Form of Underwriting Agreement between Senior Housing Properties Trust and the underwriters named therein relating to the sale of $200 million aggregate principal amount of 8 5/8% Senior Notes due 2012.
10.1 Transaction Agreement by and among Senior Housing Properties Trust, certain subsidiaries of Senior Housing Properties Trust party thereto, Five Star Quality Care, Inc., certain subsidiaries of Five Star Quality Care, Inc. party thereto, FSQ, Inc., Hospitality Properties Trust, HRPT Properties Trust and Reit Management & Research LLC.
10.2 Agreement of Merger among Five Star Quality Care, Inc., FSQ Acquisition, Inc. and FSQ, Inc.
10.3 Form of Master Lease Agreement by and among certain affiliates of Senior Housing Properties Trust, as Landlords, and Five Star Quality Care Trust, as Tenant, relating to the 56 properties managed by FSQ, Inc. (Incorporated by reference to Five Star Quality Care, Inc.'s Registration Statement on Form S-1 filed December 5, 2001, File No. 333-69846).
10.4 Form of Master Lease Agreement by and among certain affiliates of Senior Housing Properties Trust, as Landlords, and FS Tenant Holding Company Trust, as Tenant, relating to the 31 properties managed by Marriott Senior Living Services, Inc. (Incorporated by reference to Five Star Quality Care, Inc.'s Registration Statement on Form S-1 filed December 5, 2001, File No. 333-69846).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SENIOR HOUSING PROPERTIES TRUST
By: /s/ John R. Hoadley
----------------------------------
Name: John R. Hoadley
Title: Chief Financial Officer
Date: December 14, 2001
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INDEX TO FINANCIAL STATEMENTS
SENIOR HOUSING PROPERTIES TRUST UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements......................................... F-2 Unaudited Pro Forma Condensed Consolidated Balance Sheet at September 30, 2001.......................................... F-3 Unaudited Pro Forma Condensed Consolidated Statement of Income for the year ended December 31, 2000..................... F-4 Unaudited Pro Forma Condensed Consolidated Statement of Income for the nine months ended September 30, 2001............. F-5 Unaudited Pro Forma Condensed Consolidated Statement of Income for the twelve months ended September 30, 2001........... F-6 Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements................................................ F-7 |
SENIOR HOUSING PROPERTIES TRUST
INTRODUCTION TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2001 AND
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE NINE AND TWELVE MONTHS ENDED SEPTEMBER 30, 2001
The following unaudited pro forma consolidated balance sheet gives
separate effect to: (1) our issuance of $200 million of 8 5/8% senior
unsecured notes in December 2001 and our issuance of 14,047,000 common shares
of beneficial interest in October 2001; (2) our pending spin-off of our
subsidiary, Five Star Quality Care, Inc. (Five Star), the lease to Five Star
of 56 facilities and related transactions described in the notes thereto; and
(3) the pending acquisition of 31 properties from Crestline Capital
Corporation (Crestline), for $600 million, the lease of those properties to
Five Star and related transactions described in the notes thereto, as though
all such transactions had occurred on September 30, 2001.
The following unaudited pro forma consolidated statements of income give separate effect to: (1) our sale of four properties in October 2000, financing transactions completed after January 1, 2000, our issuance of $200 million of 8 5/8% senior unsecured notes in December 2001 and certain other transactions described in the notes thereto; (2) our pending Five Star spin-off, the lease to Five Star of 56 properties and related transactions as described in the notes thereto; and (3) the pending acquisition of 31 properties from Crestline, the lease of those properties to Five Star and related transactions described in the notes hereto, as though all such transactions occurred at the beginning of the period presented.
The pro forma information is based in part upon (1) our historical financial statements filed on our Form 10-Q for the quarter ended September 30, 2001 and our Form 10-K for the year ended December 31, 2000; (2) the financial statements of CSL Group, Inc. and Subsidiaries as Partitioned For Sale to SNH/CSL Properties Trust filed with our Forms 8-K dated September 21, 2001 and October 3, 2001; and (3) the financial statements of our acquired businesses filed on Form 8-K dated January 30, 2001, as amended, and this pro forma information should be read in conjunction with all of these financial statements and notes thereto. In the opinion of management, all adjustments necessary to reflect the effects of the transactions discussed above have been reflected in the pro forma information.
The following unaudited pro forma financial data is not necessarily indicative of what our actual financial position or results of operations would have been as of the date or for the period indicated, nor does it purport to represent our financial position or results of operations for future periods.
SENIOR HOUSING PROPERTIES TRUST
Unaudited Pro Forma Condensed Consolidated Balance Sheet September 30, 2001
(DOLLARS IN THOUSANDS)
Pending Pending
Financing Spin-off Acquisition
Historical Adjustments Subtotal Adjustments Subtotal Adjustments Pro Forma
---------- ----------- ---------- ----------- -------- ----------- -----------
ASSETS
Real estate, net....... $476,437 $-- $476,437 $(3,040) (D) $473,397 $600,086 (K) $1,073,483
Cash and cash
equivalents......... 8,084 334,711 (A) 342,795 (28,286) (E) 314,509 (314,420)(L) 89
Accounts receivable,
net................. 39,133 39,133 (34,511) (F) 4,622 4,622
Other assets........... 37,994 4,250 (B) 42,244 (4,548) (G) 37,696 269 (M) 37,965
----------- ------------ ----------- ------------ ---------- ------------ -------------
$561,648 $338,961 $900,609 $(70,385) $830,224 $285,935 $1,116,159
=========== ============ =========== ============ ========== ============ =============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Revolving credit
facility............ $31,000 $(31,000)(A) $-- $-- $-- $51,000 (N) $51,000
Unsecured senior debt,
net of discount..... -- 198,326 (B) 198,326 198,326 198,326
Other debt............. 9,100 9,100 9,100 233,386 (N) 242,486
Prepaid and deferred
rents............... 9,475 9,475 9,475 9,475
Security deposits...... 1,520 1,520 1,520 1,520
Accounts payable and
accrued expenses of
facilities'
operations.......... 16,113 16,113 (16,113) (H) -- --
Other liabilities...... 7,185 7,185 (4,272) (I) 2,913 1,549 (O) 4,462
----------- ------------ ----------- ------------ ---------- ------------ -------------
Total liabilities...... 74,393 167,326 241,719 (20,385) 221,334 285,935 507,269
Trust preferred
securities.......... 27,394 27,394 27,394 27,394
Shareholders' equity... 459,861 171,635 (C) 631,496 (50,000) (J) 581,496 581,496
----------- ------------ ----------- ------------ ---------- ------------ -------------
$561,648 $338,961 $900,609 $(70,385) $830,224 $285,935 $1,116,159
=========== ============ =========== ============ ========== ============ =============
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SENIOR HOUSING PROPERTIES TRUST
Unaudited Pro Forma Condensed Consolidated Statement of Income For The Year Ended December 31, 2000
(amounts in thousands, except per share amounts)
Financing Pending Pending
and Other Spin-off Acquisition
Historical Adjustments Subtotal Adjustments Subtotal Adjustments Pro Forma
---------- ----------- ---------- ----------- -------- ----------- -----------
REVENUES:
Rental income.............. $64,377 $(9,366) (P) $54,426 $(1,227) (W) $53,199 $63,000 (AA) $116,199
(585) (Q)
Other real estate income... 2,520 2,520 (2,520) (X) --
Interest and other income.. 1,520 400 (R) 1,920 (695) (Y) 1,225 1,225
FF&E reserve income........ -- -- -- 6,794 (BB) 6,794
Gain on foreclosures and
lease terminations...... 7,105 (7,105) (S) -- -- --
---------- ------------- ----------- ---------- ------------- ----------- -----------
Total revenues............. 75,522 (16,656) 58,866 (4,442) 54,424 69,794 124,218
EXPENSES:
Interest................... 15,366 3,333 (T) 18,699 -- 18,699 26,051 (CC) 44,750
Distributions on trust
preferred securities.... -- 2,811 (U) 2,811 2,811 2,811
Depreciation............... 20,140 (1,936)(P) 18,167 (619) (Z) 17,548 17,003 (DD) 34,551
(37)(Q)
General and administrative.
--Recurring................ 5,475 (424)(P) 4,995 4,995 3,500 (DD) 8,495
(56)(Q)
-- Related to foreclosures
and lease terminations.. 3,519 (3,519)(S) -- -- --
---------- ------------- ----------- ---------- ------------- ----------- -----------
Total expenses............. 44,500 172 44,672 (619) 44,053 46,554 90,607
---------- ------------- ----------- ---------- ------------- ----------- -----------
Income before gain on sale
of properties........... $31,022 $(16,828) $14,194 $(3,823) $10,371 $23,240 $33,611
========== ============= =========== ========== ============= =========== ===========
Weighted average shares
outstanding............. 25,958 17,464 (V) 43,422 43,422 43,422
========== ============= =========== ============= ===========
Basic and diluted earnings
per share:
Net income................. $1.20 $0.33 $0.24 $0.77
========== =========== ============= ===========
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SENIOR HOUSING PROPERTIES TRUST
Unaudited Pro Forma Condensed Consolidated Statement of Income For Nine Months Ended September 30, 2001
(amounts in thousands, except per share amounts)
(unaudited)
Financing Pending Pending
and Other Spin-off Acquisition
Historical Adjustments Subtotal Adjustments Subtotal Adjustments Pro Forma
---------- ----------- ---------- ----------- -------- ----------- -----------
REVENUES:
Rental income............... $33,302 $-- $33,302 $5,250 (W) $38,552 $47,250 (AA) $85,802
Facilities' operations...... 170,681 170,681 (170,681)(X) -- --
Interest and other income... 897 897 897 897
FF&E reserve income......... -- -- -- -- 4,293 (BB) 4,293
---------- ----------- ----------- ------------- --------- ----------- -------------
Total revenues.............. 204,880 204,880 (165,431) 39,449 51,543 90,992
EXPENSES:
Interest.................... 4,900 9,009 (T) 13,909 13,909 17,271 (CC) 31,180
Distributions on trust
preferred securities..... 749 1,359 (U) 2,108 2,108 2,108
Depreciation................ 14,537 14,537 (1,098) (Z) 13,439 12,752 (DD) 26,191
Facilities' operations...... 166,230 166,230 (166,230) (X) -- --
General and administrative..
--Recurring................. 3,189 3,189 3,189 2,625 (DD) 5,814
--Related to foreclosures and
lease terminations....... 4,167 (4,167)(S) -- -- --
---------- ----------- ----------- ------------- --------- ----------- -------------
Total expenses.............. 193,772 6,201 199,973 (167,328) 32,645 32,648 65,293
---------- ----------- ----------- ------------- --------- ----------- -------------
Net income.................. $11,108 $(6,201) $4,907 $1,897 $6,804 $18,895 $25,699
========== =========== =========== ============= ========= =========== =============
Weighted average shares
outstanding.............. 27,049 16,373 (V) 43,422 43,422 43,422
========== =========== =========== ========= =============
Basic and diluted earnings
per share:
Net income.................. $0.41 $0.11 $0.16 $0.59
========== =========== ========= =============
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For Twelve Months Ended September 30, 2001
(amounts in thousands, except per share amounts)
(unaudited)
Financings Pending Pending
and Other Spin-off Acquisition Pro
Historical Adjustments Subtotal Adjustments Subtotal Adjustments Forma
----------------------------------------------------------------------------------------------------------------------------
Revenues:
Rental income............ $47,799 $(1,050)(P) $46,749 $7,000 (W) $53,749 $63,000 (AA) $116,749
Facilities' operations... 170,681 170,681 (170,681)(X) -- --
Other real estate
income................. 1,292 1,292 (1,292)(X) --
Interest and other
income................. 1,088 1,088 1,088 1,088
FF&E reserve income...... -- -- -- 5,992 (BB) 5,992
Gain on foreclosures and
lease terminations..... 7,105 (7,105)(S) -- -- --
--------- --------- --------- -------- --------- -------- --------
Total revenues........... 227,965 (8,155) 219,810 (164,973) 54,837 68,992 123,829
Expenses:
Interest................. 7,671 10,919 (T) 18,590 18,590 23,887 (CC) 42,477
Distributions on trust
preferred securities... 749 2,062 (U) 2,811 2,811 2,811
Depreciation............. 19,298 (194)(P) 19,104 (1,253)(Z) 17,851 17,003 (DD) 34,854
Facilities' operations... 166,230 166,230 (166,230)(X) -- --
General and
administrative
--Recurring.............. 4,273 (43)(P) 4,230 4,230 3,500 (DD) 7,730
--Related to foreclosures
and lease
terminations........... 6,816 (6,816)(S) -- -- --
--------- --------- --------- -------- --------- -------- --------
Total expenses........... 205,037 5,928 210,965 (167,483) 43,482 44,390 87,872
--------- --------- --------- -------- --------- -------- --------
Income before gain on
sale of properties..... $22,928 $(14,083) $8,845 $2,510 $11,355 $24,602 $35,957
========= ========= ========= ======== ========= ======== ========
Weighted average shares
outstanding............ 26,766 16,656 (V) 43,422 43,422 43,422
========= ========= ========= ========= ========
Basic and diluted
earnings per share:
Income before gain on
sale of properties..... $0.86 $0.20 $0.26 $0.83
========= ========= ========= ========
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SENIOR HOUSING PROPERTIES TRUST
CONDENSED CONSOLIDATED BALANCE SHEET ADJUSTMENTS
(DOLLARS IN THOUSANDS)
A. Represents the net proceeds from our issuance of common shares in October 2001, a portion of which was used to reduce our revolving credit facility to zero and our issuance of $200 million of 8 5/8% senior unsecured notes due 2012:
Net proceeds from issuance of senior unsecured notes (see Note B)...... $194,076
Net proceeds from issuance of common shares (see Note C)............... 171,635
Total net proceeds applied to credit facility.......................... (31,000)
--------------
Net cash available..................................................... $334,711
==============
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B. Represents our issuance of $200 million of 8 5/8% senior unsecured notes due 2012. The underwriters' commission and other issuance costs constitute other assets to be amortized over the term of the notes:
Gross proceeds.......................................... $200,000
Less: discount.......................................... (1,674)
-------------
Adjusted gross proceeds................................. 198,326
Underwriters' commission and other issuance costs....... (4,250)
-------------
Net proceeds............................................ $194,076
=============
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C. Represents our issuance of common shares in October 2001. A portion of the net proceeds was used to reduce our revolving credit facility to zero (see Note A). The remaining net proceeds are held as cash and cash equivalents:
Total common shares issued............................. 14,047,000
Price per common share................................. x $12.90
--------------
Gross proceeds......................................... $181,206
Underwriters' discount and other issuance costs........ (9,571)
--------------
Net proceeds from issuance of common shares............ $171,635
==============
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D. Represents the real estate and related personal property owned by Five Star at the time of the spin-off.
E. Represents cash which will be contributed by us to Five Star as part of its capitalization immediately prior to the spin-off, as follows:
Net equity to be contributed................................ $50,000
Real estate and related personal property (See Note D)...... (3,040)
Accounts receivable (See Note F)............................ (34,511)
Prepaid expenses (See Note G)............................... (4,548)
Accounts payable and accrued expenses (See Note H).......... 16,113
Other liabilities (See Note I).............................. 4,272
------------
Net cash and cash equivalents............................... $28,286
============
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F. Represents patient accounts receivable arising from 56 nursing home operations which will belong to Five Star at the time of the spin-off.
G. Represents primarily prepaid expenses associated with 56 nursing home operations which will belong to Five Star at the time of the spin-off.
H. Represents accounts payable and accrued expenses associated with 56 nursing home operations which will belong to Five Star at the time of the spin-off.
I. Represents other liabilities associated with the 56 nursing home operations which will be liabilities of Five Star at the time of the spin-off.
J. Represents the net equity (assets in excess of liabilities, see Notes D through I) which will be contributed by us to Five Star at the time of the spin-off.
K. The purchase of properties from Crestline will be reported using the purchase method of accounting. Estimated closing costs and contractual adjustments are estimated at $2,733, net. When these properties are leased to Five Star, Five Star will assume the operating accounts receivable and operating accounts payable and accrued operating expenses and we will make a payment to Five Star of the amount of these operating liabilities in excess of these operating assets, estimated to be $3,573. Accordingly, using the data as of the end of Crestline's 2001 third fiscal quarter (September 7, 2001), amounts allocated to fixed assets are as follows:
Contract purchase price.......................................... $600,000
Estimated closing costs and adjustments, net..................... 2,733
Estimated payment to Five Star at lease commencement............. 3,573
------------
Subtotal...................................................... 606,306
Monetary assets assumed from Crestline (see Note L).............. (7,769)
Monetary liabilities assumed from Crestline other than
funded debt (see Note N) ........................................ 1,549
------------
Total fixed assets............................................... $600,086
============
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L. Represents estimated cash used to complete the purchase from Crestline, as follows:
Adjusted contract price, closing costs and payments to Five Star (See Note K).... $606,306
Assumed Crestline debt, including capital leases (See Note N).................... (233,386)
Borrowings under our revolving bank credit facility (See Note N)................. (51,000)
Deposit applied (See Note M)..................................................... (7,500)
-----------
Net cash used.................................................................... $314,420
===========
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M. Amounts allocated to other assets represent cash deposits in restricted accounts for use: (1) servicing future interest payments on assumed mortgage debt; (2) real estate tax escrows; and (3) cash escrow accounts for capital expenditures at the facilities. The assets received in the Crestline transaction are offset by a deposit currently in escrow that will be applied to the purchase price when the Crestline transaction is closed:
Assets received......................... $7,769
Deposit to be applied............... (7,500)
--------------
Net adjustment to other assets....... $269
==============
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N. To finance the acquisition from Crestline, we expect to assume certain existing Crestline debts and to draw $51,000 under our revolving bank credit facility, as follows:
Assumed Crestline debt, including capital leases... $233,386 Borrowings under our revolving credit facility..... 51,000 |
O. Other liabilities primarily represent accrued interest related to the assumed Crestline debt.
CONDENSED CONSOLIDATED STATEMENT OF INCOME ADJUSTMENTS
(DOLLARS IN THOUSANDS)
P. Represents elimination of rental income, depreciation expense and general and administrative expense related to four facilities we sold in October 2000.
Q. Represents elimination of rental and interest income, depreciation expense and general and administrative expense related to the period prior to transfer to a former tenant of five facilities and transfer to a former borrower of one mortgage as part of foreclosure settlements, net of impact from one facility transferred to us as part of a foreclosure settlement and leased to a new tenant.
R. Represents annualized dividend income on common shares of HRPT Properties Trust conveyed to us as part of a foreclosure settlement.
S. Represents the elimination of the gain on foreclosure and lease terminations and the related general and administrative expenses because they are not expected to recur.
T. Common equity issuances during the pro forma periods produced net proceeds sufficient to repay our outstanding revolving credit facility balance in full on a pro forma basis. This adjustment represents the elimination of historical interest expense on our revolving credit facility and an adjustment for interest on the $9.1 million of mortgages payable, which we obtained in July 2001, and on the 8 5/8% senior unsecured notes due 2012 expected to be issued in December 2001, as follows:
Nine Months Twelve
Year Ended Ended Months Ended
December 31, September 30, September 30,
2000 2001 2001
---- ---- ----
Elimination of interest expense on
revolving bank credit facility........ $(15,366) $(4,792) $(7,563)
Adjustment for interest on
mortgages payable..................... 857 419 640
Adjustment for interest on the 8 5/8%
senior unsecured notes................ 17,842 13,382 17,842
-------------- --------------- -------------
$3,333 $9,009 $10,919
============== =============== =============
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The mortgages require interest to be paid based on prime less a discount. The interest expense adjustment was calculated as follows:
YEAR ENDED DECEMBER 31, 2000 Unsecured
Mortgages Senior Notes
--------- -------------
Debt balance.................................... $9,100 $200,000
Average rate for period......................... x 8.2% x 8.625%
------------- -------------
Interest expense................................ $ 746 $ 17,250
Plus amortization of deferred financing fees.... 111 592
------------- -------------
Total adjustment................................ $ 857 $ 17,842
============= =============
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Unsecured
Senior
NINE MONTHS ENDED SEPTEMBER 30, 2001 Mortgages Notes
--------- ---------
Debt balance................................. $9,100 $200,000
Average rate for period...................... x 6.5% x 8.625%
------------- ------------
Interest expense............................. $ 444 $ 12,938
Plus amortization of deferred financing fees. 83 444
------------- ------------
Total expense................................. 527 13,382
Less amount included in historical results ... (108) --
------------- ------------
Net adjustment................................ $ 419 $ 13,382
============= ============
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Unsecured
Senior
TWELVE MONTHS ENDED SEPTEMBER 30, 2001 Mortgages Notes
--------- ---------
Debt balance................................. $9,100 $200,000
Average rate for period...................... x 7% x 8.625%
------------- ------------
Interest expense............................. $ 637 $ 17,250
Plus amortization of deferred financing fees. 111 592
------------- ------------
Total expense................................. 748 17,842
Less amount included in historical results ... (108) --
------------- ------------
Net adjustment................................ $ 640 $ 17,842
============= ============
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U. During June and July 2001, we issued trust preferred securities. This adjustment represents distributions on trust preferred securities as follows:
Year Ended Nine Months Ended Twelve Months Ended
December 31, 2000 September 30, 2001 September 30, 2001
------------------- ------------------- -------------------
Gross amount of trust preferred securities...... $27,394 $27,394 $27,394
Distribution rate (10.125% per annum)........... x 10.125% x 7.59375% x 10.125%
---------------- ------------- --------------
Total pro forma distributions for the period.... $ 2,774 $ 2,080 $ 2,774
Add: amortization of related deferred issuance
costs........................................... 37 28 37
---------------- ------------- --------------
Distributions for period........................ 2,811 2,108 2,811
Less: amount included in historical results..... -- (749) (749)
---------------- ------------- --------------
Net adjustment.................................. $ 2,811 $ 1,359 $ 2,062
================ ============= ==============
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V. Represents the impact of the common equity issuance described in Note C and our July 2001 common equity issuance of 3,445,000 shares on our weighted average common shares outstanding during the periods shown.
W. Represents minimum rent expected to be paid by Five Star for our 56 nursing home properties, net of rent received from former tenants prior to foreclosure. Additional rent equal to 3% of Five Star's revenues at these properties in excess of 2003 revenues is due us beginning in 2004.
Year Ended Nine Months Ended Twelve Months Ended
December 31, 2000 September 30, 2001 September 30, 2001
------------------- ------------------ --------------------
Minimum rent for 56 facilities currently
owned by us to be leased to Five Star.......... $ 7,000 $5,250 $7,000
Less rent received from former tenants
prior to foreclosure........................... (8,227) -- --
---------- -------- ------
Net adjustment................................... $(1,227) $5,250 $7,000
========== ======== ======
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X. Represents elimination, for any period subsequent to December 31, 2000, of facilities' operating revenues and expenses, and for any period prior to December 31, 2000, of other real estate income. These amounts were derived from the operations of facilities that were conducted for our own account. The facilities will be leased by Five Star subsequent to the spin-off and no longer operated for our account.
Y. Represents elimination of interest income received from a former mortgagee prior to foreclosure.
Z. Represents the elimination of historical depreciation expense related to the properties to be transferred to Five Star (see Note D).
AA. Represents minimum rent expected to be paid by Five Star for the 31 properties which we expect to acquire in the pending acquisition. Additional rent equal to 5% of revenues at these properties in excess of 2002 revenues is due beginning in 2003.
BB. In addition to the minimum rent and additional rent described in Note W and Note AA, our lease with Five Star and the Marriott management agreements for the 31 properties to be acquired from Crestline will require Five Star to deposit a percentage of gross revenues from these properties into an FF&E reserve for capital expenditures at the 31 properties which we expect to acquire in the pending Crestline transaction. The FF&E reserve accounts and improvements and other items purchased with those funds will belong to us. Accordingly, the periodic deposits will be reported as additional rental income to us under GAAP.
CC. To complete the purchase from Crestline, we will assume debts as described in Note N above. These debts bear interest at various rates, including some at floating rates based on LIBOR. The applicable interest rates during the pro forma periods, assuming LIBOR equals its monthly average during the periods presented, were as follows:
Nine Months Twelve Months
Year Ended Ended Ended
December 31, September 30, September 30,
2000 2001 2001
---- ---- ----
Assumed term debt including capitalized
leases, fixed rates.......................... 9.4% 9.4% 9.4%
Assumed term debt, floating rates................ 9.2% 7.1% 7.7%
Revolving bank credit facility, floating rate.... 8.4% 6.3% 6.9%
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Some of the debt we will assume in the Crestline transaction requires both interest and principal payments. The weighted average outstanding balance for the obligations described above are as follows:
Nine Months Twelve Months
Year Ended Ended Ended
December 31, September 30, September 30,
2000 2001 2001
---- ---- ----
Assumed term debt including capitalized
leases, fixed rates....................... $142,370 $141,016 $141,016
Assumed term debt, floating rates............. 92,370 92,370 92,370
Revolving bank credit facility, floating
rate.......................................... 49,646 51,000 51,000
---------------- -------------- --------------
Total......................................... $284,386 $284,386 $284,386
================ ============== ==============
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On a pro forma basis, the combination of the average interest rates and the average debt balances set forth above produce interest expense as follows:
Nine Months Twelve Months
Ended Ended
Year Ended September 30, September 30,
December 31, 2000 2001 2001
----------------- ---- ----
Assumed term debt including capitalized
leases, fixed rates....................... $13,383 $9,942 $13,256
Assumed term debt, floating rates............ 8,498 4,919 7,112
Revolving bank credit facility, floating
rate......................................... 4,170 2,410 3,519
------------------- -------------- ---------
Total........................................ $26,051 $17,271 $23,887
=================== ============== =========
|
As outlined above, a portion of the debt we expect to incur as part of the acquisition of properties from Crestline will be at floating rates. A 1/8 percentage point increase in interest rates would produce pro forma interest expense which is $178 higher per annum.
DD. Represents the impact of the purchase of the 31 properties from Crestline on depreciation expense and general and administrative expense.
Exhibit 1.1
SENIOR HOUSING PROPERTIES TRUST
$200,000,000 Aggregate Principal Amount
8 5/8% Senior Notes Due 2012
UNDERWRITING AGREEMENT
December 13, 2001
UNDERWRITING AGREEMENT
December 13, 2001
UBS Warburg LLC
Dresdner Kleinwort Wasserstein
-- Grantchester, Inc.
First Union Securities, Inc.
BMO Nesbitt Burns Corp.
CIBC World Markets Corp.
PNC Capital Markets, Inc.
SG Cowen Securities Corporation
c/o UBS Warburg LLC
299 Park Avenue
New York, New York 10171-0026
Ladies and Gentlemen:
Senior Housing Properties Trust, a real estate investment trust organized under the laws of the State of Maryland (the "COMPANY"), proposes to issue and sell to the underwriters named in SCHEDULE A annexed hereto (the "UNDERWRITERS") $200,000,000 in aggregate principal amount of its 8 5/8% Senior Notes Due 2012 (the "NOTES"). The Notes are to be issued pursuant to an indenture to be dated as of December 20, 2001, between the Company and State Street Bank and Trust Company, as trustee (the "TRUSTEE"), as supplemented by a first supplemental indenture thereto to be dated as of December 20, 2001 (the "Indenture"). Copies of the Indenture, in substantially final form, have been delivered to each of the Underwriters.
The Company has prepared and filed with the Securities and Exchange Commission (the "COMMISSION") in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "ACT"), a registration statement (file number 333-60392) on Form S-3 under the Act (the "REGISTRATION STATEMENT"), including a prospectus relating to, among other things, common shares of beneficial interest, preferred shares of beneficial interest, depository shares, guarantees, debt securities and warrants for such securities of the Company, and such amendments to such registration statement as may have been required prior to the date hereof have been similarly prepared and have been filed with the Commission. Such registration statement, as so amended, and any post-effective amendments thereto, have been declared by the Commission to be effective under the Act. Such registration statement, as amended at the date of this Agreement, meets the requirements set forth in Rule 415(a)(1)(x) under the Act and complies in all other material respects with said Rule. The Company will next file with the Commission pursuant to Rule 424(b) under the Act a final prospectus supplement to the basic prospectus included in such
registration statement, as so amended, describing the Notes and the offering thereof, in such form as has been provided to or discussed with, and approved, by the Underwriters.
The term "REGISTRATION STATEMENT" as used in this Agreement means the registration statement, as amended at the time it became effective, as supplemented or amended prior to the execution of this Agreement, including (i) all financial schedules and exhibits thereto and (ii) all documents incorporated by reference or deemed to be incorporated by reference therein. If it is contemplated, at the time this Agreement is executed, that a post-effective amendment to the registration statement will be filed and must be declared effective before the offering of the Notes may commence, the term "Registration Statement" as used in this Agreement means the registration statement as amended by said post-effective amendment. If an abbreviated registration statement is prepared and filed with the Commission in accordance with Rule 462(b) under the Act (an "ABBREVIATED REGISTRATION STATEMENT"), the term "Registration Statement" includes the Abbreviated Registration Statement. The term "BASIC PROSPECTUS" as used in this Agreement means the base prospectus dated May 21, 2001, as filed with the Commission pursuant to Rule 424(b) included in the Registration Statement. The term "PREPRICING PROSPECTUS" as used in this Agreement means the preliminary form of the Prospectus Supplement (as defined herein) subject to completion, dated December 6, 2001, used in connection with the offering of the Notes. The term "PROSPECTUS SUPPLEMENT" as used in this Agreement means any final prospectus supplement specifically relating to the Notes, in the form filed with, or transmitted for filing to, the Commission pursuant to Rule 424 under the Act. The term "PROSPECTUS" as used in this Agreement means the Basic Prospectus together with the Prospectus Supplement, except that if such Basic Prospectus is amended or supplemented on or prior to the date on which the Prospectus Supplement was first filed pursuant to Rule 424, the term "PROSPECTUS" shall refer to the Basic Prospectus as so amended or supplemented and as supplemented by the Prospectus Supplement. Any reference in this Agreement to the registration statement, the Registration Statement, the Basic Prospectus, any Prepricing Prospectus, any Prospectus Supplement or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of the registration statement, the Registration Statement, the Basic Prospectus, such Prepricing Prospectus, such Prospectus Supplement or the Prospectus, as the case may be, and any reference to any amendment or supplement to the registration statement, the Registration Statement, the Basic Prospectus, any Prepricing Prospectus, any Prospectus Supplement or the Prospectus shall be deemed to refer to and include any documents filed after such date under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), which, upon filing, are incorporated by reference therein, as required by paragraph (b) of Item 12 of Form S-3. As used herein, the term "INCORPORATED DOCUMENTS" means the documents which are incorporated by reference in the registration statement, the Registration Statement, the Basic Prospectus, any Prepricing Prospectus, any Prospectus Supplement, the Prospectus, or any amendment or supplement thereto.
The Company and the Underwriters agree as follows:
1. SALE AND PURCHASE. On the basis of the representations and warranties herein and subject to the terms and conditions herein set forth, the Company agrees to issue and sell to each Underwriter and, upon the basis of the representations, warranties and agreements of the Company herein contained and subject to all the terms and conditions set forth herein, each
Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of 97.163% of the principal amount thereof (the "PURCHASE PRICE"), the principal amount of Notes set forth opposite the name of such Underwriter in SCHEDULE A annexed hereto (or such principal amount of Notes increased as set forth in Section 8 hereof).
The Company is advised by you that the Underwriters intend (i) to make a public offering of the Notes as soon after the date hereof as in your judgment is advisable and (ii) initially to offer the Notes upon the terms set forth in the Prospectus.
2. PAYMENT AND DELIVERY. Payment of the purchase price for the Notes shall be made to the Company by Federal Funds wire transfer, against delivery of the Notes to you through the facilities of the Depository Trust Company ("DTC") for the respective accounts of the Underwriters. Such payment and delivery shall be made at 10:00 A.M., New York City time, on December 20, 2001 (unless another time shall be agreed to by you or unless postponed in accordance with the provisions of Section 8 hereof). The time at which such payment and delivery are actually made is hereinafter sometimes called the "TIME OF PURCHASE."
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to each of the Underwriters that:
(a) No order preventing or suspending the use of the Basic Prospectus, any Prepricing Prospectus, the Prospectus Supplement or the Prospectus is in effect and no proceedings for such purpose are pending or, to the knowledge of the Company, threatened by the Commission or the securities authority of any state or other jurisdiction. The Registration Statement has become effective under the Act; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or, to the knowledge of the Company, threatened by the Commission or the securities authority of any state or other jurisdiction.
(b) (i) The Company is eligible to use Form S-3 and the offering of the Notes complies with the requirements of Rule 415, (ii) each part of the Registration Statement, when such part became effective, and also any Abbreviated Registration Statement when it shall become effective, complied in all material respects with applicable requirements of the Act, the Exchange Act and the Trust Indenture Act of 1939 (the "1939 ACT"), (iii) each part of the Registration Statement, when such part became effective, did not contain and each such part, as may be amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (iv) the Registration Statement, any Abbreviated Registration Statement, the Basic Prospectus, any Prepricing Prospectus, the Prospectus Supplement and the Prospectus comply and, as may be amended or supplemented, if applicable, will comply in all material respects with the Act, the Exchange Act and the 1939 Act and (v) the Prospectus does not contain and, as may be amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph (b) do not apply to (x) statements or omissions in the Registration Statement, the Basic Prospectus, any
Prepricing Prospectus, the Prospectus Supplement or the Prospectus based upon information relating to any Underwriter furnished to the Company by such Underwriter through you expressly for use therein or (y) the Trustee's Statement of Eligibility and Qualification on Form T-1 (the "FORM T-1") under the 1939 Act.
(c) The Incorporated Documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act, and none of such documents, when they were filed with the Commission, contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein not misleading; and any further documents so filed and incorporated by reference in the Registration Statement and/or the Prospectus, when such documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act, as applicable, and will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading.
(d) The Indenture has been duly and validly authorized by the Company and, upon its execution and delivery by the Company and assuming due execution and delivery by the Trustee, will be a valid and binding agreement of the Company, enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other similar laws affecting creditors' rights generally or general equitable principles; and the Indenture has been duly qualified under the 1939 Act and conforms in all material respects to the description thereof in the Registration Statement and the Prospectus.
(e) The Notes have been duly and validly authorized by the Company and, when executed by the Company and authenticated by the Trustee in accordance with the Indenture and delivered to the Underwriters against payment therefor in accordance with the terms hereof, will have been validly issued and delivered, and will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture and enforceable in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally or by general equitable principles, and the Notes will conform in all material respects to the description thereof in the Prospectus.
(f) As of the date of this Agreement, the Company has and will have an authorized capitalization as set forth in the Prospectus; all of the issued and outstanding Common Shares of the Company have been duly and validly authorized and issued and are fully paid and non-assessable, have been issued in compliance with all federal and state securities laws and were not issued in violation of any preemptive or similar right.
(g) The Company has been duly formed and is existing as a real estate investment trust in good standing under the laws of the State of Maryland, with trust power to own, lease and operate its properties and conduct its business as described in the Registration Statement.
(h) The Company is duly qualified and is in good standing in each jurisdiction in which the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to so qualify in any such jurisdiction would not individually or in the aggregate have a material adverse effect on the business, prospects, properties, condition (financial or otherwise) or results of operations of the Company and the Subsidiaries (as defined herein), taken as a whole (a "MATERIAL ADVERSE EFFECT").
(i) The Company has no subsidiaries (as defined in the Act) other than those identified in SCHEDULE B hereto (collectively, the "SUBSIDIARIES"). Other than the Subsidiaries, the Company does not own, directly or indirectly, any shares of stock or any other equity or long-term debt of any other corporation or have any direct or indirect equity interest or ownership of long-term debt in any firm, partnership, joint venture, limited liability company, association or other entity except for the Company's ownership of 1,000,000 common shares of HRPT Properties Trust and 100 common shares of Marriott International, Inc. The Subsidiaries identified in SCHEDULE C hereto have no material assets, liabilities, operations or properties. Each Subsidiary has been duly incorporated or formed and is validly existing as a corporation or other entity, as the case may be, in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite corporate, trust, partnership or other power to acquire and own, lease and operate its properties and to conduct its business, as described in the Registration Statement and the Prospectus; and each Subsidiary is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of the property requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect.
(j) This Agreement has been duly authorized, executed and delivered by the Company.
(k) Neither the Company nor any of the Subsidiaries is in breach or violation of, or in default under (and no event has occurred which with notice, lapse of time, or both would result in any breach or violation of, or constitute a default under), its Declaration of Trust, charter or by-laws or other organizational documents or in the performance or observance of any obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any Subsidiary is subject or by which any of them or any of their properties is bound or affected, the effect of which would, individually or in the aggregate, have a Material Adverse Effect or decree, order or judgment applicable to the Company or any Subsidiary.
(l) Except as would not individually or in the aggregate have a Material Adverse Effect, the issuance by the Company of the Notes, the compliance by the Company with all of the provisions of this Agreement, the execution, delivery and performance by the Company of this Agreement, and the consummation of the transactions contemplated herein will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or
any Subsidiary is a party or by which the Company or any Subsidiary is bound or to which any of the property or assets of the Company or any Subsidiary is subject. In addition, such action will not result in any violation of the provisions of the Declaration of Trust or the bylaws of the Company or
any Subsidiary or any of the Company's or any Subsidiary's other organizational documents or applicable laws or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its or its Subsidiaries' properties.
(m) No approval, authorization, consent or order of or filing with any federal, state or local or foreign governmental or regulatory commission, board, body, authority or agency is required in connection with the issuance and sale of the Notes or the consummation by the Company of the transaction as contemplated hereby other than registration of the Notes under the Act, the qualification of the Indenture under the 1939 Act and any necessary qualification under the securities or blue sky laws of the various jurisdictions in which the Notes are being offered by the Underwriters.
(n) Except as set forth in the Registration Statement and the Prospectus: (i) no person has the right, contractual or otherwise, to cause the Company to issue to it, or register pursuant to the Act, the Notes. No person has the right, contractual or otherwise, to cause the Company to register under the Act any securities of the Company as a result of the filing or effectiveness of the Registration Statement or the sale of Notes contemplated thereby, except for such rights as have been complied with or waived.
(o) Ernst & Young LLP, whose report on the consolidated financial statements of the Company and the Subsidiaries was filed with the Commission as part of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and is incorporated by reference in the Registration Statement and Prospectus, are independent public accountants as required by the Act.
(p) KPMG LLP, whose report on the financial statements with respect to 42 nursing home facilities was filed with the Commission as part of the Company's Current Report on Form 8-K/A and is incorporated by reference in the Registration Statement and Prospectus, are independent public accountants as required by the Act.
(q) Arthur Andersen LLP, whose report on the financial statements with respect to 31 facilities ("CRESTLINE FACILITIES") to be acquired by the Company pursuant to a Stock Purchase Agreement, dated August 9, 2001, among the Company, SNH/CSL Properties Trust, Crestline Capital Corporation and CSL Group, Inc. was filed with the Commission as part of the Company's Current Report on Form 8-K, dated September 21, 2001 (the "SEPTEMBER 21, 2001 8-K"), and is incorporated by reference in the Registration Statement and Prospectus, are independent public accountants as required by the Act.
(r) All legal or governmental proceedings, contracts, leases or documents of a character required to be described in the Registration Statement or the Prospectus or any Incorporated Document, and all documents required to be filed as an exhibit to the
Registration Statement or any Incorporated Document, have been so described or filed or will be filed prior to the time of purchase as required.
(s) Except as otherwise set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of the Subsidiaries is a party or of which any of the Company's or any of the Subsidiaries' properties or assets is the subject, the result of which would, individually or in the aggregate, have a Material Adverse Effect, and, to the Company's knowledge, no such proceedings are threatened or contemplated, except as disclosed in the Prospectus, the result of which would, individually or in the aggregate, have a Material Adverse Effect. To the Company's knowledge, there are no legal or governmental proceedings pending to which any lessee, sublessee or operator of any property of the Company or any Subsidiary or portion thereof is a party, the result of which would, individually or in the aggregate, have a Material Adverse Effect, and no such proceedings are being threatened or contemplated, except as disclosed in the Prospectus and the result of which would, individually or in the aggregate, have a Material Adverse Effect. Neither the Company nor any of the Subsidiaries has received from any governmental authority notice of any violation of any local, state or federal law, rule or regulation including without limitation any such law, rule or regulation applicable to the health care industry ("HEALTH CARE LAWS") or relating to human health or safety or the environment or any hazardous or toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), except as disclosed in the Prospectus, the result of which would, individually or in the aggregate, have a Material Adverse Effect, and to the Company's knowledge, there is no such violation, or any occurrence or circumstance that would give rise to a claim under or pursuant to any local, state or federal law, rule or regulation (including without limitation any Health Care Laws or Environmental Laws), which would, individually or in the aggregate, have a Material Adverse Effect. To the Company's knowledge, there is no violation of any local, state or federal law, rule or regulation (including without limitation Health Care Laws and Environmental Laws) by any person from whom the Company or any of the Subsidiaries acquired any of its properties (a "SELLER"), or any lessee, sublessee or operator of any of their respective properties or any part thereof, the result of which would, individually or in the aggregate, have a Material Adverse Effect, and to the Company's knowledge, there is no such violation, or any occurrence or circumstance that would give rise to a claim under or pursuant to any local, state or federal law, rule or regulation (including without limitation any Health Care Laws or Environmental Laws), which would, individually or in the aggregate, have a Material Adverse Effect, except as disclosed in the Prospectus. Neither the Company nor any of the Subsidiaries has received from any governmental authority any written notice of any condemnation of or zoning change affecting the properties or any part thereof of the Company or any of the Subsidiaries that individually or in the aggregate would have a Material Adverse Effect and the Company does not know of any such condemnation or zoning change which is threatened and which if consummated individually or in the aggregate would have a Material Adverse Effect. Nothing has come to the Company's attention that any seller, lessee, sublessee or operator of any property of the Company or any of the Subsidiaries, or portion thereof has, received from any governmental authority any written notice of any condemnation of or zoning change affecting the Properties or any part thereof of the
Company or any of the Subsidiaries that individually or in the aggregate would have a Material Adverse Effect.
(t) Each of the Company and the Subsidiaries have good and marketable title in fee simple or ground leases to the properties disclosed in the Prospectus as being owned by them (the "PROPERTIES"), free and clear of all liens, encumbrances, claims, mortgages, deeds of trust, restrictions, security interests and defects ("PROPERTY ENCUMBRANCES"), except for: (x) the leasehold interests of lessees in the Company's and the Subsidiaries' properties held under lease (the "LEASES") and (y) any other Property Encumbrances that would not, individually or in the aggregate, have a Material Adverse Effect. All Property Encumbrances on or affecting the properties of the Company or any of the Subsidiaries which are required to be disclosed in the Prospectus are disclosed therein. Each of the Leases pertaining to the properties of the Company or any of the Subsidiaries has been duly authorized by the Company or one of the Subsidiaries, as applicable, and is a valid and binding agreement of the Company or one of the Subsidiaries, as applicable, and, to the Company's knowledge, each other party thereto, enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. To the Company's knowledge, no lessee of any portion of any of the properties of the Company or any of the Subsidiaries is in default under its respective lease and there is no event which, but for the passage of time or the giving of notice or both, would constitute a default under any such lease, except such defaults that would not, individually or in the aggregate, have a Material Adverse Effect.
(u) The Company and each of the Subsidiaries and, to the Company's knowledge, each of the operators, lessees or sublessees of any property or portion thereof of the Company or any of the Subsidiaries have such permits, licenses, approvals, certificates, franchises and authorizations of governmental or regulatory authorities ("PERMITS"), including, without limitation, under any Health Care Laws or Environmental Laws, as are necessary in the case of each such party to acquire and own, lease or operate its properties and to conduct its business, all as described in the Prospectus, except where the failure to obtain such permits would not individually or in the aggregate have a Material Adverse Effect; except as described in the Prospectus, the Company and each of the Subsidiaries and, to the Company's knowledge, each of the lessees, sublessees or operators of any property or portion thereof of the Company or any of the Subsidiaries have fulfilled and performed all of their obligations with respect to such permits and, except as disclosed in the Prospectus, no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or result in any other impairment of the rights of the holder of any such permit, except where the failure to fulfill or perform, or the resulting termination or impairment, would not, individually or in the aggregate, have a Material Adverse Effect; and, except as described in the Prospectus, such permits contain no restrictions that are burdensome to the Company and the Subsidiaries, taken as a whole and that would, individually or in the aggregate, have a Material Adverse Effect.
(v) The financial statements, together with the related schedules and notes, forming a part of the Registration Statement and the Prospectus present fairly the consolidated financial position of the Company and the Subsidiaries as of the dates indicated and the consolidated results of operations and cash flows of the Company and the Subsidiaries for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis during the periods involved. The pro forma financial statements and other pro forma financial data included or incorporated by reference in the Registration Statement and the Prospectus comply as to form in all material respects with the applicable accounting requirements of Regulation S-X of the Act, and the pro forma adjustments have been properly applied to the historical amounts in the compilation of those statements. The other financial and statistical data set forth in the Registration Statement and the Prospectus are accurately presented and prepared on a basis consistent with such financial statements and books and records of the Company. There are no financial statements (historical or pro forma) that are required to be included in the Registration Statement and the Prospectus that are not included as required.
(w) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been (i) any
material adverse change, or any prospective material adverse change, in the
business, properties, condition (financial or otherwise) or results of
operations of the Company and the Subsidiaries taken as a whole, (ii) any
transaction which is material to the Company or the Subsidiaries, (iii) any
obligation, direct or contingent, which is material to the Company and the
Subsidiaries taken as a whole, incurred by the Company or the Subsidiaries,
(iv) any material change in the outstanding shares of beneficial interest or
material increase in the outstanding indebtedness of the Company or the
Subsidiaries, (v) any dividend or distribution of any kind declared, paid or
made on the shares of beneficial interest of the Company other than (A)
regular quarterly dividends, declared, paid or made or a dividend
distribution of any kind on any class of its shares of beneficial interest
(other than dividends or distributions from wholly-owned subsidiaries of the
Company) and (B) the issuance of common shares of beneficial interest to the
trustees and officers pursuant to the Company's Incentive Share Award Plan,
or (vi) to the Company's knowledge, any material adverse change, or any
prospective material adverse change, in the business, properties, condition
(financial or otherwise) or results of operations of the business of the
Crestline Facilities, as described in the Company's September 21, 2001
Current Report on Form 8-K, taken as a whole. None of the Company nor the
Subsidiaries has any material contingent obligation which is not disclosed
in the Registration Statement.
(x) Each of the Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amount as are customary in the business in which they are engaged, except as described in the Prospectus. Except as would not, individually or in the aggregate, have a Material Adverse Effect, all policies of insurance insuring the Company and the Subsidiaries or any of their businesses, assets, employees, officers, directors and trustees are in full force and effect, and the Company and the Subsidiaries are in compliance with the terms of such policies in all material respects. Except as would not, individually or in the aggregate, have a Material Adverse Effect, there are no claims by the Company or any of
the Subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause.
(y) Except as disclosed in the Registration Statement, neither the Company nor any of the Subsidiaries has either sent or received any communication regarding termination of, or intent not to renew, any of the contracts or agreements referred to or described in, or filed as an exhibit to, the Registration Statement or any Incorporated Document, and no such termination or non-renewal has been threatened by the Company or any of the Subsidiaries or any other party to any such contract or agreement.
(z) Neither the Company nor any of the Subsidiaries or any of their respective affiliates has taken, directly or indirectly, any action designed to or which has constituted or which might reasonably be expected to cause or result, under the Exchange Act or otherwise, in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Notes.
(aa) The Company and the Subsidiaries have not sustained since the date of the latest audited financial statements included in the Prospectus any loss or interference with their businesses from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as disclosed in the Prospectus or other than any loss or interference, which would individually or in the aggregate not have a Material Adverse Effect.
(bb) The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(cc) The Company and the Subsidiaries have filed all federal, state, local and foreign tax returns and tax forms required to be filed. Such returns and forms are complete and correct in all material respects, and all taxes shown by such returns or otherwise assessed that are due or payable have been paid, except such taxes as are being contested in good faith and as to which adequate reserves have been provided. All payroll withholdings required to be made by the Company and the Subsidiaries with respect to employees have been made except where the failure to fulfill or perform, would not, individually or in the aggregate, have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and the Subsidiaries in respect of any tax liability for any year not finally determined are adequate to meet any assessments or reassessments for additional taxes. There have been no tax deficiencies asserted and, to the Company's knowledge, no tax deficiency might be reasonably asserted or threatened against the Company and/or the Subsidiaries that would individually or in the aggregate have a Material Adverse Effect.
(dd) The Company meets the requirements for qualification and taxation as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "CODE").
(ee) The Company is not and, after giving effect to the offering and sale of the Notes, will not be an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended (the "INVESTMENT COMPANY ACT").
4. CERTAIN COVENANTS. The Company hereby agrees:
(a) to furnish such information as may be required and otherwise to cooperate in qualifying the Notes for offering and sale under the securities or blue sky laws of such states as you may designate and to maintain such qualifications in effect so long as required for the distribution of the Notes; PROVIDED that the Company shall not be required to qualify as a foreign corporation or to consent to the service of process under the laws of any such state (except service of process with respect to the offering and sale of the Notes); and to promptly advise you of the receipt by the Company of any notification with respect to the suspension of the qualification of the Notes for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose;
(b) to make available to the Underwriters in New York City as many copies of the Prospectus (or of the Prospectus as amended or supplemented if the Company shall have made any amendments or supplements thereto) as the Underwriters may reasonably request for the purposes contemplated by the Act; in case any Underwriter is required to deliver a prospectus beyond the nine-month period referred to in Section 10(a)(3) of the Act in connection with the sale of the Notes, the Company will prepare promptly upon request, but at its expense, such amendment or amendments to the Registration Statement and such prospectuses as may be necessary to permit compliance with the requirements of Section 10(a)(3) of the Act;
(c) to advise you promptly, confirming such advice in writing, of any request by the Commission for amendments or supplements to the Registration Statement or Prospectus or for additional information with respect thereto, or of notice of institution of proceedings for, or the entry of a stop order suspending the effectiveness of the Registration Statement and, if the Commission should enter a stop order suspending the effectiveness of the Registration Statement, to make every reasonable effort to obtain the lifting or removal of such order as soon as possible; to advise you promptly of any proposal to amend or supplement the Registration Statement or Prospectus, including by filing any documents that would be incorporated therein by reference and to file no such amendment or supplement to which you shall object in writing;
(d) to file promptly all reports and any definitive proxy or information statement required to be filed by the Company with the Commission in order to comply with the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Notes, and to promptly notify you of such filing;
(e) if, at the time this Agreement is executed and delivered, it is necessary for the registration statement or a post-effective amendment thereto or any Abbreviated Registration Statement to be declared effective before the offering of the Notes may commence, the Company will endeavor to cause the registration statement or such post-effective amendment to become effective as soon as possible and will advise you promptly and, if requested by you, will confirm such advice in writing, when the registration statement or such post-effective amendment has become effective;
(f) to furnish to you and, upon request, to each of the other Underwriters for a period of three years from the date of this Agreement (i) copies of any reports or other communications which the Company shall send to its shareholders or shall from time to time publish or publicly disseminate, (ii) copies of all annual, quarterly and current reports filed with the Commission on Forms 10-K, 10-Q and 8-K, or such other similar form as may be designated by the Commission, (iii) copies of documents or reports filed with any national securities exchange on which any class of securities of the Company is listed, and (iv) such other information as you may reasonably request regarding the Company or the Subsidiaries, in each case as soon as such communications, documents or information becomes available; PROVIDED, HOWEVER, that in no case shall the Company be required to furnish materials pursuant to this paragraph which are filed and publicly accessible via EDGAR;
(g) to advise the Underwriters promptly of the happening of any event known to the Company within the time during which a Prospectus relating to the Notes is required to be delivered under the Act which, in the judgment of the Company, would require the making of any change in the Prospectus then being used, or in the information incorporated therein by reference, so that the Prospectus would not include an untrue statement of material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading, and, during such time, to prepare and furnish, at the Company's expense, to the Underwriters promptly such amendments or supplements to such Prospectus as may be necessary to reflect any such change and to furnish you a copy of such proposed amendment or supplement before filing any such amendment or supplement with the Commission;
(h) to make generally available to its security holders, and to deliver to you, an earnings statement of the Company (which will satisfy the provisions of Section 11(a) of the Act) covering a period of twelve months beginning after the effective date of the Registration Statement (as defined in Rule 158(c) of the Act) as soon as is reasonably practicable after the termination of such twelve-month period;
(i) to furnish to its shareholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, shareholders' equity and of cash flow of the Company) for such fiscal year, accompanied by a copy of the certificate or report thereon of nationally recognized independent certified public accountants;
(j) to furnish to you one conformed copy of the Registration Statement, as initially filed with the Commission, and of all amendments thereto (including all exhibits thereto and documents incorporated by reference therein) and sufficient conformed copies of the foregoing (other than exhibits) for distribution of a copy to each of the other Underwriters;
(k) to furnish to you as early as practicable prior to the time of purchase but not later than two business days prior thereto, a copy of the latest available unaudited interim consolidated financial statements, if any, of the Company and the Subsidiaries which have been read by the Company's independent certified public accountants, as stated in their letter to be furnished pursuant to Section 6(d) hereof;
(l) to apply the net proceeds from the sale of the Notes in the manner set forth under the caption "Use of proceeds" in the Prospectus;
(m) to pay all expenses, fees and taxes in connection with (i) the preparation and filing of the Registration Statement, each Preliminary Prospectus, the Prospectus, and any amendments or supplements thereto, and the printing and furnishing of copies of each thereof to the Underwriters and to dealers (including costs of mailing and shipment), (ii) the issuance, sale and delivery of the Notes by the Company, (iii) the word processing and/or printing of this Agreement, any Agreement Among Underwriters, any dealer agreements and the Indenture and the reproduction and/or printing and furnishing of copies of each thereof to the Underwriters and to dealers (including costs of mailing and shipment), (iv) the qualification of the Notes for offering and sale under state laws and the determination of their eligibility for investment under state law as aforesaid (including the legal fees and filing fees and other disbursements of counsel to the Underwriters) and the printing and furnishing of copies of any blue sky surveys or legal investment surveys to the Underwriters and to dealers and (v) the filing for review of the public offering of the Notes by the NASDR (including the legal fees and filing fees and other disbursements of counsel to the Underwriters with respect thereto), (vi) any listing of the Notes on any securities exchange and any registration thereof under the Exchange Act, (vii) the fees and expenses of the Trustee and its counsel, (viii) the approval of the Notes by DTC for "book entry" transfer, (ix) the rating of the Notes by rating agencies and (x) the performance of the Company's other obligations under this Agreement;
(n) to furnish to you, before filing with the Commission subsequent to the effective date of the Registration Statement and during the period referred to in paragraph (a)(vii) above, a copy of any document proposed to be filed pursuant to Section 13, 14 or 15(d) of the Exchange Act; and
(o) to not, without the prior written consent of UBS Warburg LLC, offer, sell, contract to sell, pledge, or otherwise dispose of, (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the Company or any affiliate of the Company or any person in privity with the Company or any affiliate of the Company) directly or indirectly, including the filing (or participation in the filing) of a registration statement with the Commission in respect of,
or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, any debt securities issued or guaranteed by the Company (other than the Notes) or publicly announce an intention to effect any such transaction, during the period from the date hereof through and including December 31, 2001; and
(p) to use its best efforts to continue to qualify as a REIT under Sections 856 through 860 of the Code.
5. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the Notes are not
delivered for any reason other than the termination of this Agreement
pursuant to clause (ii), (iii) or (iv) of the second paragraph of Section 7
hereof or pursuant to the last paragraph of Section 8 hereof or the default
by one or more of the Underwriters in its or their respective obligations
hereunder, the Company shall, in addition to paying the amounts described in
Section 4 hereof, reimburse the Underwriters for all of their out-of-pocket
expenses, including the reasonable fees and disbursements of their counsel.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of the Underwriters hereunder are subject to the accuracy of the representations and warranties on the part of the Company on the date hereof and at the time of purchase the performance by the Company of its obligations hereunder and to the following additional conditions precedent:
(a) The Company shall furnish to you at the time of purchase an opinion of Sullivan & Worcester LLP, counsel for the Company, addressed to the Underwriters, and dated the time of purchase with reproduced copies for each of the other Underwriters and in form satisfactory to Dewey Ballantine LLP, counsel for the Underwriters, stating that:
(i) the Company has been duly formed, is existing as a real estate investment trust and is in good standing under the laws of the State of Maryland, with trust power to own, lease and operate its properties and conduct its business in all material respects as described in the Registration Statement and the Prospectus, to execute and deliver this Agreement and to issue, sell and deliver the Notes as herein contemplated;
(ii) the Company is duly qualified to transact business and is in good standing in each other jurisdiction in which it owns or leases properties, or conducts any business, so as to require such qualification, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;
(iii) each Subsidiary of the Company identified in SCHEDULE D attached hereto (each a "MATERIAL SUBSIDIARY") is a corporation or other legal entity duly formed, existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each Material Subsidiary has the corporate, trust, partnership or other power to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. All of the issued and outstanding shares of beneficial ownership of, or other ownership interests in, of each Material Subsidiary has been duly authorized and validly issued, is fully paid and except as to Material Subsidiaries that are partnerships, non-assessable, and except for SPTMRT Properties Trust, is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien or encumbrance;
(iv) this Agreement has been duly authorized, executed and delivered by the Company, and is a legal, valid and binding agreement of the Company, enforceable in accordance with its terms, except as enforcement of the same may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles and except as to those provisions relating to indemnities for liabilities arising under the Act as to which no opinion need be expressed;
(v) the Indenture has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery by the Trustee, is a legal, valid and binding agreement of the Company, enforceable in accordance with its terms, except as enforceability of the same may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance or other similar laws affecting creditors' rights generally and by general equitable principles. The Indenture has been duly qualified under the 1939 Act;
(vi) The Notes conform to the description thereof in the Prospectus. The Indenture conforms to the description thereof on the Prospectus;
(vii) the Notes are in a form contemplated by the Indenture, and have been duly authorized by all necessary corporate action and when the Notes have been duly authenticated by the Trustee as specified in the Indenture and delivered against payment therefor in accordance with the Agreement, the Notes will be valid and binding obligations of the Company enforceable in accordance with its terms (except as enforcement thereof may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance and other similar laws relating to or affecting creditors' rights generally and by general equitable principles), and entitled to the benefits of the Indenture;
(viii) the Company has authorized and outstanding shares of beneficial interest as set forth or incorporated by reference in the Registration Statement and the Prospectus; the outstanding shares of beneficial interest of the Company have been duly and validly authorized and issued and are fully
paid, nonassessable and free of any preemptive rights, resale rights, rights of first refusal and similar rights under any contract, agreement or instrument to which the Company is a party described in or filed as an exhibit to the Registration Statement or otherwise known to such counsel;
(ix) the Registration Statement and the Prospectus (except as to the financial statements and schedules and other financial and statistical data contained therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Act;
(x) the Registration Statement has become effective under the Act and, to such counsel's knowledge, no stop order proceedings with respect thereto are pending or threatened under the Act and any required filing of the Prospectus, and any supplement thereto, pursuant to Rule 424 under the Act, has been made in the manner and within the time period required by such Rule 424;
(xi) the issue and sale of the Notes and the compliance by the Company with the provisions of the Indenture and this Agreement by the Company and the transactions contemplated hereby and thereby do not and will not conflict with, or result in any breach of, or constitute a violation under (nor constitute any event which with notice, lapse of time, or both, would result in any breach of, or constitute a default under) (A) any provisions of the Declaration of Trust, charter, by-laws or other organizational documents of the Company or any of the Material Subsidiaries, (B) any provision of any material agreement or other instrument to which the Company or any of the Material Subsidiaries is a party or by which their respective properties may be bound or affected, that is described in the Prospectus or filed as an exhibit to the Registration Statement or any Incorporated Document or is otherwise known to such counsel or (C) any federal, state, local or foreign law, regulation or rule, or any decree, to which the Company or the Material Subsidiaries may be subject;
(xii) to such counsel's knowledge, there are no contracts, licenses, agreements, leases or documents of a character which are required to be filed as exhibits to the Registration Statement or to be described in the Prospectus which have not been so filed or described;
(xiii) to such counsel's knowledge, except as described in the Prospectus or as would not, individually or in the aggregate, have a Material Adverse Effect, there are no private or governmental actions, suits, claims, investigations or proceedings pending, threatened or contemplated to which the Company or any of the Subsidiaries or any of their officers is subject or of which any of their properties is subject, whether at law, in equity or before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency;
(xiv) to such counsel's knowledge, no person has the right, pursuant to the terms of any contract, agreement or other instrument described in or filed as an exhibit to the Registration Statement or any Incorporated Document, to cause the Company to register under the Act any debt securities of the Company as a result of the filing or effectiveness of the Registration Statement or the sale of the Notes as contemplated hereby, except for such rights as have been complied with or waived; and to the knowledge of such counsel, except as described in the Registration Statement and Prospectus, no person is entitled to registration rights with respect to securities of the Company;
(xv) the Company is not, and after the offering and sale of the Notes, will not be, an "investment company," or an entity controlled by an "investment company," as such terms are defined in the Investment Company Act; and
(xvi) to such counsel's knowledge the statements in (i) the Registration Statement and the Prospectus under the captions "Description of notes", "Our tenants and property operations", "Description of other indebtedness", "Description of debt securities" and "Material federal income tax consequences"; (ii) in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 under the captions "Business--Financing Policies" (with respect to the first paragraph only), "Business--Regulation and Reimbursement", "Business--Government Regulations and Rate Setting" and "Federal Income Tax Considerations"; and (iii) in the September 21, 2001 8-K under the captions "B. Crestline Transaction" and "C. Supplementary Federal Income Tax Considerations" in each case insofar as such statements purport to summarize matters arising under Maryland, Massachusetts or New York law or the federal law of the United States, or provisions of documents as to which the Company is a party specifically referred to therein, are accurate in all material respects.
In addition, such counsel shall state that, in the opinion of such counsel, and subject to the restrictions and limitations set forth in such counsel's tax opinion filed as an exhibit to the Registration Statement and reasonably acceptable to you, (a) the Company has qualified to be taxed as a REIT under the Code for each of its fiscal years and (b) the proposed method of operation described in the Prospectus and as represented to such counsel by the Company will enable the Company to continue to satisfy the requirements for such qualification for subsequent fiscal years under the Code. Such counsel may state that actual qualification as a REIT, however, will depend upon the Company's continued ability to meet, and its meeting, through actual annual operating results and distributions, the various qualifying tests under the Code.
Also, such counsel shall state that it has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants of the Company and representatives of the Underwriters at which the contents of the Registration Statement and Prospectus were discussed and, although such counsel is not passing upon and does not assume responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or Prospectus (except as and to the extent stated in subparagraphs (vi), (ix) and (xvi) above), on the basis of the foregoing nothing has come to the attention of such counsel that causes them to believe that the Registration Statement or any amendment thereto at the time such Registration Statement or amendment became effective contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus or any supplement thereto at the date of the Prospectus Supplement or such other supplement, and at all times up to and including the time of purchase contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and schedules and other financial and statistical data and exhibits included or incorporated by reference in the Registration Statement or Prospectus or as to the Form T-1).
In rendering their opinion as aforesaid, Sullivan & Worcester LLP may rely upon an opinion, dated as of the time of purchase, of Ballard Spahr Andrews & Ingersoll, LLP as to matters governed by Maryland law, provided that such reliance is expressly authorized by such opinion and a copy of such opinion is delivered to the Underwriters and is, in form and substance, satisfactory to the Underwriters and counsel for the Underwriters. In addition, in rendering such opinion, such counsel may state that their opinion as to laws of the State of Delaware is limited to the Delaware General Corporation Law and that their opinion with respect to the qualification of the Company and is Subsidiaries to do business in jurisdictions other than their respective jurisdiction of organization is based solely upon certificates to such effect issued by an appropriate official of the applicable jurisdictions.
(b) The Company shall furnish to you at the time of purchase an opinion of Ballard Spahr Andrews & Ingersoll, LLP, special Maryland counsel of the Company, addressed to the Underwriters, and dated the time of purchase with reproduced copies for each of the other Underwriters and in form satisfactory to Dewey Ballantine LLP, counsel for the Underwriters, stating that:
(i) the Company has been duly formed, is existing as a real estate investment trust and is in good standing under the laws of the State of Maryland, with trust power to own, lease and operate its properties and conduct its business in all material respects as described in the Registration Statement and the Prospectus, to execute and deliver this Agreement and to issue, sell and deliver the Notes as herein contemplated;
(ii) each Subsidiary of the Company identified in SCHEDULE E attached hereto (each a "MARYLAND SUBSIDIARY") is a corporation or other legal entity duly formed, existing and in good standing under the laws of its jurisdiction of organization. Each Maryland Subsidiary has the trust power to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. All of the issued and outstanding shares of beneficial interest of each Maryland Subsidiary have been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through
subsidiaries, and to such counsel's knowledge, except for SPTMRT Properties Trust, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity;
(iii) the execution, delivery and performance of this agreement by the Company and the transactions contemplated hereby and by the Registration Statement do not and will not conflict with, or result in any breach of, or constitute a default under (nor constitute any event which with notice, lapse of time, or both, would result in any breach of, or constitute a default under) (A) any provisions of the Declaration of Trust, charter or by-laws or other organizational documents of the Company or any of the Maryland Subsidiaries or (B) any local or state Maryland law or administrative regulation applicable to the Company and the Maryland Subsidiaries;
(iv) the Company has authorized and outstanding shares of beneficial interest as set forth or incorporated by reference in the Registration Statement and the Prospectus; the outstanding shares of beneficial interest of the Company have been duly and validly authorized and issued by all necessary trust action and are fully paid, nonassessable and free of any preemptive rights, resale rights, rights of first refusal and similar rights under the Maryland REIT Law;
(v) no approval, authorization, consent or order of or filing with any Maryland governmental or regulatory commission, board, body, authority or agency having jurisdiction over the Company is required in connection with the execution, delivery and performance of this Agreement, the issuance and sale of the Notes being delivered at the time of purchase or and the consummation of the transactions contemplated hereby and by the Prospectus (In rendering the opinion expressed in this paragraph (v), such counsel need express no opinion concerning the securities laws of the State of Maryland.);
(vi) to such counsel's knowledge the statements in
(i) the Registration Statement and the Prospectus under the
caption "Description of certain provisions of Maryland law and
of our declaration of trust and bylaws" and in each case
insofar as such statements purport to summarize matters
arising under Maryland law are accurate in all material
respects;
(vii) to such counsel's knowledge, neither the Company nor any of the Maryland Subsidiaries is in violation of its Declaration of Trust, charter or by-laws or other organizational documents or in violation of any local or state Maryland law or administrative regulation applicable to the Company and the Maryland Subsidiaries; and
(viii) except as described in the Registration Statement and the Prospectus, all of the outstanding shares of capital stock of each of the
Maryland Subsidiaries that is a REIT have been duly authorized and validly issued, are fully paid and non-assessable, are owned by the Company.
(c) You shall have received at the time of purchase an opinion of Dewey Ballantine LLP, counsel for the Underwriters, dated the time of purchase with respect to the issuance and sale of the Notes by the Company, the Registration Statement, the Prospectus and such other related matters as the Underwriters may require. In addition, Dewey Ballantine LLP may rely on the opinion of Ballard Spahr Andrews & Ingersoll, LLP as to all matters of Maryland law.
(d) You shall have received from Ernst & Young LLP, a letter dated, respectively, the date of this Agreement and the time of purchase and addressed to the Underwriters (with reproduced copies for each of the Underwriters) in the forms approved by Dewey Ballantine LLP, counsel for the Underwriters.
(e) You shall have received from KPMG LLP, a letter dated, respectively, the date of this Agreement and addressed to the Underwriters (with reproduced copies for each of the Underwriters) in the form approved by Dewey Ballantine LLP, counsel for the Underwriters.
(f) You shall have received from Arthur Andersen LLP, a letter dated, respectively, the date of this Agreement and the time of purchase and addressed to the Underwriters (with reproduced copies for each of the Underwriters) in the forms approved by Dewey Ballantine LLP, counsel for the Underwriters.
(g) No amendment or supplement to the Registration Statement or Prospectus, including documents deemed to be incorporated by reference therein, shall have been to which you have objected in writing.
(h) Prior to the time of purchase (i) no stop order with respect to the effectiveness of the Registration Statement shall have been issued under the Act or proceedings initiated under Section 8(d) or 8(e) of the Act; (ii) the Registration Statement and all amendments thereto, or modifications thereof, if any, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (iii) the Prospectus and all amendments or supplements thereto, or modifications thereof, if any, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading.
(i) Between the time of execution of this Agreement and the time of purchase (i) no material and unfavorable change, financial or otherwise (other than as referred to in the Registration Statement and Prospectus), in the business, prospects, properties, condition of the Company and the Subsidiaries taken as a whole shall occur or become known and (ii) no transaction which is material and unfavorable to the Company and the Subsidiaries taken as a whole shall have been entered into by the Company or any of the Subsidiaries.
(j) Between the time of execution of this Agreement and the time of purchase there shall not have occurred any downgrading, nor shall any notice or announcement have been given or made of (i) any intended or potential downgrading or (ii) any review or possible change that does not indicate an improvement, in the rating accorded any securities of or guaranteed by the Company by any "nationally recognized statistical rating organization," as that term is defined in Rule 436(g)(2) under the Act.
(k) The Company will at the time of purchase deliver to you a certificate of two of its executive officers to the effect that the representations and warranties of the Company as set forth in this Agreement are true and correct as of such date, that the Company has performed such of its obligations under this Agreement as are to be performed at or before the time of purchase and the conditions set forth in paragraphs (g), (h), (i) and (j) of this Section 6 have been met.
(l) The Company will, at the time of purchase deliver to you a certificate signed by the President of the Company substantially in such form approved by you and counsel to the Underwriters, respecting the Company's compliance, both prior to and after giving effect to the transactions contemplated hereby, with the financial covenants set forth in the Company's credit agreement and certain other agreements and instruments respecting outstanding indebtedness of the Company and the Subsidiaries.
(m) The Company shall have furnished to you such other documents and certificates as to the accuracy and completeness of any statement in the Registration Statement and the Prospectus as of the time of purchase as you may reasonably request.
7. EFFECTIVE DATE OF AGREEMENT; TERMINATION. This Agreement shall become effective: (i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at the time this Agreement is executed and delivered, it is necessary for the registration statement or a post-effective amendment thereto or an Abbreviated Registration Statement to be declared or become effective before the offering of the Notes may commence, when notification of the effectiveness of the registration statement or such post-effective amendment has been released by the Commission or such Abbreviated Registration Statement has, pursuant to the provisions of Rule 462 under the Act, become effective. Until such time as this Agreement shall have become effective, it may be terminated by the Company, by notifying you, or by you, as Underwriters, by notifying the Company.
The obligations of the several Underwriters hereunder shall be subject to termination in the absolute discretion of you or any group of Underwriters (which may include you) which has agreed to purchase in the aggregate at least 50% of the aggregate principal amount of the Notes (i) if, since the time of execution of this Agreement or the respective dates as of which information is given in the Registration Statement and Prospectus, (y) there has been any material adverse and unfavorable change, financial or otherwise (other than as referred to in the Registration Statement and Prospectus), in the business, prospects, properties, condition (financial or otherwise) or results of operations of the Company and the Subsidiaries taken as a whole, which would, in your judgment or in the judgment of such group of Underwriters, make it impracticable to market the Notes, or (z) there shall have occurred any downgrading, or any notice shall have been given of (a) any intended or potential downgrading or (b) any review or
possible change that does not indicate an improvement, in the rating accorded any securities of or guaranteed by the Company or any of the Subsidiaries by any "nationally recognized statistical rating organization", as that term is defined in Rule 436(g)(2) under the Act or (ii) if, at any time prior to the time of purchase trading in securities on the NYSE, the American Stock Exchange or the Nasdaq Stock Market Inc. ("Nasdaq") shall have been suspended or limitations or minimum prices shall have been established on the NYSE, the American Stock Exchange or the Nasdaq or (iii) if, at any time prior to the time of purchase a banking moratorium shall have been declared either by the United States or New York State authorities, or (iv) if, at any time prior to the time of purchase the United States shall have declared war in accordance with its constitutional processes or there shall have occurred any material outbreak or escalation of hostilities or other national or international calamity or crisis of such magnitude in its effect on the financial markets of the United States as, in your judgment or in the judgment of such group of Underwriters, to make it impracticable to market the Notes.
If you or any group of Underwriters elects to terminate this Agreement as provided in this Section 7, the Company and each other Underwriter shall be notified promptly by letter, telegram or telecopy.
If the sale to the Underwriters of the Notes, as contemplated by this Agreement, is not carried out by the Underwriters for any reason permitted under this Agreement or if such sale is not carried out because the Company shall be unable to comply with any of the terms of this Agreement, the Company shall not be under any obligation or liability under this Agreement (except to the extent provided in Sections 4, 5 and 9 hereof), and the Underwriters shall be under no obligation or liability to the Company under this Agreement (except to the extent provided in Section 9 hereof) or to one another hereunder.
8. INCREASE IN UNDERWRITERS' COMMITMENTS. Subject to Sections 6 and 7, if any Underwriter shall default in its obligation to take up and pay for the Notes to be purchased by it hereunder (otherwise than for reasons sufficient to justify the termination of this Agreement under the provisions of Section 7 hereof) and if the principal amount of the Notes which all Underwriters so defaulting shall have agreed but failed to take up and pay for does not exceed 10% of the total aggregate principal amount of the Notes, the non-defaulting Underwriters shall take up and pay for (in addition to the principal amount of the Notes they are obligated to purchase pursuant to Section 1 hereof) the principal amount of the Notes agreed to be purchased by all such defaulting Underwriters, as hereinafter provided. Such Notes shall be taken up and paid for by such non-defaulting Underwriter or Underwriters in such numbers as you may designate with the consent of each Underwriter so designated or, in the event no such designation is made, such Notes shall be taken up and paid for by all non-defaulting Underwriters pro rata in proportion to the aggregate principal amount of the Notes set opposite the names of such non-defaulting Underwriters in SCHEDULE A.
If a new Underwriter or Underwriters are substituted by the Underwriters or by the Company for a defaulting Underwriter or Underwriters in accordance with the foregoing provision, the Company or you shall have the right to postpone the time of purchase for a period not exceeding five business days in order that any necessary changes in the Prospectus and other documents may be effected.
The term Underwriter as used in this agreement shall refer to and include any Underwriter substituted under this Section 8 with like effect as if such substituted Underwriter had originally been named in SCHEDULE A.
If the aggregate principal amount of the Notes which the defaulting Underwriter or Underwriters agreed to purchase exceeds 10% of the total aggregate principal amount of the Notes which all Underwriters agreed to purchase hereunder, and if neither the non-defaulting Underwriters nor the Company shall make arrangements within the five business day period stated above for the purchase of all the principal amount of the Notes which the defaulting Underwriter or Underwriters agreed to purchase hereunder, this Agreement shall be terminated without further act or deed and without any liability on the part of the Company to any non-defaulting Underwriter and without any liability on the part of any non-defaulting Underwriter to the Company. Nothing in this paragraph, and no action taken hereunder, shall relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.
9. INDEMNITY AND CONTRIBUTION.
(a) The Company agrees to indemnify, defend and hold harmless each Underwriter, its partners, directors, officers, employees and agents and any person who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, and the successors and assigns of all of the foregoing persons, from and against any loss, damage, expense, liability or claim (including the reasonable cost of investigation) which, jointly or severally, any such Underwriter or any such person may incur under the Act, the Exchange Act, the common law or otherwise, insofar as such loss, damage, expense, liability or claim arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, the Basic Prospectus, any Prepricing Prospectus, any Prospectus Supplement or in the Prospectus (or in any of the foregoing as the same may at any time be amended or supplemented), or arises out of or is based upon any omission or alleged omission to state a material fact required to be stated in the Registration Statement, the Basic Prospectus, any Prepricing Prospectus, any Prospectus Supplement or the Prospectus (or in any of the foregoing as the same may at any time be amended or supplemented) or necessary to make the statements made therein not misleading, except insofar as any such loss, damage, expense, liability or claim arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in and in conformity with information furnished by or on behalf of any Underwriter through you to the Company expressly for use with reference to such Underwriter in the Registration Statement, the Basic Prospectus, any Prepricing Prospectus, any Prospectus Supplement or the Prospectus (or in any of the foregoing as the same may at any time be amended or supplemented) or arises out of or is based upon any omission or alleged omission to state a material fact in connection with such information required to be stated in the Registration Statement, the Basic Prospectus, any Prepricing Prospectus, any Prospectus Supplement or the Prospectus (or in any of the foregoing as the same may at any time be amended or supplemented) or necessary to make such information not misleading or (ii) any untrue statement or alleged untrue statement made by the Company in Section 3 of this Agreement or the failure by the Company to perform when and as required any agreement or covenant contained herein or (iii) any untrue statement or alleged untrue statement of any material fact contained in any audio or visual materials provided by the Company or based upon
written information furnished by or, with the approval of the Company, on behalf of the Company including, without limitation, slides, videos, films, tape recordings, used in connection with the marketing of the Notes; PROVIDED, however, that, solely with regard to clause (i), the foregoing indemnity agreement with respect to any Basic Prospectus or Prepricing Prospectus shall not inure to the benefit of any Underwriter from whom the person asserting such losses, claims, damages or liabilities purchased Securities, or any person controlling the Underwriter, if sufficient copies of the Prospectus were timely delivered to such Underwriter pursuant to Section 4 hereof and a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not given or sent to such person, if required by law to have been delivered, at or prior to the written confirmation of the sale of the Securities to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities.
If any action, suit or proceeding (together, a "PROCEEDING") is brought against an Underwriter or any such person in respect of which indemnity may be sought against the Company pursuant to the foregoing paragraph, such Underwriter or such person shall promptly notify the Company in writing of the institution of such Proceeding and the Company shall assume the defense of such Proceeding, including the employment of counsel reasonably satisfactory to such indemnified party and payment of all fees and expenses related thereto; PROVIDED, HOWEVER, that the omission to so notify the Company shall not relieve the Company from any liability which the Company may have to any Underwriter or any such person or otherwise. Such Underwriter or such person shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter or of such person unless the employment of such counsel shall have been authorized in writing by the Company in connection with the defense of such Proceeding or the Company shall not have, within a reasonable period of time in light of the circumstances, employed counsel to have charge of the defense of such Proceeding or such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from, additional to or in conflict with those available to the Company (in which case the Company shall not have the right to direct the defense of such Proceeding on behalf of the indemnified party or parties), in any of which events such fees and expenses shall be borne by the Company and paid as incurred (it being understood, however, that the Company shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel) in any one Proceeding or series of related Proceedings in the same jurisdiction representing the indemnified parties who are parties to such Proceeding). The Company shall not be liable for any settlement of any such Proceeding effected without its prior written consent but if settled with the prior written consent of the Company, the Company agrees to indemnify and hold harmless any Underwriter and any such person from and against any loss or liability by reason of such settlement. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second sentence of this paragraph, then the indemnifying party agrees that it shall be liable for any settlement of any Proceeding effected without its written consent if (i) such settlement is entered into more than 60 business days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement and (iii) such indemnified party shall have given the indemnifying party at least 30 days' prior notice of its intention to settle. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending or threatened Proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such Proceeding and does not include an admission of fault, culpability or a failure to act, by or on behalf of such indemnified party.
(b) Each Underwriter severally agrees to indemnify, defend and hold
harmless the Company, its trustees, officers, employees and agents, and any
person who controls the Company within the meaning of Section 15 of the Act, or
Section 20 of the Exchange Act, from and against any loss, damage, expense,
liability or claim (including the reasonable cost of investigation) which,
jointly or severally, the Company or any such person may incur under the Act,
the Exchange Act, or common law or otherwise, insofar as such loss, damage,
expense, liability or claim arises out of or is based upon any untrue statement
or alleged untrue statement of a material fact contained in and in conformity
with information furnished by or on behalf of such Underwriter through you to
the Company expressly for use with reference to such Underwriter in the
Registration Statement, the Basic Prospectus, any Prepricing Prospectus, the
Prospectus Supplement or in the Prospectus (or in any of the foregoing as such
document may at any time be amended or supplemented) or arises out of or is
based upon any omission or alleged omission to state a material fact in
connection with such information required to be stated in the Registration
Statement, the Basic Prospectus, any Prepricing Prospectus, the Prospectus
Supplement or the Prospectus (or in any of the foregoing as such document may at
any time be amended or supplemented) or necessary to make such information not
misleading.
If any Proceeding is brought against the Company or any such person in respect of which indemnity may be sought against any Underwriter pursuant to the foregoing paragraph, the Company or such person shall promptly notify such Underwriter in writing of the institution of such Proceeding and such Underwriter shall assume the defense of such Proceeding, including the employment of counsel reasonably satisfactory to such indemnified party and payment of all fees and expenses, PROVIDED, HOWEVER, that the omission to so notify such Underwriter shall not relieve such Underwriter from any liability which such Underwriter may have to the Company or any such person or otherwise. The Company or such person shall have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of the Company or such person unless the employment of such counsel shall have been authorized in writing by such Underwriter in connection with the defense of such Proceeding or such Underwriter shall not have employed counsel to have charge of the defense of such Proceeding or such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to or in conflict with those available to such Underwriter (in which case such Underwriter shall not have the right to direct the defense of such Proceeding on behalf of the indemnified party or parties, but such Underwriter may employ counsel and participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of such Underwriter), in any of which events such fees and expenses shall be borne by such Underwriter and paid as incurred (it being understood, however, that such Underwriter shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel) in any one Proceeding or series of related Proceedings in the same jurisdiction representing the indemnified parties who are parties to such Proceeding). No Underwriter shall be liable for any settlement of any such Proceeding effected without the
written consent of such Underwriter but if settled with the written consent of such Underwriter, such Underwriter agrees to indemnify and hold harmless the Company and any such person from and against any loss or liability by reason of such settlement. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second sentence of this paragraph, then the indemnifying party agrees that it shall be liable for any settlement of any Proceeding effected without its written consent if (i) such settlement is entered into more than 60 business days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement and (iii) such indemnified party shall have given the indemnifying party at least 30 days' prior notice of its intention to settle. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened Proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such Proceeding.
(c) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under subsections (a) and (b) of this
Section 9 in respect of any losses, damage, expenses, liabilities or claims
referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, damages, expenses,
liabilities or claims (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other hand from the offering of the Notes or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, damages, expenses, liabilities or
claims, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same respective proportion as the total
proceeds from the offering (net of underwriting discounts and commissions but
before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, bear to the aggregate
public offering price of the Notes. The relative fault of the Company on the one
hand and of the Underwriters on the other shall be determined by reference to,
among other things, whether the untrue statement or alleged untrue statement of
a material fact or omission or alleged omission relates to information supplied
by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, damages, expenses, liabilities and claims referred to in this subsection
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating, preparing to defend or
defending any claim or Proceeding.
(d) The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in subsection (c)
above. Notwithstanding the provisions of this Section 9, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Notes underwritten by such Underwriter and distributed to the public were offered to the public exceeds the amount of any damage which such Underwriter has otherwise been required to pay by reason of such untrue statement or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 9 are several in proportion to their respective underwriting commitments and not joint.
(e) The indemnity and contribution agreements contained in this Section
9 and the covenants, warranties and representations of the Company contained in
this Agreement shall remain in full force and effect regardless of any
investigation made by or on behalf of any Underwriter, its partners, directors,
officers, employees or agents or any person (including each partner, officer,
director, employee or agent of such person) who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, or by or
on behalf of the Company, its trustees, officers, employees or agents or any
person who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, and shall survive any termination of this
Agreement or the issuance and delivery of the Notes. The Company and each
Underwriter agree promptly to notify each other of the commencement of any
Proceeding against it and, in the case of the Company, against any of the
Company's officers, trustees, employees or agents in connection with the
issuance and sale of the Notes, or in connection with the Registration Statement
or Prospectus.
10. NOTICES. Except as otherwise herein provided, all statements, requests, notices and agreements shall be in writing or by telegram and, if to the Underwriters, shall be sufficient in all respects if delivered or sent to UBS Warburg LLC, 299 Park Avenue, New York, New York 10171, Attention: Syndicate Department, with a copy to Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New York 10019, Attention: Frederick W. Kanner, and if to the Company, shall be sufficient in all respects if delivered or sent to the Company at the offices of the Company at 400 Centre Street, Newton, Massachusetts 02458, Attention: David J. Hegarty, President and Chief Operating Officer, with a copy to Sullivan & Worcester LLP, One Post Office Square, Boston, Massachusetts 02109, Attention: Alexander A. Notopoulos, Jr., Esq.
11. GOVERNING LAW; CONSTRUCTION. This Agreement and any claim, counterclaim or dispute of any kind or nature whatsoever arising out of or in any way relating to this Agreement (a "CLAIM"), directly or indirectly, shall be governed by, and construed in accordance with, the laws of the State of New York. The Section headings in this Agreement have been inserted as a matter of convenience of reference and are not a part of this Agreement.
12. SUBMISSION TO JURISDICTION. Except as set forth below, no Claim may be commenced, prosecuted or continued in any court other than the courts of the State of New York located in the City and County of New York or in the United States District Court for the Southern District of New York, which courts shall have jurisdiction over the adjudication of such matters, and the Company consents to the jurisdiction of such courts and personal service with respect thereto. The Company hereby consents to personal jurisdiction, service and venue in any court in which any Claim arising out of or in any way relating to this Agreement is brought by
any third party against an Underwriter or any indemnified party. Each Underwriter and the Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) waives all right to trial by jury in any action, proceeding or counterclaim (whether based upon contract, tort or otherwise) in any way arising out of or relating to this Agreement. The Company agrees that a final judgment in any such action, proceeding or counterclaim brought in any such court shall be conclusive and binding upon the Company and may be enforced in any other courts in the jurisdiction of which the Company is or may be subject, by suit upon such judgment.
13. PARTIES AT INTEREST. The Agreement herein set forth has been and is made solely for the benefit of the Underwriters, the Company and to the extent provided in Section 9 hereof the controlling persons, directors and officers and, if applicable, trustees referred to in such Section, and their respective successors, assigns, heirs, personal representatives and executors and administrators. No other person, partnership, association or corporation (including a purchaser, as such purchaser, from any of the Underwriters) shall acquire or have any right under or by virtue of this Agreement.
14. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth in the pertinent sentence on the last paragraph on the cover page of the Prospectus Supplement and the statements set forth in the third and seventh paragraphs under the caption "Underwriting" in the Prospectus Supplement constitute the only information furnished by or on behalf of the Underwriters as such information is referred to in Sections 3 and 9 hereof.
15. COUNTERPARTS. This Agreement may be signed by the parties in one or more counterparts that together shall constitute one and the same agreement among the parties.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the Underwriters, the Company and their respective successors and assigns and any successor or assign of any substantial portion of the Company's and any of the Underwriters' respective businesses and/or assets.
17. MISCELLANEOUS. Each of the Underwriters is not a bank. Each of the Underwriters is a separate entity from its lending and other affiliates and is solely responsible for its own contractual obligations and commitments, including obligations with respect to sales and purchases of securities. Securities sold, offered or recommended by any of the Underwriters are not deposits, are not insured by the Federal Deposit Insurance Corporation, are not guaranteed by a branch or agency, and are not otherwise an obligation or responsibility of a branch or agency.
Lending affiliates of each of the Underwriters may have lending relationships with issuers of securities underwritten or privately placed by one or more of the Underwriters. To the extent required under the securities laws, the Prospectus will disclose the existence of any such lending relationships and whether the proceeds of the issue will be used to repay debts owed to affiliates of any of the Underwriters.
THE ARTICLES OF AMENDMENT AND RESTATEMENT ESTABLISHING SENIOR HOUSING PROPERTIES TRUST, DATED SEPTEMBER 2, 1999, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO, IS
DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "SENIOR HOUSING PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION OF TRUST, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SENIOR HOUSING PROPERTIES TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SENIOR HOUSING PROPERTIES TRUST. ALL PERSONS DEALING WITH SENIOR HOUSING PROPERTIES TRUST, SHALL LOOK ONLY TO THE ASSETS OF SENIOR HOUSING PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
If the foregoing correctly sets forth the understanding between the Company and the Underwriters, please so indicate in the space provided below for the purpose, whereupon this letter and your acceptance shall constitute a binding agreement between the Company and the Underwriters severally.
Very truly yours,
SENIOR HOUSING PROPERTIES TRUST
Title:
Accepted and agreed to
as of the date first above written:
UBS WARBURG LLC
DRESDNER KLEINWORT WASSERSTEIN
--GRANTCHESTER, INC.
FIRST UNION SECURITIES, INC.
BMO NESBITT BURNS CORP.
CIBC WORLD MARKETS CORP.
PNC CAPITAL MARKETS, INC.
SG COWEN SECURITIES CORPORATION
By: UBS WARBURG LLC
SCHEDULE A
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
UBS Warburg LLC............................................................................... 120,000,000
Dresdner Kleinwort Wasserstein
--Grantchester, Inc........................................................................... 20,000,000
First Union Securities, Inc................................................................... 20,000,000
BMO Nesbitt Burns Corp........................................................................ 10,000,000
CIBC World Markets Corp....................................................................... 10,000,000
PNC Capital Markets, Inc...................................................................... 10,000,000
SG Cowen Securities Corporation............................................................... 10,000,000
----------------
Total............................................. $200,000,000
================
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Schedule A-1
SCHEDULE B
SUBSIDIARY NAME
Five Star Quality Care Holding Co., Inc.
Five Star Quality Care Trust
Five Star Quality Care, Inc.
Five Star Quality Care-AZ, LLC
Five Star Quality Care-CA, Inc.
Five Star Quality Care-CA, LLC
Five Star Quality Care-Colorado, LLC
Five Star Quality Care-CT, LLC
Five Star Quality Care-GA, LLC
Five Star Quality Care-IA, Inc.
Five Star Quality Care-IA, LLC
Five Star Quality Care-KS, LLC
Five Star Quality Care-MI, Inc.
Five Star Quality Care-MI, LLC
Five Star Quality Care-MO, LLC
Five Star Quality Care-NE, Inc.
Five Star Quality Care-NE, LLC
Five Star Quality Care-WI, LLC
Five Star Quality Care-WY, LLC
FS Lafayette Tenant Trust
FS Lexington Tenant Trust
FS Tenant Pool I Trust
FS Tenant Pool III Trust
FS Tenant Pool IV Trust
FSQ Acquisition, Inc.
HRES1 Properties Trust
HRES2 Properties Trust
SHOPCO-SD, LLC
SNH Capital Trust Holdings
SNH Capital Trust I
SNH Capital Trust II
SNH Capital Trust III
SNH/CSL Properties Trust
SPTGEN Properties Trust
SPTIHS Properties Trust
SPTMISC Properties Trust
SPTMNR Properties Trust
SPTMRT Properties Trust
SPTSUN II Properties Trust
SPTSUN Properties Trust
Schedule B-1
SCHEDULE C
Five Star Quality Care Trust
FS Lafayette Tenant Trust
FS Lexington Tenant Trust
FS Tenant Pool I Trust
FS Tenant Pool III Trust
FS Tenant Pool IV Trust
Schedule C-1
SCHEDULE D
MATERIAL SUBSIDIARIES
HRES1 Properties Trust
SPTMRT Properties Trust
Schedule D-1
SCHEDULE E
MARYLAND SUBSIDIARIES
Five Star Quality Care, Inc.
HRES1 Properties Trust
HRES2 Properties Trust
SNH Capital Trust Holdings
SNH Capital Trust I
SNH Capital Trust II
SNH Capital Trust III
SNH/CSL Properties Trust
SPTGEN Properties Trust
SPTIHS Properties Trust
SPTMISC Properties Trust
SPTMNR Properties Trust
SPTMRT Properties Trust
SPTSUN Properties Trust
SPTSUN II Properties Trust
Schedule E-1
Exhibit 10.1
TRANSACTION AGREEMENT
by and among
SENIOR HOUSING PROPERTIES TRUST,
CERTAIN SUBSIDIARIES OF SENIOR HOUSING PROPERTIES TRUST
IDENTIFIED HEREIN AS EXISTING PROPERTY LANDLORDS,
FIVE STAR QUALITY CARE, INC.,
CERTAIN SUBSIDIARIES OF FIVE STAR QUALITY CARE, INC.
IDENTIFIED HEREIN AS EXISTING PROPERTY SUBTENANTS,
FSQ, INC.,
HOSPITALITY PROPERTIES TRUST,
HRPT PROPERTIES TRUST, AND
REIT MANAGEMENT & RESEARCH LLC
December 7, 2001
TABLE OF CONTENTS
SECTION 1 DEFINITIONS........................................................................1
1.1 DEFINITIONS................................................................1
SECTION 2 PRELIMINARY ACTIONS; CAPITALIZATION OF FIVE STAR; DISTRIBUTION AND MERGER.........10
2.1 PRELIMINARY ACTIONS.......................................................10
2.2 PROPERTY TRANSFERS........................................................11
2.3 CAPITALIZATION............................................................12
2.4 LEASE OF EXISTING PROPERTIES..............................................13
2.5 SERVICES AGREEMENT........................................................13
2.6 AGREEMENT OF MERGER BETWEEN FIVE STAR, MERGER SUB AND FSQ.................13
2.7 THE DISTRIBUTION..........................................................14
SECTION 3 AGREEMENTS RE: CSL PROPERTIES.....................................................15
3.1 AGREEMENT TO LEASE CSL PROPERTIES AND RELATED MATTERS.....................15
3.2 ACTIONS RELATING TO OPERATING AGREEMENTS..................................16
3.3 TERMINATION OF THE CSL STOCK PURCHASE AGREEMENT...........................17
3.4 AGREEMENT OF HPT..........................................................17
SECTION 4 REPRESENTATIONS; NO IMPLIED REPRESENTATIONS, ETC..................................17
SECTION 5 POST-DISTRIBUTION COVENANTS.......................................................18
5.1 OPERATIONS AND INVESTMENTS OF FIVE STAR...................................18
5.2 COOPERATION, EXCHANGE OF INFORMATION, RETENTION OF RECORDS,
AND COSTS OF REPORTING..................................................18
5.3 RESTRICTIONS ON OWNERSHIP.................................................19
SECTION 6 SURVIVAL; INDEMNIFICATION.........................................................19
6.1 INDEMNIFICATION BY SNH....................................................19
6.2 INDEMNIFICATION BY FIVE STAR..............................................20
6.3 INDEMNIFICATION PROCEDURES................................................20
6.4 CERTAIN LIMITATIONS, ETC..................................................21
6.5 PRIORITY OF SECTION 7.....................................................22
SECTION 7 TAX MATTERS.......................................................................22
7.1 GENERAL RESPONSIBILITY FOR TAXES..........................................22
7.2 ALLOCATION OF CERTAIN TAXES AMONG TAXABLE PERIODS.........................23
7.3 FILING AND PAYMENT RESPONSIBILITY.........................................23
7.4 REFUNDS AND CREDITS.......................................................24
7.5 TAX CONTESTS..............................................................24
7.6 RESOLUTION OF DISPUTES....................................................24
SECTION 8 MISCELLANEOUS.....................................................................25
8.1 ARBITRATION...............................................................25
8.2 CONFIDENTIALITY...........................................................25
8.3 NOTICES...................................................................25
8.4 WAIVERS, ETC..............................................................27
8.5 ASSIGNMENT; SUCCESSORS AND ASSIGNS........................................27
8.6 SEVERABILITY..............................................................27
8.7 COUNTERPARTS, ETC.........................................................28
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TABLE OF CONTENTS
8.8 GOVERNING LAW.............................................................28
8.9 EXPENSES..................................................................28
8.10 SECTION AND OTHER HEADINGS; INTERPRETATION................................29
8.11 EXCULPATION...............................................................29
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TRANSACTION AGREEMENT
THIS TRANSACTION AGREEMENT made December 7, 2001, by and among (a) SENIOR HOUSING PROPERTIES TRUST, a Maryland real estate investment trust (including its successors and permitted assigns, "SNH"), (b) SPTIHS PROPERTIES TRUST ("SPTIHS"), SPTMNR PROPERTIES TRUST ("SPTMNR") and HRES2 PROPERTIES TRUST ("HRES2"), each a Maryland real estate investment trust and a subsidiary of SNH (collectively, the "EXISTING PROPERTY LANDLORDS"), (c) FIVE STAR QUALITY CARE, INC., a Maryland corporation successor by merger to SHOPCO HOLDINGS, INC., a Delaware corporation, (including its successors and permitted assigns, "FIVE STAR") and currently a wholly-owned subsidiary of SNH, (d) the entities identified as "Existing Property Subtenants" on the signature pages hereto, (e) FSQ, INC., a Delaware corporation (formerly known as "Five Star Quality Care, Inc.") (including its successors and permitted assigns, "FSQ"), (f) HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment trust (including its successors and permitted assigns, "HPT"), HRPT PROPERTIES TRUST, a Maryland real estate investment trust (including its successors and permitted assigns, "HRPT"), and (g) REIT MANAGEMENT & RESEARCH LLC, a Delaware limited liability company (including its successors and permitted assigns, "RMR").
RECITAL
SNH is a real estate investment trust which, indirectly through subsidiaries, owns the Existing Properties (defined below) and pursuant to the terms of the CSL Stock Purchase Agreement (defined below), will acquire the 31 additional CSL Properties (defined below). SNH has determined to distribute substantially all of the outstanding common stock of Five Star held by SNH to the holders of common shares of beneficial interest of SNH as a special distribution. HRPT, as a shareholder of SNH, has determined to distribute to its shareholders all the outstanding common stock of Five Star it receives in such special distribution, as well as any shares it purchases from Five Star pursuant to SECTION 2.7 below. Thereafter, SNH will lease the Existing Properties and, upon acquisition thereof, the CSL Properties, to Five Star. The Existing Properties are currently managed by FSQ, and FSQ will be merged with a subsidiary of Five Star so that Five Star may acquire the personnel, operating systems and assets used by FSQ to manage the Existing Properties. RMR currently provides certain services to SNH, Five Star, FSQ, HRPT and HPT, and the parties desire that RMR continue to provide such services. In connection with the foregoing, the parties wish to define certain rights and obligations in connection with their businesses.
NOW, THEREFORE, it is agreed:
SECTION 1 DEFINITIONS
1.1 DEFINITIONS.
Capitalized terms used in this Agreement shall have the meanings set forth below:
(1) "ACTION": any litigation or legal or other actions, arbitrations, counterclaims, investigations, proceedings, requests for material information by or pursuant to the order of any Governmental Authority, or suits, at law or in arbitration or equity commenced by any Person.
(2) "AFFILIATE": with respect to any Person, any other Person controlling, controlled by or under common control with, such Person, with "control" for such purpose, with respect to an Entity, meaning the possession of the power to vote or direct the voting of a majority of the voting securities of, or other voting interests in, such Entity which are entitled to elect directors, trustees or similar officials of such Entity.
(3) "AGENT": EquiServe Trust Company, N.A., the distribution agent appointed by SNH and HRPT to distribute the Five Star Common Shares to holders of SNH Common Shares and HRPT Common Shares, respectively, pursuant to the Distribution.
(4) "AGREEMENT": this Transaction Agreement, together with the Schedules and Exhibits hereto, as amended in accordance with the terms hereof.
(5) "BENEFITED PARTIES": the meaning given in SECTION 5.1.
(6) "CASH CONTRIBUTION AMOUNT": an amount in cash equal to $50,000,000 MINUS the total shareholders' equity of Five Star immediately prior to the Distribution (after giving effect to the transfers referenced in SECTION 2.2, but before the contribution referenced in SECTION 2.3(B)). For administrative convenience, in calculating the Cash Contribution Amount, the Distribution shall be deemed to have taken place at the close of business on December 31, 2001.
(7) "CHANGE IN CONTROL": means (a) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Commission) of 9.8% or more, or rights, options or warrants to acquire 9.8% or more, of the outstanding shares of voting stock of any Tenant or Five Star or any other guarantor of any Tenant's obligations under any Lease, or the power to direct the management and policies of any Tenant or Five Star or any other guarantor of any Tenant's obligations under any Lease, directly or indirectly, (b) the merger or consolidation of any Tenant or Five Star or any other guarantor of any Tenant's obligations under any Lease with or into any other Person (other than the merger or consolidation of any Person into Tenant, Five Star or such guarantor that does not result in a Change of Control of Tenant, Five Star or such guarantor under clauses (a), (c) or (d) of this definition), (c) any one or more sales or conveyances to any Person of all or any material portion of its assets (including capital stock) or business of any Tenant or Five Star or any other guarantor of any Tenant's obligations under any Lease, as the case may be, or (d) the cessation, for any reason, of the individuals who at the beginning of any twenty-four (24) consecutive month period (commencing on or after the date hereof) constituted the board of directors of any Tenant or Five Star or any other guarantor of any Tenant's obligations under any Lease (together with any new directors whose election by such Board or whose nomination for election by the shareholders of such Tenant, Five Star or other guarantor, as the case may be, was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of any such period or whose election or nomination for election was previously so approved) to
constitute a majority of the board of directors of such Tenant, Five Star or other guarantor then in office.
(8) "CHARTER": with respect to any Entity, its constituent governing documents, including, by way of example, its certificate of incorporation and by-laws (if a corporation), its operating agreement and certificate of formation (if a limited liability company), its declaration of trust and by-laws (if a real estate investment trust) and its limited partnership agreement and certificate of limited partnership (if a limited partnership).
(9) "CHESHIRE PREMISES": the meaning given in SECTION 2.2(D).
(10) "CLJ": Crestline Capital Corporation, a Maryland corporation.
(11) "CODE": the United States Internal Revenue Code of 1986, as from time to time in effect, and any successor law, and any reference to any statutory provision shall be deemed to be a reference to any successor statutory provision.
(12) "COMMISSION": the United States Securities and Exchange Commission.
(13) "CONTRACT": any lease, contract, instrument, license, agreement, sales order, purchase order, open bid or other obligation or commitment (whether or not written) and all rights and obligations therein.
(14) "COVERED LIABILITIES": the meaning given in SECTION 6.1.
(15) "CSL": CSL Group, Inc., an Indiana corporation.
(16) "CSL CLOSING": the Closing under (and as defined in) the CSL Stock Purchase Agreement.
(17) "CSL CLOSING DATE": the Closing Date under (and as defined in) the CSL Stock Purchase Agreement.
(18) "CSL PROPERTIES": the properties listed on SCHEDULE 1.1(18).
(19) "CSL PROPERTIES ASSIGNMENT AND ASSUMPTION AGREEMENT": an Assignment
and Assumption Agreement among the CSL Property Landlords and the CSL Property
Subtenants in mutually acceptable form.
(20) "CSL PROPERTIES HOLDING COMPANY": FS Tenant Holding Company Trust, a Maryland business trust.
(21) "CSL PROPERTIES MASTER LEASE": the meaning given in SECTION 3.1(A)(B).
(22) "CSL PROPERTIES SUBLEASES": the meaning given in SECTION 3.1(C)(A).
(23) "CSL PROPERTY LANDLORDS": The following CSL Subsidiaries:
(A) CCFL Senior Living LLC,
(B) CCOP Senior Living LLC,
(C) CCCP Senior Living LLC,
(D) CCSL Senior Living LLC,
(E) CCDE Senior Living LLC,
(F) CCC Financing I Trust (successor to CCC Financing I Corporation),
(G) CCC Ohio Healthcare Trust (successor to CCC Ohio Healthcare Inc.),
(H) CCC of Kentucky Trust (successor to CCC of Kentucky Inc.),
(I) the New CSL Landlords, and
(J) Leisure Park Venture Limited Partnership.
(24) "CSL PROPERTY SUBTENANTS": The following Maryland business trusts, each to be a subsidiary of the CSL Properties Holding Company at the CSL Closing Date:
(A) FS Tenant Pool I Trust [Existing GMAC properties],
(B) FS Tenant Pool II Trust [New Loan properties],
(C) FS Tenant Pool III Trust [Nomura properties],
(D) FS Lafayette Tenant Trust [Lafayette],
(E) FS Leisure Park Tenant Trust [Leisure Park],
(F) FS Lexington Tenant Trust [Lexington], and
(G) FS Tenant Pool IV Trust [Foulk Manor South, Tiffany House, Springwood Court].
(25) "CSL STOCK PURCHASE AGREEMENT": the Stock Purchase Agreement dated as of August 9, 2001, as amended by an Amendment dated as of November 5, 2001, among SNH, SNH/CSL Properties Trust, CLJ and CSL, as further amended and in effect from time to time.
(26) "CSL SUBSIDIARY": each Person which is a direct or indirect Subsidiary of CSL.
(27) "DISTRIBUTION": the distribution of a number of Five Star Common Shares (i) by SNH to holders of SNH Common Shares equal to one-tenth (1/10th) of the number of SNH Common Shares that are issued and outstanding on the Record Date, and (ii) by HRPT to holders
of HRPT Common Shares equal to one one-hundredth (1/100th) of the number of HRPT Common Shares that are issued and outstanding on the Record Date.
(28) "DISTRIBUTION DATE": the date determined by the Board of Trustees of each of SNH and HRPT or authorized committees thereof as the date on which the Distribution shall be effected.
(29) "EFFECTIVE DATE": the date on which the Five Star Registration Statement is declared effective by the Commission.
(30) "ENTITY": a real estate investment trust, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or any agency or instrumentality thereof.
(31) "EXISTING PROPERTIES": The properties listed on SCHEDULE 1.1(31).
(32) "EXISTING PROPERTIES HOLDING COMPANY": Five Star Quality Care Trust, a Maryland business trust, a subsidiary of Five Star and the parent of the Existing Property Subtenants.
(33) "EXISTING PROPERTIES MASTER LEASE": the meaning given in SECTION 2.4.
(34) "EXISTING PROPERTIES SUBLEASES": the meaning given in SECTION 2.4.
(35) "EXISTING PROPERTY LANDLORDS": the meaning given in the preamble to this Agreement.
(36) "EXISTING PROPERTY SUBTENANTS": The following Subsidiaries of the Existing Properties Holding Company:
(A) Five Star Quality Care-AZ, LLC (formerly known as SHOPCO-AZ, LLC),
(B) Five Star Quality Care-CA, LLC (formerly known as SHOPCO-CA, LLC),
(C) Five Star Quality Care-Colorado, LLC (formerly known as SHOPCO-COLORADO, LLC),
(D) Five Star Quality Care-CT, LLC (formerly known as SHOPCO-CT, LLC),
(E) Five Star Quality Care-GA, LLC (formerly known as SHOPCO-GA, LLC),
(F) Five Star Quality Care-IA, LLC (formerly known as SHOPCO-IA, LLC),
(G) Five Star Quality Care-KS, LLC (formerly known as SHOPCO-KS, LLC),
(H) Five Star Quality Care-MI, LLC (formerly known as SHOPCO-MI, LLC),
(I) Five Star Quality Care-MO, LLC (formerly known as SHOPCO-MO, LLC),
(J) Five Star Quality Care-NE, LLC (formerly known as SHOPCO-NE, LLC),
(K) Five Star Quality Care-WI, LLC (formerly known as SHOPCO-WI, LLC),
(L) Five Star Quality Care-WY, LLC (formerly known as SHOPCO-WY, LLC),
(M) Five Star Quality Care-CA, Inc. (formerly known as SNH-California, Inc.),
(N) Five Star Quality Care-IA, Inc. (formerly known as SNH-Iowa, Inc.),
(O) Five Star Quality Care-MI, Inc. (formerly known as SNH-Michigan, Inc.) and
(P) Five Star Quality Care-NE, Inc. (formerly known as SNH-Nebraska, Inc.).
(37) "FIVE STAR": the meaning given in the preamble to this Agreement.
(38) "FIVE STAR ASSETS": the assets of Five Star and its Subsidiaries, including those transferred and assigned to Five Star and its Subsidiaries (a) on or prior to the Distribution Date by SNH and the Existing Property Landlords pursuant to SECTION 2.2 hereof, and (b) on the CSL Closing Date by the CSL Property Landlords pursuant to the CSL Properties Assignment and Assumption Agreement.
(39) "FIVE STAR BOARD": the Five Star Board of Directors.
(40) "FIVE STAR BUSINESS": the business conducted by Five Star and its Subsidiaries, including pursuant to or utilizing the Five Star Assets and the operation and management of Senior Properties that are leased to the Tenants pursuant to the Leases.
(41) "FIVE STAR COMMON SHARES": the shares of common stock, $.01 par value, of Five Star.
(42) "FIVE STAR GROUP": Five Star and each Entity (i) whose income is included in the consolidated federal income Tax Return Form 1120 with Five Star as the common parent or (ii) that is a Subsidiary of Five Star.
(43) "FIVE STAR INDEMNIFIED PARTIES": the meaning given such term in
SECTION 6.1.
(44) "FIVE STAR LIABILITIES": all Liabilities (i) arising out of or in connection with any of the Five Star Assets or the Five Star Business (whether arising before or after the Distribution
Date (with respect to any Existing Property) or the CSL Closing Date (with respect to any CSL Property)), or (ii) arising under any Lease.
(45) "FIVE STAR REGISTRATION STATEMENT": the registration statement on Form S-1 filed by Five Star under the Securities Act in connection with the Distribution.
(46) "FIVE STAR SUBSIDIARIES": the direct or indirect Subsidiaries of Five Star.
(47) "FSQ": the meaning given in the preamble to this Agreement.
(48) "GAAP": generally accepted accounting principles as in effect from time to time in the United States of America.
(49) "GOVERNMENTAL AUTHORITY": any nation or government, any state or other political subdivision thereof, any federal, state, local or foreign Entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any government authority, agency, department, board, commission, or instrumentality of the United States, any State of the United States or political subdivision thereof, and any tribunal or arbitral authority of competent jurisdiction, and any self-regulatory organization.
(50) "HPT": the meaning given in the preamble to this Agreement.
(51) "HRPT": the meaning given in the preamble to this Agreement.
(52) "HRPT COMMON SHARES": the common shares of beneficial interest, $.01 par value, of HRPT.
(53) "HRPT GROUP": HRPT and each Entity (i) whose income is included in the federal Income Tax Return Form 1120-REIT with HRPT as the parent or (ii) that is a Subsidiary of HRPT, but excluding, in each case, any Entity in the SNH Group.
(54) "INCOME TAXES": any and all Taxes to the extent based upon or measured by net income (regardless of whether denominated as an "income tax," a "franchise tax" or otherwise), imposed by any Taxing Authority, together with any related interest, penalties or other additions thereto.
(55) "LANDLORD ASSETS": with respect to any Existing Property or CSL Property, (i) all land and improvements thereon, (ii) all furnishings, fixtures and equipment located thereon, (iii) in the case of any CSL Property, all cash reserves established to pay for furnishings, fixtures and equipment for such CSL Property and (iv) all books and records relating to the foregoing; PROVIDED, however, that Landlord Assets shall not, in any event, include refunds in respect of property tax or other liabilities for which any Tenant is liable under any Lease with respect to such Property, or any other refunds for amounts paid prior to the Distribution Date or the CSL Closing Date, as the case may be, or accounts receivable arising prior to the Distribution Date in connection with the operation of any Existing Property or prior to the CSL Closing Date in connection with the operation of any CSL Property, as the case may be, but not yet collected.
(56) "LEASES": collectively, the Existing Properties Master Lease, the CSL Properties Master Lease, the Existing Properties Subleases and the CSL Properties Subleases.
(57) "LIABILITY": any and all debts, liabilities and obligations, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, including all costs and expenses relating thereto, and including those debts, liabilities and obligations arising under any law, rule, regulation, Action, threatened Action, order or consent decree of any Governmental Authority or any award of any arbitrator of any kind, and those arising under any contract, commitment or undertaking.
(58) "LICENSE": any federal, state, local or foreign governmental approval, authorization, certificate, license, permit or exemption to which any Person is a party or that is or may be binding upon or inure to the benefit of any Person or its securities, properties or business.
(59) "MERGER AGREEMENT": the meaning given in SECTION 2.6.
(60) "MERGER SUB": FSQ Acquisition, Inc., a Delaware corporation, a first tier subsidiary of Five Star formed pursuant to SECTION 2.1(B)(C).
(61) "MSLS": Marriott Senior Living Services, Inc., a Delaware corporation.
(62) "NEW CSL LANDLORDS": the following CSL Subsidiaries (each of which is a Maryland business trust):
(A) CCC Woodlands Trust,
(B) CCC Pueblo Norte Trust,
(C) CCC Fountainview Trust,
(D) CCC Coral Oaks Trust,
(E) CCC Forum Crossing Trust,
(F) CCC Forwood Manor Trust,
(G) CCC Winchester Trust, and
(H) CCC Remington Trust.
(63) "NORTHWEST PREMISES": the meaning given in SECTION 2.2(C).
(64) "OPERATING AGREEMENTS": collectively, the Operating Agreements or Management Agreements between CSL, any CSL Subsidiary (and/or their respective Subsidiaries) or Senior Living of Boynton Beach Limited Partnership, as owner, and MSLS, as operator.
(65) "OTHER TAXES": all Taxes other than Income Taxes.
(66) "PERSON": any individual or any Entity.
(67) "POOLING AGREEMENTS": as defined in the CSL Stock Purchase Agreement.
(68) "PROPERTIES": the meaning given in SECTION 5.1.
(69) "PROPOSED TRANSACTION": the meaning given in SECTION 5.1.
(70) "RECORD DATE": the date determined by the Boards of Trustees of each of SNH and HRPT or authorized committees thereof as the record date for the Distribution.
(71) "RMR": the meaning given in the preamble to this Agreement.
(72) "SECURITIES ACT": the Securities Act of 1933, and the rules and regulations of the Commission thereunder, all as from time to time in effect.
(73) "SENIOR PROPERTIES": senior apartments, congregate communities, assisted living properties, nursing homes or other properties the primary purpose of which is to serve the needs of, and to provide living facilities to, senior citizens.
(74) "SEPARATE COUNSEL": the meaning given in SECTION 6.3(B).
(75) "SERVICES AGREEMENT": the meaning given in SECTION 2.5.
(76) "SNH": the meaning given in the preamble to this Agreement.
(77) "SNH COMMON SHARES": the common shares of beneficial interest, $.01 par value, of SNH.
(78) "SNH GROUP": SNH and each Entity (i) whose income is included in the federal income Tax Return Form 1120-REIT with SNH as the parent or in the consolidated federal income Tax Return Form 1120 of the Taxable REIT Subsidiaries with Five Star Quality Care Holding Co., Inc. (formerly known as "SNH Holding Co., Inc.") as the common parent or (ii) that is a Subsidiary of SNH; provided the Five Star Group shall only be included therein through the Distribution Date.
(79) "SNH INDEMNIFIED PARTIES": the meaning given in SECTION 6.2.
(80) "SUBSIDIARY": with respect to any Person, any Entity (i) a majority of
the voting securities of, or other voting interests in, such Entity which are
entitled to elect directors, trustees or similar officials of such Entity, or
(ii) a majority of the equity interests of such Entity, of which is owned
directly or indirectly by such Person or any Subsidiary of such Person.
(81) "TAX CONTESTS": the meaning given in SECTION 7.5.
(82) "TAXABLE REIT SUBSIDIARIES": Five Star Quality Care Holding Co., Inc. (formerly known as "SNH Holding Co., Inc."), a Delaware corporation with employer identification number 04-3499670, and its Subsidiaries.
(83) "TAXES": any net income, gross income, gross receipts, sales, use, excise, franchise, transfer, payroll, premium, property or windfall profits tax, alternative or add-on minimum tax, or other tax, fee or assessment, together with any interest and any penalty, addition to tax or other additional amount imposed by any Taxing Authority, whether any such tax is imposed directly or through withholding.
(84) "TAXING AUTHORITIES": the United States Internal Revenue Service (or any successor authority) and any other domestic or foreign Governmental Authority responsible for the administration of any Tax.
(85) "TAX RETURNS": all returns, reports, estimates, information statements, declarations and other filings relating to, or required to be filed by any taxpayer in connection with, its liability or reporting for, or its payment or receipt of any refund of, any Tax.
(86) "TENANTS": collectively, the Existing Properties Holding Company, as tenant under the Existing Properties Master Lease, the Existing Property Subtenants, as subtenants under the Existing Properties Subleases, the CSL Properties Holding Company, as tenant under the CSL Properties Master Lease and the CSL Property Subtenants, as subtenants under the CSL Properties Subleases.
(87) "THIRD-PARTY CLAIM": any Action asserted by a Person, other than any party hereto or their respective Affiliates, that gives rise to a right of indemnification hereunder.
(88) "TRANSACTION DOCUMENTS": collectively, this Agreement, the Services Agreement, the Leases, the CSL Properties Assignment and Assumption Agreement, the Merger Agreement, the Indemnification Agreement referenced in the Merger Agreement, the agreements and instruments relating to the Operating Agreements and referenced in SECTION 3.2, and each of the other agreements and instruments delivered pursuant to any of the forgoing.
(89) "TRANSITION AGREEMENTS": as defined in the CSL Stock Purchase Agreement.
SECTION 2 PRELIMINARY ACTIONS; CAPITALIZATION OF FIVE STAR; DISTRIBUTION AND MERGER
2.1 PRELIMINARY ACTIONS.
(a) Prior to the execution and delivery of this Agreement, the following actions were taken:
(A) Five Star was organized as a Maryland corporation, and SHOPCO HOLDINGS, INC., a Delaware corporation, merged with and into Five Star; and
(B) FSQ (formerly known as "Five Star Quality Care, Inc.") changed its name to "FSQ, Inc.", and each of the Existing Property Subtenants changed their names as indicated in SECTION 1.1(36).
(b) Prior to the capitalization of Five Star and the Distribution Date, Five Star will:
(A) organize the Existing Properties Holding Company and the CSL Property Subtenants (other than FS Tenant Pool II Trust [New Loan properties] and FS Leisure Park Tenant Trust [Leisure Park]) (see SCHEDULE 2.1(B)(A));
(B) contribute its interest in the Existing Property Subtenants to the Existing Properties Holding Company (see SCHEDULE 2.1(B)(B)); and
(C) organize Merger Sub as a Delaware corporation (see SCHEDULE 2.1(B)(B)).
2.2 PROPERTY TRANSFERS.
The parties hereto agree that, effective immediately prior to the Distribution on the Distribution Date:
(a) Each of Five Star Quality Care-NE, Inc., Five Star Quality Care-MI, Inc., Five Star Quality Care-IA, Inc., Five Star Quality Care-CA, Inc., Five Star Quality Care-NE, LLC and Five Star Quality Care-MI, LLC hereby grants, bargains, sells, sets over, assigns, transfers and conveys all its right, title and interest in and to all of the land more particularly described in SCHEDULE 2.2(A)(A) attached hereto that is identified in said Schedule as being owned by such Entity, and all improvements and all other Landlord Assets with respect thereto, to SPTIHS, TO HAVE AND TO HOLD such Landlord Assets unto SPTIHS, and its successors and assigns, to their own use forever (see diagram in SCHEDULE 2.2(A)(B)). Each of Five Star Quality Care-NE, Inc., Five Star Quality Care-MI, Inc., Five Star Quality Care-IA, Inc., Five Star Quality Care-CA, Inc., Five Star Quality Care-NE, LLC and Five Star Quality Care-MI, LLC agrees to execute and deliver, and to effect the recordation of, all deeds, instruments and other documents of conveyance that are necessary or desirable, in the opinion of SNH, in order to vest good and marketable legal title to such land, improvements and all other Landlord Assets of such Entity in SPTIHS.
(b) Each Existing Property Landlord hereby grants, bargains, sells, sets over, assigns, transfers and conveys all its right, title and interest in and to all assets with respect to each Existing Property of such Existing Property Landlord (excluding, however, any Landlord Assets) to the Existing Property Subtenant for such Existing Property identified in SCHEDULE 2.2(B), TO HAVE AND TO HOLD such assets unto such Existing Property Subtenant, and its successors and assigns, to their own use forever.
(c) SPTMNR hereby grants, bargains, sells, sets over, assigns, transfers and conveys all its right, title and interest in and to (i) the land more particularly described in SCHEDULE 2.2(C) attached hereto, and all improvements thereon (the "NORTHWEST PREMISES"), (ii) all furnishings, fixtures and equipment located at the Northwest Premises, (iii) all cash reserves established to pay for furnishings, fixtures and equipment at the Northwest Premises, and (iv) all books and records relating to the foregoing, to Five Star Quality Care-WI, LLC, a Delaware limited liability company ("FSQ-WI"), TO HAVE
AND TO HOLD the Northwest Premises and such other assets unto FSQ-WI, and its successors and assigns, to their own use forever. SPTMNR agrees to execute and deliver, and to effect the recordation of, all deeds, instruments and other documents of conveyance that are necessary or desirable, in the opinion of Five Star, in order to vest good and marketable legal title to the Northwest Premises and such other assets in FSQ-WI.
(d) HRES2 hereby grants, bargains, sells, sets over, assigns, transfers and conveys all its right, title and interest in and to (i) the land more particularly described in SCHEDULE 2.2(D) attached hereto, and all improvements thereon (the "CHESHIRE PREMISES"), (ii) all furnishings, fixtures and equipment located at the Cheshire Premises, (iii) all cash reserves established to pay for furnishings, fixtures and equipment at the Cheshire Premises and (iv) all books and records relating to the foregoing, to Five Star Quality Care-CT, LLC, a Delaware limited liability company ("FSQ-CT"), TO HAVE AND TO HOLD the Cheshire Premises and such other assets unto FSQ-CT, and its successors and assigns, to their own use forever. HRES2 agrees to execute and deliver, and to effect the recordation of, all deeds, instruments and other documents of conveyance that are necessary or desirable, in the opinion of Five Star, in order to vest good and marketable legal title to the Cheshire Premises and such other assets in FSQ-CT.
(e) Five Star, each Existing Property Subtenant (with respect to each Existing Property leased to it pursuant to a Existing Properties Sublease), FSQ-WI (with respect to the Northwest Premises and related assets) and FSQ-CT (with respect to the Cheshire Premises and related assets) hereby assume and agree to timely pay, perform, observe and discharge all Five Star Liabilities.
(f) EACH ASSET AFFECTED BY ANY OF PARAGRAPHS (a) THROUGH (d) ABOVE IS CONVEYED "AS IS, WHERE IS", WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE).
2.3 CAPITALIZATION.
(a) SNH and Five Star intend that on the Distribution Date (but prior to the Distribution), and after giving effect to the transfers contemplated by SECTION 2.2, Five Star shall have a total shareholders' equity, determined in accordance with GAAP, of $50,000,000. To effect this, SNH agrees to make a capital contribution to Five Star, in cash, equal to the Cash Contribution Amount as estimated by SNH in good faith on the Business Day prior to the Distribution Date. As soon as practicable following the Distribution Date, but in any event not later than March 15, 2002, Five Star shall furnish SNH with a certificate signed by its Treasurer setting forth the final Cash Contribution Amount, certifying that such amount was determined in accordance with the terms of this Agreement and in accordance with GAAP, and attaching Five Star's consolidated balance sheet prepared in accordance with GAAP as of the close of business on December 31,
2001. If the final Cash Contribution Amount exceeds the estimated Cash Contribution Amount, SNH shall pay Five Star, in immediately available funds, an amount equal to such excess promptly following the date of delivery of such certificate. If the final Cash Contribution Amount is less than the estimated Cash Contribution Amount, Five Star shall pay SNH, in immediately available funds, an amount equal to such shortfall on the date such certificate is delivered.
(b) If the CSL Stock Purchase Agreement is terminated because CLJ's shareholders have rejected the transactions contemplated by the CSL Stock Purchase Agreement, then upon receipt of payment from CLJ of the fee due upon such termination, SNH will contribute an amount equal to such fee (up to $7,500,000) to Five Star as additional capital.
2.4 LEASE OF EXISTING PROPERTIES.
SNH and Five Star shall cause the Existing Property Landlords and the
Existing Properties Holding Company to enter into a Master Lease Agreement in
mutually acceptable form (the "EXISTING PROPERTIES MASTER LEASE"), to be
effective immediately after the Distribution on the Distribution Date, pursuant
to which the Existing Property Landlords will lease the Existing Properties to
the Existing Properties Holding Company. The Existing Properties Holding Company
shall simultaneously enter into a sublease agreement with each of the Existing
Property Subtenants (the "EXISTING PROPERTIES SUBLEASES") pursuant to which the
Existing Properties Holding Company will sublease each of the Existing
Properties to one of the Existing Property Subtenants. In connection therewith,
(i) Five Star shall execute and deliver a guaranty of the obligations of the
Existing Properties Holding Company under the Existing Properties Master Lease,
(ii) Five Star shall cause the outstanding shares of the Existing Properties
Holding Company and of each Existing Property Subtenant to be pledged to the
Existing Property Landlords to secure such obligations and (iii) the Existing
Properties Holding Company shall execute and deliver a security agreement in
favor of the Existing Property Landlords to secure such obligations.
2.5 SERVICES AGREEMENT.
Five Star and RMR shall enter into a Shared Services Agreement in mutually acceptable form (the "SERVICES AGREEMENT"), to be effective on the effective date of the merger of Merger Sub and FSQ pursuant to SECTION 2.6, pursuant to which RMR shall provide the services to Five Star described, and upon the terms set forth, therein.
2.6 AGREEMENT OF MERGER BETWEEN FIVE STAR, MERGER SUB AND FSQ.
Five Star, Merger Sub and FSQ will enter into an Agreement and Plan of Merger in mutually acceptable form pursuant to which Merger Sub will merge with and into FSQ effective on or soon after January 2, 2002 (the "MERGER AGREEMENT"). Pursuant to the Merger Agreement, the shareholders of FSQ will receive 250,000 Five Star Common Shares on the effective date of the merger. Effective on the effective date of the merger, all existing management agreements with FSQ as manager, and relating to any Existing Property, shall terminate.
Immediately after the merger, Five Star shall contribute its interest in the Existing Properties Holding Company to FSQ, as the surviving company (see SCHEDULE 2.6).
2.7 THE DISTRIBUTION.
Five Star shall furnish a copy of the prospectus contained in the Five Star Registration Statement to shareholders of SNH and HRPT in connection with the Distribution. HRPT owns some of the outstanding SNH Common Shares and will, in turn, distribute to its shareholders all the Five Star Common Shares it receives in the distribution from SNH. On the Distribution Date, subject to the conditions set forth in this Agreement, SNH shall deliver to the Agent a share certificate representing a number of whole and fractional Five Star Common Shares equal to one tenth (1/10th) the number of SNH Common Shares issued and outstanding on the Record Date, and shall instruct the Agent to distribute, on or as soon as practicable following the Distribution Date, to holders of record of SNH Common Shares on the Record Date, one tenth (1/10th) of a Five Star Common Share for each SNH Common Share owned of record by such holder. HRPT shall instruct the Agent to distribute on or as soon as practicable following the Distribution Date, to holders of record of HRPT Common Shares on the Record Date, one hundredth (1/100th) of one Five Star Common Share for each HRPT Common Share owned of record by such holder. Each of SNH and HRPT will distribute fractional shares. In addition, each of SNH and HRPT shall authorize the Agent to perform such withholding in respect of the Distribution as may be required by Taxing Authorities. Five Star agrees to provide all share certificates that the Agent requires in order to effect the Distribution and any such associated withholding. Notwithstanding the Distribution, SNH intends to retain ownership of approximately 25,000 Five Star Common Shares, plus approximately 10,000 additional Five Star Common Shares that SNH will receive in its capacity as holder of record of approximately 1,000,000 HRPT Common Shares.
In the event HRPT does not receive a sufficient number of Five Star Common Shares to complete its above distribution, HRPT shall purchase from Five Star on the Distribution Date (and Five Star agrees to issue to HRPT) such number of Five Star Common Shares as is equal to such shortfall. The purchase price for each such Five Star Common Share will equal the average of the reported high and low public trading prices for Five Star Common Shares on the Distribution Date.
In no event shall the Distribution occur unless the following conditions shall have been satisfied:
(a) the transactions and other actions contemplated by SECTIONS 2.1 through 2.5 that are to occur prior to the Distribution shall have been consummated in all material respects, and the Merger Agreement shall have been executed and delivered by Five Star, Merger Sub and FSQ and shall be in full force and effect; and
(b) the Five Star Registration Statement shall have been declared effective by the Commission under the Securities Act, no stop order proceedings with respect to the Five Star Registration Statement are pending or threatened under the Securities Act and
the listing of the Five Star Common Shares for trading on the American Stock Exchange shall have been approved by such Exchange;
provided, however, that any such condition may be waived by SNH, HRPT and Five Star in their sole discretion.
SECTION 3 AGREEMENTS RE: CSL PROPERTIES
3.1 AGREEMENT TO LEASE CSL PROPERTIES AND RELATED MATTERS.
(a) CSL has agreed with SNH that, prior to the CSL Closing Date:
(A) CSL will organize the New CSL Landlords and the CSL Properties Holding Company, and will cause the CSL Properties Holding Company to organize FS Tenant Pool II Trust and FS Leisure Park Tenant Trust;
(B) CSL shall cause the New CSL Landlords and Leisure Park Venture Limited Partnership to enter into a Master Lease Agreement with the CSL Properties Holding Company, in mutually acceptable form (the "CSL PROPERTIES MASTER LEASE"), pursuant to which the New CSL Landlords and Leisure Park Venture Limited Partnership will lease the CSL Properties owned by them to the CSL Properties Holding Company; and
(C) CSL shall cause the CSL Properties Holding Company to enter into sublease agreements with each of FS Tenant Pool II Trust and FS Leisure Park Tenant Trust pursuant to which the CSL Properties Holding Company will sublease the CSL Properties owned by the New CSL Landlords to FS Tenant Pool II Trust and the CSL Property owned by Leisure Park Venture Limited Partnership to FS Leisure Park Tenant Trust.
(b) SNH shall cause CLJ to transfer and assign to FSQ, on the CSL Closing Date, shares representing all the issued and outstanding beneficial interests or capital stock, as the case may be, of the CSL Properties Holding Company (and its wholly-owned subsidiaries, FS Tenant Pool II Trust and FS Leisure Park Tenant Trust) and CCC Boynton Beach, Inc.
(c) On the CSL Closing Date:
(A) Unless otherwise agreed by such parties, SNH and Five Star shall cause the CSL Property Landlords not already a party to the CSL Properties Master Lease to lease the CSL Properties not already subject to the CSL Properties Master Lease to the CSL Properties Holding Company pursuant to an amendment to the CSL Properties Master Lease in form mutually acceptable to SNH and Five Star. Unless so agreed, the CSL Properties Holding Company shall simultaneously enter into a sublease agreement
with each of the CSL Property Subtenants not already a party to
the sublease agreements referenced in SECTION 3.1(A)(C) above,
pursuant to which the CSL Properties - Holding Company will
sublease each of such CSL Properties to one of the CSL Property
Subtenants (together with the sublease agreements referenced in
SECTION 3.1(A)(C), the "CSL PROPERTIES SUBLEASES"). In connection
therewith, (i) Five Star shall execute and deliver a guaranty of
the obligations of the CSL Properties Holding Company under the
CSL Properties Master Lease, (ii) Five Star shall cause the
outstanding shares of the CSL Properties Holding Company and of
each CSL Property Subtenant to be pledged to the CSL Property
Landlords to secure such obligations and (iii) the CSL Properties
Holding Company shall execute and deliver a security agreement in
favor of the CSL Property Landlords to secure such obligations.
(B) Five Star and SNH shall cause the CSL Property Landlords and the CSL Property Subtenants to enter into the CSL Properties Assignment and Assumption Agreement with respect to each of the CSL Properties pursuant to which, immediately following the CSL Closing, (i) each of the CSL Property Landlords will assign and transfer to the relevant Tenant that leases or subleases such CSL Property all assets (including the interest of such CSL Property Landlord in all Operating Agreements, Transition Agreements and Pooling Agreements) owned by it with respect to such CSL Property (excluding, however, any Landlord Assets), and (ii) such Tenant will assume and agree to pay, perform and observe accounts payable, accrued expenses and obligations relating to the CSL Properties leased or subleased by it, as more particularly described in the CSL Properties Assignment and Assumption Agreement.
(d) If the aggregate adjusted tax bases of the assets transferred under SECTIONS 3.1(B) and (C) (for this purpose taking into account the assets and liabilities of FS Tenant Pool II Trust and FS Leisure Park Tenant Trust, and treating the stock of CCC Boynton Beach, Inc. as an asset with a fair market value of zero) exceeds the aggregate amount of the liabilities assumed, Five Star will pay SNH an amount equal to the excess. Similarly, if the aggregate amount of the liabilities assumed exceeds the aggregate adjusted tax bases of the assets transferred under SECTIONS 3.1(B) and (C) (for this purpose taking into account the assets and liabilities of FS Tenant Pool II Trust and FS Leisure Park Tenant Trust, and treating the stock of CCC Boynton Beach, Inc. as an asset with a fair market value of zero), SNH will pay Five Star (or FSQ) an amount equal to the excess. Any payment required under this SECTION 3.1(D) shall be effected within forty-five (45) days after the CSL Closing Date.
3.2 ACTIONS RELATING TO OPERATING AGREEMENTS.
On the CSL Closing Date,
(a) Each of SNH, SNH/CSL Properties Trust, CLJ, Five Star, CSL, all the CSL Subsidiaries, CCC Boynton Beach, Inc. and CCC Senior Living Corporation shall enter into an Estoppel, Consent and Agreement with MSLS and Marriott International, Inc. in mutually acceptable form with respect to each of the CSL Properties; and
(b) Each of the CSL Property Landlords, the CSL Properties Holding Company, the CSL Property Subtenants and MSLS shall enter into an Owner Agreement in mutually acceptable form with respect to each of the CSL Properties.
3.3 TERMINATION OF THE CSL STOCK PURCHASE AGREEMENT.
If the CSL Stock Purchase Agreement is terminated for any reason, then any obligations of SNH and Five Star under this SECTION 3 will terminate without recourse.
3.4 AGREEMENT OF HPT.
In consideration of the payment of $980,341 to be made to HPT by SNH on the CSL Closing Date and the agreements of Five Star set forth in SECTION 5.1 hereof, HPT agrees to enter into an amendment to the subleases and related pledge agreements referenced in Section 6.2(b) of the CSL Stock Purchase Agreement on the CSL Closing Date.
SECTION 4 REPRESENTATIONS; NO IMPLIED REPRESENTATIONS, ETC.
(a) Each party hereto represents and warrants to the others that (i) it is duly authorized to enter into and perform this Agreement and has duly executed and delivered this Agreement, (ii) the execution, delivery and performance of its obligations under this Agreement will not conflict with or result in a breach of or default under or a violation of its Charter, any material Contract to which it is a party or by which any of its assets or its Subsidiaries are bound or any order, judgment, decree, permit, statute, law, rule or regulation to which it or any of its Subsidiaries is subject, and (iii) this Agreement constitutes its valid and binding obligation, enforceable in accordance with its terms, subject to (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement generally of creditors' rights and remedies, (B) general principles of equity (regardless of whether considered in a proceeding at law or in equity), including the discretion of any court of competent jurisdiction in granting specific performance or other equitable relief, and (C) an implied duty to take action and make determinations on a reasonable basis and in good faith.
(b) EACH OF SNH AND THE EXISTING PROPERTY LANDLORDS, ON THE ONE HAND, AND FIVE STAR AND THE EXISTING PROPERTY SUBTENANTS, ON THE OTHER HAND, ACKNOWLEDGES AND AGREES THAT NONE OF THEM HAS MADE AND NONE OF THEM IS MAKING ANY EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES WHATSOEVER (INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE, EACH OF WHICH IS HEREBY
EXPRESSLY DISCLAIMED) IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
(c) Notwithstanding anything herein to the contrary, the acknowledgments and agreements of the parties set forth in this SECTION 4 shall survive the Distribution Date and the CSL Closing Date, and shall be enforceable at any time.
SECTION 5 POST-DISTRIBUTION COVENANTS
5.1 OPERATIONS AND INVESTMENTS OF FIVE STAR.
At no time during the term of any lease by SNH or any Subsidiary thereof, as landlord, to Five Star or any Subsidiary thereof, as tenant, may Five Star or any Subsidiary thereof, directly or indirectly, own or finance (including sale and leaseback transactions), or participate in the ownership or financing of, any real estate property (collectively, the "PROPERTIES") of a type then owned or financed by SNH, HRPT, HPT or any other publicly-traded Entity that is managed by RMR (a "BENEFITED PARTY"); provided that if Five Star or such Subsidiary proposes to enter into any transaction involving the ownership or financing of a Property prohibited by this SECTION 5.1 ("PROPOSED TRANSACTION"), it shall provide notice of the Proposed Transaction to the relevant Benefited Party describing the Proposed Transaction in sufficient detail and offer the relevant Benefited Party the right to acquire or finance the acquisition of the Property and negotiate in good faith with the relevant Benefited Party. If, after ten (10) Business Days, Five Star and the relevant Benefited Party have not reached agreement on the terms of the acquisition or financing, Five Star (or such Subsidiary) shall be free to acquire or finance such Property itself or with others, free of the restrictions of this SECTION 5.1.
Five Star agrees that irreparable damage would occur if any of the provisions of this SECTION 5.1 were not performed in accordance with their terms and that the Benefited Parties' remedy at law for Five Star's or its Subsidiary's breach of its obligations under this SECTION 5.1 would be inadequate. Upon any such breach, the relevant Benefited Party shall be entitled (in addition to any other rights or remedies it may have at law) to seek an injunction enjoining and restraining Five Star or such Subsidiary from continuing such breach. Five Star agrees that the period of restriction and the geographical area of restriction imposed upon Five Star are fair and reasonable. If the provisions of this SECTION 5.1 relating to the period or the area of restriction are determined to exceed the maximum period or areas which a court having jurisdiction over the matter would deem enforceable, such period or area shall, for purposes of this Agreement, be deemed to be the maximum period or area which such court determines valid and enforceable.
5.2 COOPERATION, EXCHANGE OF INFORMATION, RETENTION OF RECORDS, AND COSTS OF REPORTING.
(a) Upon reasonable request prior to and after the Distribution Date, SNH (on behalf of the SNH Group) and Five Star (on behalf of the Five Star Group) shall promptly provide, and shall cause their respective Affiliates to provide, the requesting party with such cooperation and assistance, documents and other information, without charge, as
may be necessary or reasonably helpful in connection with (i) the consummation of the transactions contemplated by this Agreement and the preservation for each such party and for the Five Star Subsidiaries, to the extent reasonably feasible, the benefits of this Agreement (including, in the case of Five Star and the Five Star Subsidiaries, the economic and operational benefits of the Five Star Assets), (ii) each such party's preparation and filing of any original or amended Tax Return or of any financial or other report required to be filed under the Securities Exchange Act of 1934, as amended, or other applicable law, (iii) the conduct of any audit, appeal, protest or other examination or any judicial or administrative proceeding involving to any extent Taxes or Tax Returns within the scope of this Agreement, (iv) the verification of an amount payable hereunder to, or receivable hereunder from, any other party. Each such party shall make its officers and facilities available on a mutually convenient basis to facilitate such cooperation.
(b) SNH and Five Star shall retain or cause to be retained all books, records and other documents within its possession or control relating to any Contracts or otherwise to the Five Star Subsidiaries or their properties, assets or liabilities, and all Tax Returns, and all books, records, schedules, workpapers, and other documents relating thereto, which Tax Returns and other materials are within the scope of this Agreement, until the expiration of the later of (i) all applicable statutes of limitations (including any waivers or extensions thereof), and (ii) any retention period required by applicable law or pursuant to any record retention agreement.
(c) SNH agrees to bear the fees and expenses payable to any independent public accountants in connection with their audit of the financial statements of the Five Star Group for Five Star's fiscal year ending December 31, 2001 and any prior fiscal year.
5.3 RESTRICTIONS ON OWNERSHIP.
For so long as Five Star or any Five Star Subsidiary is a tenant of SNH or one of SNH's Subsidiaries, (a) Five Star will not permit the occurrence of any Change in Control, and (b) Five Star will not take any action that, in the reasonable judgment of SNH or HRPT, might reasonably be expected to have an adverse impact on the ability of SNH or HRPT to qualify as a "real estate investment trust" under Sections 856 through 860 of the Code.
SECTION 6 SURVIVAL; INDEMNIFICATION
6.1 INDEMNIFICATION BY SNH.
From and after the Distribution Date, SNH shall indemnify and hold harmless Five Star, its Subsidiaries (including the Five Star Subsidiaries), each of their respective directors, trustees, officers, employees and agents, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the "FIVE STAR INDEMNIFIED PARTIES") from and against any and all damages, claims, losses, expenses, costs, obligations and liabilities, including liabilities for all reasonable attorneys', accountants', and experts' fees and expenses, including those incurred to
enforce the terms of this Agreement (collectively, "COVERED LIABILITIES"), suffered, directly or indirectly, by any Five Star Indemnified Party by reason of, or arising out of,
(a) any breach of any covenant or agreement of SNH or any Existing Property Landlord contained in this Agreement; or
(b) any Liability of SNH or its Subsidiaries (other than the Five Star Liabilities).
6.2 INDEMNIFICATION BY FIVE STAR.
From and after the Distribution Date, Five Star shall indemnify and hold harmless SNH, its Subsidiaries, each of their respective directors, trustees, officers, employees and agents, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the "SNH INDEMNIFIED PARTIES") from and against any and all Covered Liabilities suffered, directly or indirectly, by any SNH Indemnified Party by reason of, or arising out of:
(a) any breach of any covenant or agreement of Five Star or any Tenant contained in this Agreement; or
(b) any Five Star Liability.
6.3 INDEMNIFICATION PROCEDURES.
(a) If any indemnified party receives notice of the assertion of any
Third-Party Claim with respect to which an indemnifying party is obligated
under this Agreement to provide indemnification, such indemnified party
shall give such indemnifying party written notice thereof (together with a
copy of such Third-Party Claim, process or other legal pleading) promptly
after becoming aware of such Third-Party Claim; PROVIDED, HOWEVER, that the
failure of any indemnified party to give notice as provided in this SECTION
6.3 shall not relieve any indemnifying party of its obligations under this
SECTION 6, except to the extent that such indemnifying party is actually
prejudiced by such failure to give notice. Such notice shall describe such
Third-Party Claim in reasonable detail.
(b) An indemnifying party, at such indemnifying party's own expense and through counsel chosen by such indemnifying party (which counsel shall be reasonably acceptable to the indemnified party), may elect to defend any Third-Party Claim. If an indemnifying party elects to defend a Third-Party Claim, then, within ten (10) business days after receiving notice of such Third-Party Claim (or sooner, if the nature of such Third-Party claim so requires), such indemnifying party shall notify the indemnified party of its intent to do so, and such indemnified party shall cooperate in the defense of such Third-Party Claim (and pending such notice and assumption of defense, an indemnified party may take such steps to defend against such Third-Party Claim as, in such indemnified party's good-faith judgment, are appropriate to protect its interests). The indemnifying party shall pay such indemnified party's reasonable out-of-pocket expenses incurred in connection with such cooperation. After notice from an indemnifying party to
an indemnified party of its election to assume the defense of a Third-Party
Claim, such indemnifying party (i) shall not be liable to such indemnified
party under this SECTION 6 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
other than those expenses referred to in the preceding sentence, and (ii)
shall keep the indemnified party reasonably informed of the status of the
defense of such Third-Party Claim; PROVIDED, HOWEVER, that such indemnified
party shall have the right to employ one law firm as counsel, together with
a separate local law firm in each applicable jurisdiction ("SEPARATE
Counsel"), to represent such indemnified party in any action or group of
related actions (which firm or firms shall be reasonably acceptable to the
indemnifying party) if, in such indemnified party's reasonable judgment at
any time, either a conflict of interest between such indemnified party and
such indemnifying party exists in respect of such claim, or there may be
defenses available to such indemnified party which are different from or in
addition to those available to such indemnifying party and the
representation of both parties by the same counsel would be inappropriate,
and in that event (i) the reasonable fees and expenses of such Separate
Counsel shall be paid by such indemnifying party (it being understood,
however, that the indemnifying party shall not be liable for the expenses
of more than one Separate Counsel (excluding local counsel) with respect to
any Third-Party Claim (even if against multiple indemnified parties), and
(ii) each of such indemnifying party and such indemnified party shall have
the right to conduct its own defense in respect of such claim. If an
indemnifying party elects not to defend against a Third-Party Claim, or
fails to notify an indemnified party of its election as provided in this
SECTION 6.3 within the period of ten (10) (or, if applicable, fewer)
business days described above, the indemnified party may defend,
compromise, and settle such Third-Party Claim and shall be entitled to
indemnification hereunder (to the extent permitted hereunder); PROVIDED,
HOWEVER, that no such indemnified party may compromise or settle any such
Third-Party claim without the prior written consent of the indemnifying
party, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, the indemnifying party shall not, without
the prior written consent of the indemnified party, (i) settle or
compromise any Third-Party Claim or consent to the entry of any judgment
which does not include as an unconditional term thereof the delivery by the
claimant or plaintiff to the indemnified party of a written release from
all liability in respect of such Third-Party Claim, or (ii) settle or
compromise any Third-Party Claim in any manner that would reasonably be
expected to have a material adverse effect on the indemnified party.
6.4 CERTAIN LIMITATIONS, ETC.
The amount of any Covered Liabilities for which indemnification is provided under this Agreement shall be net of any amounts actually recovered by the indemnified party from third parties (including amounts actually recovered under insurance policies) with respect to such Covered Liabilities. Any indemnifying party hereunder shall be subrogated to the rights of the indemnified party upon payment in full of the amount of the relevant indemnifiable loss. An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provision hereof, have any subrogation rights with respect thereto. If any indemnified party recovers an amount from a third party in respect of an indemnifiable loss for which indemnification is provided in
this Agreement after the full amount of such indemnifiable loss has been paid by an indemnifying party or after an indemnifying party has made a partial payment of such indemnifiable loss and the amount received from the third party exceeds the remaining unpaid balance of such indemnifiable loss, then the indemnified party shall promptly remit to the indemnifying party the excess of (i) the sum of the amount theretofore paid by such indemnifying party in respect of such indemnifiable loss plus the amount received from the third party in respect thereof, less (ii) the full amount of such Covered Liabilities.
6.5 PRIORITY OF SECTION 7.
As to the Tax matters addressed in SECTION 7, including the indemnification
for Taxes and the notice, control and conduct of Tax Contests, the provisions of
SECTION 7 shall be the exclusive governing provisions.
SECTION 7 TAX MATTERS
7.1 GENERAL RESPONSIBILITY FOR TAXES.
(a) All federal Income Taxes of the SNH Group shall be borne by, shall be the responsibility of, and shall be paid by the SNH Group, and all federal Income Taxes of the Five Star Group shall be borne by, shall be the responsibility of, and shall be paid by the Five Star Group. For purposes of federal Income Taxes, items of income, gain, loss, deduction, expenditure, and credit shall be allocated and apportioned between the SNH Group and the Five Star Group in the following manner. Any item relating to the Five Star Assets or the Five Star Business shall be: (i) allocated exclusively to the SNH Group if such item is in respect of a period ending before the Distribution Date; (ii) allocated exclusively to the Five Star Group if such item is in respect of a period commencing after the Distribution Date; and (iii) apportioned, if such item is in respect of a period that includes the Distribution Date, between the SNH Group and the Five Star Group in a manner consistent with (A) applicable Tax laws, (B) the continued qualification of both SNH and HRPT as real estate investment trusts under the Code, and (C) commercially reasonable pro rations of items between lessors and lessees of real estate.
(b) For any state or local Income Tax that follows Section 856(i) of the Code and Section 301.7701-2(c)(2)(i) of the Treasury Regulations (i) such state and local Income Taxes of the SNH Group shall be borne by, shall be the responsibility of, and shall be paid by the SNH Group, and (ii) such state and local Income Taxes of the Five Star Group shall be borne by, shall be the responsibility of, and shall be paid by the Five Star Group. For purposes of such state and local Income Taxes, items of income, gain, loss, deduction, expenditure, and credit shall be allocated and apportioned between the SNH Group and the Five Star Group in the same manner as SECTION 7.1(A).
(c) All Taxes not covered by SECTIONS 7.1 and 7.2, including Other Taxes, shall be allocated between the SNH Group and the Five Star Group on the basis of actual transactions, events or activities (including, if applicable, days elapsed) that give rise to
or create liability for such Taxes, and based on the taxable periods to which such Taxes relate.
(d) SNH shall hold Five Star harmless from and against all Taxes which are to be borne by the SNH Group under this SECTION 7.1. Five Star shall hold SNH harmless from and against all Taxes which are to be borne by the Five Star Group under this SECTION 7.1.
7.2 ALLOCATION OF CERTAIN TAXES AMONG TAXABLE PERIODS.
SNH and Five Star agree that if Five Star or any member of the Five Star Group is permitted but not required under any applicable Tax law, including applicable state and local Income Tax laws, to treat the day before the Distribution Date or the Distribution Date as the last day of a taxable period, SNH and Five Star shall cooperate so that such day will be treated as the last day of a taxable period.
7.3 FILING AND PAYMENT RESPONSIBILITY.
(a) From and after the Distribution Date, each of SNH (on behalf of
the SNH Group) and Five Star (on behalf of the Five Star Group) shall cause
to be prepared and filed such Tax Returns as the SNH Group and the Five
Star Group, respectively, are required to file with applicable Taxing
Authorities. Each of SNH (on behalf of the SNH Group) and Five Star (on
behalf of the Five Star Group) agree that, except as required by applicable
law, they will not take positions in any such Tax Return that are
inconsistent with (i) the description of federal Income Tax consequences in
the Five Star Registration Statement, (ii) the transfer of the CSL
Properties Holding Company, the CSL Property Subtenants and other
wholly-owned noncorporate Subsidiaries being treated as the transfer of
underlying assets and liabilities pursuant to Internal Revenue Service
Revenue Rulings 99-5 and 99-6, (iii) each asset transferred pursuant to
SECTION 2.2 or SECTION 3.1, taking into account Internal Revenue Service
Revenue Rulings 99-5 and 99-6, having a fair market value equal to its
adjusted tax basis immediately before such transfer (except that the stock
of CCC Boynton Beach, Inc. shall be treated as an asset having a fair
market value of zero), (iv) the payments from SNH to Five Star under
SECTION 2.3 representing a capital contribution from SNH to Five Star that
is non-taxable, and the payments from Five Star to SNH under SECTION 2.3,
if any, representing a non-taxable return of excess capital contributions,
and (v) any other Tax Return, whether filed on behalf of the SNH Group or
the Five Star Group, previously or substantially contemporaneously filed
with such Tax Return. In particular, SNH and Five Star will use all
reasonable business efforts to cooperate with one another in valuing the
individual assets comprising the Five Star Assets, to the extent such
valuations are necessary for Tax purposes.
(b) To the extent that either of the SNH Group or the Five Star Group bears responsibility pursuant to SECTION 7.1 for some or all of a Tax which is to be paid with a Tax Return for which the other bears preparation and filing responsibility pursuant to SECTION 7.3, then (i) the party bearing responsibility for some or all of such Tax shall have
the right to review and comment upon such Tax Return at least fifteen (15) days before such Tax Return must be filed, (ii) the party bearing responsibility for some or all of such Tax shall pay over by wire transfer the amount of such Tax for which it is responsible to the party filing such Tax Return at least three (3) days before such Tax Return must be filed, and (iii) the party responsible for preparing and filing such Tax Return will file such Tax Return on or before its due date and pay over to the applicable Taxing Authority the amount of Tax due with such Tax Return.
(c) SNH and Five Star shall cooperate to revoke, effective as of December 31, 2001, any Code Section 856(l) "taxable REIT subsidiary" elections in effect for the Taxable REIT Subsidiaries.
7.4 REFUNDS AND CREDITS.
Any refunds or credits of Taxes shall be for the account of the party
bearing responsibility for such Taxes under Section 7.1. Each of SNH and Five
Star agrees that if as the result of any audit adjustment made by any Taxing
Authority with respect to a Tax to be borne by the other party under SECTION
7.1, any member of the SNH Group or the Five Star Group, respectively, receives
a Tax benefit in the form of a cash refund or in the form of a credit applicable
against Tax liabilities to be borne by such benefited party under this SECTION
7, then the benefited party shall notify the other party of the same within ten
(10) days of, as applicable, receiving the cash refund or filing the Tax Return
in which such credit is utilized, and then pay over immediately to such other
party the amount of such Tax refund or credit.
7.5 TAX CONTESTS.
If either SNH (on behalf of the SNH Group) or Five Star (on behalf of the
Five Star Group) becomes aware of any audit, pending or threatened assessment,
official inquiry, examination or proceeding ("TAX CONTESTS") that could result
in an official determination with respect to Taxes due or payable, the
responsibility for any portion of which rests with the other party, such party
shall promptly so notify the other party in writing. The party bearing greater
responsibility for the Taxes contested in a Tax Contest shall bear the costs
(including attorneys' and accountants' fees, but excluding the contested Taxes)
of such Tax Contest, and shall control and conduct such Tax Contest in a
reasonable manner after consulting in good faith with the other party. The other
party shall supply the party controlling the Tax Contest with such powers of
attorney and assistance as may be reasonably requested. The responsibility for
any additional liability for Taxes resulting from a Tax Contest shall be
allocated and apportioned between the SNH Group and the Five Star Group in
accordance with SECTION 7.1. Except to the extent in conflict with the
provisions of this SECTION 7, the provisions of SECTION 6.3 shall be applicable
to Tax Contests.
7.6 RESOLUTION OF DISPUTES.
At the request of either SNH or Five Star, any disputes between SNH (on behalf of the SNH Group) and Five Star (on behalf of the Five Star Group) with respect to matters governed by this SECTION 7 shall be resolved through an arbitration by a firm of independent certified
public accountants, mutually agreed upon by SNH and Five Star and having no material relationship with either SNH or Five Star, whose determination shall be final and binding on both parties. The cost of such firm shall be borne equally by SNH and Five Star.
SECTION 8 MISCELLANEOUS
8.1 ARBITRATION.
Any and all disputes and disagreements arising out of or relating to this
Agreement, other than actions or claims for injunctive relief or claims raised
in actions or proceedings brought by third parties and other than disputes under
SECTION 7 as to which either party elects to apply the provisions of SECTION
7.6, shall be resolved through negotiations or, if the dispute is not so
resolved, through binding arbitration conducted in Boston, Massachusetts under
the J.A.M.S. Comprehensive Arbitration Rules and Procedures, with the following
amendments to those rules. First, in no event shall the arbitration from
commencement to issuance of an award take longer than 180 days. Second, the
arbitration tribunal shall consist of three arbitrators and the optional appeal
procedure provided for in Rule 32 shall not be utilized. Third, in lieu of the
deposition permitted in Rule 15(c), the only deposition per side shall be a
single deposition to last no longer than one six-hour day that each party may
take of the opposing party or an individual under the control of the opposing
party. Judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
8.2 CONFIDENTIALITY.
Each party hereto shall use its reasonable business efforts to maintain the confidentiality of any information concerning the other party or any Subsidiary of the other party provided to or discovered by it or its representatives and which is not otherwise available on a nonconfidential basis to such party and shall not (except as may otherwise be required by applicable law or the rules and regulations of the New York Stock Exchange or the American Stock Exchange) disclose such information, subject to the provisions of this Section, to anyone other than those people who have a need to know such information in connection with the conduct of such party's business, including its attorneys, accountants and other representatives and agents or during the course of or in connection with any Action based upon or in connection with the subject matter of this Agreement.
8.3 NOTICES.
(a) Any and all notices, demands, consents, approvals, offers, elections and other communications required or permitted under this Agreement shall be deemed adequately given if in writing and the same shall be delivered either in hand, or by mail or Federal Express or similar expedited commercial carrier, addressed to the recipient of the notice, postpaid and registered or certified with return receipt requested (if by mail), or with all freight charges prepaid (if by Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be deemed to have been given for all purposes of this Agreement upon the date of receipt or refusal,
except that whenever under this Agreement a notice is either received on a day which is not a business day or is required to be delivered on or before a specific day which is not a business day, the day of receipt or required delivery shall automatically be extended to the next business day.
(c) All such notices shall be addressed:
If to Five Star or any Tenant, to:
Five Star Quality Care, Inc.
400 Centre Street
Newton, Massachusetts 02458
Attn: President
If to SNH or any Existing Property Landlord, to:
Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attn: President
If to HPT, to:
Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attn: President
If to HRPT, to:
HRPT Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attn: President
If to FSQ (prior to the effective date under the Merger Agreement), to:
FSQ, Inc.
400 Centre Street
Newton, Massachusetts 02458
Attn: President
If to RMR, to:
REIT Management & Research LLC
400 Centre Street
Newton, Massachusetts 02458
Attn: President
(d) By notice given as herein provided, the parties hereto and their respective successors and assigns shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses effective upon receipt by the other parties of such notice and each shall have the right to specify as its address up to two other addresses within the United States of America.
8.4 WAIVERS, ETC.
No provision of this Agreement may be waived except by a written instrument signed by the party waiving compliance. No waiver by any party hereto of any of the requirements hereof or of any of such party's rights hereunder shall release the other parties from full performance of their remaining obligations stated herein. No failure to exercise or delay in exercising on the part of any party hereto any right, power or privilege of such party shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege by such party. This Agreement may not be amended, nor shall any waiver, change, modification, consent or discharge be effected, except by an instrument in writing executed by or on behalf of the party against whom enforcement of any amendment, waiver, change, modification, consent or discharge is sought.
8.5 ASSIGNMENT; SUCCESSORS AND ASSIGNS.
This Agreement and all rights and obligations hereunder shall not be assignable by any party without the written consent of the other parties, except to a successor to such party by merger or consolidation or an assignee of substantially all of the assets of such party. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not intended and shall not be construed to create any rights in or to be enforceable in any part by any other Person.
8.6 SEVERABILITY.
If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict of any provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question invalid, inoperative or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute or rule of public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative or unenforceable provision had never been contained herein and such provision reformed so that it would be valid, operative and enforceable to the maximum extent permitted in such jurisdiction or in such case.
8.7 COUNTERPARTS, ETC.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and shall supersede and take the place of any other instruments purporting to be an agreement of the parties hereto relating to the subject matter hereof. This Agreement may not be amended or modified in any respect other than by the written agreement of all of the parties hereto.
8.8 GOVERNING LAW.
This Agreement shall be interpreted, construed, applied and enforced in accordance with the laws of The Commonwealth of Massachusetts applicable to contracts between residents of Massachusetts which are to be performed entirely within Massachusetts.
8.9 EXPENSES.
SNH agrees to pay and to hold each other party to this Agreement (and its Subsidiaries) harmless from and against (a) all costs, expenses and fees (including in each case the reasonable fees and disbursements of counsel), incident to (i) the drafting, preparation, execution and delivery of this Agreement and all other agreements, instruments and other documents entered into by such other party or any Subsidiary thereof in connection herewith or in connection with the Distribution or the CSL Closing or consummation of the other transactions contemplated hereby, (ii) the preparation, printing, filing and distribution under the Securities Act of the Five Star Registration Statement (including financial statements and exhibits), each preliminary prospectus and prospectus in connection therewith and all amendments and supplements to any of them, (iii) the registration or qualification of the Five Star Common Shares for offer and sale under the securities and Blue Sky laws of the several states in connection with the Distribution, (iv) the initial listing of the Five Star Common Shares on the American Stock Exchange and (v) furnishing such copies of the Five Star Registration Statement, the final prospectus contained therein and all amendments and supplements thereto as may be requested for use by transferors thereof who are required to deliver a prospectus in connection with the Distribution, (b) the fees and expenses of the Agent in connection with the Distribution, and (c) all real property transfer Taxes, including Taxes levied upon the transfer of equity in an Entity owning real estate assets, and all excise, sales, use, value added, registration stamp, recording, documentary, conveyancing, franchise, property, transfer, gains and similar Taxes, levies, charges and fees, including any deficiencies, interest, penalties, additions to Tax or additional amounts excluding any Income Taxes, incurred in connection with the transactions contemplated by this Agreement. Each party hereto shall take all reasonable actions in making efforts to minimize the amount of transfer Taxes, and shall cooperate with one another in providing any appropriate exemption certifications or other similar documentation.
8.10 SECTION AND OTHER HEADINGS; INTERPRETATION.
The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, subsection, Schedule and Exhibit references are to this Agreement, unless otherwise specified. The words "including" and "include" shall be deemed to be followed by the words "without limitation."
8.11 EXCULPATION.
THE DECLARATION OF TRUST ESTABLISHING SNH, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "SNH DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "SENIOR HOUSING PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE SNH DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SNH SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SNH. ALL PERSONS DEALING WITH SNH IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF SNH FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
THE DECLARATION OF TRUST ESTABLISHING SPTIHS, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "SPTIHS DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "SPTIHS PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE SPTIHS DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SPTIHS SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SPTIHS. ALL PERSONS DEALING WITH SPTIHS IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF SPTIHS FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
THE DECLARATION OF TRUST ESTABLISHING SPTMNR, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "SPTMNR DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "SPTMNR PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE SPTMNR DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SPTMNR SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SPTMNR. ALL PERSONS DEALING
WITH SPTMNR IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF SPTMNR FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
THE DECLARATION OF TRUST ESTABLISHING HRES2, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "HRES2 DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HRES2 PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE HRES2 DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF HRES2 SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HRES2. ALL PERSONS DEALING WITH HRES2 IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF HRES2 FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
THE DECLARATION OF TRUST ESTABLISHING HPT, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "HPT DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE HPT DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF HPT SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HPT. ALL PERSONS DEALING WITH HPT IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF HPT FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
THE DECLARATION OF TRUST ESTABLISHING HRPT, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "HRPT DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HRPT PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE HRPT DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF HRPT SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HRPT. ALL PERSONS DEALING WITH HRPT IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF HRPT FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as a sealed instrument as of the date first above written.
SENIOR HOUSING PROPERTIES TRUST
By: /s/ David J. Hegarty ----------------------------------- Title: President |
SPTIHS PROPERTIES TRUST
By: /s/ David J. Hegarty ----------------------------------- Title: President |
SPTMNR PROPERTIES TRUST
By: /s/ David J. Hegarty ----------------------------------- Title: President |
HRES2 PROPERTIES TRUST
By: /s/ David J. Hegarty ----------------------------------- Title: President |
FIVE STAR QUALITY CARE, INC.
By: /s/ Bruce J. Mackey Jr. ----------------------------------- Title: Treasurer |
FSQ, INC.
By: /s/ Bruce J. Mackey Jr. ----------------------------------- Title: Treasurer |
HOSPITALITY PROPERTIES TRUST
By: /s/ Thomas M. O'Brien ----------------------------------- Title: Treasurer |
HRPT PROPERTIES TRUST
By: /s/ John A. Mannix ----------------------------------- Title: President |
REIT MANAGEMENT & RESEARCH LLC
By: /s/ Jennifer B. Clark ----------------------------------- Title: Vice President |
EXISTING PROPERTY SUBTENANTS:
FIVE STAR QUALITY CARE-AZ, LLC
By: /s/ Bruce J. Mackey Jr. ----------------------------------- Title: Treasurer |
FIVE STAR QUALITY CARE-CA, LLC
By: /s/ Beth S. Witte ----------------------------------- Title: Vice President |
FIVE STAR QUALITY CARE-COLORADO, LLC
By: /s/ Bruce J. Mackey Jr. ----------------------------------- Title: Treasurer |
FIVE STAR QUALITY CARE-CT, LLC
By: /s/ Beth S. Witte ----------------------------------- Title: Vice President |
FIVE STAR QUALITY CARE-GA, LLC
By: /s/ Beth S. Witte ----------------------------------- Title: Vice President |
FIVE STAR QUALITY CARE-IA, LLC
By: /s/ Bruce J. Mackey Jr. ----------------------------------- Title: Treasurer |
FIVE STAR QUALITY CARE-KS, LLC
By: /s/ Beth S. Witte ----------------------------------- Title: Vice President |
FIVE STAR QUALITY CARE-MI, LLC
By: /s/ Bruce J. Mackey Jr. ----------------------------------- Title: Treasurer |
FIVE STAR QUALITY CARE-MO, LLC
By: /s/ Bruce J. Mackey Jr. ----------------------------------- Title: Treasurer |
FIVE STAR QUALITY CARE-NE, LLC
By: /s/ Bruce J. Mackey Jr. ----------------------------------- Title: Treasurer |
FIVE STAR QUALITY CARE-WI, LLC
By: /s/ Bruce J. Mackey Jr. ----------------------------------- Title: Treasurer |
FIVE STAR QUALITY CARE-WY, LLC
By: /s/ Bruce J. Mackey Jr. ----------------------------------- Title: Treasurer |
FIVE STAR QUALITY CARE-CA, INC.
By: /s/ Beth S. Witte ----------------------------------- Title: Vice President |
FIVE STAR QUALITY CARE-IA, INC.
By: /s/ Bruce J. Mackey Jr. ----------------------------------- Title: Treasurer |
FIVE STAR QUALITY CARE-MI, INC.
By: /s/ Bruce J. Mackey Jr. ----------------------------------- Title: Treasurer |
FIVE STAR QUALITY CARE-NE, INC.
By: /s/ Bruce J. Mackey Jr. ----------------------------------- Title: Treasurer |
OMITTED SCHEDULES
The following schedules to the Transaction Agreement have been omitted.
Schedule Number Schedule Description 1.1(18) CSL Properties 1.1(31) Existing Properties 2.1(b)(A) Diagrams 2.1(b)(B) Diagrams 2.2(a)(A) Property Description 2.2(a)(B) Diagrams 2.2(b) Diagrams 2.2(c) Legal Description-Northwest Premises 2.2(d) Legal Description-Cheshire Premises 2.6 Diagrams |
The Registrant agrees to furnish supplementally a copy of the foregoing omitted schedules to the Securities and Exchange Commission upon request.
Exhibit 10-2
AGREEMENT OF MERGER
among
FIVE STAR QUALITY CARE, INC.,
FSQ ACQUISITION, INC.
and
FSQ, INC. (formerly known as "Five Star Quality Care, Inc.")
December 5, 2001
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS...............................................................................1
1.1. Definitions............................................................................1
SECTION 2. TRANSACTIONS AND TERMS OF MERGER..........................................................4
2.1. Merger.................................................................................4
2.2. Charter of the Survivor................................................................4
2.3. Bylaws of the Survivor.................................................................4
2.4. Directors and Officers of the Survivor.................................................5
2.5. Conversion of Securities...............................................................5
SECTION 3. CLOSING, EFFECTIVE TIME AND DELIVERY OF CONSIDERATION.....................................5
3.1. The Closing............................................................................5
3.2. Effective Time.........................................................................5
SECTION 4. REPRESENTATIONS AND WARRANTIES OF FSQ.....................................................5
4.1. Organization, etc......................................................................6
4.2. Authorization; Execution; Binding Effect...............................................6
4.3. Capitalization.........................................................................6
4.4. Subsidiaries...........................................................................6
4.5. No Conflicting Agreements or Charter Provisions........................................7
4.6. Litigation.............................................................................7
4.7. Disclosure.............................................................................7
4.8. Financial Statements...................................................................7
4.9. No Undisclosed Liabilities.............................................................8
4.10. Compliance with Law....................................................................8
4.11. No Changes.............................................................................8
4.12. Benefit Plans..........................................................................8
4.13. Tax Matters...........................................................................10
4.14. Material Contracts....................................................................12
4.15. Insurance.............................................................................12
4.16. Employee Matters......................................................................13
4.17. Title to Property.....................................................................13
4.18. Proprietary Information...............................................................13
4.19. Environmental Matters.................................................................13
4.20. Fees..................................................................................14
SECTION 5. REPRESENTATIONS AND WARRANTIES OF FIVE STAR..............................................14
5.1. Organization, Etc.....................................................................14
5.2. Authorization: Execution: Binding Effect..............................................14
5.3. Capitalization........................................................................15
5.4. No Conflicting Agreements or Charter Provisions.......................................15
5.5. Fees..................................................................................15
SECTION 6. CERTAIN COVENANTS AND AGREEMENTS.........................................................15
6.1. Conduct of Business by FSQ............................................................15
|
TABLE OF CONTENTS
(continued)
PAGE
6.2. Employee Benefits; Severance Policy...................................................16
6.3. Inspection of the Properties and Access to Information................................16
6.4. No Solicitation.......................................................................17
6.5. Reasonable Efforts; Further Assurances; Cooperation...................................17
6.6. Public Announcements..................................................................17
6.7. Supplements to Schedules..............................................................17
6.8. Tax Returns...........................................................................17
6.9. Termination of Management Agreement...................................................18
SECTION 7. CONDITIONS...............................................................................18
7.1. Conditions to Each Party's Obligations................................................18
7.2. Conditions to Obligations of FSQ......................................................18
7.3. Conditions to Obligations of Five Star and Merger Sub.................................19
SECTION 8. TERMINATION..............................................................................19
8.1. Termination...........................................................................19
8.2. Effect of Termination.................................................................20
SECTION 9. MISCELLANEOUS PROVISIONS.................................................................21
9.1. Notices...............................................................................21
9.2. Schedules and Exhibits................................................................21
9.3. Computation of Time...................................................................21
9.4. Assignment: Successors in Interest....................................................21
9.5. No Third-Party Beneficiaries..........................................................22
9.6. Investigation; Survival of Representations and Warranties.............................22
9.7. Number; Gender........................................................................22
9.8. Captions..............................................................................22
9.9. Amendments............................................................................22
9.10. Controlling Law: Integration: Waiver................................................22
9.11. Severability..........................................................................23
9.12. Counterparts..........................................................................23
|
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "AGREEMENT") is made and entered into as of December 5, 2001, among Five Star Quality Care, Inc., a Maryland corporation ("FIVE STAR"), with its principal office located in Newton, Massachusetts, FSQ Acquisition, Inc., a Delaware corporation ("MERGER SUB"), with its principal office located in Newton, Massachusetts, and FSQ, Inc., a Delaware corporation ("FSQ") (formerly known as "Five Star Quality Care, Inc."), with its principal office located in Newton, Massachusetts.
RECITALS:
The parties hereto have agreed to merge Merger Sub with and into FSQ, with FSQ to be the surviving entity, upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the foregoing, and the representations, warranties, covenants and agreements set forth in this Agreement, the parties agree as follows:
SECTION 1.
DEFINITIONS
1.1. DEFINITIONS.
Except as otherwise provided in this Agreement, the capitalized terms set forth below (in their singular and plural forms as applicable) shall have the following meanings:
(1) "Advertising": Five Star Advertising, Inc., a Delaware corporation.
(2) "Affiliate": any Person that is or has been in last five year period ending with the Closing Date treated as a single employer with FSQ under Sections 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA.
(3) "Agreement": this Agreement of Merger, as amended or otherwise modified from time to time in accordance with its terms, together with the schedules hereto.
(4) "Benefit Arrangement" any material benefit arrangement that is not a
Plan, including (i) any employment or consulting agreement, (ii) any arrangement
providing for insurance coverage or workers' compensation benefits, (iii) any
incentive bonus or deferred bonus arrangement, (iv) any arrangement providing
termination allowance, severance pay, salary continuation for disability, or
other leave of absence, supplemental unemployment benefits, lay-off, reduction
in force or similar benefits, (v) any stock option or equity compensation plan,
(vi) any deferred compensation plan, (vii) any compensation policy or practice,
(viii) any educational assistance arrangements or policies, (ix) any plan
governed by Section 125 of the Code and (x) any change of control arrangements
or policies.
(5) "Business Day": a day, other than a Saturday or a Sunday, on which banking institutions in Boston, Massachusetts are required to be open.
(6) "Certificate of Merger": the Certificate of Merger to be executed by Merger Sub and FSQ and delivered to the Secretary of State of Delaware relating to the merger of Merger Sub with and into FSQ, as contemplated by SECTION 2.1.
(7) "Charter": a Person's certificate or articles of incorporation.
(8) "Closing": the closing of the Merger which will take place as described in SECTION 3.1.
(9) "Closing Date": the date on which the Closing occurs.
(10) "Code": the Internal Revenue Code of 1986, as amended.
(11) "Contract": any contract, agreement, indenture, note, bond, loan agreement, instrument, lien, conditional sales contract, lease, mortgage, license, franchise, insurance policy, commitment or other arrangement or agreement.
(12) "Delaware Law": Sections 17-101 et seq. of Title 6 of the Delaware Code Annotated.
(13) "Effective Time": the date and time at which the Merger becomes effective pursuant to Delaware Law and as provided in SECTION 3.2 of this Agreement.
(14) "Environmental Laws": any and all applicable federal, state and local environmental health and safety statutes, laws and ordinances and all regulations and rules of all governmental agencies, bureaus or departments and all applicable judicial, administrative and regulatory decrees, judgments and orders, including common law rulings, relating to injury to, or the protection of, the environment or human health, including, without limitation, all requirements pertaining to reporting, licensing, permitting, investigation, remediation and removal of emissions, discharges, releases or threatened releases of Hazardous Materials into the environment or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials.
(15) "ERISA": the Employee Retirement Income Security Act of 1974, as amended.
(16) "Five Star Common Stock": shares of Five Star Common Stock, $0.01 par value.
(17) "Five Star Registration Statement": the registration statement on Form S-1 filed by Five Star under the Securities Act of 1933, as amended, in connection with the distribution contemplated by the Transaction Agreement.
(18) "Five Star Subsidiaries": the Subsidiaries of Five Star, each of which is a "Five Star Subsidiary".
(19) "FSQ Financial Statements": defined in SECTION 4.8.
(20) "GAAP": generally accepted accounting principles as in effect on the date of the financial statements, taxes or other item being referenced.
(21) "Hazardous Materials": any substance (i) the presence of which requires or may hereafter require notification, investigation or remediation under any Environmental Law; (ii) which is or becomes defined as a "hazardous substance", "hazardous material", "hazardous" or "dangerous waste" or similar term under the Comprehensive Environmental Response Compensation and Liability Act, as amended (42 USC ss.9601 et. seq.), or any other federal, state or local Environmental Law; (iii) which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous; or (iv) without limitation, which contains or consists of gasoline, diesel fuel, or other petroleum products or natural gas, natural gas liquids, liquefied natural gas or synthetic gas usable for fuels.
(22) "IRS": the United States Internal Revenue Service.
(23) "Knowledge": the terms "FSQ's knowledge" and "to the knowledge of FSQ", "Five Star's knowledge" and "to the knowledge of Five Star," and "Merger Sub's knowledge" and "to the knowledge of Merger Sub" mean the actual knowledge of any of their respective officers and directors.
(24) "Lien": any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on common law, statute, court decision or contract and including, without limitation, any mortgage, pledge, security interest, lease, encumbrance, lien, purchase option, call or right, or charge of any kind (including any agreement to give or permit any of the foregoing), any conditional sale or other title retention agreement, any lease of property (whether real, personal or mixed) which is required, in accordance with GAAP, to be recorded by the lessee as the acquisition of an asset and the incurrence of a liability, and the filing of any financing statement under the Uniform Commercial Code or personal property security legislation of any jurisdiction.
(25) "Management Agreement": the Master Management Agreement dated as of October 1, 2000 among certain Subsidiaries of Five Star and FSQ, as Manager.
(26) "Material Adverse Effect": any material adverse effect on the business, assets, liabilities, financial condition or results of operations of a Person and its Subsidiaries, taken as whole.
(27) "Merger": the merger of Merger Sub with and into FSQ as provided in
SECTION 2.1 of this Agreement.
(28) "Merger Consideration": with respect to each issued and outstanding share of FSQ's common stock, 250 shares of fully paid and nonassessable Five Star Common Stock.
(29) "Party": Each of Five Star, Merger Sub and FSQ.
(30) "Permitted Liens": any Liens for Taxes not yet due or delinquent and any statutory encumbrance arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent.
(31) "Person": an individual, real estate investment trust, partnership, joint venture, corporation, limited liability company, trust and any other form of business organization.
(32) "Plan": an employee benefit plan as defined in Section 3(3) of ERISA.
(33) "Proprietary Data": defined in SECTION 4.18.
(34) "Purchase Proposal": any proposal or offer to acquire all or substantially all of the assets of FSQ or all or substantially all of FSQ's equity securities, whether by merger, purchase of assets, tender offer or otherwise, whether for cash, securities or any other consideration or combination thereof.
(35) "Qualified Plan": a Plan maintained by FSQ or an Affiliate that complies or is intended to comply with Section 401 of the Code.
(36) "Subsidiaries": all corporations, associations or other entities of which a person owns, directly or indirectly, more than 50% of the voting stock or other voting equity interests of such corporation, association or other entity.
(37) "Survivor": defined in SECTION 2.1.
(38) "Taxes": defined in SECTION 4.13(1).
(39) "Tax Returns": defined in SECTION 4.13(1).
(40) "Transaction Agreement": the Transaction Agreement dated as of December 7, 2001 among Senior Housing Properties Trust, Five Star, FSQ, Hospitality Properties Trust, HRPT Properties Trust, REIT Management & Research LLC and the other Persons party thereto.
SECTION 2.
TRANSACTIONS AND TERMS OF MERGER
2.1. MERGER.
Subject to the terms and conditions of this Agreement, at the Effective Time, Merger Sub shall be merged with and into FSQ in accordance with the provisions of and with the effect provided under Delaware Law. The separate existence of Merger Sub shall thereupon cease, and FSQ shall be the surviving corporation of the Merger (sometimes referred to as the "SURVIVOR") and shall continue to be governed by Delaware Law. The Merger shall be consummated pursuant to the terms of this Agreement.
2.2. CHARTER OF THE SURVIVOR.
The Charter of Merger Sub in effect immediately prior to the Effective Time shall be the Charter of the Survivor, until amended in accordance with Delaware Law.
2.3. BYLAWS OF THE SURVIVOR.
The Bylaws of Merger Sub in effect immediately prior to the Effective Time shall be the Bylaws of the Survivor, until amended in accordance with Delaware Law.
2.4. DIRECTORS AND OFFICERS OF THE SURVIVOR.
The directors and officers of Merger Sub immediately prior to the Effective Time shall be the directors and officers of the Survivor as of the Effective Time.
2.5. CONVERSION OF SECURITIES.
(1) MERGER SUB SHARES. Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall, at the Effective Time, automatically become a share of common stock of the Survivor.
(2) FSQ SHARES. Each share of common stock of FSQ issued and outstanding immediately prior to the Effective Time shall, as of the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive the Merger Consideration. As a result of the Merger and without any action on the part of the holder thereof, at the Effective Time all shares of common stock of FSQ issued and outstanding immediately prior to the Effective Time shall be cancelled and retired and shall cease to exist and each holder of common stock of FSQ shall thereafter cease to have any rights with respect thereto except the right to receive, without interest, the Merger Consideration, upon the surrender of a certificate representing such common stock of FSQ.
SECTION 3.
CLOSING, EFFECTIVE TIME AND DELIVERY OF CONSIDERATION
3.1. THE CLOSING.
Following the day on which the last of the conditions set forth in this Agreement shall be fulfilled or waived in accordance herewith, subject to the terms and conditions of this Agreement, the closing of the Merger shall take place at the offices of Sullivan & Worcester LLP, at Boston, Massachusetts at 9:00 a.m. (local time), on January 2, 2002, or at such other time, date or place as the Parties may agree.
3.2. EFFECTIVE TIME.
If all of the conditions to the Merger set forth in this Agreement shall have been fulfilled or waived and this Agreement shall not have been terminated, on the Closing Date the Parties shall execute and deliver to the Delaware Secretary of State a Certificate of Merger in accordance with Delaware Law. The Merger shall become effective upon the acceptance for filing of the Certificate of Merger by the Secretary of State of the State of Delaware.
SECTION 4.
REPRESENTATIONS AND WARRANTIES OF FSQ
FSQ represents and warrants to Five Star and acknowledges that Five Star is relying upon such representations and warranties in connection with the transactions provided for in this Agreement:
4.1. ORGANIZATION, ETC.
FSQ is duly organized, validly existing and in good standing as a corporation under the laws of the state of Delaware and has all requisite power and authority (i) to conduct its business as it is now conducted, (ii) to own or lease all of the properties owned or leased by it, (iii) to enter into and perform this Agreement and (iv) to otherwise consummate the transactions contemplated by this Agreement. The records and minute books of FSQ contain complete and accurate, in all material respects, minutes of all meetings of the directors and the shareholders of FSQ since the date of its formation, all such meetings were duly called and held, and the stock record books and register of holders of common stock of FSQ are complete and accurate. FSQ is duly qualified to do business and is in good standing in all jurisdictions in which the ownership or lease of property by it or the conduct of its business makes such qualification necessary, except where the failure to be qualified does not have and would not be reasonably expected to have a Material Adverse Effect on FSQ.
4.2. AUTHORIZATION; EXECUTION; BINDING EFFECT.
The execution and delivery of this Agreement, and the consummation of the transactions provided for in this Agreement, have been duly authorized by all necessary corporate and stockholder action on the part of FSQ and this Agreement constitutes the legal, valid and binding obligation of FSQ, enforceable against it in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other laws affecting creditors' rights and remedies generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
4.3. CAPITALIZATION.
The authorized capital stock of FSQ consists of 3,000 shares of common stock $0.01 par value, of which 1,000 shares are issued and outstanding. FSQ has not issued any options or any securities convertible into common stock of FSQ. All of such outstanding common stock of FSQ has been duly authorized and validly issued, is fully paid and nonassessable and is not subject to any preemptive or similar rights. FSQ is not a party to or bound by any agreement, put or commitment pursuant to which it is obligated to purchase, redeem or otherwise acquire any of its common stock or any options or securities convertible into its common stock.
4.4. SUBSIDIARIES.
FSQ does not have any Subsidiaries or own, directly or indirectly, or control any equity or voting interest in any Person, except for Advertising.
Advertising is duly organized, validly existing and in good standing as a corporation under the laws of the state of Delaware. Advertising has not engaged in any business, and has not incurred any liabilities of any nature whatsoever, except for franchise taxes and like expenses required to be incurred by it to maintain its existence or qualification. The authorized capital stock of Advertising consists of 3,000 shares of common stock $0.01 par value, of which 1,000 shares are issued and outstanding. All of such outstanding common stock of Advertising has been duly authorized and validly issued, is fully paid and nonassessable and is not subject to any preemptive or similar rights. All of the issued and outstanding common stock of Advertising is
owned beneficially and of record by FSQ, free and clear of all Liens. There are no outstanding options, rights or agreements of any kind relating to the issuance, sale or transfer of any capital stock of Advertising.
4.5. NO CONFLICTING AGREEMENTS OR CHARTER PROVISIONS.
The execution, delivery and compliance with and performance of the terms and provisions of this Agreement will not conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, (i) the Charter or Bylaws of FSQ or Advertising or any resolutions adopted by their respective directors or stockholders, (ii) any provision of any material Contract to which FSQ or Advertising is a party or by which they or any part of their respective assets may be bound, or (iii) any order, judgment, decree, license, permit, statute, law, rule or regulation to which FSQ or Advertising is subject. The execution, delivery and performance of this Agreement will not result in the creation of any Lien upon or any preferential arrangement with respect to the business or any part of the assets or properties of FSQ or Advertising.
4.6. LITIGATION.
There is (whether insured or uninsured) no action, suit, proceeding or investigation pending or, to the knowledge of FSQ, threatened, at law or in equity, in any court or before or by any federal, state, municipal or other governmental authority, department, commission, board, agency or other instrumentality (i) against FSQ or Advertising or, to the knowledge of FSQ, affecting FSQ or Advertising, except for private civil litigation involving claims which will not have a Material Adverse Effect on FSQ, (ii) to the knowledge of FSQ, against or adversely affecting any officer or director of FSQ or Advertising, or (iii) adversely affecting this Agreement or any action taken or to be taken or documents executed or to be executed pursuant to or in connection with the provisions of this Agreement.
4.7. DISCLOSURE.
None of the information concerning FSQ or its business, condition (financial or otherwise), assets, liabilities, personnel, and policies contained herein, in any Schedule (as the same are superseded or supplemented prior to the Closing Date) or in the FSQ Financial Statements contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.
4.8. FINANCIAL STATEMENTS.
FSQ has heretofore furnished to Five Star copies of the unaudited financial statements of FSQ for the fiscal year ended December 31, 2000 and the unaudited financial statements of FSQ for the nine month period ended September 30, 2001 (collectively, the "FSQ FINANCIAL STATEMENTS"). The FSQ Financial Statements, including in each case the notes thereto, have been prepared from the books and records of FSQ and in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, except as otherwise noted therein, are true, accurate and complete in all material respects, and fairly present the financial condition and results of operations of FSQ on the bases therein stated, as of the respective dates thereof, and for
the respective periods covered thereby subject, in the case of unaudited financial statements, to normal year-end audit adjustments and accruals and absence of footnotes.
4.9. NO UNDISCLOSED LIABILITIES.
Except as set forth in FSQ Financial Statements, as of September 30, 2001, FSQ did not have any obligations, indebtedness or liabilities of any nature which would have been required by GAAP to be reflected on the balance sheet of FSQ as of September 30, 2001 or the notes thereto, that are not shown on such balance sheet or the notes to such balance sheet. Except as set forth in such balance sheet, FSQ, on the date of this Agreement, does not have outstanding any material obligation, indebtedness or liability, and FSQ does not know of any basis for the assertion against FSQ of any such material obligation, indebtedness or liability, other than those incurred since September 30, 2001 in the ordinary course of business or disclosed in SCHEDULE 4.9.
4.10. COMPLIANCE WITH LAW.
FSQ (i) has complied with all laws, regulations and orders which are applicable to its business as presently conducted, (ii) possesses all permits, licenses and other governmental approvals, accreditations, consents, authorizations and orders specifically applicable to, or necessary for the conduct of, its business as currently conducted, and (iii) has obtained all governmental approvals and all other approvals, consents, certifications and waivers and has made all filings, given all notices and otherwise complied with all governmental laws, rules and regulations which are required on the part of FSQ to enter into and perform this Agreement, and to otherwise consummate the transactions contemplated by this Agreement, except in each case, where the failure to have acted in accordance with clauses (i), (ii) and (iii) has not and would not reasonably be expected to have a Material Adverse Effect on FSQ.
4.11. NO CHANGES.
Since September 30, 2001, there has not been, occurred or arisen (i) any change in, or agreement to change the character or nature of the business of FSQ, (ii) any change in the financial condition, results of operations, business, properties, assets or liabilities of FSQ, which has had or would reasonably be expected to have a Material Adverse Effect on FSQ or (iii) any obligation incurred by FSQ, other than any incurred in the ordinary course of business or which, individually or in the aggregate, with all other obligations so incurred, is or are not material in amount to FSQ.
4.12. BENEFIT PLANS.
(1) Except as described in SCHEDULE 4.12, neither FSQ nor any Affiliate contributes to any Plan or Benefit Arrangement nor has contributed to or sponsored any Plan or Benefit Arrangement in the five year period ending with the Closing Date. As to all Plans and Benefit Arrangements listed in SCHEDULE 4.12:
(a) all such Plans and Benefit Arrangements comply and have been administered in all material respects in form and in operation with all applicable laws, and all required returns (including without limitation information returns)
have been prepared in accordance with all applicable laws and have been timely filed in accordance with applicable laws with respect to any such Plan or Benefit Arrangement, except where the failure to so comply or to prepare and file such returns could not reasonably be expected to have a Material Adverse Effect, and neither FSQ nor any Affiliate has received any outstanding written notice from any governmental or quasi-governmental authority questioning or challenging such compliance (where such noncompliance could reasonably be expected to have a Material Adverse Effect);
(b) all Qualified Plans maintained or previously maintained by FSQ or any Affiliate comply and complied in all material respects in form and in operation with all applicable requirements of the Code and ERISA, a favorable determination letter has been received from the Internal Revenue Service with respect to each such Plan (or the sponsor of the Plan is entitled to rely on a favorable opinion letter issued to the Plan's prototype sponsor by the Internal Revenue Service) and no event has occurred that will or could reasonably be expected to give rise to disqualification of any such Plan or to a tax under Section 511 of the Code;
(c) there are no non-exempt "prohibited transactions" (as described in
Section 406 of ERISA or Section 4975 of the Code) with respect to any Plans
and neither FSQ nor any of its Affiliates has otherwise engaged in any
prohibited transaction;
(d) there have been no acts or omissions by FSQ or any Affiliate that have given rise to or could reasonably be expected to give rise to material fines, penalties, taxes or related charges under Sections 502(c), 502(i) or 4071 of ERISA or Chapter 43 of the Code for which FSQ or any Affiliate may be liable;
(e) there are no claims (other than routine claims for benefits) pending or, to FSQ's Knowledge, threatened involving any Plan or the assets of any Plan, except as set forth on SCHEDULE 4.12(1)(e);
(f) no Qualified Plan is subject to Title IV of ERISA;
(g) neither FSQ nor any Affiliate nor, to the best of the knowledge of FSQ, any of their respective directors, officers, employees or any other fiduciary has committed any breach of fiduciary responsibility imposed by ERISA that would subject FSQ or any Affiliate or any of their respective directors, officers or employees to liability under ERISA;
(h) no Qualified Plan that is subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code had an accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the most recently completed fiscal year of such Plan;
(i) except as set forth in SCHEDULE 4.12(1)(i), and other than pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, or any equivalent state statute, neither FSQ nor any Affiliate maintains any Plan that provides benefits described in Section 3(1) of ERISA to any former employees or retirees of FSQ or any of its Affiliates;
(j) except as set forth in SCHEDULE 4.12(1)(j), the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or any equivalent state statute, and the Health Insurance Portability and Accountability Act of 1996, or any equivalent state statute, have been complied with in all material respects;
(k) FSQ has made available to Five Star copies of the Federal Form 5500 series and accountant's opinion, if applicable, for each Plan or Benefit Arrangement (and the most recent actuarial valuation reports for each Plan, if any, that is subject to Title IV of ERISA), for three plan years preceding the Closing Date and all information provided by FSQ or any Affiliate to any actuary in connection with the preparation of any such actuarial valuation report was true, correct and complete in all material respects; and
(l) FSQ has delivered to Five Star correct and complete copies of all Plans and Benefit Arrangements and, where applicable, each of the following documents with respect to such Plans or Benefit Arrangements: (i) any amendments; (ii) any related trust documents; (iii) any documents governing the investment and management of the Plan or the Benefit Arrangement, or the assets thereof, including, without limitation, any documents relating to fees incurred by the sponsor or participants and beneficiaries; (iv) the most recent summary plan descriptions and summaries of material modifications; and (v) written communications to employees to the extent the substance of the Plans and Benefit Arrangements described therein differ materially from the other documentation furnished under this clause.
(2) Neither FSQ nor any Affiliate is or ever has been a party to any multiemployer plan, within the meaning of Section 4001(a)(3) of ERISA, or made contributions to any such plan.
(3) No employee is entitled to, nor shall any employee accrue or receive,
additional benefits, services, accelerated rights to payment of benefits or
accelerated vesting, whether pursuant to any Plan, Benefit Arrangement or
otherwise, including the right to receive any parachute payment as defined in
Section 280G of the Code, or become entitled to severance, termination allowance
or other similar payments as a result of this Agreement and the transactions
contemplated hereunder.
4.13. TAX MATTERS.
(1) FSQ is, and at all times since its creation has been, a qualified subchapter S corporation under the Code.
(2) Except where any failure to do so would not have a Material Adverse Effect on FSQ, FSQ has filed when due (including extensions) with local, foreign and other governmental
agencies all tax returns, estimates, information and reports ("TAX RETURNS") required to be filed by FSQ with respect to all federal, state, local or foreign taxes, levies, imposts, duties, licenses and registration fees, and similar charges, including, without limitation, income taxes, unemployment and social security withholding taxes, sales and use taxes, real estate transfer taxes, estimated and installment taxes, and interest, penalties, and additions to tax with respect thereto ("TAXES"), and all such Tax Returns were correct and complete in all material respects. Except where any failure to do so would not have a Material Adverse Effect on FSQ, FSQ has paid when due and payable all Taxes (whether or not shown as due and payable on its Tax Returns), including, without limitation, all Taxes due with respect to any completed and settled audit, examination or deficiency litigation with any taxing authority. To the extent of Taxes not yet due and payable, FSQ has made required estimated payments of or accrued or otherwise adequately reserved in accordance with GAAP for the payment of such Taxes, including, without limitation, unpaid Taxes for all taxable periods (or portions thereof) through the Closing Date. FSQ is not a party to or bound by any agreement providing for the allocation or sharing of Taxes.
(3) No Taxes have been assessed or asserted in writing in respect of any Tax Returns filed by FSQ or claimed in writing to be due by any taxing authority or otherwise that are not accrued or adequately reserved for in accordance with GAAP, and no Liens for Taxes exist with respect to any of the assets or properties of FSQ, except for statutory Liens for Taxes not yet due or payable or that are being contested in good faith. No Tax Return of FSQ has been or, to FSQ's knowledge, is currently being examined or audited by the IRS or other taxing authority (whether foreign or domestic), there is no deficiency or refund litigation pending with respect to any Taxes, and FSQ is not bound by any currently effective private ruling, closing agreement or similar agreement with any taxing authority relating to a material amount of Taxes. FSQ has not executed or filed with the IRS or any other taxing authority (whether foreign or domestic) any agreement, waiver, or other document extending, or having the effect of extending, the period for assessment or collection of any Taxes, which extension or waiver is still in effect. All final adjustments made by the IRS with respect to any Tax Return of FSQ have been reported to the relevant state, local, or foreign taxing authorities to the extent required by law, except where the failure to do so would not have a Material Adverse Affect on FSQ. No requests for ruling or determination letters filed by FSQ with respect to FSQ are pending with any taxing authority.
(4) FSQ has not filed a consent pursuant to Section 341(f) of the Code, or agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code) owned directly or indirectly by it. No property of FSQ is property that is or will be required to be treated as (A) being owned by another person pursuant to the provisions of Section 168(f)(8) of the Code of 1954, as in effect prior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982, (B) "tax-exempt use property" within the meaning of Section 168(h)(1) of the Code, or (C) subject to a lease under Section 7701(h) of the Code. FSQ does not have a permanent establishment in any foreign country and does not operate or conduct a business through any branch in any foreign country. FSQ has not agreed to and FSQ is not required to make any adjustment pursuant to Section 481(a) of the Code or any similar provision of state, local or foreign law by reason of a change in the accounting method initiated by FSQ, and FSQ has no knowledge that the IRS or other governmental authority has proposed any such adjustment or change in accounting method. FSQ has not executed or entered into a closing agreement pursuant to Section 7121 of the Code or any predecessor provision thereof or any similar provision of state, local or foreign law. FSQ is not,
nor has it been, a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code, and Five Star is not required to
withhold tax on the acquisition of the stock of FSQ by reason of Section 1445 of
the Code. FSQ has not at any time been (i) a member of an affiliated group of
corporations filing consolidated, combined or unitary income or franchise Tax
Returns, or (ii) a member of any partnership or joint venture for a period for
which the statue of limitations for any Tax potentially applicable as a result
of such membership has not expired. Neither FSQ nor any of its affiliates, nor
any predecessor of FSQ or of any of its Affiliates by merger, reorganization,
liquidation or consolidation, has within the three (3) years prior to the date
of this Agreement been a party to a transaction intended to qualify under
Section 355 of the Code or so much of Section 356 of the Code as relates to
Section 355 of the Code.
(5) The performance of the transactions contemplated by this Agreement will not (either alone or upon the occurrence of any additional or subsequent event) result in FSQ being subject to additional Taxes.
(6) The performance of the transactions contemplated by this Agreement will not (either alone or upon the occurrence of any additional or subsequent event) result in any payment that would constitute an "excess parachute payment" within the meaning of Section 280G of the Code.
4.14. MATERIAL CONTRACTS.
Except as set forth in SCHEDULE 4.14, FSQ is not a party to or bound by any (A) Contract involving commitments for future payments in excess of $100,000 not made in the ordinary course of business or terminable on more than ninety (90) days notice without payment of premium or penalty; (B) Contract involving a commitment for future payment of in excess of $100,000 for any purchase or sale by FSQ of property, improvements, services or equipment not made in the ordinary course of business; (C) Contract among partners or granting a right of refusal or for a partnership or for a joint venture or for the acquisition, sale or lease of any assets of FSQ; (D) mortgage, pledge, conditional sales contract, security agreement, factoring agreement or other similar Contract with respect to any real or tangible personal property of FSQ; (E) loan agreement, credit agreement, promissory note, guarantee, indenture, subordination agreement, letter of credit or any other similar type of Contract; (F) retainer Contract with attorneys, accountants, actuaries, appraisers, investment bankers or other professional advisers; or (G) noncompetition, nondisclosure or confidentiality Contract or any other Contract that prohibits FSQ from freely engaging in any business or competing anywhere in the world. FSQ has made available to Five Star true, correct and complete copies of the Contracts listed in SCHEDULE 4.14, together with all amendments, waivers, modifications, supplements or side letters affecting the obligations of any party thereunder. Advertising is not a party to any Contracts.
4.15. INSURANCE.
FSQ has obtained all insurance coverage required to be obtained by it under the Management Agreement, and such insurance is in full force and effect.
4.16. EMPLOYEE MATTERS.
SCHEDULE 4.16 sets forth a list of: (i) the job title, current annual base salary rates of, and required bonuses payable to, all present officers, employees and agents of FSQ having an annual base compensation in excess of $150,000 per year (including commissions and bonuses) and (ii) all employment or compensation agreements with each officer and employee of FSQ (including all deferred compensation, severance, "stay-put" and similar agreements and all agreements which result in the creation or occurrence of any right, duty or obligation based upon, or as a result of, any change of control of FSQ or its assets).
4.17. TITLE TO PROPERTY.
FSQ has good and merchantable title to all its material property and assets, tangible and intangible, owned by FSQ, in each case free and clear of all Liens, except for Permitted Liens and Liens reflected in the FSQ Financial Statements.
4.18. PROPRIETARY INFORMATION.
Except as set forth on SCHEDULE 4.18, FSQ owns, or has a right to use without limitations or restrictions adversely affecting the use of the same in the ordinary conduct of its business, subject to all applicable laws, rules and regulations, including without limitation, directives, orders or similar actions of any applicable state regulatory authority, all technology, know-how, processes and other proprietary information now used in the conduct of its business (collectively, "PROPRIETARY DATA"), and, except where the absence thereof would not have a Material Adverse Effect on FSQ, the consummation of the transactions contemplated by this Agreement will not alter or impair any such rights or breach any agreements with third party vendors or require payments of additional sums thereto. No claims have been asserted by any Person to use or obtain access to any such Proprietary Data and no Person has challenged or questioned (i) the validity or effectiveness of any license or agreement relating to the same in accordance with the terms thereof or (ii) the right of FSQ to copy, modify, use or distribute the same, nor to the best of FSQ's knowledge, is there any basis for any such claim, challenge or question. The manner in which FSQ has actually used or copied such Proprietary Data does not infringe on the rights of any Persons.
4.19. ENVIRONMENTAL MATTERS.
FSQ:
(a) is in compliance in all material respects with any applicable Environmental Laws, has not been notified that it is potentially liable under, has not received any request for information pursuant to and is not a "potentially responsible party" under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Resource Conservation Recovery Act, as amended, or any similar state law;
(b) has not entered into and is not a party under any consent decree, compliance order, or administrative or judicial order, injunction or judgment pursuant to any Environmental Law;
(c) except where such would not reasonably be expected to result in a Material Adverse Effect, has obtained all permits, licenses and other authorizations and made all filings which are required to be obtained or made by FSQ for the ownership and operation of its property, facilities and assets and the operation of its businesses under all Environmental Laws and is and at all times since its organization has been in compliance in all material respects with the terms and conditions of all such required permits, licenses and other authorizations; and
(d) is not the subject of or, to the knowledge of FSQ, threatened with any legal action involving a demand for damages or other potential liability arising under or relating to any Environmental Law.
4.20. FEES.
No person acting on behalf of FSQ is, or will be, entitled to any commission, broker's, finder's or investment banking fees from any of the Parties or from any Person controlling, controlled by or under a common control with any Party, in connection with the transactions contemplated by this Agreement.
SECTION 5.
REPRESENTATIONS AND WARRANTIES OF FIVE STAR
Five Star represents and warrants to FSQ and acknowledges that FSQ is relying on such representations and warranties in connection with the transactions provided for in this Agreement:
5.1. ORGANIZATION, ETC.
Five Star is a corporation, duly organized, validly existing and in good standing under the laws of the State of Maryland, Merger Sub is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, and each has all requisite power and authority (i) to conduct its business as it is now conducted, (ii) to own or lease all of the properties owned or leased by it, (iii) to enter into and perform this Agreement and (iv) to otherwise consummate the transactions contemplated by this Agreement. Each of Five Star and Merger Sub is duly qualified to do business and is in good standing in all jurisdictions in which the ownership or lease of property by it or the conduct of its business makes such qualification necessary, except where the failure to be qualified does not have and would not be reasonably expected to have a Material Adverse Effect on Five Star.
5.2. AUTHORIZATION: EXECUTION: BINDING EFFECT.
The execution, delivery and performance of this Agreement and the consummation of the transactions provided for in this Agreement have been duly authorized by all necessary action on the part of each Five Star and Merger Sub (including the approval of the Merger by Five Star as the sole shareholder of Merger Sub). This Agreement constitutes the legal, valid and binding obligation of each of Five Star and Merger Sub, enforceable against each in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors' rights and remedies generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
5.3. CAPITALIZATION.
As of the date of this Agreement, the authorized capital stock of Five Star consists of 10,000,000 shares of Five Star Common Stock, of which 4,367,170 shares are issued and outstanding. Except as set forth on SCHEDULE 5.3, as of the date of this Agreement, Five Star has not issued any options or any securities convertible into common stock of Five Star. All such outstanding Five Star Common Stock has been duly authorized and validly issued, is fully paid and nonassessable and is not subject to any preemptive or similar rights. Five Star is not a party to or bound by any agreement, put or commitment pursuant to which it is obligated to purchase, redeem or otherwise acquire any of its common stock or any options or securities convertible into Five Star Common Stock.
5.4. NO CONFLICTING AGREEMENTS OR CHARTER PROVISIONS.
The execution, delivery and compliance with and performance of the terms and provisions of this Agreement will not conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default (or an event which, with notice, lapse of time, or both, would constitute a default) under, or result in any violation of, (A) the Charter or Bylaws of either Five Star or Merger Sub or any resolutions adopted by the shareholders or directors of Five Star or the shareholder or directors of Merger Sub, (B) any provision of any material Contract to which Five Star or any of the Five Star Subsidiaries is a party or by which it or any of the Five Star Subsidiaries or any part of it or any of the Five Star Subsidiaries' assets may be bound or (C) any order, judgment, decree, license, permit, statute, law, rule or regulation to which Five Star or any of the Five Star Subsidiaries is subject.
5.5. FEES.
No person acting on behalf of Five Star is, or will be, entitled to any commission, broker's, finder's or investment banking fees from any of the Parties or from any Person controlling, controlled by or under a common control with any Party, in connection with the transactions contemplated by this Agreement.
SECTION 6.
CERTAIN COVENANTS AND AGREEMENTS
6.1. CONDUCT OF BUSINESS BY FSQ.
From the date of this Agreement to the Effective Time, except as required in connection with the Merger and the other transactions contemplated by this Agreement or as set forth on SCHEDULE 6.1 and unless FSQ obtains Five Star's prior written consent in each instance, FSQ will:
(a) Carry on its business as currently conducted and only in the usual and ordinary course and make no amendment to its Charter or Bylaws;
(b) Use all commercially reasonable efforts to preserve its business organization intact and continue to conduct its business in a good and businesslike fashion consistent with past practices;
(c) Not issue any equity or voting securities or options or rights to purchase equity or voting securities, not purchase any of its equity or voting securities and not make any distributions on its common stock;
(d) Not enter into, modify, amend or terminate any material Contract.
In connection with the continued operation of the business of FSQ between the date of this Agreement and the Effective Time, FSQ shall confer in good faith with one or more representatives of Five Star as often as Five Star shall reasonably request to report operational matters of materiality and the general status of ongoing operations. FSQ acknowledges that Five Star does not and will not waive any rights it may have under this Agreement as a result of such consultations nor shall Five Star be responsible for any decisions made by FSQ's officers and directors with respect to matters which are the subject of such consultation unless Five Star so consents in writing.
6.2. EMPLOYEE BENEFITS; SEVERANCE POLICY.
(1) Provided that it complies in all material respects with applicable law and the terms of any employment arrangements identified in SECTION 4.16, Five Star may, in its sole discretion, substitute employee compensation, benefit and severance programs for those of FSQ and any Affiliate as are comparable with the programs provided from time to time to Five Star's employees and the employees of Five Star's Affiliates. Subject to the preceding sentence, Five Star shall have no obligation to continue the existence of any Plan or Benefit Arrangement maintained by FSQ or any Affiliate.
(2) At least one day prior to the Closing , FSQ and each Affiliate shall take all actions necessary to terminate each Qualified Plan that Five Star directs FSQ to terminate. If a Qualified Plan is terminated in accordance with this SECTION 6.2(2), benefit accruals, including contributions of salary reduction contributions, if any, shall cease. FSQ and each Affiliate agrees to take no action to merge any of its Qualified Plans, transfer the assets of any of its Qualified Plans, or terminate any of its Qualified Plans, except as otherwise provided in this SECTION 6.2(2) following the execution of this Agreement without the consent of Five Star.
6.3. INSPECTION OF THE PROPERTIES AND ACCESS TO INFORMATION.
At all times prior to the Closing Date, FSQ will permit Five Star and its representatives to examine the contracts, books, records and other information of FSQ, including, without limitation, all Contracts, and make copies thereof, at such reasonable times as Five Star or its representatives may reasonably request by notice to FSQ (which notice may be oral).
6.4. NO SOLICITATION.
Between the date of this Agreement and the Effective Time or until this Agreement is terminated as permitted under SECTION 8.1, FSQ shall not, and shall not permit any officer or director of FSQ, directly or indirectly, to solicit or initiate (including by way of furnishing any non-public information concerning FSQ's business, properties or assets) discussions, inquiries or proposals or participate in any negotiation leading to any Purchase Proposal, except for the transactions contemplated by this Agreement.
6.5. REASONABLE EFFORTS; FURTHER ASSURANCES; COOPERATION.
Each of the Parties shall use its commercially reasonable efforts to perform its obligations under this Agreement and to take, or cause to be taken or do, or cause to be done, all things necessary, proper or advisable under applicable law to obtain all regulatory approvals and satisfy all conditions to the obligations of the Parties under this Agreement and to cause the Merger and the other transactions contemplated in this Agreement to be carried out promptly in accordance with the terms of this Agreement and shall cooperate fully with each other and their respective officers, trustees, directors, general partners, employees, agents, counsel, accountants and other designees in connection with any steps required to be taken as a part of its obligations under this Agreement. Upon the execution of this Agreement and thereafter, each Party shall do such things as may be reasonably requested by the other Parties in order more effectively to consummate the Merger and the other transactions contemplated by this Agreement.
6.6. PUBLIC ANNOUNCEMENTS.
Each party will consult with the other party before issuing, and provide each other the opportunity to review and comment upon, any press release or other written public statements which address in any manner the transactions contemplated by this Agreement, and shall not issue any such press release or make any such written public statement prior to such consultation, except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange.
6.7. SUPPLEMENTS TO SCHEDULES.
From time to time prior to the Effective Time, FSQ and Five Star will each promptly supplement or amend the respective schedules which they have delivered pursuant to this Agreement with respect to any matter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in any such disclosure schedule or which is necessary to correct any information in any such schedule which has been rendered inaccurate. The delivery of any supplement or amendment to the respective disclosure letters of the parties pursuant to this SECTION 6.7 shall not in any matter constitute a waiver by any party of any of the conditions contained in SECTION 7.
6.8. TAX RETURNS.
FSQ will prepare and file all Tax Returns and other tax reports, filings and amendments thereto required to be filed by FSQ with respect to periods ending on or before the Effective
Time, and provide Five Star, at its request, with copies for Five Star's review, of all such returns, reports, filings and amendments prior to filing.
6.9. TERMINATION OF MANAGEMENT AGREEMENT.
Provided that the closing of the Merger takes place on the date provided for in SECTION 3.1 hereof, the Management Agreement shall be terminated, and the liabilities of the parties thereunder settled, as of December 31, 2001.
SECTION 7.
CONDITIONS
7.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS.
The respective obligations of each Party to effect the Merger shall be subject to the fulfillment at or prior to the Closing of each of the following conditions:
(1) ILLEGALITY. No statute, rule or regulation shall have been enacted by the government (or any governmental agency) of the United States or any state, municipality or other political subdivision thereof that makes the consummation of the Merger and any other material transaction contemplated by this Agreement illegal.
(2) INJUNCTION. At the Effective Time there shall be no effective injunction, writ or preliminary restraining order or any order of any nature issued by a court or governmental agency of competent jurisdiction that the transactions provided for in this Agreement or any of them not be consummated as provided in this Agreement; PROVIDED that the Parties shall have used their reasonable efforts to cause any such injunction, writ or order to be vacated or lifted.
(3) CONSENTS. All consents, authorizations, orders and approvals of (or filing or registration with) any governmental commission, board or other regulatory body required in connection with the execution, delivery and performance of this Agreement shall have been obtained.
7.2. CONDITIONS TO OBLIGATIONS OF FSQ.
The obligations of FSQ to effect the Merger shall be subject to the fulfillment (or waiver by FSQ) at or prior to the Closing of each of the following conditions:
(1) REPRESENTATIONS AND WARRANTIES. The representations and warranties of Five Star set forth in this Agreement shall be true and correct in all material respects (except that where any statement in a representation or warranty includes a standard of materiality, such statement shall be true and correct in all respects giving effect to such standard) as of the date of this Agreement and as of the Effective Time as though made on and as of the Effective Time (except where such representation or warranty specifically relates to an earlier date).
(2) PERFORMANCE OF OBLIGATIONS BY FIVE STAR. Five Star shall have performed in all material respects all covenants and agreements required to be performed by it under this Agreement.
(3) CERTIFICATES. Five Star shall have furnished FSQ with a certificate of
its appropriate officers as to compliance with the conditions set forth in this
SECTION 7.2.
7.3. CONDITIONS TO OBLIGATIONS OF FIVE STAR AND MERGER SUB.
The obligations of Five Star and Merger Sub to effect the Merger shall be subject to the fulfillment (or waiver by Five Star) at or prior to the Closing of each of the following conditions:
(1) REPRESENTATIONS AND WARRANTIES. The representations and warranties of FSQ set forth in this Agreement shall be true and correct (except that where any statement in a representation or warranty includes a standard of materiality, such statement shall be true and correct in all respects giving effect to such standard) as of the date of this Agreement and as of the Effective Time (except where such representation or warranty specifically relates to an earlier date).
(2) PERFORMANCE OF OBLIGATIONS OF FSQ. FSQ shall have performed in all material respects all covenants and agreements required to be performed by it under this Agreement.
(3) CERTIFICATES. FSQ shall have furnished Five Star with a certificate of its appropriate officers as to compliance with or satisfaction of the conditions set forth in this SECTION 7.3.
(4) NO MATERIAL ADVERSE EFFECT. No change which has a Material Adverse Effect on FSQ shall have occurred from the date hereof to the Effective Time.
(5) INDEMNIFICATION AGREEMENT. The shareholders of FSQ shall have executed and delivered an Indemnification Agreement in the form of EXHIBIT A.
SECTION 8.
TERMINATION
8.1. TERMINATION.
This Agreement may be terminated at any time (subject to the provisions of this SECTION 8.1) prior to the Effective Time:
(a) by mutual agreement of the directors of each of FSQ and Five Star;
(b) by either Five Star or FSQ, in writing, if for any reason the Closing has not occurred by January 15, 2002, except that no party shall have the right to terminate under this SECTION 8.1(b) if the conditions precedent to such Party's obligation to close have been or at Closing would be satisfied or have been waived by such Party and such Party has nonetheless failed or refused to close;
(c) by either Five Star or FSQ, in writing, if there shall be any order, writ, injunction or decree of any court or governmental or regulatory agency binding on Five Star and/or FSQ, which prohibits or restrains Five Star and/or FSQ from consummating the transactions contemplated by this Agreement, provided that Five Star and FSQ shall have used commercially reasonable efforts to have any such order, writ, injunction or decree lifted and the same shall not have been lifted within 90 days after entry, by any such court or governmental or regulatory agency;
(d) by FSQ in writing without liability:
(1) if the conditions set forth in SECTIONS 7.1 and 7.2 shall not have been complied with or performed and such noncompliance or nonperformance shall not have been cured or eliminated (or by its nature cannot be cured or eliminated) by Five Star or otherwise by January 15, 2002, or
(2) if Five Star shall have (a) failed to perform in any material respect its agreements contained in this Agreement required to be performed by it on or prior to the Closing Date or (b) breached any of its representations or warranties contained in this Agreement, which failure or breach is not cured within 10 days after FSQ has notified Five Star of its intent to terminate.
(e) by Five Star in writing without liability if:
(1) the conditions set forth in SECTIONS 7.1 and 7.3 shall not have been complied with or performed and such noncompliance or nonperformance shall not have been cured or eliminated (or by its nature cannot be cured or eliminated) by FSQ or otherwise by January 15, 2002; or
(2) if FSQ shall have (a) failed to perform in any material respect its agreements contained in this Agreement required to be performed by it on or prior to the Closing Date or (b) breached any of its representations or warranties contained in this Agreement, which failure or breach is not cured within 10 days after Five Star has notified FSQ of its intent to terminate.
8.2. EFFECT OF TERMINATION.
If this Agreement is terminated by either Five Star or FSQ pursuant to
SECTION 8.1, this Agreement shall become void and there shall be no further
obligation on the part of either Five Star or FSQ.
SECTION 9.
MISCELLANEOUS PROVISIONS
9.1. NOTICES.
All notices, communications and deliveries required or permitted by this Agreement shall be made in writing signed by the Party making the same, shall specify the Section of this Agreement pursuant to which it is given or being made, and shall be deemed given or made (i) on the date delivered if delivered in person, (ii) on the third Business Day after it is mailed if mailed by registered or certified mail (return receipt requested) (with postage and other fees prepaid), or (iii) on the day after it is delivered, prepaid, to an overnight express delivery service that confirms to the sender delivery on such day, as follows:
To Five Star or Merger Sub:
Five Star Quality Care, Inc.
400 Centre Street
Newton, Massachusetts 02458
Attn: President
To FSQ:
FSQ, Inc.
400 Centre Street
Newton, Massachusetts 02458
Attn: President
or to such other representative or at such other address of a Party as such Party may furnish to the other Party by notice similarly given.
9.2. SCHEDULES AND EXHIBITS.
The Schedules, Exhibits and all documents expressly referred to in this Agreement, are incorporated into this Agreement and are made a part of this Agreement as if set out in full.
9.3. COMPUTATION OF TIME.
Whenever the last day for the exercise of any privilege or the discharge of any duty under this Agreement shall fall upon a Saturday, Sunday or any date on which banks in Boston, Massachusetts are not required to be open, the Party having such privilege or duty may exercise such privilege or discharge such duty on the next succeeding day which is a regular Business Day.
9.4. ASSIGNMENT: SUCCESSORS IN INTEREST.
No assignment or transfer by Five Star or FSQ, of its rights and obligations under this Agreement prior to the Closing shall be made except with the prior written consent of the other
Party. This Agreement shall be binding upon and shall inure to the benefit of the Parties and their permitted successors and assigns, and any reference to a Party shall also be a reference to a permitted successor or assign.
9.5. NO THIRD-PARTY BENEFICIARIES.
With the exception of the Parties, there shall exist no right of any person to claim a beneficial interest in this Agreement or any rights occurring by virtue of this Agreement.
9.6. INVESTIGATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The respective representations and warranties of FSQ and Five Star
contained in this Agreement or in any Schedule, certificate, or other document
delivered by any Party prior to Closing shall not be deemed waived or otherwise
affected by any investigation made by a Party. Except for the obligations of the
shareholders of FSQ under the Indemnification Agreement and as provided in
SECTION 8.2, the respective representations and warranties, covenants and
agreements of Five Star and FSQ contained in this Agreement shall expire with
and be terminated by the Merger.
9.7. NUMBER; GENDER.
Whenever the context so requires, the singular number shall include the plural and the plural shall include the singular, and the gender of any pronoun shall include the other genders.
9.8. CAPTIONS.
The titles, captions and table of contents contained in this Agreement are inserted in this Agreement only as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision of this Agreement. Unless otherwise specified to the contrary, all references to Sections are references to Sections of this Agreement and all references Schedules and Exhibits are references to Schedules and Exhibits to this Agreement.
9.9. AMENDMENTS.
To the extent permitted by law, this Agreement may be amended by a subsequent writing signed by all of the Parties upon the approval of the general partner, board of directors or board of trustees, as the case may be, of each of the Parties.
9.10. CONTROLLING LAW: INTEGRATION: WAIVER.
This Merger shall be governed by Delaware Law and otherwise, this Agreement shall be governed by and construed and enforced in accordance with the laws of The Commonwealth of Massachusetts. This Agreement supersedes all negotiations, agreements and understandings among the Parties with respect to the subject matter of this Agreement and constitutes the entire agreement among the Parties. The failure of any Party at any time or times to require performance of any provisions of this Agreement shall in no manner affect the right to enforce the same. No waiver by any Party of any conditions, or of the breach of any term, provision,
warranty, representation, agreement or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed or construed as a further or continuing waiver of any such condition or breach of any other term, provision, warranty, representation, agreement or covenant contained in this Agreement.
9.11. SEVERABILITY.
Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by law, the Parties waive any provision of law which renders any such provision prohibited or unenforceable in any respect.
9.12. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which shall together be considered one and the same agreement, and it shall not be necessary in making proof of this Agreement or the terms of this Agreement to produce or account for more than one of such counterparts.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
EXECUTED under seal as of the date first above written.
FIVE STAR QUALITY CARE, INC.
By: /s/ Bruce J. Mackey Jr. ------------------------------------------ Name: Bruce J. Mackey Jr. Title: Chief Financial Officer and Treasurer |
FSQ ACQUISITION, INC.
By: /s/ Bruce J. Mackey Jr. ------------------------------------------ Name: Bruce J. Mackey Jr. Title: Chief Financial Officer and Treasurer |
FSQ, INC. (formerly known as "Five Star Quality Care, Inc.")
By: /s/ Jennifer B. Clark ------------------------------------------ Name: Jennifer B. Clark Title: Assistant Secretary |
OMITTED SCHEDULES
The following schedules to the Agreement of Merger have been omitted.
Schedule Number Schedule Description
4.9 Undisclosed Liabilities of FSQ, Inc.
4.12(a) Benefit Plans
4.12(1)(e) Pending or Threatened Claims against Qualified
Plans
4.12(1)(i) ERISA
4.12(1)(j)
4.14 Material Contracts
4.16 Employee Matters
4.18 Proprietary Information
5.3 Capitalization of Five Star
5.8 Undisclosed Liabilities of Five Star
5.9 Non-Compliance with Law by Five Star
5.11 Tax Matters
6.1 Conduct of Business by FSQ, Inc.
|
The Registrant agrees to furnish supplementally a copy of the foregoing omitted schedules to the Securities and Exchange Commission upon request.
EXHIBIT A
INDEMNIFICATION AGREEMENT
(see attachment)
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("AGREEMENT") is made and entered into ___________, 2001, by and among the undersigned stockholders (the "STOCKHOLDERS") of FSQ, Inc., a Delaware corporation ("FSQ"), and FIVE STAR QUALITY CARE, INC., a Maryland corporation ("FIVE STAR").
RECITALS
A. Five Star, FSQ Acquisition, Inc., a Delaware corporation ("MERGER SUB") and FSQ have entered into an Agreement of Merger, dated December 5, 2001 (the "MERGER AGREEMENT"), pursuant to which Merger Sub will be merged with and into FSQ, with FSQ remaining as the survivor (the "MERGER").
B. Pursuant to the Merger Agreement, each share of common stock of FSQ outstanding immediately prior to the Merger will be converted into a right to receive 250 shares of common stock, par value $0.01, of Five Star (the "FIVE STAR COMMON SHARES").
C. On the date hereof, each Stockholder owns 50% of the issued and outstanding shares of common stock of FSQ.
D. Pursuant to the terms of the Merger Agreement, and as a condition to Five Star's obligations under the Merger Agreement, the Stockholders have agreed to provide certain indemnities to Five Star and the other Indemnified Parties (as hereinafter defined).
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings given therefor in the Merger Agreement.
2. INDEMNIFICATION BY THE STOCKHOLDERS.
Subject to the other provisions of this Agreement, for the period from and after the Closing and ending January 1, 2003 (the "CLAIM PERIOD"), each of the Stockholders shall indemnify and hold harmless, Five Star and its subsidiaries and affiliates, each of their respective officers, trustees, directors, employees, agents and representatives, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the "INDEMNIFIED PARTIES"), against such Stockholder's Allocable Portion (as defined in PARAGRAPH 4 below) of any losses, claims, damages, liabilities or expenses whenever arising or incurred (including, without limitation, amounts paid in settlement, reasonable costs of investigation and reasonable attorneys' fees and expenses) (collectively, "LOSSES") arising out of or relating to any breach of any representation or warranty made by FSQ in the Merger Agreement, provided that, solely for the purposes of this Agreement no breach shall be deemed to have occurred if the applicable representation and warranty made by FSQ (other than the representations and warranties made by FSQ in Sections 4.1 though 4.4, 4.5 (as to clauses (i) and (ii) of the first sentence thereof and
the second sentence thereof), 4.6 (except to the extent such representation is qualified as to knowledge), 4.9 (except to the extent such representation is qualified as to knowledge), 4.11, 4.16 and 4.20 of the Merger Agreement) would have been true and correct in all material respects had it been qualified by the phrase "to the knowledge of FSQ" (as defined in the Merger Agreement), whether or not so qualified in the Merger Agreement.
3. INDEMNIFICATION PROCEDURE.
(a) Promptly after receipt by an Indemnified Party of notice of the commencement of any action or proceeding involving a claim to which indemnification is being sought, such Indemnified Party will, if a claim is to be made against any Stockholder, give notice to each stockholder of the commencement of such action or proceeding.
(b) In case any such action is brought against an Indemnified Party, unless in such Indemnified Party's reasonable judgment a conflict of interest between the Indemnified Party and either Stockholder may exist in respect of such claim, the Stockholders shall be entitled to assume and control the defense of such action to the extent that they may wish, with counsel reasonably satisfactory to such Indemnified Party, and after notice from the Stockholders to such Indemnified Party of their election so to assume and control the defense of such action, the Stockholders shall not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by the latter in connection with the defense of such action other than reasonable costs of investigation. Notwithstanding the foregoing, in any such action, any Indemnified Party shall have the right to retain its own counsel, but the fees and disbursements of such counsel shall be at the expense of such Indemnified Party unless the Stockholders shall have failed to retain counsel for the Indemnified Party. It is understood that the Stockholders shall not, in connection with any action or related actions in the same jurisdiction, be liable for the fees and disbursements of more than one separate firm qualified in such jurisdiction to act as counsel for all Indemnified Parties, unless in any such Indemnified Party's reasonable judgment a conflict of interest between such Indemnified Party and any other indemnified party may exist in respect of such claim. the Stockholders shall not be liable for any settlement of any proceeding effected without their consent; no Stockholder shall, without the consent of the Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.
4. LIABILITY LIMITS; ALLOCABLE PORTION; ETC.
(a) The Stockholders shall have no liability for losses until such time as the aggregate of such Losses exceeds $50,000 (the "DEDUCTIBLE"), and thereafter each Stockholder shall indemnify the Indemnified Parties for such Stockholder's Allocable Portion of all Losses incurred in excess of the Deductible.
(b) Each Stockholder's aggregate liability for all Losses under this Agreement shall not exceed the value of the Merger Consideration paid to such Stockholder,
determined as of the Closing Date. The value of each Five Star Common Share paid as Merger Consideration shall be deemed to equal the closing sale price for a Five Star Common Share as reported by the American Stock Exchange for the Closing Date.
(c) In satisfaction of any liability hereunder, each Stockholder shall tender to the Indemnified Party such number of Five Star Common Shares as is sufficient to satisfy his Allocable Portion of such liability. Each Five Star Common Share delivered in satisfaction of a claim made under PARAGRAPH 2 or 3 above shall be valued at the closing sale price for a Five Star Common Share as reported by the American Stock Exchange for the Closing Date.
(d) A Stockholder's "Allocable Portion" of any Losses or claims hereunder shall mean 50% of such Losses or claims.
5. ARBITRATION.
Any and all disputes and disagreements arising out of or relating to this
Agreement, other than actions or claims for injunctive relief or claims raised
in actions or proceedings brought by third parties, shall be resolved through
negotiations or, if the dispute is not so resolved, through binding arbitration
conducted in Boston, Massachusetts under the J.A.M.S./Endispute Comprehensive
Arbitration Rules and Procedures, with the following amendments to those rules.
First, in no event shall the arbitration from commencement to issuance of an
award take longer than 180 days. Second, the arbitration tribunal shall consist
of three arbitrators and the optional appeal procedure provided for in Rule 32
shall not be utilized. Third, in lieu of the depositions permitted in Rule
15(c), the only depositions per side shall be (1) a single deposition to last no
longer than one six-hour day that each Party may take of the opposing Party or
an individual under the control of the opposing Party and (2) no more than three
depositions by each Party limited to witnesses who will not be available to
testify at the hearing, each such deposition to last no longer than one six-hour
day. Judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
6. NOTICES. All notices, communications and deliveries required or permitted by this Agreement shall be made in writing signed by the Party making the same, shall specify the Section of this Agreement pursuant to which it is given or being made, and shall be deemed given or made (i) on the date delivered if delivered by telecopy or in person, (ii) on the third business day after it is mailed if mailed by registered or certified mail (return receipt requested) (with postage and other fees prepaid), or (iii) on the day after it is delivered, prepaid, to an overnight express delivery service that confirms to the sender delivery on such day, as follows:
To: Five Star Quality Care, Inc.
400 Centre Street
Newton, Massachusetts 02548
Attn: President
To the Stockholders:
Barry M. Portnoy
400 Centre Street
Newton, MA 02548; and
Gerard Martin
400 Centre Street
Newton, MA 02548
or to such other representative or at such other address of a Party as such Party hereto may furnish to the other Parties in writing.
7. TIME OF THE ESSENCE; COMPUTATION OF TIME. Time is of the essence for each and every provision of this Agreement. Whenever the last day for the exercise of any privilege or the discharge of any duty under this Agreement shall fall upon a Saturday, Sunday or any date on which banks in Boston, Massachusetts are closed, the Party having such privilege or duty may exercise such privilege or discharge such duty on the next succeeding day which is a regular business day.
8. CAPTIONS. The titles and captions contained in this Agreement are inserted in this Agreement only as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision of this Agreement. Unless otherwise specified to the contrary, all references to sections are references to Sections of this Agreement.
9. AMENDMENTS. To the extent permitted by law, this Agreement may be amended by a subsequent writing signed by all of the Parties.
10. CONTROLLING LAW; INTEGRATION; WAIVER. This Agreement shall be governed by and construed and enforced in accordance with the laws of the commonwealth of Massachusetts. This Agreement supersedes all negotiations, agreements and understandings among the Parties with respect to the subject matter of this Agreement and constitutes the entire agreement among the Parties to this Agreement relating to the subject matter of this Agreement. The failure of any Party at any time or times to require performance of any provisions of this Agreement shall no manner affect the right to enforce the same. No waiver by any Party of any conditions, or of the breach of any term, provision, warranty, representation, agreement or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed or construed as a further or continuing waiver of any such condition or breach of any other term, provision, warranty, representation, agreement or covenant contained in this Agreement.
11. SOLE RECOURSE. The Parties agree that the remedies set forth in this Agreement shall be the sole recourse of the Indemnified Parties for any and all Losses and any other breaches by any Stockholders under this Agreement and, after the Closing Date, under the Merger Agreement.
12. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by law, the Parties waive any provision of law which renders any such provision prohibited or unenforceable in any respect.
EXECUTED under seal as of the date first above written.
FIVE STAR QUALITY CARE, INC.
By: _________________________________
Title:
STOCKHOLDERS: