-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AhPJ2kcy52Gc9azLL4CUmG/IrboBL+JybCGoJMh4Z0dbg0y3T9Wv5qDklbp9+IdL rkQgKiNO8MJFRdnkMS7BKQ== 0000950135-96-002408.txt : 19960603 0000950135-96-002408.hdr.sgml : 19960603 ACCESSION NUMBER: 0000950135-96-002408 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19960530 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDITRUST CENTRAL INDEX KEY: 0000774350 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 046532031 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-01843 FILM NUMBER: 96574910 BUSINESS ADDRESS: STREET 1: 197 FIRST AVE CITY: NEEDHAM STATE: MA ZIP: 02194 BUSINESS PHONE: 6174336000 MAIL ADDRESS: STREET 1: 197 FIRST AVENUE CITY: NEEDHAM STATE: MA ZIP: 02194 S-3/A 1 MEDITRUST-AMEND NO 2 TO FORM S-3 1 As filed with the Securities and Exchange Commission on May 30, 1996 Registration No. 333-1843 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------- FORM S-3/A AMENDMENT NO. 2 TO REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------- MEDITRUST (Exact name of registrant as specified in governing instruments) Massachusetts 04-6532031 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 197 First Avenue Needham Heights, Massachusetts 02194 (617) 433-6000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ----------- ABRAHAM D. GOSMAN Chairman and Chief Executive Officer MEDITRUST 197 First Avenue Needham Heights, Massachusetts 02194 (617) 433-6000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies of communications to: MICHAEL J. BOHNEN, ESQUIRE NUTTER, McCLENNEN & FISH, LLP One International Place Boston, MA 02110-2699 (617) 439-2000 Approximate date of commencement of proposed sale to public: From time to time after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or reinvestment plans, check the following box. /X/ 2 CALCULATION OF REGISTRATION FEE
============================================================================================================== Title of Each Class Amount to Be Proposed Proposed Amount of of Securities Being Registered Maximum Offering Maximum Registration Fee Registered Price per Unit Aggregate Offering (2) Price (1) - -------------------------------------------------------------------------------------------------------------- Common and Preferred Shares of Beneficial Interest, Debt Securities (6) (6) $500,000,000 $172,413.80 and Warrants for Common and Preferred Shares of Beneficial Interest and Debt Securities, Issuable in Series(3)(4)(5) ==============================================================================================================
(1) In no event will the aggregate maximum offering price of all securities issued pursuant to this Registration Statement exceed $500,000,000, or if any Debt Securities are issued with an original issue discount, such greater amount as shall result in an aggregate offering price of $500,000,000. Any securities registered hereunder may be sold separately or as units with other securities registered hereunder. (2) Determined pursuant to Rule 457(o) under the Securities Act of 1933, as amended. (3) There is also being registered an indeterminate number of Shares of Beneficial Interest as may be issued upon conversion of the Debt Securities or exercise of the Securities Warrants registered hereby. (4) There is also being registered hereunder an indeterimate number of Debt Securities as may be issued upon exercise of the Securities Warrants registered hereby. (5) There is also being registered hereunder an indeterminate number of Debt Securities Warrants and Share Warrants representing rights to purchase Debt Securities and Shares of Beneficial Interest, respectively, registered pursuant to this Registration Statement. (6) Not applicable pursuant to General Instructions II.D of Form S-3 under the Securities Act of 1933, as amended. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. 3 SUBJECT TO COMPLETION, DATED__________ PROSPECTUS MEDITRUST Common and Preferred Shares of Beneficial Interest, Debt Securities and/or Securities Warrants ------------------- Meditrust, a Massachusetts business trust (together with its subsidiaries unless the context otherwise requires, the "Company"), is a real estate investment trust under the Internal Revenue Code of 1986, as amended, which may offer from time to time, in one or more series, its debt securities (the "Debt Securities"), warrants to purchase Debt Securities (the "Debt Securities Warrants"), common shares of beneficial interest, without par value (the "Common Shares"), preferred shares of beneficial interest (the "Preferred Shares" and together with the Common Shares, the "Shares") and warrants to purchase Shares (the "Share Warrants"). The Debt Securities Warrants and the Share Warrants are collectively referred to herein as the "Securities Warrants." The Debt Securities, Shares and Securities Warrants are collectively referred to herein as the "Securities." The Securities will have an aggregate offering price of $500,000,000 and will be offered in amounts, at prices and on terms to be determined at the time of offering. In the case of Debt Securities, the specific title, the aggregate principal amount, the offering price, the maturity, the rate and time of payment of any interest, any redemption or sinking fund provisions, any conversion provisions and any other specific term of the Debt Securities will be set forth in an accompanying supplement to this Prospectus (the "Prospectus Supplement"). In the case of Shares, the specific number of Shares and offering price will be set forth in an accompanying Prospectus Supplement. In the case of Preferred Shares, the specific designation, any dividend, liquidation, redemption, conversion, voting and other rights, the offering price and any other specific term of the Preferred Shares will be set forth in an accompanying Prospectus Supplement. In the case of Securities Warrants, the duration, offering price, exercise price and detachability, if applicable, will be set forth in an accompanying Prospectus Supplement. The Prospectus Supplement will also disclose whether the Securities will be listed on a national securities exchange and if they are not to be listed, the possible effects thereof on their marketability. The Securities may be sold: (i) directly by the Company; (ii) through underwriting syndicates represented by one or more managing underwriters, or by one or more underwriters without a syndicate; and (iii) through agents designated from time to time. The names of any underwriters or agents of the Company involved in the sale of the Securities in respect of which this Prospectus is being delivered and any applicable commissions or discounts will be set forth in an accompanying Prospectus Supplement. See "Plan of Distribution." The net proceeds to the Company from such sale also will be set forth in the Prospectus Supplement. The Company's shares are traded on the New York Stock Exchange under the symbol "MT." On May 28, 1996, the closing sale price of the Shares on the New York Stock Exchange was $33.375. ------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------------- THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. This Prospectus may not be used to consummate sales of Securities unless accompanied by a Prospectus Supplement. ------------------------------------- The date of this Prospectus is May 30, 1996. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER SECURITIES LAWS OF ANY SUCH STATE. 4 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024 of the offices of the Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, or at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048, Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the principal offices of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. Reports, proxy materials and other information concerning the Company can also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, Room 1102, New York, New York 10005. The Company has filed with the Commission a Registration Statement on Form S-3 (together with all amendments and exhibits thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus and any accompanying Prospectus Supplement do not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is made to the Registration Statement, copies of which may be obtained upon payment of a fee prescribed by the Commission, or may be examined free of charge at the principal office of the Commission in Washington, D.C. Statements made in this Prospectus and any accompanying Prospectus Supplement as to the contents of any contract or other document referred to are not necessarily complete, and reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company hereby incorporates by reference into this Prospectus its (i) Annual Report on Form 10-K for the fiscal year ended December 31, 1995, as amended by the Company's Form 10-K/A dated March 5, 1996, (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1996 and (iii) Current Report on Form 8-K dated January 29, 1996, which shall be deemed to be a part hereof. All documents filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior to the termination of the offering of the Securities offered hereby shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing 2 5 such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in a subsequently filed document, as the case may be, which also is or is deemed to be incorporated by reference herein, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom this Prospectus is delivered, upon the written or oral request of such person, a copy (without exhibits) of any or all documents incorporated by reference into this Prospectus. Requests for such copies should be directed to Lisa P. McAlister, Chief Financial Officer and Treasurer, Meditrust, 197 First Avenue, Needham Heights, Massachusetts 02194, telephone (617) 433-6000. ----------- THE DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED AUGUST 6, 1985, AS AMENDED (THE "DECLARATION"), A COPY OF WHICH IS DULY FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE COMMONWEALTH OF MASSACHUSETTS, PROVIDES THAT THE NAME "MEDITRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY; AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL PERSONS DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. 3 6 THE COMPANY Meditrust, established in 1985, is the largest dedicated health care real estate investment trust in the United States based on its gross real estate investments of over $2 billion as of March 31, 1996. The Company invests in high quality health care facilities managed by experienced operators and attempts to achieve diversity in its property portfolio by sector of the health care industry, geographic location, operator and form of investment. As of March 31, 1996, the Company had investments in 333 facilities, consisting of 265 long-term care facilities, 24 rehabilitation hospitals, 20 retirement and assisted living facilities, 13 medical office buildings, ten alcohol and substance abuse and psychiatric facilities and one acute care hospital campus. Included in the 333 facilities are 19 properties under construction that are expected to be completed during the next three to 12 months. The properties are located in 35 states and are operated by 33 health care companies. Of the 33 different operators, 13 are publicly-traded companies (i.e., Sun Healthcare Group, Inc., Horizon/CMS Healthcare Corporation, Geriatric and Medical Centers, Inc., OrNda Healthcorp., Integrated Health Services, Inc., Emeritus Corporation, Tenet HealthCare Corporation, Columbia/HCA Healthcare Corporation, HealthSouth Rehabilitation Corporation, The Multicare Companies, Inc., Mariner Health Group, Inc., Youth Services International, Inc. and Sterling House Corporation), and constitute approximately 45% of the Company's real estate investments. The Company's real estate investments are either owned by the Company or secured by a mortgage lien. As of March 31, 1996, permanent mortgage loans constituted 50%, sale/leaseback transactions constituted 43% and development mortgage financing constituted 7% of the Company's portfolio as measured by gross real estate investments. The leases and mortgages provide for rental or interest rates which generally range from approximately 9% to 13% per annum of the acquisition price or mortgage amount. The leases and mortgages generally provide for an initial term of 10 years, with the leases having one or more five-year renewal options. The leases and mortgages also provide for additional rent and interest which are generally either based upon a percentage of increased revenues over specific base period revenues of the related properties or a fixed rent or interest escalation provision. In addition, the Company usually obtains guarantees from the parent corporation, if any, of the operator or affiliates or individual principals of the operator. Many obligations are backed by letters of credit or pledges of certificates of deposit which cover from three to 12 months of lease or mortgage payments. In addition, the Company's permanent and development mortgage loans and leases generally are cross-defaulted or where appropriate cross-collateralized with other mortgage and development loans, leases or other agreements between the Company and the same operator or any affiliated operators. With respect to development mortgage loans, the Company generally requires guaranteed maximum price construction contracts, performance completion bonds or guarantees. The Company enters into a development mortgage loan when the Company will also be the permanent owner or mortgage lender. 4 7 In making its investment decisions, the Company reviews, among other criteria, the operational viability of the facility, the experience and competency of the operator and the financial strength of the guarantor. From time to time, the Company enters into transactions with related parties. As of March 31, 1996, the Company had total commitments of $167 million, $97 million of which was funded, to companies in which Abraham D. Gosman, the Company's Chairman and Chief Executive Officer, owns an equity interest. The Company expects to enter into additional transactions with related parties in the future. All of the terms and conditions of such transactions are subject to approval by the independent Trustees of the Company. The Board of Trustees believes that the terms of the transactions which the Company has entered into with related parties are not less favorable to the Company than those prevailing at the time for comparable transactions with unrelated persons. The Company was organized to qualify, and intends to continue to operate, as a real estate investment trust in accordance with Federal tax laws and regulations. So long as the Company so complies, with limited exceptions, the Company will not be taxed under Federal income tax laws on that portion of its taxable income that it distributes to its shareholders. The Company has distributed, and intends to continue to distribute, substantially all of its real estate investment trust taxable income to shareholders. See "Federal Income Tax Considerations." In order to meet its ongoing capital requirements for additional investments, the Company may raise additional capital through a variety of sources, including the sale of Shares and debt securities and drawings against its revolving bank lines of credit. The Company is a self-administered real estate investment trust, with its principal executive offices at 197 First Avenue, Needham Heights, Massachusetts 02194. Its telephone number is (617) 433-6000. 5 8 HEALTH CARE REFORM AND REGULATION Many of the operators with which the Company does business rely on government reimbursement, primarily Medicare and Medicaid, for a significant portion of their operating revenues. During the 1994 session of the United States Congress, there was active consideration of various proposals for national health care reform, including the administration's proposal to cap national health care spending and the future growth of Medicare and Medicaid funding. No such legislation was passed during the 1994 session of Congress. Other recent proposals include replacement of the current Medicaid program with block grants to the states and other limitations on Medicaid spending. Some of these proposals, if enacted, could have an impact on operators doing business with the Company. It is not possible to predict whether and when health care reform legislation will be passed by Congress and, if passed, what features such legislation will contain or the effect it may have on the nursing home, assisted living or rehabilitation care industries, the reimbursements levels available to health care providers or on the health care industry in general. From time to time, Medicaid, Medicare and other governmental payors have reviewed the billing practices of many health care facilities operators including certain of the operators with which the Company does business. It is unclear what impact such reviews may have on these operators. The Company does not believe, however, that any adverse findings against these operators would materially affect the Company's financial position.
RATIO OF EARNINGS TO FIXED CHARGES Year Ended December 31, ----------------------- Three Months Ended 1991 1992 1993 1994 1995 March 31, 1996 -------------------------------------------------------------------------- Ratio 1.60 1.88 2.02 2.19 2.35 3.21
For the purpose of calculating the ratio of earnings to fixed charges for the years ended December 31, 1991, 1992, 1993, 1994 and 1995, and the three-month period ended March 31, 1996, net income has been added to interest expense and that sum has been divided by such interest expense. To date, the Company has not issued Preferred Shares; therefore, the ratios of earnings to fixed charges and preferred stock dividend requirements are the same as the ratios of earnings to fixed charges set forth above. USE OF PROCEEDS Unless otherwise specified in the Prospectus Supplement which accompanies this Prospectus, the net proceeds from the sale of the Securities offered from time to time hereby will be used for general business purposes, including the repayment of bank lines of credit, if 6 9 any, outstanding, and investments in health care facilities. As of May 29, 1996, there were no loans outstanding under the Company's bank lines of credit. Any drawings under the Company's bank lines of credit will mature on or before June 30, 1997 and bear interest at the lenders' respective prime rates or the London Interbank Offering Rate plus 1.00% per annum. Pending such uses, the net proceeds will be invested in short-term, interest-bearing, direct obligations issued or guaranteed by the United States, certificates of deposit or accounts, or investment grade commercial paper, consistent with the Company's qualification as a real estate investment trust, the Company's Restated Declaration of Trust (the "Declaration"), and the Company's agreements with its lenders. DESCRIPTION OF SHARES There is no limit on the number of Shares the Company is authorized to issue. Shares may be issued by the Board of Trustees without any vote of the shareholders. The Shares are without par value. On the date hereof, the outstanding Shares are of one class. The following description is qualified in all respects by reference to the Declaration and the By-laws of the Company, copies of which are incorporated by reference as exhibits to the Registration Statement of which this Prospectus is a part. Redemption. For the Company to qualify as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the "Code"), in any taxable year, not more than 50% of its outstanding Shares may be owned by five or fewer individuals and Shares must be owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. In order to meet these requirements, the Trustees have the power to redeem or prohibit the transfer of a sufficient number of Shares selected in a manner deemed appropriate to maintain or bring the ownership of the Shares into conformity with such requirements. In connection with the foregoing, if the Trustees shall, at any time and in good faith, be of the opinion that direct or indirect ownership of at least 9.9% or more of the Shares has or may become concentrated in the hands of one beneficial owner, the Trustees shall have the power (i) by lot or other means deemed equitable by them to call for the purchase from any shareholder of the Company of a number of Shares sufficient, in the opinion of the Trustees, to maintain or bring the direct or indirect ownership of Shares of such owner to a level of no more than 9.9% of the outstanding Shares, and (ii) to refuse to transfer or issue Shares to any person whose acquisition of such Shares would cause a beneficial holder to hold in excess of 9.9% of the outstanding Shares. Further, any transfer of Shares that would create a beneficial owner of more than 9.9% of the outstanding Shares shall be deemed void and the intended transferee shall be deemed never to have had an interest therein. The purchase price for any Shares so redeemed shall be equal to the fair market value of the Shares reflected in the closing sales price for the Shares, if then listed on a national securities exchange, or the average of the closing sales price for the Shares if then listed on more than one national securities exchange, or if the Shares are not then listed on a national securities exchange, the latest bid quotation for the Shares if then traded over-the-counter, on the last business day immediately preceding the day on which notices of such acquisition are sent by the Company. 7 10 From and after the date fixed for purchase by the Trustees, the holder of any Shares so called for purchase shall cease to be entitled to distributions, voting rights and other benefits with respect to such Shares, except the right to payment of the purchase price for the Shares. The foregoing provisions may have the effect of discouraging unilateral tender offers or other takeover proposals which certain shareholders might deem in their interest or in which they might receive a substantial premium. The provisions could also have the effect of insulating current management against the possibility of removal and could, by possibly reducing temporary fluctuations in market price caused by accumulations of Shares, deprive shareholders of opportunities to sell at a temporarily higher market price. Additional Provisions. The Declaration provides that annual meetings of shareholders are to be held within six months after the end of each fiscal year and special meetings of the shareholders may be called by the President of the Company, a majority of the Trustees or a majority of the Independent Trustees (defined in the Declaration) and shall be called upon the written request of the holders of 10% or more of the outstanding Shares. Whenever any action is to be taken by the shareholders, it shall, except as otherwise clearly indicated in the Declaration, be authorized by holders of a majority of the Shares then outstanding and entitled to vote thereon. See "Preferred Shares." Notwithstanding the foregoing, at all elections of Trustees, voting by shareholders shall be conducted under the non-cumulative method and the election of Trustees shall be by the affirmative vote of the holders of Shares representing a plurality of the Shares then outstanding which are present in person or by proxy at a meeting in which a quorum is present. Whenever shareholders are required or permitted to take any action (unless a vote at a meeting is specifically required, as with respect to termination or amendment of the Declaration), such action may be taken without a meeting by written consents setting forth the action so taken, signed by the holders of a majority (or such higher percentage as may be specified) of the outstanding Shares that would be entitled to vote thereon at a meeting. Except with respect to matters on which a shareholders' vote is specifically required by the Declaration, no action taken by the shareholders at any meeting shall in any way bind the Trustees. The Shares have no preemptive or appraisal rights. The Declaration provides that shareholders of the Company shall not be subject to any liability for the acts or obligations of the Company and that, as far as is practicable, each written agreement of the Company is to contain a provision to that effect. No personal liability will attach to the shareholders for claims under any contract containing such a provision in writing where adequate notice is given of such provision, except possibly in a few jurisdictions. With respect to all types of claims in such jurisdictions and with respect to tort claims, contract claims where the shareholder liability is not disavowed as described above, claims for taxes and 8 11 certain statutory liabilities in other jurisdictions, a shareholder may be held personally liable to the extent claims are not satisfied by the Company. However, the Declaration provides that, upon payment of any such liability, the shareholder will be entitled to reimbursement from the general assets of the Company. The Trustees intend to conduct the operations of the Company, with the advice of counsel, in such a way as to avoid, as far as is practicable, the ultimate liability of the shareholders of the Company. For example, almost all of the real estate and all of the mortgages included in the assets of the Company are held by corporate subsidiaries. The Trustees do not intend to provide insurance covering such risks to shareholders. COMMON SHARES General. All Common Shares participate equally in dividends and in net assets available for distribution to holders of Common Shares on liquidation or termination of the Company, have one vote per Common Share on all matters submitted to a vote of the shareholders and do not have cumulative voting rights in the election of Trustees. The Common Shares offered hereby will be validly issued, fully paid and nonassessable by the Company upon issuance. The Common Shares have no conversion, exchange or sinking fund rights. Transfer Agent and Registrar. Fleet National Bank, Providence, Rhode Island, acts as transfer agent and registrar of the Common Shares. PREFERRED SHARES General. Under the Declaration, the Company has authority to issue an unlimited number of Preferred Shares. No Preferred Shares were outstanding as of May 29, 1996. Preferred Shares may be issued from time to time, in one or more series, as authorized by the Board of Trustees of the Company. Prior to issuance of shares of each series, the Board of Trustees is required by the Declaration to fix for each series, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption, of such series of Preferred Shares. The Preferred Shares will, when issued, be fully paid and nonassessable and will have no preemptive rights. The Board of Trustees could authorize the issuance of Preferred Shares with terms and conditions that could have the effect of discouraging a takeover or other transaction that holders of Shares might believe to be in their best interests or in which holders of some, or a majority, of the Shares might receive a premium for their Shares over the then market price of such Shares. Terms. The following description of the Preferred Shares sets forth certain general terms and provisions of the Preferred Shares to which any Prospectus Supplement may relate. The statements below describing the Preferred Shares are in all respects subject to and qualified in their entirety by reference to the applicable provisions of the Declaration and any applicable amendment to the Declaration designating the terms of a series of Preferred Shares (a "Designating Amendment"). 9 12 Reference is made to the Prospectus Supplement relating to any Preferred Shares offered thereby for the specific terms of such securities, including: (1) The title of such Preferred Shares; (2) The number of such Preferred Shares offered, the liquidation preference per Share and the offering price of such Preferred Shares; (3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of calculation thereof applicable to such Preferred Shares; (4) The date from which dividends on such Preferred Shares shall accumulate, if applicable; (5) The procedures for any auction and remarketing, if any, for such Preferred Shares; (6) The provision for a sinking fund, if any, for such Preferred Shares; (7) The provision for redemption, if applicable, of such Preferred Shares; (8) Any listing of such Preferred Shares on any securities exchange; (9) The terms and conditions, if applicable, upon which such Preferred Shares will be convertible into Common Shares, including the conversion price (or manner of calculation thereof); (10) Any other specific terms, preferences, rights, limitations or restrictions of such Preferred Shares; (11) A discussion of federal income tax considerations applicable to such Preferred Shares; (12) The relative ranking and preference of such Preferred Shares as to dividend rights and rights upon liquidation, dissolution or winding up of the affairs of the Company; (13) Any limitations on issuance of any series of Preferred Shares ranking senior to or on a parity with such series of Preferred Shares as to dividend rights and rights upon liquidation, dissolutions or winding up of the affairs of the Company; and (14) Any limitations, in addition to those imposed on Shares generally under the Declaration, on direct or beneficial ownership and restrictions on transfer, in each case as may be appropriate to preserve the status of the Company as a REIT. 10 13 Rank. Unless otherwise specified in the Prospectus Supplement, the Preferred Shares will, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Company, rank (i) senior to all Common Shares of the Company, and to all equity securities ranking junior to such Preferred Shares with respect to dividend rights or rights upon liquidation, dissolution or winding up of the Company; (ii) on a parity with all equity securities issued by the Company the terms of which specifically provide that such equity securities rank on a parity with the Preferred Shares with respect to dividend rights or rights upon liquidation, dissolution or winding up of the Company; and (iii) junior to all equity securities issued by the Company the terms of which specifically provide that such equity securities rank senior to the Preferred Shares with respect to dividend rights or rights upon liquidation, dissolution or winding up of the Company. The term "equity securities" does not include convertible Debt Securities. Dividends. Holders of the Preferred Shares of each series will be entitled to receive, when, as and if declared by the Board of Trustees of the Company, out of assets of the Company legally available for payment, cash dividends at such rates and on such dates as will be set forth in the applicable Prospectus Supplement. Each such dividend shall be payable to holders of record as they appear on the share transfer books of the Company on such record dates as shall be fixed by the Board of Trustees of the Company. Dividends on any series of the Preferred Shares may be cumulative or non-cumulative, as provided in the applicable Prospectus Supplement. Dividends, if cumulative, will be cumulative from and after the date set forth in the applicable Prospectus Supplement. If the Board of Trustees of the Company fails to declare a dividend payable on a dividend payment date on any series of the Preferred Shares for which dividends are non-cumulative, then the holders of such series of the Preferred Shares will have no right to receive a dividend in respect of the dividend period ending on such dividend payment date, and the Company will have no obligation to pay the dividend accrued for such period, whether or not dividends on such series are declared payable on any future dividend payment date. Unless otherwise provided in the applicable Prospectus Supplement, if Preferred Shares of any series are outstanding, no dividends will be declared or paid or set apart for payment on any other equity securities of the Company of any other series ranking, as to dividends, on a parity with or junior to the Preferred Shares of such series for any period unless (i) if such series of Preferred Shares has a cumulative dividend, full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment on the Preferred Shares of such series for all past dividend periods and the then current dividend period or (ii) if such series of Preferred Shares does not have a cumulative dividend, full dividends for the then current dividend period have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment on the Preferred Shares of such series. When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon Preferred Shares of any series and the shares of any other series of Preferred Shares ranking on a parity as to dividends with the Preferred Shares of such series, all dividends declared upon Preferred 11 14 Shares of such series and any other series of Preferred Shares ranking on a parity as to dividends with such Preferred Shares shall be declared pro rata so that the amount of dividends declared per Preferred Share of such series and such other series of Preferred Shares shall in all cases bear to each other the same ratio that accrued dividends per Preferred Share of such series (which shall not include any accumulation in respect of unpaid dividends for prior dividend periods if such Preferred Shares do not have a cumulative dividend) and such other series of Preferred Shares bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Preferred Shares of such series which may be in arrears. Except as provided in the immediately preceding paragraph and unless otherwise indicated in the applicable Prospectus Supplement, unless (i) if such series of Preferred Shares has a cumulative dividend, full cumulative dividends on the Preferred Shares of such series have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for payment for all past dividend periods and the then current dividend period, and (ii) if such series of Preferred Shares does not have a cumulative dividend, full dividends on the Preferred Shares of such series have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for payment for the then current dividend period, no dividends (other than in Shares or other equity securities ranking junior to the Preferred Shares of such series as to dividends and upon liquidation) shall be declared or paid or set aside for payment nor shall any other distribution be declared or made upon the Shares, or any other equity securities ranking junior to or on a parity with the Preferred Shares of such series as to dividends or upon liquidation, nor shall any Shares or any other equity securities of the Company ranking junior to or on a parity with the Preferred Shares of such series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such securities) by the Company (except by conversion into or exchange for other equity securities of the Company ranking junior to the Preferred Shares of such series as to dividends and upon liquidation). Redemption. If so provided in the applicable Prospectus Supplement, the Preferred Shares will be subject to mandatory redemption or redemption at the option of the Company, as a whole or in part, in each case upon the terms, at the times and at the redemption prices set forth in such Prospectus Supplement. The Prospectus Supplement relating to a series of Preferred Shares that is subject to mandatory redemption will specify the number of such Preferred Shares that shall be redeemed by the Company in each year commencing after a date to be specified, at a redemption price per share to be specified, together with an amount equal to all accrued and unpaid dividends thereon (which shall not, if such Preferred Shares do not have a cumulative dividend, include any accumulation in respect of unpaid dividends for prior dividend periods) to the date of redemption. The redemption price may be payable in cash or other property, as specified in the applicable Prospectus Supplement. If the redemption price for Preferred Shares of any series is payable only from the net proceeds of the issuance of equity securities of the 12 15 Company, the terms of such Preferred Shares may provide that, if no such equity securities shall have been issued or to the extent the net proceeds from any issuance are insufficient to pay in full the aggregate redemption price then due, such Preferred Shares shall automatically and mandatorily be converted into the applicable equity securities of the Company pursuant to conversion provisions specified in the applicable Prospectus Supplement. Notwithstanding the foregoing and unless otherwise provided in the applicable Prospectus Supplement, unless (i) if a series of Preferred Shares has a cumulative dividend, full cumulative dividends on all shares of such series of Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period, and (ii) if a series of Preferred Shares does not have a cumulative dividend, full dividends on all Preferred Shares of such series have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for the then current dividend period, no Preferred Shares shall be redeemed unless all outstanding Preferred Shares of such series are simultaneously redeemed; provided, however, that the foregoing shall not prevent the purchase or acquisition of Preferred Shares of such series to preserve the REIT status of the Company or pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Preferred Shares of such series. In addition, unless (i) if such series of Preferred Shares has a cumulative dividend, full cumulative dividends on all outstanding shares of such series of Preferred Shares have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period, the Company shall not purchase or otherwise acquire directly or indirectly any Preferred Shares of such series (except by conversion into or exchange for equity securities of the Company ranking junior to the Preferred Shares of such series as to dividends and upon liquidation); provided, however, that the foregoing shall not prevent the purchase or acquisition of Preferred Shares of such series to preserve the REIT status of the Company or pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Preferred Shares of such series. Liquidation Preference. Unless otherwise provided in the applicable Prospectus Supplement, upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, then, before any distribution or payment shall be made to the holders of any Common Shares or any other class or series of equity securities of the Company ranking junior to the Preferred Shares in the distribution of assets upon any liquidation, dissolution or winding up of the Company, the holders of each series of Preferred Shares shall be entitled to receive out of assets of the Company legally available for distribution to stockholders liquidating distributions in the amount of the liquidation preference per share, if any, set forth in the applicable Prospectus Supplement, plus an amount equal to all dividends accrued and unpaid thereon (which shall not include any accumulation in respect of unpaid noncumulative dividends for prior dividend periods). After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Preferred Shares will have no right or claim to any of the remaining assets of the Company. In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the available assets of the 13 16 Company are insufficient to pay the amount of the liquidating distributions on all outstanding Preferred Shares and the corresponding amounts payable on all shares of other classes or series of equity securities of the Company ranking on a parity with the Preferred Shares in the distribution of assets, then the holders of the Preferred Shares and all other such classes or series of equity securities shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. If liquidating distributions shall have been made in full to all holders of Preferred Shares, the remaining assets of the Company shall be distributed among the holders of any other classes or series of equity securities ranking junior to the Preferred Shares upon liquidation, dissolution or winding up, according to their respective rights and preferences and in each case according to their respective number of shares. Voting Rights. Holders of the Preferred Shares will have such voting rights, if any, as indicated in the applicable Prospectus Supplement, or as from time to time required by law. Conversion Rights. The terms and conditions, if any, upon which any series of Preferred Shares is convertible into Common Shares will be set forth in the applicable Prospectus Supplement relating thereto. Such terms will include the number of Shares into which the Preferred Shares are convertible, the conversion price (or manner of calculation thereof), the conversion period, provisions as to whether conversion will be at the option of the holders of the Preferred Shares or the Company, the events requiring an adjustment of the conversion price and provisions affecting conversion in the event of the redemption of such series of Preferred Shares. Transfer Agent. The transfer agent and registrar for the Preferred Shares will be set forth in the applicable Prospectus Supplement. DESCRIPTION OF DEBT SECURITIES The Prospectus Supplement will describe certain terms of any Debt Securities offered hereby, including (i) the title of such Debt Securities; (ii) any limit on the aggregate principal amount of such Debt Securities and their purchase price; (iii) the date or dates on which such Debt Securities will mature; (iv) the rate or rates per annum (or manner in which interest is to be determined) at which such Debt Securities will bear interest, if any, and the date from which such interest, if any, will accrue; (v) the dates on which such interest, if any, on such Debt Securities will be payable and the regular record dates for such interest payment dates; (vi) any mandatory or optional sinking fund or analogous provisions; (vii) additional provisions, if any, for the defeasance of such Debt Securities; (viii) the date, if any, after which and the price or prices at which such Debt Securities may, pursuant to any optional or mandatory redemption or repayment provisions, be redeemed and the other detailed terms and provisions of any such optional or mandatory redemption or repayment provisions; (ix) whether such Debt Securities are to be issued in whole or in part in registered form represented by one or more registered 14 17 global securities (a "Registered Global Security") and, if so, the identity of the depository for such Registered Global Security or Securities; (x) certain applicable United States Federal income tax consequences; (xi) any provisions relating to security for payments due under such Debt Securities; (xii) any provisions relating to the conversion or exchange of such Debt Securities into or for Shares or Debt Securities of another series; (xiii) any provisions relating to the ranking of such Debt Securities in right of payment as compared to other obligations of the Company; (xiv) the denominations in which such Debt Securities are authorized to be issued; (xv) the place or places where principal of, premium, if any, and interest, if any, on such Debt Securities will be payable; (xvi) whether such debt Securities are to be issued pursuant to an indenture of trust; and (xvii) any other specific term of such Debt Securities, including any additional events of default or covenants provided for with respect to such Debt Securities, and any terms that may be required by or advisable under applicable laws or regulations. The Debt Securities may be issued in one or more series under an Indenture to be executed by the Company and a trustee (the "Trustee"), a form of which is included as an exhibit to the Registration Statement of which this Prospectus is a part (the "Indenture"). The terms of the Debt Securities may include those stated in the Indenture and those made a part of the Indenture (before any supplements) by reference to the Trust Indenture Act of 1939, as amended. The following is a summary of certain provisions of the Indenture and does not purport to be complete and is qualified in its entirety by reference to the detailed provisions of the Indenture, including the definitions of certain terms therein to which reference is hereby made, for a complete statement of such provisions. Wherever particular provisions or sections of the Indenture or terms defined therein are referred to herein, such provisions or definitions are incorporated herein by reference. General. The Indenture does not limit the aggregate principal amount of Debt Securities that may be issued thereunder and provides that Debt Securities may be issued from time to time in one or more series. Conversion Rights. The terms, if any, on which Debt Securities of any series may be converted into Shares or Debt Securities of another series will be set forth in the Prospectus Supplement relating thereto. To protect the Company's status as a real estate investment trust ("REIT"), the holders of Debt Securities of any series ("Holders") may not convert any Debt Security, and such Debt Security shall not be convertible by any Holder, if as a result of such conversion any person would then be deemed to beneficially own, directly or indirectly, 9.9% or more of the then outstanding Shares. The conversion price will be subject to adjustment under certain conditions, including (i) the payment of dividends (and other distributions) in Shares on any class of shares of the Company; (ii) subdivisions, combinations and reclassifications of Shares; (iii) the issuance to all or substantially all holders of Shares of rights or warrants entitling them to subscribe for or purchase Shares at a price per Share (or having a conversion price per Share) less than the then 15 18 current market price; and (iv) distributions to all or substantially all holders of Shares or shares of any other class, or evidences of indebtedness or assets (including securities, but excluding those rights, warrants, dividends and distributions referred to above and dividends and distributions not prohibited under the terms of the Indenture) of the Company, subject to the limitation that all adjustments by reason of any of the foregoing would not be made until they result in a cumulative change in the conversion price of at least 1%. In the event the Company shall effect any capital reorganization or reclassification of its Shares or shall consolidate or merge with or into any trust or corporation (other than a consolidation or merger in which the Company is the surviving entity) or shall sell or transfer substantially all its assets to any other trust or corporation, the Holders shall, if entitled to convert such Debt Securities at any time after such transaction, receive upon conversion thereof, in lieu of each Share into which the Debt Securities of such series would have been convertible prior to such transaction, the same kind and amount of stock and other securities, cash or property as shall have been issuable or distributable in connection with such transaction with respect to each Share. A conversion price adjustment made according to the provisions of the Debt Securities of any series (or the absence of provision for such an adjustment) might result in a constructive distribution to the Holders of Debt Securities of such series or holders of Shares that would be subject to taxation as a dividend. The Company may, at its option, make such reductions in the conversion price, in addition to those set forth above, as the Board of Trustees of the Company deems advisable to avoid or diminish any income tax to holders of Shares resulting from any dividend or distribution of Shares (or rights to acquire Shares) or from any event treated as such for income tax purposes or for any other reason. The Board of Trustees will also have the power to resolve any ambiguity or correct any error in the provisions relating to the adjustment of the conversion price of the Debt Securities of such series and its actions in so doing shall be final and conclusive. Fractional Shares will not be issued upon conversion, but, in lieu thereof, the Company will pay a cash adjustment based upon market price. The Holders of Debt Securities of any series at the close of business on an interest payment record date shall be entitled to receive the interest payable on such Debt Securities on the corresponding interest payment date notwithstanding the conversion thereof. However, Debt Securities surrendered for conversion during the period from the close of business on any record date for the payment of interest to the opening of business on the corresponding interest payment date must be accompanied by payment of an amount equal to the interest payable on such interest payment date. Holders of Debt Securities of any series who convert Debt Securities of such series on an interest payment date will receive the interest payable by the Company on such date and need not include payment in the amount of such interest upon surrender of such Debt Securities for conversion. Except as aforesaid, no payment or adjustment is to be made on conversion for interest accrued on the Debt Securities of any series or for dividends on Shares. 16 19 Optional Redemption. The Debt Securities of any series that are convertible into Shares will be subject to redemption, in whole or from time to time in part, at any time for certain reasons intended to protect the Company's status as a REIT at the option of the Company on at least 30 days' prior notice by mail at a redemption price equal to 100% of the principal amount, plus interest accrued to the date of redemption. Except as otherwise set forth in the accompanying Prospectus Supplement, the Company may exercise its redemption powers solely with respect to the securities of the security holder or holders which pose a threat to the Company's REIT status and only to the extent deemed necessary by the Company's Board of Trustees to preserve such status. (See "Redemption" under "Description of Shares".) Dividends, Distributions and Acquisitions of Shares of Beneficial Interest. The Indenture provides that the Company will not (i) declare or pay any dividend or make any distribution on its Shares or to holders of its Shares (other than dividends or distributions payable in its Shares or other than as the Company determines is necessary to maintain its status as a REIT) or (ii) purchase, redeem or otherwise acquire or retire for value any of its Shares or permit any subsidiary to do so, if at the time of such action an Event of Default (as defined in the Indenture) has occurred and is continuing or would exist immediately after giving effect to such action. Additional Covenants. Any additional covenants of the Company with respect to a series of the Debt Securities will be set forth in the Prospectus Supplement relative thereto. Modification of the Indenture. Under the Indenture, with certain exceptions, the rights and obligations of the Company with respect to any series of Debt Securities and the rights of Holders of such series may only be modified by the Company and the Trustee with the consent of the Holders of at least a majority in principal amount of the outstanding Debt Securities of such series. However, without the consent of each Holder of any Debt Securities affected, an amendment, waiver or supplement may not (i) reduce the principal of, or rate of interest on, any Debt Securities; (ii) change the stated maturity date of the principal of, or any installment of interest on, any Debt Securities; (iii) waive a default in the payment of the principal amount of, or the interest on, or any premium payable on redemption of, any Debt Securities; (iv) change the currency for payment of the principal of, or premium or interest on, any Debt Securities; (v) impair the right to institute suit for the enforcement of any such payment when due; (vi) adversely affect any right to convert any Debt Securities; (vii) reduce the amount of outstanding Debt Securities necessary to consent to an amendment, supplement or waiver provided for in the Indenture; or (viii) modify any provisions of the Indenture relating to the modification and amendment of the Indenture or waivers of past defaults, except as otherwise specified. Events of Default, Notice and Waiver. Except as otherwise set forth in the accompanying Prospectus Supplement, the following is a summary of certain provisions of the Indenture relating to events of default, notice and waiver. 17 20 The following are Events of Default under the Indenture with respect to any series of Debt Securities: (i) default in the payment of interest on the Debt Securities of such series when due and payable, which continues for 30 days; (ii) default in the payment of principal of (and premium, if any) on the Debt Securities when due, at maturity, upon redemption or otherwise, which continues for five Business Days; (iii) failure to perform any other covenant of the Company contained in the Indenture or the Debt Securities of such series which continues for 60 days after written notice as provided in the Indenture; (iv) default under any bond, debenture or other Indebtedness (as defined in the Indenture) of the Company or any subsidiary if (a) either (x) such event of default results from the failure to pay any such Indebtedness at maturity or (y) as a result of such event of default, the maturity of such Indebtedness has been accelerated prior to its expressed maturity and such acceleration shall not be rescinded or annulled or the accelerated amount paid within ten days after notice to the Company of such acceleration, or such Indebtedness having been discharged, and (b) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal or interest thereon, or the maturity of which has been so accelerated, aggregates $10,000,000 or more; (v) certain events of bankruptcy, insolvency or reorganization relating to the Company; and (vi) any other Event of Default provided with respect to the Debt Securities of that series. If an Event of Default occurs and is continuing with respect to the Debt Securities of any series, either the Trustee or the Holders of a majority in aggregate principal amount of the outstanding Debt Securities of such series may declare the Debt Securities due and payable immediately. The Indenture provides that the Trustee will, within 90 days after the occurrence of any Default or Event of Default with respect to the Debt Securities of any series, give to the Holders of Debt Securities notice of all uncured Defaults and Events of Default known to it, but the Trustee will be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interest of such Holders, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any of the Debt Securities of such series. The Indenture provides that the Holders of a majority in aggregate principal amount of the Debt Securities of any series then outstanding may direct the time, method and place of conducting any proceedings for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Debt Securities of such series. The right of a Holder to institute a proceeding with respect to the Indenture is subject to certain conditions precedent including notice and indemnity to the Trustee, but the Holder has an absolute right to receipt of principal of (and premium, if any) and interest on such Holder's Debt Securities on or after the respective due dates expressed in the Debt Securities, and to institute suit for the enforcement of any such payments. The Holders of a majority in principal amount of the outstanding Debt Securities of any series then outstanding may on behalf of the Holders of all Debt Securities of such series waive 18 21 certain past defaults, except a default in payment of the principal of (or premium, if any) or interest on any Debt Securities of such series or in respect of certain provisions of the Indenture which cannot be modified or amended without the consent of the Holder of each outstanding Debt Securities of such series affected thereby. The Company will be required to furnish to the Trustee annually a statement of certain officers of the Company stating whether or not they know of any Default or Events of Default (as defined in the Indenture) and, if they have knowledge of a Default or Event of Default, a description of the efforts to remedy the same. Consolidation, Merger, Sale or Conveyance. The Indenture provides that the Company may merge or consolidate with, or sell or convey all or substantially all of its assets to, any other trust or corporation, provided that (i) either the Company shall be the continuing entity, or the successor entity (if other than the Company) shall be an entity organized and existing under the laws of the United States or a state thereof or the District of Columbia (although it may, in turn, be owned by a foreign entity) and such entity shall expressly assume by supplemental indenture all of the obligations of the Company under the Debt Securities of any series and the Indenture, (ii) immediately after giving effect to such transactions no Default or Event of Default shall have occurred and be continuing, and (iii) the Company shall have delivered to the Trustee an Officers' Certificate and opinion of counsel, stating that the transaction and supplemental indenture comply with the Indenture. The Indenture does not contain any provision requiring the Company to repurchase the Debt Securities of any series at the option of the Holders thereof in the event of a leveraged buyout, recapitalization or similar restructuring of the Company, even though the Company's creditworthiness and the market value of the Debt Securities may decline significantly as a result of such transaction. The Indenture does not protect Holders of the Debt Securities of any series against any decline in credit quality, whether resulting from any such transaction or from any other cause. Global Securities. The Debt Securities of a series may be issued in whole or in part in global form (the "Global Securities"). The Global Securities will be deposited with a depository (the "Depository"), or with a nominee for a Depository, identified in the Prospectus Supplement. In such case, one or more Global Securities will be issued in a denomination or aggregate denominations equal to the portion of the aggregate principal amount of outstanding Debt Securities of the series to be represented by such Global Security or Securities. Unless and until it is exchanged in whole or in part for Debt Securities in definitive form, a Global Security may not be transferred except as a whole by the Depository for such Global Security to a nominee of such Depository or by a nominee of such Depository to such Depository or another nominee of such Depository or by such Depository or any such nominee to a successor for such Depository or a nominee of such successor. The specific material terms of the depository arrangement with respect to any portion of a series of Debt Securities to be represented by a Global Security will be described in the Prospectus Supplement. The Company anticipates that the following provisions will apply to all depository arrangements. 19 22 Upon the issuance of a Global Security, the Depository for such Global Security will credit, on its book entry registration and transfer system, the respective principal amounts of the Debt Securities represented by such Global Security to the accounts of persons that have accounts with such Depository ("participants"). The accounts to be credited shall be designated by any underwriters or agents participating in the distribution of such Debt Securities. Ownership of beneficial interests in a Global Security will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in such Global Security will be shown on, and the transfer of that ownership will be effected only through records maintained by the Depository for such Global Security (with respect to interests of participants) or by participants or persons that hold through participants (with respect to interests of persons other than participants). So long as the Depository for a Global Security, or its nominee, is the registered owner of such Global Security, such Depository or such nominee as the case may be, will be considered the sole owner or Holder of the Debt Securities represented by such Global Security for all purposes under the Indenture; provided, however, that for purposes of obtaining any consents or directions required to be given by the Holders of the Debt Securities, the Company, the Trustee and its agents will treat a person as the holder of such principal amount of Debt Securities as specified in a written statement of the Depository. Principal, premium, if any, and interest payments, if any, on Debt Securities represented by a Global Security registered in the name of a Depository or its nominee will be made to such Depository or its nominee, as the case may be, as the registered owner of such Global Security. None of the Company, the Trustee or any Paying Agent for such Debt Securities will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in such Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Company expects that the Depository for any Debt Securities represented by a Global Security, upon receipt of any payment of principal, premium, if any, or interest will immediately credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Security as shown on the records of such Depository. The Company also expects that payments by participants will be governed by standing instructions and customary practices, as is now the case with the securities held for the accounts of customers registered in "street names," and will be the responsibility of such participants. If the Depository for any Debt Securities represented by a Global Security is at any time unwilling or unable to continue as Depository and a successor Depository is not appointed by the Company within 90 days, the Company will issue each Debt Security in definitive form to the beneficial owners thereof in exchange for such Global Security. In addition, the Company may at any time and in its sole discretion determine not to have any of the Debt Securities of a series represented by one or more Global Securities and, in such event, will issue Debt Securities of such series in definitive form in exchange for all of the Global Security or Securities representing such Debt Securities. 20 23 The laws of some states require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in Debt Securities represented by Global Securities. Governing Law. The Indenture and the Debt Securities will be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. DESCRIPTION OF SECURITIES WARRANTS The Company may issue Securities Warrants for the purchase of Debt Securities or Shares. Securities Warrants may be issued independently or together with Debt Securities or Shares offered by any Prospectus Supplement and may be attached to or separate from such Debt Securities or Shares. Each series of Securities Warrants will be issued under a separate warrant agreement (a "Securities Warrant Agreement") to be entered into between the Company and a bank or trust company, as Securities Warrant agent, all as set forth in the Prospectus Supplement relating to the particular issue of offered Securities Warrants. The Securities Warrant agent will act solely as an agent of the Company in connection with the Securities Warrant certificates relating to the Securities Warrants and will not assume any obligation or relationship of agency or trust for or with any holders of Securities Warrant certificates or beneficial owners of Securities Warrants. The following summaries of certain provisions of the Securities Warrant Agreement and Securities Warrants do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the Securities Warrant Agreement and the Securities Warrant certificates relating to each series of Security Warrants which will be filed with the Commission and incorporated by reference as an exhibit to the Registration Statement of which this Prospectus is a part at or prior to the time of the issuance of such series of Security Warrants. If Debt Securities Warrants are offered, the applicable Prospectus Supplement will describe the terms of such Securities Warrants, including the following where applicable: (i) the offering price, (ii) the denominations and terms of the series of Debt Securities purchasable upon exercise of such Securities Warrants, (iii) the designation and terms of any series of Debt Securities with which such Securities Warrants are being offered and the number of such Securities Warrants being offered with each such Debt Security, (iv) the date, if any, on and after which such Securities Warrants and the related series of Debt Securities will be transferable separately, (v) the principal amount of the series of Debt Securities purchasable upon exercise of each such Securities Warrant and the price at which such principal amount of Debt Securities of such series may be purchased upon such exercise, (vi) the date on which the right to exercise such Securities Warrants shall commence and the date (the "Expiration Date") on which such right shall expire, (vii) whether the Securities Warrants will be issued in registered or bearer form, (viii) any special United States Federal income tax consequences, (ix) the terms, if any, on which the Company may accelerate the Expiration Date and (x) any other terms of such Securities Warrants. 21 24 In the case of Share Warrants, the applicable Prospectus Supplement will describe the terms of such Securities Warrants, including the following where applicable: (i) the offering price, (ii) the aggregate number of Shares purchasable upon exercise of such Securities Warrants and the exercise price, (iii) the designation and terms of the Shares purchasable upon exercise of such Securities Warrants, (iv) the designation and terms of the Securities with which such Securities Warrants are being offered, if any, and the number of such Securities Warrants being offered with each such Security, (v) the date, if any, on and after which such Securities Warrants and the related series of Debt Securities or Shares will be transferable separately, (vi) the date on which the right to exercise such Securities Warrants shall commence and the Expiration Date, (vii) any special United States Federal income tax consequences and (viii) any other terms of such Securities Warrants. Securities Warrant certificates may be exchanged for new Securities Warrant certificates of different denominations, may (if in registered form) be presented for registration of transfer, and may be exercised at the corporate trust office of the Securities Warrant agent or any other office indicated in the applicable Prospectus Supplement. Prior to the exercise of any Debt Securities Warrants, holders of such Securities Warrants will not have any of the rights of holders of the Debt Securities purchasable upon such exercise, including the right to receive payments of principal of, premium, if any, or interest, if any, on such Debt Securities or to enforce covenants in the applicable indenture. Prior to the exercise of any Share Warrants, holders of such Securities Warrants will not have any rights of holders of such Shares, including the right to receive payments of dividends, if any, on such Shares, or to exercise any applicable right to vote. Certain Risk Considerations. Any Securities Warrants issued by the Company will involve a certain degree of risk, including risks arising from the fluctuations in the price of the underlying securities and general risks applicable to the stock market (or markets) on which the underlying securities are traded. Prospective purchasers of the Securities Warrants should recognize that the Securities Warrants may expire worthless and, thus, purchasers should be prepared to sustain a total loss of the purchase price of their Securities Warrants. This risk reflects the nature of a Securities Warrant as an asset which, other factors held constant, tends to decline in value over time and which may, depending on the price of the underlying securities, become worthless when it expires. The trading price of a Securities Warrant at any time is expected to increase as the price, or, if applicable, dividend rate on the underlying securities increases. Conversely, the trading price of a Securities Warrant is expected to decrease as the time remaining to expiration of the Securities Warrant decreases and as the price or, if applicable, dividend rate on the underlying securities, decreases. Assuming all other factors are held constant, the more a Securities Warrant is "out of the money" (i.e., the more the exercise price exceeds the price of the underlying securities and the shorter its remaining term to expiration), the greater the risk that a purchaser of the Securities Warrant will lose all or part of his or her investment. If the price of the underlying securities does not rise before the Securities Warrant expires to an 22 25 extent sufficient to cover a purchaser's cost of the Securities Warrant, the purchaser will lose all or part of his or her investment in such Securities Warrant upon expiration. In addition, prospective purchasers of the Securities Warrants should be experienced with respect to options and option transactions and understand the risks associated with options and should reach an investment decision only after careful consideration, with their financial advisers, of the suitability of the Securities Warrants in light of their particular financial circumstances and the information discussed herein and, if applicable, the Prospectus Supplement. Before purchasing, exercising or selling any Securities Warrants, prospective purchasers and holders of Securities Warrants should carefully consider, among other things, (i) the trading price of the Securities Warrants, (ii) the price of the underlying securities at such time, (iii) the time remaining to expiration and (iv) any related transaction costs. Some of the factors referred to above are in turn influenced by various political, economic and other factors that can affect the trading prices of the underlying securities and should be carefully considered prior to making any investment decisions. Purchasers of the Securities Warrants should further consider that the initial offering price of the Securities Warrants may be in excess of the price that a purchaser of options might pay for a comparable option in a private, less liquid transaction. In addition it is not possible to predict the price at which the Securities Warrants will trade in the secondary market or whether any such market will be liquid. The Company may, but is not obligated to, file an application to list any Securities Warrants issued on a United States national securities exchange. To the extent that any Securities Warrants are exercised, the number of Securities Warrants outstanding will decrease, which may result in a lessening of the liquidity of the Securities Warrants. Finally, the Securities Warrants will constitute direct, unconditional and unsecured obligations of the Company and as such will be subject to any changes in the perceived creditworthiness of the Company. Exercise of Securities Warrants. Each Securities Warrant will entitle the holder thereof to purchase such principal amount of Debt Securities or number of Shares, as the case may be, at such exercise price as shall in each case be set forth in, or calculable from, the Prospectus Supplement relating to the offered Securities Warrants. After the close of business on the Expiration Date (or such later date to which such Expiration Date may be extended by the Company), unexercised Securities Warrants will become void. Securities Warrants may be exercised by delivering to the Securities Warrant agent payment as provided in the applicable Prospectus Supplement of the amount required to purchase the Debt Securities or Shares, as the case may be, purchasable upon such exercise together with certain information set forth on the reverse side of the Securities Warrant certificate. Securities Warrants will be deemed to have been exercised upon receipt of payment of the exercise price, subject to the receipt within five Business Days of the Securities Warrant certificate evidencing such Securities Warrants. Upon receipt of such payment and the Securities Warrant certificate properly completed and duly executed at the corporate trust office of the Securities Warrant agent or any other office indicated in the applicable Prospectus Supplement, the Company will, 23 26 as soon as practicable, issue and deliver the Debt Securities or Shares, as the case may be, purchasable upon such exercise. If fewer than all of the Securities Warrants represented by such Securities Warrant certificate are exercised, a new Securities Warrant certificate will be issued for the remaining amount of Securities Warrants. Amendments and Supplements to Securities Warrant Agreement. The Securities Warrant Agreements may be amended or supplemented without the consent of the holders of the Securities Warrants issued thereunder, to effect changes that are not inconsistent with the provisions of the Securities Warrants and that do not adversely affect the interest of the holders of the Securities Warrants. Share Warrant Adjustments. Unless otherwise indicated in the applicable Prospectus Supplement, the exercise price of and the number of Shares covered by a Share Warrant are subject to adjustment in certain events, including (i) payment of a dividend on the Shares payable in Shares and Share splits, combinations or reclassification of Shares, (ii) issuance to all holders of Shares of rights or warrants to subscribe for or purchase Shares at less than their current market price (as defined in the Securities Warrant Agreement for such series of Share Warrants) and (iii) certain distributions of evidences of indebtedness or assets (including securities but excluding cash, dividends or distributions paid out of consolidated earnings or retained earnings or dividends payable in Shares or of subscription rights and warrants excluding those referred to above). No adjustments in the exercise price of and the number of Shares covered by a Share Warrant will be made for regular quarterly or other periodic or recurring cash dividends or distributions or for cash dividends or distributions to the extent paid from consolidated earnings or retained earnings. No adjustment will be required unless such adjustment would require a change of at least 1% in the exercise price then in effect. Except as stated above, the exercise price of and the number of Shares covered by a Share Warrant will not be adjusted for the issuance of Shares or any securities convertible into or exchangeable for Shares or carrying the right or option to purchase or otherwise acquire the foregoing in exchange for cash, other property or services. In the event of any (i) consolidation or merger of the Company with or into any entity (other than consolidation or a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding Shares), (ii) sale, transfer, lease or conveyance of all or substantially all of the assets of the Company or (iii) reclassification, capital reorganization or change of the Shares (other than solely a change in par value), then any holder of a Share Warrant will be entitled, on or after the occurrence of any such event, to receive on exercise of such Share Warrant the kind and amount of Shares or other securities, cash or other property (or any combination thereof) that the holder would have received had such holder exercised such holder's Share Warrant immediately prior to the occurrence of such event. If the consideration to be received upon exercise of the Share Warrant following any such event consists of common stock (or its equivalent) of the surviving entity, then from and after the occurrence of such event, the exercise price of such Share Warrant will be subject to the same 24 27 anti-dilution and other adjustments described in the second preceding paragraph, applied as if such common stock were Shares. FEDERAL INCOME TAX CONSIDERATIONS The following is a summary of the material federal income tax considerations that may be relevant to a prospective holder of Securities. This summary is for information purposes only and is not tax advice. No ruling letters from the Internal Revenue Service ("IRS") have been or will be requested by the Company on any tax issue connected with this Prospectus. This summary is based upon the Internal Revenue Code of 1986, as amended (the "Code"), as currently in effect, applicable Treasury Regulations thereunder and judicial and administrative interpretations thereof, all of which are subject to change, including changes that may be retroactive. No assurances can be given that the IRS will not challenge the propriety of one or more of the tax positions described herein or that such a challenge would not be successful. The tax treatment of a holder of any of the Securities will vary depending upon the terms of the specific securities acquired by such holder, as well as such holder's particular situation. The discussion below addresses in particular material federal income tax considerations to holders of Shares. Any material federal income tax considerations relevant to holders of Securities other than Shares will be provided in the applicable Prospectus Supplement relating thereto. This summary does not purport to deal with all aspects of taxation that may be relevant to particular holders of Shares or other Securities in light of their personal investment or tax circumstances. Except as specifically provided, the discussion below does not address foreign, state or local tax consequences, nor does it specifically address the tax consequences to taxpayers subject to special treatment under the federal income tax laws (including dealers in securities, foreign persons, life insurance companies, tax-exempt organizations, financial institutions, and taxpayers subject to the alternative minimum tax). The discussion below assumes that the Shares are and will be held as capital assets within the meaning of Section 1221 of the Code. EACH PROSPECTIVE PURCHASER OF SECURITIES IS ADVISED TO CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP AND SALE OF SECURITIES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN THE APPLICABLE TAX LAWS. Taxation of the Company General. The sections of the Code regarding REIT status are highly technical and complex. The following sets forth the material aspects of the sections that govern the federal income tax 25 28 treatment of a REIT. This summary is qualified in its entirety by the applicable Code provisions, rules and regulations promulgated thereunder, and administrative and judicial interpretations thereof. Nutter, McClennen & Fish, LLP has acted as tax counsel to the Company in connection with this Prospectus and the Company's election to be taxed as a REIT and has rendered an opinion to the Company as of May 29, 1996 to the effect that the Company has been organized in conformity with the requirements for qualification as a REIT, and its proposed method of operation is consistent with meeting the requirements for qualification and taxation as a REIT under the Code. Nutter, McClennen & Fish, LLP undertakes no obligation to update this opinion subsequent to such date. It must be emphasized that this opinion is based on various assumptions and upon the factual representations and legal conclusions of the Company as set forth in the Certificate of certain officers of the Company attached to the opinion. Moreover, such qualification and taxation as a REIT depends upon the Company's ability to meet (through actual annual operating results, distribution levels and diversity of stock ownership) the various qualification tests imposed under the Code discussed below, the results of which have not been and will not be reviewed by Nutter, McClennen & Fish, LLP. Accordingly, no assurance can be given that the actual results of the Company's operations in any particular taxable year will satisfy such requirements. See "Failure to Qualify." If the Company qualifies for taxation as a real estate investment trust and distributes to its shareholders at least 95% of its "real estate investment taxable income," it generally will not be subject to federal corporate income taxes on the amount distributed. However, a real estate investment trust is subject to special taxes on the net income derived from "prohibited transactions," on nonqualified income when it fails certain income tests, on the net income from foreclosure properties and on undistributed capital gains. In addition, under certain circumstances, the Company may be subject to a minimum tax on its items of tax preference and a 4% excise tax on certain amounts of undistributed income. Requirements for Qualification. Section 856(a) of the Code defines a real estate investment trust as a corporation, trust or association (1) which is managed by one or more trustees; (2) the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest; (3) which would be taxable, but for Sections 856 through 860 of the Code, as a domestic corporation; (4) which is neither a financial institution nor an insurance company subject to certain provisions of the Code; (5) the beneficial ownership of which is held by 100 or more persons; (6) not more than 50% in value of the outstanding shares of which is owned, directly or indirectly (after the application of certain attribution rules) by five or fewer individuals at any time during the last half of the Company's taxable year; and (7) which meets certain other tests, described below. Section 856(b) of the Code provides that conditions (1) to (4), inclusive, must be met during the entire taxable year and that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. 26 29 It is the expectation of the Company that it will have at least 100 shareholders during the requisite period for each of its taxable years. Furthermore, the Board of Trustees of the Company has the power under the Company's Declaration of Trust to prohibit any transfer of the Company's Shares and to redeem Shares that have been transferred pursuant to any transfer that in the opinion of the Trustees would jeopardize the status of the Company as a real estate investment trust. Nevertheless, there can be no assurance that the Company will continue to meet this requirement, and, if the Company has fewer than 100 shareholders during the requisite period, condition (5) described above will not be satisfied, and the Company will not qualify as a real estate investment trust during such taxable year. See "Failure to Qualify." To qualify as a REIT for a taxable year under the Code, the Company must elect or previously have elected to be so treated and must meet other requirements, certain of which are summarized below, including percentage tests relating to the sources of its gross income, the nature of the Company's assets, and the distribution of its income to shareholders. The Company also must take certain actions specified in regulations under the Code to attempt to ascertain the true owners of its Shares and must maintain records of such ownership. The Company has elected to be and intends to remain qualified as a REIT under Sections 856 through 860 of the Code. Qualification of the Company as a REIT will depend upon its continued ability to meet, through actual annual operating results, the various qualification tests imposed under the Code and discussed below. No assurance can be given that the actual results of the Company's operations will satisfy such requirements. In particular, the various qualification tests imposed under the Code may not be met if the loans made by the Company are not fully secured by mortgages on real property or interests in real property, or if the Company's leases for facilities (the "Leases") are not true leases for federal income tax purposes, or if any of the partnerships in which the Company is a partner is treated for tax purposes as an association taxable as a corporation. See "Income Tests," Federal Income Tax Treatment of Leases and "Other Tax Consequences". Income Tests. There are three gross income requirements. First, at least 75% of the Company's gross income (excluding gross income from certain sales of property held primarily for sale to customers in the ordinary course of the Company's business ("dealer sales")) must be derived directly or indirectly from investments relating to real property (including "rents from real property") or mortgages on real property, or must be "qualified temporary investment income." Second, at least 95% of the Company's gross income (excluding gross income from dealer sales) must be derived from such real property investments, dividends, interest, certain payments under interest rate swap and cap agreements and gain from the sale or disposition of stock, securities or real property or from any combination of the foregoing. Third, gain from the sale or other disposition of stock or securities (including certain interest rate swap and cap agreements) held for less than one year, gain from dealer sales (other than foreclosure property) and gain on the sale or other disposition of real property interests held for less than four years 27 30 (apart from involuntary conversions and sales of foreclosure property) must represent less than 30% of the Company's gross income. The Company may temporarily invest a portion of the net proceeds from the sale of Securities in short-term investments. Although the Company will make every effort to ensure that its income generated by these investments will be of a type which satisfies the 75% and 95% gross income tests, there can be no assurance in this regard. Moreover, the Company may realize capital gain upon sale or exchange of such assets held for less than one year, and any such short-term capital gain will be subject to the limitations imposed by the 30% gross income test. In order to qualify as "rents from real property," the amount of rent received may be based on receipts or sales, but must not be determined from the income or profits of any person, unless such person is a tenant all of whose income would qualify as "rents from real property" if such amounts were received by the real estate investment trust. The Code provides also that rents will not qualify as "rents from real property" in satisfying the gross income tests if the real estate investment trust, or an owner of 10% or more of the real estate investment trust, also owns 10% or more of the tenant. In addition, the Company must not manage the property or furnish or render services to the tenants of such property, except through an independent contractor from whom the Company derives no income. However, there is an exception to this rule which permits a real estate investment trust to perform certain customary tenant services of the sort which a tax-exempt organization could perform without being considered in receipt of "unrelated taxable business income." Finally, if rent attributable to personal property leased in connection with a lease of real property is greater than 15% of the total rent received under the lease, then the portion of rent attributable to such personal property will not qualify as "rents from real property." If any rent payments do not qualify as rents from real property for the purposes of Section 856 of the Code, it will be more difficult for the Company to meet the 95% or 75% gross income tests and qualify as a real estate investment trust. Interest income received by the Company with respect to its loans will be qualifying income for purposes of the 75% test only to the extent the interest is attributable to obligations secured by interests in real property. Interest is deemed attributable to obligations secured by real property only to the extent the value of the real property securing such loan equals or exceeds the amount of the loan. The Company believes that the value of the real property securing its loans is such that interest on such loans will not cause the Company to fail the 75% gross income test. However, there is no assurance that the IRS will not assert a contrary position respecting the value of the real property securing the Company's loans with the result that the Company may fail to meet the 75% gross income test in a taxable year. See "Failure to Qualify." Moreover, interest which is based on receipts or sales of the debtor may constitute qualifying income for purposes of the 75% test, but interest based on income or profits of the debtor will generally not constitute qualifying income. If the Company fails to satisfy one or both of the 75% or 95% gross income tests for any taxable year, it may nevertheless qualify as a real estate investment trust for such year if its 28 31 failure to meet such tests was due to reasonable cause and not due to willful neglect, it attaches a schedule of the sources of its income to its return, and any incorrect information on the schedule was not due to fraud with intent to evade tax. It is not possible, however, to state whether in all circumstances the Company would be entitled to the benefit of these relief provisions. If these relief provisions apply, a 100% tax is imposed upon the greater of the amount by which the Company failed the 75% gross income test or the 95% gross income test less an amount which generally reflects the expenses attributable to earning the non-qualified income. Asset Tests. At the close of each quarter of the Company's taxable year, it must also satisfy three tests relating to the nature of its assets. First, at least 75% of the value of the Company's total assets must consist of real estate assets (including real estate assets held by any "qualified REIT subsidiary" of the Company and its allocable share of real estate assets held by joint ventures or partnerships in which the Company participates), cash, cash items and government securities. Second, not more than 25% of the Company's total assets may be represented by securities other than those includible in the 75% asset class. Finally, of the investments included in the 25% asset class, the value of any one issuer's securities owned by the Company may not exceed 5% of the value of the Company's total assets, and the Company may not own more than 10% of any one issuer's outstanding voting securities. Shares in a "qualified REIT subsidiary" of the Company are excluded from the foregoing computation. A "qualified REIT subsidiary" of the Company is any corporation 100% of the stock of which is held by the Company at all times during the corporation's existence. The Company's management believes that each of the Company's subsidiaries meets the requirements for classification as a "qualified REIT subsidiary." Where a failure to satisfy the 25% asset test results from an acquisition of securities or other property during a quarter, the failure can be cured by disposition of sufficient non-qualifying assets within 30 days after the close of such quarter. The Company intends to maintain adequate records of the value of its assets to determine the compliance with the 25% asset test, and to take such action as may be required to cure any failure to satisfy the test within 30 days after the close of any quarter. Distribution Requirements. The Company, in order to qualify as a real estate investment trust, is required to distribute to its shareholders an amount equal to or greater than the excess of (A) the sum of (i) 95% of the Company's "real estate investment trust taxable income" (computed without regard to the dividends paid deduction and the Company's net capital gain) and (ii) 95% of the net income, if any, (after tax) from foreclosure property, over (B) the Company's "excess noncash income," if any. "Excess noncash income" is the excess of the sum of (A) certain imputed rent receipts, income from like-kind exchanges intended in good faith to qualify but ultimately determined to be ineligible for nonrecognition under Section 1031 of the Code and, in the case of a real 29 32 estate investment trust on the cash method of accounting, the excess of imputed original issue discount income from certain debt instruments over amounts actually received under such instruments over (B) five percent of the real estate investment trust taxable income for the year determined without regard to the deduction for dividends paid or net capital gain. In addition, the Company must have qualified as a real estate investment trust for every taxable year beginning after February 28, 1986 or have no earnings and profits accumulated in any non-real estate investment trust year. To the extent that the Company does not distribute all of its net long-term capital gain or distributes at least 95%, but less than 100% of its "real estate investment trust taxable income," as adjusted, even if it is not subject to tax as a regular corporation it will be subject to regular federal income tax on such undistributed net long-term capital gain or such undistributed real estate investment trust taxable income. In addition, a nondeductible 4% excise tax is imposed on the excess of (i) 85% of the Company's ordinary income for the year plus 95% of capital gain net income for the year and any undistributed income from prior years over (ii) the actual distribution to the shareholders during the year. Dividends declared in October, November or December and paid during the following January will be treated as having been paid and received on December 3l. It is possible that the Company, from time to time, may not have sufficient cash or other liquid assets to meet the 95% distribution requirements, due to timing differences between the actual receipt of income and actual payment of deductible expenses on the one hand and the inclusion of such income and deduction of such expenses in arriving at taxable income of the Company on the other hand. In the event that timing differences were to occur, in order to meet the 95% requirement, the Company might find it necessary to arrange for short-term, or possibly long-term, borrowing. In particular, the Company has borrowed significant amounts to acquire certain of the facilities which it has leased. If and when the Company sells such a facility, it will be required to repay any outstanding loans securing such facility. If at the time of sale the debt required to be repaid exceeds the Company's basis in the facility the Company will, because of the repayment of the loan, realize a greater amount of income than cash from the sale. As a consequence, the Company may be unable, without additional borrowings, to meet the 95% distribution requirement for such taxable year. Under certain circumstances, the Company may be able to rectify a failure to meet the distribution requirement for a year by paying "deficiency dividends" to shareholders in a later year, which may be included in the Company's deduction for dividends paid for the earlier year. The Company may be able to avoid being taxed on amounts distributed as deficiency dividends; however, the Company will be required to pay interest and a penalty based upon the amount of any deduction for deficiency dividends. Federal Income Tax Treatment of Leases. The availability to the Company of, among other things, depreciation deductions with respect to the Company's facilities will depend upon the treatment of the Company (or its 30 33 subsidiary or a partnership in which the Company or its subsidiary is a partner) as the owner of the facilities and the classification of the Leases as true leases, rather than as sales or financing arrangements, for federal income tax purposes. The questions whether the Company is the owner of the facilities and whether the Leases are true leases for federal income tax purposes are essentially factual matters. In a series of Revenue Procedures (Rev. Procs. 75-21, 75-28, 76-30, 79-48) the IRS set forth guidelines (regarding such matters as the residual value of the property, the term of the lease, the lessor's investment in the property and the terms of purchase options, if any) for the issuance of rulings with respect to whether certain transactions purporting to be leases of property would be treated as such for federal income tax purposes. Although the transactions pursuant to which the Company leases the facilities do not fully satisfy the conditions enumerated in such Revenue Procedures, such conditions are applicable only to advance ruling requests and are not statements of substantive law. The Company believes that the Leases are true leases and it (or its subsidiary or the partnership in which the Company or a subsidiary is a partner) should be treated as the owner of the facilities so leased for federal income tax purposes. However, no assurance can be given that the IRS will not successfully challenge the status of the Company as the owner of the facilities and the status of the Leases as true leases. In such event the Company would not be entitled to claim depreciation deductions with respect to such facilities and, as a result, the Company might fail to meet the 95% dividend distribution requirement, or if such requirement is met, then a larger percentage of distributions from the Company may in some years constitute ordinary dividend income, instead of a partial return of capital to shareholders. The IRS could assert that the acquisition price of one or more of the facilities leased back to the seller was less than the fair market value of the facility, and that the Company therefore realized prepaid rent in the amount of the difference in the year of the purchase. Although the Company believes it has paid fair market value for each of the facilities, there can be no assurance that the IRS would not be successful in such a challenge. If the IRS were to prevail, the Company might fail to meet the requirement that it distribute annually at least 95% of its "real estate investment trust taxable income," in which event it could lose its qualification as a real estate investment trust. The Company should be able to rectify a failure to meet the 95% distribution requirement arising from a determination by a court or a so-called "closing agreement" with the IRS that the Company has prepaid rental income by paying a "deficiency dividend" to its shareholders in a later year, which would be included in the Company's deduction for dividends paid for the year challenged. The Company might thus be able to avoid disqualification of real estate investment trust status and being subject to the regular corporate income tax on amounts ultimately distributed as deficiency dividends; however, it would in such case remain liable for interest and penalties with respect to any failure to meet the 95% distribution requirement until the deficiency dividend was paid. Furthermore, the Company might have to borrow funds to pay any deficiency dividend and such interest, penalties and excise tax, since it will not actually have received cash equal to any deemed prepaid rental income, and as a result the Company's ability to pay future dividends might be impaired. 31 34 Additionally, it should be noted that Code Section 467 (concerning leases with increasing rents) could apply to the Leases because each Lease provides for percentage or additional rents which may increase from one period to the next. Section 467 provides that in the case of a so-called "disqualified leaseback agreement" rental income must be accrued at a constant rate. If such constant rent accrual is required, the Company would recognize rental income in excess of cash rents and as a result may fail to meet the 95% dividend distribution requirement. See "Failure to Qualify." Because Section 467 directs the Department of the Treasury to issue regulations providing that rents will not be treated as increasing for tax avoidance purposes where the increases are based upon a fixed percentage of lessee receipts, the additional rent provisions of the leases should not cause the leases to be "disqualified leaseback agreements." However, the absence of Treasury Regulations to date means that there can be no assurance that none of the leases will be treated as "disqualified leaseback agreements" resulting in constant rent accrual. Section 467 also requires that if the leased properties are disposed of during the lease term (without taking into account renewal options), the Company must recapture as ordinary income the portion of its realized gain that is equal to the excess amounts of income that would have been accrued in prior years had constant accrual been required. Prohibited Transactions. Most of the Leases grant the lessee the option to purchase the leased property. It is possible that the IRS, upon the sale of a facility either to the lessee pursuant to such a purchase option or to another party, or upon the sale of part or all of a loan made by the Company, will take the position that the gain from such sale is income from a "prohibited transaction." A prohibited transaction occurs when a real estate investment trust sells property to customers in the ordinary course of its business. The determination whether a sale by the Company of any of its real estate assets will occur in the ordinary course of its business will be based upon the facts and circumstances of the transaction, including the frequency of the Company's sales of property and the length of time the Company held the property. The consequences to the Company of realizing gain from a prohibited transaction are that the Company will be subject to a l00% penalty tax upon the gain realized from such transaction and such gain will be treated as non-qualifying income for purposes of the 30% test, which could adversely affect the Company's status as a real estate investment trust. See "Failure to Qualify". The Company believes that it does not hold any of its real estate assets for sale to customers in the ordinary course of its business. However, no assurance can be given that the IRS will not successfully assert a contrary position with respect to a sale of any of the Company's assets with the consequences described above. Failure to Qualify. If the Company fails to qualify for taxation as a real estate investment trust in any taxable year, and the relief provisions do not apply, the Company will be subject to tax (including any applicable minimum tax) on its taxable income at regular corporate rates. Distributions to shareholders in any year in which the Company fails to qualify will not be deductible by the Company nor will they be required to be made. In such event, to the extent of current and 32 35 accumulated earnings and profits, all distributions to shareholders will be taxable as ordinary income. Subject to certain limitations provided in the Code, corporations will be eligible for the dividends received deduction with respect to such dividends. Unless entitled to relief under specific statutory provisions, the Company will also be disqualified from taxation as a real estate investment trust for the next four taxable years. It is not possible to state whether in all circumstances the Company would be entitled to statutory relief. Failure to qualify for even one year could result in the Company's incurring substantial indebtedness (to the extent borrowings are feasible) or liquidating substantial investments in order to pay the resulting taxes. Taxation of Shareholders Generally. As long as the Company qualifies as a real estate investment trust, distributions made to the Company's shareholders out of current or accumulated earnings and profits will be taken into account by them as ordinary income (which will not be eligible for the dividends received deduction for corporations). Distributions that are designated as capital gain dividends will be taxed as long-term capital gains to the extent they do not exceed the Company's actual net capital gain for the taxable year. Distributions in excess of current or accumulated earnings and profits will not be taxable to a shareholder to the extent that they do not exceed the adjusted basis of the shareholder's Shares, but will reduce the basis of the shareholder's Shares. To the extent that such distributions exceed the adjusted basis of a shareholder's Shares, they will be included in income as capital gain (long-term or short-term depending upon the holding period for the Shares) assuming the Shares are a capital asset in the hands of the shareholder. Shareholders may not include in their individual income tax returns any net operating losses or capital losses of the Company. In general, any loss upon a sale or exchange of Shares by a shareholder who has held such Shares for six months or less (after applying certain rules), will be treated as a long-term capital loss to the extent of distributions from the Company required to be treated by such shareholder as long-term capital gain. Distributions by the Company will constitute "portfolio income" to the shareholders, and not "passive income," for purposes of applying the provisions of Code Section 469. Accordingly, shareholders will not be able to net any "passive losses" against such distributions. Tax-Exempt Shareholders. In Revenue Ruling 66-106, the IRS ruled that amounts distributed by a real estate investment trust to a tax-exempt employees' pension trust did not constitute "unrelated business taxable income." Revenue rulings are interpretive in nature and subject to revocation or modification by the IRS. However, based upon Revenue Ruling 66-106 and the analysis therein, dividend distributions by the Company to qualified pension plans (including individual retirement accounts) and other tax-exempt entities should not constitute "unrelated business 33 36 taxable income." This Ruling may not apply if a shareholder has borrowed money to acquire Shares or if the Company makes a distribution of long term capital gain. Tax-exempt shareholders are urged to consult their tax advisors respecting the tax consequences to them from their investment in the Company. Withholding on Dividends. Shareholders may be subject to "back-up withholding" from a reportable payment at a rate of 31% if, among other things, (i) the shareholder fails to furnish a social security number or other taxpayer identification number ("TIN") to the Company certified under penalties of perjury within a reasonable time after the request therefor; (ii) the IRS notifies the Company that the TIN furnished by the shareholder is incorrect; (iii) the IRS notifies the Company that backup withholding should be commenced because the shareholder has failed to properly report interest or dividends; or (v) when required to do so, the shareholder fails to certify under penalties of perjury that such shareholder is not subject to backup withholding or that the TIN provided to the Company is correct. Any amount withheld is creditable against a shareholder's federal income tax liability for such year. Shareholders should consult their tax advisors as to their qualification for exemption from withholding and the procedure for obtaining such an exemption. The Company will report to its shareholders and the IRS the amount of dividends paid during each calendar year, and the amount of tax withheld, if any. Alternative Minimum Tax. The Company will be subject to the alternative minimum tax on its undistributed real estate investment trust taxable income to the extent such tax exceeds its regular tax liability. Tax preference items of a real estate investment trust must be apportioned between the trust and its shareholders in accordance with regulations. No such regulations have yet been issued and, accordingly, the proper method of apportionment of preference items of the Company is unclear. Prospective investors should consult their tax advisors to determine whether and to what extent an investment in the Company would have an adverse effect on their alternative minimum tax position. Foreign Shareholders. The preceding discussion does not address the federal income tax consequences to foreign shareholders of an investment in the Company. Foreign shareholders in the Company should consult their own tax advisors concerning the application to them of the Foreign Investment in 34 37 Real Property Tax Act of l980 ("FIRPTA"), which altered the federal income tax treatment of an investment in REITs by foreign shareholders. (a) Distributions of cash made by the Company to a foreign shareholder are generally subject to United States withholding tax at a 30% rate unless a lower rate or exemption is provided by an applicable tax treaty. A foreign shareholder receiving a distribution subject to such withholding tax will be able to claim a refund to the extent the withholding has been imposed on a portion of such distribution which does not constitute a "dividend" (i.e., a distribution out of the Company's current or accumulated earnings and profits). The basis which a foreign shareholder has in his shares is reduced by the portion of the distribution that does not constitute a dividend, and after basis has been reduced to zero, such non-dividend distributions generally represent capital gain from the sale or exchange of the shares. The United States tax treatment of such gain is described in section (c) below. If a distribution is effectively connected with a United States trade or business conducted by the foreign holder, the portion of such distribution constituting a dividend is generally subject to graduated United States federal income tax. (b) Distributions attributable to gain from the Company's sale or exchange of United States real property interests are subject to the same United States graduated federal income tax which applies to U.S. persons unless a lower rate or exemption is provided under an applicable tax treaty. Such distributions to a foreign holder are also subject to withholding at a 35% rate to the extent the distributions are designated as capital gains dividends by the Company. If a distribution is designated as a capital gain dividend after the time that the distribution has been made, the 35% withholding rate will generally apply to subsequent distributions in an amount equal to the previous distribution designated as capital gain. (c) The Company believes that it is currently a domestically-controlled REIT (i.e., a real estate investment trust where less than 50% in value of its shares is held directly or indirectly by foreign persons at all times during the period in question). As such, gain realized by a foreign holder on the sale, exchange, redemption or other disposition of Shares is not subject to United States federal income tax unless (1) the gain is effectively connected with a United States trade or business of the foreign holder, in which case the gain is generally subject to graduated United States federal income tax; or (2) in the case of a nonresident alien, the individual is present in the United States for 183 days or more during the year of disposition, and either has a tax home in the United States or maintains an office or other fixed place of business in the United States and the income is attributable to such office, in which case the gain is subject to 30% federal income tax. If the Company is not a domestically-controlled REIT, the sale of Shares by a foreign shareholder will be treated as a disposition of United States real property interest, and consequently the gain will be subject to graduated United States income tax rates and withholding as described in section (b). 35 38 (d) Shares held by an individual at the time of his death (or previously transferred subject to certain rights or powers or certain transfers by gift within three years of death) are subject to United States federal estate tax unless otherwise provided by an applicable treaty. (e) Dividend distributions are not subject to information reporting or backup withholding. Under current law, payments of proceeds from the sale of Shares to or through a broker are generally subject to information reporting and backup withholding unless the shareholder certifies as to his non-United States status or otherwise establishes an exemption. Future Tax Laws. The foregoing discussion is based on provisions of the Code, Treasury Regulations, administrative interpretations and court decisions. No assurance can be given that subsequent legislation, Treasury Regulations, administrative interpretations or court decisions will not change the tax laws so that the treatment of a real estate investment trust or the consequences of an investment in the Company would vary substantially from the treatment described above. Any such change might apply retroactively. Other Tax Consequences. Certain of the Company's investments are through partnerships (the "Partnerships"), which may involve certain tax risks. Such risks include possible challenge by the IRS of (a) allocations of income and expense items which could affect the computation of taxable income of the Company and (b) the status of the Partnerships as partnerships (as opposed to associations taxable as corporations) for income tax purposes. If any of the Partnerships in which the Company is a partner is treated as an association, it would be treated as a taxable entity. In such a situation, if the Company's ownership interest in any of the Partnerships exceeded 10% of the Partnership's voting interests or the value of such interest exceeded 5% of the value of the Company's assets, the Company would cease to qualify as a real estate investment trust. Furthermore, in such a situation distributions from any of the Partnerships to the Company would be treated as dividends, which are not taken into account in satisfying the 75% gross income test described above and which could therefore make it more difficult for the Company to qualify as a real estate investment trust for the taxable year in which such distribution was received. In addition, in such a situation the interest in any of the Partnerships held by the Company would not qualify as a "real estate asset," which could make it more difficult for the Company to meet the 75% asset test described above. Finally, in such a situation the Company would not be able to deduct its share of losses generated by any of the Partnerships in computing its taxable income. See "Failure to Qualify." The Company believes that each of the Partnerships will be treated for tax purposes as a partnership. However, no assurance can be given that the IRS may not successfully challenge the tax status of any of the Partnerships. The Company and its shareholders may be subject to state or local taxation in various state or local jurisdictions, including those in which it or they transact business or reside. 36 39 There may be other federal, state, local or foreign tax considerations applicable to the circumstances of a particular shareholder. PLAN OF DISTRIBUTION General. The Company may sell the Securities in any of three ways: (i) through underwriting syndicates represented by one or more managing underwriters, or by one or more underwriters without a syndicate; (ii) through agents designated from time to time; and (iii) directly to investors. The names of any underwriters or agents of the Company involved in the sale of the Securities in respect of which this Prospectus is being delivered and any applicable commissions or discounts will be set forth in the Prospectus Supplement. The net proceeds to the Company from such sale will also be set forth in the Prospectus Supplement. The distribution of the Securities may be effected from time to time in one or more transactions at a fixed price or prices (which may be changed from time to time), at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Prospectus Supplement will describe the method of distribution of the Securities. In connection with the sale of Securities, underwriters or agents acting on the Company's behalf may receive compensation from the Company or from purchasers of Securities for whom they may act as agents, in the form of discounts, concessions or commissions. The underwriter, dealers and agents that participate in the distribution of Securities may be deemed to be underwriters under the Securities Act and any discounts or commissions received by them and any profit on the resale of Securities by them may be deemed to be underwriting discounts and commissions under the Securities Act. Any such underwriter will be identified and any such compensation will be described in the Prospectus Supplement. Agents and underwriters may be entitled under agreements entered into with the Company to indemnification by the Company against certain liabilities, including liabilities under the Securities Act, or to contribution with respect to payments which the agents or underwriters may be required to make in respect thereof. Agents and underwriters may engage in transactions with or perform services for the Company in the ordinary course of business. Structured Equity Program. The Company may also issue and sell Shares from time to time through one or more sales agents (to be named in a prospectus supplement hereto, the "Agent") in ordinary brokers' transactions on the New York Stock Exchange (the "NYSE"). Such sales, if any, will be effected during a series of one or more pricing periods (each, a "Pricing Period"), each consisting of five consecutive calendar days in duration, unless a shorter period has otherwise been agreed to by the Company and the Agent. For each Pricing Period, an Average Market 37 40 Price (as hereinafter defined) will be computed. With respect to any Pricing Period, "Average Market Price" shall equal the average of the arithmetic mean of the high and low sales prices of the Shares of the Company reported on the NYSE for each trading day of such Pricing Period. The net proceeds to the Company with respect to sales of Shares in any Pricing Period up to a maximum amount agreed to in advance with the Agent (the "Average Market Price Shares") will equal a percentage (the "Company's Percentage") of the Average Market Price for each Share sold during the Pricing Period (subject to adjustment in certain circumstances), plus Excess Proceeds (as defined below), if any. The compensation to the Agent for sales of Average Market Price Shares in any Pricing Period will equal the difference between the aggregate gross sales price at which such sales are actually effected and the net proceeds to the Company for such sales, but in no event will exceed 10% of the aggregate gross sales prices of the Average Market Price Shares during any Pricing Period (the "Maximum Commission"). To the extent that such aggregate gross sales prices are less than the Average Market Price, the compensation to the Agent will be correspondingly reduced; to the extent that such aggregate gross sales prices are greater than the Average Market Price, the compensation to the Agent will be correspondingly increased (but in no event will exceed the Maximum Commission). In the event that the average aggregate gross sales price in any Pricing Period equals the Company's Percentage of the Average Market Price (or less) for such Pricing Period, all of the proceeds from such sales will be for the account of the Company and no compensation will be payable to the Agent. To the extent that the Agent's compensation under the foregoing formula would otherwise exceed the Maximum Commission in any Pricing Period, the excess will constitute additional net proceeds to the Company (the "Excess Proceeds"). Any Shares sold by the Agent during the Pricing Period on behalf of the Company other than Average Market Price Shares ("Additional Shares") will be at a fixed commission rate based on a percentage of the Share price per Share. In no event will the compensation to the Agent be in excess of any applicable requirements of the National Association of Securities Dealers, Inc. Settlements of sales of Additional Shares and Average Market Price Shares will occur on the third business day following the date on which any such sales are made. Purchases of Shares from the Agent, as sales agent for the Company, will settle the regular way on the NYSE. Compensation to the Agent with respect to sales of Average Market Price Shares will be paid out of the proceeds of such settlements. There is no arrangement for funds to be received in an escrow, trust or similar arrangement. At the end of each Pricing Period, the Company will file a Prospectus Supplement under the applicable paragraph of Rule 424(b) promulgated under the Act, which Prospectus Supplement will set forth the name of the Agent, dates included in such Pricing Period, the number of such Shares sold through the Agent as sales agent (identifying separately the number of Average Market Shares and any Additional Shares), the high and low prices at which Average Market Shares were sold during such Pricing Period, the net proceeds to the Company, 38 41 the compensation payable by the Company to the Agent with respect to such sales pursuant to the formula set forth above and other relevant information. Unless otherwise indicated in a Prospectus Supplement, the Agent will act as sales agent on a best efforts basis. In connection with the sale of the Shares on behalf of the Company, the Agent will be deemed to be an "underwriter" within the meaning of the Securities Act, and the compensation of the Agent may be deemed to be underwriting commissions or discounts. The Company intends to provide indemnification and contribution to the Agent against certain civil liabilities, including liabilities under the Securities Act. The Agent may engage in transactions with, or perform services for, the Company in the ordinary course of business. LEGAL MATTERS The validity of the Securities offered hereby will be passed upon for the Company by Nutter, McClennen & Fish, LLP, Boston, Massachusetts. In addition, Nutter, McClennen & Fish, LLP will pass upon certain Federal income tax matters relating to the Company. The name of any legal counsel that passes on the validity of the other Securities offered hereby for any underwriter or agent will be set forth in the applicable Prospectus Supplement. EXPERTS The consolidated balance sheets of the Company as of December 31, 1995 and 1994 and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995, and the financial statement schedules incorporated by reference in this Prospectus and elsewhere in the Registration Statement, have been audited by Coopers & Lybrand L.L.P., independent accountants, as indicated in their report with respect thereto, and are incorporated by reference herein in reliance upon the authority of said firm as experts in accounting and auditing. Any financial statements and schedules hereafter incorporated by reference in the registration statement of which this Prospectus is a part that have been audited and are the subject of a report by independent accountants will be so incorporated by reference in reliance upon such reports and upon the authority of such firms as experts in accounting and auditing to the extent covered by consents filed with the Commission. 39 42 =============================================================================== NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE HEREIN, IN CONNECTION WITH THIS OFFERING AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION IN THE PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. - ------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- Available Information ..................................................... 2 Incorporation of Certain Documents by Reference .................................................. 2 The Company ............................................................... 4 Health Care Reform and Regulation ........................................................... 6 Ratio of Earnings to Fixed Charges ................................................................. 6 Use of Proceeds ........................................................... 6 Description of Shares ..................................................... 7 Description of Debt Securities .............................................................. 14 Description of Securities Warrants ................................................................ 21 Federal Income Tax Considerations ........................................................... 25 Plan of Distribution ...................................................... 37 Legal Matters ............................................................. 39 Experts ................................................................... 39
MEDITRUST PROSPECTUS May 30, 1996 =============================================================================== 43 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 16. Exhibits The following is a list of exhibits filed as part of this Registration Statement (numbering corresponds to numbering in Item 601 of Regulation S-K).
Exhibit Description ----------- No. - --- 1.1 Form of Underwriting Agreement (incorporated by reference to Exhibit 1 to the Current Report on Form 8-K dated October 7, 1994) 1.2 Form of Underwriting Agreement (incorporated by reference to Exhibit 1 to the Current Report on Form 8-K dated July 13, 1995) 1.3 Form of Distribution Agreement (incorporated by reference to Exhibit 1 to the Current Report dated August 8, 1995) 1.4 Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Registration Statement on Form S-3 (File No. 33-55386)) 1.5 Form of Sales Agency Agreement (incorporated by reference to Exhibit 1.5 to the Registration Statement on Form S-3 (File No. 33-62293)) 4.1 Restated Declaration of Trust dated May 10, 1996 4.2 By-laws, as amended (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1992) 4.3 Form of Indenture and Form of Convertible Debenture (incorporated by reference to Exhibit 4 to the Registration Statement on Form S-3 (File No. 33-50835)) 4.4 Form of Indenture Supplement and Form of Note (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated July 13, 1995) 4.5 Form of Indenture Supplement and Forms of Convertible Notes (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated July 27, 1995) 4.6 Form of Indenture Supplement and Forms of Medium-Term Notes (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated August 13, 1995)
II-1 44 4.7 Form of Debt Security(1) 4.8 Form of Securities Warrant Agreement(1) 5 Opinion letter of Nutter, McClennen & Fish, LLP(2) 8 Opinion letter of Nutter, McClennen & Fish, LLP regarding tax matters 12 Computation of Ratios of Earnings to Fixed Charges 23.1 Consents of Nutter, McClennen & Fish, LLP (included in Exhibits 5 and 8) 23.2 Consent of Coopers & Lybrand L.L.P.(2) 25 Form T-1 Statement of Eligibility and Qualification of Fleet National Bank under the Trust Indenture Act of 1939(2)
(1) To be filed by amendment or incorporated by reference if necessary in connection with the offering of the Securities. (2) Filed previously. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, Commonwealth of Massachusetts on May 30, 1996. MEDITRUST By: /s/ Abraham D. Gosman* ------------------------------ Abraham D. Gosman, Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this amendment to the registration statement has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. II-2 45
Signature Title Date - --------- ----- ---- /s/ Abraham D. Gosman* Chairman of the - ------------------------------------ Board and Chief Abraham D. Gosman Executive Officer May 30, 1996 (Principal Executive Officer) /s/ Lisa P. McAlister* Chief Financial Officer - ------------------------------------ and Vice President Lisa P. McAlister (Principal May 30, 1996 Financial and Accounting Officer) /s/ David F. Benson* President - ------------------------------------ and Trustee May 30, 1996 David F. Benson /s/ Edward W. Brooke* Trustee May 30, 1996 - ------------------------------------ Edward W. Brooke /s/ Robert Cataldo* Trustee May 30, 1996 - ------------------------------------ Robert Cataldo /s/ Philip L. Lowe* Trustee May 30, 1996 - ------------------------------------ Philip L. Lowe /s/ Thomas J. Magovern* Trustee May 30, 1996 - ------------------------------------ Thomas J. Magovern /s/ Gerald Tsai, Jr.* Trustee May 30, 1996 - ------------------------------------ Gerald Tsai, Jr. /s/ Frederick W. Zuckerman* Trustee May 30, 1996 - ------------------------------------ Frederick W. Zuckerman *By: /s/ Michael J. Bohnen ------------------------------- Michael J. Bohnen Attorney-in-fact
*A power of attorney was previously filed with the Registration Statement. II-3 EX-4.1 2 RESTATED DECLARATION OF TRUST DATED 5/10/96 1 ------------------------------------------------- MEDITRUST ------------ Restated Declaration of Trust ------------ August 6, 1985 (as restated on May 10, 1996) ------------ Principal Business Address: 197 First Avenue Needham, MA 02194 ------------ Business Address of Meditrust's Trustees: 197 First Avenue Needham, MA 02194 ------------ Agent for Service of Process for Meditrust and its Trustees: Michael S. Benjamin, Esq Senior Vice President, General Counsel and Secretary Meditrust 197 First Avenue Needham, MA 02194 ------------------------------------------------- 2 ARTICLE I THE TRUST; DEFINITIONS
Page ---- 1.1 Name........................................................... 2 1.2 Places of Business............................................. 2 1.3 Nature of Trust ............................................... 2 1.4 Definitions ................................................... 2 ARTICLE II TRUSTEES 2.1 Number, Term of Office and Qualifications of Trustees................................................... 6 2.2 Compensation and Other Remuneration ........................... 7 2.3 Resignation, Removal and Death of Trustees .................... 7 2.4 Vacancies...................................................... 7 2.5 Successor and Additional Trustees ............................. 7 2.6 Actions by Trustees ........................................... 8 2.7 Certification of Changes in Trustees .......................... 8 2.8 Committees .................................................... 9 2.9 Investment Committee........................................... 9 ARTICLE III TRUSTEES' POWERS 3.1 Power and Authority of Trustees ............................... 9 3.2 Specific Powers and Authority ................................. 10 3.3 By-Laws ....................................................... 15 ARTICLE IV ADVISOR 4.1 Employment of Advisor ......................................... 15 4.2 Other Activities of Advisor ................................... 15 ARTICLE V INVESTMENT POLICY AND POLICIES WITH RESPECT TO CERTAIN DISTRIBUTIONS TO SHAREHOLDERS 5.1 Statement of Policy ........................................... 16 5.2 Prohibited Investments and Activities ......................... 17 5.3 Appraisals .................................................... 18
3 ARTICLE VI THE SHARES AND SHAREHOLDERS
Page ---- 6.1 Description of Shares .......................................................... 19 6.2 Certificates ................................................................... 21 6.3 Fractional Shares .............................................................. 21 6.4 Issuance of Units .............................................................. 21 6.5 Legal Ownership of Trust Estate ................................................ 22 6.6 Shares Deemed Personal Property ................................................ 22 6.7 Share Record; Issuance and Transferability of Shares............................ 22 6.8 Dividends or Distributions to Shareholders ..................................... 23 6.9 Transfer Agent, Dividend Disbursing Agent and Registrar......................... 23 6.10 Shareholders' Meetings ......................................................... 23 6.11 Proxies ........................................................................ 25 6.12 Reports to Shareholders ........................................................ 25 6.13 Fixing Record Date ............................................................. 25 6.14 Notice to Shareholders ......................................................... 25 6.15 Shareholders' Disclosures; Trustees; Right to Refuse to Transfer Shares; Limitation on Holdings; Redemption; of Shares ......................... 26 ARTICLE VII LIABILITY OF TRUSTEES, SHAREHOLDERS, OFFICERS, EMPLOYEES AND AGENTS, AND OTHER MATTERS 7.1 Exculpation of Trustees, Officers, Employees and Agents .................................................................... 27 7.2 Limitation of Liability of Shareholders, Trustees, Officers, Employees and Agents ......................................................... 28 7.3 Express Exculpatory Clauses and Instruments .................................... 28 7.4 Indemnification and Reimbursement of Trustees, Officers, Employees, and Agents ............................................... 29 7.5 Right of Trustees, Officers, Employees and Agents to Own Share or Other Property and to Engage in Other Business ...................................................................... 29 7.6 Transactions Between Trustees, Officers, Employees or Agents and the Trust ................................................................ 30 7.7 Restriction of Duties and Liabilities .......................................... 31 7.8 Persons Dealing with Trustees, Officers, Employees or Agents ..................................................................... 31 7.9 Reliance ....................................................................... 31
4 ARTICLE VIII DURATION, AMENDMENT AND TERMINATION OF TRUST
Page ---- 8.1 Duration of Trust .............................................................. 32 8.2 Termination of Trust ........................................................... 32 8.3 Amendment Procedure ............................................................ 33 8.4 Amendments Effective ........................................................... 33 8.5 Transfer to Successor .......................................................... 33 8.6 Sale of Assets, Merger ......................................................... 34 ARTICLE IX MISCELLANEOUS 9.1 Applicable Law ................................................................. 34 9.2 Index and Headings for Reference Only .......................................... 34 9.3 Successors in Interest ......................................................... 34 9.4 Inspection of Records .......................................................... 34 9.5 Counterparts ................................................................... 35 9.6 Provisions of the Trust in Conflict with Law or Regulations; Severability .................................................................. 35 9.7 Certifications ................................................................. 35
5 RESTATED DECLARATION OF TRUST OF MEDITRUST AUGUST 6, 1985 (as restated on May 10, 1996) DECLARATION OF TRUST restated as of the date set forth above by the undersigned Trustees. WITNESSETH: WHEREAS, the Trustees desire to continue the trust originally formed and subsequently amended and restated, as herein restated, for the principal purpose of investing in real property and interests therein; and WHEREAS, the Trustees desire that such trust qualify as a "real estate investment trust" under the REIT Provisions of the Internal Revenue Code; and WHEREAS, in furtherance of such purpose the Trustees intend to acquire certain real property and interests therein, and other property, real, personal or mixed, tangible and intangible, of any kind or character whatsoever, and to hold, manage and dispose of all such property as Trustees in the manner hereinafter stated; WHEREAS, it is proposed that the beneficial interest in the Trust be divided into one or more classes or series of transferable Shares of Beneficial Interest, evidenced by certificates therefor, as hereinafter provided; and WHEREAS, the Trustees desire to amend certain provisions of the Trust as originally formed and subsequently amended and restated and to restate such amended Trust in its entirety; WHEREAS, in accordance with the provisions of Section 8.3 of the Restated Declaration of Trust As Amended, this Restated Declaration of Trust has been approved by the holders of a majority of the Shares of Beneficial Interest of the Trust entitled to vote thereon; NOW, THEREFORE, the Restated Declaration of Trust as Amended is restated as follows and it is hereby agreed and declared that the Trustees will hold any and all property of every type and description which they are acquiring or may hereafter acquire as Trustees, together with the proceeds thereof, in trust, to manage and dispose of the same for the benefit of the holders from time to time of the Shares of Beneficial Interest being issued and to be issued hereunder in the manner and subject to the stipulations contained herein. 6 ARTICLE I THE TRUST: DEFINITIONS 1.1 Name. The name of the Trust created by this Declaration of Trust shall be "Meditrust" and so far as may be practicable the Trustees shall conduct the Trust's activities, execute all documents and sue or be sued under that name, which name (and the word "Trust" wherever used in this Declaration of Trust, except where the context otherwise requires) shall refer to the Trustees collectively but not individually or personally nor to the officers, agents, employees or Shareholders of the Trust or of such Trustees. Under circumstances under which the Trustees determine that the use of such name is not practicable or under circumstances in which the Trustees are contractually bound to change that name, they may adopt another name under which the Trust may hold property or conduct its activities. 1.2 Places of Business. The Trust shall maintain an office in Massachusetts at such place in Massachusetts as the Trustees may determine from time to time. The Trust may have such other offices or places of business within or without the Commonwealth of Massachusetts as the Trustees may from time to time determine. 1.3 Nature of Trust. The Trust shall be of the type commonly termed a Massachusetts business trust. It is intended that the Trust shall carry on a business as a "real estate investment trust" as described in the REIT Provisions of the Internal Revenue Code. The Trust is not intended to be, shall not be deemed to be, and shall not be treated as a general partnership, limited partnership, joint venture, corporation or joint stock company (but nothing herein shall preclude the Trust from being treated for tax purposes as an association under the REIT Provisions of the Internal Revenue Code) nor shall the Trustees or Shareholders or any of them for any purpose be, nor be deemed to be, nor be treated in any way whatsoever to be, liable or responsible hereunder as partners or joint venturers. The relationship of the Shareholders to the Trustees shall be solely that of beneficiaries of the Trust in accordance with the rights conferred upon them by this Declaration. 1.4 Definitions. The terms defined in this Section 1.4 wherever used in this Declaration shall, unless the context otherwise requires, have the respective meanings hereinafter specified. Whenever the singular number is used in this Declaration and when permitted by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders and vice versa. Where applicable, calculations to be made pursuant to any such definition shall be made in accordance with generally accepted accounting principles as in effect from time to time except as otherwise provided in such definition. -2- 7 (a) Advisor. "Advisor" shall mean the Person employed by the Trustees in accordance with the provisions of Article IV but shall not include any individual who provides services to the Trust as an employee, advisor or consultant, on either a full-time or part-time basis. (b) Affiliate. "Affiliate" shall mean, as to any person, (i) any other Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any other Person that owns beneficially, directly or indirectly, five percent (5%) or more of the outstanding capital stock or shares of equity interests of such Person, or (iii) any officer, director, employee, general partner or trustee of such Person or of any Person controlling, controlled by or under common control, with such Person (excluding trustees and persons serving in similar capacities who are not otherwise an Affiliate of such Person). (c) Affiliated Trustee. "Affiliated Trustee" shall mean a Trustee who is not an Independent Trustee. (d) Annual Meeting of Shareholders. "Annual Meeting of Shareholders" shall mean the meeting described in the first sentence of Section 6.10. (e) Annual Report. "Annual Report" shall have the meaning set forth in Section 6.12. (f) Average Invested Assets. "Average Invested Assets" for any period shall mean the average of the values of the Invested Assets of the last day of each month during such period. (g) Book Value. "Book Value" of an asset or assets shall mean the value of such asset or assets of the Trust on the books of the Trust, without deduction for depreciation or other asset valuation reserves and without deduction for mortgages or other security interests to which such asset or assets are subject, except that no asset shall be valued at more than its fair market value as determined by or under procedures adopted by the Trustees, and the underlying assets of a partnership, joint venture or other form of indirect ownership, to the extent of the Trust's interest therein, shall be valued as if owned by the Trust. (h) By-Laws. "By-Laws" shall have the meaning set forth in Section 3.3. (i) Declaration. "Declaration" or "this Declaration" shall mean this Declaration of Trust, as amended, restated or modified from time to time. References in this Declaration to "herein" and "hereunder" shall be deemed to refer to this Declaration and shall not be limited to the particular text, article or section in which such words appear. -3- 8 (j) Independent Trustee. "Independent Trustee" shall mean a Trustee, who, in his individual capacity, (i) is not affiliated, directly or indirectly, with an Advisor of the Trust, whether by ownership of, ownership interest in, employment by, any business or professional relationship with, or serves as an officer or director of, such Advisor or an affiliated business entity of such Advisor and (ii) does not perform any services for the Trust except as Trustee. An indirect relationship shall include circumstances in which a member of the immediate family of a Trustee has one of the foregoing relationships with the Trust or an Advisor of the Trust. (k) Internal Revenue Code. "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as now enacted or hereafter amended, or successor statutes. (l) Invested Assets. "Invested Assets" shall mean the Book Value of all the Real Estate Investments of the Trust. (m) Mortgage Loans. "Mortgage Loans" shall mean notes, debentures, bonds and other evidences of indebtedness or obligations which are negotiable or nonnegotiable and which are secured or collateralized by Mortgages. (n) Mortgages. "Mortgages" shall mean mortgages, deeds of trust or other security interests in Real Property or in rights or interests, including leasehold interests, in Real Property. (o) Net Assets. "Net Assets shall mean the total assets (other than intangibles) at cost before deducting depreciation or other non-cash reserves less total liabilities, calculated at least quarterly on a basis consistently applied. (p) Net Income. "Net Income" for any period shall mean the net income of the Trust determined in accordance with generally accepted accounting principles (calculating the net income of the Trust from any partnership, joint venture or other form of indirect ownership as if the Trust directly received its proportionate share of such entity's income, gains, expenses and losses, including non-cash charges and imputed interest) for such period (i) excluding realized gains and losses from the disposition of Trust assets (after attributing to such disposition the taxes and fees paid in connection therewith); (ii) before deducting additions to reserves or provisions for depreciation, amortization, provision for bad debts and other similar non-cash charges and imputed interest; and (iii) less the amount of any bad debts actually charged to the provision therefor. -4- 9 (q) Person. "Person" shall mean and include individuals, corporations, limited partnerships, general partnerships, joint stock companies or associations, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts, or other entities and governments and agencies and political subdivisions thereof. (r) Real Estate Investment. "Real Estate Investment" shall mean any direct or indirect investment in any interest in Real Property or in any Mortgage, Mortgage Loan, or any interest therein or in any Person whose principal purpose is to make any such investment. (s) Real Property. "Real Property" shall mean and include land, leasehold interests (including but not limited to interests of a lessor or lessee therein), rights and interests in land, and any buildings, structures, improvements, furnishings, fixtures and equipment located on or used in connection with land, leasehold interests or rights in land or interests therein, but does not include investments in Mortgages, Mortgage Loans or interests therein. (t) REIT. "REIT" shall mean a real estate investment trust as defined in the REIT Provisions of the Internal Revenue Code. (u) REIT Provisions of the Internal Revenue Code. "REIT Provisions of the Internal Revenue Code" shall mean Parts II and III of Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code, or similar provisions of any successor statute. (v) Securities. "Securities" shall mean any stock, shares, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in, temporary or interim certificates for, receipts for, guarantees of, or warrants, options or rights to subscribe to, purchase or acquire any of the foregoing. (w) Shareholders. "Shareholders" shall mean as of any particular time all holders of record of outstanding Shares at such time. (x) Shares. "Shares" or, as the context may require, "shares" shall mean the shares of beneficial interest of the Trust as described in the first sentence of Section 6.1 hereof. (y) Total Assets. "Total Assets" shall mean the Book Value of all the assets of the Trust, as such Book Value appears on the most recent quarterly balance sheet of the Trust. -5- 10 (z) Total Operating Expenses. "Total Operating Expenses" for any period shall mean all cash operating expenses, including additional expenses paid directly or indirectly by the Trust to the Advisor, Affiliates of the Advisor or third parties based upon their relationship with the Trust, including loan administration, servicing, engineering, inspection and all other expenses paid by the Trust, except the expenses related to raising capital, for interest, taxes, and direct property acquisition, operation, maintenance and management costs and costs of litigation. (aa) Trust. "Trust" shall mean the Trust created by this Declaration. (bb) Trustees. "Trustees" shall mean, as of any particular time, the original signatories hereto as long as they hold office hereunder and additional and successor Trustees, and shall not include the officers, employees or agents of the Trust or the Shareholders. Nothing herein shall be deemed to preclude the Trustees from also serving as officers, employees or agents of the Trust or owning Shares. (cc) Trust Estate. "Trust Estate" shall mean as of any particular time any and all property, real, personal or otherwise, tangible or intangible, which is transferred, conveyed or paid to or purchased by the Trust or Trustees and all rents, income, profits and gains therefrom and which at such time is owned or held by or for the Trust or the Trustees. ARTICLE II TRUSTEES 2.1 Number, Term of Office and Qualifications of Trustees. There shall be no fewer than three (3) nor more than twelve (12) Trustees. The initial Trustees shall be the signatories hereto. Within the limits set forth in this Section 2.1, the number of Trustees may be increased or decreased from time to time by the Trustees or by the Shareholders. No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term. Subject to the provisions of Section 2.3 each Trustee shall hold office until the next annual meeting of Shareholders and until the election and qualification of his successor. There shall be no cumulative voting in the election for Trustees. A Trustee shall be an individual at least twenty-one (21) years of age who is not under legal disability. A majority of the Trustees shall at all times be persons who are Independent Trustees; provided, however, that upon a failure to comply with this requirement because of the resignation, removal or death of a Trustee who is an Independent Trustee, such requirement shall not be applicable for a period of sixty (60) days. Nominees to serve as Independent Trustees shall be nominated by the then current Independent Trustees, if any. Unless otherwise required by law, no Trustee shall be required to give bond, surety or security in any jurisdiction for the performance of any duties or -6- 11 obligations hereunder. The Trustees in their capacity as Trustees shall not be required to devote their entire time to the business and affairs of the Trust. 2.2 Compensation and Other Remuneration. The Trustees shall be entitled to receive such reasonable compensation for their services as Trustees as the Trustees may determine from time to time. The Trustees and Trust officers shall be entitled to receive remuneration for services rendered to the Trust in any other capacity. Subject to Sections 7.5 and 7.6, such services may include, legal, accounting or other professional services, or services as a broker, transfer agent or underwriter, whether performed by a Trustee or any person affiliated with a Trustee. 2.3 Resignation, Removal and Death of Trustees. A Trustee may resign at any time by giving written notice to the remaining Trustees at the principal office of the Trust. Such resignation shall take effect on the date specified in such notice, without need for prior accounting. A Trustee may be removed at any time with or without cause by vote or consent of holders of Shares representing a majority of the total votes authorized to be cast by Shares then outstanding and entitled to vote thereon, or with cause by all remaining Trustees. A Trustee judged incompetent or bankrupt, or for whom a guardian has been appointed, shall be deemed to have resigned as of the date of such adjudication or appointment. Upon the resignation or removal of any Trustee, his legal representative shall perform the acts set forth in the preceding sentence and the discharge mentioned therein shall run to such legal representative and to the incapacitated Trustee or the estate of the deceased Trustee, as the case may be. 2.4 Vacancies. If any or all the Trustees cease to be Trustees hereunder, whether by reason of resignation, removal, incapacity, death or otherwise, such event shall not terminate the Trust or affect its continuity. Until vacancies are filled, the remaining Trustee or Trustees (even though fewer than three (3)) may exercise the powers of the Trustees hereunder. Vacancies (including vacancies created by increases in number) may be filled by the remaining Trustee or Trustees or by a majority of the remaining Trustees (or a majority of the remaining Independent Trustees, if any, if the vacant position was formerly held by an Independent Trustee or is required to be held by an Independent Trustee) or by vote of the Shareholders. If at any time there shall be no Trustees in office, successor Trustees shall be elected by the Shareholders as provided in Section 6.10. Any Trustee elected to fill a vacancy created by the resignation, removal or death of a former Trustee shall hold office for the unexpired term of such former Trustee. 2.5 Successor and Additional Trustees. The right, title and interest of the Trustees in and to the Trust Estate shall also vest in successor and additional Trustees upon their qualification, and they shall thereupon have all the rights and obligations of Trustees hereunder. Such right, title and interest shall vest in the Trustees whether or not conveyancing documents have been executed and delivered. Appropriate -7- 12 written evidence of the election and qualification of successor and additional Trustees shall be filed with the records of the Trust and in such other offices or places as the Trustees may deem necessary, appropriate or desirable. 2.6 Actions by Trustees. The Trustees may act with or without a meeting. A quorum for all meetings of the Trustees shall be a majority of the Trustees; provided, however, that, whenever pursuant to Section 7.6 or otherwise the vote of a majority of a particular group of Trustees is required at a meeting, a quorum for such meeting shall be a majority of the Trustees which shall include a majority of such group. Unless specifically provided otherwise in this Declaration, any action of the Trustees may be taken at a meeting by vote of a majority of the Trustees present (a quorum being present) or without a meeting by written consents of a majority of the Trustees, which consents shall be filed with the records of meetings of the Trustees. Any action or actions permitted to be taken by the Trustees in connection with the business of the Trust may be taken pursuant to authority granted by a meeting of the Trustees conducted by a telephone conference call or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time, and participation by such means shall constitute presence in person at the meeting and the transaction of Trust business represented thereby shall be of the same authority and validity as if transacted at a meeting of the Trustees held in person or by written consent. The minutes of any Trustees' meeting held by telephone shall be prepared in the same manner as a meeting of the Trustees held in person. Any agreement, deed, mortgage, lease or other instrument or writing executed by one or more of the Trustees or by any authorized person shall be valid and binding upon the Trustees and upon the Trust when authorized or ratified by action of the Trustees or as provided in the By-Laws. With respect to the actions of the Trustees, Trustees who have, or are Affiliates of Persons who have, any direct or indirect interest in or connection with any matter being acted upon may be counted for all quorum purposes under this Section 2.6 and, subject to the provisions of Section 7.6, may vote on the matter as to which they or their Affiliates have such interest or connection. 2.7 Certification of Changes in Trustees. No alteration in the number of Trustees, no removal of a Trustee and no election or appointment of any individual as Trustee (other than an individual who was serving as a Trustee immediately prior to such election or appointment) shall become effective unless and until there shall be delivered to the President or the Secretary of the Trust an instrument in writing signed by a majority of the Trustees, certifying to such alteration in the number of Trustees and/or to such removal of a Trustee and/or naming the individual so elected or appointed as Trustee, together with his written acceptance thereof and agreement to be bound thereby. -8- 13 2.8 Committees. The Trustees may appoint from among their number such standing committees as the Trustees determine. All members of the audit committee, if any, shall be Independent Trustees. A majority of the members of each standing committee shall be Independent Trustees; provided, however, that upon a failure to comply with this requirement because of the resignation, removal or death of a Trustee who is an Independent Trustee, such requirement shall not be applicable for a period of sixty (60) days. Each committee shall have such powers, duties and obligations as the Trustees may deem necessary or appropriate. The standing committees shall report their activities periodically to the Trustees. 2.9 Investment Committee. The Investment Committee shall consist of the Independent Trustees and shall have the power to approve real estate acquisitions and sales and other investments of the Trust. In addition to such other powers as provided in this Declaration or the By-Laws or as delegated by the Trustees from time to time, the Investment Committee shall have the following special duties: (a) The Investment Committee shall review the investment policies of the Trust at least annually to determine that the policies being followed by the Trust are in the best interests of the Shareholders. The basis for each determination shall be set forth in the minutes of the Investment Committee. (b) The Investment Committee shall supervise the performance of the Advisor and the compensation paid to it by the Trust. ARTICLE III TRUSTEES' POWERS 3.1 Power and Authority of Trustees. The Trustees, subject only to the specific limitations contained in this Declaration, shall have, without further or other authorization, and free from any power or control on the part of the Shareholders, full, absolute and exclusive power, control and authority over the Trust Estate and over the business and affairs of the Trust to the same extent as if the Trustees were the sole owners thereof in their own right and may do all such acts and things as in their sole judgment and discretion are necessary for or incidental to or desirable for the carrying out of or conducting the business of the Trust. Any construction of this Declaration or any determination made in good faith by the Trustees of the purposes of the Trust or the existence of any power or authority hereunder shall be conclusive. In construing the provisions of this Declaration, presumption shall be in favor of the grant of powers and authority to the Trustees. The enumeration of any specific power or authority herein shall not be construed as limiting the aforesaid powers or the general powers or authority or any other specified power or authority conferred herein upon the Trustees. -9- 14 3.2 Specific Powers and Authority. Subject only to the express limitations contained in this Declaration and in addition to any powers and authority conferred by this Declaration or which the Trustees may have by virtue of any present or future statute or rule or law, the Trustees without any action or consent by the Shareholders shall have and may exercise at any time and from time to time the following powers and authorities which may or may not be exercised by them in their sole judgment and discretion and in such manner and upon such terms and conditions as they may from time to time deem proper: (a) to retain, invest and reinvest the capital or other funds of the Trust in, and to acquire, purchase, or own, real or personal property of any kind, (including without limitation Securities of any Person) wherever located in the world, and make commitments for such investments, all without regard to whether any such property is authorized by law for the investment of trust funds or produces or may produce income and to possess and exercise all the rights, powers and privileges appertaining to the ownership of the Trust Estate; and to increase the capital of the Trust at any time by the issuance of any additional Shares or other Securities of the Trust for such consideration as they deem advisable; (b) without limitation of the powers set forth in paragraph (a) above, to invest in, purchase or otherwise acquire for such consideration as they deem proper, in cash or other property or through the issuance of Shares or through the issuance of notes, debentures, bonds or other obligations of the Trust, and to hold for investment, the entire or any participating interests in any Mortgage Loans, or interests in Real Property, including ownership of, or participations in the ownership of, or rights to acquire, equity interests in Real Property or in Persons owning, developing, improving, operating or managing Real Property, which interests may be acquired independently of or in connection with other investment activities of the Trust and, in the latter case, may include rights to receive additional payments based on gross income or rental or other income from the Real Property or improvements thereon; to invest in loans secured by the pledge or transfer of Mortgage Loans; to develop, operate, pool, utilize, grant production payments out of or lease or otherwise dispose of mineral, oil and gas properties and rights; (c) to sell, rent, lease, hire, exchange, release, partition, assign, mortgage, pledge, hypothecate, grant security interests in, encumber, negotiate, convey, transfer or otherwise dispose of any and all the Trust Estate by deeds (including deeds in lieu of foreclosure), trust deeds, assignments, bills of sale, transfers, leases, mortgages, financing statements, security agreements and other instruments for any of such purposes executed and delivered for and on behalf of the Trust or the Trustees by one or more of the Trustees or by a duly authorized officer, employee, agent or nominee of the Trust, provided that no -10- 15 disposition of a Real Estate Investment shall be accomplished without the approval of a majority of the Trustees (including a majority of the Independent Trustees); (d) to issue Shares, bonds, debentures, notes or other evidences of indebtedness which may be secured or unsecured and may be subordinated to any indebtedness of the Trust to such Persons for such cash, property or other consideration (including without limitation Securities issued or created by, or interests in any Person) at such time or times and on such terms as the Trustees may deem advisable and to list any of the foregoing Securities issued by the Trust on any securities exchange and to purchase or otherwise acquire, hold, cancel, reissue, sell and transfer any of such Securities, and to cause the instruments evidencing such Securities to bear an actual or facsimile imprint of the seal of the Trust and to be signed by manual or facsimile signature or signatures (and to issue such Securities, whether or not any Person whose manual or facsimile signature shall be imprinted thereon shall have ceased to occupy the office with respect to which such signature was authorized), provided that, where only facsimile signatures for the Trust are used, the instrument shall be countersigned manually by a transfer agent, registrar or other authentication agent. Any of such Securities of different types may be issued in combinations or units with such restrictions on the separate transferability thereof as the Trustees shall determine; (e) to enter into leases or subleases of real and personal property as lessor or lessee and to enter into contracts, obligations and other agreements for a term, extending beyond the term of office of the Trustees and beyond the possible termination of the Trust, or having a lesser term; (f) to borrow money and give negotiable or non-negotiable instruments therefor; to guarantee, indemnify or act as surety with respect to payment or performance of obligations of third parties; to enter into other obligations on behalf of the Trust; and to assign, convey, transfer, mortgage, subordinate, pledge, grant security interests in, encumber or hypothecate the Trust Estate to secure any indebtedness of the Trust or any other of the foregoing obligations of the Trust; (g) to lend money, whether secured or unsecured; (h) to create reserve funds for any purpose; (i) to incur and pay out of the Trust Estate any charges or expenses, and disburse any funds of the Trust, which charges, expenses or disbursements are, in the opinion of the Trustees, necessary or incidental to or desirable for the carrying out of any of the purposes of the Trust or conducting the business of -11- 16 the Trust, including without limitation taxes and other governmental levies, charges and assessments, of whatever kind or nature, imposed upon or against the Trustees in connection with the Trust or the Trust Estate or any part thereof, and for any of the purposes herein; (j) to deposit funds of the Trust in banks, trust companies, savings and loan associations and other depositories, whether or not such deposits will draw interest, the same to be subject to withdrawal on such terms and in such manner and by such Person or Persons (including any one or more Trustees, officers, employees or agents) as the Trustees may determine; (k) to possess and exercise all the rights, powers and privileges pertaining to the ownership of all or any Mortgages or Securities issued or created by, or interests in, any Person, forming part of the Trust Estate, to the same extent that an individual might, and, without limiting the generality of the foregoing, to vote or give any consent, request or notice, or waive any notice, either in person or by proxy or power of attorney, with or without power of substitution, to one or more Persons, which proxies and powers of attorney may be for meetings or actions generally or for any particular meeting or action, and may include the exercise of discretionary powers; (1) to cause to be organized or assist in organizing any Person under the laws of any jurisdiction to acquire the Trust Estate or any part or parts thereof or to carry on any business in which the Trust shall directly or indirectly have any interest, and to sell, rent, lease, hire, convey, negotiate, assign, exchange or transfer the Trust Estate or any part or parts thereof to or with any such Person or any existing Person in exchange for the Securities thereof or otherwise, and to merge or consolidate the Trust with or into any Person or merge or consolidate any Person into the Trust, and to lend money to, subscribe for the Securities of, and enter into any contracts with, any Person in which the Trust holds or is about to acquire Securities or any other interest; (m) to enter into joint ventures, general or limited partnerships, participation or agency arrangements and any other lawful combination or associations; (n) to elect, appoint, engage or employ such officers for the Trust as the Trustees may determine, who may be removed or discharged at the discretion of the Trustees, such officers to have such powers and duties, and to serve such terms, as may be prescribed by the Trustees or by the By-Laws; to engage or employ any Persons (including, without limitation, subject to the provisions of Section 7.5 and 7.6, any Trustee, officer or agent and any Person in which any Trustee, officer or agent is directly or indirectly interested or with which he is directly or indirectly connected) as agents, representatives, employees or independent contractors (including, without limitation, real estate advisors, -12- 17 investment advisors, transfer agents, registrars, underwriters, accountants, attorneys at law, real estate agents, managers, appraisers, brokers, architects, engineers, construction managers, general contractors or otherwise) in one or more capacities, and to pay compensation from the Trust for services in as many capacities as such Person may be so engaged or employed; and to delegate any of the powers and duties of the Trustees to any one or more Trustees, agents, representatives, officers, employees, independent contractors or other Persons; provided, however, that no such delegation shall be made to an Affiliate of the Advisor, except with the approval of a majority of the Independent Trustees; (o) to determine whether moneys, Securities or other assets received by the Trust shall be charged or credited to income or capital or allocated between income and capital, including the power to amortize or fail to amortize any part or all of any premium or discount, to treat any part or all the profit resulting from the maturity or sale of any asset whether purchased at a premium or at a discount, as income or capital, or apportion the same between income and capital, to apportion the sales price of any asset between income and capital, and to determine in what manner any expenses or disbursements are to be borne as between income and capital, whether or not in the absence of the power and authority conferred by this subsection such moneys, Securities or other assets would be regarded as income or as capital or such expense or disbursement would be charged to income or to capital; to treat any dividend or other distribution on any investment as income or capital or apportion the same between income and capital; to provide or fail to provide reserves for depreciation, amortization or obsolescence in respect of all or any part of the Trust Estate subject to depreciation, amortization or obsolescence in such amounts and by such methods as they shall determine; and to determine the method or form in which the accounts and records of the Trust shall be kept and to change from time to time such method or form; (p) to determine or cause to be determined from time to time the value of all or any part of the Trust Estate and of any services, Securities, property or other consideration to be furnished to or acquired by the Trust, and from time to time to revalue or cause to be revalued all or any part of the Trust Estate in accordance with such appraisals or other information as are in the Trustees' sole judgment, necessary and/or satisfactory; (q) to collect, sue for, and receive all sums of money coming due to the Trust, and to engage in, intervene in, prosecute, join, defend, compound, compromise, abandon or adjust, by arbitration or otherwise, any actions, suits, proceedings, disputes, claims, controversies, demands or other litigation relating to the Trust, the Trust Estate or the Trust's affairs, to enter into agreements therefor, whether or not any suit is commenced or claim accrued -13- 18 or asserted and, in advance of any controversy, to enter into agreements regarding arbitration, adjudication or settlement thereof; (r) to renew, modify, release, compromise, extend, consolidate or cancel, in whole or in part, any obligation to or of the Trust or participate in any reorganization of obligors to the Trust; (s) to purchase and pay for out of the Trust Estate insurance contracts and policies insuring the Trust Estate against any and all risks and insuring the Trust and/or all or any of the Trustees, the Shareholders, officers, employees or agents against any and all claims and liabilities of every nature asserted by any Person arising by reason of any action alleged to have been taken or omitted by the Trust or by the Trustees, Shareholders, officers, employees or agents; (t) to cause legal title to any of the Trust Estate to be held by and/or in the name of the Trustees, or except as prohibited by law by and/or in the name of the Trust or one or more of the Trustees or any other Person, on such terms, in such manner, with such powers in such Person as the Trustees may determine, and with or without disclosure that the Trust or Trustees are interested therein; (u) to adopt a fiscal year for the Trust, and from time to time to change such fiscal year; (v) to adopt and use a seal (but the use of a seal shall not be required for the execution of instruments or obligations of the Trust); (w) to the extent permitted by law, to indemnify or enter into agreements with respect to indemnification with any Person with which the Trust has dealings, including without limitation any investment advisor or independent contractor, to such extent as the Trustees shall determine; (x) to confess judgment against the Trust; (y) to discontinue the operations of the Trust; (z) to repurchase or redeem Shares; and (aa) to do all other such acts and things as are incident to the foregoing, and to exercise all powers which are necessary or useful to carry on the business of the Trust and to carry out the provisions of this Declaration, including, without limitation, all powers of directors of a Massachusetts business corporation. -14- 19 3.3. By-Laws. The Trustees may make or adopt and from time to time amend or repeal regulations (the "By-Laws") not inconsistent with law or with this Declaration, containing provisions relating to the business of the Trust and the conduct of its affairs and in such By-Laws may define the duties of the officers, employees and agents of the Trust. ARTICLE IV ADVISOR 4.1 Employment of Advisor. The Trustees are responsible for the general policies of the Trust and for the general supervision of the business of the Trust conducted by all officers, agents, employees, advisors, managers or independent contractors of the Trust. However, the Trustees are not and shall not be required personally to conduct the business of the Trust, and, consistent with their ultimate responsibility as stated above, the Trustees shall have the power to appoint, employ or contract with any Person including one or more of themselves or any corporation, partnership or trust in which one or more of them may be directors, officers, stockholders, partners or trustees, as the Trustees may deem necessary or proper for the transaction of the business of the Trust. The Trustees may therefore employ or contract with such Person (herein referred to as the "Advisor") and, consistent with their ultimate responsibility as set forth in this Section 4.l, the Trustees may grant or delegate such authority to the Advisor as the Trustees may in their sole discretion deem necessary or desirable without regard to whether such authority is normally granted or delegated by trustees. The Trustees shall have the power to determine the terms and compensation of the Advisor or any other Person whom they may employ or with whom they may contract; provided, however, that any determination to employ or contract with any Trustee or any Person such that a Trustee would be an Affiliated Trustee shall be valid only if made, approved or ratified after disclosure of such interests by the affirmative vote or written consent of a majority of the Trustees who would continue to be Independent Trustees. The Trustees may exercise broad discretion in allowing the Advisor to administer and regulate the operations of the Trust, to act as agent for the Trust, to execute documents on behalf of the Trustees and to make executive decisions which conform to general policies and general principles previously established by the Trustees. 4.2. Other Activities of Advisor. The Advisor shall not be required to administer the Trust as its sole and exclusive function and may have other business interests and may engage in other activities similar or in addition to those relating to the Trust, including the rendering of advice or services of any kind to other investors or any other Persons (including other REITs) and the management of other investments. The Trustees may request the Advisor to engage in certain other -15- 20 activities which complement the Trust's investments, and the Advisor may receive compensation or commissions therefor from the Trust or other Persons. The Advisor shall be required to use its best efforts to supervise the operation of the Trust in a manner consistent with the investment policies and objectives of the Trust. Neither the Advisor nor (subject to any applicable provisions of Section 7.5) any director, trustee, officer, partner or employee of the Advisor or of any Person which controls, is controlled by or is under common control with the Advisor nor any such Person shall be obligated to present any particular investment opportunities to the Trust, even if such opportunities are of a character such that, if presented to the Trust, they could be taken by the Trust, and, subject to the foregoing, each of them shall be protected in taking for its own account or recommending to others any such particular investment opportunity. Upon request of any Trustee, the Advisor shall from time to time promptly furnish the Trustees with such information on a confidential basis as to any investments within the Trust's investment policies made by the Advisor for its own account as may be provided in the advisory contract with the Advisor in effect from time to time. ARTICLE V INVESTMENT POLICY AND POLICIES WITH RESPECT TO CERTAIN DISTRIBUTIONS TO SHAREHOLDERS 5.1 Statement of Policy. While the Trustees are authorized pursuant to Article III to invest the Trust Estate in a wide variety of investments, it shall be the policy of the Trustees to invest the major portion of the Trust Estate in health care related, income-producing Real Estate Investments. These general objectives shall be pursued in a manner consistent with the investment policies specified in the remainder of this Section 5.1. The Trust may make secured or unsecured borrowings to make additional Real Estate Investments and for normal working capital needs, including, without limitation, the repair and maintenance of properties in which it has invested, tenant improvements and leasing commissions. The Trust may make such borrowings from third parties or, subject to approval by a majority of the Independent Trustees, from Affiliates of the Advisor. Interest and other financing charges or fees to be paid on loans from such Affiliates will not exceed the interest and other financing charges or fees which would be charged by third party financing institutions on comparable loans for the same purpose in the same geographic area. -16- 21 To the extent that the Trust Estate has assets not otherwise invested in accordance with this Section 5.l, it shall be the policy of the Trustees to invest such assets in interest-bearing accounts, certificates of deposit, short-term money-market Securities, short-term government Securities, mortgage-backed Securities guaranteed by the Government National Mortgage Association, mortgages insured by the Federal Housing Administration or guaranteed by the Veterans Administration, mortgage loan participations purchased from banks or other financial institutions and other similarly secured short-term investment Securities. It shall be the policy of the Trustees to make investments in such manner as to comply with the requirements of the Internal Revenue Code with respect to the composition of the investments and the derivation of the income for a real estate investment trust as defined in the REIT Provisions of the Internal Revenue Code; provided, however, that no Trustee, officer, employee or agent of the Trust shall be liable for any act or omission resulting in the loss of tax benefits under the Internal Revenue Code, except for that arising from his own willful misfeasance, bad faith, gross negligence or reckless disregard of duty. 5.2 Prohibited Investments and Activities. The Trust shall not engage in any of the following investment practices or activities: (a) Investment in junior mortgage loans unless, by appraisal or other method, the Independent Trustees determine (i) the capital investment in any such mortgage loan is adequately secured on the basis of the equity of the borrower in the property underlying such investment and of the ability of the borrower to repay the mortgage loan; or (ii) such mortgage loan is a financing device entered into by the Trust to establish the priority of its capital investment over the capital of others investing with the Trust in a real estate project. The Trustees shall determine and ensure that any such junior mortgage loan is not and may not be made subordinate to a mortgage held by the Advisor, if any, a Person or entity Affiliated therewith, a Trustee, or a Person or entity Affiliated with a Trustee; (b) Allowing the maximum aggregate borrowings of the Trust to exceed 300% of Net Assets, in the absence of a satisfactory showing that a higher level of borrowing is appropriate, and approval of such higher level by a majority of the Independent Trustees. The aggregate borrowings of the Trust, secured and unsecured, shall be reasonable in relation to the Net Assets thereof and shall be reviewed at least quarterly by the Trustees. Any borrowing in excess of 300% of Net Assets shall be disclosed to the Shareholders in the next quarterly report of the Trust, along with justification for such excess. -17- 22 (c) Investment of more than ten percent (10%) of its Total Assets in Unimproved Real Property or mortgage loans with respect hereto. "Unimproved Real Property" shall be deemed to include any parcel of real property which (i) was not acquired by the Trust for the purpose of producing rental or other operating income; (ii) has no development or construction in process; and (iii) no development or construction with respect to which is planned in good faith to commence within one year; (d) Investment in commodity or commodity future contracts other than interest rate futures used solely for hedging purposes; (e) Issuing equity securities which are redeemable at the option of the holders thereof; (f) Issuing debt Securities unless the historical debt service coverage for the most recently completed fiscal year, as adjusted for known changes, is sufficient to properly service the higher level of debt; (g) Issuing options or warrants to purchase Shares at an exercise price less than the fair market value of such Shares on the date of grant or issuance thereof or for consideration (which may include services) that, in the judgment of the Independent Trustees, has a market value less than that of each such option or warrant on the date of grant. The aggregate numbers of Shares issuable at any time upon exercise of outstanding options or warrants shall not exceed an amount equal to ten percent (10%) of the outstanding Shares on the date of grant or issuance of any options or warrants; (h) Investing more than one percent (1%) of the assets of the Trust in real estate contracts for sale, unless such real estate contracts are recordable in the chain of title; or (i) Acting in any way that would disqualify the Trust as a real estate investment trust within the meaning of Sections 856-860 of the Internal Revenue Code, as amended or similar provisions of any successor statute. 5.3 Appraisals. If the Trust shall at any time purchase Real Property, or interests therein, the consideration paid therefor shall generally be based upon the fair market value which, upon the request of a majority of the Independent Trustees, shall be determined by an appraisal by a Person who is not an Affiliate of the Trust or the Advisor and who is, in the sole judgment of the Trustees, properly qualified to make such a determination. -18- 23 ARTICLE VI THE SHARES AND SHAREHOLDERS 6.1 Description of Shares. The interest of the Shareholders shall be divided into shares of beneficial interest which shall be known collectively as "Shares," all of which shall be validly issued, fully paid and nonassessable by the Trust upon receipt of full consideration for which they have been issued or without additional consideration if issued by way of share dividend or share split. Each holder of Shares shall as a result thereof be deemed to have agreed to and be bound by the terms of this Declaration. The Shares may be issued for such consideration as the Trustees shall deem advisable. The Shares shall be without par value. The number of Shares which the Trust shall have authority to issue is unlimited. The Trustees are hereby expressly authorized at any time, and from time to time, to provide for the issuance of Shares upon such terms and conditions and pursuant to such agreements as the Trustees may determine. The Shares may consist of one or more classes or series. The Trustees may, from time to time, establish and designate the different classes and series and designate variations in the relative rights and preferences between the different classes and series as provided below, but in all other respects all Shares shall be identical. Subject to the provisions hereof, the Trustees are authorized to establish one or more classes or series of Shares and, to the extent now or hereafter permitted by the laws of the Commonwealth of Massachusetts, to fix and determine the preferences, voting powers, qualifications and special or relative rights or privileges of each class or series including, but not limited to: (a) the number of Shares to constitute such class or series and the distinguishing designation thereof; (b) the dividend rate on the Shares of such class or series and the preferences, if any, and the special and relative rights of such Shares of such series as to dividends; (c) whether or not the Shares of such class or series shall be redeemable, and, if redeemable, the price, terms and manner of redemption; (d) the preferences, if any, and the special and relative rights of the Shares of such class or series upon the voluntary or involuntary dissolution or liquidation of the Company; -19- 24 (e) whether or not the Shares of such class or series shall be subject to the operation of a sinking or purchase fund and, if so, the terms and provisions of such fund; (f) whether or not the Shares of such class or series shall be convertible into any other class or series of Shares and, if so, the conversion price or ratio and other conversion rights; (g) the conditions under which the Shares of such class or series shall have separate voting rights or no voting rights; and (h) such other designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions of such class or series to the full extent now or hereafter permitted by the laws of the Commonwealth of Massachusetts. Notwithstanding the fixing of the number of Shares constituting a particular class or series, the Trustees may at any time authorize the issuance of additional Shares of the same class or series. Before the Trust shall issue any Shares of any newly designated class or series, a certificate setting forth the resolution or resolutions of the Trustees fixing the voting powers, designations, preferences and rights of such class or series, the qualifications, limitations or restrictions thereof, and the number of Shares of such class or series authorized by the Trustees, shall be executed by a majority of the Trustees and filed with the Secretary of the Commonwealth of Massachusetts in accordance with Section 8.4 hereof. The holders of Shares shall be entitled to receive, when and as declared from time to time by the Trustees out of any funds legally available for the purpose, such dividends or distributions as may be declared from time to time by the Trustees. In the event of the termination of the Trust pursuant to Section 8.l or otherwise, or upon the distribution of its assets, the assets of the Trust available for payment and distribution to Shareholders shall be distributed ratably among the holders of Shares at the time outstanding in accordance with Section 8.2. Except as otherwise authorized by the Trustees with respect to any particular class or series, all Shares shall have equal noncumulative voting rights at the rate of one vote per share and equal dividend, distribution, liquidation and other rights, and shall have no preference, conversion, exchange, sinking fund or redemption rights. No holder of Shares shall be entitled as a matter of right to subscribe for or purchase any part of any new or additional issue of Shares of any class whatsoever of the Trust, or of securities convertible into any shares of any class whatsoever of the Trust, whether now or hereafter authorized and whether issued for cash or other consideration or by way of dividend. -20- 25 6.2 Certificates. Ownership of Shares shall be evidenced by certificates. Every Shareholder shall be entitled to receive a certificate, in such form as the Trustees shall from time to time approve, specifying the number of Shares held by such Shareholder. Subject to Sections 6.4 and 6.15(c) hereof, such certificates shall be treated as negotiable and title thereto and to the Shares represented thereby shall be transferred by delivery thereof to the same extent in all respects as a stock certificate, and the Shares represented thereby, of a Massachusetts business corporation. Unless otherwise determined by the Trustees, such certificates shall be signed by the President or any Vice President and the Treasurer or any Assistant Treasurer and shall be countersigned by a transfer agent, and registered by a registrar, if any, and such signatures may be facsimile signatures in accordance with Section 3.2(d) - -21-hereof. There shall be filed with each transfer agent a copy of the form of certificate so approved by the Trustees, certified by the Chairman, President or Secretary, and such form shall continue to be used unless and until the Trustees approve some other form. In furtherance of the provisions of Section 6.15(c) hereof, each certificate evidencing Shares shall contain a legend imprinted thereon to the following effect, or such other legend as the Trustees may from time to time adopt: "Provisions Relating to Redemption and Prohibition of Transfer of Shares." "The shares represented by this certificate may be redeemed by the Trust, and the transfer thereof may be prohibited, all upon the terms and conditions set forth in the Declaration of Trust. The Trust will furnish a copy of such terms and conditions to the registered holder of this certificate upon request and without charge." 6.3 Fractional Shares. In connection with any issuance of Shares, the Trustees may issue fractional Shares or may provide for the issuance of scrip including, without limitation, the time within which any such scrip must be surrendered for exchange into full Shares and the rights, if any, of holders of scrip upon the expiration of the time so fixed, the rights, if any, to receive proportional distributions, and the rights, if any, to redeem scrip for cash, or the Trustees may in their discretion, or if they see fit at the option of each holder, provide in lieu of scrip for the adjustment of the fractions in cash. The provisions of Section 6.2 hereof relative to certificates for Shares shall apply so far as applicable to such scrip, except that such scrip may in the discretion of the Trustees be signed by a transfer agent alone. 6.4 Issuance of Units. Notwithstanding any other provisions of this Declaration of Trust, the Trustees may issue from time to time units consisting of different Securities of the Trust. Any Security issued in any such unit shall have the -21- 26 same characteristics and shall entitle the registered holder thereof to the same rights as any identical Securities issued by the Trustees, except that the Trustees may provide (and may cause a notation to be placed on the certificate representing such unit or Securities of the Trust issued in any such unit) that for a specified period not to exceed one year after issuance, Securities of the Trust issued in any such unit may be transferred upon the books of the Trust only in such unit. 6.5 Legal Ownership of Trust Estate. The legal ownership of the Trust Estate and the right to conduct the business of the Trust are vested exclusively in the Trustees (subject to Section 3.2(t)), and the Shareholders shall have no interest therein other than beneficial interest in the Trust conferred by their Shares issued hereunder and they shall have no right to compel any partition, division, dividend or distribution of the Trust or any of the Trust Estate. 6.6 Shares Deemed Personal Property. The Shares shall be personal property and shall confer upon the holders thereof only the interest and rights specifically set forth or provided for in this Declaration. The death, insolvency or incapacity of a Shareholder shall not dissolve or terminate the Trust or affect its continuity nor give his legal representative any rights whatsoever, whether against or in respect of other Shareholders, the Trustees or the Trust Estate or otherwise except the sole right to demand and subject to the provisions of this Declaration, the By-Laws and any requirements of law, to receive a new certificate for Shares registered in the name of such legal representative, in exchange for the certificate held by such Shareholder. 6.7 Share Record; Issuance and Transferability of Shares. Records shall be kept by or on behalf of and under the direction of the Trustees, which shall contain the names and addresses of the Shareholders, the number of Shares held by them respectively, and the numbers of the certificates representing the Shares, and in which there shall be recorded all transfers of Shares. The Trust, the Trustees and the officers, employees and agents of the Trust shall be entitled to deem the Persons in whose names certificates are registered on the records of the Trust to be the absolute owners of the Shares represented thereby for all purposes of this Trust; but nothing herein shall be deemed to preclude the Trustees or officers, employees or agents of the Trust from inquiring as to the actual ownership of Shares. Until a transfer is duly effected on the records of the Trust, the Trustees shall not be affected by any notice of such transfer, either actual or constructive. Shares shall be transferable on the records of the Trust only by the record holder thereof or by his agent thereunto duly authorized in writing upon delivery to the Trustees or a transfer agent of the certificate or certificates therefor, properly endorsed or accompanied by duly executed instruments of transfer and accompanied by all necessary documentary stamps together with such evidence of the genuineness of each such endorsement, execution or authorization and of other -22- 27 matters as may reasonably be required by the Trustees or such transfer agent. Upon such delivery, the transfer shall be recorded in the records of the Trust and a new certificate for the Shares so transferred shall be issued to the transferee and in case of a transfer of only a part of the Shares represented by any certificate, a new certificate for the balance shall be issued to the transferor. Any Person becoming entitled to any Shares in consequence of the death of a Shareholder or otherwise by operation of law shall be recorded as the holder of such Shares and shall receive a new certificate therefor but only upon delivery to the Trustees or a transfer agent of instruments and other evidence required by the Trustees or the transfer agent to demonstrate such entitlement, the existing certificate for such Shares and such releases from applicable governmental authorities as may be required by the Trustees or transfer agent. In case of the loss, mutilation or destruction of any certificate for Shares, the Trustees may issue or cause to be issued a replacement certificate on such terms and subject to such rules and regulations as the Trustees may from time to time prescribe. Nothing in this Declaration shall impose upon the Trustees or a transfer agent a duty or limit their rights to inquire into adverse claims. 6.8 Dividends or Distributions to Shareholders. Subject to Section 6.1, the Trustees may from time to time declare and pay to Shareholders such dividends or distributions in cash, property or assets of the Trust or Securities issued by the Trust, out of current or accumulated income, capital, capital gains, principal, surplus, proceeds from the increase or financing or refinancing of Trust obligations, or from the sale of portions of the Trust Estate or from any other source as the Trustees in their discretion shall determine. Shareholders shall have no right to any dividend or distribution unless and until declared by the Trustees. The Trustees shall furnish the Shareholders with a statement in writing advising as to the source of the funds so distributed not later than ninety (90) days after the close of the fiscal year in which the distribution was made. 6.9 Transfer Agent, Dividend Disbursing Agent and Registrar. The Trustees shall have power to employ one or more transfer agents, dividend disbursing agents and registrars (including the Advisor and/or its Affiliates) and to authorize them on behalf of the Trust to keep records, to hold and to disburse any dividends or distributions, and to have and perform, in respect of all original issues and transfers of Shares, dividends and distributions and reports and communications to Shareholders, the powers and duties usually had and performed by transfer agents, dividend disbursing agents and registrars of a Massachusetts business corporation. 6.10 Shareholders' Meetings. There shall be an annual meeting of the Shareholders at such time and place as shall be determined by or in the manner prescribed in the By-Laws, at which the Trustees shall be elected and any other proper business may be conducted. The Annual Meeting of Shareholders shall be held after delivery to the Shareholders of the Annual Report and within six (6) months after the end of each fiscal year. Special meetings of Shareholders may be called by -23- 28 the President or by a majority of the Trustees or of the Independent Trustees and shall be called by the President upon the written request of Shareholders holding in the aggregate not less than ten percent (10%) of the total votes authorized to be cast by the outstanding Shares of the Trust entitled to vote at such meeting, in the manner provided in the By-Laws. If there shall be no Trustees, the officers of the Trust shall promptly call a special meeting of the Shareholders entitled to vote for the election of successor Trustees. Notice of any special meeting shall state the purpose of the meeting. Upon receipt of a written request either in person or by registered mail stating the purpose of a special meeting requested by Shareholders, the Trust shall provide all Shareholders, within ten (10) business days after receipt of said request, written notice of such special meeting and the purpose of such special meeting to be held on a date not less than twenty (20) nor more than sixty (60) days after receipt of said request, at a time and place convenient to Shareholders. The holders of Shares entitled to vote at the meeting representing a majority of the total number of votes authorized to be cast by Shares then outstanding and entitled to vote on any question present in person or by proxy shall constitute a quorum at any such meeting for action on such question. Any meeting may be adjourned from time to time by a majority of the votes properly cast upon the question, whether or not a quorum is present, and except as otherwise provided in the By-Laws the meeting may be reconvened without further notice. At any reconvened session of the meeting at which there shall be a quorum, any business may be transacted at the meeting as originally noticed. Whenever any action is to be taken by the Shareholders, it shall, except as otherwise clearly indicated in this Declaration or the By-Laws, require, and may be effected by, the affirmative vote of the holders of a majority of the Shares present or represented and entitled to vote and voting on such matter, provided that such majority shall be at least a majority of the number of Shares required to constitute a quorum for action on such matter. Any election by Shareholders shall be determined by a plurality of the votes cast by the Shareholders entitled to vote at the election. No ballot shall be required for such election unless requested by a Shareholder present or represented at the meeting and entitled to vote in the election. Whenever Shareholders are required or permitted to take any action (unless a vote at a meeting is specifically required as in Section 8.l and 8.3), such action may be taken without a meeting by written consents setting forth the action so taken, signed by the holders of a majority (or such higher percentage as may be specified elsewhere in this Declaration) of the outstanding Shares that would be entitled to vote thereon at a meeting. The Shareholders shall be entitled, to the same extent as the shareholders in a Massachusetts business corporation, to determine by vote whether a court action, proceeding or claim should be brought or maintained derivatively or as a -24- 29 class action on behalf of the Trust or its Shareholders. Except with respect to matters on which a Shareholders' vote shall be required for or shall determine action of the Trustees as expressly set forth in this Declaration, no action taken by the Shareholders at any meeting shall in any way bind the Trustees. 6.11 Proxies. Whenever the vote or consent of a Shareholder entitled to vote is required or permitted under this Declaration, such vote or consent may be given either directly by such Shareholder or by a proxy in the form prescribed in the By-Laws. The Trustees may solicit such proxies from the Shareholders or any of them entitled to vote in any matter requiring or permitting the Shareholders' vote or consent. No proxy for any meeting of Shareholders entitled to vote shall be effective unless such proxy shall have been placed on file with such officer of the Trust as the Trustees shall have designated for such purposes for verification prior to such meeting. 6.12 Reports to Shareholders. Not later than one hundred fifty (150) days after the close of each fiscal year of the Trust, the Trustees shall mail or deliver a report of the business and operations of the Trust during such fiscal year to the Shareholders, which report shall constitute the accounting of the Trustees for such fiscal year. The report (the "Annual Report") shall be in such form and have such content as the Trustees deem proper. The Annual Report shall include an audited statement indicating the financial position of the Trust and a statement indicating the results of its operations, each prepared in accordance with generally accepted accounting principles. Such financial statements shall be accompanied by the report of an independent certified public accountant thereon. A manually signed copy of the accountant's report shall be filed with the Trustees. The Independent Trustees shall take reasonable steps to carry out the foregoing. 6.13 Fixing Record Date. The By-Laws may provide for fixing or, in the absence of such provision, the Trustees may fix, in advance, a date as the record date for determining the Shareholders entitled to notice of or to vote at any meeting of Shareholders or to express consent to any proposal without a meeting or for the purpose of determining Shareholders entitled to receive payment of any dividend or distribution (whether before or after termination of the Trust) or any Annual Report or other communication from the Trustees, or for any other purpose. Except as provided in Section 6.10, the record date so fixed shall be not less than five (5) days nor more than sixty (60) days prior to the date of the meeting or event for the purpose of which it is fixed. 6.14 Notice to Shareholders. Any notice of meeting or other notice, communication or report to any Shareholder shall be deemed duly delivered to such Shareholder when such notice, communication or report is deposited, with postage thereon prepaid, in the United States mail, addressed to such Shareholder at his -25- 30 address as it appears on the records of the Trust or is delivered in person to such Shareholder. 6.15 Shareholders Disclosures; Trustees Right to Refuse to Transfer Shares; Limitation on Holdings; Redemption of Shares. (a) The Shareholders shall upon demand disclose to the Trustees in writing such information with respect to direct and indirect ownership of the Shares as the Trustees deem necessary or appropriate to comply with the REIT Provisions of the Internal Revenue Code or to comply with the requirements of any taxing authority or governmental agency. (b) Whenever it is deemed by them to be reasonably necessary to protect the status of the Trust as a REIT, the Trustees may require a statement or affidavit from each Shareholder or proposed transferee of Shares setting forth the number of Shares already owned by him and any related Person or Affiliate specified in the form prescribed by the Trustees for that purpose. If, in the opinion of the Trustees, which shall be conclusive upon any proposed transferee of Shares, any proposed transfer would jeopardize the status of the Trust as a REIT, the Trustees shall have the right, but not the duty, to refuse to permit such transfer. (c) The Trustees, by notice to the holder thereof, may redeem any or all Shares which have been transferred pursuant to a transfer which, in the opinion of the Trustees, would jeopardize the status of the Trust as a REIT. Without limiting the generality of the foregoing, if the Trustees shall, at any time and in good faith, be of the opinion that direct or indirect ownership of at least 9.9% or more of the Shares has or may become concentrated in the hands of one beneficial owner (as defined on October 1, 1982 in Rule 13d-3 under the Securities Exchange Act of 1934), the Trustees, shall have the power (i) by lot or other means deemed equitable by them to call for the purchase from any Shareholder a number of Shares sufficient, in the opinion of the Trustees, to maintain or bring the direct or indirect ownership of Shares of such beneficial owner to no more than 9.9% of the outstanding Shares, and (ii) to refuse to transfer or issue Shares to any Person whose acquisition of such Shares would, in the opinion of the Trustees, result in the direct or indirect ownership of more than 9.9% of the outstanding Shares. The purchase price for any Shares shall be equal to the fair market value of the Shares reflected in the closing sale price for the Shares, if then listed on a national securities exchange, or the average of the closing sales prices for the Shares if then listed on more than one national securities exchange, or if the Shares are not then listed on a national securities exchange, the latest bid quotation for the Shares if then traded over-the-counter, on the last business day immediately preceding the day on which notices of such acquisition are sent, or, if no such closing sales prices or quotations are available, then the purchase price shall be equal to the net asset value of such Shares as determined by the Trustees in accordance with the provisions of applicable -26- 31 law. Payment of the purchase price shall be made in cash by the Trust at such time in such manner as may be determined by the Trustees. From and after the date fixed for purchase by the Trustees, the holder of any Shares so called for purchase shall cease to be entitled to distributions, voting rights and other benefits with respect to such Shares, excepting only the right to payment of the purchase price fixed as aforesaid. Any transfer of Shares, options, warrants or other securities convertible into Shares that would create a beneficial owner of more than 9.9% of the outstanding Shares shall be deemed void ab initio and the intended transferee shall be deemed never to have an interest therein. If the foregoing provision is determined to be void or invalid by virtue of any legal decision, statute, rule or regulation, then the transferee of such shares, options, warrants or other securities convertible into Shares shall be deemed, at the option of the Trust to have acted as agent on behalf of the Trust in acquiring such Shares and to hold such Shares on behalf of the Trust. Notwithstanding any other provision in this Declaration of Trust or the By-Laws of the Trust, the foregoing provision may not be amended or repealed without the affirmative vote of 90% of the Shares entitled to vote. (d) Notwithstanding any other provision of this Declaration of Trust to the contrary, any purported acquisition of Shares of the Trust which would result in the disqualification of the Trust as a REIT shall be null and void. (e) Nothing contained in this Section 6.15 or in any other provision of this Declaration of Trust shall limit the authority of the Trustees to take such other action as they deem necessary or advisable to protect the Trust and the interests of the Shareholders by preservation of the Trust status as a REIT. ARTICLE VII LIABILITY OF TRUSTEES, SHAREHOLDERS, OFFICERS, EMPLOYEES AND AGENTS AND OTHER MATTERS 7.1 Exculpation of Trustees, Officers, Employees and Agents. (a) No Trustee, officer, employee, agent or Affiliate of the Trust shall be liable to the Trust, to any Shareholder or to any other Person for any loss suffered by the Trust which arises out of any action or inaction of the Trustee, officer, employee, agent or Affiliate of the Trust if such Trustee, officer, employee, agent or Affiliate of the Trust, in good faith, determined that such course of conduct was in the best interests of the Trust and such course of conduct did not constitute gross negligence or willful misconduct of such Trustee, officer, employee, agent or Affiliate of the Trust. (b) No Trustee shall be personally liable to the Trust or its Shareholders for monetary damages for breach of fiduciary duty by such Trustee as a Trustee notwithstanding any provision contained in Section 7.1(a) hereof or any provision of -27- 32 law imposing such liability, except to the extent provided by applicable law for liability (i) for breach of the Trustee's duty of loyalty to the Trust or its Shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, or (iii) for any transaction from which the Trustee derived an improper personal benefit. Liability of a Trustee for matters described in clauses (i), (ii) and (iii) in the preceding sentence shall be determined pursuant to Section 7.1(a) hereof. 7.2 Limitation of Liability of Shareholders, Trustees, Officers, Employees and Agents. The Trustees, officers, employees and agents of the Trust in incurring any debts, liabilities or obligations or in taking or omitting any other actions for or in connection with the Trust are, and shall be deemed to be, acting as Trustees, officers, employees or agents of the Trust and not in their own individual capacities. The Trustees shall have no power to bind the Shareholders personally, or to call upon them for the payment of any money or any assessment whatsoever other than such sums as the Shareholders may at any time personally agree to pay for new Shares to be acquired from the Trust. No Shareholder and, except to the extent provided in Section 7.l, no Trustee, officer, employee or agent shall be liable for (a) any debt, liability or obligation of any kind of, or with respect to, the Trust or (b) any claim, demand, judgment or decree against the Trust (in any such case in tort, contract or otherwise) arising out of any action taken or omitted for or on behalf of the Trust and the Trust shall be solely liable therefor and resort shall be had solely to the Trust Estate for the payment or performance thereof, and no Shareholder and, except as aforesaid, no Trustee, officer, employee or agent shall be subject to any personal liability whatsoever, in tort, contract or otherwise, to any other Person or Persons in connection with the Trust Estate or the affairs of the Trust (or any actions taken or omitted for or on behalf of the Trust), and all such other Persons shall look solely to the Trust Estate for satisfaction of claims of any nature arising in connection with the Trust Estate or the affairs of the Trust (or any action taken or omitted for or on behalf of the Trust). Each Shareholder shall be entitled to pro rata indemnity from the Trust Estate if, contrary to the provisions hereof, such Shareholder shall be held to any personal liability. 7.3 Express Exculpatory Clauses and Instruments. Any written instrument creating an obligation of the Trust shall include a reference to this Declaration and provide that neither the Shareholders nor the Trustees nor officers, employees or agents of the Trust shall be liable thereunder and that all Persons shall look solely to the Trust Estate for the payment of any claim thereunder or for the performance thereof; however, the omission of such provision from any such instrument shall not render the Shareholders or any Trustee, officer, employee or agent of the Trust liable nor shall the Trustees or any officer, employee or agent of the Trust be liable to anyone for such omission. -28- 33 7.4 Indemnification and Reimbursement of Trustees, Officers, Employees and Agents. The present and former Trustees, officers, employees, agents and Affiliates of the Trust and the present and former directors, officers, employees, agents and Affiliates of the Advisor who are engaged in business by, or on behalf of, the Trust (or any person who serves or served, at the Trust's request, as a director, officer, employer or agent of another organization or who serves or served at the Trust's request in any capacity with respect to any employee benefit plan) shall be indemnified by the Trust against any losses, judgments, liabilities, expenses and amounts paid in settlement of any claims sustained by them in connection with service in such capacity, provided that such losses, judgments, liabilities, expenses and amounts paid in settlement were not the result of gross negligence or willful misconduct on the part of such Persons, and provided further, that such Person gives prompt notice thereof, executes such documents and takes such action as will permit the Trust to conduct the defense or settlement thereof and cooperate therein. In the event of a settlement approved by the Trustees of any such claim, alleged liability, action, suit or proceeding, indemnification and reimbursement shall be provided except as to such matters covered by the settlement for which the Trust receives advice of its independent counsel (which advice the Trust is obligated to request) that such matters, if adjudicated, would likely be adjudicated to have arisen out of or been based upon such Person's gross negligence or willful misconduct. Such rights of indemnification and reimbursement shall be satisfied only out of the Trust Estate. The Trust shall not incur the cost of that portion of any insurance, other than public liability insurance, which insures any party against any liability the indemnification of which is herein prohibited. The rights accruing to any Person under these provisions shall not exclude any other right to which he may be lawfully entitled, nor shall anything contained herein restrict such Person's right to contribution as may be available under applicable law. The Trust may provide advances to any such Person for legal expenses and other costs related to a claim which may be indemnified hereunder, provided that such Person undertakes to repay the advanced funds to the Trust in cases where it is determined that such Person was not entitled to such indemnification. Any action taken by or conduct on the part of a Trustee, officer, employee or agent of the Trust in conformity with or in good faith reliance upon the provisions of Section 7.5 shall not, for the purposes of this Trust (including without limitation Sections 7.l, 7.2 and 7.3 and this Section 7.4) constitute negligence or misconduct. 7.5 Right of Trustees, Officers, Employees and Agents to Own Shares or Other Property and to Engage in Other Business. Any Trustee or officer, employee or agent of the Trust may acquire, own, hold and dispose of Shares in the Trust, for his individual account, and may exercise all rights of a Shareholder to the same extent and in the same manner as if he were not a Trustee or officer, employee or agent of the Trust. Any Trustee or officer, employee or agent of the Trust may, in his personal -29- 34 capacity or in the capacity of trustee, officer, director, stockholder, partner, member, adviser or employee of any Person or otherwise, have business interests and engage in business activities similar to or in addition to those relating to the Trust, which interests and activities may be similar to and competitive with those of the Trust and may include the acquisition, syndication, holding, management, development, operation or disposition, for his own account or for the account of such Person or others, of interests in Mortgages, interests in Real Property, or interests in Persons engaged in the real estate business. Each Trustee, officer, employee and agent of the Trust shall be free of any obligation to present to the Trust any investment opportunity which comes to him in any capacity other than solely as Trustee, officer, employee or agent of the Trust, even if such opportunity is of a character which, if presented to the Trust, could be taken by the Trust; provided, however, that the provisions of this sentence shall not extend, with respect to interests in Real Property which could be acquired by the Trust consistent with its then existing policies, to any of such Trustees or agents who are Affiliated Trustees or would be Affiliated Trustees were they Trustees rather than agents, or to any officer or employee of the Trust or (at a time when there is no Advisor or other person providing an investment program for the Trust) to any Trustee of the Trust, who in failing to present such opportunity is not acting as a trustee, officer, director, stockholder, partner, member, adviser or employee of any Person other than the Trust but is acting for his own personal account. Subject to the provisions of Article IV and Section 7.6, any Trustee or officer, employee or agent of the Trust may be interested as trustee, officer, director, stockholder, partner, member, adviser or employee of, or otherwise have a direct or indirect interest in, any Person who may be engaged to render advice or services to the Trust, and may receive compensation from such Person as well as compensation as Trustee, officer, employee or agent or otherwise hereunder. 7.6 Transactions Between Trustees, Officers, Employees or Agents and the Trust. Except as otherwise provided by this Declaration, and in the absence of fraud, a contract, act or other transaction, between the Trust and any other Person, or in which the Trust is interested, shall be valid and no Trustee, officer, employee or agent of the Trust shall have any liability as a result of entering into any such contract, act or transaction, even though (a) one or more Trustees, officers, employees or agents are directly or indirectly interested in or connected with, or are trustees, partners, directors, employees, officers, or agents of such other Person, or (b) one or more of the Trustees, officers, employees or agents of the Trust, individually or jointly with others, is a party or are parties to, or directly or indirectly interested in, or connected with, such contract, act or transaction, provided that (i) such interest or connection is disclosed or known to the Trustees and thereafter the Trustees authorize or ratify such contract, act or other transaction by affirmative vote of a majority of the Trustees who are not so interested or (ii) such interest or connection is disclosed or known to the Shareholders, and thereafter such contract, act or transaction is approved by Shareholders holding a majority of the Shares, then outstanding and entitled to vote -30- 35 thereon or (iii) such contract, act or transaction is fair as to the Trust as of the time it is authorized, approved or ratified by the Trustees or the Shareholders. This Section 7.6 shall not prevent any sale of Shares issued by the Trust for the public offering thereof in accordance with a registration statement filed with the Securities and Exchange Commission under the Securities Act of l933. The Trustees are not restricted by this Section 7.6 from forming a corporation, partnership, trust or other business association owned by any Trustee, officer, employee or agent or by their nominees for the purpose of holding title to property of the Trust or managing property of the Trust, provided that the Trustees make a determination that the creation of such entity for such purpose is in the best interest of the Trust. No Trustee, officer or Advisor of the Trust or any Affiliate of such Person shall, directly or indirectly, acquire any asset for the purpose of reselling it to the Trust except to purchase property to be acquired by the Trust upon completion of financing arrangements by the Trust. 7.7 Restriction of Duties and Liabilities. The Shareholders, Trustees, officers, employees and agents shall in no event have any greater duties or liabilities than those established by this Declaration of Trust or, in cases as to which such duties or liabilities are not so established, than those of the shareholders, directors, officers, employees and agents of a Massachusetts business corporation in effect from time to time. 7.8 Persons Dealing with Trustees, Officers, Employees or Agents. Any act of the Trustees, officers, employees or agents purporting to be done in their capacity as such, shall, as to any Persons dealing with such Trustees, officers, employees or agents, be conclusively deemed to be within the purposes of this Trust and within the powers of the Trustees, officers, employees or agents. No Person dealing with the Trustees or any of them, or with the officers, employees or agents of the Trust, shall be bound to see to the application of any funds or property passing into their hands or control. The receipt of the Trustees or any of them, or of authorized officers, employees or agents of the Trust, for moneys or other consideration, shall be binding upon the Trust. 7.9 Reliance. The Trustees and the officers, employees and agents of the Trust may consult with counsel and the advice or opinion of such counsel shall be prima facie evidence of good faith and lack of negligence of all the Trustees and the officers, employees and agents of the Trust in respect of any action taken or suffered by them in reliance on or in accordance with such advice or opinion. In discharging their duties, Trustees or officers, employees or agents of the Trust, when acting in good faith, may rely upon financial statements of the Trust represented to them to fairly present the financial position or results of operations of the Trust by the -31- 36 President of the Trust or the officer of the Trust having charge of its books of account, or stated in a written report by an independent certified public accountant fairly to present the financial position or results of operations of the Trust. The Trustees and the officers, employees and agents of the Trust may rely, and shall be personally protected in acting, upon any instrument or other document believed by them in good faith to be genuine. ARTICLE VIII DURATION, AMENDMENT AND TERMINATION OF TRUST 8.1 Duration of Trust. The Trust shall continue without limitation of time, provided, however, that the Trust may be terminated at any time by the affirmative vote at a meeting of Shareholders of the holders of Shares representing a majority, of the total number of votes authorized to be cast by Shares, then outstanding and entitled to vote thereon. 8.2 Termination of Trust. (a) Upon the termination of the Trust: (i) the Trust shall carry on no business except for the purposes of winding up its affairs; (ii) the Trustees shall proceed to wind up the affairs of the Trust and all the powers of the Trustees under this Declaration shall continue until the affairs of the Trust shall have been wound up, including the power to fulfill or discharge the contracts of the Trust, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the remaining Trust Estate to one or more persons at public or private sale for consideration which may consist in whole or in part of cash, Securities or other property of any kind, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business; and (iii) after paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and refunding agreements, as they deem necessary for their protection, the Trustees may distribute the remaining Trust Estate, in cash or, with the consent of at least 90% of the Shareholders not affiliated with the Advisor, in kind or partly each, among the Shareholders according to their respective rights. -32- 37 (b) After termination of the Trust and distribution to the Shareholders as herein provided, the Trustees shall execute and lodge among the records of the Trust an instrument in writing setting forth the fact of such termination and such distribution, a copy of which instrument shall be filed with the Secretary of State of the Commonwealth of Massachusetts, and the Trustees shall thereupon be discharged from all further liabilities and duties hereunder and the rights and interests of all Shareholders shall thereupon cease. 8.3 Amendment Procedure. This Declaration may be amended (except as to the limitations of personal liability of the Shareholders, Trustees, officers, employees and agents of the Trust and the prohibition of assessments upon Shareholders set forth in Section 7.2) at a meeting of Shareholders by holders of Shares representing a majority (or, with respect to (i) amendments to Article V, (ii) amendments to the proviso to Section 8.l, and (iii) amendments to this Section 8.3 that would reduce the percentage vote required to approve any amendments to this Declaration, three quarters) of the total number of votes authorized to be cast by Shares, then outstanding and entitled to vote thereon, provided that the Trustees may authorize one or more classes or series of Shares to vote separately as a class or series with respect to certain or all amendments to the Declaration as determined by the Trustees. Two-thirds of the Trustees may, after fifteen (l5) days written notice to the Shareholders, also amend this Declaration without the vote or consent of Shareholders if they deem it necessary to conform this Declaration to the requirements of (i) the REIT Provisions of the Internal Revenue Code, (ii) other applicable federal laws or regulations or (iii) any state securities or "blue sky" laws or requirements of administrative agencies thereunder in connection with any public offering of Shares, but the Trustees shall not be liable for failing so to do. Actions by the Trustees pursuant to Section 6.1 or Section 9.6(a) that result in amending this Declaration shall be effected without vote or consent of Shareholders. 8.4 Amendments Effective. Any amendment pursuant to any Section of this Declaration of Trust (including any resolution adopted pursuant to Section 6.1 hereof) shall not become effective until a certification in recordable form signed by a majority of the Trustees setting forth an amendment and reciting that it was duly adopted as aforesaid or a copy of this Declaration, as amended, in recordable form, and executed by a majority of the Trustees, is filed with the Secretary of State of the Commonwealth of Massachusetts. 8.5 Transfer to Successor. The Trustees, with the approval a majority of the Trustees (including a majority of the Independent Trustees) and the affirmative vote or written consent, approving a plan for this purpose, of the holders of Shares representing a majority of the total number of votes authorized to be cast by Shares then outstanding and entitled to vote thereon, shall (a) cause the organization of a corporation, association, trust or other organization to take over the Trust Estate and carry on the affairs of the Trust, (b) merge the Trust into, or sell, convey and transfer -33- 38 the Trust Estate to, any such corporation, association, trust or organization in exchange for Securities thereof, or beneficial interests therein, and the assumption by such transferee of the liabilities of the Trust and (c) thereupon terminate this Declaration and deliver such shares, Securities or beneficial interests among the Shareholders in accordance with such plan. 8.6 Sale of Assets, Merger. The Trustees, with the approval of a majority of the Trustees (and, in the case of a merger, a majority of the Independent Trustees) and the affirmative vote or written consent of the holders of Shares representing (i) a majority of the total number of votes authorized to be cast by Shares then outstanding and entitled to vote thereon and (ii) such percentage as determined by the Trustees of the total number of votes authorized to be cast by any class and/or series of Shares as shall have been authorized by the Trustees to vote separately as a class or series on such matters, may: (a) sell, lease or exchange all or substantially all of the property and assets of the Trust or (b) merge the Trust into any corporation, association, trust or organization. ARTICLE IX MISCELLANEOUS 9.1 Applicable Law. This Declaration and the rights of all parties and the construction and effect of every provision hereof shall be subject to and construed according to the statutes and laws of the Commonwealth of Massachusetts. 9.2 Index and Headings for Reference Only. The index and headings preceding the text, articles and sections hereof have been inserted for convenience and reference only and shall not be construed to affect the meaning, construction or effect of this Declaration. 9.3 Successors in Interest. This Declaration and the By-Laws shall be binding upon and inure to the benefit of the undersigned Trustees and their successors, assigns, heirs, distributees and legal representatives, and every Shareholder and his successors, assigns, heirs, distributees and legal representatives. 9.4 Inspection of Records. Trust records shall be available for inspection by Shareholders at the same time and in the same manner and to the extent that comparable records of a Massachusetts business corporation would be available for inspection by shareholders, under the laws of the Commonwealth of Massachusetts. Except as specifically provided for in this Declaration, Shareholders shall have no greater right than shareholders of a Massachusetts business corporation to require financial or other information from the Trust, Trustees or officers of the Trust. Any -34- 39 federal or state securities administration or other similar authority shall have the right, at reasonable times during business hours and for proper purposes, to inspect the books and records of the Trust. 9.5 Counterparts. This Declaration may be simultaneously executed in several counterparts, each of which when so executed shall be deemed to be an original and such counterparts together shall constitute one and the same instrument, which shall be sufficiently evidenced by any such original counterpart. 9.6 Provisions of the Trust in Conflict with Law or Regulations; Severability. (a) The provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any one or more of such provisions (the "Conflicting Provisions") are in conflict with the REIT Provisions of the Internal Revenue Code, or with other applicable federal laws and regulations, the Conflicting Provisions shall be deemed never to have constituted a part of the Declaration; provided, however, that such determination by the Trustees shall not affect or impair any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted (including but not limited to the election of Trustees) prior to such determination. A certification in recordable form signed by a majority of the Trustees setting forth any such determination and reciting that it was duly adopted by the Trustees, or a copy of this Declaration, with the Conflicting Provisions removed pursuant to such a determination, in recordable form, signed by a majority of the Trustees, shall be conclusive evidence of such determination when filed with the Secretary of State of the Commonwealth of Massachusetts. The Trustees shall not be liable for failure to make any determination under this Section 9.6(a). Nothing in this Section 9.6(a) shall in any way limit or affect the right of the Trustees to amend this Declaration as provided in Section 8.3. (b) If any provision of this Declaration shall be held invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render invalid or unenforceable any other provision of this Declaration, and this Declaration shall be carried out as if any such invalid or unenforceable provision were not contained herein. 9.7 Certifications. The following certifications shall be final and conclusive as to any Persons dealing with the Trust: (a) a certification of a vacancy among the Trustees by reason of resignation, removal, increase in the number of Trustees, incapacity, death or otherwise, when made in writing by a majority of the remaining Trustees; (b) a certification as to the individuals holding office as Trustees or officers at any particular time, when made in writing by any one of the president, vice -35- 40 president, treasurer, assistant treasurer, secretary or assistant secretary of the Trust or by any Trustee; (c) a certification that a copy of this Declaration or of the By-Laws is a true and correct copy thereof as then in force, when made in writing by any one of the president, vice president, treasurer, assistant treasurer, secretary or assistant secretary of the Trust or by any Trustee; (d) the certifications referred to in Sections 2.7, 8.4 and 9.6(a); and (e) a certification as to any actions by Trustees, other than the above, when made in writing by any one of the president, vice president, treasurer, assistant treasurer, secretary or assistant secretary of the Trust or by any Trustee. -36- 41 IN WITNESS WHEREOF, the undersigned has signed these presents all on the day and year first above written. /s/ Robert Cataldo ------------------------------------- Robert Cataldo As Trustee, and not individually ACKNOWLEDGMENT COMMONWEALTH OF MASSACHUSETTS May 8, 1996 SS: COUNTY OF SUFFOLK On this 8th day of May, 1996, before me personally appeared Robert Cataldo, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. Notarial Seal /s/ Michael J. Bohnen ----------------------------------- Notary Public My commission expires: May 4, 2001 -37- 42 IN WITNESS WHEREOF, the undersigned has signed these presents all on the day and year first above written. /s/ Abraham D. Gosman ------------------------------------- Abraham D. Gosman As Trustee, and not individually ACKNOWLEDGMENT COMMONWEALTH OF MASSACHUSETTS May 8, 1996 SS: COUNTY OF SUFFOLK On this 8th day of May, 1996, before me personally appeared Abraham D. Gosman, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. Notarial Seal /s/ Michael J. Bohnen ------------------------------------- Notary Public My commission expires: May 4, 2001 -38- 43 IN WITNESS WHEREOF, the undersigned has signed these presents all on the day and year first above written. /s/ Philip L. Lowe -------------------------------------- Philip L. Lowe As Trustee, and not individually ACKNOWLEDGMENT COMMONWEALTH OF MASSACHUSETTS May 8, 1996 SS: COUNTY OF SUFFOLK On this 8th day of May, 1996, before me personally appeared Philip L. Lowe, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. Notarial Seal /s/ Michael J. Bohnen ------------------------------- Notary Public My commission expires: May 4, 2001 -39- 44 IN WITNESS WHEREOF, the undersigned has signed these presents all on the day and year first above written. /s/ Thomas J. Magovern ------------------------------------ Thomas J. Magovern As Trustee, and not individually ACKNOWLEDGMENT COMMONWEALTH OF MASSACHUSETTS May 8, 1996 SS: COUNTY OF SUFFOLK On this 8th day of May, 1996, before me personally appeared Thomas J. Magovern, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. Notarial Seal /s/ Michael J. Bohnen ---------------------------------- Notary Public My commission expires: May 4, 2001 -40- 45 IN WITNESS WHEREOF, the undersigned has signed these presents all on the day and year first above written. /s/ Gerald Tsai, Jr. -------------------------------- Gerald Tsai, Jr. As Trustee, and not individually ACKNOWLEDGMENT COMMONWEALTH OF MASSACHUSETTS May 8, 1996 SS: COUNTY OF SUFFOLK On this 8th day of May, 1996, before me personally appeared Gerald Tsai, Jr., to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. Notarial Seal /s/ Michael J. Bohnen ---------------------------------------- Notary Public My commission expires: May 4, 2001 -41- 46 IN WITNESS WHEREOF, the undersigned has signed these presents all on the day and year first above written. /s/ Edward W. Brooke -------------------------------- Edward W. Brooke As Trustee, and not individually ACKNOWLEDGMENT COMMONWEALTH OF MASSACHUSETTS May 8, 1996 SS: COUNTY OF SUFFOLK On this 8th day of May, 1996, before me personally appeared Edward W. Brooke, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. Notarial Seal /s/ Michael J. Bohnen --------------------------------------------- Notary Public My commission expires: May 4, 2001 -42- 47 IN WITNESS WHEREOF, the undersigned has signed these presents all on the day and year first above written. /s/ Frederick W. Zuckerman -------------------------------- Frederick W. Zuckerman As Trustee, and not individually ACKNOWLEDGMENT COMMONWEALTH OF MASSACHUSETTS May 8, 1996 SS: COUNTY OF SUFFOLK On this 8th day of May, 1996, before me personally appeared Frederick W. Zuckerman, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. Notarial Seal /s/ Michael J. Bohnen ---------------------------------------- Notary Public My commission expires: May 4, 2001 -43- 48 IN WITNESS WHEREOF, the undersigned has signed these presents all on the day and year first above written. /s/ David F. Benson -------------------------------- David F. Benson As Trustee, and not individually ACKNOWLEDGMENT COMMONWEALTH OF MASSACHUSETTS May 8, 1996 SS: COUNTY OF SUFFOLK On this 8th day of May, 1996, before me personally appeared David F. Benson, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. Notarial Seal /s/ Michael J. Bohnen --------------------------------------- Notary Public My commission expires: May 4, 2001 -44- EX-8 3 OPINION OF NUTTER, MCCLENNAN & FISH 1 NUTTER, MCCLENNEN & FISH, LLP ATTORNEYS AT LAW ONE INTERNATIONAL PLACE BOSTON, MASSACHUSETTS 02110-2699 TELEPHONE: 617-439-2000 FACSIMILE: 617-973-9748 CAPE COD OFFICE HYANNIS, MASSACHUSETTS May 30, 1996 12742-405 Meditrust 197 First Avenue Needham, Massachusetts 02194 Ladies and Gentlemen: You have requested our opinion regarding the federal income taxation of shareholders of Meditrust, a Massachusetts business trust organized under a Declaration of Trust dated August 6, 1985, as amended (the "Company"), in connection with the Registration Statement (File No. 333-1843) on Form S-3 with respect to the Company's shelf registration of $500,000,000 in Company securities consisting of a combination of shares of beneficial interest, debt securities and/or warrants to be offered from time to time (the "Registration Statement"). In rendering this opinion, we have examined and relied upon the following documents: (1) The Declaration of Trust of the Company dated August 6, 1985, as restated on May 10, 1996 (as so restated, the "Declaration of Trust"); (2) The By-laws of the Company adopted on August 6, 1985, as amended on February 24, 1992 (as so amended, the "By-Laws"); (3) A certification by officers of the Company in the form attached hereto as Exhibit A; and (4) The Registration Statement and the prospectus included therein of even date herewith (the "Basic Prospectus") together with all presently existing documents expressly incorporated therein by reference but excluding documents referred to therein but not expressly incorporated by reference. 2 Meditrust May 30, 1996 Page 2 In rendering this opinion, we have made the following assumptions without any independent investigation or review: (1) That all documents submitted to us as originals are authentic and all signatures thereon are genuine, and that all documents submitted to us as certified or photostatic copies conform to their originals; (2) That the beneficial ownership (as distinguished from record ownership, which is discussed in Exhibit A) of the Company is, and has been for at least 335 days of each of its taxable years (or a proportionate part in the case of its taxable year ended December 31, 1985), held by at least 100 persons; (3) That at no time has more than 50 percent in value of the outstanding shares of the Company been owned (directly or indirectly under the provisions of Section 544 of the Internal Revenue Code of 1986, as amended (the "Code")) by or for not more than five individuals; and (4) That all statements set forth in Exhibit A were true and accurate when made and continue to be true and accurate; and that with respect to any such statement made to the knowledge of the declarants, the actual facts are as so stated. Based solely upon the foregoing, having regard to legal considerations which we deem relevant, and subject to the assumptions and qualifications set forth herein, we are of the opinion that: (1) The Company is constituted in conformity with the requirements for qualification as a real estate investment trust set forth in sections 856(a)(1) through (6) and 859 of the Code. (2) The Company's proposed method of operation as described in the Basic Prospectus, if followed by the Company, is consistent with meeting the requirements for qualification and taxation as a real estate investment trust set forth in Sections 856 through 860 of the Code so long as the Company meets the various qualification tests imposed by the Code through actual operating results. 3 Meditrust May 30, 1996 Page 3 (3) The statements contained in the Basic Prospectus under the caption "Federal Income Tax Considerations" fairly present the material U.S. federal income tax consequences of an investment in common shares of beneficial interest in the Company. No opinion is expressed as to the ability of the Company to meet the various qualification tests imposed by the Code based on its actual annual operating results, which have not been and will not be reviewed by us. In particular, and without limiting the foregoing, the various qualification tests may not be met in the future (and may not have been met in the past) if the loans made by the Company are not fully secured by mortgages on real property or interests in real property, or if the leases entered into by the Company are not true leases for federal income tax purposes, or if any of the partnerships in which the Company is a partner is treated for tax purposes as an association taxable as a corporation. Our opinion is based on our interpretation of the statutes, regulations, decisions and published administrative interpretations in effect on the date hereof, and we can offer no assurance that such statutes, regulations, decisions and published administrative interpretations will not be amended, revoked or modified in a manner that would affect our opinion as set forth herein. It should also be noted that, although this opinion reflects our conclusions as to the application of current law to the facts and transactions described herein, we can offer no assurance that contrary positions will not be asserted by the Internal Revenue Service or that the Internal Revenue Service or a court of law will not rule otherwise. We understand that this opinion letter is to be used in connection with the Registration Statement, as finally amended, and hereby consent to the filing of this opinion letter with and as a part of the Registration Statement as so amended, and to the reference to our firm in the Prospectus under the headings "Federal Income Tax Consequences" and "Legal Matters." It is understood that this opinion letter is to be used in connection with the offer and sale of the shares of beneficial interest, debt securities and/or warrants only while the Registration Statement is effective as so amended and as it may be amended from time to time as contemplated by Section 10(a)(3) of the Securities Act. Very truly yours, Nutter, McClennen & Fish, LLP LJM/ltm EX-12 4 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 12 Computation of Ratios of Earnings to Fixed Charges (dollars in thousands)
Three Months Ended Year Ended December 31, March 31, - ---------------------------------------------------------------------------- 1991 1992 1993 1994 1995 1996 - ---------------------------------------------------------------------------- Net Income $ 34,225 $ 51,358 $ 63,636 $ 80,460 $ 86,518 $ 35,533 Interest Expense 56,886 58,159 62,193 67,479 64,163 16,105 -------- -------- -------- -------- -------- -------- Total $ 91,111 $109,517 $125,829 $147,939 $150,681 $ 51,638 ======== ======== ======== ======== ======== ======== Ratio 1.60 1.88 2.02 2.19 2.35 3.21
For purposes of calculating the ratio of earnings to fixed charges for the years ended December 31, 1991, 1992, 1993, 1994 and 1995, and the three-month period ended March 31, 1996, net income has been added to interest expense and that sum has been divided by such interest expense. II-4 -----END PRIVACY-ENHANCED MESSAGE-----