-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, V7jBGlrc3nOXrT5R1HpPLvo/RKjBW6QS2KChkit24TL5/CphX9+VEk485r+RaBcx CvnP5blmkR3BBWz7xByCjQ== 0000950135-94-000188.txt : 19940322 0000950135-94-000188.hdr.sgml : 19940322 ACCESSION NUMBER: 0000950135-94-000188 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940321 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDITRUST CENTRAL INDEX KEY: 0000774350 STANDARD INDUSTRIAL CLASSIFICATION: 6798 IRS NUMBER: 046532031 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-09582 FILM NUMBER: 94517054 BUSINESS ADDRESS: STREET 1: 128 TECHNOLOGY CTR CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 6177361500 10-K 1 MEDITRUST FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended: DECEMBER 31, 1993 Commission file number: 0-14022 MEDITRUST (Exact name of registrant as specified in its charter) Massachusetts 04-6532031 - ---------------------------------------- ---------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 128 Technology Center, Waltham, MA 02154 - ---------------------------------------- ----------- (Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (617) 736-1500 -------------- Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered ------------------- ----------------------------------------- Shares of Beneficial Interest without par value New York Stock Exchange 9% Convertible Debentures due 2002 New York Stock Exchange 7% Convertible Debentures due 1998 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No________ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K. ______ Aggregate market value of voting shares held by non-affiliates as of February 28, 1994: $1,083,421,000 Number of Shares of Beneficial Interest outstanding of registrant as of February 28, 1994: 33,407,993 The following documents are incorporated by reference into the indicated Part of this Form 10-K.
Document Part -------- ---- Definitive Proxy Statement for the May 26, 1994 Annual Meeting of Shareholders, to be filed pursuant to Regulation 14A III
2 PART I Item 1. BUSINESS General Information regarding Meditrust's business is given as of February 28, 1994. Meditrust (the "Company"), a real estate investment trust organized on August 6, 1985, invests in the subacute sector of the health care industry in locations throughout the United States. The objective of the Company is to enable shareholders to participate in the investment in health care related facilities held primarily for the production of income to be distributed to shareholders. In meeting this objective, the Company attempts to invest in high quality facilities that are managed by experienced operators and to achieve diversity in its property portfolio by sector of the health care industry, geographic location, operator and form of investment. 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. The Company currently has investments in 213 facilities, consisting of 179 long-term care facilities, 20 rehabilitation hospitals, two alcohol and substance abuse treatment facilities, six psychiatric hospitals, four retirement living centers and two medical office buildings. Included in the 213 facilities are four properties under construction that are expected to begin operations during the next three to twelve months. The Company's investments take the form of sale/leaseback transactions, permanent mortgage loans and development mortgage loans. The Company only enters into development mortgage loans if, upon completion of the facility, the Company's development mortgage loan is to be replaced by either a permanent mortgage loan from the Company or a sale/leaseback transaction with the Company. The Company's gross real estate investments increased by $206,822,000 during 1993 to $1,287,602,000 at December 31, 1993 as a result of the Company making permanent and development mortgage loans and entering into sale/leaseback transactions. Permanent Mortgage Loans. During 1993, the Company provided permanent mortgage financing of $181,908,000 for 26 long-term care facilities, one rehabilitation facility and one retirement living facility totaling approximately 4,300 beds and located in 13 states and for additions to four facilities having permanent mortgage loans. As of February 28, 1994, the Company was committed to provide additional financing of approximately $2,207,000 for four existing permanent mortgage loans. -2- 3 Sale/Leaseback Transactions. During 1993, the Company funded $8,000,000 for the purchase of a rehabilitation facility located in Arkansas and capitalized additional costs of $10,272,000 relating to thirteen facilities located in eight states. Other Transactions. During the year ended December 31, 1993, the Company entered into a series of transactions with a prior operator of certain rehabilitation and long-term care facilities financed by the Company. As a result of these transactions, the Company acquired for $99,763,000 five rehabilitation and four long-term care facilities (located in New York, Massachusetts, Michigan, New Hampshire, Wisconsin and Washington), reduced existing mortgage loans by $81,690,000, reduced a related bank participation in one of the mortgage loans by $18,073,000, acquired from the operators of certain facilities operating receivables and provided advances under a working capital line. Also in connection with these transactions, the Company leased eight of these facilities to four different operators and entered into a management agreement for the remaining facility. During 1993, the Company acquired a psychiatric facility in Texas for an amount equal to its existing mortgage loan of $6,803,000 and entered into a lease transaction with one of its existing operators. Also during 1993, the Company reduced its real estate investments by $34,978,000 from the sale of a long-term care facility located in Washington and from the prepayment of permanent mortgage loans on five long-term care facilities located in Massachusetts and two long-term care facilities located in Connecticut. In addition, the Company collected principal payments of $4,662,000 and reduced its investment in a partnership by $178,000. Conversion of Development Mortgage Loans to Permanent Loans. During 1993, the Company provided ongoing development financing of $16,097,000 resulting in an aggregate funding of $33,963,000 for four long-term care facilities located in four states totaling 496 beds. Construction of these facilities was completed and development mortgage loans totaling $16,969,000 were converted to permanent mortgage loans and development mortgage loans totaling $16,994,000 were converted into sale/leaseback transactions. Development Mortgage Loans. During 1993, the Company provided ongoing construction financing of $12,290,000 for three long- term care facilities and for additions to two existing long-term care facilities. As of February 28, 1994, the Company is committed to provide additional financing of approximately $17,831,000 for the completion of seven facilities. Financings. In February 1993, the Company completed the sale of 3,277,500 Shares at $30.625 per Share and issued $92,120,000 of 7% convertible debentures due 1998. The Company used the proceeds to repay short-term borrowings and for investments in additional health care facilities. In November 1993, the Company issued $86,250,000 of 6 7/8% convertible debentures due 1998. The Company used the proceeds to repay short-term borrowings and for investments in additional health care facilities. The Company may raise additional capital from public or private sources and invest in additional health care related facilities. -3- 4 INVESTMENT AND OTHER POLICIES General The Company invests in income-producing health care related facilities which may include long-term care facilities, rehabilitation hospitals, alcohol and substance abuse treatment facilities, psychiatric hospitals, retirement living facilities, medical office buildings and other health care related facilities. These investments are made primarily for the production of income. Because the Company invests in health care related facilities, the Company is not in a position to diversify its investment portfolio to include assets selected to reduce the risks associated with investment in improved real estate in a single industry. However, the Company intends to continue to diversify its portfolio by broadening its geographic base, providing financing to more operators, diversifying the type of health care facilities in its portfolio and diversifying the types of financing methods provided. In evaluating potential investments, the Company considers such factors as: (1) the current and anticipated cash flow and its adequacy to meet operational needs and other obligations and to provide a competitive market return on equity to the Company's shareholders; (2) the geographic area, type of property and demographic profile; (3) the location, construction quality, condition and design of the property; (4) the potential for capital appreciation, if any; (5) the growth, tax and regulatory environment of the communities in which the properties are located; (6) occupancy and demand for similar health care facilities in the same or nearby communities; (7) an adequate mix of private and governmental-sponsored patients; (8) potential alternative uses of the facilities; and (9) prospects of liquidity through financing or refinancing. Management conducts market research and analysis for all potential investments on behalf of the Company. Management also reviews the value of the property, the interest rates and debt service coverage requirements of any debt to be assumed and the anticipated sources of repayment for such debt. The Company's Declaration of Trust places no limitations on the percentage of the Company's total assets that may be invested in any one property or joint venture or on the nature or identity of the operators of such properties. The independent Trustees of the Company, however, may establish such limitations as they deem appropriate from time to time. From time to time, the Company enters into senior debt transactions. The Company has no current plans to underwrite securities of other issuers. The Company has authority to offer shares of beneficial interest ("Shares") in exchange for investments which conform to its standards and to repurchase or otherwise acquire its Shares or other securities. The Company has no present plans to invest in the securities of others for the purpose of exercising control, although the Company owns interests in partnerships which own health care facilities. The Company makes loans on such terms as the Trustees may approve. The Company will not, without the prior approval of a majority of Trustees, including a majority of the independent Trustees of the Company, acquire from or sell to any Trustee, director, officer or employee of the Company, or any affiliate thereof, any of the assets or other property of the Company. The Company provides its shareholders with annual reports containing audited financial statements and quarterly reports containing unaudited financial information. -4- 5 Reinvestment of Sales Proceeds In the event the Company sells or otherwise disposes of any of its properties, the independent Trustees will determine whether and to what extent the Company will acquire additional properties or distribute the proceeds to the shareholders. Short-Term Investments The Company invests its cash in certain short-term investments during interim periods between the receipt of revenues and distributions to shareholders. Cash not invested in facilities may be invested in interest-bearing bank accounts, certificates of deposit, short-term money-market securities, short-term United States 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 loans, mortgage loan participations, and certain other similar investments. The Company's ability to make certain of these investments may be limited by tax considerations. The Company's return on these short-term investments may be more or less than its return on real estate investments. Borrowing Policies The Company may incur additional indebtedness when, in the opinion of the Trustees, it is advisable. For short-term purposes, the Company may, from time to time, negotiate lines of credit, arrange for other short-term borrowings from banks or others or issue commercial paper. The Company may arrange for long-term borrowing from banks, insurance companies, public offerings or private placements to institutional investors. Under the Company's Declaration of Trust and under documents pertaining to certain existing indebtedness, the Company is subject to various restrictions with respect to borrowings. See "Prohibited Investments and Activities." In addition, the Company may incur mortgage indebtedness on real estate which it has acquired through purchase, foreclosure or otherwise. When terms are deemed favorable, the Company may invest in properties subject to existing loans or mortgages. The Company also may obtain financing for unleveraged properties in which it has invested or may refinance properties acquired on a leveraged basis. There is no limitation on the number or amount of mortgages which may be placed on any one property, but overall restrictions on mortgage indebtedness are provided under documents pertaining to certain existing indebtedness. Prohibited Investments and Activities The Declaration of Trust imposes certain prohibitions and restrictions on various investment practices or activities of the Company, including prohibitions against: (i) investing in junior mortgage loans, unless, by appraisal or other method, the Independent Trustees determine: (a) 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 (b) such mortgage loan is a financing device entered into by the Company to establish the priority of its capital investment over the capital of others investing with the Company in a real estate project; -5- 6 (ii) allowing the aggregate borrowings of the Company to exceed 300% of the net assets of the Company, unless the Independent Trustees determine that a higher level of borrowing is appropriate; (iii) investing more than 10% of the Company's total assets in unimproved real property or mortgage loans with respect thereto; (iv) investing in commodity or commodity futures contracts other than interest rate futures used solely for hedging purposes; (v) issuing equity securities which are redeemable at the option of the holders thereof; (vi) issuing debt securities, unless the historical debt service coverage for the most recently completed fiscal year, as adjusted for known changes, is sufficient to service the higher level of debt; (vii) granting options or issuing warrants to purchase Shares at an exercise price or for consideration less than the fair market value of such Shares on the date of such grant or issuance; (viii) investing more than 1% of the assets of the Company in real estate contracts for sale, unless such real estate contracts are recordable in the chain of title; and (ix) acting in any way that would disqualify the Company as a real estate investment trust under the provisions of the Internal Revenue Code. At the Annual Meeting in May 1992, the shareholders voted to amend the Declaration of Trust by deleting all of the foregoing restrictions. The amendment remains subject to the consent of certain third party lenders. In addition to prohibitions and restrictions imposed by the Declaration of Trust, there are and may be, from time to time, additional restrictions imposed by debt instruments or other agreements entered into by the Company. Policy Changes The prohibitions and restrictions contained in the Declaration of Trust may not be changed by the Trustees without shareholder approval. All other policies set forth herein may be changed by the Trustees without shareholder approval. Competition The Company competes, primarily on the basis of price, knowledge of the industry, and flexibility of financing structure, with real estate partnerships, other real estate investment trusts, banks and other investors generally in the acquisition, leasing and financing of health care related facilities. -6- 7 The operators of the facilities compete on a local and regional basis with other operators of comparable facilities. They compete with independent operators as well as companies managing multiple facilities, some of which are substantially larger and have greater resources than the operators of the Company's facilities. Some of these facilities are operated for profit while others are owned by governmental agencies or tax-exempt not-for-profit organizations. Employees The Company currently employs 44 persons. Declaration of Trust The Declaration of Trust of the Company 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 certain statutory liabilities in other jurisdictions, a shareholder may be held personally liable to the extent that claims are not satisfied by the Company. However, the Declaration of Trust 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. The Trustees do not intend to provide insurance covering such risks to the shareholders. GOVERNMENT REGULATION Each of the Company's investments is in a health care related facility and the amount of percentage rent or additional interest, if any, which is based on the operator's gross revenues from certain of the facilities, is in most cases subject to changes in the reimbursement and license policies of federal, state and local governments. In addition, the acquisition of health care facilities is generally subject to state and local regulatory approval. Medicare, Medicaid, Blue Cross and Other Payors Certain of the operators receive payments for patient care from federal Medicare programs for elderly and disabled patients, state Medicaid programs for medically indigent and cash grant patients, private insurance carriers, employers and Blue Cross plans, health maintenance organizations, preferred provider organizations and directly from patients. In general, Medicare payments for psychiatric care, long-term care services and rehabilitative care are based on allowable costs plus a return on equity for proprietary facilities. Payments from state Medicaid programs for psychiatric care are based on reasonable costs or are at fixed rates. Long-term care facilities are generally paid by the Medicaid programs at fixed rates. Most Medicare and Medicaid payments are below retail rates. Blue Cross payments in different states and areas are based on costs, negotiated rates or retail rates. -7- 8 Long-Term Care Facilities Regulation of long-term care facilities is exercised primarily through the licensing of such facilities. The particular agency having regulatory authority and the license qualification standards vary from state to state and, in some instances, from locality to locality. Licensure standards are constantly under review and undergo periodic revision. Governmental authorities generally have the power to review the character, competence and community standing of the operator and the financial resources and adequacy of the facility, including its plant, equipment, personnel and standards of medical care. Long-term care facilities are certified under the Medicare program and all are eligible to qualify under state Medicaid programs, although not all participate in the Medicaid programs. Rehabilitation Hospitals Rehabilitation hospitals are also subject to extensive federal, state and local legislation and regulation. Rehabilitation hospitals are subject to periodic inspections and licensure requirements. Inpatient rehabilitation facilities are cost-reimbursed, receiving the lower of reasonable costs or reasonable charges. Typically, the fiscal intermediary pays a set rate per day based on the prior year's costs for each facility. Annual cost reports are filed with the operator's fiscal intermediary and adjustments are made, if necessary. Alcohol and Substance Abuse Treatment Facilities Alcohol and substance abuse treatment facilities must comply with the licensing requirements of federal, state and local health agencies and with the requirements of municipal building codes, health codes and local fire departments. In granting and renewing a facility's license, a state health agency considers, among other things, the physical buildings and equipment, the qualifications of the administrative personnel and health care staff, the quality of nursing and other services and the continuing compliance of such facility with the laws and regulations applicable to its operations. Psychiatric Hospitals Psychiatric hospitals generally are subject to extensive federal, state and local legislation and regulation. Licensing for psychiatric hospitals is subject to periodic inspections regarding standards of medical care, equipment and hygiene. In addition, there are specific laws regulating civil commitment of patients and disclosure of information regarding patients being treated for chemical dependency. Many states have adopted a "patient's bill of rights" which sets forth standards, such as using the least restrictive treatment, allowing patient access to the telephone and mail, allowing the patient to see a lawyer and requiring the patient to be treated with dignity. Insurance reimbursement for psychiatric treatment generally is more limited than for general health care. Medical Office Buildings The individual physicians, groups of physicians and health care providers which occupy medical office buildings are subject to a variety of federal, state and local regulations applicable to their specific areas of practice. Since medical office buildings may contain numerous types of medical services, a wide variety of regulations may apply. In addition, medical office buildings must comply with the requirements of municipal building codes, health codes and local fire departments. -8- 9 Item 2. PROPERTIES The table sets forth certain information as of February 28, 1994 regarding the Company's facilities:
Purchase Price Annual Base Rent Number of Number of or Mortgage Plus Debt Service or Location Facilities Beds (1) Amount (2) Interest Payment(3) - -------- ---------- --------- -------------- -------------------- (dollars in thousands) LONG-TERM CARE FACILITIES Alabama 1 226 $ 7,759 $ 940 Arizona 1 120 2,883 (4) 317 Colorado 3 427 19,209 (5) 2,305 Connecticut 18 2,382 129,071 (6) 15,056 Florida 2 330 19,432 (7) 2,149 Illinois 29 2,881 59,100 (8) 5,572 Indiana 1 145 6,270 706 Maryland 1 136 8,494 977 Massachusetts 20 3,194 187,799 (9) 21,209 Michigan 7 888 28,978 (10) 3,580 Missouri 1 186 8,798 1,078 New Jersey 4 687 27,211 (11) 2,952 Nevada 2 350 16,846 (4) 2,087 New York 3 432 49,226 5,529 North Carolina 1 120 3,164 (4) 380 Ohio 5 567 23,400 2,581 Pennsylvania 4 546 21,443 (12) 2,665 Pennsylvania and New Jersey (16) 12 2,050 84,947 (4) 9,776 Rhode Island 1 156 5,000 (4) 538 Tennessee 2 323 11,187 (4) 1,204 Texas 22 1,903 41,759 (13) 3,745 Utah 1 120 5,600 (4) 461 West Virginia and Pennsylvania (16) 5 400 13,968 (4) 1,607 Wyoming 1 150 5,500 649 Various (17) 15 1,759 44,182 (4) 5,304 Various (18) 17 2,680 96,075 (4) 10,332 --- --------- ---------- --------- TOTAL LONG-TERM CARE 179 23,158 927,301 103,699 --- --------- ---------- --------- REHABILITATION HOSPITALS Arkansas 2 140 17,451 1,999 Arizona 1 80 9,965 1,196 California 5 298 68,899 (14) 8,528 Kansas 1 80 11,649 1,437 Louisiana 2 170 21,920 2,751 Michigan 1 55 7,788 817 New Hampshire 1 128 11,835 1,354 New York 1 30 4,701 493 Tennessee 1 60 8,858 (4) 1,108 Texas 3 200 34,889 4,344 Washington 1 55 5,685 686 Wisconsin 1 109 13,861 1,619 --- --------- ---------- --------- TOTAL REHABILITATION 20 1,405 217,501 26,332 --- --------- ---------- ---------
-9- 10
Purchase Price Annual Base Rent Number of Number of or Mortgage Plus Debt Service or Location Facilities Beds (1) Amount (2) Interest Payment(3) -------- ---------- -------- -------------- -------------------- (dollars in thousands) ALCOHOL AND SUBSTANCE ABUSE TREATMENT FACILITIES New York 2 354 94,000 10,058 --- ------ ---------- -------- PSYCHIATRIC HOSPITALS Arizona 1 114 8,088 (4) 1,012 California 1 61 5,750 719 Louisiana 1 90 8,750 1,050 New York 1 100 30,000 3,363 Texas 2 156 13,420 1,462 --- ------ ---------- -------- TOTAL PSYCHIATRIC 6 521 66,008 7,606 --- ------ ---------- -------- RETIREMENT LIVING FACILITIES Colorado 1 215 15,820 (4) 1,701 Florida 1 182 10,430 (4) 1,025 Texas 1 424 960 (15) 899 (15) Wyoming 1 161 9,700 1,144 --- ------ ---------- -------- TOTAL RETIRMENT LIVING 4 982 36,910 4,769 --- ------ ---------- -------- MEDICAL OFFICE BUILDINGS California 1 8,201 (19) 656 Florida 1 5,023 (19) 402 --- ------ ---------- -------- TOTAL MEDICAL OFFICE BUILDINGS 2 13,224 1,058 --- ------ ---------- -------- TOTAL ALL FACILITIES (20)(21) 213 26,420 $1,354,944 $153,522 === ====== ========== ========
(1) Based upon information provided by the operators of the facilities, the average occupancy of the Company's facilities for the year ended December 31, 1993, was as follows: long-term care facilities, 90%; rehabilitation hospitals, 54%; alcohol and substance abuse treatment facilities, 61%; psychiatric hospitals, 52%; retirement living facilities, 82%. Generally, average occupancy rates are determined by dividing the number of patient days in each period by the average number of licensed bed days during such period. (2) Represents purchase price or mortgage amount at February 28, 1994 for operating facilities and the estimated construction loan amount for facilities under construction. The annual base rentals/interest payments under the leases or mortgages are generally projected to be 10.0% - 12.5% of the purchase price or mortgage amount, in accordance with the terms of the respective agreements. -10- 11 (3) Base rent excludes additional and percentage rent and interest but includes an aggregate of $6,868,000 in debt service. Additional and percentage rent and interest for the year ended December 31, 1993 was an aggregate of $8,657,000 for all of the facilities. Additional and percentage rent and interest are calculated based upon a percentage of a facility's revenues over an agreed upon base amount. (4) Permanent mortgage loans. (5) Includes a permanent mortgage loan of $7,301,000. (6) Includes permanent mortgage loans aggregating $69,158,000. (7) Includes permanent mortgage loan of $8,432,000 (8) Includes a permanent mortgage loan of $50,500,000. (9) Includes permanent mortgage loans of $74,292,000. (10) Includes permanent mortgage loans of $21,494,000. (11) Includes a permanent mortgage loan of $3,426,000. (12) Includes a permanent mortgage loan of $9,911,000. (13) Includes permanent mortgage loans of $36,246,000. (14) Includes a permanent mortgage loan of $29,911,000. (15) Fifty percent owned by the Company. The amount shown as annual base rent represents the Company's partnership distribution received during the year ended December 31, 1993. (16) Represents mortgages collateralized by multi-state facilities. (17) Represents a permanent mortgage on fifteen properties located in nine states. (18) Represents a permanent mortgage on seventeen properties located in ten states. (19) Construction mortgage loan. (20) Investments by the Company in facilities operated by The Mediplex Group, Inc., Life Care Centers of America, Inc., and Continental Medical Systems, Inc. represented 27.2%, 14.6% and 9.7%, respectively, of the Company's total assets as of February 28, 1994. (21) The 28 facilities for which The Mediplex Group, Inc. has guaranteed the lessee's or borrower's obligations or provided working capital assurances are located in Massachusetts, Connecticut, New York, New Jersey, Florida, Michigan and Arkansas and include 22 long-term care facilities, 3 rehabilitation hospitals, 2 alcohol and substance abuse treatment facilities and 1 psychiatric hospital. -11- 12 Long-Term Care Facilities. The long-term care facilities offer restorative, rehabilitative and custodial nursing care for patients not requiring more extensive and sophisticated treatment available at acute care hospitals. The facilities are designed to provide custodial care and to supplement hospital care and many have transfer agreements with one or more acute care hospitals. Rehabilitation Hospitals. The rehabilitation hospitals provide treatment to restore physical, psycho-social, educational, vocational and economic usefulness and independence to disabled persons. Rehabilitation concentrates on physical disabilities and impairments and utilizes a coordinated multidisciplinary team approach to help patients attain measurable goals. Alcohol and Substance Abuse Treatment Facilities. These facilities provide inpatient treatment for alcohol and substance abuse, including medical evaluation, detoxification and rehabilitation. Specialized programs offer treatment for adults, adolescents, families and chronic abusers. Psychiatric Hospitals. The psychiatric hospitals offer comprehensive, multidisciplinary adult, adolescent and substance abuse psychiatric programs. Patients are evaluated upon admission and an individualized treatment plan is developed. Elements of the treatment plan include individual, group and family therapy, activity therapy, educational programs and career and vocational planning. Retirement Living Facilities. The retirement living facilities offer specially designed residential units for active and ambulatory elderly residents and provide various ancillary services. They contain nursing facilities to provide a continuum of care. The retirement living facilities offer their residents an opportunity for an independent lifestyle with a range of social and health services. Medical Office Buildings. Medical office building facilities contain individual physician, physician group and other health care provider offices for the administration and treatment of patients, usually in close proximity to the general service acute care hospital to which the physicians are affiliated. The types of services provided in a medical office building may include outpatient therapy, clinics, examination facilities and the provision of other medical services in a non-hospital setting. LEASES Each facility (which includes the land, buildings and improvements, related easements and rights and fixtures (the "Leased Properties")), that is owned by the Company is leased to a health care provider pursuant to a long-term net lease (collectively, the "Leases") which generally contains terms as outlined below. Generally, the Leased Properties do not include major movable equipment. The fixed terms of the Leases generally range from 10 to 20 years and contain from two to nine five-year renewal options. Some Leases are subject to earlier termination upon the occurrence of certain contingencies described in the Lease. The Company's Leased Properties aggregated approximately $686,000,000 of gross real estate investments at December 31, 1993. The base rents range from approximately 10% to 15% per annum of the Company's equity investment in the Leased Properties and many may be adjusted upward during the terms of the leases to an amount equal to 300 to 500 basis points over the five-year United States Treasury securities' yield at the time of adjustment. The base rents for the renewal periods are generally fixed rents for the initial renewal periods and market rates for later renewal periods. All Leases, except for two facilities located in New York, provide for additional rents in addition to the base rent, based on revenues exceeding specified base revenues. The rents for these two facilities are subject to periodic -12- 13 fixed increases. In addition, the Company typically charges a lease commitment fee at the initiation of the sale/leaseback transaction. Each Lease is a net lease requiring the lessee to pay rent and all additional charges incurred in the operation of the Leased Property. The lessees are required to repair, rebuild and maintain the Leased Properties. The obligations under the Leases are guaranteed by the parent corporation of the lessee, if any, or affiliates or individual principals of the lessee. Some obligations are further backed by letters of credit, security deposits or certificates of deposit from various financial institutions which cover up to one full year's lease payments and which remain in effect until the expiration of a fixed time period or the fulfillment of certain performance criteria. The Company also may obtain other credit enhancement devices similar to those it may obtain with respect to permanent mortgage loans. See "Permanent Mortgage Loans." With respect to two of the facilities, the Company leases the land pursuant to ground leases and in turn subleases the land to the operator of the facility. Such subleases contain substantially similar terms as the Leases. PERMANENT MORTGAGE LOANS The Company's permanent mortgage loan program is comprised of secured loans which are structured to provide the Company with interest income, additional interest based upon the revenue growth of the operating facility, principal amortization and commitment fees. Virtually all of the approximately $589,000,000 of permanent mortgage loans as of December 31, 1993 are first mortgage loans. The interest rates on the Company's investments in permanent mortgage loans for operating facilities ranged from 10.0% to 13.5% per annum on the outstanding balances. The yield to the Company on permanent mortgage loans depends upon a number of factors, including the stated interest rate, average principal amount outstanding during the term of the loan, the amount of the commitment fee charged at the inception of the loan, the interest rate adjustments and the additional interest earned in the revenue growth of the operating facility. The permanent mortgage loans for operating facilities made through December 31, 1993 are generally subject to 10-year terms that provide for a balloon payment on the outstanding principal balance at the end of the tenth year. The interest adjustment generally provides for interest to be charged at the greater of the current interest rate or 300 to 450 basis points over the five- year United States Treasury securities' yield at the time of adjustment. -13- 14 The Company generally requires a variety of additional forms of security and collateral beyond that which is provided by the lien of the mortgage. For example, the Company requires one or more of the following items: (a) a guaranty of the complete payment and performance of all obligations associated with each mortgage loan from the borrower's parent corporation, if any, other affiliates of the borrower and/or one or more of the individual principals controlling such borrower; (b) a collateral assignment from the borrower of the leases and the rents relating to the mortgaged property; (c) a collateral assignment from the borrower of all permits, licenses, approvals and contracts relating to the operation of the mortgaged property; (d) a pledge of all, or substantially all, of the equity interest held in the borrower; (e) cash collateral or a pledge of a certificate of deposit, for a negotiated dollar amount typically equal to at least one year's principal and interest on the loan (which cash collateral or pledge of certificate of deposit typically remains in effect until the later to occur of (i) three years after the closing of the mortgage loan or (ii) the achievement by the facility of an agreed-upon cash flow debt coverage ratio for three consecutive fiscal quarters and, in the event that after the expiration of the letter of credit or pledge of certificate of deposit, the agreed-upon financial covenants are not maintained throughout the loan term, the borrower is often required to provide the Company with cash collateral or pledge of certificate of deposit); (f) an agreement by any affiliate of the borrower or the facility to subordinate all payments due to it from the borrower to all payments due to the Company under the mortgage loan; and (g) a security interest in all of the borrower's personal property, including, in some instances, the borrower's accounts receivable. In addition, the mortgage loans are generally cross-defaulted and cross-collateralized with any other mortgage loans, leases or other agreements between the borrower or an affiliate of the borrower and the Company. DEVELOPMENT MORTGAGE LOANS The Company makes development mortgage loans that by their terms convert either into sale/leaseback transactions or permanent mortgage loans upon the completion of development of the facilities. Generally, the interest rates on the outstanding balances of the Company's development mortgage loans are the greater of a base rate or 75 to 550 basis points over the prime rate of a specified financial institution. The Company also typically charges a commitment fee at the commencement of the loan. The development loan period generally commences upon the funding of such loans and terminates upon the earlier of (a) the completion of development of the applicable facility or (b) a specific date. This period is generally 12 to 18 months. During the term of the development loan, funds are advanced pursuant to draw requests made by the borrower in accordance with the terms and conditions of the applicable loan agreement which require a site visit prior to the advancement of funds. Monthly payments of interest only are made on the total amount of the loan proceeds advanced during the development period. -14- 15 Since it began its development mortgage loan program in August 1987, the Company has funded the development of ten rehabilitation hospitals, six long-term care facilities and one retirement living facility. These facilities, subsequently converted into sale/leaseback transactions, represent an investment of approximately $140,606,000 as of December 31, 1993. The Company had advanced approximately $11,477,000 towards a commitment of $13,896,000 of development mortgage loans in conjunction with the development of additions to three additional long-term care facilities as of December 31, 1993. These development loans convert automatically into sale/leaseback transactions upon completion of the facility. Simultaneously with the commencement of the term of each of these development loans, the Company has generally entered into a purchase and sale and lease agreement with the borrower pursuant to which (a) the Company will purchase the facility upon completion of the development for purchase prices ranging from (i) a stated maximum price that is generally equal to the face amount of the development mortgage loan to (ii) the actual cost of developing the facility plus an amount equal to the sum of specified "soft costs" items associated with such development and (b) upon such sale the borrower will immediately lease back the facility from the Company. The base rent under the lease is established upon the conclusion of the development loan period at the greater of (i) a rate specifically agreed to at the time of the issuance of the commitment for the loan or (ii) 300 to 450 basis points over the five-year United States Treasury securities' yield at the time of adjustment. See "Leases." The Company has also funded since inception the development of two rehabilitation hospitals, eight long-term care facilities and one retirement living facility that were converted to permanent mortgage loans, representing an investment of approximately $104,788,000 as of December 31, 1993. The Company had advanced approximately $4,663,000 towards a total commitment of $10,335,000 of development mortgage loans in conjunction with the development of two additional long-term care facilities as of December 31, 1993. These development mortgage loans convert automatically into permanent mortgage loans upon completion of the facility and the balance, if any, of the principal amount of the loan is advanced to the borrower. The interest rate of the loans is adjusted upon their conversion to permanent status to be the greater of (i) a rate specifically agreed to at the time of the issuance of the commitment for the loan or (ii) 300 to 350 basis points over the five-year United States Treasury securities' yield at the time of adjustment. The other terms and conditions of such loans generally are substantially similar to the Company's permanent mortgage loans. See "Permanent Mortgage Loans." As with the Company's permanent mortgage financing program, the development mortgage loans generally include a variety of additional forms of security and collateral beyond that which is provided by the lien of the mortgage. See "Permanent Mortgage Loans." During the development loan period, the Company generally requires additional security and collateral in the form of either (a) payment and performance completion bonds or (b) completion guarantees by either one, or a combination of, the borrower's parent entity, other affiliates of the borrower or one or more of the individual principals who control the borrower. In addition, prior to any advance of funds by the Company under the development mortgage loan, the borrower must provide (a) satisfactory evidence in the form of an endorsement to the Company's title insurance policy for the loan that no intervening liens have been placed on the property since the date of the Company's previous advance; (b) a certificate executed by the architect for the project that indicates that all construction work completed on the project conforms with the requirements of the applicable plans and specifications; (c) a certificate executed by the general contractor that all work requested for reimbursement by the borrower has been completed; and (d) satisfactory evidence that the funds remaining unadvanced under the loan are sufficient for the payment of all costs necessary for the completion of the project in accordance with the terms and provisions of the applicable loan agreement. -15- 16 As a further safeguard during the development loan period, the Company generally will retain a portion of the loan proceeds equal to 10% of the principal loan amount until it has received satisfactory evidence that the project has been fully completed in accordance with the applicable plans and specifications and the period during which liens may be perfected with respect to any work performed, or labor or materials supplied, in connection with the construction of the project has expired. The Company also monitors the progress of the development of each project and the accuracy of the borrower's draw requests by having its own inspector perform on- site inspections of the project prior to the release of any requested funds. Item 3. LEGAL PROCEEDINGS NONE. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE. EXECUTIVE OFFICERS OF THE REGISTRANT The following information relative to the Company's executive officers is given as of February 28, 1994:
Name Age Position with the Company ---- --- ------------------------- Abraham D. Gosman 65 Chairman, Chief Executive Officer and Trustee David F. Benson 44 President and Trustee Michael F. Bushee 36 Senior Vice President of Operations Michael S. Benjamin 36 Senior Vice President, Secretary and General Counsel Lisa M. Pavelka 30 Vice President and Treasurer Stephen H. Press 57 Vice President of Acquisitions C. Michael Ford 55 Vice President of Marketing Keith E. Grant 53 Controller
-16- 17 Abraham D. Gosman has been Chairman of the Company since its organization in 1985 and became Chief Executive Officer in February 1991. He had been Chief Executive Officer of A.M.A. Advisory Corp., the Company's former advisor (the "Advisor"), from June 1988 until February 1991 and President of the Advisor from its incorporation until July 1988. From August 1989 until April 12, 1991, Mr. Gosman had been Chief Executive Officer of Diamond Treatment Centers, Inc. ("Diamond") and, until he resigned in March 1991, each of its subsidiaries, which own and operate alcohol treatment facilities. On April 12, 1991, involuntary proceedings under Chapter 11 of the Federal Bankruptcy Code were filed against Diamond and each of its subsidiaries, to which filing such companies consented on April 24, 1991. Mr. Gosman was the Chief Executive Officer of The Mediplex Group, Inc. ("Mediplex"), an operator and developer of health care facilities, from its incorporation in 1983 until September 1988. After the acquisition of Mediplex in August 1990 by a company, the majority of whose stock was owned by Mr. Gosman, Mr. Gosman again assumed the position of Chief Executive Officer and Chairman of the Board of Mediplex. Mr. Gosman has been in the health care and development business for more than thirty years. David F. Benson has been President of the Company since September 1991 and was Treasurer of the Company from January 1986 to May 1992. He was Treasurer of Mediplex from January 1986 through June 1987. He was previously associated with Coopers & Lybrand, independent accountants, from 1979 to 1985. Michael F. Bushee has been Senior Vice President of Operations of the Company since October 1993. He was Vice President from December 1989 to October 1993, Director of Development from January 1988 to December 1989 and has been associated with the Company since July 1987. He was previously associated with The Stop & Shop Companies, Inc., a retailer of food products and general merchandise, for three years and Wolf & Company, P.C., independent accountants, for four years. Michael S. Benjamin has been Senior Vice President, Secretary and General Counsel of the Company since October 1993. He was Vice President, Secretary and General Counsel from May 1992 to October 1993, Secretary and General Counsel from December 1990 to May 1992 and Assistant Counsel to the Company from November 1989 to December 1990. His previous association was with the law firm of Brown, Rudnick, Freed & Gesmer, from 1983 to 1989. Lisa M. Pavelka has been Vice President of the Company since October 1993 and Treasurer since May 1992. She was Controller from December 1990 to May 1992 and Assistant Controller of the Company from November 1988 to December 1990. She was previously associated with Arthur Andersen & Co., independent accountants, from 1985 to 1988. Stephen H. Press has been Vice President of Acquisitions of the Company since October 1993 and previously held this position with the Company from June 1987 to December 1990. He was Vice President of Development and Regulatory Affairs for Integrated Health Services, Inc., a medical services company, from April 1991 to October 1993. C. Michael Ford has been Vice President of Marketing of the Company since October 1993. He previously was Chairman of the Board and Chief Executive Officer of Montpelier Corporation, a health care consulting company, from December 1990 to October 1993. He was previously associated with Charter Medical Corporation, an acute care and psychiatric hospital management company, from 1976 to 1990. -17- 18 Keith E. Grant has been Controller of the Company since May 1992. He was Director of Operations Management of the Company from January 1990 to May 1992. He was previously associated with New MediCo Holding Co., Inc., an operator of health care facilities, from September 1989 to December 1989 and Damon Corporation, a health care company, from August 1971 to August 1989. -18- 19 PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) The Shares are traded on the New York Stock Exchange under the symbol MT. The following table sets forth for periods shown the high and low sale prices for the Shares as reported on the New York Stock Exchange composite tape.
High Low ---- ---- 1992 First Quarter . . . . . . . . . . $31.250 $25.500 Second Quarter . . . . . . . . . . 28.500 25.375 Third Quarter . . . . . . . . . . 30.000 27.625 Fourth Quarter . . . . . . . . . . 31.375 28.250 1993 First Quarter . . . . . . . . . . $34.000 $29.125 Second Quarter . . . . . . . . . . 33.750 30.250 Third Quarter . . . . . . . . . . 34.625 31.875 Fourth Quarter . . . . . . . . . . 34.250 31.250 1994 First Quarter (through February 28, 1994) . . . $33.750 $31.375
(b) As of February 28, 1994, there were 3,942 holders of record of the Shares. (c) The Company has declared the following dividends during its two most recent fiscal years:
Dividends Period Declared Per Share ------ ------------------ Quarter Ended March 31, 1992 . . . . . . . . . . . . . . $ .6075 Quarter Ended June 30, 1992 . . . . . . . . . . . . . . . .6125 Quarter Ended September 30, 1992 . . . . . . . . . . . . .6175 Quarter Ended December 31, 1992 . . . . . . . . . . . . . .6225 ------- $2.4600 =======
Quarter Ended March 31, 1993 . . . . . . . . . . . . . . $ .6275 Quarter Ended June 30, 1993 . . . . . . . . . . . . . . .6325 Quarter Ended September 30, 1993 . . . . . . . . . . . . .6375 Quarter Ended December 31, 1993 . . . . . . . . . . . . . .6425 ------- $2.5400 =======
-19- 20 The Company intends to distribute to its shareholders on a quarterly basis a majority of cash flow from operating activities available for distribution. Cash flow from operating activities available for distribution to shareholders of the Company will be derived primarily from the rental payments and interest payments derived from its real estate investments. All distributions will be made by the Company at the discretion of the Trustees and will depend on the earnings of the Company, its financial condition and such other factors as the Trustees deem relevant. In order to qualify for the beneficial tax treatment accorded to real estate investment trusts by Sections 856 to 860 of the Internal Revenue Code, the Company is required to make distributions to holders of its Shares which actually will be of at least 95% of the Company's "real estate investment trust taxable income". -20- 21 Item 6. SELECTED FINANCIAL INFORMATION The following table presents selected financial information with respect to the Company for each of the five years in the period ended December 31, 1993. This financial information has been derived from financial statements included elsewhere in this Form 10-K and should be read in conjunction with those financial statements and accompanying footnotes.
Year Ended December 31, ----------------------------------------------------------- 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- (In thousands except per Share data) OPERATING DATA: Revenues $ 150,826 $132,394 $112,910 $89,121 $71,601 --------- -------- -------- ------- ------- Expenses: Interest expense . . . . . . . . . 62,193 58,159 56,886 43,494 34,614 Depreciation and amortization . . 16,277 14,032 13,185 10,821 9,625 General and administrative expenses 8,720 8,845 4,930 5,824 5,847 --------- -------- -------- ------- ------- Total expenses . . . . . . . . . 87,190 81,036 75,001 60,139 50,086 --------- -------- -------- ------- ------- Net income before extraordinary item 63,636 51,358 37,909 28,982 21,515 Loss on prepayment of debt --------- -------- 3,684 ------- ------- Net income . . . . . . . . . . . . . $ 63,636 $ 51,358 $ 34,225 $28,982 $21,515 ========= ======== ======== ======= ======= Shares of beneficial interest (weighted average) . . . . . . . . 31,310 26,360 21,710 18,409 15,721 PER SHARE DATA: Net income before extraordinary item $2.03 $1.95 $1.75 $1.57 $1.37 Net income . . . . . . . . . . . . . 2.03 1.95 1.58 1.57 1.37 Dividends paid(1) . . . . . . . . . . 2.54 2.46 2.38 2.33 2.09
December 31, ----------------------------------------------------------- 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- (in Thousands) BALANCE SHEET DATA: Real estate investments, net . . . . $ 1,214,308 $1,021,630 $842,518 $746,517 $647,104 Total assets . . . . . . . . . . . . 1,310,401 1,094,941 928,254 821,741 681,638 Long-term obligations . . . . . . . . 658,245 606,585 463,695 512,010 417,039 Total liabilities . . . . . . . . . . 724,606 663,458 500,736 548,378 459,885 Total shareholders' equity . . . . . 585,795 431,483 427,518 273,363 221,753
(1) Dividends, used in this context, include distributions in excess of current or accumulated net income. -21- 22 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Year Ended December 31, 1993 vs. Year Ended December 31, 1992 Revenues for the year ended December 31, 1993 were $150,826,000 compared to $132,394,000 for the year ended December 31, 1992, an increase of $18,432,000 or 14%. Revenue growth resulted from increased rental income of $10,776,000 and increased interest income of $7,656,000 as a result of additional real estate investments made during the past year. For the year ended December 31, 1993, total expenses increased by $6,154,000. Interest expense increased by $4,034,000 and resulted primarily from the issuance of convertible debentures in February and November 1993 which was partially offset by the prepayment of senior debt in December 1992. Depreciation and amortization increased by $2,245,000 primarily due to depreciation of the additional real estate investments made during the past year. Other expenses decreased by $125,000 principally attributable to lower administrative expenses. Year Ended December 31, 1992 vs. Year Ended December 31, 1991 Revenues for the year ended December 31, 1992 were $132,394,000 compared to $112,910,000 for the year ended December 31, 1991, an increase of $19,484,000 or 17%. This increase is primarily the result of increased interest income of $19,259,000 from additional mortgage investments made during the year. Additional rent and interest increased approximately $2,222,000 or 41% from $5,399,000 in 1991 to $7,621,000 in 1992. Interest earned on investments decreased in 1992 by $3,005,000 resulting from a higher level of investment cash available from an equity offering in the second quarter of 1991. Other revenues increased by approximately $1,008,000. For the year ended December 31, 1992, total expenses increased $6,035,000. Interest expense increased by $1,273,000, resulting from the issuance of $100,000,000 of convertible debentures in April 1992 and was partially offset by the secured debt prepayment of $57,000,000 in December 1991. Depreciation and amortization increased by $847,000, principally due to increased amortization expense of other assets. Other expenses increased by $3,915,000, principally due to a higher level of operating costs associated with the portfolio growth and the issuance of Shares for executive compensation, a non-cash expense of $1,220,000. -22- 23 Liquidity and Capital Resources The Company provides funding for its investments through a combination of long-term and short-term financing including both debt and equity. The Company obtains long-term financing through the issuance of Shares, the issuance of long-term secured and unsecured notes, the issuance of convertible debentures and the assumption of mortgage notes. The Company obtains short-term financing through the use of bank lines of credit which are replaced with long-term financing as appropriate. It is the Company's objective to match the mortgage and lease terms with the terms of its borrowings. The Company seeks to maintain an appropriate spread between its borrowing costs and the rate of return on its investments. When development mortgage loans convert to sale/leaseback transactions or permanent mortgage loans, the base rent or interest rate, as appropriate, is fixed at the time of such conversion. In February 1993, the Company completed the sale of 3,277,500 Shares at $30.63 per Share and issued $92,120,000 of 7% convertible debentures due 1998. The Company used the proceeds to repay short-term borrowings and for investments in additional health care facilities. In November 1993, the Company issued $86,250,000 of 6 7/8% convertible debentures due 1998. The Company used the proceeds to repay short-term borrowings and for investments in additional health care facilities. As of February 28, 1994, the Company's gross real estate investments totaled approximately $1,338,599,000 including 179 long- term care facilities, 20 rehabilitation hospitals, two alcohol and substance abuse treatment facilities, six psychiatric hospitals, three retirement living facilities and two medical office buildings. The Company has shareholders' equity of approximately $590,313,000 and a total debt to equity ratio of approximately 1.2 to 1.0 as of February 28, 1994. The Company has an unsecured line of credit of $130,000,000 bearing interest at the lender's prime rate or LIBOR plus 1.5%, of which $16,000,000 is available at February 28, 1994. As of February 28, 1994, the Company had outstanding funding commitments of approximately $20,038,000 for the completion of four facilities under construction and for additions to seven existing facilities. The Company believes that its various sources of capital resources are adequate to finance its operations as well as pending property acquisitions, mortgage financings and future dividends. For the balance of 1994, however, in the event that the Company identifies appropriate investment opportunities, the Company may raise additional capital through the sale of shares of beneficial interest or by the issuance of additional long-term debt. -23- 24 Item 8. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES INDEX TO FINANCIAL STATEMENTS Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . F-2 Financial Statements - -------------------- Consolidated Balance Sheets as of December 31, 1993 and 1992 . . . . . . . . . . F-3 Consolidated Statements of Income for the years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . F-4 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1993, 1992 and 1991 . . . . . . . F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . F-6 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . F-8 Financial Statement Schedules - ----------------------------- Report of Independent Accountants on Financial Statement Schedules . . . . . . . S-1 VIII. Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . S-2 XI. Real Estate and Accumulated Depreciation . . . . . . . . . . . . . . . . . S-3 XII. Mortgage Loans on Real Estate . . . . . . . . . . . . . . . . . . . . . . S-6
F-1 25 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Trustees of Meditrust: We have audited the accompanying consolidated balance sheets of Meditrust as of December 31, 1993 and 1992, 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, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Meditrust at December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. COOPERS & LYBRAND Boston, Massachusetts March 10, 1994 F-2 26 MEDITRUST CONSOLIDATED BALANCE SHEETS
December 31, ------------------------------- 1993 1992 -------- -------- (In thousands) ASSETS Real estate investments: Land . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,257 $ 42,836 Buildings and improvements, net of accumulated depreciation of $73,294 and $59,150, respectively (Notes 3 and 6) . . . . . . 564,345 446,978 Real estate mortgages (Note 4) . . . . . . . . . . . . . 601,706 531,816 ---------- ---------- Total real estate investments . . . . . . . . . . . 1,214,308 1,021,630 Other assets, net . . . . . . . . . . . . . . . . . . . . . . 66,862 36,551 Short-term cash investments . . . . . . . . . . . . . . . . . 16,306 24,858 Fees, interest and other receivables (Note 7) . . . . . . . . 12,925 11,902 ---------- ---------- Total assets . . . . . . . . . . . . . . . . . . . . $1,310,401 $1,094,941 ========== ========== LIABILITIES & SHAREHOLDERS' EQUITY Indebtedness (Note 6): Senior unsecured notes payable, net . . . . . . . . . . . $ 297,155 $ 296,476 Senior mortgage notes payable, net . . . . . . . . . . . . 31,804 75,167 Convertible debentures, net . . . . . . . . . . . . . . . 199,822 93,356 Bank notes payable, net . . . . . . . . . . . . . . . . . 69,375 80,780 Bonds and mortgages payable, net . . . . . . . . . . . . . 60,089 60,806 ---------- ---------- Total indebtedness . . . . . . . . . . . . . . . . . 658,245 606,585 Deferred income . . . . . . . . . . . . . . . . . . . . . . . 14,468 14,910 Accrued expenses and other liabilities . . . . . . . . . . . 51,893 41,963 ---------- ---------- Total liabilities . . . . . . . . . . . . . . . . . 724,606 663,458 ---------- ---------- Commitments and contingencies (Note 4) Shareholders' equity (Notes 5, 6 and 12): Shares of Beneficial Interest without par value: Unlimited Shares authorized; 32,836 and 26,767 Shares issued and outstanding in 1993 and 1992, respectively . . . . . 666,220 497,222 Distributions in excess of net income . . . . . . . . . (80,425) (65,739) ---------- --------- Total shareholders' equity . . . . . . . . . . . . . 585,795 431,483 ---------- --------- Total liabilities and shareholders' equity . . . . . $1,310,401 $1,094,941 ========== =========
The accompanying notes are an integral part of these financial statements. F-3 27 MEDITRUST CONSOLIDATED STATEMENTS OF INCOME
For The Year Ended December 31, ---------------------------------------------- 1993 1992 1991 ----------- ----------- ------------- (In thousands except per Share data) Revenues: Rental income (Note 7) . . . . . . . . . . . $ 80,455 $ 69,679 $ 68,628 Interest income . . . . . . . . . . . . . . . 70,371 62,715 44,282 --------- -------- -------- Total revenues . . . . . . . . . 150,826 132,394 112,910 --------- -------- -------- Expenses: Interest expense . . . . . . . . . . . . . . 62,193 58,159 56,886 Depreciation and amortization . . . . . . . . 16,277 14,032 13,185 General and administrative (Note 7) . . . . . 8,720 8,845 4,930 --------- -------- -------- Total expenses . . . . . . . . . 87,190 81,036 75,001 --------- -------- -------- Net income before extraordinary item . . . . . . 63,636 51,358 37,909 Loss on prepayment of debt (Note 6) . . . . . . 3,684 --------- -------- -------- Net income . . . . . . . . . . . . . . . . . . . $ 63,636 $ 51,358 $ 34,225 ========= ======== ======== Net income before extraordinary item per Share of Beneficial Interest . . . . . . . . . . . $ 2.03 $ 1.95 $ 1.75 Net income per Share of Beneficial Interest . . . 2.03 1.95 1.58 Weighted average Shares of Beneficial Interest outstanding . . . . . . . . . . . . . 31,310 26,360 21,710
The accompanying notes are an integral part of these financial statements. F-4 28 MEDITRUST CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Shares Amount --------- ------------ (In thousands except per Share data) Balance, December 31, 1990 . . . . . . . . . . . . . . . . . . . . . 18,722 $273,363 Proceeds from issuance of Shares of Beneficial Interest, net of offering costs of $6,089 . . . . . . . . . . . . 6,880 161,604 Issuance of Shares of Beneficial Interest for purchase of A.M.A. Advisory Corp. (Note 7) . . . . . . . . . . . 342 8,005 1991 Dividends paid during 1991 ($2.38 per Share) . . . . . . . . . . (49,679) Net income for the year ended December 31, 1991 . . . . . . . . . . 34,225 ------ -------- Balance, December 31, 1991 . . . . . . . . . . . . . . . . . . . . . 25,944 427,518 Issuance of Shares of Beneficial Interest associated with: Conversion of debentures . . . . . . . . . . . . . . . . . . . . . 114 3,075 Exercise of warrants . . . . . . . . . . . . . . . . . . . . . . . 486 9,712 Employee compensation . . . . . . . . . . . . . . . . . . . . . . 223 4,750 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (86) 1992 Dividends paid during 1992 ($2.46 per Share) . . . . . . . . . . (64,844) Net income for the year ended December 31, 1992 . . . . . . . . . . . 51,358 ------ -------- Balance, December 31, 1992 . . . . . . . . . . . . . . . . . . . . . 26,767 431,483 Proceeds from issuance of Shares of Beneficial Interest, net of offering costs of $5,135 . . . . . . . . . . 3,277 95,239 Issuance of Shares of Beneficial Interest associated with: Conversion of debentures, net of unamortized issue costs of $2,414 2,508 67,263 Exercise of warrants . . . . . . . . . . . . . . . . . . . . . 182 3,646 Employee compensation . . . . . . . . . . . . . . . . . . . . 102 2,851 1993 Dividends paid during 1993 ($2.54 per Share) . . . . . . . . (78,323) Net income for the year ended December 31, 1993 . . . . . . . . . 63,636 ------ -------- Balance, December 31, 1993 . . . . . . . . . . . . . . . . . . . 32,836 $585,795 ====== ========
The accompanying notes are an integral part of these financial statements. F-5 29 MEDITRUST CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Year Ended December 31, --------------------------------------- 1993 1992 1991 -------- -------- -------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . $ 63,636 $ 51,358 $34,225 Depreciation, amortization and provision for losses . . . . . . . . . . . . . . . . . . . . . 28,422 16,020 14,982 Gain on sale of real estate and mortgage prepayments . . . . . . . . . . . . . . . . . . . (8,005) Loss on prepayment of debt . . . . . . . . . . . . . 3,684 Other items, net . . . . . . . . . . . . . . . . . . 778 564 1,059 ---------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES AVAILABLE FOR DISTRIBUTION . . . . . . . . . . . . . . 84,831 67,942 53,950 Net change in other assets and liabilities (Note 2) . (5,540) 7,916 (9,656) --------- -------- -------- Net cash provided by operating activities . . . 79,291 75,858 44,294 ---------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from convertible debentures . . . . . . . . 178,370 100,000 Proceeds from bank notes . . . . . . . . . . . . . . 100,000 75,000 Payment of senior mortgage notes payable . . . . . . (43,800) (32,600) (57,200) Debt prepayment and issuance costs . . . . . . . . . (5,483) (4,541) (4,338) Payments of bank note payable . . . . . . . . . . . (130,000) Proceeds from bonds and mortgages payable.... . . . 8,300 Principal payments on bonds and mortgages payable . (868) (662) (560) Distributions to shareholders . . . . . . . . . . . (78,323) (64,844) (49,679) Proceeds from equity offering . . . . . . . . . . . 100,374 166,244 Equity offering costs . . . . . . . . . . . . . . . (5,135) (97) (6,089) Proceeds from warrant conversions and stock options 5,671 13,253 1,449 ---------- -------- -------- Net cash provided by financing activities . . . 120,806 85,509 58,127 ---------- -------- --------
The accompanying notes are an integral part of these financial statements. F-6 30 MEDITRUST CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
For The Year Ended December 31, -------------------------------------- 1993 1992 1991 ------- -------- -------- (In thousands) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of real estate . . . . . . . . . . . $ (18,272) $ (6,520) $(15,886) Investment in real estate mortgages and development funding . . . . . . . . . . . . . (210,295) (208,092) (135,933) Prepayment proceeds and principal payments on real estate mortgages and note . . . . . . . . . . 42,045 27,228 3,200 Proceeds from sale of real estate . . . . . . . . 5,194 Repayment of construction loan advances . . . . . 41,053 Acquisition of receivables and working capital advances . . . . . . . . . . . . . . . (47,153) Collection of receivables and repayment of working capital advances . . . . . . . . . . . . . . . 19,832 Decrease in committed funds. . . . . . . . . . . 33,958 8,416 --------- -------- -------- Net cash used in investing activities . . (208,649) (153,426) (99,150) --------- -------- -------- Net (decrease) increase in short-term cash investments . . . . . . (8,552) 7,941 3,271 Short-term cash investments at: Beginning of year . . . . . . . . . . . . . . . 24,858 16,917 13,646 --------- -------- -------- End of year . . . . . . . . . . . . . . . . . . $ 16,306 $ 24,858 $ 16,917 ========= ======== ======== Supplemental disclosure of cash flow information: Interest paid during the period . . . . . . . . . . . $ 59,746 $ 51,600 $ 55,383 Non-cash investing and financing transactions: Acquisition and lease of real estate: Value of real estate acquired . . . . . . . . . 106,566 22,500 Reduction of real estate mortgage . . . . . . . (88,493) (15,843) Issuance of demand note payable . . . . . . . . (18,073) (6,657) Shares issued for: Purchase of A.M.A. Advisory Corp. . . . . . . . 8,005 Executive compensation . . . . . . . . . . . . 826 1,220 Conversion of debentures . . . . . . . . . . . 69,677 3,075
The accompanying notes are an integral part of these financial statements. F-7 31 MEDITRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES Meditrust (the "Company"), a real estate investment trust, invests in the sub-acute sector of the health care industry, including long-term care facilities, rehabilitation hospitals, and other sub-acute health care related facilities. These facilities are located throughout the United States and are operated by regional and national health care providers. The Company's more significant accounting policies follow: Principles of Consolidation The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its majority- owned partnerships after the elimination of all significant intercompany accounts and transactions. The Company uses the equity method of accounting for its 50% ownership in a limited partnership. Real Estate Investments Land, buildings and improvements are stated at cost. Depreciation is provided for on a straight-line basis over 40 years, the expected useful lives of the buildings and improvements. The Company provides reserves for potential losses based upon management's periodic review of its portfolio and such reserves are included in accrued expenses and other liabilities. Capitalization of Construction Period Interest The Company capitalizes interest costs associated with funds used to finance the construction of facilities. The amount capitalized is based upon the borrowings outstanding during the construction period using the rate of interest which approximates the Company's cost of financing. Short-term Cash Investments Short-term cash investments consist of certificates of deposit and other investments with less than 90-day maturities at time of purchase and are stated at cost which approximates fair value. Other Assets Other assets includes cash restricted for specified disbursement in accordance with certain facility acquisitions and mortgage financings. The corresponding liabilities are reflected in accrued expenses and other liabilities. Other assets also includes goodwill associated with the acquisition of the Company's previous investment advisor which is being amortized on a straight-line basis over a ten year period and facilities' operating receivables and working capital advances. F-8 32 MEDITRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued Debt Issuance Costs Debt issuance costs have been deferred and are being amortized using primarily the effective interest method over the term of the related borrowings. Revenue Recognition Rental income from operating leases is recognized as earned over the life of the lease agreements. Interest income on real estate mortgages is recognized on the accrual basis. Deferred income consists principally of fees which are being amortized over the fixed term of the lease, construction period or mortgage related to such facilities. Net Income Per Share Net income per Share of Beneficial Interest ("Shares") is computed using the weighted average number of Shares outstanding during the year of computation. Income Taxes The Company has elected to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended, and believes it has met all the requirements for qualification as such. Accordingly, the Company will not be subject to federal income taxes on amounts distributed to shareholders, provided it distributes annually at least 95% of its real estate investment trust taxable income and meets certain other requirements for qualifying as a real estate investment trust. Therefore, no provision for federal income taxes is believed necessary in the financial statements. Reclassifications Certain reclassifications have been made in the prior years' consolidated financial statements to conform with the current year's presentation. F-9 33 MEDITRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued 2. SUPPLEMENTAL CASH FLOW INFORMATION Details of net change in other assets and liabilities (excluding non-cash items, deferred income recognized in excess of cash received and changes in restricted cash and related liabilities) follow:
For The Year Ended December 31, -------------------------------------- 1993 1992 1991 -------- --------- --------- (In thousands) Increase in fees, interest and other receivables . . . . . . . . . . . . . . . . $(1,705) $(3,904) $ (6,157) Increase in other assets . . . . . . . . . . . . . (1,630) (83) (7,144) Increase in deferred income . . . . . . . . . . . . 2 2,314 4,122 Increase (decrease) in accrued expenses and other liabilities . . . . . . . . (2,207) 9,589 (477) -------- ------ --------- $(5,540) $7,916 $ (9,656) ======== ====== =========
3. REAL ESTATE INVESTMENTS During 1993, the Company funded $8,000,000 for the purchase of a rehabilitation facility located in Arkansas and capitalized additional costs of $10,272,000 relating to thirteen facilities located in eight states. Also during 1993, the Company received proceeds of $5,194,000 from the sale of a long-term care facility located in Washington. Depreciation of real estate amounted to $14,548,000, $12,250,000 and $11,992,000 for the years ended December 31, 1993, 1992 and 1991, respectively. Minority interest in the equity of the majority-owned (94%) partnerships relating to the Company's investment in seven rehabilitation facilities is $2,661,000 and $2,686,000 as of December 31, 1993 and 1992 and is included in accrued expenses and other liabilities in the consolidated financial statements. 4. REAL ESTATE MORTGAGES During 1993, the Company provided permanent mortgage financing of approximately $181,908,000 for 26 long-term care facilities, one rehabilitation facility and one retirement living facility, which are located in 13 states and for additions to four facilities having permanent mortgage loans. During 1993, the Company also provided ongoing construction financing of $12,290,000 for three long-term care facilities and for additions to two existing long-term care facilities. Also during 1993, the Company provided ongoing development funding of $16,097,000, resulting in aggregate funding of $33,963,000 for four long-term care facilities located in three states. Construction of these facilities was completed and development mortgage loans totaling $16,969,000 were converted to permanent mortgage loans and development mortgage loans totaling $16,994,000 were converted into sale/leaseback transactions. F-10 34 MEDITRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued During 1993, the Company received proceeds amounting to $37,383,000 from the prepayment of permanent mortgage loans on five long-term care facilities located in Massachusetts and two long-term care facilities located in Connecticut and collected principal payments of $4,662,000 on mortgage loans. During the year ended December 31, 1993, the Company entered into a series of transactions with a prior operator of certain rehabilitation and long-term care facilities financed by the Company. As a result of these transactions, the Company acquired for $99,763,000 five rehabilitation and four long-term care facilities (located in New York, Massachusetts, Michigan, New Hampshire, Wisconsin and Washington), reduced existing mortgage loans by $81,690,000, reduced a related bank participation in one of the mortgage loans by $18,073,000, acquired from operators of certain facilities operating receivables and provided advances under a working capital line. Amounts associated with the receivables and advances under the working capital line are included in other assets at December 31, 1993. Also in connection with these transactions, the Company leased eight of these facilities to four different operators and entered into a management agreement for the remaining facility. During 1993, the Company acquired a psychiatric facility in Texas for an amount equal to its existing mortgage loan of $6,803,000 and entered into a lease transaction with one of its existing operators. At December 31, 1993, the Company was committed to provide additional financing of approximately $8,994,000 relating to three long-term care facilities currently under construction and for additions to four existing long-term care facilities. 5. SHARES OF BENEFICIAL INTEREST Distributions paid to shareholders are determined by the Company's Board of Trustees based on an analysis of cash flows from operating activities. Cash flows from operating activities differ from net income primarily due to depreciation and amortization expense, a noncash item. Distributions in excess of net income as reflected on the Company's consolidated balance sheets is primarily a result of an accumulation of this difference. All Shares participate equally in dividends and in net assets available for distribution to shareholders on liquidation or termination of the Company. The Trustees of the Company have the authority to effect certain Share redemptions or prohibit the transfer of Shares under certain circumstances. Total distributions to shareholders during the years ended December 31, 1993, 1992 and 1991 included a return of capital per Share of $.3797, $.7462 and $.7273, respectively. Also, the 1993 distribution includes a long-term capital gain distribution of $.1351 per Share. F-11 35 MEDITRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued 6. INDEBTEDNESS. Indebtedness of the Company at December 31, 1993 and 1992 is as follows:
1993 1992 ---- ---- (In thousands) Senior unsecured notes: Principal payments of $20,000,000 due in December 1995 and $16,000,000 due in December 1996 through December 2000, interest ranging from 10.00% to 10.57% . . . . . . . . $ 99,511 $ 99,331 Principal payments of $20,000,000 due in October 1995 through October 1999, interest at 10.22% . . . . . . . . . . 98,920 98,716 Principal payments of $12,500,000 due in February 1994 through February 2001, interest at 10.86% . . . . . . . . . 98,724 98,429 -------- -------- 297,155 296,476 -------- -------- Senior mortgage notes: Principal payments of $10,800,000 due in December 1994 through December 1996 and $200,000 due in December 1997, interest at 10.75% . . . . . . . . . . . . . . . . . . . . . 31,804 42,402 Principal payment with interest at 9.95% . . . . . . . . . . . 32,765 -------- -------- 31,804 75,167 -------- -------- Convertible debentures: 9% interest, convertible at $27.00 per Share, due 2002 . . . . 42,499 93,356 7% interest, convertible at $30.625 per Share, due 1998 . . . 73,317 6 7/8% interest, convertible at $37.125 per Share, due 1998 . 84,006 -------- -------- 199,822 93,356 -------- -------- Bank notes payable: Revolving credit agreement expiring July 1995 . . . . . . . . 44,785 74,135 Demand note, due July 1994 . . . . . . . . . . . . . . . . . . 24,590 6,645 -------- -------- 69,375 80,780 Bonds and mortgages payable: Mortgage notes, interest ranging from 3.1% to 12.2%, monthly principal and interest payments ranging from $22,000 to $78,000 and maturing from January 1998 through March 2001, collateralized by nine facilities . . . 56,519 57,196 Manatee County, Florida Industrial Revenue Bonds, Series 1983, serial payments ranging from $45,000 to $90,000 due in 1994 through 2000 and $345,000 due in December 2003 and $2,770,000 due in December 2013, interest ranging from 12.0% to 13.5%, collateralized by one facility . . . . . . . 3,570 3,610 -------- -------- 60,089 60,806 -------- -------- Total indebtedness . . . . . . . . . . . . . . . . . . . . . . . $658,245 $606,585 ======== ========
F-12 36 MEDITRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued Convertible Debentures. The 9% convertible debentures issued in April 1992 are subject to redemption by the Company on or after April 23, 1995 at 100% of the principal amount plus accrued interest. During the year ended December 31, 1993, $53,042,000 of debentures were converted into 1,964,495 Shares. During the year ended December 31, 1992, $3,075,000 of debentures were converted into 113,886 Shares. The 7% debentures issued in February 1993 are subject to redemption by the Company on or after March 1, 1996 at 100% of the principal amount plus accrued interest. During the year ended December 31, 1993, $16,635,000 of debentures were converted into 543,182 Shares. The 6 7/8% debentures issued in November 1993 are subject to redemption, to the extent necessary to preserve the Company's status as a real estate investment trust, at any time by the Company at 100% of the principal amount plus accrued interest. Senior Mortgage Notes. The 10.75% notes due December 1997 are collateralized by six facilities. In December 1992, $10,800,000 of principal amount due December 1997 was prepaid. These notes were issued with detachable warrants to purchase 790,000 Shares at a price of $20 per Share with an expiration date of December 1994. The Company has valued these warrants at $1,202,500 and is amortizing this discount over ten years. Warrants were exercised for 182,308 Shares and 486,154 Shares during 1993 and 1992, respectively. Principal payments on the mortgage notes in the amounts of $33,000,000 (9.95%) due in March 1994, $11,000,000 (9.81%) due in March 1993 and $11,000,000 (9.81%) due in March 1992 were prepaid in December 1993, December 1992 and December 1991, respectively. In connection with the prepayment in 1991, the Company incurred charges and wrote off unamortized debt issuance costs of $121,000, which is included in loss on prepayment of debt. In December 1991, the Company prepaid a $46,200,000, 10.25% five-year note agreement with a bank and incurred prepayment charges of $3,251,000 and wrote off unamortized issuance costs of $312,000, which amounts are included in loss on prepayment of debt. Bank Notes Payable. The Company has an unsecured revolving credit agreement for a maximum of $130,000,000 bearing interest at the lender's prime rate or LIBOR plus 1.5%. Fees associated with this agreement are .5% per annum of the total unused commitment plus an $80,000 agent fee. F-13 37 MEDITRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued Bonds Payable. In December 1987, the Company defeased the Camden County, New Jersey Economic Development Revenue Bonds, Series A and extinguished the related debt. The Company placed U.S. Treasury bills aggregating $5,019,986 in an irrevocable trust to fund applicable trustee fees and satisfy the interest and sinking fund payments on the remaining balance of $4,270,000. The senior unsecured notes payable, senior mortgage notes payable, convertible debentures, bank notes payable and mortgages payable are presented net of unamortized debt issuance costs of $9,785,000 and $9,347,000 at December 31, 1993 and 1992, respectively. Amortization expense associated with the debt issuance costs amounted to $2,961,000, $2,123,000 and $1,797,000 for the years ended December 31, 1993, 1992 and 1991, respectively, and is reflected in interest expense. All debt instruments contain certain covenants, the most restrictive of which limits the ratio of total debt to consolidated shareholders' equity. The Company's debt-to-equity ratio may exceed 180% no longer than 180 days out of any 450-day period and may not exceed 225% at any time. The aggregate maturities of senior unsecured notes payable, senior mortgage notes payable, bonds and mortgages payable and convertible debentures, excluding the bank notes payable, the 9% convertible debentures and amounts defeased for the five years subsequent to December 31, 1993, are as follows: 1994...................... $ 48,714,000 1995...................... 64,195,000 1996...................... 60,274,000 1997...................... 49,767,000 1998...................... 231,335,000
7. RELATED PARTY TRANSACTIONS The Company has material transactions with related parties as described in these notes, including, but not limited to, the acquisition of health care facilities, lending of mortgage and construction funds, lease transactions and advisory services (through February 26, 1991), all of which transactions have been reviewed by the Independent Trustees. On February 26, 1991, the Company's Advisor merged (the "Merger") with and into a wholly-owned subsidiary of the Company, Meditrust Management Corp. ("MMC"), pursuant to an Agreement and Plan of Merger among the Company, MMC, the Advisor and all of the shareholders of the Advisor. Initial consideration for this transaction totaled approximately $5,000,000, comprised of 185,000 Shares and $1,300,000 in cash. In addition, the Company agreed to pay to the shareholders of the Advisor a contingent acquisition price up to a maximum of $2,000,000 for each $1.00 increase in the price per Share in excess of $20.00 per Share during the five year period ending December 31, 1995, up to an aggregate maximum amount of $10,000,000. During 1991, contingent payments totaling $10,000,000 were paid in the form of Shares. F-14 38 MEDITRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued Until the Merger, the Company had an Advisory Agreement with the Advisor, a corporation principally owned by Abraham D. Gosman, the Company's Chairman of the Board. For the year ended December 31, 1991, the fees pursuant to its advisory agreements amounted to $738,000. As of December 31, 1993, The Mediplex Group, Inc. ("Mediplex") guarantees the lessees' and borrowers' obligations or provides working capital assurances for 28 of the Company's facilities and a Mediplex affiliate is a subordinated participant in six of the Company's permanent mortgage loans. Approximately 25% of the stock of Mediplex is owned by the Chairman of the Company. The expiration of the fixed term of the Company's leases and mortgages with Mediplex or its subsidiaries range from 1995 to 2007. The lease terms require Mediplex to pay aggregate base rent of $32,669,000 per annum and the mortgages require annual principal and interest payments of $3,598,000. As a result of these lease and mortgage transactions with Mediplex or its subsidiaries, the Company recorded revenues of approximately $34,516,000, $29,256,000 and $28,609,000 for the years ended December 31, 1993, 1992 and 1991, respectively. Mediplex owed the Company $450,000 and $250,000 for additional rent at December 31, 1993 and 1992, respectively. During 1992, the Company acquired from a prior operator for $22,500,000 two previously mortgaged long-term care facilities located in Massachusetts and leased these facilities to The Mediplex Group, Inc. During 1993, the Company acquired from a prior operator for $26,353,000 two previously mortgaged rehabilitation facilities located in Michigan and in New York and a long-term care facility located in Massachusetts and leased these properties to The Mediplex Group, Inc. Also, during 1993, the Company provided permanent mortgage financing of $32,740,000 for four long-term care facilities located in Massachusetts and Connecticut and entered into a sale/leaseback transaction for $8,000,000 for a rehabilitation facility located in Arkansas. The land and facility owned by one of the Company's subsidiaries is leased to a corporation wholly-owned by Abraham D. Gosman and is managed by a Mediplex subsidiary. The lease is a fixed-term operating lease expiring in 2006. The lessee is required to pay aggregate base rent of $3,364,000 per annum over the lease term and supplemental rent (as defined in the lease agreements). Total revenues earned by the Company from this lease arrangement were $3,421,000, $3,486,000 and $3,440,000 for the years ended December 31, 1993, 1992 and 1990, respectively. For further information regarding the Company and Mediplex, see Note 12. 8. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," requires that the Company disclose estimated fair values for certain of its financial instruments as defined by the Standard. F-15 39 MEDITRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued Fair value estimates are subjective in nature and are dependent on a number of significant assumptions associated with each financial instrument or group of financial instruments. Because of a variety of permitted calculations and assumptions regarding estimates of future cash flows, risks, discount rates and relevant comparable market information, reasonable comparisons of the Company's fair value information with other companies cannot necessarily be made. The following methods and assumptions were used to estimate the fair value of financial instruments for which it is practicable to estimate that value: Real Estate Mortgages The fair value of real estate mortgages have been estimated by discounting future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. As of December 31, 1993, the fair value of real estate mortgages amounted to approximately $652,000,000. Indebtedness The quoted market price for the Company's publicly traded convertible debentures and rates currently available to the Company for debt with similar terms and remaining maturities were used to estimate fair value of existing debt. As of December 31, 1993, the fair value of the Company's indebtedness amounted to approximately $711,000,000. 9. LEASE COMMITMENTS The Company's land and facilities are generally leased pursuant to noncancelable, fixed-term operating leases expiring from 1995 to 2007. The leases also generally provide multiple, five-year renewal options and the option to purchase the facilities at fair market value at the end of the initial term of the lease or at various times during the lease. The lessees are required to pay aggregate base rent during the lease term and applicable debt service payments as well as percentage, supplemental and additional rent (as defined in the lease agreements). For the years ended December 31, 1993, 1992 and 1991, additional rent and interest amounted to $8,657,000, $7,621,000 and $5,399,000, respectively. In addition, the lessees pay all taxes, insurance, maintenance and other operating costs of the land and facilities. F-16 40 MEDITRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued Future minimum lease payments, including debt service payments (as defined in the lease agreements) which are based on interest rates in effect at December 31, 1993, expected to be received by the Company during the initial term of the leases for the years subsequent to December 31, 1993, are as follows: 1994 $ 77,144,000 1995 76,146,000 1996 70,927,000 1997 70,213,000 1998 63,086,000 Thereafter 244,576,000
10. STOCK OPTION PLANS Incentive awards under the Company's stock option plans (the "Plans") which may be granted by the Board of Trustees include nonqualified or nonstatutory options to purchase Company shares and incentive stock options (collectively, "options"). The number of Shares available for issuance under the Plans is 5% of the number of outstanding Shares. Up to 500,000 Shares available under each Plan may be issued pursuant to incentive stock options. Trustees, officers and key employees of the Company or any other entity providing similar services to the Company and its officers, directors and key employees, and all persons retained by the Company solely as consultants are eligible to participate in the Plans. Such options expire 10 years after the date granted. One third of all options granted become exercisable at the end of each year following the date of issuance. Options to purchase 290,000 Shares were exercisable as of December 31, 1993. Information concerning option activity for the years 1993, 1992, and 1991 is as follows:
Shares Option Price ------ ------------ Outstanding at December 31, 1990 . . . . . . . . 299,000 $16.625 to $20.375 Granted . . . . . . . . . . . . . . . . . . . 585,000 $26.250 to $26.625 Exercised . . . . . . . . . . . . . . . . . . 86,000 $16.625 to $19.875 Expired . . . . . . . . . . . . . . . . . . . 52,000 $16.625 to $18.625 ------- Outstanding at December 31, 1991 . . . . . . . . 746,000 $16.625 to $26.625 Granted . . . . . . . . . . . . . . . . . . . 62,000 $26.75 to $29.00 Exercised . . . . . . . . . . . . . . . . . . 182,000 $16.625 to $26.375 Expired . . . . . . . . . . . . . . . . . . . 28,000 $26.25 to $26.375 ------- Outstanding at December 31, 1992 . . . . . . . . 598,000 $16.625 to $29.00 Granted . . . . . . . . . . . . . . . . . . . 126,000 $26.375 to $34.00 Exercised . . . . . . . . . . . . . . . . . . 83,000 $16.625 to $27.625 Expired . . . . . . . . . . . . . . . . . . . 23,000 $26.375 to $27.625 ------- Outstanding at December 31, 1993 . . . . . . . . 618,000 $16.625 to $34.000 =======
F-17 41 MEDITRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued 11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following quarterly financial data summarizes the unaudited quarterly results for the years ended December 31, 1993 and 1992:
Quarter Ended ------------------------------------------------------------------ March 31 June 30 September 30 December 31 -------- ------- ------------ ----------- 1993 (In thousands, except per Share amounts) - ---- Revenues . . . . . . . . . $36,625 $37,311 $38,616 $38,274 Net income . . . . . . . . 14,838 16,001 16,081 16,716 Net income per Share . . . .50 .51 .51 .51
Quarter Ended ------------------------------------------------------------------- 1992 March 31 June 30 September 30 December 31 - ---- -------- ------- ------------ ----------- (In thousands, except per Share amounts) Revenues . . . . . . . . . $30,943 $33,235 $34,845 $33,371 Net income . . . . . . . . 12,662 12,676 12,981 13,039 Net income per Share . . . .49 .49 .49 .49
12. SUBSEQUENT EVENTS On January 11, 1994, the Board of Trustees of the Company declared a dividend of $.6475 per Share payable February 15, 1994, to shareholders of record on January 31, 1994. The dividend related to the period October 1, 1993 through December 31, 1993. On January 27, 1994, the Company entered into a Consent Agreement with Sun Healthcare Group, Inc. ("Sun"), pursuant to which the Company agreed to consent to a proposed merger of Mediplex with a subsidiary of Sun, subject to the fulfillment by Sun and Mediplex of certain closing conditions. The Company's consent to the merger is required pursuant to the terms of the various leases and loans between the Company and Mediplex (the "Mediplex Financing Documents"). As a condition to the Company's consent to the merger, Sun and Mediplex have agreed to certain modifications to the existing Mediplex Financing Documents and to certain terms which will govern the ongoing relationship and future transactions among the Company, Mediplex and Sun. (See Note 7 for further information regarding related party transactions between the Company and Mediplex). On March 2, 1994, the Company announced the sale of $90,000,000 of 7 1/2% convertible debentures due 1998 and convertible at $36.18 per Share. The Company used the proceeds to repay short-term borrowings. F-18 42 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Shareholders and Trustees of Meditrust: Our report on the consolidated financial statements of Meditrust is included on page F-2 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in the index on page F-1 of this Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. Coopers & Lybrand Boston, Massachusetts March 10, 1994 S-1 43 MEDITRUST SCHEDULE VIII VALUATION AND QUALIFYING ACCOUNTS
Balance at Additions Balance at Beginning Charged to Costs End of Description of Period and Expenses Deductions Period - ----------- --------- ------------ ---------- ------ General valuation allowance included in Accrued Expenses and Other Liabilities for the year ended December 31: 1991 $1,031,000 $ 1,031,000 1992 $1,031,000 5,113,132 $3,438,186 (A) 2,705,946 1993 2,705,946 9,329,724 12,035,670
(A) Costs primarily associated with the disposition of certain real estate investments. S-2 44 MEDITRUST SCHEDULE XI REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1993
Initial Cost to Company ---------- Cost Capitalized Building & Subsequent to Description (1) Encumbrances Improvements Acquisiton - -------------- ------------ ------------ ---------- LTC - --- Alabaster, AL . . $ 5,799,000 $1,810,000 Aurora, CO . . . 5,015,448 Evergreen, CO . . 5,540,775 Danbury, CT . . . 5,295,000 Westport, CT . . 4,970,000 Newington, CT . . 8,970,000 Cheshire, CT . . 6,770,000 Wethersfield, CT 12,440,000 Southfield, CT . 7,750,000 Bradenton, FL . . $3,570,000 9,900,000 Hoffman Estates, IL 6,000,012 7,720,000 W. Lafayette, IN 4,535,267 6,030,000 190,000 Beverly, MA . . . 6,300,000 Newton, MA . . . 12,430,000 Lexington, MA . . 11,210,000 E. Longmeadow, MA 12,400,000 Holyoke, MA . . . 11,980,670 684,248 Lowell, MA . . . 9,897,730 594,621 Lynn, MA . . . . 13,293,267 870,248 Peabody, MA . . . 7,245,315 Randolph, MA . . 9,014,760 Wilmington, MA . 6,689,925 Baltimore, MD . . 4,494,200 Grand Blanc, MI . 6,500,000 863,800 Riverside, MO . . 8,559,900 Bound Brook, NJ . 1,624,000 Camden, NJ . . . 8,334,780 New Milford, NJ . 11,110,000
Gross Amount at Which Carried at Close of Period -------------------------------------------- Acumm. Building & Deprec. Cost Date Description (1) Land (2) Improvements Total (5) (4)(5) Date Acquired - --------------- -------- ------------ ---------- -------- ---- ------- LTC - --- Alabaster, AL . . $ 150,000 $ 7,609,000 $ 7,759,000 $ 1,019,206 1971 8/87 Aurora, CO . . . 974,552 5,015,448 5,990,000 449,306 1990 6/90 Evergreen, CO . . 377,013 5,540,775 5,917,788 415,214 1991 6/90 Danbury, CT . . . 305,000 5,295,000 5,600,000 1,086,562 1976 10/85 Westport, CT . . 400,000 4,970,000 5,370,000 1,019,874 1965 10/85 Newington, CT . . 430,000 8,970,000 9,400,000 1,840,688 1978 10/85 Cheshire, CT . . 455,000 6,770,000 7,225,000 1,389,253 1975 10/85 Wethersfield, CT 12,440,000 12,440,000 2,284,221 1965 8/86 Southfield, CT . 750,000 7,750,000 8,500,000 32,292 1993 11/93 Bradenton, FL . . 1,100,000 9,900,000 11,000,000 1,485,000 1985 12/87 Hoffman Estates, IL 880,000 7,720,000 8,600,000 1,157,996 1976 1/88 W. Lafayette, IN 50,000 6,220,000 6,270,000 912,758 1964 1/88 Beverly, MA . . . 645,000 6,300,000 6,945,000 1,292,815 1972 10/85 Newton, MA . . . 630,000 12,430,000 13,060,000 2,550,750 1977 10/85 Lexington, MA . . 590,000 11,210,000 11,800,000 2,058,365 1965 8/86 E. Longmeadow, MA 400,000 12,400,000 12,800,000 1,937,480 1986 9/87 Holyoke, MA . . . 121,600 12,664,918 12,786,518 403,107 1973 9/92 Lowell, MA . . . 500,000 10,492,351 10,992,351 333,345 1975 9/92 Lynn, MA . . . . 1,206,734 14,163,515 15,370,249 264,174 1960 4/93 Peabody, MA . . . 805,035 7,245,315 8,050,350 1,086,800 1987 10/90 Randolph, MA . . 1,001,640 9,014,760 10,016,400 1,352,220 1987 10/90 Wilmington, MA . 743,325 6,689,925 7,433,250 1,003,492 1987 10/90 Baltimore, MD . . 4,000,000 4,494,200 8,494,200 74,903 1993 5/93 Grand Blanc, MI . 120,000 7,363,800 7,483,800 979,780 1970 5/88 Riverside, MO . . 238,000 8,559,900 8,797,900 1,230,479 1965 3/88 Bound Brook, NJ . 1,176,000 1,624,000 2,800,000 284,177 1963 12/86 Camden, NJ . . . 450,250 8,334,780 8,785,030 1,458,571 1984 12/86 New Milford, NJ . 1,090,000 11,110,000 12,200,000 1,666,510 1971 12/87
S-3 45 MEDITRUST SCHEDULE XI REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1993
Initial Cost to Company ------------ Cost Capitalized Building & Subsequent Description (1) Encumbrances Improvement Acquisiton - -------------- ------------ ----------- ---------- LTC CONTINUED - ------------- Cortland, NY . . $ 4,440,173 $ 260,930 Niskayuna, NY . . 9,708,000 834,537 Troy, NY 9,967,564 491,673 Bellbrook, OH . . 2,787,134 Huber Heights, OH 3,593,360 Medina, OH . . . $ 7,066,509 10,568,000 New London, OH . 2,110,837 West Carrolton, OH 3,483,669 Erie, PA . . . . 4,753,000 375,000 Greensburg, PA . 5,544,012 Houston, TX 4,000,000 Cheyenne, WY . . 5,200,000 RL- Cheyenne, WY . . 9,325,000 PSYCH - ----- Hollywood, CA . . 4,035,000 Monroe, LA . . . 7,770,000 Holliswood, NY . 26,400,000 DeSoto, TX . . . 3,934,000 College Station, TX 5,822,509 A & D------ Carmel, NY . . . 32,300,000 Scotia, NY . . . 57,000,000 REHAB. - ------ Benton, AK . . . 7,865,000 392,410 Jonesboro, AR . . 4,305,472 8,861,835 Tucson, AZ . . . 9,965,000 Bakersfield, CA . 10,907,463 Fresno, CA . . . 8,077,584 14,469,580 Kentfield, CA . . 9,650,000 Topeka, KS . . . 5,286,162 10,353,829
Gross Amount at Which Carried at Close of Period ------------------------------------------- Accum. Building & Deprec. Const. Date Description (1) Land (2) Improvements Total (5) (4)(5) Date Acquired - -------------- -------- ------------ --------- ------- ------ -------- LTC CONTINUED - ------------- Cortland, NY . . $ 4,701,103 $ 4,701,103 $ 47,138 1986 8/93 Niskayuna, NY . . $ 292,000 10,542,537 10,834,537 210,135 1976 3/93 Troy, NY 56,100 10,459,237 10,515,337 104,854 1972 8/93 Bellbrook, OH . . 212,000 2,787,134 2,999,134 214,841 1981 12/90 Huber Heights, OH 174,000 3,593,360 3,767,360 276,988 1984 12/90 Medina, OH . . . 232,000 10,568,000 10,800,000 1,497,153 1954 4/88 New London, OH . 22,600 2,110,837 2,133,437 162,711 1985 12/90 West Carrolton, OH 216,400 3,483,669 3,700,069 268,534 1983 12/90 Erie, PA . . . . 335,000 5,128,000 5,463,000 756,055 1977 12/87 Greensburg, PA . 525,000 5,544,012 6,069,012 288,750 1991 6/90 Houston, TX 4,000,000 4,000,000 1962 3/92 Cheyenne, WY . . 300,000 5,200,000 5,500,000 519,984 1989 12/89 RL - -- Cheyenne, WY . . 375,000 9,325,000 9,700,000 932,496 1989 12/89 PSYCH - ----- Hollywood, CA . . 1,715,000 4,035,000 5,750,000 571,610 1957 5/88 Monroe, LA . . . 530,000 8,220,000 8,750,000 1,152,114 1982 5/88 Holliswood, NY . 3,600,000 26,400,000 30,000,000 4,620,000 1963 12/86 DeSoto, TX . . . 849,270 5,709,730 6,559,000 805,875 1988 1/88 College Station, TX 980,185 5,880,631 6,860,816 98,008 1987 5/93 A & D - ----- Carmel, NY . . . 1,700,000 32,300,000 34,000,000 5,930,999 1979 8/86 Scotia, NY . . . 3,000,000 57,000,000 60,000,000 10,466,052 1929 8/86 REHAB. - ------ Benton, AK . . . 135,000 8,257,410 8,392,410 148,287 1967 4/93 Jonesboro, AR . . 196,225 8,861,835 9,058,060 1,091,927 1989 2/89 Tucson, AZ . . . 9,965,000 9,965,000 851,177 1990 8/90 Bakersfield, CA . 1,522,537 10,907,463 12,430,000 977,129 1990 6/90 Fresno, CA . . . 2,088,920 14,469,580 16,558,500 1,026,687 1991 3/91 Kentfield, CA . . 350,000 9,650,000 10,000,000 1,387,179 1963 3/88 Topeka, KS . . . 1,295,499 10,353,829 11,649,328 1,276,313 1989 2/89
S-4 46 MEDITRUST SCHEDULE XI REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1993
Initial Cost to Company ---------- Cost Capitalized Building & Subsequent to Description (1) Encumbrances Improvements Acquisition - -------------- ------------ ------------ ----------- REHAB. (CONTINUED) - ------------------ Ruston, LA . . . $ 4,258,489 $ 10,021,462 Baton Rouge, LA . 5,642,004 10,366,008 Battle Creek, MI 7,265,913 $ 374,542 Effingham, NH . . 8,121,200 2,235,304 Cortland, NY 26,309,407 1,303,410 Arlington, TX . . 10,132,662 Ft. Worth, TX . . 6,009,891 10,814,520 Houston, TX . . . 5,469,929 10,707,069 Lake Terrace, WA 4,389,224 265,819 Waterford, WI . . 11,515,023 2,066,205 ----------- ------------ ----------- TOTAL . . . . . . $60,221,319 $621,742,223 $15,896,599 =========== ============ ===========
Gross Amount at Which Carried at Close of Period ---------------------------------------- Accum. Building & Deprec. Const. Date Description (1) Land (2) Improvements Total (5) (4)(5) Date Acquired - -------------- -------- ------------ --------- -------- ---- -------- REHAB. (CONTINUED) - ------------------ Ruston, LA . . . $ 321,551 $ 10,021,462 $ 10,343,013 $1,277,904 1988 12/88 Baton Rouge, LA . 1,211,000 10,366,008 11,577,008 1,230,963 1988 4/89 Battle Creek, MI 146,970 7,640,455 7,787,425 137,190 1933 4/93 Effingham, NH . . 1,478,800 10,356,504 11,835,304 212,688 1985 4/93 Cortland, NY 263,000 27,612,817 27,875,817 276,770 1971 8/93 Arlington, TX . . 1,161,338 10,132,662 11,294,000 907,729 1990 6/90 Ft. Worth, TX . . 1,548,022 10,814,520 12,362,542 923,730 1990 8/90 Houston, TX . . . 525,000 10,707,069 11,232,069 1,271,465 1989 4/89 Lake Terrace, WA 1,029,980 4,655,043 5,685,023 73,708 1987 5/93 Waterford, WI . . 280,000 13,581,228 13,861,228 230,146 1968 4/93 ---------- ------------ ------------ ----------- TOTAL . . . . . . $48,257,546 $637,638,822 $685,896,368 (3) $73,294,627 =========== ============ ============ ===========
S-5 47 MEDITRUST SCHEDULE XI REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1993 (1) Facility classifications are Long-Term Care (LTC), Retirement Living (RL), Psychiatric Hospital (Psych), Alcohol and Substance Abuse Treatment (A&D) and Rehabilitation Hospital (Rehab). (2) Gross amount at which land is carried at close of period also represents initial cost to Company. (3) Cost for federal income tax purposes. (4) Depreciation is calculated using a 40-year life for all completed facilities. (5) Real estate and accumulated depreciation reconciliations for the three years ended December 31, 1993 are as follows:
Accumulated Real Estate Depreciation ----------- ------------ Balance at close of year--December 31, 1990 . . . . . . . $540,343,000 $35,661,000 Additions during the period: Acquisitions . . . . . . . . . . . . . . . . . . 15,886,000 Construction in progress . . . . . . . . . . . . 4,768,000 Provision for depreciation . . . . . . . . . . . 11,239,000 Deductions during the period: Repayment of construction loan advance . . . . . . (41,053,000) ------------ ----------- Balance at close of year--December 31, 1991 . . . . . . . 519,944,000 46,900,000 Additions during the period: Acquisitions . . . . . . . . . . . . . . . . . . 4,750,000 Value of real estate acquired . . . . . . . . . 22,500,000 Additions to existing properties . . . . . . . . 1,770,000 Provision for depreciation . . . . . . . . . . . ----------- Balance at close of year--December 31, 1992 . . . . . . . 548,964,000 59,150,000 Additions during the period: Acquisitions . . . . . . . . . . . . . . . . . . 20,244,000 Value of real estate acquired . . . . . . . . . . 106,566,000 Other . . . . . . . . . . . . . . . . . . . . . . 4,000,000 Additions to existing properties . . . . . . . . 10,272,000 Provision for depreciation . . . . . . . . . . . 14,548,000 Deductions: Sale of real estate . . . . . . . . . . . . . . . (4,150,000) (404,000) ------------ ----------- Balance at close of year--December 31, 1993 . . . . . . . $685,896,000 $73,294,000 ============ ===========
S-6 48 MEDITRUST SCHEDULE XII MORTGAGE LOANS ON REAL ESTATE December 31, 1993
Periodic Face Carrying Interest Final Payment Amount of Amount of Description(A) Rate Maturity Date Terms (B)(C) Mortgages Mortgages (D) -------------- -------- ------------- ------------ --------- ------------ Long-term care facilities: Arizona 11.00% October, 2002 $ 2,509,000 $ 2,910,000 $2,887,000 Colorado 12.00% May, 2001 6,542,000 7,455,000 7,312,000 Connecticut 7.13% - August, 1995 - 13.5% December, 2003 68,794,000 68,959,000 67,696,000 Connecticut 11.00% - 11.50% In progress 7,738,000 7,738,000 Florida 10.75% November, 2003 8,181,244 8,432,000 8,432,000 Illinois (29 facilities) 12.03% December, 1998 30,252,000 37,073,000 32,900,000 Massachusetts 12.50% November, 2001 25,912,000 27,000,000 26,960,000 Massachusetts 11.50% In progress 3,450,000 3,450,000 Massachusetts 11.00% - August, 2000 - (All other) 12.90% March, 2003 44,451,000 49,890,000 47,430,000 Michigan 11.75% - December, 2001 - 12.75% June, 2002 20,770,000 21,768,000 21,521,000 Nevada 12.25% - May, 2000 - 12.50% February, 2001 16,296,000 16,994,000 16,866,000 New Jersey 11.38% December, 1993 8,332,000 4,636,000 3,439,000(E) North Carolina 12.00% September, 1998 2,918,000 3,325,000 3,171,000 Pennsylvania 12.25% In progress 9,911,000 9,911,000 Pennsylvania and New Jersey 12.00% April, 2002 77,152,000 86,003,000 85,063,000 Rhode Island 10.75% November, 2003 4,851,000 5,000,000 5,000,000 Tennessee 10.75% July, 2003 10,888,000 11,222,000 11,196,000 Texas 12.00% November, 2000 8,360,000 8,625,000 8,480,000 Utah 11.00% In progress 3,440,000 3,440,000 Various (9 states) 12.00% October, 1994 44,150,000 44,493,000 44,213,000 Various (9 states) 10.75% May, 2003 93,063,000 96,298,000 96,149,000 West Virginia and Pennsylvania 11.50% October, 2002 12,269,000 14,100,000 13,987,000 Rehabilitation hospitals: California 12.50% July, 2001 24,042,000 30,975,000 29,990,000 Tennessee 12.50% September, 2000 8,637,000 9,000,000 8,870,000 Retirement living facilities: Colorado 12.25% October, 1993 15,795,000 16,200,000 15,770,000(F) Florida 10.00% December, 1998 11,734,000 11,734,000 11,734,000 Psychiatric hospitals: Arizona 12.50% October, 1999 7,077,000 8,360,000 8,101,000 ------------ ------------ Total $614,991,000 $601,706,000(G)(H) ============ ============
S-7 49 MEDITRUST SCHEDULE XII MORTGAGE LOANS ON REAL ESTATE (A) All mortgage loans on real estate are first mortgage loans except a second mortgage loan amounting to $4,250,000 for a Connecticut facility. (B) Ten-year terms (except for loan on fifteen facilities located in nine states which is two years, Waterford, CT, Bourne and New Bedford, MA and Lauderhill, FL, which are five years and Waterbury and Bristol, CT, which are seven years) with principal and interest payable at varying amounts over life to maturity with interest adjustment generally at the end of the fifth year. (C) Balloon payment is due upon maturity based on current interest rate with various prepayment penalties. (D) No mortgage loan is subject to delinquent principal or interest. (E) Mortgage loan term has been extended for a one year period. (F) Mortgage loan term has been extended for a ten year period. (G) The aggregate cost for federal income tax purposes. (H) Reconciliation of carrying amount of mortgage loans for the three years ended December 31, 1993 is as follows: Balance at December 31, 1990 . . . . . . . . . . $240,141,000 Additions during period: New mortgage loans . . . . . . . . . . . . 108,194,000 Construction loan advances . . . . . . . . 22,371,000 Deductions during period: Collection of principal . . . . . . . . . . (2,600,000) ----------- Balance at December 31, 1991 . . . . . . . . . . 368,106,000 Additions during period: New mortgage loans . . . . . . . . . . . . 183,426,000 Construction loan advances . . . . . . . . 24,666,000 Other . . . . . . . . . . . . . . . . . . . 1,189,000 Deductions during period: Collection of principal . . . . . . . . . . (27,228,000) Acquisition of properties, net . . . . . . . (15,843,000) Other . . . . . . . . . . . . . . . . . . . (2,500,000) ----------- Balance at December 31, 1992 . . . . . . . . . . 531,816,000 Additions during period: New mortgage loans . . . . . . . . . . . . 181,908,000 Construction loan advances . . . . . . . . 28,387,000 Deductions during period: Collection of principal . . . . . . . . . . (35,490,000) Acquisition of properties, net . . . . . . (88,493,000) Conversion of construction loans to sale/leaseback transactions . . . . . . (12,244,000) Other . . . . . . . . . . . . . . . . . . . (4,178,000) ------------ Balance at December 31, 1993 . . . . . . . . . . $601,706,000 ============
S-8 50 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE NOT APPLICABLE. PART III Item 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated by reference to Item 4a above and the table and the information following it appearing in the first subsection of the section entitled "Election of Trustees" contained in the Company's Proxy Statement for its Annual Meeting of Shareholders ("Annual Meeting Proxy Statement"), to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended ("Regulation 14A"). There are no family relationships among any of the Trustees or executive officers of the Company. Item 11. EXECUTIVE COMPENSATION Incorporated by reference to the section entitled "Executive Compensation" contained in the Company's Annual Meeting Proxy Statement, to be filed pursuant to Regulation 14A. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference to the table appearing in the first subsection of the section entitled "Election of Trustees" and the section entitled "Voting Securities, Principal Holders Thereof and Holdings by Certain Executive Officers" contained in the Company's Annual Meeting Proxy Statement, to be filed pursuant to Regulation 14A. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference to the section entitled "Certain Transactions" contained in the Company's Annual Meeting Proxy Statement, to be filed pursuant to Regulation 14A. -24- 51 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements Financial Statements filed as a part of this report are listed in the index appearing on Page F-1. (a) 2. Financial Statement Schedules Financial Statement Schedules required as part of this report are listed on the index appearing on Page F-1. (a) 3. Exhibits Exhibits required as part of this report are listed in the index appearing on Page 29. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS 1988 Stock Option Plan - Form 10-K for fiscal year ended December 31, 1988, Exhibit 10.13 1992 Equity Incentive Plan - Registration Statement No. 33-48695, Exhibit 4.3 Employment Agreement with - Form 10-Q for fiscal quarter ended March 31, 1993, Exhibit Abraham D. Gosman 10.1
(b) No reports on Form 8-K were filed during the quarter ended December 31, 1993. -25- 52 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MEDITRUST By:/s/ Lisa M. Pavelka Vice President and Treasurer (and Principal Financial and Accounting Officer) Dated: March 21, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name Title Date ---- ----- ---- /s/ Abraham D. Gosman Chairman, Chief Executive March 21, 1994 - ---------------------------- Abraham D. Gosman Officer and Trustee /s/ David F. Benson President and March 21, 1994 - ---------------------------- David F. Benson Trustee /s/ Edward W. Brooke Trustee March 21, 1994 - ---------------------------- Edward W. Brooke /s/ Hugh L. Carey Trustee March 21, 1994 - ---------------------------- Hugh L. Carey /s/ Robert Cataldo Trustee March 21, 1994 - ---------------------------- Robert Cataldo /s/ Thomas J. Magovern Trustee March 21, 1994 - ---------------------------- Thomas J. Magovern /s/ Philip L. Lowe Trustee March 21, 1994 - ---------------------------- Philip L. Lowe /s/ Gerald Tsai, Jr. Trustee March 21, 1994 - ---------------------------- Gerald Tsai, Jr. /s/ Frederick W. Zuckerman Trustee March 21, 1994 - ---------------------------- Frederick W. Zuckerman
-26- 53 The Declaration of Trust establishing Meditrust dated August 6, 1985 (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. -27- 54 EXHIBITS
Exhibit No Title Method of Filing - ------- ----- ---------------- 3.1 Restated Declaration of Trust, as amended . . . . . . . . . . . . Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-3 (File No. 33-55386) 3.2 By-Laws, as amended . . . . . . Incorporated by reference to Exhibit 3.2 to Form 10-K for the fiscal year ended December 31, 1992 4.1 1988 Stock Option Plan, as amended . . . . . . . . . . . . . . . . .. Incorporated by reference to Exhibit 10.13 to Form 10-K for the fiscal year ended December 31, 1988 4.2 1992 Equity Incentive Plan . . Incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-8 (File No. 33-48695) 4.3 Form of Indenture dated February 4, 1993 between The Company and Fleet National Bank, as trustee . . . Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3 (File No. 33-55386) 4.4 Form of 7% Convertible Debenture due 1998 . . . . . . . . . . . . . Incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-3 (File No. 33-55386) 4.5 Form of Fiscal Agency Agreement dated February 4, 1993 between the Company and Fleet National Bank as fiscal agent . . . . . . . . . . . . . Filed herewith 4.6 Form of 7% Convertible Debenture due 1998 . . . . . . . . . . . . . Included in Exhibit 4.5 4.7 Form of Fiscal Agency Agreement dated November 15, 1993 between the Company and Fleet National Bank as fiscal agent . . . . . . . . . . . . . Filed herewith 4.8 Form of 6 7/8% Convertible Debenture due 1998 . . . . . . . . . . . Included in Exhibit 4.7
-28- 55
Exhibit No Title Method of Filing - ------- ----- ---------------- 4.9 Form of Indenture dated April 23, 1992 between The Company and Fleet National Bank, as trustee.. Incorporated by reference to Exhibit 4 to the Registration Statement on Form S-3 (File No. 33-45979 4.10 Form of 9% Convertible Debenture due 2002 . . . . . . . . . . . . . Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3 (File No. 33-45979) 10.1 Note Agreement relating to first mortgage notes due December 1, 1997 Incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-11 (File No. 33-20557) 10.2 Amended and Restated Lease Agreement between Mediplex of Queens, Inc. and QPH, Inc. dated December 30, 1986 Incorporated by reference to Exhibit 2.2 to the Form 8-K dated January 13, 1987 10.3 Form of Lease for Carmel, New York and Scotia, New York facilities . . Incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-11 (File No. 33-7483) 10.4 Form of Credit Agreement between the Registrant and Barclays Bank PLC, New York Branch dated as of March 7, 1988 . . . . . . . . . . . . . . . . . . . Incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-11 (File No. 33-20557) 10.5 Note Agreement dated as of October 31, 1989 among the Registrant, The Prudential Insurance Company of America, et al . . . . . . . . Incorporated by reference to Exhibit 10.4 to Form 8 -- dated December 5, 1989
-29- 56
Exhibit No Title Method of Filing - ------- ----- ---------------- 10.6 Note Agreement dated as of February 16, 1989, as amended and restated as of October 31, 1989, among the Registrant, The Prudential Insurance Company of America, et al . . Incorporated by reference to Exhibit 10.5 to Form 8 ----- dated December 5, 1989 10.7 Note Agreement dated as of January 1, 1993 by and among the Registrant, Principal Mutual Life Insurance Company, et al . . . . . . . . Incorporated by reference to Exhibit 10.1 to Form 10-Q ----- dated May 4, 1993 10.8 Employment Agreement dated January 1, 1993 by and between the Company and Abraham D. Gosman . . . . . . . Incorporated by reference to Exhibit 10.1 to Form 10-Q dated May 4, 1993 10.9 Revloving Credit Agreement dated as of July 1, 1991 among the Company, various financial institutions and Societe Generale, New York Branch, as agent . . . . . . . . . . . . . Incorporated by reference to Exhibit 10.23 to Form 10-K dated February 28, 1992 10.10 Revolving Credit Agreement dated as of March 10, 1992 between the Company and Via Banque . . . . . . . . . . Incorporated by reference to Exhibit 10.10 to Form 10-K dated March 25, 1993 10.11 Consent Agreement dated as of January 27, 1994 between the Company and Sun Healthcare Group, Inc. . . . . Incorporated by reference to Form 8-K dated January 27, 1994 11 Statement Regarding Computation of Per Share Earnings . . . . . . . . Filed herewith 21 Subsidiaries of the Registrant Filed herewith 23 Consent of Coopers & Lybrand Filed herewith
-30- EX-4.5 2 FORM OF FISCAL AGENCY AGREEMENT DATED 2-4-93 1 EXHIBIT 4.5 FISCAL AGENCY AGREEMENT dated as of February 4, 1993 between MEDITRUST and Fleet National Bank, as Fiscal Agent 2 FISCAL AGENCY AGREEMENT, dated as of February 4, 1993, between MEDITRUST, a business trust duly organized and validly existing under the laws of the Commonwealth of Massachusetts (the "Company"), and Fleet National Bank, a banking corporation duly organized and validly existing under the laws of the United States of America (the "Fiscal Agent"). 1. The Securities. The Company has by a Placement Agency Agreement, dated January 27, 1993 (the "Placement Agency Agreement"), among the Company and the placement agents named therein (the "Placement Agents"), agreed to issue up to U.S. $64,870,000, aggregate principal amount of its 7% Convertible Debentures Due 1998 (hereinafter referred to as the "Securities"). Interest on the Securities shall be calculated on the basis of a 360 day year comprised of twelve 30 day months. Except as set forth in the next sentence, the Securities will initially be issued in temporary form, and will subsequently be exchanged for Securities in definitive form either as bearer Securities ("Bearer Securities"), in denominations of U.S. $1,000 and U.S. $10,000 and with interest coupons attached, representing the semiannual interest payable thereon, or as fully registered Securities ("Registered Securities"), in denominations of U.S. $1,000 and integral multiples thereof. The Securities in definitive form shall be substantially in the form of Exhibit A hereto (the "Definitive Securities"). The Securities will be convertible as provided in Section 4 of the Definitive Securities and Section 7 hereof. The Securities may be redeemed by the Company as provided in Section 3 of the Definitive Securities and Section 6 hereof. The temporary global debenture in respect of the Securities will be issued in bearer form without coupons in the aggregate principal amount of the entire issue of Securities, substantially in the form of Exhibit B hereto (the "Global Security"). The Definitive Securities and the Global Security shall contain such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Agreement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistent herewith, be determined by the officer of the Company executing such Securities, as evidenced by his execution of such Securities. Appointment of Agents and Security Registrar. The Company hereby appoints Fleet National Bank, at present having its principal corporate trust office at 111 Westminster Street, Providence, Rhode Island 02903 and having an office in London at Fleet Bank of Massachusetts, N.A., 40-41 St. Andrews Hill, London EC4V 5DE England, as its fiscal agent in respect of the Securities upon the terms and subject to the conditions herein set forth. (Fleet National Bank and its successor or successors as such fiscal agent qualified and appointed in accordance with Section 11 hereof are herein called the "Fiscal Agent.") The Fiscal Agent shall have the powers and authority granted to and conferred upon it herein and in the Securities, 3 and such further powers and authority, acceptable to it, to act on behalf of the Company as the Company may hereafter grant to or confer upon it. In addition, the Company hereby appoints Fleet National Bank at present located at 111 Westminster Street, Providence, Rhode Island 02903 acting through its office in London at Fleet Bank of Massachusetts, N.A., 40-41 St. Andrews Hill, London EC4V 5DE England, as its paying agent in respect of the Securities upon the terms and subject to the conditions herein set forth. (Fleet National Bank and its successor or successors as such paying agent qualified and appointed in accordance with Section 11 hereof are herein called the "Paying Agent.") The Paying Agent shall have the powers and authority granted to and conferred upon it herein and in the Securities, and such further powers and authority, acceptable to it, to act on behalf of the Company as the Company may hereafter grant to or confer upon it. As used herein, "paying agencies" shall mean paying agencies maintained by the Company as provided in Section 12(f) hereof. The Company hereby appoints Fleet National Bank, at present located at 111 Westminster Street, Providence, Rhode Island 02903, acting through its office in London at Fleet Bank of Massachusetts, N.A., 40-41 St. Andrews Hill, London EC4V 5DE England, as its conversion agent in respect of the Securities upon the terms and subject to the conditions herein set forth (Fleet National Bank and its successor or successors as such conversion agent qualified and appointed in accordance with Section 11 hereof are herein called the "Conversion Agent," and the Paying Agent, the Conversion Agent, the Transfer Agents (as herein defined) and the Fiscal Agent are sometimes herein referred to severally as an "Agent" and, collectively, as the "Agents"). The Conversion Agent shall have the powers and authority granted to and conferred upon it herein and in the securities, and such further powers and authority, acceptable to it, to act on behalf of the Company as the Company may hereafter grant to or confer upon it. As used herein, "conversion agencies" shall mean conversion agencies maintained by the Company as provided in Section 12(f) hereof. (i) The Company shall cause to be kept at the principal corporate trust office of the Fiscal Agent a register (the registers maintained in such office and in any other office or agency designated for such purpose (which office shall be located outside of the United Kingdom) being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as the Company may prescribe, the Company shall provide for the registration of Registered Securities and of transfers of Registered Securities. The Fiscal Agent is hereby appointed "Security Registrar" for the purpose of registering Registered Securities and transfers of Registered Securities as herein provided. -2- 4 i. Registration and Transfer. (i) Upon surrender for registration of transfer of any Registered Security at any office or agency designated for such purpose by the Company pursuant to Section 12(g) hereof, the Company shall execute, and the Fiscal Agent shall authenticate and register and make available for delivery, in the name of the designated transferee or transferees, one or more new Registered Securities of any authorized denominations and of a like aggregate principal amount. (ii) Bearer Securities may, at the option of the holder thereof, be exchanged for an equal aggregate principal amount of Registered Securities in denominations of $1000 and integral multiples thereof without coupons and/or Bearer Securities of authorized denominations, upon surrender of the Bearer Securities to be exchanged at any office or agency designated for such purpose by the Company pursuant to Section 12(g), with all unmatured coupons and all matured coupons in default thereto appertaining. If such holder is unable to produce any such unmatured coupon or coupons or matured coupon or coupons in default, such exchange may be effected if the Bearer Securities are accompanied by payment in an amount equal to the face amount of such missing coupon or coupons, or the surrender of such missing coupon or coupons may be waived by the Company in writing if there be furnished to it such security or indemnity as it may require to save it, the Fiscal Agent, the Paying Agent and any paying agency harmless. If thereafter the holder of such Security shall surrender to any paying agency any such missing coupon in respect of which such a payment shall have been made, such holder shall be entitled to receive the amount of such payment. Registered Securities may, at the option of the holder thereof, be exchanged for Registered Securities of any other authorized denominations and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at any office or agency designated for such purpose by the Company pursuant to Section 12(g). Registered Securities shall not be exchangeable for Bearer Securities. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Fiscal Agent shall authenticate and deliver, the Registered Securities which the holder making the exchange is entitled to receive. (iii) All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Securities surrendered upon such registration of transfer or exchange. -3- 5 (iv) Every Registered Security presented for registration of transfer or surrendered for exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company, the Fiscal Agent and the Transfer Agent to which such Security is presented or surrendered and the Security Registrar, duly executed by the holder thereof or his attorney duly authorized in writing. In the case of Registered Securities, all such instruments shall comply with the provisions of Paragraph (a) above. The registration of the transfer of a Registered Security by the Security Registrar shall be deemed to be the written acknowledgement of such transfer on behalf of the Company. (v) No service charge shall be made for any exchange or registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Securities, other than exchanges pursuant to Section 4 hereof or not involving any registration of transfer. (vi) Neither the Company nor the Fiscal Agent nor any of the offices or agencies designated for the purposes specified in Section 12(f) nor any Transfer Agent shall be required (i) to exchange Bearer Securities for Registered Securities during the period between the close of business on the Record Date (as defined in Section 5 hereof) and the opening of business on the next succeeding interest payment date, (ii) to exchange any Bearer Security (or portion thereof) for a Registered Security if the Company shall determine and inform the Fiscal Agent in writing that, as a result thereof, the Company may incur adverse consequences under the Federal income tax laws and regulations (including proposed regulations) of the United States in effect or proposed at the time of such exchange, or (iii) in the event of a redemption in part, (A) to register the transfer of Registered Securities or to exchange any Bearer Securities for Registered Securities during a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Securities to be redeemed, or (B) to register the transfer of or exchange any Registered Security so selected for redemption in whole or in part, except portions not being redeemed of Securities being redeemed in part, or (C) to exchange any Bearer Security called for redemption; provided, however, that a Bearer Security called for redemption may be exchanged, on the terms and conditions set forth above, for a Registered Security that is simultaneously surrendered, with written instruction for payment on the date fixed for redemption, unless the redemption date is between the close of business on any Record Date and the close of business on the next succeeding interest payment date, in which case such exchange may only be made prior to the Record Date immediately preceding the redemption date. -4- 6 ii. Global Security; Exchange. (i) The Securities shall initially be in the form of the Global Security. The Global Security shall be authenticated by the Fiscal Agent upon the order of the Company on the same conditions, in substantially the same manner and with the same effect as the Definitive Securities. The Global Security will be issued upon payment to the Company or its order in United States dollars in next-day funds by check or wire transfer to a United States dollar account designated by the Company, at 2:30 p.m., London time, on February 4, 1993, or at such other time on the same or such other date, not later than 5:00 p.m., London time, on the fifth business day in London thereafter, as the Placement Agents and the Company may agree. Such payment will be made (1) upon authorization from the Placement Agents and (2) against delivery of the Global Security for the balance of the Securities to The Chase Manhattan Bank, N.A., London office, as depositary (the "Common Depositary") for Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System (the "Euroclear Operator"), and Centrale de Livraison de Valeurs Mobilieres S.A. ("CEDEL S.A."). The Global Security shall be held on deposit with the Common Depositary for the accounts of the Euroclear Operator and CEDEL S.A., for credit to the Placement Agents' respective Securities Clearance Accounts (or to such other accounts as the Placement Agents may have specified) with the Euroclear Operator or CEDEL S.A. (ii) Without unnecessary delay but in any event not less than 15 days prior to the Exchange Date (as defined below), the Company will execute and deliver to the Fiscal Agent at its office in London Definitive Securities in the aggregate principal amount outstanding in the Global Debenture. "Exchange Date" means the date following the expiration of the 40-day period commencing on the Closing Date. On or after the Exchange Date, the Global Security may be surrendered to the Fiscal Agent to be exchanged, as a whole or in part, for Definitive Bearer Securities without charge, and the Fiscal Agent shall authenticate and deliver, in exchange for such Global Security or the portions thereof to be exchanged, an equal aggregate principal amount of Definitive Bearer Securities, but only upon presentation to the Fiscal Agent at its office in London of a certificate of the Euroclear Operator or CEDEL S.A. with respect to the Global Security or portions thereof being exchanged, substantially in the form of Exhibit C hereto, to the effect that it has received a certificate or certificates in substantially the form set forth in Exhibit D hereto dated no earlier than 15 days prior to the Exchange Date and signed by the person appearing in its records as the owner of the Global Security or portions thereof being exchanged. Similarly, after the Exchange Date, portions of the Global Security may be exchanged for an equal aggregate principal amount of Definitive Registered Securities upon presentation to the Fiscal Agent at its office in -5- 7 London of a certificate substantially in the form of Exhibit E hereto. (iii) Only Bearer Securities may be issued upon receipt by the Euroclear Operator or CEDEL S.A. of a certificate or certificates in the form of Exhibit D hereto. Bearer Securities will be delivered only outside the United States, its territories or possessions. Only Registered Securities may be issued upon receipt by the Euroclear Operator or CEDEL S.A. of a certificate or certificates in the form of Exhibit E hereto. (iv) The delivery to the Fiscal Agent by the Euroclear Operator or CEDEL S.A. of any certificate referred to above may be relied upon by the Company and the Fiscal Agent as conclusive evidence that a corresponding certificate or certificates has or have been delivered to the Euroclear Operator or CEDEL S.A. pursuant to the terms of this Agreement. (v) Upon any such exchange of a portion of the Global Security for a Definitive Security or Securities, the Global Security shall be endorsed by the Fiscal Agent to reflect the reduction of its principal amount by an amount equal to the aggregate principal amount of such Definitive Security or Securities. Until so exchanged in full, the Global Security shall in all respects be entitled to the same benefits under this agreement as Definitive Securities authenticated and delivered hereunder. iii. Payment. (i) The Company will pay or cause to be paid to the Paying Agent the amounts, at the times and for the purposes, set forth herein and in the text of the Securities, and the Company hereby authorizes and directs the Paying Agent to make payment of the principal of and interest on and Additional Amounts (as defined in Section 2 of the Definitive Securities), if any, on the Securities from such payments. (ii) At least 15 days prior to the date on which any payment of Additional Amounts shall be required to be made pursuant to Section 2 of the Definitive Securities, the Company will furnish the Paying Agent, each other paying agency of the Company and the Fiscal Agent with a certificate of one of its duly authorized officers instructing the Paying Agent and each other paying agency of the Company as to the amounts required (i) to be deducted or withheld for or on account of any taxes described in Section 2 of the Definitive Securities from a payment to be made on that date and (ii) to be paid to each holder of Securities or coupons as Additional Amounts pursuant to that paragraph. If the foregoing amounts are not uniform for all holders, then the Company's certificate shall specify by country of residence or other factor, with reasonable clarity, the amounts required to be -6- 8 deducted or withheld and to be paid as Additional Amounts for each holder or class of holders of the Securities or coupons. In the absence of its receipt of any such certificate from the Company, the Paying Agent may make payment without deduction or withholding. The Company hereby agrees to indemnify the Paying Agent, each other paying agency of the Company and the Fiscal Agent for, and to hold them harmless against, any loss, liability or expense reasonably incurred without gross negligence or bad faith on their part, arising out of or in connection with actions taken or omitted by any of them in reliance on any certificate furnished pursuant to this Section. (iii) Interest on any Registered Security that is payable, and is punctually paid or duly provided for, on any interest payment date shall be paid to the person in whose name that Security is registered at the close of business on the February 15 or August 15 immediately preceding such interest payment date (each a "Record Date"). In case a Bearer Security is surrendered for exchange for a Registered Security after the close of business on any Record Date and before the opening of business on the next succeeding interest payment date, the Fiscal Agent shall not be required to perform such transfer or exchange of such Security. (iv) In the case of any Registered Security which is converted after any Record Date and on or prior to the next succeeding interest payment date (other than any Registered Security called for redemption prior to such interest payment date), interest that is payable on such interest payment date shall be payable on such interest payment date notwithstanding such conversion, and such interest shall be paid to the person in whose name that Registered Security is registered at the close of business on such Record Date. Except as otherwise expressly provided in the immediately preceding sentence, in the case of any Security which is converted, interest that is payable after the date of conversion on such Security shall not be payable. (v) Any interest on any Registered Security that is payable, but is not punctually paid or duly provided for, on any interest payment date shall forthwith cease to be payable to the registered holder thereof on the relevant Record Date by virtue of having been such holder, and such defaulted interest may be paid by the Company to the registered holder of such Registered Security on a subsequent record date established by the Company in any lawful manner if, after written notice given by the Company to the Fiscal Agent of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Fiscal Agent. (vi) Subject to the foregoing provisions of this Section 5, each Security delivered under this Agreement upon registration of transfer of or in exchange for or in lieu of any other Security -7- 9 shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. (vii) In order to provide for the payment of the principal of and interest on the Securities as the same shall become due and payable, the Company shall pay to the Paying Agent at its office in London, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts therein, and in same day funds, the following amounts (and the Company shall give notice to the Fiscal Agent at least one full business day prior to the date payment is due to the Paying Agent as to the means of such payment), to be held and applied by the Paying Agent as hereinafter set forth: (i) The Company shall pay to the Paying Agent on the business day immediately prior to each interest payment date in immediately available funds an amount sufficient to pay the interest due on (and Additional Amounts, if any, on) all the Securities outstanding on such interest payment date, and the Paying Agent shall apply the amounts so paid to it to the payment of such interest (and Additional Amounts, if any) on such interest payment date. (ii) If the Company shall elect, or shall be required, to redeem the Securities in accordance with Section 6 hereof, the Company will pay to the Paying Agent on the business day immediately prior to the date fixed for redemption thereof in immediately available funds an amount sufficient (with any amount then held by the Paying Agent and available for the purpose) to pay the redemption price of the Securities called for redemption on the redemption date or entitled to be redeemed, together with accrued interest thereon (and Additional Amounts, if any, thereon) to the date fixed for redemption if such redemption date occurs on an interest payment date, and the Paying Agent shall apply such amount to the payment of the redemption price and accrued interest (and Additional Amounts, if any) in accordance with the terms of the Securities. (iii) On the business day immediately prior to the maturity date of the Securities, the Company shall pay to the Paying Agent in immediately available funds an amount which, together with any amounts then held by the Paying Agent, and available for payment thereof, shall be equal to the entire amount of principal and interest (and Additional Amounts, if any) to be due on such maturity date on all the Securities then outstanding, and the Paying Agent shall apply such amount to the payment of the principal of and interest on (and Additional Amounts, if any, on) the Securities in accordance with the terms of the Securities. -8- 10 iv. Redemption. If, under the circumstances described in Section 3 of the Definitive Securities, the Company shall elect to redeem the outstanding Securities, the following provisions shall be applicable: (i) The Company shall, at least 75 days (or such shorter period as shall be reasonably acceptable to the Fiscal Agent) before the date designated for such redemption, give written notice to the Agents of its election to redeem the outstanding Securities on the redemption date specified in such notice and state in such notice that the conditions precedent to such redemption have occurred and describe them and shall request the Fiscal Agent to arrange for publication and mailing of the notice specified in clause (c) below. (ii) In case the Company shall give notice to the Agents of its election to redeem the Securities, the Fiscal Agent shall cause to be published on behalf of the Company a notice of redemption in accordance with the provisions of Section 3 of the Definitive Securities and shall mail by first-class mail a copy of the notice to each holder of a Registered Security at the address of such holder as it shall appear in the Security Register. The Fiscal Agent shall send a copy of such notice of redemption to the Company, the Paying Agent (if different from the Fiscal Agent) and each other paying agency of the Company. (iii) Such notice shall be published on behalf and at the expense of the Company in an Authorized Newspaper (as defined in Section 19 hereof) in Providence, Rhode Island, London and, so long as the Securities are listed on the Luxembourg Stock Exchange, in Luxembourg, as set forth in Section 19 of this Agreement and Section 3 of the Definitive Securities. In the case of a redemption in whole, notice will be given once not more than 60 nor less than 30 days prior to the date fixed for redemption. In the case of a partial redemption, notice will be given twice, the first such notice to be given not more than 75 nor less than 60 days prior to the date fixed for redemption and the second such notice to be given not more than 60 and not less than 30 days prior to the date fixed for redemption. The Fiscal Agent shall notify the Company promptly of the portions of outstanding Securities to be called for redemption. Notwithstanding any other provision of this Section 6, with respect to redemptions described in Section 3(a)(ii) of the Definitive Securities, the Securities will be immediately redeemable, at the option of and upon notice by the Company to the extent deemed sufficient in the opinion of the Company's Board of Trustees to prevent the holder of such Securities or any other person having an interest therein if the Securities were thereupon converted from being deemed to own shares of beneficial interest of the Company ("Shares") in excess of the limits -9- 11 prescribed in Article VI, Section 6.15 of the Company's Restated Declaration of Trust, as amended. v. Conversion of Securities. (i) Subject to and upon compliance with the provisions of this Section 7, at the option of the holder thereof, any Definitive Security or, in the case of any Registered Security or Bearer Security of a denomination other than $1,000, any portion of the principal amount thereof which is $1,000 or an integral multiple of $1,000 may be converted at any time on or after the date which is, in the case of Bearer Securities, the Exchange Date, at the principal amount thereof, or of such portion thereof, into fully paid and nonassessable Shares as set forth in the Definitive Securities. The price at which Shares shall be delivered upon conversion (herein called the "Conversion Price") shall be initially $30.625 per Share. The Conversion Price shall be adjusted in certain instances as provided in paragraphs (c)(i), (ii), (iii), (iv), (vi) and (vii) of Section 4 of the Definitive Securities. Notwithstanding the foregoing, a holder may not convert any Security, and such Security shall not be convertible by any holder, if as a result of such conversion any person would then be deemed to own Shares in excess of the limits prescribed in Article VI, Section 6.15 of the Company's Restated Declaration of Trust, as amended. (ii) In order to exercise the conversion privilege, the holder of any Security to be converted shall surrender such Security, or, if less than the entire principal amount of a Registered Security or Bearer Security of a denomination other than $1,000 is to be converted, the portion thereof to be converted, together with all unmatured coupons and any matured coupons in default appertaining thereto, at the office of the Conversion Agent or any office or agency of the Company maintained for that purpose pursuant to Section 12(f), accompanied by written notice, in substantially the form set forth in the Definitive Security, to the Company, at such office or agency that the holder elects to convert such Security. Registered Securities surrendered for conversion during the period after the close of business on any Record Date next preceding any interest payment date to the close of business on such interest payment date shall (except in the case of Registered Securities or portions thereof which have been called for redemption on a redemption date within such period) be accompanied by payment of an amount equal to interest payable on such interest payment date on the principal amount being surrendered for conversion. Except as otherwise provided in the immediately preceding sentence and subject to Section 5(d), no payment or adjustment shall be made upon any conversion on account of any interest accrued on the Securities surrendered for conversion or on account of any dividends on the Shares issued upon conversion. -10- 12 a) Securities shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Securities for conversion in accordance with the foregoing provisions, and at such time the rights of the holders of such Securities as holders shall cease, and the person or persons entitled to receive the Shares issuable upon conversion shall be treated for all purposes as the record holder or holders of such Shares at such time. As promptly as practicable on or after the conversion date, the Company shall cause to be issued or delivered at such office or agency a certificate or certificates for the number of full Shares issuable or deliverable upon conversion, together with payment, in lieu of any fraction of a share, as provided below. (iii) In the case of any Registered Security or Bearer Security of a denomination other than $1,000 which is converted in part only, upon such conversion the Company shall execute and the Fiscal Agent shall authenticate and deliver to the holder thereof, at the expense of the Company, a new Security or Securities of any authorized kind or denomination as requested by such holder, in aggregate principal amount equal to the unconverted portion of the principal amount of such Security. (iv) No fractional Shares shall be issued or delivered upon conversion of Securities. If more than one Security shall be surrendered for conversion at one time by the same holder, the number of full shares which shall be issuable or deliverable upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Securities (or, in the case of Registered Securities or Bearer Securities of a denomination other than $1,000, specified portions thereof) so surrendered. Instead of any fractional Share which would otherwise be issuable or deliverable upon conversion of any Security or Securities (or, in the case of Registered Securities or Bearer Securities of a denomination other than $1,000, specified portions thereof), the Company shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the Closing Price per Share (as defined in the Definitive Securities) at the close of business on the day preceding the day of conversion. (v) Whenever the Conversion Price is adjusted as provided in the Definitive Securities: 1) the Company shall compute the adjusted Conversion Price in accordance with the terms of the Definitive Securities and shall prepare a certificate signed by the President, any Vice President or the Treasurer of the Company setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the Conversion Agent and at each office or agency -11- 13 maintained for the purpose of conversion of Securities pursuant to Section 12(f); and 2) a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall forthwith be required, and, as soon as practicable after it is required, the Company shall promptly cause a notice setting forth the adjusted Conversion Price to be given to the holders of the Securities as provided in Section 19. (vi) In case: 1) the Company shall declare a dividend (or any other distribution) on its Shares payable otherwise than in cash out of its retained earnings (excluding dividends payable in Shares for which adjustment is made pursuant to the terms of the Definitive Securities); or 2) the Company shall authorize the granting to the holders of its Shares of rights or warrants to subscribe for or purchase any equity securities of any class or of any other rights; or 3) of any reclassification of the Shares of the Company (other than a subdivision or combination of its outstanding Shares) or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company; or 4) of the involuntary dissolution, liquidation or winding up of the Company; or 5) the Company proceeds to take any other action which would require an adjustment of the Conversion Price pursuant to the Definitive Securities; then the Company shall cause to be filed with the Conversion Agent and at each office or agency maintained for the purpose of conversion of Securities a notice setting forth the anticipated adjusted Conversion Price and a brief statement of the facts requiring such adjustment, and shall cause notice to be given as provided in Section 19 except that notice need be given once at least 20 days (or 10 days in any case specified in clause (i) or (ii) above) prior to the applicable record date hereinafter specified, stating (x) the date on which a record is to be established for the purpose of such dividend, distribution, or grant of rights or warrants or, if a record is not to be established, the date as of which the holders of Shares of record to be entitled to such dividend, distribution, rights or warrants -12- 14 is to be determined, or (y) the date on which a reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up or other action is expected to become effective, and the date as of which it is expected that holders of Shares of record shall be entitled to exchange their Shares for the securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up or other action. The failure to give notice required by this Section or any defect therein shall not affect the legality or validity of any dividend, distribution, rights, warrants, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up, or other action, or the vote on any such action. (vii) The Company shall, at all times from and after the date on which the Securities are convertible into Shares, have reserved and available, free from preemptive rights, out of its authorized but unissued Shares, for the purpose of effecting the conversion of Securities, the full number of Shares then issuable upon the conversion of all Securities. (viii) The Company covenants that all Shares which may be issued or delivered upon conversion of Securities will upon issuance be fully paid and nonassessable and, except as provided in Section 13, the Company will pay all stamp, excise or similar taxes or duties, liens and charges with respect to the issue thereof. (ix) All converted Securities shall be held by the Company, and may, at any time, be delivered to the Fiscal Agent for cancellation, which shall hold or dispose of the same in accordance with its policy for disposal of canceled securities or as otherwise directed by the Company. Converted Securities shall not be transferred. The Company will promptly give, or cause to be given, written notice to the Fiscal Agent of the serial numbers of all Securities which have been converted. (x) In case of any consolidation with, or merger of the Company into, any other corporation, or in case of any merger of another corporation into the Company (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding Shares of the Company), or in case of any sale or transfer of all or substantially all of the assets of the Company, the corporation formed by such consolidation or resulting from such merger or which acquires such assets, as the case may be, shall execute and deliver to the Fiscal Agent an amendment to the Fiscal Agency Agreement providing that the holder of each Definitive Security shall have the right during the period such Security shall be convertible as specified in the Definitive Securities to convert such Securities only into the kind and amount of securities, cash, and other property receivable upon such consolidation, merger, sale or transfer by a -13- 15 holder of the number of Shares of the Company into which such Security might have been converted immediately prior to such consolidation, merger, sale or transfer assuming, if such consolidation, merger, sale or transfer is prior to the period such Security shall be convertible, that the Securities were convertible at such time at the initial Conversion Price as adjusted pursuant to the terms of the Definitive Securities. Such amendment shall provide for adjustments which, for events subsequent to the effective date of such amendment, shall be as nearly equivalent as may be practicable, as determined by the Company, to the adjustments provided for in the Definitive Securities. The above provisions of this Section shall similarly apply to successive consolidations, mergers, sales or transfers. (xi) Subject to Section 11(j), neither the Fiscal Agent nor the Conversion Agent or agency appointed by the Company shall at any time be under any duty or responsibility to any holder of Securities to determine whether any facts exist which may require any adjustment of the Conversion Price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in the Definitive Securities provided to be employed, in making the same. Neither the Fiscal Agent nor the Conversion Agent or agency appointed by the Company shall be accountable with respect to the validity or value (or the kind or amount) of any Shares or of any securities or property which may at any time be issued or delivered upon the conversion of any Security; and neither the Fiscal Agent nor the Conversion Agent or agency appointed by the Company makes any representation with respect thereto. Neither the Fiscal Agent nor the Conversion Agent or agency appointed by the Company shall be responsible for any acts or omissions of the Company including without limitation any failure of the Company to issue, transfer or deliver any Shares or Share certificates or other securities or property or to make any cash payment upon the delivery of any Security for the purpose of conversion or to comply with any of the covenants contained in this Section 7. (m) The Fiscal Agent has no duty to determine when an adjustment under this paragraph 7 should be made, how it should be made or whether it should be made. The Fiscal Agent shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of the Securities. vi. Surrendered Securities. All Securities, together with any coupons appertaining thereto, surrendered for payment, redemption, retirement, transfer or exchange and all coupons paid through the application of interest installments shall be delivered to the Fiscal Agent. In any such case the Fiscal Agent shall cancel all Securities and coupons not previously canceled -14- 16 and dispose of or deliver all such Securities and coupons to the Company in accordance with the Fiscal Agent's policy for disposal of canceled securities. vii. Mutilated, Destroyed, Stolen or Lost Securities. The Fiscal Agent is hereby authorized, in accordance with the provisions of the Securities and this Section, from time to time to authenticate and deliver Securities in exchange for or in lieu of Securities that become mutilated, destroyed, stolen or lost, upon receipt of indemnity and such other documents or proof as may be required in form and substance satisfactory to the Fiscal Agent and the Company. Every Security authenticated and delivered in exchange for or in lieu of any such Security shall be considered the obligation of the Company and shall carry all the rights to interest accrued and unpaid and to accrue which were carried by such Security, and notwithstanding anything to the contrary herein contained, any new Bearer Security shall have attached thereto such coupons that neither gain nor loss in interest shall result from such exchange or substitution. viii. Signatures. Securities shall be executed on behalf of the Company by its Chairman, its President, its Secretary, any Vice President or its Treasurer or any Assistant Secretary, any of whose signatures may be manual or in facsimile, and any coupons appertaining thereto shall be executed on behalf of the Company by the facsimile signature of its Chairman, its President, its Secretary, any Vice President or its Treasurer or any Assistant Secretary. Any signature in facsimile may be imprinted or otherwise reproduced on the Securities. The Company may adopt and use the signature or facsimile signature of any person who shall be a Chairman, President, Secretary, Vice President, Treasurer or Assistant Secretary at the time of the execution of the Securities, notwithstanding the fact that at the time the Securities shall be authenticated and delivered, or disposed of, such person shall have ceased to have held such office by virtue of which such person so executed such security. ix. Agreements Concerning Agents. Each of the Agents accepts its obligations herein and in the Securities, upon the terms and conditions hereof and thereof, including the following, to all of which the Company agrees and to all of which the rights hereunder of the holders from time to time of the Securities and coupons shall be subject: (i) Each of the Agents shall be entitled to reasonable compensation for all services rendered by such Agent, as separately agreed to from time to time by the Company and such Agent, and the Company agrees to pay promptly such compensation and to reimburse each of the Agents for the reasonable out-of-pocket expenses (including, but not limited to, reasonable counsel fees and expenses) incurred by such Agent in connection with the services rendered by it hereunder. The Company also -15- 17 agrees to indemnify each of the Agents and each other paying agency and conversion agency of the Company for, and to hold it harmless against, any loss, liability or expense (including the costs and expenses of defending against any claim of liability, including the reasonable fees and expenses of its counsel) incurred without gross negligence or bad faith on the part of such Agent or other paying agency and conversion agency, arising out of or in connection with its acting as an Agent or other paying agency and conversion agency of the Company hereunder. The obligations of the Company under this clause (a) shall survive payment of the Securities or the resignation or removal of any Agent or paying agency and conversion agency. (ii) In acting under this Agreement and in connection with the Securities, each of the Agents and each other paying agency and conversion agency of the Company is acting solely as agent of the Company, and does not assume any obligation, or relationship of agency or trust, for or with any of the owners or holders of the Securities or coupons, except that all funds held by the Paying Agent or any other paying agency of the Company for payment of principal of or interest on (or Additional Amounts, if any, on) the Securities shall be held in trust but need not be segregated from other funds except as required by law and as set forth herein and in the Securities, and shall be applied as set forth herein and in the Securities; provided, however, that monies paid by the Company to the Paying Agent or any other paying agency of the Company for the payment of principal of or interest on (or Additional Amounts, if any, on) Securities remaining unclaimed at the end of two years after such principal or interest (or Additional Amounts, if any) shall have become due and payable shall be repaid to the Company, as provided and in the manner set forth in the Definitive Securities, whereupon the aforesaid trust shall terminate and all liability of the Paying Agent or such other paying agency of the Company with respect thereto shall cease. (iii) Each of the Agents and each other paying agency and conversion agency of the Company may consult with one or more counsel satisfactory to it (including counsel to the Company), and the written opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the opinion of such counsel. (iv) Each of the Agents and each other paying agency and conversion agency of the Company shall be protected and shall incur no liability for or in respect of any action taken, omitted or suffered by it in reliance upon any Security or coupon, notice, direction, consent, certificate, affidavit, statement or other paper or document believed in good faith by such Agent or such other paying agency and conversion agency of the Company to -16- 18 be genuine and to have been signed by the proper party or parties. (v) Each of the Agents and each other paying agency and conversion agency of the Company, its officers, directors and employees may become the owner of, or acquire any interest in, any Securities or coupons, with the same rights that it or they would have if it were not an Agent or such other paying agency of the Company hereunder, and may engage or be interested in any financial or other transaction with the Company and its affiliates and may act on, or as depositary, trustee or agent for, any committee or body of holders of Securities or other obligations of the Company, as freely as if it were not an Agent or a paying agency or conversion agency of the Company hereunder. (vi) Neither the Paying Agent nor any other paying agency of the Company shall be under any liability for interest on, or have any responsibility to invest, any monies at any time received by it pursuant to any of the provisions of this Agreement or of the Securities. (vii) The recitals contained herein and in the Securities (except in the Fiscal Agent's certificates of authentication), shall be taken as the statements of the Company, and the Agents assume no responsibility for the correctness of the same. None of the Agents makes any representation as to the validity or sufficiency of this Agreement or the Securities or coupons or the Company's Offering Memorandum dated January 28, 1993, or any other offering material, except for such Agent's due authorization to execute this Agreement. Neither the Agents nor any other paying agency of the Company shall be accountable for the use or application by the Company of the proceeds of any Securities. (viii) The Agents and each other paying agency and conversion agency of the Company shall be obligated to perform such duties and only such duties as are herein and in the Securities specifically set forth and no implied duties or obligations shall be read into this Agreement or the Securities against the Agents or any other paying agency and conversion agency of the Company. The Agents shall not be under any obligation to take any action hereunder which may tend to involve them in any expense or liability, the payment or reimbursement of which within a reasonable time is not, in their reasonable opinion, assured to them through surety or other indemnity satisfactory to such Agents. (ix) Unless herein or in the Securities otherwise specifically provided, any order, certificate, notice, request, direction, or other communication, from the Company made by or given by it under any provision of this Agreement shall be in writing and shall be sufficient if signed by the Chairman, -17- 19 President, Secretary, Assistant Secretary, any Vice President or Treasurer of the Company. (x) Anything in this Agreement to the contrary notwithstanding, none of the Agents shall incur any liability hereunder, except as a result of gross negligence or bad faith attributable to it or its officers or employees, and shall incur no liability for the gross negligence or bad faith of its agents appointed by it with due care; provided that the Agent shall notify the Company of the appointment of any such agents. (xi) Except as specifically provided herein or in the Securities, none of the Agents shall have any duty or responsibility in case of any default by the Company in the performance of its obligations (including, without limiting the generality of the foregoing, any duty or responsibility to accelerate all or any of the Securities or to initiate or to attempt to initiate any proceedings at law or otherwise or to be make any demand for the payment thereof upon the Company). x. Offices, Resignation, Successors, Etc. of Agents; Paying, Conversion and Transfer Agencies. (i) The Company agrees that, until none of the Securities and coupons is outstanding or until monies for the payment of all principal of and interest on (and Additional Amounts payable pursuant to Section 2 of the Definitive Securities, if any, on) all outstanding Securities shall have been made available at the office of the Paying Agent and shall have been returned to the Company as provided in the Securities, there shall at all times be a Fiscal Agent in Providence, Rhode Island or the Borough of Manhattan, New York City, which shall be a bank or trust company organized and doing business under the laws of the United States of America or of any State of the United States of America, in good standing and authorized under such laws to exercise corporate trust powers, a Paying Agent and a Conversion Agent having offices in a city in Western Europe and in either Providence, Rhode Island or New York City, which shall be a bank or trust company organized, in good standing and doing business under the laws of the United States of America or of any State of the United States of America, and a paying agency and a conversion agency in at least one city in Western Europe, which shall be Luxembourg so long as the Securities are listed on the Luxembourg Stock Exchange. (ii) Each of the Agents may at any time resign as such Agent by giving written notice to the Company of such intention on its part, specifying the date on which its desired resignation shall become effective; provided, however, that such date shall never be less than ninety days after receipt of such notice by the Company unless the Company agrees to accept less notice. Each of the Agents hereunder may be removed at any time by the -18- 20 filing with it at least 30 days prior to the date of such proposed removal, an instrument in writing signed on behalf of the Company and specifying such removal and the date when it is intended to become effective. Such resignation or removal shall take effect upon the date of the appointment by the Company, as hereinafter provided, of a successor Fiscal Agent, Conversion Agent, Transfer Agent or Paying Agent, as the case may be, and the acceptance of such appointment by such successor Agent. At the time of its resignation or removal, each of the Agents shall be entitled to the payment by the Company of its compensation for the services rendered hereunder and to the reimbursement of all reasonable out-of-pocket expenses incurred in connection with the services rendered hereunder by such Agent. (iii) In case at any time any of the Agents shall resign, or shall be removed, or shall be incapable of acting, or shall file a voluntary petition as a debtor under Chapter 7 or 11 of Title 11 of the United States Code or have an order for relief-entered against it as a debtor under Chapter 7 or 11 of Title 11 of the United States Code or make an assignment for the benefit of its creditors or consent to the appointment of a receiver of all or any substantial part of its property, or shall admit in writing its inability to pay or meet its debts as they mature, or if an order of any court shall be entered approving any petition filed by or against the Fiscal Agent under any legislation similar to the provisions of Title 11 of the United States Code or against any of the Agents under the provisions of any legislation similar to the Provisions of Title 11 of the United States Code, or if a receiver of it or of all or any substantial part of its property shall be appointed, or if any public officer shall take charge or control of it or of its property or affairs, for the purpose of rehabilitation, conservation or liquidation, a successor Agent, qualified as aforesaid, shall be appointed by the Company by an instrument in writing. Upon the appointment as aforesaid of a successor Agent and acceptance by it of such appointment, the Agent so superseded shall cease to be such Agent hereunder. If no successor Agent shall have been so appointed by the Company and shall have accepted appointment as hereinafter provided, any holder of a Security, on behalf of itself and all others similarly situated, or any Agent may petition any court of competent jurisdiction for the appointment of a successor Agent and shall promptly notify the Company of such action. (iv) Any successor Fiscal Agent, Conversion Agent, Transfer Agent or Paying Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to the Company an instrument accepting such appointment hereunder, and thereupon such successor Agent, without any further act, deed or conveyance, shall become vested with all the authority, rights, powers, trusts, immunities, duties and obligations of such predecessor with like effect as if originally named as such Agent hereunder, and such predecessor, upon payment of its charges and -19- 21 disbursements then unpaid, shall thereupon become obligated to transfer, deliver and pay over, and such successor Agent shall be entitled to receive, all monies, securities or other property on deposit with or held by such predecessor, as such Agent hereunder. (v) Any corporation or bank into which any of the Agents hereunder may be merged or converted, or any corporation or bank with which such Agent may be consolidated, or any corporation or bank resulting from any merger, conversion or consolidation to which such Agent shall be a party, or any corporation or bank to which such Agent shall sell or otherwise transfer all or substantially all the assets and business of such Agent, or any corporation to which the Fiscal Agent shall sell or otherwise transfer all or substantially all of its corporate trust business, provided that it shall be qualified as aforesaid, shall be the successor to such Agent under this Agreement without the execution or filing of any document or any further act on the part of any of the parties hereto. (vi) So long as there shall be a Fiscal Agent and Paying Agent hereunder, the Company shall maintain agencies (i) where Registered Securities (but not Bearer Securities or coupons) may be presented for surrender and payment (and for the payment of Additional Amounts on the Registered Securities, if any) and where Securities may be surrendered for conversion in Providence, Rhode Island or the Borough of Manhattan, New York City, and (ii) where Securities and coupons may be surrendered for payment (and for the payment of Additional Amounts (pursuant to Section 2 of the Definitive Securities) on Bearer Securities, if any) and where Securities may be surrendered for conversion in at least one city in Western Europe, which shall be Luxembourg so long as the Securities are listed on the Luxembourg Stock Exchange. The Company now intends to maintain additional agencies (subject to applicable laws and regulations) where Bearer Securities and coupons may be surrendered for payment (and for the payment of Additional Amounts (pursuant to Section 2 of the Definitive Securities) on Bearer Securities, if any), where Registered Securities may be surrendered for payment and where Securities may be surrendered for conversion in London, England and Luxembourg, and during such period to keep the Agents advised of the names and locations of such agencies. Unless the Company shall otherwise notify each of the Agents in writing, the sole such paying agencies and conversion agencies shall be the agencies specified in the Securities. The Company authorizes the Paying Agent to pay to or to the order of the aforesaid agencies, upon demand by such agencies, funds for the payment of the principal of and interest on (and Additional Amounts pursuant to Section 2 of the Definitive Securities, if any, on) the Securities. Except as otherwise arranged by the Company, the Fiscal Agent shall arrange for the payment of the compensation of such paying agencies for their services as such, and the Company -20- 22 shall pay to the Fiscal Agent from time to time sufficient funds to make such payments. (vii) So long as there shall be a Fiscal Agent, Paying Agent and Conversion Agent hereunder, the Company shall maintain a Security Registrar and additional transfer agencies (the "Transfer Agents") (i) where Registered Securities may be surrendered for exchange for Registered Securities and (ii) in at least one city in Western Europe, where Bearer Securities may be delivered in exchange for Bearer Securities or for Registered Securities. Consistent with applicable laws and regulations, including the provisions of the federal income tax laws of the United States, such agencies may be the same agencies as or different agencies from those maintained by the Company pursuant to Section 12(f). The Company hereby appoints Banque Generale du Luxembourg ("Banque Generale"), 27 Avenue Monterey, L-2951 Luxembourg, as Transfer Agent for such exchanges. The transfer, exchange and registration of transfer or exchange of Registered Securities shall be made by the Fiscal Agent in Providence, Rhode Island or by Banque Generale, as agent for the Fiscal Agent, so long as the Securities are registered on the Luxembourg Stock Exchange. xi. Taxes. The Company will pay all stamp taxes and other similar duties, if any, that may be imposed by the United States of America or the United Kingdom, or any state or political subdivision thereof or taxing authority therein, with respect to the execution or delivery of this Agreement, or the issuance of the Global Security, or the exchange from time to time of the Global Security for Definitive Securities, or with respect to the issue or delivery of Shares on conversion of Securities; provided, however, that the Company shall not be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue or delivery of Shares in a name other than that of the holder of the Security or Securities to be converted, and no such issue or delivery shall be made unlessand until the person requesting such issue has paid to the Company the amount of any such tax or duty or has established to the satisfaction of the Company that such tax or duty has been paid. xii. Meetings and Votes of Holders. (i) A meeting of holders of Securities may be called at any time and from time to time pursuant to this Section for any of the following purposes: (i) to give any notice to the Company or to the Fiscal Agent, or to give any directions to the Fiscal Agent, or to consent to the waiving of any default hereunder or under the Definitive Securities and its consequences, or to take any other action authorized to be taken by holders of Securities pursuant to Section 9 of the Definitive Securities; or (ii) to take any other action authorized to be taken by or on behalf of -21- 23 the holders of any specified aggregate principal amount of the Securities under any other provision of this Agreement, the Definitive Securities or under applicable law. (ii) Meetings of holders of Securities may be held at such place or places in Providence, Rhode Island, The City of New York or London as the Fiscal Agent or, in case of its failure to act, the Company or the holders calling the meeting shall from time to time determine. (iii) The Fiscal Agent may at any time call a meeting of holders of Securities to be held at such time and at such place in any of the locations designated in Section 14(b) hereof as the Fiscal Agent shall determine. Notice of every meeting of holders shall be made as specified in Section 19 hereof, except that such notice shall set forth the time and the place of such meeting, in general terms the action proposed to be taken at such meeting and a general description of regulations applicable to such meeting and shall be published at least three times in the publications specified in such Section 19, the first publication to be not less than 21 nor more than 180 days prior to the date fixed for the meeting. (iv) In case at any time the Company or the holders of at least 25% in aggregate principal amount of the Securities shall have requested the Fiscal Agent to call a meeting of the holders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Fiscal Agent shall not have given the first notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the holders of Securities in the amount above specified may determine the time and the place in either of the locations designated in Section 14(b) hereof for such meeting and may call such meeting to take any action authorized in Section 14(a) hereof by giving notice thereof as provided in Section 14(c) hereof. (v) To be entitled to vote at any meeting of holders of Securities, a person shall be (i) a holder of one or more Securities, or (ii) a person appointed by an instrument in writing as proxy for a holder or holders of Securities by such holder or holders, which proxy need not be a holder of Securities. The only persons who shall be entitled to be present or to speak at any meeting of holders shall be the persons entitled to vote at such meeting and their counsel and any representatives of the Fiscal Agent and its counsel and any representatives of the Company and its counsel. (vi) The persons entitled to vote a majority in principal amount of the outstanding Securities shall constitute a quorum for the transaction of all business specified in Section 14(a) -22- 24 hereof. No business shall be transacted in the absence of a quorum unless a quorum is represented when the meeting is called to order. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of the holders of Securities (as provided in Section 14(d) hereof), be dissolved. In any other case the meeting shall be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 14(c) hereof except that such notice need be published only once but must be given not less than five days prior to the date on which the meeting is scheduled to be reconvened. Subject to the foregoing, at the reconvening of any meeting adjourned for a lack of a quorum, the persons entitled to vote 25% in principal amount of the Securities shall constitute a quorum for the taking of any action set forth in the notice of the original meeting. Notice of the reconvening of an adjourned meeting shall state expressly the percentage of the aggregate principal amount of the Securities that shall constitute a quorum. At a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid, any resolution and all matters (except as limited by Section 9 of the Definitive Securities) shall be effectively passed and decided if passed or decided by the persons entitled to vote a majority in principal amount of the Securities represented and voting at such meeting, provided that such amount shall be not less than 25% in principal amount of the Securities outstanding. Any holder of a Security who has executed an instrument in writing appointing a person as his proxy shall be deemed to be present for the purposes of determining a quorum and be deemed to have voted; provided, however, that such holder shall be considered as present or voting only with respect to the matters covered by such instrument in writing. Any resolution effectively passed or decision taken at any meeting of the holders of Securities duly held in accordance with this Section 14 shall be binding on all the holders of Securities whether or not present or represented at the meeting. (vii) Notwithstanding any other provision of this Agreement, the Fiscal Agent may make such reasonable regulations as it may deem advisable for any meeting of holders of Securities in regard to proof of the holding of Securities and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Bearer Securities shall be proved by the production of the Bearer Securities or by a certificate executed, as depositary, by, and the appointment of any proxy shall be proved by having the signature of the person -23- 25 executing the proxy witnessed or guaranteed by, in each case, any trust company, bank or banker satisfactory to the Fiscal Agent. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified herein or other proof. The holding of Registered Securities shall be proved by the registry books maintained in accordance with Section 2(d) hereof or by a certificate or certificates of the Fiscal Agent in its capacity as the Company's agent for the maintenance of such books. (viii) The Fiscal Agent shall, by an instrument in writing, appoint a temporary chairperson of the meeting, unless the meeting shall have been called by the Company or by the holders of Securities as provided in Section 14(d) hereof, in which case the Company or the holders calling the meeting, as the case may be, shall in like manner appoint a temporary chairperson. A permanent chairperson and a permanent secretary of the meeting shall be elected by vote of the holders of a majority in principal amount of the Securities represented at the meeting and entitled to vote. (ix) At any meeting each holder or proxy shall be entitled to one vote for each U.S. $1,000 principal amount of Securities held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Securities challenged as not outstanding and ruled by the chairperson of the meeting to be not outstanding. The chairperson of the meeting shall have no right to vote, except as a holder or proxy. (x) Any meeting of holders of Securities duly called pursuant to Section 14(c) or 14(d) hereof at which a quorum is present may be adjourned from time to time by vote of the holders (or proxies for the holders) of a majority in principal amount of the Securities represented at the meeting and entitled to vote; and the meeting may be held as so adjourned without further notice. (xi) The vote upon any resolution submitted to any meeting of holders of Securities shall be by written ballots on which shall be subscribed the signatures of the holders of Securities or of their representatives by proxy and the serial number or numbers of the Securities held or represented by them. The permanent chairperson of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record, at least in triplicate, of the proceedings of each meeting of holders of Securities shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts -24- 26 setting forth a copy of the notice of the meeting and showing that said notice was published as provided in Section 14(c) or 14(d) hereof and, if applicable, Section 14(f) hereof. Each copy shall be signed and verified by the affidavits of the chairperson and secretary of the meeting, and one such copy shall be delivered to the Company and another to the Fiscal Agent to be preserved by the Fiscal Agent, the copy delivered to the Fiscal Agent to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. xiii. Merger, Consolidation or Sale of Assets. (i) If at any time there shall be a merger, consolidation, sale or conveyance of assets or assumption of obligations to which any of the covenants contained in Section 6 of the Definitive Securities pertains, then in any such event the successor or assuming corporation referred to therein will promptly deliver to the Fiscal Agent: 1) A certificate signed by an executive officer of such successor or assuming corporation stating that as of the time immediately after the effective date of any such transaction the covenants of the Company contained in the Definitive Securities have been complied with and the successor or assuming corporation is not in default under the provisions of this Agreement or the Securities, as applicable; and 2) A written opinion of legal counsel (who may be an employee of or counsel to the successor or assuming corporation) stating that in such counsel's opinion such covenants have been complied with and that any instrument or instruments executed in the performance of such covenants comply with the requirements thereof. In case of any such merger, consolidation, sale, conveyance or assumption, such successor or assuming corporation shall succeed to and be substituted for the Company with the same effect, subject to (in the case of a merger to which the Company is a party) Section 6(b) of the Definitive Securities, as if it had been named herein and in the Definitive Securities as the Company; the Company shall thereupon be relieved of any further obligation or liability hereunder or upon the Securities, and the Company, as the predecessor corporation may thereupon or at any time thereafter be dissolved, wound up or liquidated. If applicable, such successor or assuming corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Company any or all of the Securities issuable hereunder which theretofore shall not have been executed on behalf of the Company and delivered to the Fiscal Agent; and, upon the order of such successor or assuming corporation, instead -25- 27 of the Company, and subject to all the terms, conditions and limitations in this Agreement prescribed, the Fiscal Agent shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Fiscal Agent for authentication, and any Securities which such successor or assuming corporation thereafter shall cause to be signed and delivered to the Fiscal Agent for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Agreement as the Securities theretofore or thereafter issued in accordance with the terms of this Agreement as though all of such Securities had been issued at the date of the execution hereof. In case of any merger, consolidation, sale, conveyance or assumption, such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be deemed by the Company to be appropriate. (ii) The Fiscal Agent may rely on the documents delivered to it pursuant to this Agreement by any successor or assuming corporation pursuant to this Section 15 as conclusive evidence that any such merger, consolidation, sale, conveyance or assumption complies with the provisions of this Section and the Securities. xiv. GOVERNING LAW. THIS AGREEMENT, THE SECURITIES AND ANY COUPONS APPERTAINING THERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS, UNITED STATES OF AMERICA. xv. Amendments. This Agreement may be amended by the parties hereto, and certain provisions hereof may be waived, in the manner provided in Section 9 of the Definitive Securities. This Agreement may also be amended by the parties hereto, without the consent of the holder of any Security, for the purposes set forth in Section 9 of the Definitive Securities and for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein or in any manner that the parties may mutually deem necessary or desirable, and that shall not adversely affect the interests of the holders of the Securities. xvi. Agent for Service of Process. As long as any of the Securities or coupons appertaining thereto remain outstanding, the Company will at all times have an authorized agent in the United States of America, upon whom process may be served in any legal action or proceeding arising out of or relating to this Agreement or any Security or any coupons appertaining thereto. Service of process upon such agent and written notice of such service mailed or delivered to the Company shall to the extent permitted by law be deemed in every respect effective service of process upon the Company in any such legal action or proceeding. -26- 28 The Company hereby appoints the Fiscal Agent as its agent for such purpose, and covenants and agrees that service of process in any legal action or proceeding may be made upon it at the office of such agent at 111 Westminster Street, Providence, Rhode Island 02903 Attention: Corporate Trust Department (or such other address as may be the principal corporate trust office of such agent, or such other address as may be the principal corporate trust office of any successor fiscal agent located in the City of New York), unless and until the Company shall designate another agent for such purpose by written notice to the Fiscal Agent. If the Fiscal Agent receives any such service of process, it shall promptly notify the Company of such service. xvii. Notices. All notices hereunder shall be deemed to have been given when deposited in the mail as first class mail, registered or certified, return receipt requested, postage prepaid, addressed to any party hereto as follows: Address The Company 128 Technology Center Waltham, Massachusetts 02154 Attn: President The Fiscal Agent 111 Westminster Street Providence, Rhode Island 02903 Attn: Vice President Corporate Trust The Paying Agent 111 Westminster Street Providence, Rhode Island 02903 Attn: Vice President Corporate Trust or at any other address of which any of the foregoing shall have notified the others in writing. Notices to holders of the Securities shall be given by publication in an Authorized Newspaper. For purposes of this Agreement, the term "Authorized Newspaper" means a newspaper customarily published on each business day in morning editions, whether or not it shall be published in Saturday, Sunday or holiday editions, such as The Wall Street Journal (Eastern edition) in Providence, Rhode Island or The City of New York, the Financial Times in London and the Luxemburger Wort in Luxembourg. If by reason of the temporary or permanent suspension of publication of any newspaper or by reason of any other cause it shall be impossible to make publication of such notice in an Authorized Newspaper as herein provided, then such publication or -27- 29 other notice in lieu thereof as shall be made by the Fiscal Agent shall constitute sufficient publication of such notice, if such publication or other notice shall, so far as may be possible approximate the terms and conditions of the publication in lieu of which it is given. Notices will be mailed to registered holders of Registered Securities at their registered address as the same shall appear on the books of the Fiscal Agent on the day fifteen days prior to such mailing. The Fiscal Agent shall promptly furnish to the Company and to each other paying agency of the Company a copy of each notice so published or mailed. xviii. Counterparts. This Agreement may be executed in separate counterparts, and by each party separately in a separate counterpart, each such counterpart, when so executed and delivered, to be an original. Such counterparts shall together constitute but one and the same instrument. -28- 30 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. MEDITRUST By: Name: Title: Fleet National Bank, as Fiscal Agent By: Name: Title: 20343 -29- 31 EXHIBIT A -30- 32 (FORM OF FACE OF REGISTERED DEBENTURE) THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO U.S. PERSONS EXCEPT IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. Each purchaser, by its purchase of this Security, represents, acknowledges and agrees that: (1) it is purchasing "restricted" securities which have not been registered under the Securities Act; (2) if it should decide to dispose of any of such Securities, it will not offer, sell, transfer, pledge, hypothecate or otherwise dispose of any of such Securities except (A) pursuant to Rule 144A under the Securities Act, (B) pursuant to Regulation S under the Securities Act, (C) to a sophisticated institutional investor approved as an "accredited investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act by a broker or dealer registered under Section 15 of the Securities Exchange Act of 1934, (D) pursuant to any other exemption from, or otherwise in a transaction not subject to, the registration requirements of the Securities Act as confirmed in an opinion of U.S. counsel or (E) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable state laws of the United States governing the offer or sale of securities. 33 MEDITRUST (Organized in the Commonwealth of Massachusetts) 7% CONVERTIBLE DEBENTURE DUE 1998 No. R- U.S. $ --------------- --------------- Meditrust, a business trust duly organized and existing under the laws of the Commonwealth of Massachusetts (the "Company"), for value received, hereby promises to pay to ________, or registered assigns, the principal sum of __________ Thousand United States Dollars on March 1, 1998, and to pay interest thereon, from February 4, 1993, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semiannually in arrears on March 1 and September 1, in each year (each an "Interest Payment Date"), commencing September 1, 1993, at the rate of 7% per annum until the principal hereof is paid or made available for payment. Interest hereon shall be calculated on the basis of a 360 day year comprised of twelve 30 day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Fiscal Agency Agreement, be paid to the person in whose name this Security is registered at the close of business on the Record Date for such interest, which shall be February 15 or August 15 (whether or not a Business Day) next preceding such Interest Payment Date. Except as otherwise provided in the Fiscal Agency Agreement, any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the holder on such Record Date and may be paid at any time in any lawful manner, all as more fully provided in the Fiscal Agency Agreement. Payment of interest on this Security shall be made by United States dollar check drawn on a bank in The City of New York and mailed to the person entitled thereto at his address as it shall appear in the Security Register, or (if arrangements satisfactory to the Company and the Fiscal Agent are made) by wire transfer to a United States dollar account maintained by the payee with a bank in the City of New York; provided, however, that if such mailing is not possible and no such application shall have been made, payment of interest shall be made at the Corporate Trust Office of the Fiscal Agent, or such other office or agency of the Company as may be designated for such purpose in Providence, Rhode Island or The City of New York, in United States currency. Reference is hereby made to the further provisions of this Security set forth under Terms and Conditions of the Securities on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Security shall not become valid or enforceable for any purpose unless and until the certificate of authentication hereon 34 shall have been manually signed by a duly authorized signatory of the Fiscal Agent. IN WITNESS WHEREOF, the Company has caused this Security to be duly executed in its name by the manual or facsimile signature of a duly authorized signatory. Dated: 1993 -------- --, MEDITRUST By: -------------------------------- Name: ------------------------------ Title: ----------------------------- 35 (FORM OF FACE OF BEARER DEBENTURE) THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO U.S. PERSONS EXCEPT IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE CODE. MEDITRUST (Organized in the Commonwealth of Massachusetts) 7% CONVERTIBLE DEBENTURE DUE 1998 No. B- U.S.$ -------- -------- Meditrust, a business trust duly organized and existing under the laws of the Commonwealth of Massachusetts (the "Company"), for value received, hereby promises to pay to bearer upon presentation and surrender of this Security the principal sum of ________________ Thousand United States Dollars on March 1, 1998, and to pay interest thereon, from February 4, 1993, semiannually in arrears on March 1 and September 1 in each year (each an "Interest Payment Date"), commencing September 1, 1993, at the rate of 7% per annum, until the principal hereof is paid or made available for payment. Interest hereon shall be calculated on the basis of a 360 day year comprised of twelve 30 day months. Such payments shall be made in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, subject to any laws or regulations applicable thereto and to the right of the Company (limited as provided in the Fiscal Agency Agreement) to terminate the appointment of any paying agency, at the main offices of Fleet National Bank or Banque Generale du Luxembourg, 27 Avenue Monterey, L-2951 Luxembourg or at such other offices or agencies outside the United States of America, its territories or possessions as the Company may designate, by United States dollar check drawn on a bank in the City of New York, or (if arrangements satisfactory to the Company and the Fiscal Agent are made) by wire transfer to a United States dollar account maintained by the holder at a bank outside the United States, its territories and its possessions. Interest on this Security shall be paid only at an office or agency located outside the United States, its territories or possessions and, in the case of interest due on or before maturity, only upon presentation and surrender at such an office or agency of the interest coupons hereto attached as they severally mature. No 36 payment on this Security or any coupon will be made at the Corporate Trust Office of the Fiscal Agent or any other paying agency maintained by the Company in the United States, nor will any payment be made by transfer to an account in, or by mail to an address in, the United States, except as may be permitted by United States tax laws and regulations in effect at the time of such payment without detriment to the Company. Notwithstanding the foregoing, payment of this Security and coupons may be made at the office of the Fiscal Agent in Providence, Rhode Island or The City of New York if full payment at all paying agencies outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions. Reference is hereby made to the further provisions of this Security set forth under Terms and Conditions of the Securities on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Neither this Security nor any of the coupons attached hereto shall become valid or enforceable for any purpose unless and until the certificate of authentication hereon shall have been manually signed by a duly authorized signatory of the Fiscal Agent. IN WITNESS WHEREOF, the Company has caused this Security to be duly executed in its name by the manual or facsimile signature of a duly authorized officer and coupons bearing the facsimile signature of a duly authorized signatory to be annexed hereto. Dated: 1993 ----------, MEDITRUST By: ------------------------------ Name: ---------------------------- Title: --------------------------- 37 (FORM OF FACE OF COUPON ON BEARER DEBENTURES) ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE CODE. MEDITRUST 7% CONVERTIBLE DEBENTURE DUE 1998 U.S.$ * ------------- Due ---------- Unless the Security to which this coupon appertains shall have been called for redemption prior to the due date hereof and payment thereof duly provided for or converted or exchanged, on the date set forth hereon, Meditrust (herein called the "Company") will pay to bearer, upon surrender hereof, the amount shown hereon (together with any Additional Amount in respect thereof which the Company may be required to pay according to the terms of said Security) at the paying agencies set out on the reverse hereof or at such other places outside the United States of America, its territories and possessions as the Company may determine from time to time, by United States dollar check drawn on a bank in The City of New York, or (if arrangements satisfactory to the Company and the Fiscal Agent referred to in the Security to which this coupon appertains are made) wire transfer to a United States dollar account maintained by the payee at a bank outside the United States of America, its territories and possessions, being one-half year's interest then payable on said Security. MEDITRUST By: ------------------------------- Name: ----------------------------- Title: ---------------------------- *The amount due shown on the coupon for the first Interest Payment Date will be interest for the period February 4, 1993 to September 1, 1993. 38 [Reverse of Coupon] Fleet Bank of Massachusetts, N.A. Banque Generale du Luxembourg 40-41 St. Andrews Hill 27 Avenue Monterey London EC4V 5DE L-2951 Luxembourg England 39 CERTIFICATE OF AUTHENTICATION This is one of the Securities described in the within-mentioned Fiscal Agency Agreement. Fleet National Bank, as Fiscal Agent By: --------------------------------- Authorized Signatory 40 Terms and Conditions of the Securities 1. General. (a) This Security is one of a duly authorized issue of Securities of the Company designated as its 7% Convertible Debentures due 1998 (herein called the "Securities"), limited in aggregate principal amount to U.S. $64,870,000. The Company, for the benefit of the holders from time to time of the Securities, has entered into a Fiscal Agency Agreement dated as of February 4, 1993 (the "Fiscal Agency Agreement"), between the Company and Fleet National Bank, as Fiscal Agent, Paying Agent, Security Registrar and Conversion Agent (the "Fiscal Agent"), to which Fiscal Agency Agreement reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Fiscal Agent, and the holders of Securities and any coupons appertaining thereto and of the terms upon which the Securities are, and are to be, authenticated and delivered. The holders of the Securities will be entitled to the benefits of, be bound by, and be deemed to have notice of, all of the provisions of the Fiscal Agency Agreement. A copy of the Fiscal Agency Agreement is on file and may be inspected at the offices of paying agencies appointed by the Company. (b) The Securities are issuable as bearer Securities (the "Bearer Securities"), with interest coupons attached, in the denominations of U.S. $1,000 and U.S. $10,000, and as registered Securities (the "Registered Securities"), without coupons, in denominations of U.S. $1,000 and integral multiples thereof. The Registered Securities, and transfers thereof, shall be registered as provided in Section 8 hereof and in the Fiscal Agency Agreement. The holder of any Bearer Security or any coupon and the registered holder of a Registered Security shall (to the fullest extent permitted by applicable law) be treated at all times, by all persons and for all purposes as the absolute owner of such Security or coupon, as the case may be, regardless of any notice of ownership, theft or loss or of any writing thereon. (c) The Securities are direct and unsecured obligations of the Company. There are no restrictions herein on other indebtedness or securities which may be incurred or issued by the Company. 2. Additional Amounts. The Company will pay, as additional interest ("Additional Amounts"), to the holder of this Security or of any coupon appertaining hereto who is a United States Alien (as defined below) such amounts as may be necessary in order that every net 41 payment of the principal of (and premium, if any) and interest on this Security, after withholding for or on account of any present or future tax, assessment or other governmental charge imposed upon or as a result of such payment by the United States or any political subdivision or taxing authority thereof or therein, will not be less than the interest provided herein or any coupon appertaining hereto to be then due and payable; provided, however, that the foregoing obligation to pay Additional Amounts shall not apply to: (a) any tax, assessment or other governmental charge which would not have been so imposed but for (i) the existence of any present or former connection between such holder (or between a fiduciary, settlor or beneficiary of, or a person holding a power over, such holder, if such holder is an estate or trust, or a member of such holder, if such holder is a partnership) and the United States, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, person holding a power or member) being or having been a citizen or resident or treated as a resident thereof or being or having been engaged in a trade or business therein or being or having been present therein or having or having had a permanent establishment therein, (ii) such holder's present or former status as a personal holding company, foreign personal holding company, passive foreign investment company, foreign private foundation or other foreign tax-exempt entity or controlled foreign corporation for United States tax purposes or a corporation which accumulates earnings to avoid United States Federal income tax, or (iii) such holder's status as a bank extending credit pursuant to a loan agreement entered into in the ordinary course of business; (b) any tax, assessment or other governmental charge which would not have been so imposed but for the presentation by the holder of this Security or any coupon appertaining hereto for payment on a date more than 10 days after the date on which such payment became due and payable or on the date on which payment thereof is duly provided, whichever occurs later; (c) any estate, inheritance, gift, sales, transfer or personal property tax or any similar tax, assessment or other governmental charge; (d) any tax, assessment or other governmental charge which would not have been imposed but for the failure to comply with certification, information, documentation or other reporting requirements concerning the nationality, residence, identity or present or former connection with the United States of the holder or beneficial owner of such Security or any related coupon if such compliance is required by statute, regulation or ruling of the United 42 States or any political subdivision or taxing authority thereof or therein as a precondition to relief or exemption from such tax, assessment or other governmental charge; (e) any tax, assessment or other governmental charge which is payable otherwise than by withholding from payments of principal of and premium, if any, or interest on this Security; (f) any tax, assessment or other governmental charge imposed on interest received by a person holding, actually or constructively, 10 percent or more of the total combined voting power of all classes of stock of the Company entitled to vote; or (g) any tax, assessment or other governmental charge required to be withheld by any paying agent from any payment of principal of and premium, if any, or interest on any Security or interest on any coupon appertaining thereto if such payment can be made without such withholding by any other paying agent; nor shall Additional Amounts be paid with respect to any payment of the principal of and premium, if any, or interest on this Security to a person other than the sole beneficial owner of such payment to the extent such beneficial owner would not have been entitled to the Additional Amounts had such beneficial owner been the holder of this Security or any coupon appertaining hereto. The term "United States Alien" means any person who, for United States Federal income tax purposes, is a foreign corporation, a non-resident alien individual, a non-resident alien fiduciary of a foreign estate or trust, or a foreign partnership to the extent one or more of the members of which is, for United States Federal income tax purposes, a foreign corporation, a non-resident alien individual or a non-resident alien fiduciary of a foreign estate or trust, and the term "United States" means the United States of America, its territories and possessions. Except as specifically provided herein and in the Fiscal Agency Agreement, the Company shall not be required to make any payment with respect to any tax, assessment or other governmental charge imposed by any government or any political subdivision or taxing authority thereof or therein. 3. Redemption. (a) The Securities are subject to redemption (i) as necessary for the Company to continue to qualify for United States Federal tax treatment as a real estate investment trust under section 856(a)(6) of the Internal Revenue Code of the United States of America, and (ii) on or after March 1, 1996 as a whole or in part (but, if in part, in aggregate principal amounts 43 of no less than $10,000), at the election of the Company at a redemption price equal to 100% of the principal amount, together with accrued interest to the date fixed for redemption. Provisions of this Security that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Fiscal Agent shall notify the Company promptly of the Securities or portions of Securities to be called for redemption. Notwithstanding any other provision of this Section 3, with respect to redemptions described in (i) above, this Security will be immediately redeemable, at the option of and upon notice by the Company to the extent deemed sufficient in the opinion of the Company's Board of Trustees to prevent the holder hereof or any other person having an interest herein if this Security were thereupon converted from being deemed to own shares of beneficial interest of the Company ("Shares") in excess of the limits prescribed in Article VI, Section 6.15 of the Company's Restated Declaration of Trust, as amended. (b) If, at any time, the Company shall determine that as a result of any change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of the United States or any political subdivision or taxing authority thereof or therein affecting taxation, or any amendment to or change in an official application or interpretation of such laws, regulations or rulings which change or amendment becomes effective on or after February 4, 1993, the Company has or will become obligated to pay to the holder of any Security or coupon Additional Amounts and such obligation cannot be avoided by the Company taking reasonable measures available to it, then the Company may, at its election exercised at any time when such conditions continue to exist, redeem the Securities as a whole at a redemption price equal to 100% of the principal amount, together with accrued interest, if any, to the date fixed for redemption; provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Company would be obliged to pay such Additional Amounts were a payment in respect of this Security then due; and provided further, that at the time such notice is given, such obligation to pay such Additional Amounts remains in effect. Prior to any redemption of the Securities pursuant to the preceding paragraph, the Company shall provide the Fiscal Agent with one or more certificates (signed by the President or any Vice President and the Treasurer or the Secretary) of the Company on which the Fiscal Agent may conclusively rely to the effect that the Company is entitled to redeem the Securities pursuant to such paragraph and that the conditions precedent to the right of the Company to redeem the Securities pursuant to such paragraph have occurred and a written opinion of counsel (who may be an employee of the Company) stating that all legal conditions precedent to the right of the Company to redeem the Securities pursuant to such paragraph have occurred. 44 (c) The Company shall, except as set forth in the succeeding paragraph, redeem the Securities as a whole but not in part, at 100% of their principal amount, together with interest accrued to the date fixed for redemption, after determining, based on a written opinion of counsel, that any certification, identification or information reporting requirement of United States law or regulation with regard to the nationality, residence or identity of a beneficial owner of a Bearer Security or a coupon appertaining thereto who is a United States Alien (as defined in Section 2 hereof) would be applicable to a payment of principal of, premium, if any, or interest on a Bearer Security or a coupon appertaining thereto made outside the United States by the Company or a paying agent (other than a requirement (a) which would not be applicable to a payment made (i) directly to the beneficial owner or (ii) to a custodian, nominee or other agent of the beneficial owner, or (b) which could be satisfied by the holder, custodian, nominee or other agent certifying that the beneficial owner is a United States Alien, provided, however, in each case referred to in clauses (a)(ii) and (b) payment by such custodian, nominee or agent to the beneficial owner is not otherwise subject to any requirement referred to in this sentence). The Company shall make such determination and will notify the Fiscal Agent thereof in writing as soon as practicable, stating in the notice the effective date of such certification, identification, or information reporting requirement and the dates within which the redemption shall occur, and the Fiscal Agent shall give prompt notice thereof in accordance with the Fiscal Agency Agreement. The Company shall determine the redemption date by notice to the Fiscal Agent at least 75 days before the redemption date, unless shorter notice is acceptable to the Fiscal Agent. Such redemption of the Securities must take place on such date, not later than one year after the publication of the initial notice of the Company's determination of the existence of such certification, identification or information reporting requirement. The Company shall not so redeem the securities, however, if the Company shall, based on a subsequent event, determine, based on a written opinion of counsel, not less than 30 days prior to the date fixed for redemption, that no payment would be subject to any requirement described above, in which case the Company shall notify the Fiscal Agent, which shall give prompt notice of that determination in accordance with the Fiscal Agency Agreement and any earlier redemption notice shall thereupon be revoked and of no further effect. Notwithstanding the preceding paragraph, if and so long as the certification, identification or information reporting requirement referred to in the preceding paragraph would be fully satisfied by payment of United States withholding, backup withholding or similar taxes, the Company may elect, prior to the giving of the notice of redemption, to have the provisions of this paragraph apply in lieu of the provisions of the preceding paragraph. In that event, the Company will pay such Additional Amounts (without regard to Section 2 hereof) as are necessary in 45 order that, following the effective date of such requirements, every net payment made outside the United States by the Company or a paying agent of the principal of, premium, if any, and interest on a Bearer Security or a coupon appertaining thereto to a holder who is a United States Alien (without regard to a certification, identification or information reporting requirement as to the nationality, residence or identity of such holder), after deduction for United States withholding, backup withholding or similar taxes (other than withholding, backup withholding or similar taxes (i) which would not be applicable in the circumstances referred to in the parenthetical clauses of the first sentence of the next preceding paragraph or (ii) are imposed as a result of presentation of such Bearer Security or coupon for payment more than 10 days after the date on which such payment becomes due and payable or on which payment thereof is duly provided for, whichever is later), will not be less than the amount provided in the Bearer Security or the coupon to be then due and payable. If the Company elects to pay such Additional Amounts and as long as it is obligated to pay such Additional Amounts, the Company may subsequently redeem the Securities, at any time, in whole but not in part, upon not more than 60 days nor less than 30 days notice, at 100% of their principal amount, plus accrued interest to the date fixed for redemption and Additional Amounts, if any. (d) Notice of redemption will be given by publication in Authorized Newspapers (as defined in the Fiscal Agency Agreement) in The City of New York and in London, and, so long as the Securities are listed on the Luxembourg Stock Exchange, in Luxembourg, and by mail to holders of Registered Securities, in each case in the English language, all as provided in the Fiscal Agency Agreement. In the case of a redemption in whole at the option of the Company, notice will be given once not more than 60 nor less than 30 days prior to the date fixed for redemption. In the case of a partial redemption at the option of the Company, notice will be given twice, the first such notice to be given not more than 75 or less than 60 days prior to the date fixed for redemption and the second such notice to be given not more than 60 or less than 30 days prior to the date fixed for redemption. Neither the failure to give notice nor any defect in any notice given to any particular holder of a Security shall affect the sufficiency of any notice with respect to other Securities. Notices relating to the redemption of Securities whether at the option of the Company or the holder thereof shall specify: the date fixed for redemption or the Holder Redemption Date, as the case may be; the redemption price; the place or places of payment; that payment will be made upon presentation and surrender of the Securities to be redeemed, together, in the case of a Bearer Security, with all appurtenant coupons, if any, maturing subsequent to the date fixed for redemption; that interest accrued to the date fixed for redemption (unless the redemption date is an interest payment date) will be paid as specified in said notice; and that on and after said date 46 interest thereon will cease to accrue. In the case of a redemption in part at the option of the Company, notices shall specify the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities outstanding after such partial redemption. The first notice shall specify the last date on which exchanges or transfers of Securities may be made, and the second notice shall specify the serial numbers of the Securities and the portions thereof called for redemption. In the case of a redemption in whole or in part by the Company, notices shall specify the date the conversion privilege expires in accordance with Section 4(a) hereof. Such notices shall also state that the conditions precedent, if any, to such redemption have occurred and the last day for surrender of the Securities being redeemed. (e) If notice of redemption has been given in the manner set forth in Section 3(d) hereof with respect to Securities to be redeemed at the option of the Company, the Securities so to be redeemed shall become due and payable on the applicable redemption date specified in such notice and upon presentation and surrender of the Securities at the place or places specified in the notice given by the Company with respect to such redemption, together in the case of Bearer Securities with all appurtenant coupons, if any, maturing subsequent to the redemption date, the Securities shall be paid and redeemed by the Company, at the places and in the manner and currency herein specified and at the redemption price together with accrued interest, if any, to the redemption date; provided, however, that interest due in respect of coupons maturing on or prior to the redemption date shall be payable only upon the presentation and surrender of such coupons (at an office or agency located outside of the United States of America). If any Bearer Security surrendered for redemption shall not be accompanied by all appurtenant coupons maturing after the redemption date, such Security may be paid after deducting from the amount otherwise payable an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Fiscal Agent if they are furnished with such security or indemnity as they may require to save each of them and each other paying agency of the Company harmless. From and after the redemption date, if monies for the redemption of Securities shall have been available at the principal corporate trust office of the Fiscal Agent for redemption on the redemption date, the Securities shall cease to bear interest, the coupons for interest appertaining to Bearer Securities maturing subsequent to the redemption date shall be void, and the only right of the holders of such Securities shall be to receive payment of the redemption price together with accrued interest to the redemption date if the redemption date is an interest payment date. If monies for the redemption of the Securities are not made available for payment until after the redemption date, the Securities shall not cease to bear interest until such monies have been so made available. 47 4. Conversion. (a) Subject to and upon compliance with the provisions of the Fiscal Agency Agreement, a holder of Securities is entitled, at his option, at any time on or after the Exchange Date (as defined in the Fiscal Agency Agreement) and on or before the close of business on March 1, 1998, or in case a Security or a portion thereof is called for redemption by the Company, or the holder thereof elects to have such Security or a portion thereof redeemed by the Company pursuant to Section 3(d) hereof, then in respect of such Security or such portion thereof until and including, but (unless the Company defaults in making the payment due upon redemption) not after, the close of business on the date fixed for redemption, to convert such Security (or any portion of the principal amount thereof which is U.S. $1,000 or an integral multiple thereof), at the principal amount thereof, or of such portion, into fully paid and nonassessable Shares (calculated as to each conversion to the nearest 1/1000 of a Share) at a Conversion Price equal to U.S. $30.625 aggregate principal amount of Securities for each Share (the "Conversion Price") (or at the current adjusted Conversion Price if an adjustment has been made as provided herein) by surrender of the Security, or in the case of a Security submitted for redemption pursuant to Section 3(d) hereof, satisfactory evidence of such submission, together with (i) if a Bearer Security, all unmatured coupons and any matured coupons in default appertaining thereto, and if a Registered Security (if so required by the Company or the Fiscal Agent), instruments of transfer in form satisfactory to the Company and the Fiscal Agent, duly executed by the registered holder or by his duly authorized attorney and (ii) the conversion notice hereon duly executed (a) at the Corporate Trust Office of the Fiscal Agent, or at such other office or agency of the Company as may be designated by it for such purpose in the City of New York, or (b) subject to any laws or regulations applicable thereto and subject to the right of the Company to terminate the appointment of any such conversion agency, at the offices of Fleet National Bank, and Banque Generale du Luxembourg, 27 Avenue Monterey, L-2951 Luxembourg, or at such other offices or agencies as the Company may designate. Notwithstanding the foregoing, a holder may not convert any Security, and such Security shall not be convertible by any holder, if as a result of such conversion any person would then be deemed to own Shares in excess of the limits prescribed in Article VI, Section 6.15 of the Company's Restated Declaration of Trust, as amended. (b) In the case of any Registered Security which is converted after any Record Date and on or prior to the next succeeding Interest Payment Date (other than any Registered Security whose maturity is prior to such Interest Payment Date), interest that is payable on such Interest Payment Date shall be payable on such Interest Payment Date notwithstanding such conversion, and such interest shall be paid to the person in whose name that Registered Security is registered at the close of business on such Record Date. Except as otherwise provided in 48 the immediately preceding sentence, no payment or adjustment shall be made upon any conversion on account of any interest accrued on the Securities surrendered for conversion or on account of any dividends on the Shares issued upon conversion. Registered Securities surrendered for conversion during the period after the close of business on any Record Date next preceding any Interest Payment Date to the close of business on such Interest Payment Date shall (except in the case of Registered Securities or portions thereof which are called for redemption on a redemption date within such period) be accompanied by payment of any amount equal to interest payable on such Interest Payment Date on the principal amount being surrendered for conversion. No fractions of shares or scrip representing fractions of shares will be issued or delivered on conversion, but instead of any fractional interest the Company shall pay a cash adjustment as provided in the Fiscal Agency Agreement. (c) (i) In case at any time the Company shall pay or make a stock dividend or other distribution (payable otherwise than in cash out of its retained earnings) on any class of equity securities of the Company in Shares, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced so that the same shall equal the price determined by multiplying such Conversion Price by a fraction of which the numerator shall be the number of Shares outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such adjustment to become effective immediately after the opening of business on the day following the date fixed for such determination. (ii) In case at any time the Company shall (A) subdivide its outstanding Shares, (B) combine its outstanding Shares into a smaller number of shares, or (C) issue by reclassification of its Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation) any shares, the Conversion Price in effect at the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the holder of any Security surrendered for conversion after such time shall be entitled to receive the aggregate number and kind of shares which, if such Security had been converted immediately prior to such time, he would have owned upon such conversion and been entitled to receive upon such subdivision, combination or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. (iii) In case at any time the Company shall fix a record date for the issuance of rights or warrants to all holders of its Shares entitling them to subscribe for or purchase Shares 49 at a price per share less than the current market price per Share (determined as provided in paragraph (v) of this subsection (c)) on such record date, the Conversion Price in effect at the opening of business on the day following such record date, shall be reduced so that the same shall equal the price determined by multiplying such Conversion Price by a fraction of which the numerator shall be the number of Shares outstanding at the close of business on such record date plus the number of Shares which the aggregate of the offering price of the total number of Shares so offered for subscription or purchase would purchase at such current market price and the denominator shall be the number of Shares outstanding at the close of business on such record date plus the number of Shares so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following such record date. Such reduction shall be made successively whenever such a record date is fixed; and in the event that such rights or warrants are not so issued, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such record date had not been fixed. (iv) In case at any time the Company shall fix a record date for the making of a distribution, by dividend or otherwise, to all holders of its Shares, or evidences of its indebtedness or assets (including securities, but excluding (x) any dividend or distribution referred to in paragraph (i) of this subsection (c), any rights or warrants referred to in paragraph (iii) of this subsection (c), and (y) any dividend, return of capital or distribution paid in cash out of the retained earnings of the Company), then in each such case the Conversion Price in effect after such record date shall be determined by multiplying the Conversion Price in effect immediately prior to such record date by a fraction, of which the numerator shall be the total number of outstanding Shares multiplied by the current market price per Share (as defined in paragraph (v) of this subsection (c) on such record date, less the fair market value (as determined by the Board of Directors of the Company, whose determination shall be conclusive and described in a statement filed with the Fiscal Agent) of the portion of the assets or evidences of indebtedness so to be distributed, and of which the denominator shall be the total number of outstanding Shares multiplied by such current market price per Share. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such record date has not been fixed. (v) For the purpose of any computation under paragraphs (iii) and (iv) of this subsection (c), the current market price per Share on any date shall be deemed to be the average of the Closing Prices for the 15 consecutive days upon which the principal trading market for the Shares is open selected by the Company commencing not less than 20 nor more than 50 30 days before the day in question. The Closing Price for any day shall be the last reported sales prices regular way or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case on the New York Stock Exchange or, if the Shares are not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Shares are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the closing sale price quoted on the NASDAQ National Market System, or if not so quoted, as determined by the Company. (vi) The Company may make such adjustments in the Conversion Price, in addition to those required by paragraphs (i), (ii) and (iii) of this section, as it considers to be advisable in order that any event treated for United States Federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (vii) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least twenty-five cents ($0.25) in such Conversion Price; provided, however, that any adjustment which by reason of this paragraph (vii) is not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this subsection (c) shall be made to the nearest cent or to the nearest 1/1000 of a Share, as the case may be. (d) Whenever the Conversion Price is adjusted and in the event of certain other corporate actions, as herein provided, the Company shall give notice, all as provided in the Fiscal Agency Agreement. (e) The Company shall, at all times from and after the date on which the Securities are convertible into Shares, have reserved and available, free from preemptive rights, out of its authorized but unissued Shares, for the purpose of effecting the conversion of Securities, the full number of Shares then issuable upon the conversion of all Securities. The Company covenants that all Shares which may be issued or delivered upon conversion of Securities will upon issuance be fully paid and nonassessable. (f) In case of any consolidation with, or merger of the Company into, any other corporation, or in case of any merger of another corporation into the Company (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding Shares of the Company), or in case of any sale or transfer of all or substantially all of the assets of the Company, the corporation formed by such consolidation or resulting from such merger or which acquires such assets, as the case may be, shall execute and deliver to the Fiscal Agent an amendment to the Fiscal Agency Agreement providing that the holder of each Security shall have the right during the period 51 such Security shall be convertible as specified in section (a) hereof to convert such Security only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, sale or transfer by a holder of the number of Shares of the Company into which such Security might have been converted immediately prior to such consolidation, merger, sale or transfer assuming, if such consolidation, merger, sale or transfer is prior to the period such Security shall be convertible as specified in subsection (a) hereof, that the Securities were convertible at such time at the initial Conversion Price as adjusted from February 4, 1993 to such time pursuant to paragraphs (i), (ii), (iii), (iv) and (vi) of subsection (c) hereof. Such amendment shall provide for adjustments which, for events subsequent to the effective date of such amendment, shall be as nearly equivalent as may be practicable to the adjustments provided for herein. The above provisions of this subsection shall similarly apply to successive consolidations, mergers, sales or transfers. 5. Events of Default. In the event that any of the following ("Events of Default") shall occur and be continuing: (a) the Company shall fail to pay when due the principal amount of any of the Securities whether at maturity or upon redemption or otherwise; or (b) the Company shall fail to pay any installment of interest or Additional Amounts (as described in Section 2 hereof) on any of the Securities for a period of 30 days after the date when due; or (c) the Company shall fail duly to perform or observe any other term, covenant or agreement contained in any of the Securities or in the Fiscal Agency Agreement for a period of 60 days after the date on which written notice of such failure, requiring the Company to remedy the same, shall first have been given to the Company and the Fiscal Agent by the holders of at least 25% in aggregate principal amount of the Securities at the time outstanding; provided, however, that in the event the Company shall within the aforesaid period of 60 days commence legal action in a court of competent jurisdiction seeking a determination that the Company had not failed to duly perform or observe the term or terms, covenant or covenants or agreement or agreements specified in the aforesaid notice, such failure shall not be an Event of Default unless the same continues for a period of 10 days after the date of any final determination to the effect that the Company had failed to duly perform or observe one or more of such terms, covenants or agreements; or (d) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable bankruptcy, 52 insolvency, reorganization or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of the property of it or ordering the winding-up or liquidation of the affairs of it and such decree or order shall remain unstayed and in effect for a period of 20 consecutive days; or (e) the Company shall commence a voluntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) of the Company or for any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts as they become due or shall take any corporate action in furtherance of any of the foregoing; or (f) an event of default, as defined in any indenture or instrument evidencing or under which the Company shall have outstanding at least $10,000,000 (or its equivalent in another currency), in aggregate principal amount of indebtedness for borrowed money, shall happen and be continuing and such default shall involve the failure to pay the principal of such indebtedness (or any part thereof), when due and payable after the expiration of any applicable grace period with respect thereto, or such indebtedness shall have been accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable, and failure to pay shall not have been cured by the Company within 30 days after such failure or such acceleration shall not be rescinded or annulled within 30 days after notice thereof shall have first been given to the Company; provided that if such event of default under such indenture or instrument shall be remedied or cured by the Company or waived by the holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of any of the holders of Securities; then the holder of this Security may, at such holder's option, declare the principal of this Security and the interest accrued hereon (and Additional Amounts under Section 2 hereof, if any, thereon) to be due and payable immediately by written notice to the Company and the Fiscal Agent, and if any such Event of Default shall continue at the time of receipt of such written notice, the principal of this Security and the interest accrued hereon (and Additional Amounts, if any, hereon) shall become immediately due and payable, subject to the proviso of subsection (c) of this Section 5. Upon payment of such amount of principal and interest (and Additional Amounts pursuant to Section 2 53 hereof, if any), all of the Company's obligations in respect of payment of principal of and interest on (and Additional Amounts, if any, on) this Security shall terminate. Interest on overdue principal and interest (and Additional Amounts, if any) shall accrue from the date on which such principal and interest (and Additional Amounts, if any) were due and payable to the date such principal and interest (and Additional Amounts, if any) are paid or duly provided for, at the rate borne by the Securities (to the extent payment of such interest shall be legally enforceable). If an Event of Default, as defined in this Section 5, with respect to the Securities, or an event which would, with the passing of time or the giving of notice, or both be an Event of Default, shall occur and be continuing, the Company shall within two business days of becoming aware thereof notify the Fiscal Agent in writing, of such Event of Default and the Fiscal Agent shall thereupon promptly notify all of the holders of the Securities of such Event of Default. The Company shall provide to the Fiscal Agent on each anniversary of the date hereof, a certificate to the effect that there is then existing no default with respect to the Securities, as defined in this Section. 6. Merger, Consolidation, Sale, Conveyance or Assumption. (a) The Company will not merge or consolidate with, or sell or convey all or substantially all of its assets to, any other corporation (for purposes hereof "corporation" shall include business trusts, limited partnerships, business corporations and other business entities), unless (i) either (A) the Company shall be the surviving corporation in the case of a merger or (B) (I) the surviving, resulting or transferee corporation shall expressly assume the due and punctual payment (including Additional Amounts pursuant to Section 2 hereof, if any) of all the Securities, according to their tenor, and the due and punctual performance of all of the covenants and obligations of the Company under the Securities, the coupons and the Fiscal Agency Agreement, by supplemental agreement reasonably satisfactory to the Fiscal Agent, (II) immediately after such merger, consolidation, sale or conveyance, the Securities will not be subject to United States Federal estate tax as a result thereof, if held by a person who at the time of death is not a citizen or resident of the United States unless such successor corporation shall have agreed, by supplemental agreement, to indemnify the persons liable therefor for the amount of United States Federal estate tax attributable and paid in respect of any Securities includable in the gross estate of a person who at the time of death is not a citizen or resident of the United States or unless the Securities would be subject to United States Federal estate tax immediately prior to such merger, consolidation, sale or conveyance if held by a person who at the time of death is not a citizen or resident of the United States, and (III) the Fiscal Agent shall have received the documentation 54 required in the context by the Fiscal Agency Agreement, (ii) the surviving, resulting or transferee corporation, if not organized and validly existing under the laws of the United States, shall expressly agree to make payments under the Securities free of any deduction or withholding for or on account of taxes, levies, imposts and charges whatsoever imposed by or for the account of the jurisdiction where such successor corporation is generally subject to taxation (or any political subdivision or taxing authority thereof or therein) in a manner equivalent to that set forth herein, subject to the exceptions contained in such forms of the Securities, and (iii) the Company or such successor corporation, as the case may be, shall not, immediately after such merger, consolidation, sale or conveyance, be in default in the performance of any covenants or obligations of the Company under the Securities or the Fiscal Agency Agreement. In calculating the amount of tax attributable to any Securities for purposes of sub-clause (II) above in accordance with the provisions of the Internal Revenue Code of 1986, as amended, the gross estate of the decedent shall be deemed to include only Securities issued under the Fiscal Agency Agreement. (b) Upon any merger, consolidation, sale, conveyance or assumption as provided in Section 6(a), the successor or assuming corporation shall succeed to and be substituted for, and may exercise every right and power of and be subject to all the obligations of, the Company under the Securities and Fiscal Agency Agreement, with the same effect as if such successor or assuming corporation had been named as the Company therein and herein and the Company shall be released from its liability as obligor under the Securities and Fiscal Agency Agreement. 7. INTENTIONALLY OMITTED 8. Replacement, Transfer and Exchange of Securities. (a) In case any Security shall at any time become mutilated, destroyed, stolen or lost and such Security or evidence of the loss, theft or destruction thereof (together with the indemnity hereinafter referred to and such other documents or proof as may be required) shall be delivered to the Fiscal Agent, a new Security of like tenor and date with appropriate interest coupons, if any, will be issued by the Company in exchange for the Security so mutilated, or in lieu of the Security so destroyed, stolen or lost, but, in the case of a destroyed, stolen or lost Security only upon receipt of evidence satisfactory to the Fiscal Agent and the Company that such Security was destroyed, stolen or lost, and if required by the Fiscal Agent or the Company, upon receipt also of indemnity satisfactory to the Fiscal Agent and the Company. All expenses and reasonable charges associated with procuring such indemnity and with the preparation, authentication and delivery of a new Security shall be borne by the owner of the Security so mutilated, destroyed, stolen or lost. 55 (b) As provided in the Fiscal Agency Agreement and subject to certain limitations therein set forth, Bearer Securities (with all unmatured coupons appertaining thereto) are exchangeable at, subject to applicable laws and regulations, the offices of the paying agencies in London and Luxembourg or as designated by the Company for such purpose pursuant to the Fiscal Agency Agreement, for an equal aggregate principal amount of Registered Securities and/or Bearer Securities of authorized denominations, and Registered Securities are exchangeable at the Corporate Trust Office of the Fiscal Agent in Providence, Rhode Island or The City of New York or, subject to applicable laws and regulations, the offices of the paying agencies in London and Luxembourg or as designated by the Company for such purpose pursuant to the Fiscal Agency Agreement, for an equal aggregate principal amount of Registered Securities of authorized denominations as requested by the holder surrendering the same. Registered Securities will not be exchangeable for Bearer Securities. The Company shall not be required (a) to exchange Bearer Securities for Registered Securities during the period between the close of business on any February 15 or August 15 and the opening of business on the next succeeding interest payment date, or (b) in the event of a redemption in part, (i) to register the transfer of Registered Securities or to exchange Bearer Securities for Registered Securities during a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Securities called for such redemption; (ii) to register the transfer of or exchange any such Registered Securities, or portion thereof, called for redemption; or (iii) to exchange any such Bearer Securities called for redemption; provided, however, that a Bearer Security called for redemption may be exchanged for a Registered Security which is simultaneously surrendered, with written instruction for payment on the date fixed for redemption, unless the date fixed for redemption is during the period between the close of business on any February 15 or August 15 and the close of business on the next succeeding interest payment date, in which case such exchange may only be made prior to the close of business on February 15 or August 15 immediately preceding the date fixed for redemption. The Company also shall not be required to exchange Securities if, as a result thereof, the Company would incur adverse consequences under United States Federal income tax laws in effect at the time of such exchange. In the event of redemption or conversion of a Registered Security in part only, a new Security or Securities for the unredeemed or unconverted portion hereof will be issued in the name of the holder thereof. (c) The costs and expenses of effecting any exchange or registration of transfer pursuant to the foregoing provisions, except for the expenses of delivery by other than regular mail (if any) and except, if the Company shall so require, the payment of a sum sufficient to cover any tax or other governmental charge or insurance charges that may be imposed in relation thereto, will be borne by the Company. 56 (d) The Company has initially appointed as registrar and transfer agent the Fiscal Agent acting through its principal corporate trust office in Providence, Rhode Island. The Company has also initially appointed Banque Generale du Luxembourg as a transfer agent. The Company may at any time terminate the appointment of the registrar and transfer agent and appoint additional or other registrars and transfer agents or approve any change in an office through which the registrar or transfer agent acts; provided that, until all of the Securities have been delivered to the Fiscal Agent for cancellation, or monies sufficient to pay the Securities have been made available for payment and either paid or returned to the Company as provided in the Securities, the Company will maintain a registrar and a transfer agent in The City of New York in the United States and in Luxembourg, so long as the Securities are registered on the Luxembourg Stock Exchange. (e) For purposes of the provisions of this Security and the Fiscal Agency Agreement, any Security authenticated and delivered pursuant to the Fiscal Agency Agreement shall, as of any date of determination, be deemed to be "outstanding", except for: (i) Securities previously converted, or canceled by the Fiscal Agent or delivered to the Fiscal Agent for cancellation; (ii) Securities which have been called for redemption by the Company in accordance with Section 3 hereof or which have become due and payable at maturity or otherwise and with respect to which monies sufficient to pay the principal thereof and interest thereon shall have been made available to the Fiscal Agent; or (iii) Securities in lieu of or in substitution for which other Securities have been authenticated and delivered pursuant to the Fiscal Agency Agreement; provided, however, that in determining whether the holders of the requisite principal amount of outstanding Securities are present at a meeting of holders of Securities for quorum purposes or have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any subsidiary thereof shall be disregarded and deemed not to be outstanding. 9. Modifications and Amendments. (a) Without the consent of any holders of Securities or coupons, modifications of or amendments to the Fiscal Agency Agreement may be made for any of the following purposes: (i) to evidence the succession of another corporation to the Company and the assumption by any such successor of the 57 covenants of the Company in the Fiscal Agency Agreement or the Securities; (ii) to add to the covenants of the Company for the benefit of the holders of Securities or coupons, or to surrender any right or power herein conferred upon the Company; (iii) to permit payment of principal and interest on Bearer Securities in the United States, provided that such payment is permitted by United States tax laws and regulations then in effect; (iv) to make provision with respect to the conversion rights of holders of Securities pursuant to Section 4(f) hereof; (v) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein; and (vi) to make any other provisions with respect to matters or questions arising under this Security or the Fiscal Agency Agreement, provided such action pursuant to this clause (vi) shall not adversely affect the interests of the holders of Securities or coupons. (b) Modifications and amendments to the Fiscal Agency Agreement or to these Securities may be made, and future compliance with or past default by the Company under any of the provisions thereof may be waived, with the consent of the holders of at least a majority in aggregate principal amount of the Securities at the time outstanding, or of such lesser percentage as may act at a meeting of holders of Securities held in accordance with the provisions set forth herein; provided, that no such modification, amendment or waiver may, without the consent of the holder of each such Security affected thereby: (i) waive a default in the payment of the principal of or interest on any Security; (ii) change the stated maturity of the principal of or any installment of interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or change the obligation of the Company to pay Additional Amounts pursuant to Section 2 hereof (except as permitted by subsection (a) of this Section 9), or change the coin or currency in which any Security or the interest thereon is payable, or convert any Securities as provided in Sections 3 and 4, respectively. (iii) reduce the requirements of Section 10 hereof for quorum or voting, or reduce the percentage in principal amount of the outstanding Securities the consent of whose holders is required for any amendment or modification of the Fiscal Agency Agreement or the Terms and Conditions of the Securities or the consent of whose holders is required for any waiver (of 58 compliance with certain provisions of the Fiscal Agency Agreement or the Securities or certain defaults hereunder and thereunder and their consequences) provided for in these Terms and Conditions; (iv) change the obligation of the Company to maintain an office or agency in the City of New York and outside the United States; or (v) modify any of the provisions of this Section except to increase any such percentage or to provide that certain other provisions of the Fiscal Agency Agreement or the Securities cannot be modified or waived without the consent of the holder of each outstanding Security affected thereby. It shall not be necessary for any act of holders of Securities under this Section to approve the particular form of any proposed amendment, modification or waiver, but it shall be sufficient if such act shall approve the substance thereof. Any modifications, amendments or waivers to the Fiscal Agency Agreement or to these Terms and Conditions will be conclusive and binding on all holders of the Securities, whether or not they have given such consent or, were present at such meeting, and on all holders of coupons, whether or not notation of such modifications, amendments or waivers is made upon the Securities or coupons, and on all future holders of Securities and coupons. Any instrument given by or on behalf of any holder of a Security in connection with any consent to any such modification, amendment or waiver will be irrevocable once given and will be conclusive and binding on all subsequent holders of such Security. 10. Meetings and Votes of Holders. (a) A meeting of holders of Securities may be called at any time and from time to time pursuant to this Section for any of the following purposes: (i) to give any notice to the Company or to the Fiscal Agent, or to give any directions to the Fiscal Agent, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by holders of Securities pursuant to these Terms and Conditions; or (ii) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of the Securities under any other provision of the Fiscal Agency Agreement, under applicable law or under these Terms and Conditions. (b) Meetings of holders of Securities may be held at such place or places in Providence, Rhode Island or The City of New York or London as the Fiscal Agent or, in case of its failure to act, the Company or the holders calling the meeting shall from time to time determine. The Fiscal Agent may at any time call a meeting of holders of the Securities to be held at such time and at such place in 59 any of such designated locations as the Fiscal Agent shall determine. Notice of every meeting of holders shall be made as specified in the Fiscal Agency Agreement. In case at any time the Company or the holders of at least 25% in aggregate principal amount of the Securities outstanding shall have requested the Fiscal Agent to call a meeting of the holders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Fiscal Agent shall not have given the first notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the holders of Securities in the amount above specified may determine the time and the place in such designated locations for such meeting and may call such meeting to take any action authorized herein by giving notice thereof as provided in the Fiscal Agency Agreement. (c) To be entitled to vote at any meeting of holders of Securities, a person shall be (i) a holder of one or more Securities, or (ii) a person appointed by an instrument in writing as proxy for a holder or holders of Securities by such holder or holders, which proxy need not be a holder of Securities. The only persons who shall be entitled to be present or to speak at any meeting of holders shall be the persons entitled to vote at such meeting and their counsel and any representatives of the Fiscal Agent and its counsel and any representatives of the Company and its counsel. The persons entitled to vote a majority in principal amount of the Securities shall constitute a quorum for the transaction of all business specified in subsection (a) hereof. No business shall be transacted in the absence of a quorum unless a quorum is represented when the meeting is called to order. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of the holders of Securities, be dissolved. In any other case the meeting shall be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in the Fiscal Agency Agreement. Subject to the foregoing, at the reconvening of any meeting adjourned for a lack of a quorum the persons entitled to vote 25% in principal amount of the Securities outstanding shall constitute a quorum for the taking of any action set forth in the notice of the original meeting. Notice of the reconvening of an adjourned meeting shall state expressly the percentage of the aggregate principal amount of the Securities that shall constitute a quorum. At a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid, any resolution and all matters (except as limited by Section 9 of these Terms and Conditions) shall be effectively passed and decided if passed or decided by the persons entitled to vote a majority in principal amount of the Securities represented and voting at such meeting, provided that 60 such amount shall be not less than 25% in principal amount of the Securities outstanding. Any holder of a Security who has executed an instrument in writing appointing a person as his proxy shall be deemed to be present for the purposes of determining a quorum and be deemed to have voted; provided, however, that such holder shall be considered as present or voting only with respect to the matters covered by such instrument in writing. Any resolution effectively passed or decision taken at any meeting of the holders of Securities duly held in accordance with this Section 10 shall be binding on all the holders of Securities whether or not present or represented at the meeting. (d) The Fiscal Agent may make such reasonable regulations as it may deem advisable for any meeting of holders of Securities in regard to proof of the holding of Securities and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Bearer Securities shall be proved by the production of the Bearer Securities or by a certificate executed, as depositary, by, and the appointment of any proxy shall be proved by having the signature of the person executing the proxy witnessed or guaranteed by, in each case, any trust company, bank or banker satisfactory to the Fiscal Agent. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified herein or other proof. The holding of Registered Securities shall be proved by the registry books maintained in accordance with the Fiscal Agency Agreement or by a certificate or certificates of the Fiscal Agent in its capacity as the Company's agent for the maintenance of such books. (e) The Fiscal Agent shall, by an instrument in writing, appoint a temporary chairperson and a temporary secretary of the meeting, unless the meeting shall have been called by the Company or by the holders of Securities as provided herein and in the Fiscal Agency Agreement, in which case the Company or the holders calling the meeting, as the case may be, shall in like manner appoint a temporary chairperson and a temporary secretary. A permanent chairperson and a permanent secretary of the meeting shall be elected by vote of the holders of a majority in principal amount of the Securities represented at the meeting and entitled to vote. At any meeting each holder or proxy shall be entitled to one vote for each U.S. $1,000 principal amount of Securities held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Securities challenged as not outstanding and ruled by the chairperson of the meeting to be not outstanding. The chairperson of the meeting shall have no right to vote, except as a holder or proxy. Any meeting of holders of Securities duly 61 called at which a quorum is present may be adjourned from time to time by vote of the holders (or proxies for the holders) of a majority in principal amount of the Securities represented at the meeting and entitled to vote; and the meeting may be held as so adjourned without further notice. (f) The vote upon any resolution submitted to any meeting of holders of Securities shall be written ballots on which shall be subscribed the signatures of the holders of Securities or of their representatives by proxy and the serial number or numbers of the Securities held or represented by them. The permanent chairperson of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record, at least in triplicate, of the proceedings of each meeting of holders of Securities shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was published as provided in the Fiscal Agency Agreement. Each copy shall be signed and verified by the affidavits of the chairperson and secretary of the meeting, and one of such copy shall be delivered to the Company and another to the Fiscal Agent to be preserved by the Fiscal Agent, the copy delivered to the Fiscal Agent to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. 11. Non-Business Days. In any case where the date of maturity of the principal of or interest on (or Additional Amounts, if any) the Securities or the date fixed for redemption of any Security shall be at any place of payment a Saturday, Sunday, a legal holiday or a day on which banking institutions in such place of payment are authorized or obligated by law to close, then payment of principal or interest (or Additional Amounts, if any) need not be made on such date at such place but may be made on the next succeeding day at such place of payment which is not a Saturday, Sunday, a legal holiday or a day on which banking institutions are authorized or obligated by law to close, with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date. 12. Fiscal and Paying Agent. (a) In acting under the Fiscal Agency Agreement and in connection with the Securities, the Fiscal Agent is acting solely as agent of the Company and does not assume any obligation towards or relationship of agency or trust for or with the owner 62 or holder of this Security or any interest coupon appertaining hereto, except that any funds held by the Fiscal Agent for payment on this Security shall be held in trust by it and applied as set forth herein, but need not be segregated from other funds held by it, except as required by law. For a description of the duties and the immunities and rights of the Fiscal Agent under the Fiscal Agency Agreement, reference is made to the Fiscal Agency Agreement, and the obligations of the Fiscal Agent to the holder hereof are subject to such immunities and rights. (b) Any monies paid by the Company to any paying agency for payment of principal of or interest on any Security (including Additional Amounts, if any, in respect thereof) and remaining unclaimed for two years after such payment has been made shall be repaid to the Company and to the extent permitted by law the holder of any Security shall thereafter look only to the Company for any payment thereof as a general unsecured obligation thereof and all liability of the Fiscal Agent with respect thereto shall cease. (c) No reference herein to the Fiscal Agency Agreement and no provision of this Security or of the Fiscal Agency Agreement shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest (including Additional Amounts, as described above) on this Security at the times, places and rate, and in the coin or currency, herein prescribed or to convert or redeem (at the request of a holder) this Security as provided herein or in the Fiscal Agency Agreement. Title to Bearer Securities and coupons shall pass by delivery. As provided in the Fiscal Agency Agreement and subject to certain limitations therein set forth, the transfer of Registered Securities is registrable on the Security Register upon surrender of a Registered Security for registration of transfer at the office or agency of the Company in Providence, Rhode Island or The City of New York, or, subject to applicable laws and regulations, at the offices of the paying agency in Luxembourg, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the holder thereof or his attorney duly authorized in writing, and thereupon one or more new Registered Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. 13. Notices. All notices to the holders of Securities will be published in an Authorized Newspaper (as defined in the Fiscal Agency Agreement) in Providence, Rhode Island, The City of New York and in London, and, as long as the Securities are listed on the Luxembourg Stock Exchange, in Luxembourg. It is expected that publication in Providence, Rhode Island and The City of New York 63 will be made in The Wall Street Journal (Eastern edition), in London in the Financial Times and in Luxembourg in the Luxemburger Wort. Notices shall be deemed to have been given on the date of publication as aforesaid or, if published on different dates, on the date of the first such publication. Notices will be mailed to registered holders of Registered Securities at their registered addresses as the same shall appear on the books of the Fiscal Agent on the day fifteen days prior to such mailing. 14. GOVERNING LAW. (a) THE FISCAL AGENCY AGREEMENT, THE SECURITIES AND ANY COUPONS APPERTAINING THERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. (b) THE COMPANY HAS APPOINTED FLEET NATIONAL BANK, 111 WESTMINSTER STREET, PROVIDENCE, RHODE ISLAND 02903 (ATTENTION: CORPORATE TRUST ADMINISTRATOR) AS ITS AGENT UPON WHOM PROCESS MAY BE SERVED IN ANY SUIT, ACTION OR PROCEEDING RELATING TO OR ARISING OUT OF THIS SECURITY, THE FISCAL AGENCY AGREEMENT OR ANY COUPON APPERTAINING HERETO, WITH A COPY TO THE COMPANY AT 128 TECHNOLOGY CENTER, WALTHAM, MASSACHUSETTS 02154 (ATTENTION: PRESIDENT). 15. Authentication. This Security and any coupon appertaining thereto shall not become valid or obligatory for any purpose until the certificate of authentication hereon shall have been duly signed by the Fiscal Agent acting under the Fiscal Agency Agreement. 16. Warranty of the Issuer. Subject to Section 15 hereof, the Company hereby certifies and warrants that all acts, conditions and things required to be done and performed and to have happened precedent to the creation and issuance of this Security and any coupons appertaining thereto, and to constitute the same legal, valid and binding obligations of the Company enforceable in accordance with their terms, have been done and performed and have happened in due and strict compliance with all applicable laws. 17. Accounting Terms. All accounting terms not otherwise defined herein shall have the meanings assigned to them in accordance with generally accepted accounting principles as applied in the United States. 18. Descriptive Headings. The descriptive headings appearing herein are for convenience of reference only and shall not alter, limit or define the provisions hereof. 64 TRANSFER NOTICE Only if a Registered Security or Shares issued upon conversion of any Security is transferred (if no registration statement covering such Shares is effective): FOR VALUE RECEIVED, the undersigned Holder hereby sell(s), assign(s) and transfer(s) unto _____________________________ _______________________________ whose taxpayer identification number is ________________ and whose address including postal/zip code is __________________________________________________ ___________________________________________________________ the within Security and all rights thereunder, hereby irrevocably constituting and appointing __________________________ attorney-in-fact to transfer said Security on the books of the Company with full power of substitution in the premises. In connection with the transfer of this Security, the undersigned Holder certifies that: [Check one) [ ] (a) This Security is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) in compliance with the exemption from registration under the Securities Act of 1933 provided by Rule 144A. [ ] (b) This Security is being transferred in an Offshore Transaction (as defined in Regulation S under the Securities Act of 1933) in compliance with the exemption from registration under the Securities Act of 1933 provided by Regulation S. [ ] (c) This Security is being transferred to a sophisticated institutional investor which is an "accredited investor" (within the meaning of Rule 501(a)(l), (2), (3) or (7) under the Securities Act of 1933) in a transaction not involving any general solicitation or advertising. Dated: Name: ------------- ----------------------- By: ------------------------- Title: ---------------------- 65 NOTICE: The signature of the Holder to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without enlargement or any change whatsoever. SIGNATURE GUARANTEED ---------------------------------------- TO BE COMPLETED BY A BROKER OR DEALER IF (c) ABOVE IS CHECKED: The undersigned represents and warrants that (i) it is a broker or dealer registered under Section 15 of the Securities Exchange Act of 1934, (ii) each person which will become a beneficial owner of this Security upon transfer is a sophisticated institutional investor which is an "accredited investor" (within the meaning of Rule 501(a)(l), (2), (3) or (7) under the Securities Act of 1933); (iii) no general solicitation or advertising was made or used by it in connection with the offer and sale of this Security to such person(s); and (iv) each such person has been notified that this Security has not been registered under the Securities Act of 1933 and is subject to the restrictions on transfer of the Security set forth herein and in the Fiscal Agency Agreement. Dated: -------------- ---------------------------- By: ------------------------ IF NONE OF THE FOREGOING BOXES IS CHECKED, THE FISCAL AGENT SHALL NOT BE OBLIGATED TO REGISTER THE TRANSFER OF THIS SECURITY UNLESS AND UNTIL THE CONDITIONS TO ANY SUCH TRANSFER OF REGISTRATION SET FORTH HEREIN, ON THE FACE HEREOF AND IN THE FISCAL AGENCY AGREEMENT SHALL HAVE BEEN SATISFIED. 66 CONVERSION NOTICE If or Bearer Security of denomination U.S. $1,000: The undersigned holder of this Security hereby irrevocably exercises the option to convert this Security into Shares of Meditrust in accordance with the terms of this Security and directs that such shares be registered in the name of and delivered, together with a check in payment for any fractional share, to the undersigned unless a different name has been indicated below. If shares are to be registered in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Dated: -------------- ---------------------- Signature [MUST BE GUARANTEED] If shares are to be registered in the name of and delivered to a person other than the holder, please print such person's name and address: - ----------------------------- - ----------------------------- - ----------------------------- HOLDER Please print name and address of holder: ------------------------------ ------------------------------ ----------------------------- 67 CONVERSION NOTICE If Registered Security or Bearer Security of denomination U.S. $10,000: The undersigned holder of this Security hereby irrevocably exercises the option to convert this Security, or portion hereof (which is U.S. $1,000 or an integral multiple thereof) below designated, into Shares of Meditrust in accordance with the terms of this Security, and directs that such Shares, together with a check in payment for any fractional share and any Securities representing any unconverted principal amount hereof, be delivered to and be registered (if a Registered Security) in the name of the undersigned unless a different name has been indicated below. If shares or Securities are to be registered in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Dated: -------------- ---------------------------- Signature [MUST BE GUARANTEED] If shares or Securities are to If only a portion of the registered in the name of a , Securities is to be Person other than the holder, converted please indicate: please print such person's name and address: 1. Principal Amount to be con- verted: U.S.$ - ----------------------------- --------- 2. Kind, amount and denomina- - ----------------------------- tion of Securities repre- senting unconverted prin- - ----------------------------- cipal amount to be issued: Bearer-U.S.$ -------------- Denominations: U.S.$______ (U.S. $1,000 or $10,000) Registered-U.S.$__________ Denominations: U.S.$______ (U.S. $1,000 or an integral multiple thereof) REGISTERED SECURITIES ARE NOT EXCHANGEABLE FOR BEARER SECURITIES. 68 EXHIBIT B 69 (FORM OF GLOBAL SECURITY) THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). NEITHER THIS SECURITY NOR ANY PORTION HEREOF MAY BE OFFERED OR SOLD DIRECTLY OR INDIRECTLY IN THE UNITED STATES OF AMERICA, ITS TERRITORIES OR POSSESSIONS ("UNITED STATES") OR TO CITIZENS, NATIONALS OR RESIDENTS THEREOF OR TO ANY CORPORATION, PARTNERSHIP OR OTHER ENTITY CREATED OR ORGANIZED IN OR UNDER THE LAWS OF THE UNITED STATES OR ANY POLITICAL SUBDIVISION THEREOF OR TO ANY ESTATE" OR TRUST WHICH IS SUBJECT TO UNITED STATES FEDERAL INCOME TAXATION REGARDLESS OF THE SOURCE OF ITS INCOME OR TO ANY OTHER PERSON DEEMED A U.S. PERSON UNDER REGULATION S UNDER THE SECURITIES ACT, EXCEPT BRANCHES OR AGENCIES OF UNITED STATES BANKS OR INSURANCE COMPANIES THAT OPERATE OUTSIDE THE UNITED STATES FOR VALID BUSINESS REASONS AS LOCALLY REGULATED BRANCHES OR AGENCIES ENGAGED IN THE BANKING OR INSURANCE BUSINESS AND NOT SOLELY FOR THE PURPOSE OF INVESTING IN SECURITIES NOT REGISTERED UNDER THE SECURITIES ACT ("UNITED STATES PERSONS") OTHER THAN ANY PORTION OF THIS SECURITY SOLD, SUBJECT TO CERTAIN RESTRICTIONS, PURSUANT TO REGULATION S UNDER THE SECURITIES ACT. ANY UNITED STATES PERSON WHO HOLDS THIS SECURITY WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE CODE. MEDITRUST (Originated in the Commonwealth of Massachusetts) 7% CONVERTIBLE DEBENTURES DUE 1998 TEMPORARY GLOBAL DEBENTURE Meditrust, a corporation duly organized and existing under the laws of the Commonwealth of Massachusetts (the "Company") for value received, hereby promises to pay to bearer upon presentation and surrender of this Global Security the Principal sum of ___________________________________________ United States Dollars on March 1, 1998, and to pay interest thereon, from the date hereof, semiannually in arrears on March 1 and September 1 in each year, commencing September 1, 1993, at the rate of 7% per annum, until the principal hereof is paid or made available for payment, provided, however, that interest on this Global Security shall be payable only after the issuance of the Definitive Securities for which this Global Security is exchangeable and, in the case of Definitive Securities in bearer 70 form, only upon presentation and surrender of the interest coupons thereto attached as they severally mature. This Global Security is one of a duly authorized issue of Securities of the Company designated as specified in the title hereof (the "Securities"). This Global Security and the Definitive Securities for which it is exchangeable, as described below, are limited to the aggregate principal amount of $___________ and are entitled to the benefits of a Fiscal Agency Agreement of even date herewith (the "Fiscal Agency Agreement") among the Company and Fleet National Bank, as Fiscal Agent, Paying Agent, Security Registrar, and Conversion Agent (the "Fiscal Agent"). It is a temporary security and is exchangeable in whole or from time to time in part without charge upon request of the holder hereof for Definitive Securities in bearer form, with interest coupons attached, (a) not earlier than 40 days after the date hereof and (b) as promptly as practicable following presentation of certification, in the form set forth as Exhibits C and D of the Fiscal Agency Agreement for such purpose, that the beneficial owner or owners of this Global Security (or, if such exchange is only for a part of this Global Security, of such part) are not United States Persons. Upon any exchange of a part of this Global Security for Definitive Securities, the portion of the principal amount hereof so exchanged shall be endorsed by the Fiscal Agent on the Schedule of Exchanges hereto, and the principal amount hereof shall be reduced for all purposes by the amount so exchanged. Until exchanged in full for Definitive Securities, this Global Security shall in all respects be entitled to the same benefits under, and subject to the same terms and conditions of, the Fiscal Agency Agreement as Definitive Securities authenticated and delivered thereunder, except that neither the holder hereof nor the beneficial owners of this Global Security shall be entitled to receive payment of interest hereon, except as provided above, or to convert this Global Security into Shares of the Company or any other security, cash or other property. This Global Security shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. All terms used in this Global Security which are defined in the Fiscal Agency Agreement shall have the meanings assigned to them in the Fiscal Agency Agreement. Unless the certificate of authentication hereon has been executed by an authorized signatory of the Fiscal Agent, this Global Security shall not be valid or obligatory for any purpose. 71 IN WITNESS WHEREOF, the Company has caused this Global Security to be duly executed in its corporate name by its duly authorized signatory. Dated as of , 1993 -----------, MEDITRUST By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- CERTIFICATE OF AUTHENTICATION This is the Global Security described in the within-mentioned Fiscal Agency Agreement. Fleet National Bank, as Fiscal Agent By: ---------------------------------- Authorized Signatory 72 SCHEDULE OF EXCHANGES
Remaining principal Principal amount amount exchanged following Notation made Date for Definitive such on behalf of made Securities exchange the Fiscal Agent - ---- ---------------- --------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ----------------
73
Remaining principal Principal amount amount exchanged following Notation made Date for Definitive such on behalf of made Securities exchange the Fiscal Agent - ---- ---------------- --------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ---------------- - ----- ---------------- ----------- ----------------
74 EXHIBIT C 75 Form of Certificate to be Given by The Euroclear Operator and CEDEL S.A. CERTIFICATION U.S. $______________ 7% Convertible Debentures due March 1, 1998 (the "Securities") This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organizations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our "Member Organizations") substantially to the effect set forth in the Fiscal Agency Agreement, as of the date hereof, [principal amount of the above-captioned Securities] is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source or any other person deemed a "U.S. person" under Regulation S under the U.S. Securities Act of 1933, as amended ("United States persons"). As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its territories and possessions, including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We further certify (i) that we are not making available herewith for exchange any portion of the Global Security excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organization with respect to any portion of the part submitted herewith for exchange are no longer true and cannot be relied upon as the date hereof. We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or 76 threatened in connection with which this certification is or would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings. Dated: ______________, 1993 * Yours faithfully, [________________________________ (______________________ Office) as Operator of the Euroclear System] [CEDEL S.A.]** By: ---------------------------- - ------------------------- * To be dated no earlier than the date which is 40 days after _____________, 1993. ** Delete as appropriate. 77 EXHIBIT D 78 Form of Certificate of Beneficial Ownership for Bearer Securities to be Provided to the Euroclear Operator or to CEDEL S.A. CERTIFICATION U.S. $________________ 7% Convertible Debentures due March 1, 1998 (the "Securities") This is to certify that as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account are owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to the United States Federal income taxation regardless of its source or any other person deemed a "U.S. person" under Regulation S under the United States Securities Act of 1933, as amended ("United States persons"). As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its territories and possessions, including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Securities held by you for our account in accordance with your operating procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date. This certification excepts and does not relate to $____________ of such interest in the above Securities in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Securities cannot be made until we do so certify. We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or 79 would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings. Dated: ______________, 199_ * [Name] By: ----------------------------- Signature As, or as agent for, the beneficial owner(s) of the Securities to which this certificate relates. - ------------------------- * Not earlier than 15 days prior to the date which is 40 days after _______________, 1993. 80 EXHIBIT E 81 Form of Certificate of Beneficial Ownership for Registered Securities to be Provided to the Euroclear Operator or to CEDEL S.A. Please issue $_________ of the U.S. $____________ 7% Convertible Debentures due March 1, 1998 (the "Securities"), of Meditrust held by you for our account in registered form. We hereby certify to you that we are not a U.S. person as defined in Regulation S under the United States Securities Act of 1933, as amended. The exact name of the beneficial holder that the Securities are to be registered in is as follows: We hereby certify that we have provided such certifications on Form W-8 or its equivalent as may be necessary to avoid imposition of withholding and/or back-up withholding under U.S. federal tax law with respect to any payments of interest on the Securities. We irrevocably authorize you to produce this certificate or a copy hereof to any interested party in any administrative or proceedings with respect to the matters covered by this certificate. Dated: ______________, 1993* [NAME] By: ----------------------------- Signature [to be completed by the account holder as, or as agent for, the beneficial owner(s) of the Securities to which this certificate relates.] - ------------------------- * To be dated not earlier than the date which is 40 days after _____________, 1993. EX-4.7 3 FORM OF FISCAL AGENCY AGREEMENT DATED 11-15-93 1 EXHIBIT 4.7 FISCAL AGENCY AGREEMENT dated as of November 15, 1993 between MEDITRUST and FLEET NATIONAL BANK, as Fiscal Agent 2 FISCAL AGENCY AGREEMENT, dated as of November 15, 1993, between MEDITRUST, a business trust duly organized and validly existing under the laws of the Commonwealth of Massachusetts (the "Company"), and Fleet National Bank, a banking corporation duly organized and validly existing under the laws of the United States of America. 1. The Securities. The Company has by a Placement Agency Agreement, dated as of November 2, 1993 (the "Placement Agency Agreement"), among the Company and NatWest Securities Limited, as representative of the several placement agents (collectively, the "Placement Agents"), agreed to issue up to U.S.$86,250,000 aggregate principal amount of its 6-7/8% Convertible Debentures Due 1998 (hereinafter referred to as the "Securities"). Interest on the Securities shall be calculated on the basis of a 360 day year comprised of twelve 30 day months. Except as set forth in the next sentence, the Securities will initially be issued in temporary form, and will subsequently be exchanged for Securities in definitive form either as bearer Securities ("Bearer Securities"), in denominations of U.S. $1,000 and U.S. $10,000 and with interest coupons attached, representing the semiannual interest payable thereon, or as fully registered Securities ("Registered Securities"), in denominations of U.S. $1,000 and integral multiples thereof. The Securities in definitive form shall be substantially in the form of Exhibit A hereto (the "Definitive Securities"). The Securities will be convertible as provided in Section 4 of the Definitive Securities and Section 7 hereof. The Securities may be redeemed by the Company as provided in Section 3 of the Definitive Securities and Section 6 hereof. The temporary global debenture in respect of the Securities will be issued in bearer form without coupons in the aggregate principal amount of the entire issue of Securities, substantially in the form of Exhibit B hereto (the "Global Security"). The Definitive Securities and the Global Security shall contain such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Agreement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistent herewith, be determined by the officer of the Company executing such Securities, as evidenced by his execution of such Securities. 2. Appointment of Agents and Security Registrar. (a) The Company hereby appoints Fleet National Bank, at present having its principal corporate trust office at 111 Westminster Street, Providence, Rhode Island 02903 and having an agent with an office in London at Fleet Bank of Massachusetts, N.A., 40-41 St. Andrews Hill, London EC4V 5DE England, as its fiscal agent in respect of the Securities upon the terms and subject to the conditions herein set forth. (Fleet National Bank and its successor or successors as such fiscal agent qualified and appointed in accordance with Section 11 hereof are herein called the "Fiscal Agent.") The Fiscal Agent shall have the 3 powers and authority granted to and conferred upon it herein and in the Securities, and such further powers and authority, acceptable to it, to act on behalf of the Company as the Company may hereafter grant to or confer upon it. (b) In addition, the Company hereby appoints Fleet National Bank at present located at 111 Westminster Street, Providence, Rhode Island 02903 acting through its agent's office in London at Fleet Bank of Massachusetts, N.A., 40-41 St. Andrews Hill, London EC4V 5DE England, as its paying agent in respect of the Securities upon the terms and subject to the conditions herein set forth. (Fleet National Bank and its successor or successors as such paying agent qualified and appointed in accordance with Section 11 hereof are herein called the "Paying Agent.") The Paying Agent shall have the powers and authority granted to and conferred upon it herein and in the Securities, and such further powers and authority, acceptable to it, to act on behalf of the Company as the Company may hereafter grant to or confer upon it. As used herein, "paying agencies" shall mean paying agencies maintained by the Company as provided in Section 12(f) hereof. (c) The Company hereby appoints Fleet National Bank, at present located at 111 Westminster Street, Providence, Rhode Island 02903, acting through its agent's office in London at Fleet Bank of Massachusetts, N.A., 40-41 St. Andrews Hill, London EC4V 5DE England, as its conversion agent in respect of the Securities upon the terms and subject to the conditions herein set forth (Fleet National Bank and its successor or successors as such conversion agent qualified and appointed in accordance with Section 11 hereof are herein called the "Conversion Agent," and the Paying Agent, the Conversion Agent, the Transfer Agents (as herein defined) and the Fiscal Agent are sometimes herein referred to severally as an "Agent" and, collectively, as the "Agents"). The Conversion Agent shall have the powers and authority granted to and conferred upon it herein and in the securities, and such further powers and authority, acceptable to it, to act on behalf of the Company as the Company may hereafter grant to or confer upon it. As used herein, "conversion agencies" shall mean conversion agencies maintained by the Company as provided in Section 12(f) hereof. (d) The Company shall cause to be kept at the principal corporate trust office of the Fiscal Agent a register (the registers maintained in such office and in any other office or agency designated for such purpose (which office shall be located outside of the United Kingdom) being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as the Company may prescribe, the Company shall provide for the registration of Registered Securities and of transfers of Registered Securities. The Fiscal Agent is hereby appointed "Security Registrar" for the -2- 4 purpose of registering Registered Securities and transfers of Registered Securities as herein provided. 3. Registration and Transfer. (a) Upon surrender for registration of transfer of any Registered Security at any office or agency designated for such purpose by the Company pursuant to Section 12(g) hereof, the Company shall execute, and the Fiscal Agent shall authenticate and register and make available for delivery, in the name of the designated transferee or transferees, one or more new Registered Securities of any authorized denominations and of a like aggregate principal amount. (b) Bearer Securities may, at the option of the holder thereof, be exchanged for an equal aggregate principal amount of Registered Securities in denominations of $1000 and integral multiples thereof without coupons and/or Bearer Securities of authorized denominations, upon surrender of the Bearer Securities to be exchanged at any office or agency designated for such purpose by the Company pursuant to Section 12(g), with all unmatured coupons and all matured coupons in default thereto appertaining. If such holder is unable to produce any such unmatured coupon or coupons or matured coupon or coupons in default, such exchange may be effected if the Bearer Securities are accompanied by payment (which payment shall be deposited in the Company's account with the Fiscal Agent) in an amount equal to the face amount of such missing coupon or coupons, or the surrender of such missing coupon or coupons may be waived by the Company in writing if there be furnished to it such security or indemnity as it may require to save it, the Fiscal Agent, the Paying Agent and any paying agency harmless. If thereafter the holder of such Security shall surrender to any paying agency any such missing coupon in respect of which such a payment shall have been made, such holder shall be entitled to receive the amount of such payment (which shall be provided to the Fiscal Agent by the Company). Registered Securities may, at the option of the holder thereof, be exchanged for Registered Securities of any other authorized denominations and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at any office or agency designated for such purpose by the Company pursuant to Section 12(g). Registered Securities shall not be exchangeable for Bearer Securities. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Fiscal Agent shall authenticate and deliver the Registered Securities which the holder making the exchange is entitled to receive. (c) All Securities issued upon any registration of transfer or exchange of Securities shall be the valid -3- 5 obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Securities surrendered upon such registration of transfer or exchange. (d) Every Registered Security presented for registration of transfer or surrendered for exchange shall be duly endorsed in blank, or be accompanied by a written instrument of transfer in form satisfactory to the Company, the Fiscal Agent and the Transfer Agent to which such Security is presented or surrendered and the Security Registrar, duly executed by the holder thereof or his attorney duly authorized in writing. In the case of Registered Securities, all such instruments shall comply with the provisions of paragraph (a) above. The registration of the transfer of a Registered Security by the Security Registrar shall be deemed to be the written acknowledgement of such transfer by the Company. (e) No service charge shall be made for any exchange or registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Securities, other than exchanges pursuant to Section 4 hereof or not involving any registration of transfer. (f) Neither the Company nor the Fiscal Agent nor any of the offices or agencies designated for the purposes specified in Section 12(f) nor any Transfer Agent shall be required (i) to exchange Bearer Securities for Registered Securities during the period between the close of business on the Record Date (as defined in Section 5 hereof) and the opening of business on the next succeeding interest payment date, (ii) to exchange any Bearer Security (or portion thereof) for a Registered Security if the Company shall have determined and informed the Fiscal Agent in writing that, as a result thereof, the Company may incur adverse consequences under the Federal income tax laws and regulations (including proposed regulations) of the United States in effect or proposed at the time of such exchange, or (iii) in the event of a redemption in part, (A) to register the transfer of Registered Securities or to exchange any Bearer Securities for Registered Securities during a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Securities to be redeemed, or (B) to register the transfer of or exchange any Registered Security so selected for redemption in whole or in part, except portions not being redeemed of Securities being redeemed in part, or (C) to exchange any Bearer Security called for redemption; provided, however, that a Bearer Security called for redemption may be exchanged, on the terms and conditions set forth above, for a Registered Security that is simultaneously surrendered, with written instruction for payment on the date fixed for redemption, -4- 6 unless the redemption date is between the close of business on any Record Date and the close of business on the next succeeding interest payment date, in which case such exchange may only be made prior to the Record Date immediately preceding the redemption date. 4. Global Security; Exchange. (a) The Securities shall initially be in the form of the Global Security. The Global Security shall be authenticated by the Fiscal Agent upon the order of the Company on the same conditions, in substantially the same manner and with the same effect as the Definitive Securities. The Global Security will be issued upon payment to the Company or its order in United States dollars in next-day funds by check or wire transfer to a United States dollar account designated by the Company, at 2:30 p.m., London time, on November 15, 1993, or at such other time on the same or such other date, not later than 5:00 p.m., London time, on the fifth business day in London thereafter, as the Placement Agents and the Company may agree. Such payment will be made (1) upon authorization from the Placement Agents and (2) against delivery of the Global Security for the balance of the Securities to The Chase Manhattan Bank, N.A., London office, as depositary (the "Common Depositary") for Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System (the "Euroclear Operator"), and Centrale de Livraison de Valeurs Mobilieres S.A. ("CEDEL S.A."). The Global Security shall be held on deposit with the Common Depositary for the accounts of the Euroclear Operator and CEDEL S.A., for credit to the Placement Agents' respective Securities Clearance Accounts (or to such other accounts as the Placement Agents may have specified) with the Euroclear Operator or CEDEL S.A. (b) Without unnecessary delay but in any event not less than 15 days prior to the Exchange Date (as defined below), the Company will execute and deliver to the Fiscal Agent at its agent's office in London Definitive Securities in the aggregate principal amount outstanding in the Global Debenture. "Exchange Date" means the date following the expiration of the 40-day period commencing on the Closing Date. On or after the Exchange Date, the Global Security may be surrendered to the Fiscal Agent to be exchanged, as a whole or in part, for Definitive Bearer Securities without charge, and the Fiscal Agent shall authenticate and deliver, in exchange for such Global Security or the portions thereof to be exchanged, an equal aggregate principal amount of Definitive Bearer Securities, but only upon presentation to the Fiscal Agent at its agent's office in London of a certificate of the Euroclear Operator or CEDEL S.A. with respect to the Global Security or portions thereof being exchanged, substantially in the form of Exhibit C hereto, to the effect that Morgan Guaranty Trust Company of New York as -5- 7 operator of the Euroclear System (the "Euroclear Operator") or Centrale de Livraison de Valeurs Mobilieres S.A. ("CEDEL S.A.") has received a certificate or certificates in substantially the form set forth in Exhibit D hereto dated no earlier than 15 days prior to the Exchange Date and signed by the person appearing in its records as the owner of the Global Security or portions thereof being exchanged. Similarly, after the Exchange Date, portions of the Global Security may be exchanged for an equal aggregate principal amount of Definitive Registered Securities upon presentation to the Fiscal Agent at its agent's office in London of a certificate substantially in the form of Exhibit E hereto. (c) Only Bearer Securities may be issued upon receipt by the Euroclear Operator or CEDEL S.A. of a certificate or certificates in the form of Exhibit D hereto. Bearer Securities will be delivered only outside the United States, its territories or possessions. Only Registered Securities may be issued upon receipt by the Euroclear Operator or CEDEL S.A. of a certificate or certificates in the form of Exhibit E hereto. (d) The delivery to the Fiscal Agent by the Euroclear Operator or CEDEL S.A. of any certificate referred to above may be relied upon by the Company and the Fiscal Agent as conclusive evidence that a corresponding certificate or certificates has or have been delivered to the Euroclear Operator or CEDEL S.A. pursuant to the terms of this Agreement. (e) Upon any such exchange of a portion of the Global Security for a Definitive Security or Securities, the Global Security shall be endorsed by the Fiscal Agent to reflect the reduction of its principal amount by an amount equal to the aggregate principal amount of such Definitive Security or Securities. Until so exchanged in full, the Global Security shall in all respects be entitled to the same benefits under this agreement as Definitive Securities authenticated and delivered hereunder. 5. Payment. (a) The Company will pay or cause to be paid to the Paying Agent the amounts, at the times and for the purposes, set forth herein and in the text of the Securities, and the Company hereby authorizes and directs the Paying Agent to make payment of the principal of and interest on and Additional Amounts (as defined in Section 2 of the Definitive Securities), if any, on the Securities from such payments. (b) At least 15 days prior to the date on which any payment of Additional Amounts shall be required to be made pursuant to Section 2 of the Definitive Securities, the Company will furnish the Paying Agent, each other paying agency of the -6- 8 Company and the Fiscal Agent with a certificate of one of its duly authorized officers instructing the Paying Agent and each other paying agency of the Company as to the amounts required (i) to be deducted or withheld for or on account of any taxes described in Section 2 of the Definitive Securities from a payment to be made on that date and (ii) to be paid to each holder of Securities or coupons as Additional Amounts pursuant to that paragraph. If the foregoing amounts are not uniform for all holders, then the Company's certificate shall specify by country of residence or other factor, with reasonable clarity, the amounts required to be deducted or withheld and to be paid as Additional Amounts for each holder or class of holders of the Securities or coupons. In the absence of its receipt of any such certificate from the Company, the Paying Agent may make payment without deduction or withholding. The Company hereby agrees to indemnify the Paying Agent, each other paying agency of the Company and the Fiscal Agent for, and to hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part, arising out of or in connection with actions taken or omitted by any of them in reliance on any certificate furnished pursuant to this Section. (c) Interest on any Registered Security that is payable, and is punctually paid or duly provided for, on any interest payment date shall be paid to the person in whose name that Security is registered at the close of business on the May 1 or November 1 immediately preceding such interest payment date (each a "Record Date"). In case a Bearer Security is surrendered for exchange for a Registered Security after the close of business on any Record Date and before the opening of business on the next succeeding interest payment date, the Fiscal Agent shall not be required to perform such transfer or exchange of such Security. (d) In the case of any Registered Security which is converted after any Record Date and on or prior to the next succeeding interest payment date (other than any Registered Security called for redemption prior to such interest payment date), interest that is payable on such interest payment date shall be payable on such interest payment date notwithstanding such conversion, and such interest shall be paid to the person in whose name that Registered Security is registered at the close of business on such Record Date. Except as otherwise expressly provided in the immediately preceding sentence, in the case of any Security which is converted, interest that is payable after the date of conversion on such Security shall not be payable. (e) Any interest on any Registered Security that is payable, but is not punctually paid or duly provided for, on any interest payment date shall forthwith cease to be payable to the registered holder thereof on the relevant Record Date by virtue of having been such holder, and such defaulted interest -7- 9 may be paid by the Company to the registered holder of such Registered Security on a subsequent record date established by the Company in any lawful manner if, after written notice given by the Company to the Fiscal Agent of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Fiscal Agent. (f) Subject to the foregoing provisions of this Section 5, each Security delivered under this Agreement upon registration of transfer of or in exchange for or in lieu of any other Security shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. (g) In order to provide for the payment of the principal of and interest on the Securities as the same shall become due and payable, the Company shall pay to the Paying Agent at its agent's office in London, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts therein, and in same day funds, the following amounts (and the Company shall give notice to the Fiscal Agent at least one full business day prior to the date payment is due to the Paying Agent as to the means of such payment), to be held and applied by the Paying Agent as hereinafter set forth: (i) The Company shall pay to the Paying Agent on the business day immediately prior to each interest payment date in immediately available funds an amount sufficient to pay the interest due on (and Additional Amounts, if any, on) all the Securities outstanding on such interest payment date, and the Paying Agent shall apply the amounts so paid to it to the payment of such interest (and Additional Amounts, if any) on such interest payment date. (ii) If the Company shall elect, or shall be required, to redeem the Securities in accordance with Section 6 hereof, the Company will pay to the Paying Agent on the business day immediately prior to the date fixed for redemption thereof in immediately available funds an amount sufficient (with any amount then held by the Paying Agent and available for the purpose) to pay the redemption price of the Securities called for redemption on the redemption date or entitled to be redeemed, together with accrued interest thereon (and Additional Amounts, if any, thereon) to the date fixed for redemption if such redemption date occurs on an interest payment date, and the Paying Agent shall apply such amount to the payment of the redemption price and accrued interest (and Additional Amounts, if any) in accordance with the terms of the Securities. -8- 10 (iii) On the business day immediately prior to the maturity date of the Securities, the Company shall pay to the Paying Agent in immediately available funds an amount which, together with any amounts then held by the Paying Agent, and available for payment thereof, shall be equal to the entire amount of principal and interest (and Additional Amounts, if any) to be due on such maturity date on all the Securities then outstanding, and the Paying Agent shall apply such amount to the payment of the principal of and interest on (and Additional Amounts, if any, on) the Securities in accordance with the terms of the Securities. 6. Redemption. If, under the circumstances described in Section 3 of the Definitive Securities, the Company shall elect to redeem the outstanding Securities, the following provisions shall be applicable: (a) The Company shall, at least 75 days (or such shorter period as shall be reasonably acceptable to the Fiscal Agent) before the date designated for any redemption, give written notice to the Agents of its election to redeem the outstanding Securities on the redemption date specified in such notice and state in such notice that the conditions precedent to such redemption have occurred and describe them and shall request the Fiscal Agent to arrange for publication and mailing of the notice specified in clause (c) below. (b) In case the Company shall give notice to the Agents of its election to redeem the Securities, the Fiscal Agent shall cause to be published on behalf of the Company a notice of redemption in accordance with the provisions of Section 3 of the Definitive Securities and shall mail by first-class mail a copy of the notice to each holder of a Registered Security at the address of such holder as it shall appear in the Security Register. The Fiscal Agent shall send a copy of such notice of redemption to the Company, the Paying Agent (if different from the Fiscal Agent) and each other paying agency of the Company. (c) Such notice shall be published on behalf and at the expense of the Company in an Authorized Newspaper (as defined in Section 19 hereof), as provided in Section 19 of this Agreement and Section 3 of the Definitive Securities. In the case of a redemption in whole at the option of the Company, notice will be given once not more than 60 nor less than 30 days prior to the date fixed for redemption. In the case of a partial redemption, notice will be given twice, the first such notice to be given not more than 75 nor less than 60 days prior to the date fixed for redemption and the second such notice to be given not more than 60 and not less than 30 days prior to the date fixed for redemption. The Company shall notify the Fiscal Agent -9- 11 promptly of the specific outstanding Securities to be called for redemption. Notwithstanding any other provision of this Section 6, with respect to redemptions described in Section 3(a) of the Definitive Securities, the Securities will be immediately redeemable, at the option of and upon notice by the Company to the Fiscal Agent as provided in this Section 6, to the extent deemed sufficient in the opinion of the Company's Board of Trustees to prevent the holder of such Securities or any other person having an interest therein if the Securities were thereupon converted from being deemed to own shares of beneficial interest of the Company ("Shares") in excess of the limits prescribed in Article VI, Section 6.15 of the Company's Restated Declaration of Trust, as amended, provided the Company shall notify the Fiscal Agent from time to time with respect to the number of Shares that would exceed such limits. 7. Conversion of Securities. (a) Subject to and upon compliance with the provisions of this Section 7, at the option of the holder thereof, any Definitive Security or, in the case of any Registered Security or Bearer Security of a denomination other than $1,000, any portion of the principal amount thereof which is $1,000 or an integral multiple of $1,000 may be converted at any time on or after the date which is, in the case of Bearer Securities, the Exchange Date, at the principal amount thereof, or of such portion thereof, into fully paid and nonassessable Shares as set forth in the Definitive Securities. The price at which Shares shall be delivered upon conversion (herein called the "Conversion Price") shall be initially $37.125 per Share. The Conversion Price shall be adjusted in certain instances as provided in paragraphs (c)(i), (ii), (iii), (iv), (vi) and (vii) of Section 4 of the Definitive Securities. Notwithstanding the foregoing, a holder may not convert any Security, and such Security shall not be convertible by any holder, if as a result of such conversion any person would then be deemed to own Shares in excess of the limits prescribed in Article VI, Section 6.15 of the Company's Restated Declaration of Trust, as amended. (b) In order to exercise the conversion privilege, the holder of any Security to be converted shall surrender such Security, or, if less than the entire principal amount of a Registered Security or Bearer Security of a denomination other than $1,000 is to be converted, the portion thereof to be converted, together with all unmatured coupons and any matured coupons in default appertaining thereto, at the office of the Conversion Agent or any office or agency of the Company maintained for that purpose pursuant to Section 12(f), accompanied by written notice, in substantially the form set forth in the Definitive Security, to the Company, at such office -10- 12 or agency that the holder elects to convert such Security. Registered Securities surrendered for conversion during the period after the close of business on any Record Date next preceding any interest payment date to the close of business on such interest payment date shall (except in the case of Registered Securities or portions thereof which have been called for redemption on a redemption date within such period) be accompanied by payment of an amount equal to interest payable on such interest payment date on the principal amount being surrendered for conversion. Except as otherwise provided in the immediately preceding sentence and subject to Section 5(d), no payment or adjustment shall be made upon any conversion on account of any interest accrued on the Securities surrendered for conversion or on account of any dividends on the Shares issued upon conversion. (c) Securities shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Securities for conversion in accordance with the foregoing provisions, and at such time the rights of the holders of such Securities as holders shall cease, and the person or persons entitled to receive the Shares issuable upon conversion shall be treated for all purposes as the record holder or holders of such Shares at such time. As promptly as practicable on or after the conversion date, the Company shall cause to be issued or delivered at such office or agency a certificate or certificates for the number of full Shares issuable or deliverable upon conversion, together with payment, in lieu of any fraction of a share, as provided below. (d) In the case of any Registered Security or Bearer Security of a denomination other than $1,000 which is converted in part only, upon such conversion the Company shall execute and the Fiscal Agent shall authenticate and deliver to the holder thereof, at the expense of the Company, a new Security or Securities of any authorized kind or denomination as requested by such holder, in aggregate principal amount equal to the unconverted portion of the principal amount of such Security. (e) No fractional Shares shall be issued or delivered upon conversion of Securities. If more than one Security shall be surrendered for conversion at one time by the same holder, the number of full shares which shall be issuable or deliverable upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Securities (or, in the case of Registered Securities or Bearer Securities of a denomination other than $1,000, specified portions thereof) so surrendered. Instead of any fractional Share which would otherwise be issuable or deliverable upon conversion of any Security or Securities (or, in the case of Registered Securities or Bearer Securities of a denomination other than $1,000, specified portions thereof), the Company shall pay a cash -11- 13 adjustment in respect of such fraction in an amount equal to the same fraction of the Closing Price per Share (as defined in the Definitive Securities) at the close of business on the day preceding the day of conversion. (f) Whenever the Conversion Price is adjusted as provided in the Definitive Securities: (i) the Company shall compute the adjusted Conversion Price in accordance with the terms of the Definitive Securities and shall prepare a certificate signed by the President, any Vice President or the Treasurer of the Company setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the Conversion Agent and at each office or agency maintained for the purpose of conversion of Securities pursuant to Section 12(f); and (ii) a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall forthwith be required, and, as soon as practicable after it is required, the Company shall promptly cause a notice setting forth the adjusted Conversion Price to be given to the holders of the Securities as provided in Section 19. (g) In case: (i) the Company shall declare a dividend (or any other distribution) on its Shares payable otherwise than in cash out of its retained earnings (excluding dividends payable in Shares for which adjustment is made pursuant to the terms of the Definitive Securities); or (ii) the Company shall authorize the granting to the holders of its Shares of rights or warrants to subscribe for or purchase any equity securities of any class or of any other rights; or (iii) of any reclassification of the Shares of the Company (other than a subdivision or combination of its outstanding Shares) or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company; or (iv) of the involuntary dissolution, liquidation or winding up of the Company; or -12- 14 (v) the Company proceeds to take any other action which would require an adjustment of the Conversion Price pursuant to the Definitive Securities; then the Company shall cause to be filed with the Conversion Agent and at each office or agency maintained for the purpose of conversion of Securities a notice setting forth the anticipated adjusted Conversion Price and a brief statement of the facts requiring such adjustment, and shall cause notice to be given as provided in Section 19 except that notice need be given once at least 20 days (or 10 days in any case specified in clause (i) or (ii) above) prior to the applicable record date hereinafter specified, stating (x) the date on which a record is to be established for the purpose of such dividend, distribution, or grant of rights or warrants or, if a record is not to be established, the date as of which the holders of Shares of record to be entitled to such dividend, distribution, rights or warrants is to be determined, or (y) the date on which a reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up or other action is expected to become effective, and the date as of which it is expected that holders of Shares of record shall be entitled to exchange their Shares for the securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up or other action. The failure to give notice required by this Section or any defect therein shall not affect the legality or validity of any dividend, distribution, rights, warrants, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up, or other action, or the vote on any such action. (h) The Company shall, at all times from and after the date on which the Securities are convertible into Shares, have reserved and available, free from preemptive rights, out of its authorized but unissued Shares, for the purpose of effecting the conversion of Securities, the full number of Shares then issuable upon the conversion of all Securities. (i) The Company covenants that all Shares which may be issued or delivered upon conversion of Securities will upon issuance be fully paid and nonassessable and, except as provided in Section 13, the Company will pay all stamp, excise or similar taxes or duties, liens and charges with respect to the issue thereof. (j) All converted Securities shall be held by the Company, and may, at any time, be delivered to the Fiscal Agent for cancellation, which shall hold or dispose of the same in accordance with its policy for disposal of canceled Securities or as otherwise directed by the Company. Converted Securities shall not be transferred. The Company will promptly give, or -13- 15 cause to be given, written notice to the Fiscal Agent of the serial numbers of all Securities which have been converted. (k) In case of any consolidation with, or merger of the Company into, any other corporation, or in case of any merger of another corporation into the Company (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding Shares of the Company), or in case of any sale or transfer of all or substantially all of the assets of the Company, the corporation formed by such consolidation or resulting from such merger or which acquires such assets, as the case may be, shall execute and deliver to the Fiscal Agent an amendment to the Fiscal Agency Agreement providing that the holder of each Definitive Security shall have the right during the period such Security shall be convertible as specified in the Definitive Securities to convert such Securities only into the kind and amount of securities, cash, and other property receivable upon such consolidation, merger, sale or transfer by a holder of the number of Shares of the Company into which such Security might have been converted immediately prior to such consolidation, merger, sale or transfer assuming, if such consolidation, merger, sale or transfer is prior to the period such Security shall be convertible, that the Securities were convertible at such time at the initial Conversion Price as adjusted pursuant to the terms of the Definitive Securities. Such amendment shall provide for adjustments which, for events subsequent to the effective date of such amendment, shall be as nearly equivalent as may be practicable, as determined by the Company, to the adjustments provided for in the Definitive Securities. The above provisions of this Section shall similarly apply to successive consolidations, mergers, sales or transfers. (l) Subject to Section 11(j), neither the Fiscal Agent nor the Conversion Agent or agency appointed by the Company shall at any time be under any duty or responsibility to any holder of Securities to determine whether any facts exist which may require any adjustment of the Conversion Price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in the Definitive Securities provided to be employed, in making the same. Neither the Fiscal Agent nor the Conversion Agent or agency appointed by the Company shall be accountable with respect to (i) the validity or value (or the kind or amount) of any Shares or of any securities or property which may at any time be issued or delivered upon the conversion of any Security or (ii) the calculation of the Conversion Price; and neither the Fiscal Agent nor the Conversion Agent or agency appointed by the Company makes any representation with respect thereto. Neither the Fiscal Agent nor the Conversion Agent or agency appointed by the Company shall be responsible for any acts or omissions of the Company including without limitation any failure of the Company to issue, transfer or deliver any Shares or Share certificates or -14- 16 other securities or property or to make any cash payment upon the delivery of any Security for the purpose of conversion or to comply with any of the covenants contained in this Section 7. (m) The Fiscal Agent has no duty to determine when an adjustment under this paragraph 7 should be made, how it should be made or whether it should be made. The Fiscal Agent shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of the Securities or the calculation of the Conversion Price. 8. Surrendered Securities. All Securities, together with any coupons appertaining thereto, surrendered for payment, redemption, retirement, transfer or exchange and all coupons paid through the application of interest installments shall be delivered to the Fiscal Agent. In any such case the Fiscal Agent shall cancel all Securities and coupons not previously canceled and dispose of or deliver all such Securities and coupons to the Company in accordance with the Fiscal Agent's policy for disposal of canceled securities. 9. Mutilated, Destroyed, Stolen or Lost Securities. The Fiscal Agent is hereby authorized, in accordance with the provisions of the Securities and this Section, from time to time to authenticate and deliver Securities in exchange for or in lieu of Securities that become mutilated, destroyed, stolen or lost, upon receipt of indemnity and such other documents or proof as may be required in form and substance satisfactory to the Fiscal Agent and the Company. Every Security authenticated and delivered in exchange for or in lieu of any such Security shall be considered the obligation of the Company and shall carry all the rights to interest accrued and unpaid and to accrue which were carried by such Security, and notwithstanding anything to the contrary herein contained, any new Bearer Security shall have attached thereto such coupons that neither gain nor loss in interest shall result from such exchange or substitution. 10. Signatures. Securities shall be executed on behalf of the Company by its Chairman, its President, its Secretary, any Vice President or its Treasurer or any Assistant Secretary, any of whose signatures may be manual or in facsimile, and any coupons appertaining thereto shall be executed on behalf of the Company by the facsimile signature of its Chairman, its President, its Secretary, any Vice President or its Treasurer or any Assistant Secretary. Any signature in facsimile may be imprinted or otherwise reproduced on the Securities. The Company may adopt and use the signature or facsimile signature of any person who shall be a Chairman, President, Secretary, Vice President, Treasurer or Assistant Secretary at the time of the execution of the Securities, notwithstanding the fact that at the time the Securities shall be authenticated and delivered, or -15- 17 disposed of, such person shall have ceased to have held such office by virtue of which such person so executed such security. 11. Agreements Concerning Agents. Each of the Agents accepts its obligations herein and in the Securities, upon the terms and conditions hereof and thereof, including the following, to all of which the Company agrees and to all of which the rights hereunder of the holders from time to time of the Securities and coupons shall be subject: (a) Each of the Agents shall be entitled to reasonable compensation for all services rendered by such Agent, as separately agreed to from time to time by the Company and such Agent, and the Company agrees to pay promptly such compensation and to reimburse each of the Agents for the reasonable out-of-pocket expenses (including, but not limited to, reasonable counsel fees and expenses) incurred by such Agent in connection with the services rendered by it hereunder. The Company also agrees to indemnify each of the Agents and each other paying agency and conversion agency of the Company for, and to hold it harmless against, any loss, liability or expense (including the costs and expenses of defending against any claims of liability, including the reasonable fees and expenses of its counsel) incurred without negligence or bad faith on the part of such Agent or other paying agency and conversion agency, arising out of or in connection with its acting as an Agent or other paying agency and conversion agency of the Company hereunder or otherwise in connection with the Securities. The obligations of the Company under this clause (a) shall survive payment of the Securities or the resignation or removal of any Agent or paying agency and conversion agency. (b) In acting under this Agreement and in connection with the Securities, each of the Agents and each other paying agency and conversion agency of the Company is acting solely as agent of the Company, and does not assume any obligation, or relationship of agency or trust, for or with any of the owners or holders of the Securities or coupons, except that all funds held by the Paying Agent or any other paying agency of the Company for payment of principal of or interest on (or Additional Amounts, if any, on) the Securities shall be held in trust but need not be segregated from other funds except as required by law and as set forth herein and in the Securities, and shall be applied as set forth herein and in the Securities; provided, however, that monies paid by the Company to the Paying Agent or any other paying agency of the Company for the payment of principal of or interest on (or Additional Amounts, if any, on) Securities remaining unclaimed at the end of two years after such principal or interest (or Additional Amounts, if any) shall have become due and payable shall be repaid to the Company, as provided and in the manner set forth in the Definitive Securities, whereupon the aforesaid trust shall terminate and all liability of the Paying -16- 18 Agent or such other paying agency of the Company with respect thereto shall cease. (c) Each of the Agents and each other paying agency and conversion agency of the Company may consult with one or more counsel satisfactory to it (including counsel to the Company), and the written opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the opinion of such counsel. (d) Each of the Agents and each other paying agency and conversion agency of the Company shall be protected and shall incur no liability for or in respect of any action taken, omitted or suffered by it in reliance upon any Security or coupon, notice, direction, consent, certificate, affidavit, statement or other paper or document believed in good faith by such Agent or such other paying agency and conversion agency of the Company to be genuine and to have been signed by the proper party or parties. (e) Each of the Agents and each other paying agency and conversion agency of the Company, its officers, directors and employees may become the owner of, or acquire any interest in, any Securities or coupons, with the same rights that it or they would have if it were not an Agent or such other paying agency of the Company hereunder, and may engage or be interested in any financial or other transaction with the Company and its affiliates and may act on, or as depositary, trustee or agent for, any committee or body of holders of Securities or other obligations of the Company, as freely as if it were not an Agent or a paying agency or conversion agency of the Company hereunder. (f) Neither the Paying Agent nor any other paying agency of the Company shall be under any liability for interest on, or have any responsibility to invest, any monies at any time received by it pursuant to any of the provisions of this Agreement or of the Securities. (g) The recitals contained herein and in the Securities (except in the Fiscal Agent's certificates of authentication), shall be taken as the statements of the Company, and the Agents assume no responsibility for the correctness of the same. None of the Agents makes any representation as to the validity or sufficiency of this Agreement or the Securities or coupons or the Company's Offering Memorandum dated October 29, 1993 and amended on November 2, 1993, or any other offering material, except for such Agent's due authorization to execute this Agreement. Neither the Agents nor any other paying agency of the Company shall be accountable for the use or application by the Company of the proceeds of any Securities. -17- 19 (h) The Agents and each other paying agency and conversion agency of the Company shall be obligated to perform such duties and only such duties as are herein and in the Securities specifically set forth and no implied duties or obligations shall be read into this Agreement or the Securities against the Agents or any other paying agency and conversion agency of the Company. The Agents shall not be under any obligation to take any action hereunder which may tend to involve them in any expense or liability, the payment or reimbursement of which within a reasonable time is not, in their reasonable opinion, assured to them through surety or other indemnity satisfactory to such Agents. (i) Unless herein or in the Securities otherwise specifically provided, any order, certificate, notice, request, direction, or other communication, from the Company made by or given by it under any provision of this Agreement shall be in writing and shall be sufficient if signed by the Chairman, President, Secretary, Assistant Secretary, any Vice President or Treasurer of the Company. (j) Anything in this Agreement to the contrary notwithstanding, none of the Agents shall incur any liability hereunder, except as a result of negligence or bad faith attributable to it or its officers or employees, and shall incur no liability for the negligence or bad faith of its agents appointed by it with due care; provided that the Agent shall notify the Company of the appointment of any such agents. (k) Except as specifically provided herein or in the Securities, none of the Agents shall have any duty or responsibility in case of any default by the Company in the performance of its obligations (including, without limiting the generality of the foregoing, any duty or responsibility to accelerate all or any of the Securities or to initiate or to attempt to initiate any proceedings at law or otherwise or to make any demand for the payment thereof upon the Company). 12. Offices, Resignation, Successors, Etc. of Agents; Paying, Conversion and Transfer Agencies. (a) The Company agrees that, until none of the Securities and coupons is outstanding or until monies for the payment of all principal of and interest on (and Additional Amounts payable pursuant to Section 2 of the Definitive Securities, if any, on) all outstanding Securities shall have been made available at the office of the Paying Agent and shall have been returned to the Company as provided in the Securities, there shall at all times be a Fiscal Agent in Providence, Rhode Island or the Borough of Manhattan, New York City, which shall be a bank or trust company organized and doing business under the laws of the United States of America or of any State of the -18- 20 United States of America, in good standing and authorized under such laws to exercise corporate trust powers, a Paying Agent and a Conversion Agent having offices or agents in a city in Western Europe and in either Providence, Rhode Island or New York City, which shall be a bank or trust company organized, in good standing and doing business under the laws of the United States of America or of any State of the United States of America, and a paying agency and a conversion agency in at least one city in Western Europe, which shall be Luxembourg so long as the Securities are listed on the Luxembourg Stock Exchange. (b) Each of the Agents may at any time resign as such Agent by giving written notice to the Company of such intention on its part, specifying the date on which its desired resignation shall become effective; provided, however, that such date shall never be less than ninety days after receipt of such notice by the Company unless the Company agrees to accept less notice. Each of the Agents hereunder may be removed at any time by the filing with it at least 30 days prior to the date of such proposed removal, an instrument in writing signed on behalf of the Company and specifying such removal and the date when it is intended to become effective. Such resignation or removal shall take effect upon the date of the appointment by the Company, as hereinafter provided, of a successor Fiscal Agent, Conversion Agent, Transfer Agent or Paying Agent, as the case may be, and the acceptance of such appointment by such successor Agent. At the time of its resignation or removal, each of the Agents shall be entitled to the payment by the Company of its compensation for the services rendered hereunder and to the reimbursement of all reasonable out-of-pocket expenses incurred in connection with the services rendered hereunder by such Agent. (c) In case at any time any of the Agents shall resign, or shall be removed, or shall be incapable of acting, or shall file a voluntary petition as a debtor under Chapter 7 or 11 of Title 11 of the United States Code or have an order for relief-entered against it as a debtor under Chapter 7 or 11 of Title 11 of the United States Code or make an assignment for the benefit of its creditors or consent to the appointment of a receiver of all or any substantial part of its property, or shall admit in writing its inability to pay or meet its debts as they mature, or if an order of any court shall be entered approving any petition filed by or against the Fiscal Agent under any legislation similar to the provisions of Title 11 of the United States Code or against any of the Agents under the provisions of any legislation similar to the Provisions of Title 11 of the United States Code, or if a receiver of it or of all or any substantial part of its property shall be appointed, or if any public officer shall take charge or control of it or of its property or affairs, for the purpose of rehabilitation, conservation or liquidation, a successor Agent, qualified as aforesaid, shall be appointed by the Company by an instrument in -19- 21 writing. Upon the appointment as aforesaid of a successor Agent and acceptance by it of such appointment, the Agent so superseded shall cease to be such Agent hereunder. If no successor Agent shall have been so appointed by the Company and shall have accepted appointment as hereinafter provided, any holder of a Security, on behalf of itself and all others similarly situated, or any Agent may petition any court of competent jurisdiction for the appointment of a successor Agent and shall promptly notify the Company of such action. (d) Any successor Fiscal Agent, Conversion Agent, Transfer Agent or Paying Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to the Company an instrument accepting such appointment hereunder, and thereupon such successor Agent, without any further act, deed or conveyance, shall become vested with all the authority, rights, powers, trusts, immunities, duties and obligations of such predecessor with like effect as if originally named as such Agent hereunder, and such predecessor, upon payment of its charges and disbursements then unpaid, shall thereupon become obligated to transfer, deliver and pay over, and such successor Agent shall be entitled to receive, all monies, securities or other property on deposit with or held by such predecessor, as such Agent hereunder. (e) Any corporation or bank into which any of the Agents hereunder may be merged or converted, or any corporation or bank with which such Agent may be consolidated, or any corporation or bank resulting from any merger, conversion or consolidation to which such Agent shall be a party, or any corporation or bank to which such Agent shall sell or otherwise transfer all or substantially all the assets and business of such Agent, or any corporation to which the Fiscal Agent shall sell or otherwise transfer all or substantially all of its corporate trust business, provided that it shall be qualified as aforesaid, shall be the successor to such Agent under this Agreement without the execution or filing of any document or any further act on the part of any of the parties hereto. (f) So long as there shall be a Fiscal Agent and Paying Agent hereunder, the Company shall maintain agencies (i) where Registered Securities (but not Bearer Securities or coupons) may be presented for surrender and payment (and for the payment of Additional Amounts on the Registered Securities, if any) and where Securities may be surrendered for conversion in Providence, Rhode Island or the Borough of Manhattan, New York City, and (ii) where Securities and coupons may be surrendered for payment (and for the payment of Additional Amounts (pursuant to Section 2 of the Definitive Securities) on Bearer Securities, if any) and where Securities may be surrendered for conversion in at least one city in Western Europe, which shall be Luxembourg so long as the Securities are listed on the Luxembourg Stock -20- 22 Exchange. The Company now intends to maintain additional agencies (subject to applicable laws and regulations) where Bearer Securities and coupons may be surrendered for payment (and for the payment of Additional Amounts (pursuant to Section 2 of the Definitive Securities) on Bearer Securities, if any), where Registered Securities may be surrendered for payment and where Securities may be surrendered for conversion in London, England and Luxembourg, and during such period to keep the Agents advised of the names and locations of such agencies. Unless the Company shall otherwise notify each of the Agents in writing, the sole such paying agencies and conversion agencies shall be the agencies specified in the Securities. The Company authorizes the Paying Agent to pay to or to the order of the aforesaid agencies, upon demand by such agencies, funds for the payment of the principal of and interest on (and Additional Amounts pursuant to Section 2 of the Definitive Securities, if any, on) the Securities. Except as otherwise arranged by the Company, the Fiscal Agent shall arrange for the payment of the compensation of such paying agencies for their services as such, and the Company shall pay to the Fiscal Agent from time to time sufficient funds to make such payments. (g) So long as there shall be a Fiscal Agent, Paying Agent and Conversion Agent hereunder, the Company shall maintain a Security Registrar and additional transfer agencies (the "Transfer Agents") (i) where Registered Securities may be surrendered for exchange for Registered Securities and (ii) in at least one city in Western Europe, where Bearer Securities may be delivered in exchange for Bearer Securities or for Registered Securities. Consistent with applicable laws and regulations, including the provisions of the federal income tax laws of the United States, such agencies may be the same agencies as or different agencies from those maintained by the Company pursuant to Section 12(f). The Company hereby appoints Banque Generale du Luxembourg ("Banque Generale"), 27 Avenue Monterey, L-2951 Luxembourg, as Transfer Agent for such exchanges. The transfer, exchange and registration of transfer or exchange of Registered Securities shall be made by the Fiscal Agent in Providence, Rhode Island or by Banque Generale, as agent for the Fiscal Agent, so long as the Securities are registered on the Luxembourg Stock Exchange. 13. Taxes. The Company will pay all stamp taxes and other similar duties, if any, that may be imposed by the United States of America or the United Kingdom, or any state or political subdivision thereof or taxing authority therein, with respect to the execution or delivery of this Agreement, or the issuance of the Global Security, or the exchange from time to time of the Global Security for Definitive Securities, or with respect to the issue or delivery of Shares on conversion of -21- 23 Securities; provided, however, that the Company shall not be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue or delivery of Shares in a name other than that of the holder of the Security or Securities to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Company the amount of any such tax or duty or has established to the satisfaction of the Company that such tax or duty has been paid. 14. Meetings and Votes of Holders. (a) A meeting of holders of Securities may be called at any time and from time to time pursuant to this Section for any of the following purposes: (i) to give any notice to the Company or to the Fiscal Agent, or to give any directions to the Fiscal Agent, or to consent to the waiving of any default hereunder or under the Definitive Securities and its consequences, or to take any other action authorized to be taken by holders of Securities pursuant to Section 9 of the Definitive Securities; or (ii) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of the Securities under any other provision of this Agreement, the Definitive Securities or under applicable law. (b) Meetings of holders of Securities may be held at such place or places in Providence, Rhode Island, The City of New York or London as the Fiscal Agent or, in case of its failure to act, the Company or the holders calling the meeting shall from time to time determine. (c) The Fiscal Agent may at any time call a meeting of holders of Securities to be held at such time and at such place in any of the locations designated in Section 14(b) hereof as the Fiscal Agent shall determine. Notice of every meeting of holders shall be made as specified in Section 19 hereof, except that such notice shall set forth the time and the place of such meeting, in general terms the action proposed to be taken at such meeting and a general description of regulations applicable to such meeting and shall be published at least three times in the publications specified in such Section 19, the first publication to be not less than 21 nor more than 180 days prior to the date fixed for the meeting. (d) In case at any time the Company or the holders of at least 25% in aggregate principal amount of the Securities shall have requested the Fiscal Agent to call a meeting of the holders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Fiscal Agent shall not have given the first notice of such meeting within 21 days after receipt of such request or -22- 24 shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the holders of Securities in the amount above specified may determine the time and the place in either of the locations designated in Section 14(b) hereof for such meeting and may call such meeting to take any action authorized in Section 14(a) hereof by giving notice thereof as provided in Section 14(c) hereof. (e) To be entitled to vote at any meeting of holders of Securities, a person shall be (i) a holder of one or more Securities, or (ii) a person appointed by an instrument in writing as proxy for a holder or holders of Securities by such holder or holders, which proxy need not be a holder of Securities. The only persons who shall be entitled to be present or to speak at any meeting of holders shall be the persons entitled to vote at such meeting and their counsel and any representatives of the Fiscal Agent and its counsel and any representatives of the Company and its counsel. (f) The persons entitled to vote a majority in principal amount of the outstanding Securities shall constitute a quorum for the transaction of all business specified in Section 14(a) hereof. No business shall be transacted in the absence of a quorum unless a quorum is represented when the meeting is called to order. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of the holders of Securities (as provided in Section 14(d) hereof), be dissolved. In any other case the meeting shall be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 14(c) hereof except that such notice need be published only once but must be given not less than five days prior to the date on which the meeting is scheduled to be reconvened. Subject to the foregoing, at the reconvening of any meeting adjourned for a lack of a quorum, the persons entitled to vote 25% in principal amount of the Securities shall constitute a quorum for the taking of any action set forth in the notice of the original meeting. Notice of the reconvening of an adjourned meeting shall state expressly the percentage of the aggregate principal amount of the Securities that shall constitute a quorum. At a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid, any resolution and all matters (except as limited by Section 9 of the Definitive Securities) shall be effectively passed and decided if passed or decided by the persons entitled to vote a majority in principal amount of the Securities represented and voting at such meeting, provided that such amount shall be not less than 25% in principal amount of the Securities outstanding. Any holder of a Security who has executed an instrument in writing appointing a person as his proxy shall be deemed to be present for the purposes of -23- 25 determining a quorum and be deemed to have voted; provided, however, that such holder shall be considered as present or voting only with respect to the matters covered by such instrument in writing. Any resolution effectively passed or decision taken at any meeting of the holders of Securities duly held in accordance with this Section 14 shall be binding on all the holders of Securities whether or not present or represented at the meeting. (g) Notwithstanding any other provision of this Agreement, the Fiscal Agent may make such reasonable regulations as it may deem advisable for any meeting of holders of Securities in regard to proof of the holding of Securities and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Bearer Securities shall be proved by the production of the Bearer Securities or by a certificate executed, as depositary, by, and the appointment of any proxy shall be proved by having the signature of the person executing the proxy witnessed or guaranteed by, in each case, any trust company, bank or banker satisfactory to the Fiscal Agent. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified herein or other proof. The holding of Registered Securities shall be proved by the registry books maintained in accordance with Section 2(d) hereof or by a certificate or certificates of the Fiscal Agent in its capacity as the Company's agent for the maintenance of such books. (h) The Fiscal Agent shall, by an instrument in writing, appoint a temporary chairperson of the meeting, unless the meeting shall have been called by the Company or by the holders of Securities as provided in Section 14(d) hereof, in which case the Company or the holders calling the meeting, as the case may be, shall in like manner appoint a temporary chairperson. A permanent chairperson and a permanent secretary of the meeting shall be elected by vote of the holders of a majority in principal amount of the Securities represented at the meeting and entitled to vote. (i) At any meeting each holder or proxy shall be entitled to one vote for each U.S. $1,000 principal amount of Securities held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Securities challenged as not outstanding and ruled by the chairperson of the meeting to be not outstanding. The chairperson of the meeting shall have no right to vote, except as a holder or proxy. -24- 26 (j) Any meeting of holders of Securities duly called pursuant to Section 14(c) or 14(d) hereof at which a quorum is present may be adjourned from time to time by vote of the holders (or proxies for the holders) of a majority in principal amount of the Securities represented at the meeting and entitled to vote; and the meeting may be held as so adjourned without further notice. (k) The vote upon any resolution submitted to any meeting of holders of Securities shall be by written ballots on which shall be subscribed the signatures of the holders of Securities or of their representatives by proxy and the serial number or numbers of the Securities held or represented by them. The permanent chairperson of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record, at least in triplicate, of the proceedings of each meeting of holders of Securities shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was published as provided in Section 14(c) or 14(d) hereof and, if applicable, Section 14(f) hereof. Each copy shall be signed and verified by the affidavits of the chairperson and secretary of the meeting, and one such copy shall be delivered to the Company and another to the Fiscal Agent to be preserved by the Fiscal Agent, the copy delivered to the Fiscal Agent to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. 15. Merger, Consolidation or Sale of Assets. (a) If at any time there shall be a merger, consolidation, sale or conveyance of assets or assumption of obligations to which any of the covenants contained in Section 6 of the Definitive Securities pertains, then in any such event the successor or assuming corporation referred to therein will promptly deliver to the Fiscal Agent: (i) A certificate signed by an executive officer of such successor or assuming corporation stating that as of the time immediately after the effective date of any such transaction the covenants of the Company contained in the Definitive Securities have been complied with and the successor or assuming corporation is not in default under the provisions of this Agreement or the Securities, as applicable; and -25- 27 (ii) A written opinion of legal counsel (who may be an employee of or counsel to the successor or assuming corporation) stating that in such counsel's opinion such covenants have been complied with and that any instrument or instruments executed in the performance of such covenants comply with the requirements thereof. In case of any such merger, consolidation, sale, conveyance or assumption, such successor or assuming corporation shall succeed to and be substituted for the Company with the same effect, subject to (in the case of a merger to which the Company is a party) Section 6(b) of the Definitive Securities, as if it had been named herein and in the Definitive Securities as the Company; the Company shall thereupon be relieved of any further obligation or liability hereunder or upon the Securities, and the Company, as the predecessor corporation, may thereupon or at any time thereafter be dissolved, wound up or liquidated. If applicable, such successor or assuming corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Company any or all of the Securities issuable hereunder which theretofore shall not have been executed on behalf of the Company and delivered to the Fiscal Agent; and, upon the order of such successor or assuming corporation, instead of the Company, and subject to all the terms, conditions and limitations in this Agreement prescribed, the Fiscal Agent shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Fiscal Agent for authentication, and any Securities which such successor or assuming corporation thereafter shall cause to be signed and delivered to the Fiscal Agent for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Agreement as the Securities theretofore or thereafter issued in accordance with the terms of this Agreement as though all of such Securities had been issued at the date of the execution hereof. In case of any merger, consolidation, sale, conveyance or assumption, such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be deemed by the Company to be appropriate. (b) The Fiscal Agent may rely on the documents delivered to it pursuant to this Agreement by any successor or assuming corporation pursuant to this Section 15 as conclusive evidence that any such merger, consolidation, sale, conveyance or assumption complies with the provisions of this Section and the Securities. 16. GOVERNING LAW. THIS AGREEMENT, THE SECURITIES AND ANY COUPONS APPERTAINING THERETO SHALL BE GOVERNED BY AND -26- 28 CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS, UNITED STATES OF AMERICA. 17. Amendments. This Agreement may be amended by the parties hereto, and certain provisions hereof may be waived, in the manner provided in Section 9 of the Definitive Securities. This Agreement may also be amended by the parties hereto, without the consent of the holder of any Security, for the purposes set forth in Section 9 of the Definitive Securities and for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein or in any manner that the parties may mutually deem necessary or desirable, and that shall not adversely affect the interests of the holders of the Securities. 18. Agent for Service of Process. As long as any of the Securities or coupons appertaining thereto remain outstanding, the Company will at all times have an authorized agent in the United States of America, upon whom process may be served in any legal action or proceeding arising out of or relating to this Agreement or any Security or any coupons appertaining thereto. Service of process upon such agent and written notice of such service mailed or delivered to the Company shall to the extent permitted by law be deemed in every respect effective service of process upon the Company in any such legal action or proceeding. The Company hereby appoints the Fiscal Agent as its agent for such purpose, and covenants and agrees that service of process in any legal action or proceeding may be made upon it at the office of such agent at 111 Westminster Street, Providence, Rhode Island 02903 Attention: Corporate Trust Department (or such other address as may be the principal corporate trust office of such agent, or such other address as may be the principal corporate trust office of any successor fiscal agent located in the City of New York), unless and until the Company shall designate another agent for such purpose by written notice to the Fiscal Agent. If the Fiscal Agent receives any such service of process, it shall promptly notify the Company of such service. 19. Notices. All notices hereunder shall be deemed to have been given when deposited in the mail as first class mail, registered or certified, return receipt requested, postage prepaid, addressed to any party hereto as follows: -27- 29
Address ------- The Company 128 Technology Center Waltham, Massachusetts 02154 Attn: President The Fiscal Agent 111 Westminster Street Providence, Rhode Island 02903 Attn: Vice President Corporate Trust The Paying Agent 111 Westminster Street Providence, Rhode Island 02903 Attn: Vice President Corporate Trust
or at any other address of which any of the foregoing shall have notified the others in writing. Notices to holders of the Securities shall be given by publication in an Authorized Newspaper. For purposes of this Agreement, the term "Authorized Newspaper" means a newspaper customarily published on each business day in morning editions, whether or not it shall be published in Saturday, Sunday or holiday editions, such as The Wall Street Journal (Eastern edition) in Providence, Rhode Island or The City of New York, the Financial Times in London and, so long as the Securities are listed on the Luxembourg Stock Exchange, the Luxemburger Wort in Luxembourg. If by reason of the temporary or permanent suspension of publication of any newspaper or by reason of any other cause it shall be impossible to make publication of such notice in an Authorized Newspaper as herein provided, then such publication or other notice in lieu thereof as shall be made by the Fiscal Agent shall constitute sufficient publication of such notice, if such publication or other notice shall, so far as may be possible approximate the terms and conditions of the publication in lieu of which it is given. Notices will be mailed to registered holders of Registered Securities at their registered address as the same shall appear on the books of the Fiscal Agent on the day fifteen days prior to such mailing. The Fiscal Agent shall promptly furnish to the Company and to each other paying agency of the Company a copy of each notice so published or mailed. 20. Counterparts. This Agreement may be executed in separate counterparts, and by each party separately in a separate counterpart, each such counterpart, when so executed and delivered, to be an original. Such counterparts shall together constitute but one and the same instrument. -28- 30 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. MEDITRUST By: Name: Title: Fleet National Bank, as Fiscal Agent By: Name: Title: -29- 31 EXHIBIT A 32 (FORM OF FACE OF REGISTERED DEBENTURE) THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO U.S. PERSONS EXCEPT IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. Each purchaser, by its purchase of this Security, represents, acknowledges and agrees that: (1) it is purchasing "restricted" securities which have not been registered under the Securities Act; (2) if it should decide to dispose of any of such Securities, it will not offer, sell, transfer, pledge, hypothecate or otherwise dispose of any of such Securities except (A) pursuant to Rule 144A under the Securities Act, (B) pursuant to Regulation S under the Securities Act, (C) to a sophisticated institutional investor approved as an "accredited investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act by a broker or dealer registered under Section 15 of the Securities Exchange Act of 1934, (D) pursuant to any other exemption from, or otherwise in a transaction not subject to, the registration requirements of the Securities Act as confirmed in an opinion of U.S. counsel or (E) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable state laws of the United States governing the offer or sale of securities. 33 MEDITRUST (Organized in the Commonwealth of Massachusetts) 6-7/8% CONVERTIBLE DEBENTURE DUE 1998 No. R-_______________ U.S. $_______________ Meditrust, a business trust duly organized and existing under the laws of the Commonwealth of Massachusetts (the "Company"), for value received, hereby promises to pay to ________, or registered assigns, the principal sum of __________ Thousand United States Dollars on November 15, 1998 and to pay interest thereon, from November 15, 1993, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semiannually in arrears on May 15 and November 15, in each year (each an "Interest Payment Date"), commencing May 15, 1994, at the rate of 6-7/8% per annum until the principal hereof is paid or made available for payment. Interest hereon shall be calculated on the basis of a 360 day year comprised of twelve 30 day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Fiscal Agency Agreement, be paid to the person in whose name this Security is registered at the close of business on the Record Date for such interest, which shall be May 1 or November 1 (whether or not a Business Day) next preceding such Interest Payment Date. Except as otherwise provided in the Fiscal Agency Agreement, any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the holder on such Record Date and may be paid at any time in any lawful manner, all as more fully provided in the Fiscal Agency Agreement. Payment of interest on this Security shall be made by United States dollar check drawn on a bank in The City of New York and mailed to the person entitled thereto at his address as it shall appear in the Security Register, or (if arrangements satisfactory to the Company and the Fiscal Agent are made) by wire transfer to a United States dollar account maintained by the payee with a bank in the City of New York; provided, however, that if such mailing is not possible and no such application shall have been made, payment of interest shall be made at the Corporate Trust Office of the Fiscal Agent, or such other office or agency of the Company as may be designated for such purpose in Providence, Rhode Island or The City of New York, in United States currency. Reference is hereby made to the further provisions of this Security set forth under Terms and Conditions of the Securities on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Security shall not become valid or enforceable for any purpose unless and until the certificate of authentication hereon shall have been manually signed by a duly authorized signatory of the Fiscal Agent. 34 IN WITNESS WHEREOF, the Company has caused this Security to be duly executed in its name by the manual or facsimile signature of a duly authorized signatory. Dated: __________, 1993 MEDITRUST By: ------------------------------- Name: ------------------------------ Title: ----------------------------- 35 (FORM OF FACE OF BEARER DEBENTURE) THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO U.S. PERSONS EXCEPT IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE CODE. MEDITRUST (Organized in the Commonwealth of Massachusetts) 6-7/8% CONVERTIBLE DEBENTURE DUE 1998 No. B-________ U.S.$________ Meditrust, a business trust duly organized and existing under the laws of the Commonwealth of Massachusetts (the "Company"), for value received, hereby promises to pay to bearer upon presentation and surrender of this Security the principal sum of ________________ United States Dollars on November 15, 1998, and to pay interest thereon, from November 15, 1993 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semiannually in arrears on May 15 and November 15 in each year (each an "Interest Payment Date"), commencing May 15, 1994 , at the rate of 6-7/8% per annum, until the principal hereof is paid or made available for payment. Interest hereon shall be calculated on the basis of a 360 day year comprised of twelve 30 day months. Such payments shall be made in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, subject to any laws or regulations applicable thereto and to the right of the Company (limited as provided in the Fiscal Agency Agreement) to terminate the appointment of any paying agency, at the main offices of Fleet National Bank or Banque Generale du Luxembourg, 27 Avenue Monterey, L-2951 Luxembourg or at such other offices or agencies outside the United States of America, its territories or possessions as the Company may designate, by United States dollar check drawn on a bank in the City of New York, or (if arrangements satisfactory to the Company and the Fiscal Agent are made) by wire transfer to a United States dollar account maintained by the holder at a bank outside the United States, its territories and its possessions. Interest on this Security shall be paid only at an office or agency located outside the United States, its territories or possessions and, in the case of interest due on or before maturity, only upon presentation and 36 surrender at such an office or agency of the interest coupons hereto attached as they severally mature. No payment on this Security or any coupon will be made at the Corporate Trust Office of the Fiscal Agent or any other paying agency maintained by the Company in the United States, nor will any payment be made by transfer to an account in, or by mail to an address in, the United States, except as may be permitted by United States tax laws and regulations in effect at the time of such payment without detriment to the Company. Notwithstanding the foregoing, payment of this Security and coupons may be made at the office of the Fiscal Agent in Providence, Rhode Island or The City of New York if full payment at all paying agencies outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions. Reference is hereby made to the further provisions of this Security set forth under Terms and Conditions of the Securities on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Neither this Security nor any of the coupons attached hereto shall become valid or enforceable for any purpose unless and until the certificate of authentication hereon shall have been manually signed by a duly authorized signatory of the Fiscal Agent. IN WITNESS WHEREOF, the Company has caused this Security to be duly executed in its name by the manual or facsimile signature of a duly authorized officer and coupons bearing the facsimile signature of a duly authorized signatory to be annexed hereto. Dated: __________, 1993 MEDITRUST By: ------------------------------ Name: ---------------------------- Title: --------------------------- 37 (FORM OF FACE OF COUPON ON BEARER DEBENTURES) ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE CODE. MEDITRUST 6-7/8% CONVERTIBLE DEBENTURE DUE 1998 U.S.$_____________ Due 1998 Unless the Security to which this coupon appertains shall have been called for redemption prior to the due date hereof and payment thereof duly provided for or converted or exchanged, on the date set forth hereon, Meditrust (herein called the "Company") will pay to bearer, upon surrender hereof, the amount shown hereon (together with any Additional Amount in respect thereof which the Company may be required to pay according to the terms of said Security) at the paying agencies set out on the reverse hereof or at such other places outside the United States of America, its territories and possessions as the Company may determine from time to time, by United States dollar check drawn on a bank in The City of New York, or (if arrangements satisfactory to the Company and the Fiscal Agent referred to in the Security to which this coupon appertains are made) wire transfer to a United States dollar account maintained by the payee at a bank outside the United States of America, its territories and possessions, being one-half year's interest then payable on said Security. MEDITRUST By: ------------------------------ Name: ---------------------------- Title: --------------------------- 38 [Reverse of Coupon] Fleet Bank of Massachusetts, N.A. Banque Generale du Luxembourg 40-41 St. Andrews Hill 27 Avenue Monterey London EC4V 5DE L-2951 Luxembourg England 39 CERTIFICATE OF AUTHENTICATION This is one of the Securities described in the within-mentioned Fiscal Agency Agreement. Fleet National Bank, as Fiscal Agent By: ------------------------------- Authorized Signatory 40 Terms and Conditions of the Securities 1. General. (a) This Security is one of a duly authorized issue of Securities of the Company designated as its 6-7/8% Convertible Debentures due 1998 (herein called the "Securities"), limited in aggregate principal amount to U.S.$86,250,000. The Company, for the benefit of the holders from time to time of the Securities, has entered into a Fiscal Agency Agreement dated as of November 15, 1993 (the "Fiscal Agency Agreement"), between the Company and Fleet National Bank, as Fiscal Agent, Paying Agent, Security Registrar and Conversion Agent (the "Fiscal Agent"), to which Fiscal Agency Agreement reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Fiscal Agent, and the holders of Securities and any coupons appertaining thereto and of the terms upon which the Securities are, and are to be, authenticated and delivered. The holders of the Securities will be entitled to the benefits of, be bound by, and be deemed to have notice of, all of the provisions of the Fiscal Agency Agreement. A copy of the Fiscal Agency Agreement is on file and may be inspected at the offices of paying agencies appointed by the Company. (b) The Securities are issuable as bearer Securities (the "Bearer Securities"), with interest coupons attached, in the denominations of U.S. $1,000 and U.S. $10,000, and as registered Securities (the "Registered Securities"), without coupons, in denominations of U.S. $1,000 and integral multiples thereof. The Registered Securities, and transfers thereof, shall be registered as provided in Section 8 hereof and in the Fiscal Agency Agreement. The holder of any Bearer Security or any coupon and the registered holder of a Registered Security shall (to the fullest extent permitted by applicable law) be treated at all times, by all persons and for all purposes as the absolute owner of such Security or coupon, as the case may be, regardless of any notice of ownership, theft or loss or of any writing thereon. (c) The Securities are direct and unsecured obligations of the Company. There are no restrictions herein on other indebtedness or securities which may be incurred or issued by the Company. 2. Additional Amounts. The Company will pay, as additional interest ("Additional Amounts"), to the holder of this Security or of any coupon appertaining hereto who is a United States Alien (as defined below) such amounts as may be necessary in order that every net 41 payment of the principal of (and premium, if any) and interest on this Security, after withholding for or on account of any present or future tax, assessment or other governmental charge imposed upon or as a result of such payment by the United States or any political subdivision or taxing authority thereof or therein, will not be less than the interest provided herein or any coupon appertaining hereto to be then due and payable; provided, however, that the foregoing obligation to pay Additional Amounts shall not apply to: (a) any tax, assessment or other governmental charge which would not have been so imposed but for (i) the existence of any present or former connection between such holder (or between a fiduciary, settlor or beneficiary of, or a person holding a power over, such holder, if such holder is an estate or trust, or a member of such holder, if such holder is a partnership) and the United States, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, person holding a power or member) being or having been a citizen or resident or treated as a resident thereof or being or having been engaged in a trade or business therein or being or having been present therein or having or having had a permanent establishment therein, (ii) such holder's present or former status as a personal holding company, foreign personal holding company, passive foreign investment company, foreign private foundation or other foreign tax-exempt entity or controlled foreign corporation for United States tax purposes or a corporation which accumulates earnings to avoid United States Federal income tax, or (iii) such holder's status as a bank extending credit pursuant to a loan agreement entered into in the ordinary course of business; (b) any tax, assessment or other governmental charge which would not have been so imposed but for the presentation by the holder of this Security or any coupon appertaining hereto for payment on a date more than 10 days after the date on which such payment became due and payable or on the date on which payment thereof is duly provided, whichever occurs later; (c) any estate, inheritance, gift, sales, transfer or personal property tax or any similar tax, assessment or other governmental charge; (d) any tax, assessment or other governmental charge which would not have been imposed but for the failure to comply with certification, information, documentation or other reporting requirements concerning the nationality, residence, identity or present or former connection with the United States of the holder or beneficial owner of such Security or any related coupon if such compliance is required by statute, regulation or ruling of the United 42 States or any political subdivision or taxing authority thereof or therein as a precondition to relief or exemption from such tax, assessment or other governmental charge; (e) any tax, assessment or other governmental charge which is payable otherwise than by withholding from payments of principal of and premium, if any, or interest on this Security; (f) any tax, assessment or other governmental charge imposed on interest received by a person holding, actually or constructively, 10 percent or more of the total combined voting power of all classes of stock of the Company entitled to vote; or (g) any tax, assessment or other governmental charge required to be withheld by any paying agent from any payment of principal of and premium, if any, or interest on any Security or interest on any coupon appertaining thereto if such payment can be made without such withholding by any other paying agent; nor shall Additional Amounts be paid with respect to any payment of the principal of and premium, if any, or interest on this Security to a person other than the sole beneficial owner of such payment to the extent such beneficial owner would not have been entitled to the Additional Amounts had such beneficial owner been the holder of this Security or any coupon appertaining hereto. The term "United States Alien" means any person who, for United States Federal income tax purposes, is a foreign corporation, a non-resident alien individual, a non-resident alien fiduciary of a foreign estate or trust, or a foreign partnership to the extent one or more of the members of which is, for United States Federal income tax purposes, a foreign corporation, a non-resident alien individual or a non-resident alien fiduciary of a foreign estate or trust, and the term "United States" means the United States of America, its territories and possessions. Except as specifically provided herein and in the Fiscal Agency Agreement, the Company shall not be required to make any payment with respect to any tax, assessment or other governmental charge imposed by any government or any political subdivision or taxing authority thereof or therein. 3. Redemption. (a) The Securities are subject to redemption as necessary for the Company to continue to qualify for United States Federal tax treatment as a real estate investment trust under section 856(a)(6) of the Internal Revenue Code of the United States of America at a redemption price equal to 100% of the principal amount, together with accrued interest to the date fixed for 43 redemption. Provisions of this Security that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Company shall notify the Fiscal Agent promptly of specific outstanding Securities to be called for redemption. Notwithstanding any other provision of this Section 3, with respect to redemptions, this Security will be immediately redeemable, at the option of and upon notice by the Company to the extent deemed sufficient in the opinion of the Company's Board of Trustees to prevent the holder hereof or any other person having an interest herein if this Security were thereupon converted from being deemed to own shares of beneficial interest of the Company ("Shares") in excess of the limits prescribed in Article VI, Section 6.15 of the Company's Restated Declaration of Trust, as amended. (b) If, at any time, the Company shall determine that as a result of any change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of the United States or any political subdivision or taxing authority thereof or therein affecting taxation, or any amendment to or change in an official application or interpretation of such laws, regulations or rulings which change or amendment becomes effective on or after November 15, 1993 the Company has or will become obligated to pay to the holder of any Security or coupon Additional Amounts and such obligation cannot be avoided by the Company taking reasonable measures available to it, then the Company may, at its election exercised at any time when such conditions continue to exist, redeem the Securities as a whole at a redemption price equal to 100% of the principal amount, together with accrued interest, if any, to the date fixed for redemption; provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Company would be obliged to pay such Additional Amounts were a payment in respect of this Security then due; and provided further, that at the time such notice is given, such obligation to pay such Additional Amounts remains in effect. Prior to any redemption of the Securities pursuant to the preceding paragraph, the Company shall provide the Fiscal Agent with one or more certificates (signed by the President or any Vice President and the Treasurer or the Secretary) of the Company on which the Fiscal Agent may conclusively rely to the effect that the Company is entitled to redeem the Securities pursuant to such paragraph and that the conditions precedent to the right of the Company to redeem the Securities pursuant to such paragraph have occurred and a written opinion of counsel (who may be an employee of the Company) stating that all legal conditions precedent to the right of the Company to redeem the Securities pursuant to such paragraph have occurred. (c) The Company shall, except as set forth in the succeeding paragraph, redeem the Securities as a whole but not in part, at 100% of their principal amount, together with interest accrued to the date fixed for redemption, after determining, 44 based on a written opinion of counsel, that any certification, identification or information reporting requirement of United States law or regulation with regard to the nationality, residence or identity of a beneficial owner of a Bearer Security or a coupon appertaining thereto who is a United States Alien (as defined in Section 2 hereof) would be applicable to a payment of principal of, premium, if any, or interest on a Bearer Security or a coupon appertaining thereto made outside the United States by the Company or a paying agent (other than a requirement (a) which would not be applicable to a payment made (i) directly to the beneficial owner or (ii) to a custodian, nominee or other agent of the beneficial owner, or (b) which could be satisfied by the holder, custodian, nominee or other agent certifying that the beneficial owner is a United States Alien, provided, however, in each case referred to in clauses (a)(ii) and (b) payment by such custodian, nominee or agent to the beneficial owner is not otherwise subject to any requirement referred to in this sentence). The Company shall make such determination and will notify the Fiscal Agent thereof in writing as soon as practicable, stating in the notice the effective date of such certification, identification, or information reporting requirement and the dates within which the redemption shall occur, and the Fiscal Agent shall give prompt notice of such redemption in accordance with the Fiscal Agency Agreement. The Company shall determine the redemption date by notice to the Fiscal Agent at least 75 days before the redemption date, unless shorter notice is acceptable to the Fiscal Agent. Such redemption of the Securities must take place on such date, not later than one year after the publication of the initial notice of the Company's determination of the existence of such certification, identification or information reporting requirement. The Company shall not so redeem the securities, however, if the Company shall, based on a subsequent event, determine, based on a written opinion of counsel, not less than 30 days prior to the date fixed for redemption, that no payment would be subject to any requirement described above, in which case the Company shall notify the Fiscal Agent, which shall give prompt notice of that determination in accordance with the Fiscal Agency Agreement, and any earlier redemption notice shall thereupon be revoked and of no further effect and the Fiscal Agent shall have no liability whatsoever to the Company or to the holders of Securities with respect thereto. Notwithstanding the preceding paragraph, if and so long as the certification, identification or information reporting requirement referred to in the preceding paragraph would be fully satisfied by payment of United States withholding, backup withholding or similar taxes, the Company may elect, prior to the giving of the notice of redemption, to have the provisions of this paragraph apply in lieu of the provisions of the preceding paragraph. In that event, the Company will pay such Additional Amounts (without regard to Section 2 hereof) as are necessary in order that, following the effective date of such requirements, every net payment made outside the United States by the Company 45 or a paying agent of the principal of, premium, if any, and interest on a Bearer Security or a coupon appertaining thereto to a holder who is a United States Alien (without regard to a certification, identification or information reporting requirement as to the nationality, residence or identity of such holder), after deduction for United States withholding, backup withholding or similar taxes (other than withholding, backup withholding or similar taxes (i) which would not be applicable in the circumstances referred to in the parenthetical clauses of the first sentence of the next preceding paragraph or (ii) are imposed as a result of presentation of such Bearer Security or coupon for payment more than 10 days after the date on which such payment becomes due and payable or on which payment thereof is duly provided for, whichever is later), will not be less than the amount provided in the Bearer Security or the coupon to be then due and payable. If the Company elects to pay such Additional Amounts and as long as it is obligated to pay such Additional Amounts, the Company may subsequently redeem the Securities, at any time, in whole but not in part, upon not more than 60 days nor less than 30 days notice, at 100% of their principal amount, plus accrued interest to the date fixed for redemption and Additional Amounts, if any. (d) Notice of redemption will be given by publication in Authorized Newspapers (as defined in the Fiscal Agency Agreement) in The City of New York and in London, and, so long as the Securities are listed on the Luxembourg Stock Exchange, in Luxembourg, and by mail to holders of Registered Securities, in each case in the English language, all as provided in the Fiscal Agency Agreement. In the case of a redemption in whole at the option of the Company, notice will be given once not more than 60 nor less than 30 days prior to the date fixed for redemption. In the case of a partial redemption at the option of the Company, notice will be given twice, the first such notice to be given not more than 75 or less than 60 days prior to the date fixed for redemption and the second such notice to be given not more than 60 or less than 30 days prior to the date fixed for redemption. Neither the failure to give notice nor any defect in any notice given to any particular holder of a Security shall affect the sufficiency of any notice with respect to other Securities. Notices relating to the redemption of Securities whether at the option of the Company or the holder thereof shall specify: the date fixed for redemption or the Holder Redemption Date, as the case may be; the redemption price; the place or places of payment; that payment will be made upon presentation and surrender of the Securities to be redeemed, together, in the case of a Bearer Security, with all appurtenant coupons, if any, maturing subsequent to the date fixed for redemption; that interest accrued to the date fixed for redemption (unless the redemption date is an interest payment date) will be paid as specified in said notice; and that on and after said date interest thereon will cease to accrue. In the case of a redemption in part at the option of the Company, notices shall 46 specify the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities outstanding after such partial redemption. The first notice shall specify the last date on which exchanges or transfers of Securities may be made, and the second notice shall specify the serial numbers of the Securities and the portions thereof called for redemption. In the case of a redemption in whole or in part by the Company, notices shall specify the date the conversion privilege expires in accordance with Section 4(a) hereof. Such notices shall also state that the conditions precedent, if any, to such redemption have occurred (and the Company shall so certify to the Fiscal Agent) and the last day for surrender of the Securities being redeemed. (e) If notice of redemption has been given in the manner set forth in Section 3(d) hereof with respect to Securities to be redeemed at the option of the Company, the Securities so to be redeemed shall become due and payable on the applicable redemption date specified in such notice and upon presentation and surrender of the Securities at the place or places specified in the notice given by the Fiscal Agent on behalf of the Company with respect to such redemption, together in the case of Bearer Securities with all appurtenant coupons, if any, maturing subsequent to the redemption date, the Securities shall be paid and redeemed by the Company, at the places and in the manner and currency herein specified and at the redemption price together with accrued interest, if any, to the redemption date; provided, however, that interest due in respect of coupons maturing on or prior to the redemption date shall be payable only upon the presentation and surrender of such coupons (at an office or agency located outside of the United States of America). If any Bearer Security surrendered for redemption shall not be accompanied by all appurtenant coupons maturing after the redemption date, such Security may be paid after deducting from the amount otherwise payable an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Fiscal Agent if they are furnished with such security or indemnity as they may require to save each of them and each other paying agency of the Company harmless. From and after the redemption date, if monies for the redemption of Securities shall have been available at the principal corporate trust office of the Fiscal Agent for redemption on the redemption date, the Securities shall cease to bear interest, the coupons for interest appertaining to Bearer Securities maturing subsequent to the redemption date shall be void, and the only right of the holders of such Securities shall be to receive payment of the redemption price together with accrued interest to the redemption date if the redemption date is an interest payment date. If monies for the redemption of the Securities are not made available for payment until after the redemption date, the Securities shall not cease to bear interest until such monies have been so made available. 47 4. Conversion. (a) Subject to and upon compliance with the provisions of the Fiscal Agency Agreement, a holder of Securities is entitled, at his option, at any time on or after the Exchange Date (as defined in the Fiscal Agency Agreement) and on or before the close of business on November 15, 1998, or in case a Security or a portion thereof is called for redemption by the Company, or the holder thereof elects to have such Security or a portion thereof redeemed by the Company pursuant to Section 3(d) hereof, then in respect of such Security or such portion thereof until and including, but (unless the Company defaults in making the payment due upon redemption) not after, the close of business on the date fixed for redemption, to convert such Security (or any portion of the principal amount thereof which is U.S. $1,000 or an integral multiple thereof), at the principal amount thereof, or of such portion, into fully paid and nonassessable Shares (calculated as to each conversion to the nearest 1/1000 of a Share) at a Conversion Price equal to U.S. $37.125 aggregate principal amount of Securities for each Share (the "Conversion Price") (or at the current adjusted Conversion Price if an adjustment has been made as provided herein) by surrender of the Security, or in the case of a Security submitted for redemption pursuant to Section 3(d) hereof, satisfactory evidence of such submission, together with (i) if a Bearer Security, all unmatured coupons and any matured coupons in default appertaining thereto, and if a Registered Security (if so required by the Company or the Fiscal Agent), instruments of transfer in form satisfactory to the Company and the Fiscal Agent, duly executed by the registered holder or by his duly authorized attorney and (ii) the conversion notice hereon duly executed (a) at the Corporate Trust Office of the Fiscal Agent, or at such other office or agency of the Company as may be designated by it for such purpose in the City of New York, or (b) subject to any laws or regulations applicable thereto and subject to the right of the Company to terminate the appointment of any such conversion agency, at the offices of Fleet National Bank, and Banque Generale du Luxembourg, 27 Avenue Monterey, L-2951 Luxembourg, or at such other offices or agencies as the Company may designate. Notwithstanding the foregoing, a holder may not convert any Security, and such Security shall not be convertible by any holder, if as a result of such conversion any person would then be deemed to own Shares in excess of the limits prescribed in Article VI, Section 6.15 of the Company's Restated Declaration of Trust, as amended, provided that the Company shall notify the Fiscal Agent from time to time with respect to the number of Shares that would exceed such limits. (b) In the case of any Registered Security which is converted after any Record Date and on or prior to the next succeeding Interest Payment Date (other than any Registered Security whose maturity is prior to such Interest Payment Date), interest that is payable on such Interest Payment Date shall be payable on such Interest Payment Date notwithstanding such conversion, and such interest shall be paid to the person in 48 whose name that Registered Security is registered at the close of business on such Record Date. Except as otherwise provided in the immediately preceding sentence, no payment or adjustment shall be made upon any conversion on account of any interest accrued on the Securities surrendered for conversion or on account of any dividends on the Shares issued upon conversion. Registered Securities surrendered for conversion during the period after the close of business on any Record Date next preceding any Interest Payment Date to the close of business on such Interest Payment Date shall (except in the case of Registered Securities or portions thereof which are called for redemption on a redemption date within such period) be accompanied by payment of any amount equal to interest payable on such Interest Payment Date on the principal amount being surrendered for conversion. No fractions of shares or scrip representing fractions of shares will be issued or delivered on conversion, but instead of any fractional interest the Company shall pay a cash adjustment as provided in the Fiscal Agency Agreement. (c) (i) In case at any time the Company shall pay or make a stock dividend or other distribution (payable otherwise than in cash out of its retained earnings) on any class of equity securities of the Company in Shares, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced so that the same shall equal the price determined by multiplying such Conversion Price by a fraction of which the numerator shall be the number of Shares outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such adjustment to become effective immediately after the opening of business on the day following the date fixed for such determination. (ii) In case at any time the Company shall (A) subdivide its outstanding Shares, (B) combine its outstanding Shares into a smaller number of shares, or (C) issue by reclassification of its Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation) any shares, the Conversion Price in effect at the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the holder of any Security surrendered for conversion after such time shall be entitled to receive the aggregate number and kind of shares which, if such Security had been converted immediately prior to such time, he would have owned upon such conversion and been entitled to receive upon such subdivision, combination or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. 49 (iii) In case at any time the Company shall fix a record date for the issuance of rights or warrants to all holders of its Shares entitling them to subscribe for or purchase Shares at a price per share less than the current market price per Share (determined as provided in paragraph (v) of this subsection (c)) on such record date, the Conversion Price in effect at the opening of business on the day following such record date, shall be reduced so that the same shall equal the price determined by multiplying such Conversion Price by a fraction of which the numerator shall be the number of Shares outstanding at the close of business on such record date plus the number of Shares which the aggregate of the offering price of the total number of Shares so offered for subscription or purchase would purchase at such current market price and the denominator shall be the number of Shares outstanding at the close of business on such record date plus the number of Shares so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following such record date. Such reduction shall be made successively whenever such a record date is fixed; and in the event that such rights or warrants are not so issued, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such record date had not been fixed. (iv) In case at any time the Company shall fix a record date for the making of a distribution, by dividend or otherwise, to all holders of its Shares, or evidences of its indebtedness or assets (including securities, but excluding (x) any dividend or distribution referred to in paragraph (i) of this subsection (c), any rights or warrants referred to in paragraph (iii) of this subsection (c), and (y) any dividend, return of capital or distribution paid in cash out of the retained earnings of the Company), then in each such case the Conversion Price in effect after such record date shall be determined by multiplying the Conversion Price in effect immediately prior to such record date by a fraction, of which the numerator shall be the total number of outstanding Shares multiplied by the current market price per Share (as defined in paragraph (v) of this subsection (c) on such record date, less the fair market value (as determined by the Board of Directors of the Company, whose determination shall be conclusive and described in a statement filed with the Fiscal Agent) of the portion of the assets or evidences of indebtedness so to be distributed, and of which the denominator shall be the total number of outstanding Shares multiplied by such current market price per Share. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such record date has not been fixed. (v) For the purpose of any computation under paragraphs (iii) and (iv) of this subsection (c), the current market price per Share on any date shall be deemed to be the 50 average of the Closing Prices for the 15 consecutive days upon which the principal trading market for the Shares is open selected by the Company commencing not less than 20 nor more than 30 days before the day in question. The Closing Price for any day shall be the last reported sales prices regular way or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case on the New York Stock Exchange or, if the Shares are not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Shares are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the closing sale price quoted on the NASDAQ National Market System, or if not so quoted, as determined by the Company. (vi) The Company may make such adjustments in the Conversion Price, in addition to those required by paragraphs (i), (ii) and (iii) of this section, as it considers to be advisable in order that any event treated for United States Federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (vii) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least twenty-five cents (U.S. $0.25) in such Conversion Price; provided, however, that any adjustment which by reason of this paragraph (vii) is not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this subsection (c) shall be made to the nearest cent or to the nearest 1/1000 of a Share, as the case may be. (d) Whenever the Conversion Price is adjusted and in the event of certain other corporate actions, as herein provided, the Company shall notify the Fiscal Agent and the Fiscal Agent shall notify the holders of Securities, all as provided in Sections 7(f) and 19 of the Fiscal Agency Agreement. (e) The Company shall, at all times from and after the date on which the Securities are convertible into Shares, have reserved and available, free from preemptive rights, out of its authorized but unissued Shares, for the purpose of effecting the conversion of Securities, the full number of Shares then issuable upon the conversion of all Securities. The Company covenants that all Shares which may be issued or delivered upon conversion of Securities will upon issuance be fully paid and nonassessable. (f) In case of any consolidation with, or merger of the Company into, any other corporation, or in case of any merger of another corporation into the Company (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding Shares of the Company), or in case of any sale or transfer of all or substantially all of the assets of the Company, the corporation formed by such consolidation or 51 resulting from such merger or which acquires such assets, as the case may be, shall execute and deliver to the Fiscal Agent an amendment to the Fiscal Agency Agreement providing that the holder of each Security shall have the right during the period such Security shall be convertible as specified in section (a) hereof to convert such Security only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, sale or transfer by a holder of the number of Shares of the Company into which such Security might have been converted immediately prior to such consolidation, merger, sale or transfer assuming, if such consolidation, merger, sale or transfer is prior to the period such Security shall be convertible as specified in subsection (a) hereof, that the Securities were convertible at such time at the initial Conversion Price as adjusted from November 15, 1993 to such time pursuant to paragraphs (i), (ii), (iii), (iv) and (vi) of subsection (c) hereof. Such amendment shall provide for adjustments which, for events subsequent to the effective date of such amendment, shall be as nearly equivalent as may be practicable to the adjustments provided for herein. The above provisions of this subsection shall similarly apply to successive consolidations, mergers, sales or transfers. 5. Events of Default. In the event that any of the following ("Events of Default") shall occur and be continuing: (a) the Company shall fail to pay when due the principal amount of any of the Securities whether at maturity or upon redemption or otherwise; or (b) the Company shall fail to pay any installment of interest or Additional Amounts (as described in Section 2 hereof) on any of the Securities for a period of 30 days after the date when due; or (c) the Company shall fail duly to perform or observe any other term, covenant or agreement contained in any of the Securities or in the Fiscal Agency Agreement for a period of 60 days after the date on which written notice of such failure, requiring the Company to remedy the same, shall first have been given to the Company and the Fiscal Agent by the holders of at least 25% in aggregate principal amount of the Securities at the time outstanding; provided, however, that in the event the Company shall within the aforesaid period of 60 days commence legal action in a court of competent jurisdiction seeking a determination that the Company had not failed to duly perform or observe the term or terms, covenant or covenants or agreement or agreements specified in the aforesaid notice, such failure shall not be an Event of Default unless the same continues for a period of 10 days after the date of any final determination by such court to the effect that the Company had failed to duly perform or observe one or more of such terms, covenants or agreements; or 52 (d) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of the property of it or ordering the winding-up or liquidation of the affairs of it and such decree or order shall remain unstayed and in effect for a period of 20 consecutive days; or (e) the Company shall commence a voluntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) of the Company or for any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts as they become due or shall take any corporate action in furtherance of any of the foregoing; or (f) an event of default, as defined in any indenture or instrument evidencing or under which the Company shall have outstanding at least $10,000,000 (or its equivalent in another currency), in aggregate principal amount of indebtedness for borrowed money, shall happen and be continuing and such default shall involve the failure to pay the principal of such indebtedness (or any part thereof), when due and payable after the expiration of any applicable grace period with respect thereto, or such indebtedness shall have been accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable, and failure to pay shall not have been cured by the Company within 30 days after such failure or such acceleration shall not be rescinded or annulled within 30 days after notice thereof shall have first been given to the Company; provided that if such event of default under such indenture or instrument shall be remedied or cured by the Company or waived by the holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of any of the holders of Securities; then the holder of this Security may, at such holder's option, declare the principal of this Security and the interest accrued hereon (and Additional Amounts under Section 2 hereof, if any, thereon) to be due and payable immediately by written notice to the Company and the Fiscal Agent, and if any such Event of Default shall continue at the time of receipt of such written notice, the principal of this Security and the interest accrued hereon (and Additional Amounts, if any, hereon) shall become 53 immediately due and payable, subject to the proviso of subsection (c) of this Section 5. Upon payment of such amount of principal and interest (and Additional Amounts pursuant to Section 2 hereof, if any), all of the Company's obligations in respect of payment of principal of and interest on (and Additional Amounts, if any, on) this Security shall terminate. Interest on overdue principal and interest (and Additional Amounts, if any) shall accrue from the date on which such principal and interest (and Additional Amounts, if any) were due and payable to the date such principal and interest (and Additional Amounts, if any) are paid or duly provided for, at the rate borne by the Securities (to the extent payment of such interest shall be legally enforceable). If an Event of Default, as defined in this Section 5, with respect to the Securities, or an event which would, with the passing of time or the giving of notice, or both be an Event of Default, shall occur and be continuing, the Company shall within two business days of becoming aware thereof notify the Fiscal Agent in writing, of such Event of Default and the Fiscal Agent shall thereupon promptly notify all of the holders of the Securities of such Event of Default. The Company shall provide to the Fiscal Agent on each anniversary of the date hereof, a certificate to the effect that there is then existing no default with respect to the Securities, as defined in this Section. 6. Merger, Consolidation, Sale, Conveyance or Assumption. (a) The Company will not merge or consolidate with, or sell or convey all or substantially all of its assets to, any other corporation (for purposes hereof "corporation" shall include business trusts, limited partnerships, business corporations and other business entities), unless (i) either (A) the Company shall be the surviving corporation in the case of a merger or (B) (I) the surviving, resulting or transferee corporation shall expressly assume the due and punctual payment (including Additional Amounts pursuant to Section 2 hereof, if any) of all the Securities, according to their tenor, and the due and punctual performance of all of the covenants and obligations of the Company under the Securities, the coupons and the Fiscal Agency Agreement, by supplemental agreement reasonably satisfactory to the Fiscal Agent, (II) immediately after such merger, consolidation, sale or conveyance, the Securities will not be subject to United States Federal estate tax as a result thereof, if held by a person who at the time of death is not a citizen or resident of the United States unless such successor corporation shall have agreed, by supplemental agreement, to indemnify the persons liable therefor for the amount of United States Federal estate tax attributable and paid in respect of any Securities includable in the gross estate of a person who at the time of death is not a citizen or resident of the United States or unless the Securities would be subject to United States Federal estate tax immediately prior to such merger, 54 consolidation, sale or conveyance if held by a person who at the time of death is not a citizen or resident of the United States, and (III) the Fiscal Agent shall have received the documentation required under Section 15(a) of the Fiscal Agency Agreement, (ii) the surviving, resulting or transferee corporation, if not organized and validly existing under the laws of the United States, shall expressly agree to make payments under the Securities free of any deduction or withholding for or on account of taxes, levies, imposts and charges whatsoever imposed by or for the account of the jurisdiction where such successor corporation is generally subject to taxation (or any political subdivision or taxing authority thereof or therein) in a manner equivalent to that set forth herein, subject to the exceptions contained in such forms of the Securities, and (iii) the Company or such successor corporation, as the case may be, shall not, immediately after such merger, consolidation, sale or conveyance, be in default in the performance of any covenants or obligations of the Company under the Securities or the Fiscal Agency Agreement. In calculating the amount of tax attributable to any Securities for purposes of sub-clause (II) above in accordance with the provisions of the Internal Revenue Code of 1986, as amended, the gross estate of the decedent shall be deemed to include only Securities issued under the Fiscal Agency Agreement. (b) Upon any merger, consolidation, sale, conveyance or assumption as provided in Section 6(a), the successor or assuming corporation shall succeed to and be substituted for, and may exercise every right and power of and be subject to all the obligations of, the Company under the Securities and Fiscal Agency Agreement, with the same effect as if such successor or assuming corporation had been named as the Company therein and herein and the Company shall be released from its liability as obligor under the Securities and Fiscal Agency Agreement. 7. INTENTIONALLY OMITTED. 8. Replacement, Transfer and Exchange of Securities. (a) In case any Security shall at any time become mutilated, destroyed, stolen or lost and such Security or evidence of the loss, theft or destruction thereof (together with the indemnity hereinafter referred to and such other documents or proof as may be required) shall be delivered to the Fiscal Agent, a new Security of like tenor and date with appropriate interest coupons, if any, will be issued by the Company in exchange for the Security so mutilated, or in lieu of the Security so destroyed, stolen or lost, but, in the case of a destroyed, stolen or lost Security only upon receipt of evidence satisfactory to the Fiscal Agent and the Company that such Security was destroyed, stolen or lost, and if required by the Fiscal Agent or the Company, upon receipt also of indemnity satisfactory to the Fiscal Agent and the Company. All expenses and reasonable charges associated with procuring such indemnity and with the preparation, authentication and delivery of a new 55 Security shall be borne by the owner of the Security so mutilated, destroyed, stolen or lost. (b) As provided in the Fiscal Agency Agreement and subject to certain limitations therein set forth, Bearer Securities (with all unmatured coupons appertaining thereto) are exchangeable at, subject to applicable laws and regulations, the offices of the paying agencies in London and Luxembourg or as designated by the Company for such purpose pursuant to the Fiscal Agency Agreement, for an equal aggregate principal amount of Registered Securities and/or Bearer Securities of authorized denominations, and Registered Securities are exchangeable at the Corporate Trust Office of the Fiscal Agent in Providence, Rhode Island or The City of New York or, subject to applicable laws and regulations, the offices of the paying agencies in London and Luxembourg or as designated by the Company for such purpose pursuant to the Fiscal Agency Agreement, for an equal aggregate principal amount of Registered Securities of authorized denominations as requested by the holder surrendering the same. Registered Securities will not be exchangeable for Bearer Securities. The Company shall not be required (a) to exchange Bearer Securities for Registered Securities during the period between the close of business on any May 15 or November 15 and the opening of business on the next succeeding interest payment date, or (b) in the event of a redemption in part, (i) to register the transfer of Registered Securities or to exchange Bearer Securities for Registered Securities during a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Securities called for such redemption; (ii) to register the transfer of or exchange any such Registered Securities, or portion thereof, called for redemption; or (iii) to exchange any such Bearer Securities called for redemption; provided, however, that a Bearer Security called for redemption may be exchanged for a Registered Security which is simultaneously surrendered, with written instruction for payment on the date fixed for redemption, unless the date fixed for redemption is during the period between the close of business on any May 1 or November 1 and the close of business on the next succeeding interest payment date, in which case such exchange may only be made prior to the close of business on May 1 or November 1 immediately preceding the date fixed for redemption. The Company also shall not be required to exchange Securities if, as a result thereof, the Company would incur adverse consequences under United States Federal income tax laws in effect at the time of such exchange. In the event of redemption or conversion of a Registered Security in part only, a new Security or Securities for the unredeemed or unconverted portion hereof will be issued in the name of the holder thereof. (c) The costs and expenses of effecting any exchange or registration of transfer pursuant to the foregoing provisions, except for the expenses of delivery by other than regular mail (if any) and except, if the Company shall so require, the payment of a sum sufficient to cover any tax or other governmental charge 56 or insurance charges that may be imposed in relation thereto, will be borne by the Company. (d) The Company has initially appointed as registrar and transfer agent the Fiscal Agent acting through its principal corporate trust office in Providence, Rhode Island. The Company has also initially appointed Banque Generale du Luxembourg as a transfer agent. The Company may at any time terminate the appointment of the registrar and transfer agent and appoint additional or other registrars and transfer agents or approve any change in an office through which the registrar or transfer agent acts; provided that, until all of the Securities have been delivered to the Fiscal Agent for cancellation, or monies sufficient to pay the Securities have been made available for payment and either paid or returned to the Company as provided in the Securities, the Company will maintain a registrar and a transfer agent in The City of New York in the United States and in Luxembourg, so long as the Securities are registered on the Luxembourg Stock Exchange. (e) For purposes of the provisions of this Security and the Fiscal Agency Agreement, any Security authenticated and delivered pursuant to the Fiscal Agency Agreement shall, as of any date of determination, be deemed to be "outstanding", except for: (i) Securities previously converted, or canceled by the Fiscal Agent or delivered to the Fiscal Agent for cancellation; (ii) Securities which have been called for redemption by the Company in accordance with Section 3 hereof or which have become due and payable at maturity or otherwise and with respect to which monies sufficient to pay the principal thereof and interest thereon shall have been made available to the Fiscal Agent; or (iii) Securities in lieu of or in substitution for which other Securities have been authenticated and delivered pursuant to the Fiscal Agency Agreement; provided, however, that in determining whether the holders of the requisite principal amount of outstanding Securities are present at a meeting of holders of Securities for quorum purposes or have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any subsidiary thereof shall be disregarded and deemed not to be outstanding. 9. Modifications and Amendments. (a) Without the consent of any holders of Securities or coupons, modifications of or amendments to the Fiscal Agency Agreement may be made for any of the following purposes: 57 (i) to evidence the succession of another corporation to the Company in accordance with Section 6 hereof and the assumption by any such successor of the covenants of the Company in the Fiscal Agency Agreement or the Securities; (ii) to add to the covenants of the Company for the benefit of the holders of Securities or coupons, or to surrender any right or power herein conferred upon the Company; (iii) to permit payment of principal and interest on Bearer Securities in the United States, provided that such payment is permitted by United States tax laws and regulations then in effect; (iv) to make provision with respect to the conversion rights of holders of Securities pursuant to Section 4(f) hereof; (v) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein; and (vi) to make any other provisions with respect to matters or questions arising under this Security or the Fiscal Agency Agreement, provided such action pursuant to this clause (vi) shall not adversely affect the interests of the holders of Securities or coupons. (b) Modifications and amendments to the Fiscal Agency Agreement or to these Securities may be made, and future compliance with or past default by the Company under any of the provisions thereof may be waived, with the consent of the holders of at least a majority in aggregate principal amount of the Securities at the time outstanding, or of such lesser percentage as may act at a meeting of holders of Securities held in accordance with the provisions set forth herein; provided, that no such modification, amendment or waiver may, without the consent of the holder of each such Security affected thereby: (i) waive a default in the payment of the principal of or interest on any Security; (ii) change the stated maturity of the principal of or any installment of interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or change the obligation of the Company to pay Additional Amounts pursuant to Section 2 hereof (except as permitted by subsection (a) of this Section 9), or change the coin or currency in which any Security or the interest thereon is payable, or convert any Securities as provided in Sections 3 and 4, respectively. (iii) reduce the requirements of Section 10 hereof for quorum or voting, or reduce the percentage in principal amount of the outstanding Securities the consent of whose holders is required for any amendment or modification of the Fiscal Agency 58 Agreement or the Terms and Conditions of the Securities or the consent of whose holders is required for any waiver (of compliance with certain provisions of the Fiscal Agency Agreement or the Securities or certain defaults hereunder and thereunder and their consequences) provided for in these Terms and Conditions; (iv) change the obligation of the Company to maintain an office or agency in the City of New York and outside the United States; or (v) modify any of the provisions of this Section except to increase any such percentage or to provide that certain other provisions of the Fiscal Agency Agreement or the Securities cannot be modified or waived without the consent of the holder of each outstanding Security affected thereby. It shall not be necessary for any act of holders of Securities under this Section to approve the particular form of any proposed amendment, modification or waiver, but it shall be sufficient if such act shall approve the substance thereof. Any modifications, amendments or waivers to the Fiscal Agency Agreement or to these Terms and Conditions will be conclusive and binding on all holders of the Securities, whether or not they have given such consent or, were present at such meeting, and on all holders of coupons, whether or not notation of such modifications, amendments or waivers is made upon the Securities or coupons, and on all future holders of Securities and coupons. Any instrument given by or on behalf of any holder of a Security in connection with any consent to any such modification, amendment or waiver will be irrevocable once given and will be conclusive and binding on all subsequent holders of such Security. 10. Meetings and Votes of Holders. (a) A meeting of holders of Securities may be called at any time and from time to time pursuant to this Section for any of the following purposes: (i) to give any notice to the Company or to the Fiscal Agent, or to give any directions to the Fiscal Agent, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by holders of Securities pursuant to these Terms and Conditions; or (ii) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of the Securities under any other provision of the Fiscal Agency Agreement, under applicable law or under these Terms and Conditions. (b) Meetings of holders of Securities may be held at such place or places in Providence, Rhode Island or The City of New York or London as the Fiscal Agent or, in case of its failure to act, the Company or the holders calling the meeting shall from time to time determine. 59 The Fiscal Agent may at any time call a meeting of holders of the Securities to be held at such time and at such place in any of such designated locations as the Fiscal Agent shall determine. Notice of every meeting of holders shall be made as specified in the Fiscal Agency Agreement. In case at any time the Company or the holders of at least 25% in aggregate principal amount of the Securities outstanding shall have requested the Fiscal Agent to call a meeting of the holders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Fiscal Agent shall not have given the first notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the holders of Securities in the amount above specified may determine the time and the place in such designated locations for such meeting and may call such meeting to take any action authorized herein by giving notice thereof as provided in the Fiscal Agency Agreement. (c) To be entitled to vote at any meeting of holders of Securities, a person shall be (i) a holder of one or more Securities, or (ii) a person appointed by an instrument in writing as proxy for a holder or holders of Securities by such holder or holders, which proxy need not be a holder of Securities. The only persons who shall be entitled to be present or to speak at any meeting of holders shall be the persons entitled to vote at such meeting and their counsel and any representatives of the Fiscal Agent and its counsel and any representatives of the Company and its counsel. The persons entitled to vote a majority in principal amount of the Securities shall constitute a quorum for the transaction of all business specified in subsection (a) hereof. No business shall be transacted in the absence of a quorum unless a quorum is represented when the meeting is called to order. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of the holders of Securities, be dissolved. In any other case the meeting shall be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in the Fiscal Agency Agreement. Subject to the foregoing, at the reconvening of any meeting adjourned for a lack of a quorum the persons entitled to vote 25% in principal amount of the Securities outstanding shall constitute a quorum for the taking of any action set forth in the notice of the original meeting. Notice of the reconvening of an adjourned meeting shall state expressly the percentage of the aggregate principal amount of the Securities that shall constitute a quorum. At a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid, any resolution and all matters (except as limited by Section 9 of these Terms and Conditions) shall be effectively passed and decided if passed or decided by the 60 persons entitled to vote a majority in principal amount of the Securities represented and voting at such meeting, provided that such amount shall be not less than 25% in principal amount of the Securities outstanding. Any holder of a Security who has executed an instrument in writing appointing a person as his proxy shall be deemed to be present for the purposes of determining a quorum and be deemed to have voted; provided, however, that such holder shall be considered as present or voting only with respect to the matters covered by such instrument in writing. Any resolution effectively passed or decision taken at any meeting of the holders of Securities duly held in accordance with this Section 10 shall be binding on all the holders of Securities whether or not present or represented at the meeting. (d) The Fiscal Agent may make such reasonable regulations as it may deem advisable for any meeting of holders of Securities in regard to proof of the holding of Securities and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Bearer Securities shall be proved by the production of the Bearer Securities or by a certificate executed, as depositary, by, and the appointment of any proxy shall be proved by having the signature of the person executing the proxy witnessed or guaranteed by, in each case, any trust company, bank or banker satisfactory to the Fiscal Agent. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified herein or other proof. The holding of Registered Securities shall be proved by the registry books maintained in accordance with the Fiscal Agency Agreement or by a certificate or certificates of the Fiscal Agent in its capacity as the Company's agent for the maintenance of such books. (e) The Fiscal Agent shall, by an instrument in writing, appoint a temporary chairperson and a temporary secretary of the meeting, unless the meeting shall have been called by the Company or by the holders of Securities as provided herein and in the Fiscal Agency Agreement, in which case the Company or the holders calling the meeting, as the case may be, shall in like manner appoint a temporary chairperson and a temporary secretary. A permanent chairperson and a permanent secretary of the meeting shall be elected by vote of the holders of a majority in principal amount of the Securities represented at the meeting and entitled to vote. At any meeting each holder or proxy shall be entitled to one vote for each U.S. $1,000 principal amount of Securities held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Securities challenged as not outstanding and ruled by the chairperson of the meeting to be not outstanding. The 61 chairperson of the meeting shall have no right to vote, except as a holder or proxy. Any meeting of holders of Securities duly called at which a quorum is present may be adjourned from time to time by vote of the holders (or proxies for the holders) of a majority in principal amount of the Securities represented at the meeting and entitled to vote; and the meeting may be held as so adjourned without further notice. (f) The vote upon any resolution submitted to any meeting of holders of Securities shall be written ballots on which shall be subscribed the signatures of the holders of Securities or of their representatives by proxy and the serial number or numbers of the Securities held or represented by them. The permanent chairperson of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record, at least in triplicate, of the proceedings of each meeting of holders of Securities shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was published as provided in the Fiscal Agency Agreement. Each copy shall be signed and verified by the affidavits of the chairperson and secretary of the meeting, and one of such copy shall be delivered to the Company and another to the Fiscal Agent to be preserved by the Fiscal Agent, the copy delivered to the Fiscal Agent to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. 11. Non-Business Days. In any case where the date of maturity of the principal of or interest on (or Additional Amounts, if any) the Securities or the date fixed for redemption of any Security shall be at any place of payment a Saturday, Sunday, a legal holiday or a day on which banking institutions in such place of payment are authorized or obligated by law to close, then payment of principal or interest (or Additional Amounts, if any) need not be made on such date at such place but may be made on the next succeeding day at such place of payment which is not a Saturday, Sunday, a legal holiday or a day on which banking institutions are authorized or obligated by law to close, with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date. 12. Fiscal and Paying Agent. (a) In acting under the Fiscal Agency Agreement and in connection with the Securities, the Fiscal Agent is acting solely 62 as agent of the Company and does not assume any obligation towards or relationship of agency or trust for or with the owner or holder of this Security or any interest coupon appertaining hereto, except that any funds held by the Fiscal Agent for payment on this Security shall be held in trust by it and applied as set forth herein, but need not be segregated from other funds held by it, except as required by law. For a description of the duties and the immunities and rights of the Fiscal Agent under the Fiscal Agency Agreement, reference is made to the Fiscal Agency Agreement, and the obligations of the Fiscal Agent to the holder hereof are subject to such immunities and rights. (b) Any monies paid by the Company to any paying agency for payment of principal of or interest on any Security (including Additional Amounts, if any, in respect thereof) and remaining unclaimed for two years after such payment has been made shall be repaid to the Company and to the extent permitted by law the holder of any Security shall thereafter look only to the Company for any payment thereof as a general unsecured obligation thereof and all liability of the Fiscal Agent with respect thereto shall cease. (c) No reference herein to the Fiscal Agency Agreement and no provision of this Security or of the Fiscal Agency Agreement shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest (including Additional Amounts, as described above) on this Security at the times, places and rate, and in the coin or currency, herein prescribed or to convert or redeem (at the request of a holder) this Security as provided herein or in the Fiscal Agency Agreement. Title to Bearer Securities and coupons shall pass by delivery. As provided in the Fiscal Agency Agreement and subject to certain limitations therein set forth, the transfer of Registered Securities is registrable on the Security Register upon surrender of a Registered Security for registration of transfer at the office or agency of the Company in Providence, Rhode Island or The City of New York, or, subject to applicable laws and regulations, at the offices of the paying agency in Luxembourg, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the holder thereof or his attorney duly authorized in writing, and thereupon one or more new Registered Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. 13. Notices. All notices to the holders of Securities will be published in an Authorized Newspaper (as defined in the Fiscal Agency Agreement) in Providence, Rhode Island, The City of New York and in London, and, as long as the Securities are listed on the 63 Luxembourg Stock Exchange, in Luxembourg. It is expected that publication in Providence, Rhode Island and The City of New York will be made in The Wall Street Journal (Eastern edition), in London in the Financial Times and in Luxembourg in the Luxemburger Wort. Notices shall be deemed to have been given on the date of publication as aforesaid or, if published on different dates, on the date of the first such publication. Notices will be mailed to registered holders of Registered Securities at their registered addresses as the same shall appear on the books of the Fiscal Agent on the day fifteen days prior to such mailing. 14. GOVERNING LAW. (a) THE FISCAL AGENCY AGREEMENT, THE SECURITIES AND ANY COUPONS APPERTAINING THERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. (b) THE COMPANY HAS APPOINTED FLEET NATIONAL BANK, 111 WESTMINSTER STREET, PROVIDENCE, RHODE ISLAND 02903 (ATTENTION: CORPORATE TRUST ADMINISTRATOR) AS ITS AGENT UPON WHOM PROCESS MAY BE SERVED IN ANY SUIT, ACTION OR PROCEEDING RELATING TO OR ARISING OUT OF THIS SECURITY, THE FISCAL AGENCY AGREEMENT OR ANY COUPON APPERTAINING HERETO, WITH A COPY TO THE COMPANY AT 128 TECHNOLOGY CENTER, WALTHAM, MASSACHUSETTS 02154 (ATTENTION: PRESIDENT). 15. Authentication. This Security and any coupon appertaining thereto shall not become valid or obligatory for any purpose until the certificate of authentication hereon shall have been duly signed by the Fiscal Agent acting under the Fiscal Agency Agreement. 16. Warranty of the Issuer. Subject to Section 15 hereof, the Company hereby certifies and warrants that all acts, conditions and things required to be done and performed and to have happened precedent to the creation and issuance of this Security and any coupons appertaining thereto, and to constitute the same legal, valid and binding obligations of the Company enforceable in accordance with their terms, have been done and performed and have happened in due and strict compliance with all applicable laws. 17. Accounting Terms. All accounting terms not otherwise defined herein shall have the meanings assigned to them in accordance with generally accepted accounting principles as applied in the United States. 64 18. Descriptive Headings. The descriptive headings appearing herein are for convenience of reference only and shall not alter, limit or define the provisions hereof. 65 TRANSFER NOTICE Only if a Registered Security or Shares issued upon conversion of any Security is transferred (if no registration statement covering such Shares is effective): FOR VALUE RECEIVED, the undersigned Holder hereby sell(s), assign(s) and transfer(s) unto _____________________________ _______________________________ whose taxpayer identification number is ________________ and whose address including postal/zip code is __________________________________________________ ___________________________________________________________ the within Security and all rights thereunder, hereby irrevocably constituting and appointing __________________________ attorney-in-fact to transfer said Security on the books of the Company with full power of substitution in the premises. In connection with the transfer of this Security, the undersigned Holder certifies that: [Check one) [ ] (a) This Security is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) in compliance with the exemption from registration under the Securities Act of 1933 provided by Rule 144A. [ ] (b) This Security is being transferred in an Offshore Transaction (as defined in Regulation S under the Securities Act of 1933) in compliance with the exemption from registration under the Securities Act of 1933 provided by Regulation S. [ ] (c) This Security is being transferred to a sophisticated institutional investor which is an "accredited investor" (within the meaning of Rule 501(a)(l), (2), (3) or (7) under the Securities Act of 1933) in a transaction not involving any general solicitation or advertising. Dated: Name: ------------- ---------------------------------- By: ------------------------------------ 66 Title: --------------------------------- NOTICE: The signature of the Holder to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without enlargement or any change whatsoever. SIGNATURE GUARANTEED -------------------------------------- TO BE COMPLETED BY A BROKER OR DEALER IF (c) ABOVE IS CHECKED: The undersigned represents and warrants that (i) it is a broker or dealer registered under Section 15 of the Securities Exchange Act of 1934, (ii) each person which will become a beneficial owner of this Security upon transfer is a sophisticated institutional investor which is an "accredited investor" (within the meaning of Rule 501(a)(l), (2), (3) or (7) under the Securities Act of 1933); (iii) no general solicitation or advertising was made or used by it in connection with the offer and sale of this Security to such person(s); and (iv) each such person has been notified that this Security has not been registered under the Securities Act of 1933 and is subject to the restrictions on transfer of the Security set forth herein and in the Fiscal Agency Agreement. Dated: ------------- --------------------------------------- By: ------------------------------------ IF NONE OF THE FOREGOING BOXES IS CHECKED, THE FISCAL AGENT SHALL NOT BE OBLIGATED TO REGISTER THE TRANSFER OF THIS SECURITY UNLESS AND UNTIL THE CONDITIONS TO ANY SUCH TRANSFER OF REGISTRATION SET FORTH HEREIN, ON THE FACE HEREOF AND IN THE FISCAL AGENCY AGREEMENT SHALL HAVE BEEN SATISFIED. 67 CONVERSION NOTICE If or Bearer Security of denomination U.S. $1,000: The undersigned holder of this Security hereby irrevocably exercises the option to convert this Security into Shares of Meditrust in accordance with the terms of this Security and directs that such shares be registered in the name of and delivered, together with a check in payment for any fractional share, to the undersigned unless a different name has been indicated below. If shares are to be registered in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Dated: ------------- ---------------------------- Signature [MUST BE GUARANTEED] If shares are to be registered in the name of and delivered to a person other than the holder, please print such person's name and address: - ----------------------------- - ----------------------------- - ----------------------------- HOLDER Please print name and address of holder: ------------------------------ ------------------------------ ------------------------------ 68 CONVERSION NOTICE If Registered Security or Bearer Security of denomination U.S. $10,000: The undersigned holder of this Security hereby irrevocably exercises the option to convert this Security, or portion hereof (which is U.S. $1,000 or an integral multiple thereof) below designated, into Shares of Meditrust in accordance with the terms of this Security, and directs that such Shares, together with a check in payment for any fractional share and any Securities representing any unconverted principal amount hereof, be delivered to and be registered (if a Registered Security) in the name of the undersigned unless a different name has been indicated below. If shares or Securities are to be registered in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Dated: ---------------------------- -------------- Signature [MUST BE GUARANTEED] If shares or Securities are to If only a portion of the registered Person other than the holder, in the name of a Securities is to be please print such person's name converted please indicate: and address: l. Principal Amount to be con- verted: U.S.$ - ----------------------------- --------- 2. Kind, amount and denomina- - ----------------------------- tion of Securities repre- senting unconverted prin- - ----------------------------- cipal amount to be issued: Bearer-U.S.$______________ Denominations: U.S.$______ (U.S. $1,000 or $10,000) Registered-U.S.$__________ Denominations: U.S.$______ (U.S. $1,000 or an integral multiple thereof) REGISTERED SECURITIES ARE NOT EXCHANGEABLE FOR BEARER SECURITIES. 69 EXHIBIT B 70 (FORM OF GLOBAL SECURITY) THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). NEITHER THIS SECURITY NOR ANY PORTION HEREOF MAY BE OFFERED OR SOLD DIRECTLY OR INDIRECTLY IN THE UNITED STATES OF AMERICA, ITS TERRITORIES OR POSSESSIONS ("UNITED STATES") OR TO CITIZENS, NATIONALS OR RESIDENTS THEREOF OR TO ANY CORPORATION, PARTNERSHIP OR OTHER ENTITY CREATED OR ORGANIZED IN OR UNDER THE LAWS OF THE UNITED STATES OR ANY POLITICAL SUBDIVISION THEREOF OR TO ANY ESTATE" OR TRUST WHICH IS SUBJECT TO UNITED STATES FEDERAL INCOME TAXATION REGARDLESS OF THE SOURCE OF ITS INCOME OR TO ANY OTHER PERSON DEEMED A U.S. PERSON UNDER REGULATION S UNDER THE SECURITIES ACT, EXCEPT BRANCHES OR AGENCIES OF UNITED STATES BANKS OR INSURANCE COMPANIES THAT OPERATE OUTSIDE THE UNITED STATES FOR VALID BUSINESS REASONS AS LOCALLY REGULATED BRANCHES OR AGENCIES ENGAGED IN THE BANKING OR INSURANCE BUSINESS AND NOT SOLELY FOR THE PURPOSE OF INVESTING IN SECURITIES NOT REGISTERED UNDER THE SECURITIES ACT ("UNITED STATES PERSONS") OTHER THAN ANY PORTION OF THIS SECURITY SOLD, SUBJECT TO CERTAIN RESTRICTIONS, PURSUANT TO REGULATION S UNDER THE SECURITIES ACT. ANY UNITED STATES PERSON WHO HOLDS THIS SECURITY WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE CODE. MEDITRUST (Originated in the Commonwealth of Massachusetts) 6-7/8% CONVERTIBLE DEBENTURES DUE 1998 TEMPORARY GLOBAL DEBENTURE Meditrust, a corporation duly organized and existing under the laws of the Commonwealth of Massachusetts (the "Company") for value received, hereby promises to pay to bearer upon presentation and surrender of this Global Security the Principal sum of EIGHTY-SIX MILLION AND TWO HUNDRED AND FIFTY THOUSAND United States Dollars (U.S.$86,250,000) on November 15, 1998, and to pay interest thereon, from the date hereof, semiannually in arrears on May 15 and November 15 in each year, commencing May 15, 1994, at the rate of 6-7/8% per annum, until the principal hereof is paid or made available for payment, provided, however, that interest on this Global Security shall be payable only after the issuance of the Definitive Securities for which this Global Security is exchangeable and, in the case of Definitive Securities in bearer form, only upon presentation and 71 surrender of the interest coupons thereto attached as they severally mature. This Global Security is one of a duly authorized issue of Securities of the Company designated as specified in the title hereof (the "Securities"). This Global Security and the Definitive Securities for which it is exchangeable, as described below, are limited to the aggregate principal amount of U.S.$86,250,000 and are entitled to the benefits of a Fiscal Agency Agreement of even date herewith (the "Fiscal Agency Agreement") among the Company and Fleet National Bank, as Fiscal Agent, Paying Agent, Security Registrar, and Conversion Agent (the "Fiscal Agent"). It is a temporary security and is exchangeable in whole or from time to time in part without charge upon request of the holder hereof for Definitive Securities in bearer form, with interest coupons attached, (a) not earlier than 40 days after the date hereof and (b) as promptly as practicable following presentation of certification, in the form set forth as Exhibits C and D of the Fiscal Agency Agreement for such purpose, that the beneficial owner or owners of this Global Security (or, if such exchange is only for a part of this Global Security, of such part) are not United States Persons. Upon any exchange of a part of this Global Security for Definitive Securities, the portion of the principal amount hereof so exchanged shall be endorsed by the Fiscal Agent on the Schedule of Exchanges hereto, and the principal amount hereof shall be reduced for all purposes by the amount so exchanged. Until exchanged in full for Definitive Securities, this Global Security shall in all respects be entitled to the same benefits under, and subject to the same terms and conditions of, the Fiscal Agency Agreement as Definitive Securities authenticated and delivered thereunder, except that neither the holder hereof nor the beneficial owners of this Global Security shall be entitled to receive payment of interest hereon, except as provided above, or to convert this Global Security into Shares of the Company or any other security, cash or other property. This Global Security shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. All terms used in this Global Security which are defined in the Fiscal Agency Agreement shall have the meanings assigned to them in the Fiscal Agency Agreement. Unless the certificate of authentication hereon has been executed by an authorized signatory of the Fiscal Agent, this Global Security shall not be valid or obligatory for any purpose. 72 IN WITNESS WHEREOF, the Company has caused this Global Security to be duly executed in its corporate name by its duly authorized signatory. Dated as of November 15, 1993 MEDITRUST By: ------------------------------- Name: ----------------------------- Title: ---------------------------- CERTIFICATE OF AUTHENTICATION This is the Global Security described in the within-mentioned Fiscal Agency Agreement. Fleet National Bank, as Fiscal Agent By: ----------------------------------- Authorized Signatory 73 EXHIBIT C 74 Form of Certificate to be Given by The Euroclear Operator and CEDEL S.A. CERTIFICATION U.S. $______________ 6-7/8% Convertible Debentures due 1998 (the "Securities") This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organizations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our "Member Organizations") substantially to the effect set forth in the Fiscal Agency Agreement, as of the date hereof, U.S.$__________ is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source or any other person deemed a "U.S. person" under Regulation S under the U.S. Securities Act of 1933, as amended ("United States persons"). As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its territories and possessions, including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We further certify (i) that we are not making available herewith for exchange any portion of the Global Security excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organization with respect to any portion of the part submitted herewith for exchange are no longer true and cannot be relied upon as the date hereof. We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or 75 threatened in connection with which this certification is or would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings. Dated: ______________, 1993 * Yours faithfully, [-------------------------------- (---------------------- Office) as Operator of the Euroclear System] [CEDEL S.A.]** By: --------------------------- - ---------------------------------- * To be dated no earlier than the date which is 40 days after _____________, 1993. ** Delete as appropriate. 76 EXHIBIT D 77 Form of Certificate of Beneficial Ownership for Bearer Securities to be Provided to the Euroclear Operator or to CEDEL S.A. CERTIFICATION U.S. $________________ 6-7/8% Convertible Debentures due November 15, 1998 (the "Securities") This is to certify that as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account are owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to the United States Federal income taxation regardless of its source or any other person deemed a "U.S. person" under Regulation S under the United States Securities Act of 1933, as amended ("United States persons"). As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its territories and possessions, including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Securities held by you for our account in accordance with your operating procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date. This certification excepts and does not relate to $____________ of such interest in the above Securities in respect of which we are not able to certify and as to which we understand exchange and delivery of Definitive Securities cannot be made until we do so certify. We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or 78 would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings. Dated: ______________, 199_* [Name] By: -------------------------- Signature As, or as agent for, the beneficial owner(s) of the Securities to which this certificate relates. - ---------------------- * Not earlier than 15 days prior to the date which is 40 days after November 15, 1993. 79 EXHIBIT E 80 Form of Certificate of Beneficial Ownership for Registered Securities to be Provided to the Euroclear Operator or to CEDEL S.A. Please issue $_________ of the U.S.$____________ 6-7/8% Convertible Debentures due 1998 (the "Securities"), of Meditrust held by you for our account in registered form. We hereby certify to you that we are not a U.S. person as defined in Regulation S under the United States Securities Act of 1933, as amended. The exact name of the beneficial holder that the Securities are to be registered in is as follows: We hereby certify that we have provided such certifications on Form W-8 or its equivalent as may be necessary to avoid imposition of withholding and/or back-up withholding under U.S. federal tax law with respect to any payments of interest on the Securities. We irrevocably authorize you to produce this certificate or a copy hereof to any interested party in any administrative or proceedings with respect to the matters covered by this certificate. Dated: ______________, 1993* [NAME] By: --------------------------- Signature [to be completed by the account holder as, or as agent for, the beneficial owner(s) of the Securities to which this certificate relates.] - --------------------- * To be dated not earlier than the date which is 40 days after November 15, 1993. EX-11 4 STATEMENT OF COMPUTATION OF PER SHARE EARNINGS 1 Meditrust Exhibit 11 Statement Regarding Computation of Earnings Per Share (In thousands except per Share amounts)
Year ended December 31, ------------------------------------------ Primary 1993 1992 1991 ======= ---- ----- ----- Weighted average shares 31,310 26,360 21,710 Dilutive effect of: Stock options 119 173 83 Warrants 62 99 165 ------- ------- -------- Weighted average number of shares and equivalent shares outstanding 31,491 26,632 21,958 ======= ======= ======== Net income before extraordinary item $63,636 $51,358 $37,909 Loss on prepayment of debt (3,684) ------- ------- ------- Net income $63,636 $51,358 $34,225 ======= ======= ======= Per Share amounts: Net income before extraordinary item $2.02 $1.93 $1.73 Loss on prepayment of debt (0.17) ----- ------ ------ Net income (A) $2.02 $1.93 $1.56 ===== ===== =====
(A) This calculation is submitted in accordance with Regulation S-K item 601 (b) (11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%.
Fully Diluted ============= Weighted average number of shares used in primary calculation 31,491 26,632 21,958 Assumed conversion of convertible debentures 5,246 2,491 ------- ------- ------ Fully diluted weighted average shares and equivalent shares outstanding 36,737 29,123 21,958 ======= ======= ======= Net income before extraordinary item $63,636 $51,358 $37,909 Interest and debt issuance costs on convertible debentures 12,352 6,277 ------- ------- ------- Adjusted net income for fully diluted calculation 75,988 57,635 37,909 Loss on prepayment of debt (3,684) ------- ------- ------- Net income $75,988 $57,635 $34,225 ======= ======= ======= Per Share amounts: Net income before extraordinary item $2.07 $1.98 $1.73 Loss on prepayment of debt (0.17) ----- ----- ----- Net income (B) $2.07 $1.98 $1.56 ===== ===== =====
(B) This calculation is submitted in accordance with Regulation S-K item 601(b) (11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result. EX-21 5 SUBSIDARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT MEDITRUST SUBSIDIARY CORPORATIONS AS OF DECEMBER 31, 1993
State of Name Incorporation - ---- ------------- Meditrust Acquisition Corporation Massachusetts Meditrust of Alabama, Inc. Alabama Meditrust at Alpine, Inc. Pennsylvania Meditrust of Arizona, Inc. Delaware Meditrust of Arkansas, Inc. Arkansas Meditrust of Arlington, Texas, Inc. Massachusetts Meditrust of Bakersfield, California, Inc. Delaware Meditrust of Baton Rouge, Inc. Louisiana Meditrust of Benton, Inc. Delaware Meditrust of California, Inc. Delaware Meditrust of College Station, Inc. Delaware Meditrust of Colorado, Inc. Delaware Meditrust of Connecticut, Inc. Delaware Meditrust Finance Corporation Delaware Meditrust Financial Services Corporation Delaware Meditrust Holding V, Inc. Delaware Meditrust Holding VI, Inc. Delaware Meditrust Holding VII, Inc. Delaware Meditrust of Houston, Inc. Massachusetts Meditrust of Illinois, Inc. Illinois Meditrust of Kansas, Inc. Kansas Meditrust of Los Angeles, Inc. Delaware Meditrust of Louisiana, Inc. Louisiana Meditrust of Lynn, Inc. Delaware Meditrust Management Corp. Delaware Meditrust of Maryland, Inc. Delaware Meditrust of Massachusetts, Inc. Delaware Meditrust at Mountainview, Inc. Pennsylvania
2 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT MEDITRUST SUBSIDIARY CORPORATIONS (Continued) AS OF DECEMBER 31, 1993
State of Name Incorporation - ---- ------------- Meditrust of Michigan, Inc. Delaware Meditrust of Missouri, Inc. Delaware Meditrust Mortgage Investments, Inc. Delaware Meditrust of New Hampshire, Inc. Delaware Meditrust of New York, Inc. Delaware Meditrust of Ohio, Inc. Delaware Meditrust Tri-States, Inc. Delaware New England Finance Corporation Delaware Pacific Finance Corporation Delaware Mediplex of Queens, Inc. New York Meditrust of San Antonio, Inc. Delaware Meditrust of Texas, Inc. Delaware Meditrust of Washington, Inc. Delaware Meditrust of Wyoming, Inc. Delaware
EX-23 6 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Meditrust on Form S-8 (File No. 33-25072) and on Form S-3 (File Nos. 33-40005, 33-40926, 33-42596, 33-43931, 33-45979, 33-48695, and 33-55386) of our reports dated March 10, 1994 on our audits of the consolidated financial statements and financial statement schedules of Meditrust as of December 31, 1993 and 1992, and for the years ended December 31, 1993, 1992, and 1991, which reports are included in this Annual Report on Form 10-K. Coopers & Lybrand Boston, Massachusetts March 21, 1994 -----END PRIVACY-ENHANCED MESSAGE-----