-----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, lpHkdnlILlTHj0fwGFnNcyKIHTM/wT4JQ1czBTBtlHwpNAEfMw4ZqO7RvgUhxSsg ED5lY2mbCg+Htt6CRb30fg== 0000908737-94-000036.txt : 19941012 0000908737-94-000036.hdr.sgml : 19941012 ACCESSION NUMBER: 0000908737-94-000036 CONFORMED SUBMISSION TYPE: S-2 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19941011 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTH & RETIREMENT PROPERTIES TRUST CENTRAL INDEX KEY: 0000803649 STANDARD INDUSTRIAL CLASSIFICATION: 6798 IRS NUMBER: 046558834 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-2 SEC ACT: 1933 Act SEC FILE NUMBER: 033-55955 FILM NUMBER: 94552241 BUSINESS ADDRESS: STREET 1: 400 CENTRE ST CITY: NEWTON STATE: MA ZIP: 02158 BUSINESS PHONE: 6173323990 MAIL ADDRESS: STREET 1: 400 CENTRE STREET CITY: NEWTON STATE: MA ZIP: 02158 FORMER COMPANY: FORMER CONFORMED NAME: HEALTH & REHABILITATION PROPERTIES TRUST DATE OF NAME CHANGE: 19920703 S-2 1 Registration No. 33-________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 HEALTH AND RETIREMENT PROPERTIES TRUST (Exact Name of Registrant as Specified in Its Charter) MARYLAND 04-6558834 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification Number) 400 Centre Street Newton, Massachusetts 02158 (617) 332-3990 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) MARK J. FINKELSTEIN 400 Centre Street Newton, Massachusetts 02158 (617) 332-3990 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service) Copy to: Lena G. Goldberg, Esq. SULLIVAN & WORCESTER One Post Office Square Boston, Massachusetts 02109 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. / / If the registrant elects to deliver its latest annual report to security holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1) of this Form, check the following box. / / CALCULATION OF REGISTRATION FEE
Title of Amount to Proposed Proposed Amount of Shares to be be Registered Maximum Maximum Registration Registered Offering Aggregate Fee Price Per Offering Unit Price Series A 2,000,000 $15.00 $30,000,000 $6,000.00 Preferred Shares of Beneficial Interest, $.01 par value Common Shares of Beneficial (1) ------ ------- ------ Interest, $.01 par value _________ HEALTH AND RETIREMENT PROPERTIES TRUST 2,000,000 Series A Preferred Shares of Beneficial Interest Cross Reference Sheet Item Description in Form S-2 Caption in No. Prospectus 1. Forepart of the Registration Cover Page; Outside Statement and Outside Front Cover Front Cover Page of Prospectus . . . . . . . 2. Inside Front and Outside Back Incorporation of Cover Pages of Prospectus. . . . Certain Information by Reference; Available Information; Inside Front Cover 3. Summary Information, Risk Factors Ratio of Earnings and Ratio of Earnings to Fixed to Combined Fixed Charges . . . . . . . . . . . . . Charges and Preferred Stock Dividends 4. Use of Proceeds . . . . . . . . . The Company - The Chapple Transaction 5. Determination of Offering Price The Company - The Chapple Transaction 6. Dilution . . . . . . . . . . . . N/A 7. Selling Security Holders . . . . N/A 8. Plan of Distribution . . . . . . The Company - The Chapple Transaction 9. Description of Securities to be Description of Registered . . . . . . . . . . . Capital Stock 10. Interests of Named Experts and Legal Matters; Counsel. . . . . . . . . . . . . Experts 11. Information with Respect to the The Company; Registrant . . . . . . . . . . Description of Capital Stock; Incorporation of Certain Information by Reference 12. Incorporation of Certain Information by Reference . . . Incorporation of Certain Information by Reference 13. Disclosure of Commission Position N/A on Indemnification for Securities Act Liabilities SUBJECT TO COMPLETION, DATED OCTOBER 11, 1994 PROSPECTUS 2,000,000 Series A Preferred Shares of Beneficial Interest HEALTH AND RETIREMENT PROPERTIES TRUST Health and Retirement Properties Trust (the "Company" or "HRP") is a real estate investment trust which invests primarily in retirement communities, assisted living centers, nursing homes and other long term care facilities. On October 5, 1994, the last reported sale price for the Company's common shares of beneficial interest, $.01 par value per share (the "Common Shares"), as reported on the New York Stock Exchange, was $14-1/8. This Prospectus relates to the offer and sale by the Company of 2,000,000 shares of the Company's Series A Preferred Shares of Beneficial Interest, $.01 par value per share (the "Preferred Shares") and the Common Shares into which such shares are convertible (together, the "Offered Shares") to the Chapple Entities (as defined herein) in connection with the acquisition by the Company of nine nursing facilities from the Chapple Entities. No brokerage commissions will be paid in connection with the sale of the Shares. The Company will pay expenses of this offering estimated to be approximately $_________. No expenses or other compensation will be paid to any underwriter in connection with this offering. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. October __, 1994 No dealer, sales person or other individual has been authorized to give any information or make any representations not contained in the Prospectus in connection with the offering covered by this Prospectus. If given or made, such information or representations must not be relied upon as having been authorized by the Company. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the registered securities to which it relates in any jurisdiction where, or to any person to whom, it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create an implication that there has not been any change in the facts set forth in this Prospectus or in the affairs of the Company since the date hereof. TABLE OF CONTENTS Page Available Information. . . . . . . . . . 2 Incorporation of Certain Information by Reference. . . . . . . . . . . . . . . . 3 The Company. . . . . . . . . . . . . . . 4 Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends . . . . . 5 Federal Income Tax and ERISA Considerations . . . . . . . . . . . . . 5 Description of Capital Stock . . . . . . 6 Legal Matters. . . . . . . . . . . . . . 9 Experts. . . . . . . . . . . . . . . . . 10 AVAILABLE INFORMATION Health and Retirement Properties Trust (the "Company") has filed with the Securities and Exchange Commission (the "Commission") in Washington, D.C., a registration statement on Form S-2 (together with all amendments thereto, the "Registration Statement") under the Securities Act of 1933, as amended, with respect to the securities of the Company offered hereby. This Prospectus, which is part of the Registration Statement, does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. For further information concerning the Company and the securities offered hereby, reference is made to the Registration Statement, including the exhibits and schedules thereto. Copies of the Registration Statement together with such exhibits and schedules may be obtained from the Commission at its principal office in Washington, D.C. upon payment of a prescribed fee. The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files reports and other information with the Commission. Reports, proxy statements and other information filed by the Company with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional offices of the Commission: Chicago Regional Office, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661-2511; and New York Regional Office, Seven World Trade Center, New York, New York 10048. Copies of such material can be obtained at prescribed rates from the Public Reference Section of the Commission at its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the Company's common shares of beneficial interest are listed on the New York Stock Exchange, and reports, proxy material and other information concerning the Company may be inspected at the offices of The New York Stock Exchange located at 20 Broad Street, New York, New York 10005. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The following documents, which have been filed with the Commission pursuant to the Exchange Act, are hereby incorporated in this Prospectus and specifically made a part hereof by this reference: (i) the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, dated March 22, 1994, as amended by an Amendment No. 1 on Form-10K/A, dated March 29, 1994 (the "Form 10-K"); (ii) the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994 and June 30, 1994, copies of which accompany this Prospectus; and (iii) the Company's Current Report on Form 8-K dated July 1, 1994; and (iv) the Company's Registration Statement No. 33-53173 on Form S-3, dated April 19, 1994, as amended. The consolidated financial statements of Greenery Rehabilitation Group, Inc. ("Greenery") at and for the fiscal year ended September 30, 1993, are incorporated herein by reference from Greenery's Annual Report on Form 10-K for the fiscal year ended September 30, 1993; the consolidated financial statements of Horizon Healthcare Corporation ("Horizon") at and for the fiscal year ended May 31, 1994; the consolidated financial statements of GranCare, Inc. ("GranCare") at and for the year ended December 31, 1993 and the quarters ended March 31, 1994 and June 30, 1994 are incorporated herein by reference from GranCare's Annual Report on Form 10-K for the year ended December 31, 1993 and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994 and June 30, 1994; and the consolidated financial statements of Marriott International, Inc. ("Marriott") at and for the fiscal year ended December 31, 1993 and the fiscal quarters ended March 25, 1994 and June 17, 1994 are incorporated herein by reference from Marriott's Annual Report on Form 10-K for the year ended December 31, 1993 and its Quarterly Reports on Form 10-Q for the quarters ended March 25, 1994 and June 17, 1994. The Company will provide without charge to each person to whom this Prospectus is delivered, upon the written or oral request of such person, a copy of any and all of the information that has been incorporated by reference in this Prospectus (excluding exhibits to the information that is incorporated herein by reference unless such exhibits are specifically incorporated by reference into the information that this Prospectus incorporates). Requests for such copies should be made to the Company at its principal executive offices, 400 Centre Street, Newton, Massachusetts 02158, Attention: Investor Relations, telephone (617) 332-3990. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Shares shall be deemed incorporated by reference into this Prospectus and to be a part hereof from the respective dates of filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated herein by reference shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein, or in any other subsequently filed document that also is or is deemed to be incorporated herein by reference, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. THE DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST THE TRUST. ALL PERSONS DEALING WITH THE TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. THE COMPANY The Company is a real estate investment trust which invests in income producing health care related real estate. The Company presently has gross real estate investments and commitments, including the investment in the properties described below under the heading "The Chapple Transaction", totalling approximately $872 million in 158 Properties located in 29 states. The Company was organized in October 1986 as a Maryland real estate investment trust and commenced operations in December 1986. Its principal executive offices are located at 400 Centre Street, Newton, Massachusetts, and its telephone number is (617) 332-3990. The Chapple Transaction The Company has entered into an Agreement and Plan of Reorganization (the "Agreement") with Bennington C. C., Inc., a Vermont corporation, Berlin C. C., Inc., a Vermont corporation, St. Johnsbury C. C., Inc., a Vermont corporation, Rochester C. C., Inc., a New Hampshire corporation, Springfield C. C., Inc., a Vermont corporation, Burlington C. C., Inc., a Vermont corporation, The LP Corporation, a Vermont corporation, and American Health Care, Inc., a Vermont corporation (collectively, the "Chapple Entities") involving the purchase by the Company of nine nursing facilities owned by the Chapple Entities (the "Chapple Properties"). These nine facilities contain an aggregate of 916 licensed beds located in Vermont (eight facilities with 808 beds) and New Hampshire (one facility with 108 beds). The purchase price to be paid by the Company for the Chapple Properties is $35,000,000, subject to an adjustment equal to the amount of certain existing liens on the properties, which the Company has agreed to assume at the closing of the transaction. The purchase price is to be paid by HRP at the closing in Preferred Shares, based on a value of $15.00 per Preferred Share. This purchase price was negotiated by the Company and the Chapple Entities on an arms' length basis. Factors considered by the Company in connection with these negotiations were the current and anticipated cash flow from the Chapple Properties and its adequacy to meet operational needs and financing obligations and to provide a competitive market return on investment to the Company; the growth, tax and regulatory environment of the communities in which the Chapple Properties are located; occupancy and demand for similar health care facilities in the same or nearby communities; the mix of private and government sponsored patients; the mix of cost-based and charge-based revenues; the construction quality, condition and design of each facility; and the geographic area and type of property. The terms and conditions of the Preferred Shares (see "Description of Capital Stock -- Description of Series A Preferred Shares") were also determined by arms' length negotiation among the parties. The Chapple Transaction is subject to conditions and contingencies customary in transactions of this type, including health care and other regulatory approvals. Although no assurance can be given that the Chapple Transaction will be consummated, the Company expects that the closing will occur on or prior to December 31, 1994. The Company intends to lease the Chapple Properties located in Vermont to Vermont Subacute Corporation, a Delaware corporation ("VSA") and to lease the Chapple Property located in New Hampshire to New Hampshire Subacute Corporation, a Delaware corporation ("NHSA"). Both VSA and NHSA are wholly owned by Barry M. Portnoy and Gerard M. Martin, Trustees of the Company, and Mark J. Finkelstein, President of the Company, who also serves as President of Connecticut Subacute Corporation ("CSC"), Connecticut Subacute Corporation II ("CSC II"), VSA and NHSA. If the Chapple Transaction is consummated, it is presently contemplated that Mr. Finkelstein will resign as President of the Company. The Company anticipates that the leases will be triple net leases with an initial term of approximately fourteen years (expiring December 31, 2008) plus three successive ten year renewal options, for a maximum term of 44 years. Such renewal options may be exercised for all, but not less than all, of the Chapple Properties. Minimum rent in the first year will be set at $306,250 per month. Additional rent will be payable commencing in 1996 based upon increases in net patient revenues realized at each facility. The obligation of VSA and NHSA under the leases shall be secured by a first lien on all tangible personal property used in connection with the operation of the Chapple Properties. At the expiration of the leases (including the expiration of any renewals thereof), VSA and NHSA will have an option to purchase all, but not less than all, of the Chapple Properties from the Company for a purchase price equal to the greater of (i) the fair market value of such properties at the time of the exercise of the option (or, if the parties cannot agree on the fair market value, by appraisal) and (ii) $35,000,000. In addition, VSA and NHSA will have a right of first refusal in the event the Company determines to sell any or all of the Chapple Properties. Although the lease terms for the Chapple Properties were negotiated between related parties, such terms have been approved by the Company's Independent Trustees, and the Company believes that such terms are at least as favorable to the Company as those which could be obtained from a third party. For the year ended December 31, 1993, based on information furnished to the Company by the Chapple Entities, net revenues for the Chapple Properties aggregated approximately $31.3 million, of which 25% were charge based revenues. Average occupancy for the three-year period ended June 30, 1994 was 96%.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS Year Ended December 31, Six Months Ended 1989 1990 1991 1992 1993 6/30/94 EARNINGS Income before gain on sale of properties and extraordinary items 7,900 14,280 22,079 27,243 37,738 26,984 Adjustment for fixed charges 9,930 9,997 12,305 10,419 6,529 2,760 Total 17,830 24,277 34,384 37,662 44,267 29,744 FIXED CHARGES Interest expense 9,554 9,511 11,741 9,466 6,217 2,328 Amortization and deferred finance charges 376 486 564 953 312 432 Preferred stock dividends -- -- -- -- -- -- Total Fixed Charges 9,930 9,997 12,305 10,419 6,529 2,760 Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends 1.8 2.4 2.8 3.6 6.8 10.8
FEDERAL INCOME TAX AND ERISA CONSIDERATIONS The following description of certain federal income tax matters and the Employee Retirement Income Security Act of 1974, as amended, ("ERISA") considerations relating to the Company is qualified in its entirety by reference to the more detailed description thereof contained in the Form 10-K, which is incorporated herein by reference. Sullivan & Worcester, Boston, Massachusetts, has rendered its opinion that the discussion in this section and in the Form 10-K in the sections captioned "Federal Income Tax Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement Accounts" in all material respects is accurate and fairly summarizes the federal income tax and ERISA issues which are material to an investment in the Company's shares of beneficial interest (the "Shares") and that the opinions of counsel referred to in those sections represent Sullivan & Worcester's opinions on those subjects. Specifically, subject to qualifications and assumptions contained in its opinion and in the Form 10-K, Sullivan & Worcester has opined to the effect (a) that the Company has been organized in conformity with the requirements for federal tax qualifications as a REIT, has qualified as a REIT for its 1987, 1988, 1989, 1990, 1991 and 1992 taxable years, and that the Company's current and anticipated investments and its plan of operation will enable it to continue to meet the requirements for federal tax qualification and taxation as a REIT and (b) that, under the "plan assets" regulations promulgated by the Department of Labor under ERISA, the Common Shares are publicly offered securities and the assets of the Company will not be deemed to be "plan assets" under ERISA. The Company is and intends to remain qualified as a REIT under the Internal Revenue Code of 1986, as amended, (the "Code"). As a REIT, the Company's net income which is distributed as dividends to shareholders will be exempt from federal taxation. Distributions to the Company's shareholders generally will be includable in their income; however, dividends distributed which are in excess of current or accumulated earnings will be treated for tax purposes as a return of capital to the extent of a shareholder's basis, and will reduce the basis of shareholders' Shares. Approximately 26% of dividends distributed in calendar 1993 were treated as a return of capital. The Company intends to conduct its affairs so that the assets of the Company will not be deemed to be "plan assets" of any individual retirement account, employee benefit plan subject to Title I of ERISA, or other qualified retirement plan subject to Section 4975 of the Code which acquires its Shares. EACH PROSPECTIVE PURCHASER OF THE SHARES OFFERED HEREBY IS ADVISED TO CONSULT HIS, HER OR ITS OWN PROFESSIONAL ADVISOR REGARDING THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX AND ERISA CONSEQUENCES TO HIM, HER OR IT OF THE PURCHASE, OWNERSHIP AND SALE OF THE SHARES OFFERED HEREBY. DESCRIPTION OF CAPITAL STOCK The following description of the Shares does not purport to be complete but contains a summary of certain portions of the Declaration and By-laws of the Company. Description of Shares of Beneficial Interest The Company is authorized to issue an aggregate of 150,000,000 Shares in two classes: 100,000,000 common shares of beneficial interest, $.01 par value per share, and 50,000,000 preferred shares of beneficial interest. All the Shares presently outstanding are Common Shares. The Board of Trustees is authorized to cause the issuance, without shareholder approval, of classes or series of preferred shares from time to time and to set (or change, if the class or series has previously been established) the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms and conditions of redemption of such preferred shares. Pursuant thereto, and in connection with the Chapple Transaction, the Company will issue the Preferred Shares, which have the terms and conditions described below under the heading "Description of Series A Preferred Shares". Except as otherwise determined by the Board of Trustees with respect to any class or series of preferred shares, all of the Company's Shares: (i) will participate equally in dividends payable to shareholders when, as and if declared by the Board of Trustees and ratably in net assets available for distribution to shareholders on liquidation or dissolution; (ii) will have one vote per Share on all matters submitted to a vote of the shareholders; (iii) will not have cumulative voting rights in the election of Trustees; (iv) will have no preference, conversion, exchange or preemptive rights; and (v) will be validly issued, fully paid and nonassessable by the Company upon issuance. Description of Series A Preferred Shares Immediately prior to the consummation of the Chapple Transaction, the Trustees will file Articles Supplementary to the Declaration with the State Department of Assessments and Taxation of Maryland. These Articles Supplementary will establish the Company's Series A Preferred Shares of Beneficial Interest and set forth the terms and conditions thereof. The form of the Articles Supplementary has been filed with the Securities and Exchange Commission as an exhibit to the Registration Statement of which this Prospectus forms a part, and the summary description of the terms and conditions of the Preferred Shares set forth below is qualified in its entirety by reference to such exhibit. Although the Company does not intend to list the Preferred Shares on any exchange, the issuance of the Preferred Shares is subject to the waiver by the New York Stock Exchange of certain guidelines pertaining to preferred stock for companies whose securities are listed for trading thereon. A total of 2,000,000 of the 50,000,000 preferred shares of beneficial interest authorized by the Declaration will be designated as Preferred Shares. Each Preferred Share will have, as to all matters submitted to a vote of the shareholders of the Company, one-tenth the number of votes to which such Preferred Share would be entitled if it were a Common Share. The holders of Preferred Shares will not be entitled to vote separately as a class on any matter. The holders of the Preferred Shares will participate equally with holders of Common Shares in all dividends (other than dividends paid in Common Shares, which dividends will be paid in Preferred Shares based upon the Conversion Ratio, as defined below) payable to shareholders of the Company, when, as and if declared by the Trustees, except that the holders of the Preferred Shares (a) shall not be entitled to receive any dividend declared by the Trustees in respect of the Company's operations during the fiscal quarter ending immediately prior to the date of issuance of the Preferred Shares, and (b) shall be entitled to receive only a prorated portion (pursuant to a formula set forth in the Articles Supplementary) of any dividend declared by the Trustees in respect of the Company's operations during the fiscal quarter during which the Preferred Shares are issued. Upon any liquidation, dissolution or winding up of the Company, after payment or provision for payment of all debts and other obligations and liabilities of the Company, the holders of Preferred Shares shall be entitled, before any distribution or payment is made upon any other shares of the capital stock of the Company (other than preferred shares of beneficial interest having a senior or equal priority to the Preferred Shares), to be paid an amount equal to $15.00 per Preferred Share, after which the holders of the Preferred Shares will not be entitled to any further payment. If the assets of the Company are insufficient to permit the payment in full of such preferential amounts, then the entire amount of assets of the Company available for distribution shall be distributed ratably among the holders of the Preferred Shares and the holders of any other preferred shares of beneficial interest now or hereafter outstanding having equal priority. As set forth above under the caption "The Company -- The Chapple Transaction", the Preferred Shares will be issued to the Chapple Entities (the "Initial Holders") in connection with the Company's acquisition of the Chapple Properties from the Initial Holders. The Articles Supplementary provide that the Initial Holders may not sell, transfer or make any disposition or conversion of any Preferred Shares prior to the day after the record date for the dividend declared by the Trustees in respect of the Company's operations during the fiscal quarter during which the Preferred Shares are issued (or the day after the Trustees announce that no such dividend will be declared). At any time after such date, an Initial Holder may (a) transfer Preferred Shares to any bona fide transferee who or which is unaffiliated with such Initial Holder, in which case the transferred Preferred Shares will automatically be converted into Common Shares on the basis of one Common Share for each Preferred Share transferred (the "Conversion Ratio"), or (b) transfer any Preferred Shares to any bona fide transferee who or which is affiliated with such Initial Holder, in which case the transferred Preferred Shares will remain Preferred Shares in the hands of the transferee. If the Company at any time subdivides (by stock split, stock dividend, or otherwise) its outstanding Common Shares into a greater number of shares, the Conversion Ratio in effect immediately prior to such subdivision will be proportionately increased. If the Company at any time combines (by reverse stock split or otherwise) its outstanding Common Shares into a smaller number of shares, the Conversion Ratio in effect immediately prior to such combination will be proportionately reduced. The Trustees may at any time declare that all, but not less than all, outstanding Preferred Shares are to be converted into Common Shares at the Conversion Ratio then in effect, by written notice mailed to each holder of Preferred Shares not less than 10 nor more than 90 days prior to a proposed conversion date. No Preferred Share will be entitled to any dividends accruing after the conversion date specified in such notice, and on such conversion date all rights of the holders of Preferred Shares as such holders shall cease. There is no requirement for or restriction on repurchase or redemption of the Preferred Shares by the Company in the Articles Supplementary. Limitation of Liability; Shareholder Liability Maryland law permits a REIT to provide, and the Declaration provides, 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, and that, as far as practicable, each written agreement of the Company is to contain a provision to that effect. Despite these facts counsel has advised the Company that in some jurisdictions the possibility exists that shareholders of a non-corporate entity such as the Company may be held liable for acts or obligations of the Company. Counsel has advised the Company that the State of Texas may not give effect to the limitation of shareholder liability afforded by Maryland law, but that Texas law would likely recognize contractual limitations of liability such as those discussed above. The Company intends to conduct its business in a manner designed to minimize potential shareholder liability by, among other things, inserting appropriate provisions in written agreements of the Company; however, no assurance can be given that shareholders can avoid liability in all instances in all jurisdictions. The Declaration provides that, upon payment by a shareholder of any such liability, the shareholder will be entitled to indemnification by the Company. There can be no assurance that, at the time any such liability arises, there will be assets of the Company sufficient to satisfy the Company's indemnification obligation. The Trustees intend to conduct the operations of the Company, with the advice of counsel, in such a way as to minimize or avoid, as far as practicable, the ultimate liability of the shareholders of the Company. The Trustees do not intend to provide insurance covering such risk to the shareholders. Redemption and Business Combinations For the Company to qualify as a REIT under the Code, in any taxable year, not more than 50% in value of its outstanding Shares may be owned, directly or indirectly, by five or fewer individuals, and the Shares must be owned by 100 or more persons during at least 335 days of a taxable year or a proportionate part of a taxable year less than 12 months. In order to meet these and other requirements, the Trustees have the power to redeem or prohibit the transfer of a sufficient number of Shares to maintain or bring the ownership of the Shares into conformity with such requirements. In connection with the foregoing, if the Trustees shall, at any time and in good faith, be of the opinion that direct or indirect ownership of Shares representing more than 8.5% in value of the total Shares outstanding (the "Excess Shares") has or may become concentrated in the hands of one beneficial owner, other than "Excepted Persons" (as defined in the Declaration), the Trustees shall have the power (i) to purchase from any shareholder of the Company such Excess Shares, and (ii) to refuse to transfer or issue Shares to any person whose acquisition of such Shares would, in the opinion of the Trustees, result in the direct or indirect beneficial ownership by any person of Shares representing more than 8.5% in value of the outstanding Shares. Any transfer of Shares, options, or other securities convertible into Shares that would create a beneficial owner (other than any of the Excepted Persons) of Shares representing more than 8.5% in value of the total shares outstanding shall be deemed void ab initio and the intended transferee shall be deemed never to have had an interest therein. Further, the Declaration provides that transfers or purported acquisitions, directly, indirectly or by attribution, of Shares, or securities convertible into Shares, that could result in disqualification of the Company as a REIT are null and void and permits the Trustees to repurchase Shares or other securities to the extent necessary to maintain the Company's status as a REIT. The purchase price for any Shares so purchased shall be determined by the price of the Shares on the principal exchange on which they are then traded or, if no such price is available, then the purchase price shall be equal to the net asset value of such Shares as determined by the Trustees in accordance with applicable law. From and after the date fixed for purchase by the Trustees, and so long as payment of the purchase price for the Shares to be so redeemed shall have been made or duly provided for, the holder of any Excess Shares so called for purchase shall cease to be entitled to distributions, voting rights and other benefits with respect to such Shares, except the right to payment of the purchase price for the Shares. The Declaration also requires that, except in certain circumstances, "Business Combinations" (as defined therein) between the Company and a beneficial holder of 10% or more of the outstanding Shares, other than HRPT Advisors, Inc. (the "Advisor") or any wholly-owned subsidiary thereof, be approved by the affirmative vote of the holders of at least 75% of the outstanding Shares. Under the Declaration, the number of Trustees may be fixed from time to time by two-thirds of the Trustees or by amendment of the Declaration by the shareholders of the Company, with a minimum of three and a maximum of 12 Trustees, a majority of whom must be Independent Trustees. The Declaration fixes the current number of Trustees of the Company at five and divides the Board of Trustees into three groups. Trustees in each group are elected to three-year terms. As the Trustees' terms expire, replacements are elected by a majority vote of the outstanding Shares. The classified nature of the Board of Trustees may make it more difficult for the shareholders to remove the management of the Company than if all Trustees were elected on an annual basis. Vacancies may be filled by a majority of the remaining Trustees, except that a vacancy among the Independent Trustees must be filled by a majority of the remaining Independent Trustees or by majority vote of the Company's shareholders. Any Trustee may be removed for cause by all of the remaining Trustees, or with or without cause by vote of two-thirds of the Shares then outstanding and entitled to vote thereon. The provisions regarding business combinations and the classified nature of the Trustees and certain other matters may not be repealed or amended without the affirmative vote of the holders of at least 75% of the outstanding Shares, provided that the Trustees, by two-thirds vote, may, without the approval or consent of the shareholders adopt any amendment that they in good faith determine to be necessary to permit the Company to qualify as a REIT under the Code. The foregoing provisions may have the effect of discouraging unilateral tender offers or other takeover proposals which certain shareholders might deem in their interests or pursuant to which they might receive a substantial premium for their Shares. The provisions could also have the effect of insulating current management against the possibility of removal and could, by possibly reducing temporary fluctuations in market price caused by accumulations of shares, deprive shareholders of opportunities to sell at a temporarily higher market price. However, the Trustees believe that inclusion of the business combination provisions in the Declaration may help assure fair treatment of shareholders and preserve the assets of the Company. Control Share Acquisition Maryland law provides for a limitation of voting rights in a "control share acquisition." The Maryland statute defines a "control share acquisition" at the 20%, 33-1/3% and 50% acquisition levels, and requires a two-thirds stockholder vote (excluding shares owned by the acquiring person and certain members of management) to accord voting rights to stock acquired in a control share acquisition. The statute would require the target to hold a special meeting at the request of an actual or proposed control share acquiror or subject to compliance with certain conditions by such acquiror. In addition, unless the charter, declaration of trust or by-laws provide otherwise, the statute gives the Company, within certain time limitations, various redemption rights if there is a stockholder vote on the issue and the grant of voting rights is not approved, or if an "acquiring person statement" is not delivered to the target within 10 days following a control share acquisition. Moreover, unless the charter, declaration of trust or by-laws provide otherwise, the statute provides that if, before a control share acquisition occurs, voting rights are accorded to control shares which results in the acquiring person having majority voting power, then minority stockholders have appraisal rights. An acquisition of shares may be exempted from the control share statute provided that a charter, declaration of trust or by-law provision is adopted for such purpose prior to the control share acquisition. There are presently no such provisions in the Declaration or by-laws of the Company. Transfer Agent and Registrar State Street Bank and Trust Company is the transfer agent and registrar of the Common Shares. New York Stock Exchange The Company's Common Shares are traded on the New York Stock Exchange. The Company does not intend to list the Preferred Shares for trading on any exchange. LEGAL MATTERS Certain legal matters with respect to the Shares offered hereby will be passed upon for the Company by Sullivan & Worcester, Boston, Massachusetts. Sullivan & Worcester will rely, as to all matters of Maryland law, upon the opinion of Piper & Marbury, Baltimore, Maryland. Sullivan & Worcester has also given its opinion as to certain federal income tax matters and certain ERISA considerations relating to the Company, which matters are discussed in the Form 10-K. See "Federal Income Tax and ERISA Considerations". Barry M. Portnoy, a partner in the firm of Sullivan & Worcester, is a Trustee of the Company and a director and 50% shareholder of each of the Advisor, CSC, CSCII, a director and 33-1/3% shareholder of VSA and NHSA, and a director of Horizon Healthcare ("Horizon"). Sullivan & Worcester represents the Advisor, CSC, CSCII, VSA and NHSA on various matters. CSC, CSCII and Horizon are (and VSA and NHSA, upon consummation of the Chapple Transaction, will be) tenants of the Company. EXPERTS The financial statements of the Company appearing in the Company's Annual Report (Form 10-K) for the year ended December 31, 1993; the consolidated financial statements of Greenery appearing in the Greenery Annual Report (Form 10-K) for the year ended September 30, 1993; and the consolidated financial statements of GranCare appearing in the GranCare Annual Report (Form 10-K) for the year ended December 31, 1993 have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon included therein and are incorporated herein by reference. Such financial statements are incorporated herein in reliance upon such reports given upon the authority of such firm as experts in auditing and accounting. The audited consolidated financial statements and schedules of Horizon incorporated by reference in this Prospectus and elsewhere in the registration statement to the extent and for the periods indicated in their reports, have been audited by Arthur Andersen LLP, independent public accountants, and are included herein in reliance upon the authority of said firms as experts in giving said reports. The consolidated financial statements and schedules of Marriott incorporated by reference in this Prospectus and elsewhere in the registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. Reference is made to said report, which includes an explanatory paragraph with respect to the change in the method of accounting for income tax as discussed in "Income Taxes" in the notes to the consolidated financial statements. PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. Set forth below is an estimate of the amount of fees and expenses to be incurred in connection with the issuance and distribution of the Shares registered hereby. Registration Fee under Securities Act . . . $ 6,000.00 Legal Fees. . . . . . . . . . . . . . . . . * Accounting Fees . . . . . . . . . . . . . . * Transfer Agent Fees . . . . . . . . . . . . * Miscellaneous Fees. . . . . . . . . . . . . * Total. . . . . . . . . . . . . . . . . $ ________ * To be filed by amendment. Item 15. Indemnification of Trustees and Officers. Section 7.5 of the Company's Declaration of Trust, incorporated by reference as Exhibit 3.1 to this Registration Statement, which provides for indemnification of Trustees and officers of the Company, is hereby incorporated by reference. Item 16. Exhibits. 2.1 Agreement and Plan of Reorganization. (*) 2.2 Letter of Intent between CSC and the Company dated September 1, 1994. (*) 3.2 Form of Articles Supplementary establishing the Preferred Shares. (*) 5.1 Opinion and Consent of Sullivan & Worcester regarding legality. (#) 5.2 Opinion and Consent of Piper & Marbury. (#) 7.1 Opinion and Consent of Piper & Marbury regarding liquidation preference. (#) 8.1 Opinion and Consent of Sullivan & Worcester regarding tax matters. (#) 10.1 Advisory Agreement, as amended. (2)(+) 10.2 Second Amendment to Advisory Agreement. (7)(+) 10.3 Incentive Share Award Plan. (5)(+) 10.4 AMS Properties Security Agreement. (3) 10.5 AMS Subordination Agreement. (3) 10.6 AMS Guaranty. (3) 10.7 AMS Pledge Agreement (pledging shares of AMSP). (3) 10.8 AMS Holding Co. Pledge Agreement (pledging shares of AMS). (4) 10.9 Indemnification Agreement. (5) 10.10 Amended and Restated Voting Trust Agreement. (5) 10.11 Amended and Restated HRP Shares Pledge Agreement. (5) 10.12 Guaranty, Cross-Default and Cross-Collateralization Agreement. (5) 10.13 Purchase Agreement among HMC Retirement Properties, Inc., HMH Properties, Inc. and the Company dated March 17, 1994, as amended. (6) 10.14 Amended and Restated (June 1994) Revolving Credit Facility. (7) 10.15 Amendment to Amended and Restated Revolving Credit Facility dated as of September 30, 1994. (*) 12.1 Statement re Computation of Ratios. (*) 23.1 Consent of Sullivan & Worcester (included in their opinions to be filed as Exhibits 5.1 and 8.1 to this Registration Statement). (#) 23.2 Consent of Piper & Marbury (included in their opinions to be filed as Exhibits 5.2 and 7.1 to this Registration Statement). (#) 23.3 Consent of Ernst & Young LLP (included as page II-4 of this Registration Statement). (*) 23.4 Consents of Arthur Andersen LLP (included as pages II-5 and II-6 of this Registration Statement). (*) 24.1 Power of Attorney (included as page II-8 of this Registration Statement). (*) __________________________________ (*) Filed herewith. (+) Management contract or compensatory plan or arrangement. (#) To be filed by amendment. (1) Incorporated by reference to the Company's Registration Statement No. 33-9412 on Form S-11 dated October 10, 1986 and amendments thereto. (2) Incorporated by reference to the Company's Registration Statement No. 33-16799 on Form S-11 dated August 27, 1987 and amendments thereto. (3) Incorporated by reference to the Company's Current Report on Form 8-K dated December 28, 1990. (4) Incorporated by reference to the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 1991. (5) Incorporated by reference to the Company's Registration Statement No. 33-55684 on Form S-11 dated December 23, 1992 and amendments thereto. (6) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994. (7) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994. Item 17. Undertakings. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-2) and related Prospectus of Health and Retirement Properties Trust for the registration of 2,000,000 of its preferred shares of beneficial interest and the common shares of beneficial interest into which such preferred shares are convertible and to the incorporation by reference therein of (a) our report dated February 11, 1994 with respect to the financial statements schedules of Health and Retirement Properties Trust included in its Annual Report (Form 10-K) for the year ended December 31, 1993, (b) our report dated December 30, 1993 with respect to the consolidated financial statements and schedules of Greenery Rehabilitation Group, Inc. included in Greenery's Annual Report (Form 10-K) for the year ended September 30, 1993, and (c) our report dated March 4, 1994 with respect to the consolidated financial statements and schedules of GranCare, Inc. included in GranCare's Annual Report (Form 10-K) for the year ended December 31, 1993, all filed with the Securities and Exchange Commission. Boston, Massachusetts ERNST & YOUNG LLP October 7, 1994 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated July 22, 1994 included in Horizon Healthcare Corporation's Form 10-K for the year ended May 31, 1994, dated August 8, 1994, and to all references to our Firm included in this registration statement. ARTHUR ANDERSEN LLP Albuquerque, New Mexico October 6, 1994 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement (filed October 11, 1994) of our report dated January 28, 1994 included in the Marriott International, Inc. Form 10-K for the year ended December 31, 1993 and to all references to our Firm included in this registration statement. ARTHUR ANDERSEN LLP Washington, D.C. October 7, 1994 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-2 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newton, Commonwealth of Massachusetts on October 7, 1994. HEALTH AND RETIREMENT PROPERTIES TRUST By: /s/ Mark J. Finkelstein Mark J. Finkelstein, President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signatures Title Date /s/ Mark J. Finkelstein President and October 7, 1994 Mark J. Finkelstein Chief Executive Officer /s/ David J. Hegarty Executive Vice October 7, 1994 David J. Hegarty President and Chief Financial and Accounting Officer /s/ John L. Harrington Trustee October 7, 1994 John L. Harrington /s/ Arthur G. Koumantzelis Trustee October 7, 1994 Arthur G. Koumantzelis /s/ Rev. Justinian Manning, C.P.Trustee October 7, 1994 Rev. Justinian Manning, C.P. /s/ Gerard M. Martin Trustee October 7, 1994 Gerard M. Martin /s/ Barry M. Portnoy Trustee October 7, 1994 Barry M. Portnoy /TABLE POWER OF ATTORNEY The undersigned Officers and Trustees of Health and Retirement Properties Trust hereby severally constitute Mark J. Finkelstein, David J. Hegarty, Gerard M. Martin and Barry M. Portnoy, and each of them, to sign for us and in our names in the capacities indicated below, the Registration Statement on Form S-2 herewith filed with the Securities and Exchange Commission, and any and all amendments thereto, hereby ratifying and confirming our signatures as they may be signed by our said attorneys to the Registration Statement and any and all amendments to the Registration Statement. Witness our hands and seals on the dates set forth below.
Signatures Title Date /s/ Mark J. Finkelstein President and October 7, 1994 Mark J. Finkelstein Chief Executive Officer /s/ David J. Hegarty Executive Vice October 7, 1994 David J. Hegarty President and Chief Financial and Accounting Officer /s/ John L. Harrington Trustee October 7, 1994 John L. Harrington /s/ Arthur G. Koumantzelis Trustee October 7, 1994 Arthur G. Koumantzelis /s/ Rev. Justinian Manning, C.P.Trustee October 7, 1994 Rev. Justinian Manning, C.P. /s/ Gerard M. Martin Trustee October 7, 1994 Gerard M. Martin /s/ Barry M. Portnoy Trustee October 7, 1994 Barry M. Portnoy
EX-2.1 2 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG BERLIN C.C., INC., A VERMONT CORPORATION, ST. JOHNSBURY C.C., INC., A VERMONT CORPORATION, ROCHESTER C.C., INC., A NEW HAMPSHIRE CORPORATION, SPRINGFIELD C.C., INC. A VERMONT CORPORATION, BURLINGTON C.C., INC., A VERMONT CORPORATION BENNINGTON C.C., INC., A VERMONT CORPORATION THE LP CORPORATION, A VERMONT CORPORATION, AMERICAN HEALTH CARE, INC., A VERMONT CORPORATION ("SELLERS") and HEALTH AND RETIREMENT PROPERTIES TRUST, A MARYLAND REAL ESTATE INVESTMENT TRUST, ("HRP") ___________________________ September 1, 1994 TABLE OF CONTENTS Section 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 1 Section 2. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . 4 2.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 3. CONDITIONS TO HRP'S OBLIGATION TO CLOSE. . . . . . . . . 4 3.1 Closing Documents . . . . . . . . . . . . . . . . . . . . 5 3.2 Condition of Properties . . . . . . . . . . . . . . . . . 5 3.3 Title Policies. . . . . . . . . . . . . . . . . . . . . . 6 3.4 Opinions of Counsel . . . . . . . . . . . . . . . . . . . 6 3.5 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . 6 3.6 HRP Shares . . . . . . . . . . . . . . . . . . . . . . . 6 3.7 Rate Setting . . . . . . . . . . . . . . . . . . . . . . 7 3.8 VSA/NHSA Agreement . . . . . . . . . . . . . . . . . . . 7 3.9 Board Approval . . . . . . . . . . . . . . . . . . . . . 7 3.10 Other Properties . . . . . . . . . . . . . . . . . . . . 7 3.11 Other Approvals . . . . . . . . . . . . . . . . . . . . . 7 3.12 Deposit . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 4. CONDITIONS TO SELLERS' OBLIGATION TO CLOSE. . . . . . . . 8 4.1 HRP Shares . . . . . . . . . . . . . . . . . . . . . . . 8 4.2 Closing Documents . . . . . . . . . . . . . . . . . . . . 8 4.3 Opinion of Counsel . . . . . . . . . . . . . . . . . . . 8 4.4 Satisfaction of Other Conditions . . . . . . . . . . . . 8 Section 5. REPRESENTATIONS AND WARRANTIES OF SELLERS. . . . . . . . 8 5.1 Status and Authority of the Sellers . . . . . . . . . . . 8 5.2 Action of the Sellers . . . . . . . . . . . . . . . . . . 9 5.3 No Violations of Agreements . . . . . . . . . . . . . . . 9 5.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . 9 5.5 Existing Leases, Agreements, Etc . . . . . . . . . . . . 9 5.6 Disclosure . . . . . . . . . . . . . . . . . . . . . . . 10 5.7 Utilities, Etc. . . . . . . . . . . . . . . . . . . . . . 10 5.8 Compliance With Law . . . . . . . . . . . . . . . . . . . 10 5.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 10 5.10 Special Districts . . . . . . . . . . . . . . . . . . . . 11 5.11 Not A Foreign Person . . . . . . . . . . . . . . . . . . 11 5.12 Hazardous Substances . . . . . . . . . . . . . . . . . . 11 Section 6. REPRESENTATIONS AND WARRANTIES OF HRP . . . . . . . . . . 11 6.1 Status and Authority of HRP . . . . . . . . . . . . . . . 11 6.2 Action of HRP . . . . . . . . . . . . . . . . . . . . . . 12 6.3 No Violations of Agreements . . . . . . . . . . . . . . . 12 6.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . 12 6.5 Capitalization . . . . . . . . . . . . . . . . . . . . . 12 Section 7. COVENANTS OF THE SELLERS. . . . . . . . . . . . . . . . . 13 7.1 Compliance with Laws, Etc. . . . . . . . . . . . . . . . 13 7.2 Operation of the Facilities . . . . . . . . . . . . . . . 13 7.3 Approval of Agreements . . . . . . . . . . . . . . . . . 13 -ii- 7.4 Compliance with Agreements . . . . . . . . . . . . . . . 13 7.5 Notice of Material Changes or Untrue Representations . . 13 7.6 Title Matters . . . . . . . . . . . . . . . . . . . . . . 13 7.7 Survey Matters . . . . . . . . . . . . . . . . . . . . . 14 7.8 Other Diligence Materials . . . . . . . . . . . . . . . . 15 7.9 Other Activities During the Period Prior to Closing . . . 15 Section 8. ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . 16 8.1 Adjustments Based on Existing Liens . . . . . . . . . . . 16 8.2 Adjustments Based on Expenses of Operations, etc . . . . 16 8.3 Closing Costs. . . . . . . . . . . . . . . . . . . . . . 17 Section 9. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . 17 9.1 Default by the Sellers . . . . . . . . . . . . . . . . . 17 9.2 Default by HRP . . . . . . . . . . . . . . . . . . . . . 18 Section 10. INDEMNIFICATION. . . . . . . . . . . . . . . . . 18 10.1 Indemnification by the Sellers . . . . . . . . . . . . 18 10.2 Indemnification by HRP . . . . . . . . . . . . . . . . 18 10.3 Notice and Payment of Claims . . . . . . . . . . . . . 19 Section 11. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 19 11.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 19 11.2 Brokerage Commissions . . . . . . . . . . . . . . . . . 19 11.3 Publicity. . . . . . . . . . . . . . . . . . . . . . . . 20 11.4 Execution of Additional Documents. . . . . . . . . . . . 20 11.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . 20 11.6 Waivers, Etc. . . . . . . . . . . . . . . . . . . . . . 21 11.7 Assignment; Successors and Assigns . . . . . . . . . . . 22 11.8 Severability. . . . . . . . . . . . . . . . . . . . . . 22 11.9 Counterparts, Etc. . . . . . . . . . . . . . . . . . . . 22 11.10 Governing Law . . . . . . . . . . . . . . . . . . . . . 22 11.11 Jurisdiction. . . . . . . . . . . . . . . . . . . . . . 23 11.12 Performance on Business Days . . . . . . . . . . . . . 23 11.13 Attorneys Fees . . . . . . . . . . . . . . . . . . . . 23 11.14 Section and Other Headings . . . . . . . . . . . . . . 23 11.15 Entire Agreement . . . . . . . . . . . . . . . . . . . 23 11.16 Obligations of Sellers After the Closing . . . . . . . 24 11.17 Limitation of Liability. . . . . . . . . . . . . . . . 24 -iii- Schedule A - List of Sellers Schedule B - Allocation of HRP Shares Schedule C-1 - Berlin Health and Rehab Center Schedule C-2 - St. Johnsbury Health and Rehab Center Schedule C-3 - Springfield Health and Rehab Center Schedule C-4 - Bennington Health and Rehab Center Schedule C-5 - Hanson Court Convalescent Home Schedule C-6 - Redstone Villa Schedule C-7 - Rowan Court Health and Rehab Center Schedule C-8 - Rochester Manor Schedule C-9 - Burlington Health and Rehab Center Schedule D - Liens and Encumbrances Schedule E - Opinion of Sellers' Counsel Schedule F - Contracts and Agreements; Licensed Bed Capacity and Medicare/Medicaid Status Schedule G - Opinion of HRP's Counsel Schedule H - Compliance with Law Schedule I - Hazardous Substances Schedule J - Capitalization of HRP Schedule K - Form of Surveyor's Certificate AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION is made as of the 1st day of September, 1994, by and among the Sellers listed on Schedule A hereto (collectively, the "Sellers") and HEALTH AND RETIREMENT PROPERTIES TRUST, a Maryland real estate investment trust ("HRP"). WITNESSETH: WHEREAS, Sellers are the owners and holders of the Properties (this and other capitalized terms used and not otherwise defined herein having the meanings ascribed to such terms in Section 1); and WHEREAS, the Sellers wish to transfer substantially all of their assets to HRP, solely in exchange for voting shares of HRP and the assumption by HRP of certain of the liabilities of Sellers in a transaction intended to qualify as a Reorganization within the meaning of Section 368(a)(1)(C) of the Code; WHEREAS, it is contemplated by Sellers and HRP that, upon the consummation of such Reorganization, each Seller will distribute the HRP Shares received by such Seller to its shareholders in complete liquidation of such Seller, and will thereafter dissolve as a corporation; WHEREAS, HRP wishes to acquire substantially all of Sellers' assets and agrees to assume certain liabilities of Sellers on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the Sellers and HRP hereby agree as follows: Section 1. DEFINITIONS. Capitalized terms used in this Agreement shall have the meanings set forth below or in the Section of this Agreement referred to below: 1.1 "Agreement" shall mean this Agreement and Plan of Reorganization, together with Schedules A through K, attached hereto, as it and they may be amended from time to time as herein provided. 1.2 "Business Day" shall mean any day other than a Saturday, Sunday or any other day on which banking institutions in The Commonwealth of Massachusetts, the State of Vermont or the State of New Hampshire are authorized by law or executive action to close. 1.3 "Closing" shall have the meaning given such term in Section 2.1. -2- 1.4 "Closing Date" shall have the meaning given such term in Section 2.1. 1.5 "Code" means the United States Internal Revenue Code of 1986, as amended. 1.6 "Declaration" shall mean the Declaration of Trust of HRP, dated October 9, 1986, as the same has been and may be amended and restated from time to time. 1.7 "Deposit" shall mean the sum of Two Hundred Fifty Thousand Dollars ($250,000) paid by HRP to the Sellers and held by the Escrow Agent for the benefit of the Sellers prior to the date of this Agreement, receipt of which is hereby acknowledged by the Sellers. 1.8 "Escrow Agent" shall mean Miller, Eggleston and Rosenberg, Ltd. 1.9 "Facilities" shall mean, collectively, the nursing homes, retirement centers, congregate living facilities, pharmacies and/or other facilities offering other related health care products or services being operated by the Sellers at the Properties. 1.10 "HRP" shall have the meaning given such term in the preamble to this Agreement. 1.11 "HRP Shares" shall mean Series A Preferred Shares, $.01 par value per share, of HRP, (i) the offering and sale of which (and the offering and sale of the common shares of beneficial interest, $.01 par value per share, of HRP ("Common Shares") into which such Series A Preferred Shares are convertible), in connection with the transaction contemplated by this Agreement, shall have been registered under the Securities Act of 1933, as amended, and any applicable state "blue-sky" laws, prior to the Closing Date, and (ii) which shall have the following terms: (a) each Series A Preferred Share shall have one-tenth the voting power to which it would otherwise be entitled if such share were a Common Share; (b) Series A Preferred Shares shall be convertible into Common Shares on a one-for-one basis and shall automatically convert upon an arms- length sale thereof by any Seller or at the discretion of HRP's Board of Trustees; and (c) the Series A Preferred Shares shall be entitled to a liquidation preference. 1.12 "Properties" shall mean, collectively, those certain real properties, the improvements thereon, all fixtures, machinery, systems, equipment, furniture and furnishings owned by the Sellers attached or appurtenant thereto or used in connection therewith and all easements, privileges, licenses, rights and appurtenances relating thereto, located in (i) Berlin, Vermont and known as Berlin Health and Rehab Center, as more particularly described in Schedule C-1, attached hereto and made a part hereof; (ii) St. Johnsbury, Vermont and known as St. Johnsbury Health and Rehab Center, as more particularly described in Schedule C-2, attached hereto and made a part hereof; (iii) Springfield, Vermont and -3- known as Springfield Health and Rehab Center, as more particularly described in Schedule C-3, attached hereto and made a part hereof; (iv) Bennington, Vermont and known as Bennington Health and Rehab Center, as more particularly described in Schedule C-4, attached hereto and made a part hereof; (v) Springfield, Vermont and known as Hanson Court Convalescent Home, as more particularly described in Schedule C-5, attached hereto and made a part hereof; (vi) St. Albans, Vermont and known as Redstone Villa, as more particularly described in Schedule C-6, attached hereto and made a part hereof; (vii) Barre, Vermont and known as Rowan Court Health and Rehab Center, as more particularly described in Schedule C-7, attached hereto and made a part hereof; (viii) Rochester, New Hampshire and known as Rochester Manor, as more particularly described in Schedule C-8, attached hereto and made a part hereof; and (ix) Burlington, Vermont and known as Burlington Health and Rehab Center, as more particularly described in Schedule C-9, attached hereto and made a part hereof. 1.13 "Registration Statement" shall mean a registration statement filed by HRP with the Securities and Exchange Commission in order to register the offering and sale of HRP Shares to the Sellers pursuant to the terms of this Agreement. 1.14 "Sellers" shall have the meaning given such term in the preamble to this Agreement. 1.15 "Surveys" shall have the meaning given such term in Section 7.6. 1.16 "Title Commitments" shall have the meaning given such term in Section 7.6. 1.17 "Title Company" shall mean Lawyer's Title Company or such other title insurance company as shall have been approved by HRP. 1.18 "VSA/NHSA Agreement" shall mean that certain Purchase and Sale Agreement, dated the date hereof, among the Sellers, Vermont Subacute Corporation ("VSA") and New Hampshire Subacute Corporation ("NHSA"). Section 2. CLOSING. 2.1 Closing. (a) The transfer and delivery of the Properties to HRP and the issuance and delivery of HRP Shares to the Sellers shall be consummated at a closing (the "Closing") to be held at the offices of Sullivan & Worcester, One Post Office Square, Boston, Massachusetts, or at such other location as the Sellers and HRP may agree, at 10:00 a.m., local time, on a date (the "Closing Date") ten (10) days after the later to occur of (i) the expiration of any applicable waiting periods required under or in connection with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or the receipt from the Federal Trade Commission and any other applicable governmental agency having jurisdiction of valid and enforceable waivers thereof, (ii) the -4- declaration of the effectiveness of the Registration Statement by the Securities and Exchange Commission, (iii) the approval for listing on the New York Stock Exchange of the shares into which the HRP Shares are convertible and the waiver (if any is required) by the New York Stock Exchange of any of the terms and conditions of the HRP Shares, and (iii) the receipt of all other applicable approvals and licenses from any applicable governmental bodies including, without limitation, certificates or determinations of need, if required. In the event that the Closing shall not have occurred on or before December 31, 1994, provided that no action for specific performance shall have been commenced by any party to enforce this Agreement, any party shall have the right, by the giving of written notice, to terminate this Agreement and, in such event, the Deposit, together with interest thereon, shall be refunded to HRP in accordance with Section 9.1. (b) At the Closing, the Sellers shall transfer and deliver to HRP all of the Properties, and HRP shall accept delivery of the Properties. In exchange for the Properties, HRP shall cause to be delivered to the Sellers that number of HRP Shares, the value of which (as determined pursuant to the following sentence) shall be equal to $35,000,000; provided, however, that such amount shall be adjusted as may be required pursuant to Section 8. The value given to each HRP Share shall be equal to $15.00 per share. At the Closing, the portion of such HRP Shares allocated to each Seller on Schedule B hereto shall be issued to such Seller by delivery of a certificate or certificates representing that number of HRP Shares set forth opposite such Seller's name on such Schedule B, in such manner as each such Seller shall specify to HRP not later than three (3) Business Days prior to the Closing. Section 3. CONDITIONS TO HRP'S OBLIGATION TO CLOSE. The obligation of HRP to accept delivery of the Properties and to deliver the HRP Shares at the Closing shall be subject to the satisfaction of the following conditions precedent on and as of the Closing Date: 3.1 Closing Documents. The Sellers shall have delivered to HRP: (a) a good and sufficient special warranty deed, or its local equivalent, with respect to each of the Properties, in proper statutory form for recording, duly executed and acknowledged by the Sellers, conveying good and marketable title to the applicable Properties, free from all liens and encumbrances other than (i) liens and encumbrances approved by HRP in accordance with Sections 7.5 and 7.6 and (ii) liens set forth on Schedule D which HRP shall assume (subject to a corresponding reduction in the Purchase Price as set forth in Section 8); (b) an assignment by the Sellers and an assumption by HRP, in form and substance reasonably satisfactory to the Sellers and HRP, duly executed and acknowledged by the Sellers and HRP, of all of the Sellers' -5- right, title and interest in, to and under all licenses, contracts, permits and agreements affecting the Properties, excluding only those licenses, contracts, permits or agreements HRP elects not to assume; (c) an assignment by the Sellers and an assumption by HRP, in form and substance reasonably satisfactory to, and duly executed and acknowledged by, the Sellers and HRP of the liabilities set forth on Schedule D which HRP has agreed to assume; (d) a certificate of a duly authorized officer of each of the Sellers confirming the continued truth and accuracy of the representations and warranties of the Sellers in this Agreement; (e) to the extent the same are in the Sellers' possession, original, fully executed copies of all documents and agreements pertaining to the Properties and, in any event, copies of all such documents and agreements certified by a responsible officer of Sellers as conforming to the originals in all respects; (f) certified copies of all charter documents, applicable corporate resolutions and certificates of incumbency with respect to each of the Sellers; and (g) such other conveyance documents, certificates, deeds and other instruments as HRP, the Sellers or the Title Company may reasonably require. 3.2 Condition of Properties. (a) All of the Properties and Facilities shall be in substantially the same physical condition as on the date of this Agreement, ordinary wear and tear excepted; (b) No material default or event which with the giving of notice and/or lapse of time could constitute a default shall have occurred and be continuing under any material agreement benefiting or affecting the Properties or the Facilities; (c) No material adverse change shall have occurred, and no action shall be pending or threatened which would adversely affect the licensing, certification, qualification status, occupancy, eligibility for participation in federal or state reimbursement programs or material accreditations of any of the Facilities or, to the extent applicable, the Properties; and (d) No action shall be pending or threatened for the condemnation or taking by power of eminent domain of all or any portion of the Properties or all or any portion of the Facilities. 3.3 Title Policies. The Title Company shall be prepared, subject only to payment of the applicable premium, to issue title insurance policies to HRP, in form and substance satisfactory to HRP in accordance with Sections 7.5 and 7.6, together with such affirmative coverages as -6- HRP may require and shall have been determined available prior to the Closing. 3.4 Opinions of Counsel. HRP shall have received a written opinion from Miller, Eggleston and Rosenberg, Ltd., special counsel to the Sellers (or such additional local counsel as may be reasonably acceptable to HRP), substantially in the form attached hereto as Schedule E. 3.5 Hart-Scott-Rodino. The Sellers and HRP shall have complied with all applicable provisions (if any) of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 3.6 HRP Shares. The Registration Statement shall have been declared effective by the Securities and Exchange Commission, no stop order suspending the effectiveness of the Registration Statement shall be in effect and no proceedings for such purpose shall be pending or threatened before such Commission. In addition, HRP shall have obtained any necessary waivers from the New York Stock Exchange with respect to the terms and conditions of the HRP Shares, and the common shares of beneficial interest into which the HRP Shares are convertible shall have been approved for listing upon official notice of issuance on the New York Stock Exchange. Sellers shall have cooperated fully in the furnishing of all requisite information concerning Sellers, the Properties and the Facilities and the transactions contemplated by this Agreement for use in preparation of said Registration Statement and Sellers shall not have made any material misstatements or omitted to state any fact necessary to be stated so as not to make any statement misleading in connection with information furnished in connection therewith. 3.7 Rate Setting. HRP shall have received such assurances as HRP, in its sole discretion, shall deem necessary, including, without limitation, opinions of counsel and/or confirmations from state agencies, that the transactions contemplated by this Agreement will have an acceptable effect on Medicaid rates for the Facilities; and HRP and Sellers shall have entered into an agreement in form and substance satisfactory to HRP, in its sole discretion, pursuant to which Sellers, and, if any Seller is liquidated, the shareholders of such Seller, shall jointly and severally agree to indemnify and hold harmless HRP from and against any loss, liability, claims, causes of action, costs and expenses, including, without limitation, reasonable attorney's fees, incurred or suffered in connection with any Medicaid or Medicare depreciation recaptures. 3.8 VSA/NHSA Agreement. The transactions contemplated by the VSA/NHSA Agreement shall have been consummated. 3.9 Board Approval. The Board of Trustees of HRP shall have approved the transactions contemplated hereby in all respects. -7- 3.10 Other Properties. HRP (and/or VSA or NHSA) shall have entered into mutually satisfactory purchase or lease agreements with John F. Chapple and/or Marlin Management Services with regard to the following properties: (a) 308 Pearl Street, Burlington, Vermont; (b) the Mary Newton House, Chester Road, Springfield, Vermont; (c) 150 South Champlain Street, Burlington, Vermont; (d) approximately 108 acres located in Berlin, Vermont and known as The Rose's Farm; (e) computer hardware and software and a high-speed copier owned or leased by Marlin Management Services; and (f) pharmacy services currently provided to the Facilities by an affiliate of Sellers. 3.11 Other Approvals. The Sellers and HRP shall have received, in form and substance reasonably satisfactory to the Sellers and HRP, all required approvals and waivers, including, without limitation, all licenses, certificates of need and regulatory and reimbursement permits and approvals as may be necessary or appropriate to consummate the transaction contemplated by this Agreement and to use the Properties in the same manner as they are currently being used by the Sellers, as set forth on Schedule H hereto. 3.12 Deposit. The Escrow Agent shall have returned the Deposit, together with interest accrued thereon, to HRP. Section 4. CONDITIONS TO SELLERS' OBLIGATION TO CLOSE. The obligation of the Sellers to convey the Properties and the Facilities to HRP is subject to the satisfaction of the following conditions precedent on and as of the Closing Date: 4.1 HRP Shares. HRP shall deliver to the Sellers the HRP Shares in the manner provided in Section 2, adjusted as herein provided. 4.2 Closing Documents. HRP shall have delivered to the Sellers: (a) A certificate of a duly authorized officer of HRP confirming the continued truth and accuracy of the representations and warranties of HRP in this Agreement; and (b) Certified copies of all charter documents, applicable resolutions and certificates of incumbency with respect to HRP. 4.3 Opinion of Counsel. The Sellers shall have received a written opinion from (a) Sullivan & Worcester, special counsel to HRP (or such additional local counsel as shall be reasonably satisfactory to Sellers), substantially in the form attached hereto as Schedule E, and (b) Miller, Eggleston & Rosenberg, special counsel to the Sellers, that the transactions contemplated hereby qualify as a reorganization within Section 368(a)(1)(C) of the Code. -8- 4.4 Satisfaction of Other Conditions. The conditions precedent described in Sections 3.5, 3.6, 3.7, 3.8 and 3.10 shall have been satisfied. Section 5. REPRESENTATIONS AND WARRANTIES OF SELLERS. To induce HRP to enter into this Agreement, the Sellers jointly and severally represent and warrant to HRP as follows: 5.1 Status and Authority of the Sellers. Each of the Sellers is a corporation duly organized, validly existing and in corporate good standing under the laws of its state of incorporation, and has all requisite power and authority under the laws of such state and its respective charter documents to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. Each of the Sellers has duly qualified to transact business in each jurisdiction in which the nature of the business conducted by it requires such qualification. Each Seller is acquiring the HRP Shares solely for investment purposes, and not with a view toward involvement in the management of HRP. 5.2 Action of the Sellers. Each of the Sellers has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and upon the execution and delivery of any document to be delivered by the Sellers on or prior to the Closing Date, such document shall constitute the valid and binding obligation and agreement of each of the Sellers, enforceable against each of the Sellers in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors. 5.3 No Violations of Agreements. Except as set forth on Schedule D, neither the execution, delivery or performance of this Agreement by the Sellers, nor compliance with the terms and provisions hereof, will result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any property or assets of the Sellers pursuant to the terms of any indenture, mortgage, deed of trust, note, evidence of indebtedness or any other agreement or instrument by which any of the Sellers is bound. 5.4 Litigation. No investigation, action or proceeding is pending and, to the Sellers' knowledge, no action or proceeding is threatened and no investigation looking toward such an action or proceeding has begun, which (i) questions the validity of this Agreement or any action taken or to be taken pursuant hereto, (ii) will result in any material adverse change in the business, operation, licensure, reimbursement, affairs or condition of any of the Properties or the Facilities, (iii) result in or subject the Properties or the Facilities to a material liability, or (iv) involves condemnation or eminent domain proceedings against any part of the Properties. -9- 5.5 Existing Leases, Agreements, Etc. The Sellers have not entered into any contracts or agreements with respect to the Properties, other than as previously disclosed to HRP and listed on Schedule F hereto. The copies of such contracts or agreements heretofore made available by the Sellers to HRP for examination are true, correct and complete copies thereof, have not been amended except as evidenced by amendments similarly delivered and constitute the entire agreement between the Sellers and the respective parties thereto. There are no defaults under such contracts or agreements; no events have occurred which with the passage of time or the giving of notice or both would result in an event of default thereunder; there are no contingent liabilities under such contracts and agreements except as set forth in Schedule F; and Sellers are entitled to all benefits of such contracts and agreements which have not been assigned or encumbered in any way. Sellers may assign all such contracts and agreements to HRP. There are no other material agreements affecting the Properties. Schedule F sets forth a fair and accurate representation of the licensed bed capacity and Medicare/Medicaid certification status of each of the Facilities. 5.6 Disclosure. There is no fact or condition which materially and adversely affects the business or condition of the Properties or the Facilities which has not been set forth in this Agreement, or in the other documents, certificates or statements furnished to HRP in connection with the transactions contemplated hereby. 5.7 Utilities, Etc. All utilities and services necessary for the use and operation of the Properties and the Facilities located thereon (including, without limitation, road access, gas, water, electricity and telephone), are available thereto, are of sufficient capacity to meet adequately all needs and requirements necessary for the use and operation of the Properties and Facilities for their respective intended purposes and the Properties and the Facilities are legally entitled to be served by such utilities at rates typical for similar properties without further action by the Sellers or any other party. To the Sellers' knowledge, no fact, condition or proceeding exists which would result in the termination or impairment of the furnishing of such utilities to the Properties or the Facilities located thereon. 5.8 Compliance With Law. (i) Except as set forth on Schedule H, the Properties and the Facilities and the use and operation thereof do not violate any applicable federal, state, municipal or other governmental statutes, ordinances, by-laws, rules, regulations or any other legal requirements, including, without limitation, those relating to health care, construction, occupancy, zoning, adequacy of parking, environmental protection, occupational health and safety and fire safety; and (ii) there are presently in effect all licenses, permits, and other authorizations necessary for the current use, occupancy and operation thereof. The Sellers have not been advised in writing of any threatened request, application, proceeding, plan, study or effort which would materially adversely affect the present use, zoning of, or licenses, permits or other authorizations for use of, the Properties or -10- the Facilities or which would modify or realign any adjacent street or highway. 5.9 Taxes. Other than the amounts disclosed by tax bills, no taxes or special assessments of any kind (special, bond or otherwise) are or have been levied with respect to the Properties or any portion thereof, which are outstanding or unpaid, and, to the Sellers' knowledge, none will be levied prior to the Closing Date. Each of the Properties is separately and distinctly assessed as a separate tax lot. To the Sellers' knowledge, each of the Properties, during the most recent tax fiscal year and the three (3) years prior thereto, have been duly valued and assessed for property tax purposes in accordance with applicable law. There is no pending abatement proceeding or, to the Sellers' knowledge, threatened reassessment of all or any portion of the Properties. 5.10 Special Districts. No portion of the Properties is within a Special Flood Hazard Area (or 100-year flood plain) as identified by the Federal Emergency Management Administration or other governmental agency or within any specially designated or registered historic, architectural or taxing district, such as would require any more than normal or routine local governmental approvals in order to effect interior or exterior improvements to such Properties or the Facilities, either cosmetic or structural. 5.11 Not A Foreign Person. None of the Sellers is a "foreign person" within the meaning of Section 1445 of the United States Revenue Code of 1986, as amended, and the regulations promulgated thereunder. 5.12 Hazardous Substances. Except as set forth in Schedule H, neither the Sellers nor any other occupant or user of the Properties or the Facilities, or any portion thereof, has stored or disposed of (or engaged in the business of storing or disposing of) or has released or caused the release of any hazardous waste, contaminants, oil, radioactive or other material on the Properties or any portion thereof, the removal of which is required or the maintenance of which is prohibited or penalized by any applicable Federal, state or local statutes, laws, ordinances, rules or regulations, and, to the Sellers' knowledge, the Properties and the Facilities are free from any such hazardous waste, contaminants, oil, radioactive and other materials. The representations and warranties made in this Agreement by the Sellers shall be continuing and shall be deemed remade by the Sellers as of the Closing Date with the same force and effect as if made on, and as of, such date. All representations and warranties made by the Sellers in this Agreement shall survive the Closing for a period of three years and in the event of the liquidation and dissolution of a Seller shall be deemed to be representations and warranties of the shareholders of said Seller who receive distributions in connection with said liquidation and dissolution. -11- Section 6. REPRESENTATIONS AND WARRANTIES OF HRP. To induce the Sellers to enter in this Agreement, HRP represents and warrants to the Sellers as follows: 6.1 Status and Authority of HRP. HRP is a real estate investment trust duly organized, validly existing and in good standing under the laws of the State of Maryland, and has all requisite power and authority under the laws of such state and under the Declaration to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. HRP has duly qualified and is in good standing as a trust or unincorporated business association in each jurisdiction in which the nature of the business conducted by it requires such qualification. 6.2 Action of HRP. HRP has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and upon the execution and delivery of any document to be delivered by HRP on or prior to the Closing Date, such document shall constitute the valid and binding obligation and agreement of HRP, enforceable against HRP in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors. 6.3 No Violations of Agreements. Neither the execution, delivery or performance of this Agreement by HRP, nor compliance with the terms and provisions hereof, will result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any property or assets of HRP pursuant to the terms of any indenture, mortgage, deed of trust, note, evidence of indebtedness or any other agreement or instrument by which HRP is bound. 6.4 Litigation. No investigation, action or proceeding is pending and, to HRP's knowledge, no action or proceeding is threatened and no investigation looking toward such an action or proceeding has begun, which questions the validity of this Agreement or any action taken or to be taken pursuant hereto. 6.5 Capitalization. Schedule J sets forth the authorized capital stock of HRP and the number of shares of each class thereof outstanding as of the date hereof. All of such outstanding shares of capital stock are, and the HRP Shares to be issued to the Sellers hereunder, when issued pursuant to the terms hereof upon receipt of the consideration specified herein, will be, duly authorized and validly issued, fully paid and non-assessable and not subject to any preemptive or similar rights. The representations and warranties made in this Agreement by HRP shall be continuing and shall be deemed remade, subject to updating for those representations which are made as of the date hereof, by HRP as of -12- the Closing Date with the same force and effect as if made by HRP on, and as of, such date. All representations and warranties made in this Agreement shall survive the Closing for a period of three years. Section 7. COVENANTS OF THE SELLERS. The Sellers hereby jointly and severally covenant with HRP between the date of this Agreement and the Closing Date as follows: 7.1 Compliance with Laws, Etc. With respect to their respective Properties and Facilities, to comply in all material respects with (i) all laws, regulations and other requirements from time to time applicable of every governmental body having jurisdiction of the Properties or the use or occupancy of the Facilities located thereon and (ii) all terms, covenants and conditions of all of the instruments of record and other agreements affecting the Properties or the Facilities. 7.2 Operation of the Facilities. To operate the Properties and the Facilities only in the ordinary course of business as conducted, and to maintain the quality of the Facilities, in all material respects consistent with past practice; to maintain inventory at normal operating levels, in all material respects consistent with past practice; and to use their best efforts to preserve and maintain the Properties and the Facilities intact, maintain occupancy at present or higher percentages, keep available the services of their employees, and preserve for HRP their relationships with suppliers, customers, sales representatives and others having business relations with the Facilities, and generally maintain the reputation of the Facilities. 7.3 Approval of Agreements. Except as otherwise authorized by this Agreement, not to enter into modify, amend or terminate any material lease, contract or other agreement with respect to the Properties or the Facilities which would encumber or be binding upon the Properties or the Facilities from and after the Closing Date, without in each instance obtaining the prior written consent of HRP. 7.4 Compliance with Agreements. To the extent of their respective obligations, to comply with each and every material term, covenant and condition contained in any other document or agreement affecting the Properties or the Facilities. 7.5 Notice of Material Changes or Untrue Representations. Upon learning of any material change in any condition with respect to the Properties, the Facilities or of any event or circumstance which makes any representation or warranty of the Sellers to HRP under this Agreement untrue or misleading, promptly to notify HRP thereof (HRP agreeing, on learning of any such fact or condition, promptly to notify the Sellers thereof). 7.6 Title Matters. Within ten (10) Business Days after the date of this Agreement, the Sellers shall deliver to HRP a preliminary title -13- report or title commitment, having an effective date after the date of this Agreement, for an ALTA extended owner's policy of title insurance with respect to the Properties, together with complete and legible copies of all instruments and documents referred to as exceptions to title or as title requirements (collectively, the "Title Commitments"). Within ten (10) Business Days after receipt of the Title Commitments, HRP shall give the Sellers notice of any title exceptions to which HRP objects. Sellers shall use their best efforts to take or cause to be taken such actions as may be required to cause such exceptions to be removed from the Title Commitments. In the event that Sellers cannot cause such exceptions to be removed, the Sellers shall give HRP notice thereof; it being understood and agreed that the failure of the Sellers to give such notice within five (5) Business Days after HRP's notice of objection shall be deemed an election by the Sellers to remedy such matters. If HRP receives such notice from Sellers, HRP may elect (i) to terminate this Agreement by the giving of written notice thereof to the Sellers, in which event the Deposit, together with interest thereon, shall be returned to HRP in accordance with Section 9.1, or (ii) to consummate the transactions contemplated hereby, notwithstanding such title defect, with an appropriate abatement or reduction in the number of HRP Shares to be delivered to Sellers on account thereof, the amount of which shall be determined by good faith negotiation between the parties. HRP shall make any such election by written notice to the Sellers given on or prior to the fifth Business Day after the Sellers' notice of their inability to cure such defect. Failure of HRP to give such notice shall be deemed an election by it to proceed in accordance with clause (ii) above. 7.7 Survey Matters. As soon as practicable after the date of this Agreement, HRP shall arrange for the preparation of an ALTA survey with respect to each of the Properties (collectively, the "Surveys"), by a licensed surveyor in the jurisdiction in which the applicable property is located, which (i) contains an accurate legal description of the applicable property, (ii) shows the exact location, dimension and description (including applicable recording information) of all utilities, easements, encroachments and other physical matters affecting such property, the number of striped parking spaces located thereon and all applicable building set-back lines, (iii) states whether the applicable property is located within a 100-year flood plain and (iv) includes a certification in the form set forth in Schedule K, addressed to HRP, the Title Company and any other persons requested by HRP. Within ten (10) Business Days after receipt of the Surveys, HRP shall give the Sellers notice of any matters shown thereon to which HRP objects. Sellers shall use their best efforts to take or cause to be taken such actions as may be required to remedy the objectionable matters. In the event the Sellers cannot cause such exceptions to be removed, the Sellers shall give HRP prompt notice thereof; it being understood and agreed that the failure of the Sellers to give such notice within five (5) Business Days after HRP's notice of objection shall be deemed an election by the Sellers to remedy such matters. If -14- HRP receives such notice from the Sellers, HRP may elect (i) to terminate this Agreement by the giving of written notice thereof to the Sellers, in which event the Deposit, together with interest thereon, shall be refunded to HRP in accordance with Section 9.1, or (ii) to consummate the transactions contemplated hereby, notwithstanding such defect, with any appropriate abatement or reduction in the number of HRP Shares to be delivered to the Sellers on account thereof, the amount of which shall be determined by good faith negotiation between the parties. HRP shall make any such election by written notice to the Sellers, given on or prior to the fifth Business Day after the Sellers' notice of their inability to cure such defect. Failure of HRP to give such notice shall be deemed an election by HRP to proceed in accordance with clause (ii) above. 7.8 Other Diligence Materials. Within ten (10) days after the date of this Agreement, the Sellers shall deliver to HRP all surveys, environmental assessment reports, building evaluations, licenses, certificates of need, compliance and other surveys, and other investigations and materials pertaining to the Properties as are in the possession of the Sellers. HRP agrees to provide the Sellers with copies of all material studies and reports relating to the physical condition of the Properties prepared for HRP (if any) and with a copy of each of the Title Commitments and the Surveys. 7.9 Other Activities During the Period Prior to Closing. The Sellers and HRP shall endeavor to agree on the form of all of the closing documents and opinions of counsel described herein on or prior to the Closing Date. In addition, the Sellers and HRP shall, prior to the Closing, cooperate in the preparation and filing of any materials required (i) in order to obtain all licenses, certifications and approvals required for the purchase, sale and subsequent operation of the Properties and the Facilities; (ii) by the Hart-Scott-Rodino Improvements Act of 1976 and shall respond promptly to any requests by any governmental agency with respect thereto; or (iii) in connection with the preparation and filing of the Registration Statement. All covenants made by the Sellers in this Agreement shall survive the Closing for a period of three years and shall not be merged into any instrument or conveyance document delivered at Closing. Section 8. ADJUSTMENTS. 8.1 Adjustments Based on Existing Liens. At Closing, the number of HRP Shares to be issued to the Sellers shall be reduced by that number of HRP Shares the value of which (based on $15.00 per share) is equal to the amount of liabilities of the Sellers set forth on Schedule D which HRP has agreed to assume. 8.2 Adjustments Based on Expenses of Operations, etc. (a) Sellers shall pay or arrange for payment of the following amounts at or prior to Closing or, at the option of HRP, the number of HRP Shares to -15- be issued at the Closing shall be adjusted appropriately based upon an adjustment at the Closing (provided that official bills therefor, indicating the interest and penalties, if any, thereon, are furnished by Sellers at the Closing) as of the close of business on the day immediately preceding the Closing Date of: (i) Real estate taxes and assessments, other than special assessments, based on the rates and assessed valuation applicable in the fiscal year for which assessed; (ii) Water rates and charges; and (iii) Sewer and vault taxes and rents. If any of the foregoing cannot be apportioned at the Closing because of the unavailability of the amounts which are to be apportioned, such items shall be apportioned as soon as practicable after the Closing Date. (b) If there are water, gas or electric meters located at the Properties, the Sellers shall furnish readings thereof to a date not more than thirty (30) days prior to the Closing Date and the unfixed water rates and charges, sewer taxes and rents and gas and electricity charges, if any, based thereon for the intervening time shall be apportioned on the basis of such last readings. If such readings are not obtainable by the Closing Date, then, at the Closing, any water rates and charges, sewer taxes and rents and gas and electricity charges which are based on such readings shall be prorated based upon the per diem charges obtained by using the most recent period for which such readings shall then be available. Upon the taking of subsequent actual readings, the apportionment of such charges shall be recalculated and the Sellers or HRP, as the case may be, promptly shall make a payment to the other based upon such recalculations. (c) If any refunds of real property taxes or assessments, water rates and charges or sewer taxes and rents shall be made after the Closing, the same shall be held in trust by the Sellers or HRP, as the case may be, and shall first be applied to the unreimbursed costs incurred in obtaining the same, and the balance, if any, shall be paid to the Sellers (for the period prior to the Closing Date) and to HRP (for the period commencing with the Closing Date). (d) If on the Closing Date the Properties or any part thereof shall be or shall have been affected by any special or general assessment or assessments or real property taxes which are or may become payable in installments of which the first installment is then a charge or lien and has become payable, the Sellers shall pay or cause to be paid the unpaid installments of such assessments due prior to the Closing Date, or their pro rata share thereof, and HRP shall pay or cause to be paid all installments which are due on or after the Closing Date. The current installments shall be apportioned at the Closing. -16- (e) In the event the adjustments hereinabove provided which are to be made at the Closing result in a credit balance, such sum shall be paid at the Closing by an appropriate adjustment in the number of HRP Shares to be issued to the Sellers at the Closing. (f) No insurance policies of the Sellers are to be transferred to HRP, and no apportionment of the premiums therefor shall be made. 8.3 Closing Costs. At Closing, all closing costs for the transaction contemplated hereby (including, without limitation, documentary, stamp, and other transfer taxes and fees, recording and filing fees, premiums, charges, and fees of the Title Company and Survey costs, but specifically excluding each parties' legal and accounting fees) shall be equally divided between HRP and Sellers and an appropriate adjustment in the number of HRP Shares to be issued to Seller at Closing shall be made. Section 9. DEFAULT. 9.1 Default by the Sellers. If the Sellers shall have made any representation or warranty herein which shall be untrue or misleading in any material respect, or if the Sellers shall fail to perform any of the material covenants and agreements contained herein to be performed by them and such failure continues for a period of ten (10) days after notice thereof from HRP, then HRP may terminate this Agreement and/or HRP pursue any and all remedies available to it at law or in equity, including, but not limited to, a suit for specific performance or other equitable relief. In addition to, and not in limitation of, the foregoing, HRP may direct the Escrow Agent to return the Deposit, together with interest accrued thereon with respect to one-half of the Deposit from July 26, 1994 through the date of refund, and, with respect to the balance of the Deposit, from the date of this Agreement through the date of refund. 9.2 Default by HRP. If HRP shall have made any representation or warranty herein which shall be untrue or misleading in any material respect, or if HRP shall fail to perform any of the covenants and agreements contained herein to be performed by it and such failure shall continue for a period of ten (10) days after notice thereof from the Sellers, the Sellers may terminate this Agreement and/or the Sellers may either retain the Deposit as liquidated damages, or may pursue any and all remedies available to them at law or in equity, including, but not limited to, a suit for specific performance or other equitable relief. Section 10. INDEMNIFICATION. 10.1 Indemnification by the Sellers. The Sellers shall indemnify and hold harmless HRP and its successors and assigns, from and against any and all damages, claims, losses, liabilities, and expenses, including without limitation reasonable legal and accounting expenses (collectively, "Losses"), which may arise out of: (i) any material -17- breach or violation of this Agreement by the Sellers; (ii) any material breach of any of the representations, warranties or covenants made in this Agreement by Sellers; (iii) any material inaccuracy or misrepresentation or omission in any certificate or document delivered by the Sellers in connection with this Agreement; and (iv) any claim or action asserted by any third party arising out of or in connection with the Sellers' ownership of the Properties or operation of the Facilities prior to the Closing Date, including, without limitation, all losses, liabilities, claims causes of action or costs and expenses with respect to (a) Medicaid or Medicare depreciation recaptures as provided in Section 3.7 hereto, and (b) retroactive rate adjustments whether arising from recoupments, offsets, or otherwise. The representations, warranties and covenants of the Sellers contained in this Agreement, or any certificate, document, instrument or agreement delivered pursuant to this Agreement, shall survive the execution and delivery of this Agreement, the Closing and the consummation of the transactions contemplated by this Agreement for a period of three years from the Closing Date and in the event of the liquidation and dissolution of a Seller, these representations and warranties shall also be deemed to be the joint and several representations and warranties of the shareholders of said Seller. 10.2 Indemnification by HRP. HRP shall indemnify and hold harmless the Sellers and their successors and assigns from and against any and all Losses which may arise out of (i) any material breach or violation of this Agreement by HRP; (ii) any material breach of any of the representations, warranties or covenants made in this Agreement by HRP; (iii) any material inaccuracy or misrepresentation or omission in any certificate or document delivered by HRP in connection with this Agreement; or (iv) HRP's ownership of the Properties after the Closing Date. The warranties, representations and covenants of HRP contained in this Agreement, or any certificate, document, instrument or agreement delivered pursuant to this Agreement, shall survive the execution and delivery of this Agreement, the Closing, and the consummation of the transactions contemplated by this Agreement for a period of three years from the Closing Date. 10.3 Notice and Payment of Claims. Upon obtaining knowledge thereof, the party entitled to indemnification (the "Indemnitee") shall promptly notify the party liable for such indemnification (the "Indemnitor") in writing of any damage, claim, loss, liability or expense which the Indemnitee has determined has given or could give rise to a claim under Sections 10.1 or 10.2 hereof (such written notice being hereinafter referred to as a "Notice of Claim"). A Notice of Claim shall specify in reasonable detail the nature and estimated amount of such claim, the basis on which such claim is asserted, whether such claim is covered by insurance and whether any rights of indemnification may exist against any third party with respect to such claim. The Indemnitor shall satisfy its obligations under Sections 10.1 or 10.2, as the case may be, or shall advise the Indemnitee that in good faith it disputes the claim, within 30 days of its receipt of a Notice of Claim. -18- Section 11. MISCELLANEOUS. 11.1 Expenses. The Sellers and HRP shall pay their own expenses incident to the negotiation, preparation and carrying out of this Agreement, including, without limitation, all fees and expenses of their respective counsel. 11.2 Brokerage Commissions. Each of the parties hereto represents to the other parties that it dealt with no broker, finder or like agent in connection with this Agreement or the transactions contemplated hereby, and that it reasonably believes that there is no basis for any other person or entity to claim a commission or other compensation for bringing about this Agreement or the transactions contemplated hereby. The Sellers shall indemnify and hold harmless HRP and its legal representatives, heirs, successors and assigns from and against any loss, liability or expense, including, reasonable attorneys' fees, arising out of any claim or claims for commissions or other compensation for bringing about this Agreement or the transactions contemplated hereby made by any broker, finder or like agent, if such claim or claims are based in whole or in part on dealings with the Sellers. HRP shall indemnify and hold harmless the Sellers and their respective legal representatives, heirs, successors and assigns from and against any loss, liability or expense, including, reasonable attorneys' fees, arising out of any claim or claims for commissions or other compensation for bringing about this Agreement or the transactions contemplated hereby made by any broker, finder or like agent, if such claim or claims are based in whole or in part on dealings with HRP. Nothing contained in this section shall be deemed to create any rights in any third party. 11.3 Publicity. The parties agree that no party shall, with respect to this Agreement and the transactions contemplated hereby, contact or conduct negotiations with public officials, make any public pronouncements, issue press releases or otherwise furnish information regarding this Agreement or the transactions contemplated to any third party without the consent of the other parties except with respect to HRP as may be required by law or rules of the New York Stock Exchange or in connection with the Registration Statement, and except as may be required in order to give governmental notices and secure governmental approvals or exemptions in connection with health care licenses or permits and Hart-Scott-Rodino notifications. No party, or its employees, agents, attorneys, officers, directors or shareholders, shall trade in the securities of HRP until a public announcement of the transactions contemplated by this Agreement has been made. 11.4 Execution of Additional Documents. From and after the Closing, the Sellers and HRP shall, at the cost of the requesting party, duly execute and deliver to the parties hereto all such instruments and documents, and shall take or cause to be taken all such other and further action as any party shall reasonably request to confirm the ownership and title to the Properties. -19- 11.5 Notices. (a) Any and all notices, demands, consents, approvals, offers, elections and other communications required or permitted under this Agreement shall be deemed adequately given if in writing and the same shall be delivered either in hand, by telecopier with written acknowledgment of receipt, or by mail or Federal Express or similar expedited commercial carrier, addressed to the recipient of the notice, postpaid and registered or certified with return receipt requested (if by mail), or with all freight charges prepaid (if by Federal Express or similar carrier). (b) All notices required or permitted to be sent hereunder shall be deemed to have been given for all purposes of this Agreement upon the date of acknowledged receipt, in the case of a notice by telecopier, and, in all other cases, upon the date of receipt or refusal, except that whenever under this Agreement a notice is either received on a day which is not a Business Day or is required to be delivered on or before a specific day which is not a Business Day, the day of receipt or required delivery shall automatically be extended to the next Business Day. (c) All such Notices shall be addressed, if to the Sellers to: Marlin Management Box 1103 150 South Champlain Street Burlington, Vermont 05401 Attn: John F. Chapple, III Patricia Rickard, Esq. Telecopier No. (802) 862-6345 with a copy to: Miller, Eggleston and Rosenberg, Ltd. 150 South Champlain Street Burlington, Vermont 05401 Attn: Jon Eggleston, Esq. Telecopier No. (802) 864-0328 If to HRP, to: Health and Retirement Properties Trust 400 Centre Street Newton, Massachusetts 02158 Attn: Mr. David J. Hegarty Telecopier No. (617) 332-2261 -20- with a copy to: Sullivan & Worcester One Post Office Square Boston, Massachusetts 02109 Attn: Lena G. Goldberg, Esq. Telecopier No. (617) 338-2880 (d) By notice given as herein provided, the parties hereto and their respective successors and assigns shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses effective upon receipt by the other parties of such notice and each shall have the right to specify as its address any other address within the United States of America. 11.6 Waivers, Etc. Any waiver of any term or condition of this Agreement, or of the breach of any covenant, representation or warranty contained herein, in any one instance, shall not operate as or be deemed to be or construed as a further or continuing waiver of any other breach of such term, condition, covenant, representation or warranty or any other term, condition, covenant, representation or warranty, nor shall any failure at any time or times to enforce or require performance of any provision hereof operate as a waiver of or affect in any manner such party's right at a later time to enforce or require performance of such provision or any other provision hereof. This Agreement may not be amended, nor shall any waiver, change, modification, consent or discharge be effected, except by an instrument in writing executed by or on behalf of the party against whom enforcement of any amendment, waiver, change, modification, consent or discharge is sought. 11.7 Assignment; Successors and Assigns. This Agreement shall not be assignable by any party without the written consent of the other parties. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns. This Agreement is not intended and shall not be construed to create any rights in or to be enforceable in any part by any other persons. 11.8 Severability. If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict of any provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question invalid, inoperative or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute or rule of public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative or unenforceable provision had never been -21- contained herein and such provision reformed so that it would be valid, operative and enforceable to the maximum extent permitted in such jurisdiction or in such case. 11.9 Counterparts, Etc. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and shall supersede and take the place of any other instruments purporting to be an agreement of the parties hereto relating to the subject matter hereof. This Agreement may not be amended or modified in any respect other than by the written agreement of all of the parties hereto. 11.10 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the law (other than the law governing conflict of law matters) of The Commonwealth of Massachusetts, except that matters relating to real property law as to the Properties located in Vermont shall be governed by and construed and enforced in accordance with the law of the State of Vermont, and matters relating to real property law as to the Property located in New Hampshire shall be governed by and construed and enforced in accordance with the law of the State of New Hampshire. 11.11 Jurisdiction. The parties hereby irrevocably submit to the jurisdiction of any court sitting in The Commonwealth of Massachusetts or any United States Federal Court sitting in Boston, Massachusetts in any action or proceeding arising out of or relating to this Agreement and the parties hereby irrevocably agree that all claims in respect of any action or proceeding arising out of or relating to this Agreement shall be heard and determined in such state or Federal Court. The parties hereby consent to and grant to any such court jurisdiction over the person of such parties and over the subject matter of any such dispute and agree that delivery or mailing of any process or other papers in the manner provided in Section 11.5 or in such other manner as may be permitted by law shall be valid and sufficient service thereof. 11.12 Performance on Business Days. In the event the date on which performance or payment of any obligation of a party required hereunder is other than a Business Day, the time for payment or performance shall automatically be extended to the first Business Day following such date. 11.13 Attorneys Fees. If any lawsuit or arbitration or other legal proceeding arises in connection with the interpretation or enforcement of this Agreement, the prevailing party therein shall be entitled to receive from the other party the prevailing party's costs and expenses, including reasonable attorneys' fees incurred in connection therewith, in preparation therefor and on appeal therefrom, which amounts shall be included in any judgment therein. -22- 11.14 Section and Other Headings. The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 11.15 Entire Agreement. This Agreement (including all schedules hereto and all agreements, instruments, other documents and certificates delivered pursuant hereto or thereto) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, arrangements, covenants, promises, conditions, understandings, inducements, representations, and negotiations, expressed or implied, written or oral, between them as to such subject matter, including, without limitation, that certain letter of intent dated July 13, 1994 and accepted by the Sellers on July 18, 1994. 11.16 Obligations of Sellers After the Closing. From and after the Closing Date, the Sellers will not engage in any business, will each promptly liquidate and dissolve as a corporation, and will each distribute the HRP Shares received by it at the Closing to its shareholders in complete cancellation and redemption of their shares of such Seller. 11.17 Limitation of Liability. The Declaration is duly filed in the Office of the Department of Assessments and Taxation of the State of Maryland, provides that the name "Health and Retirement Properties Trust" refers to the trustees under the Declaration collectively as Trustees, but not individually or personally, and that no trustee, officer, shareholder, employee or agent of HRP shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, HRP. All persons dealing with HRP, in any way, shall look only to the assets of HRP for the payment of any sum or the performance of any obligation. [remainder of this page intentionally left blank] -23- IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as a sealed instrument as of the date first above written. SELLERS: BERLIN C.C., INC. By: /s/ John F. Chapple, III Its: President ST. JOHNSBURY C.C., INC. By: /s/ John F. Chapple, III Its: President ROCHESTER C.C., INC. By: /s/ John F. Chapple, III Its: President SPRINGFIELD C.C., INC. By: /s/ John F. Chapple, III Its: President BURLINGTON C.C., INC. By: /s/ John F. Chapple, III Its: President BENNINGTON C.C., INC. By: /s/ John F. Chapple, III Its: President -24- THE LP CORPORATION By: /s/ John F. Chapple, III Its: President AMERICAN HEALTH CARE, INC. By: /s/ John F. Chapple, III Its: President HRP: HEALTH AND RETIREMENT PROPERTIES TRUST By: /s/ Mark J. Finkelstein Its: President Schedule A List of Sellers Berlin C. C., Inc. Berlin Health and Rehab Center RR #3, Box 6684 Barre, Vermont 05641 St. Johnsbury C. C., Inc. St. Johnsbury Health and Rehab Center Hospital Drive St. Johnsbury, Vermont 05819 Redstone Villa 7 Forest Hills Drive St. Albans, Vermont 05478 Rochester C. C., Inc. Rochester Manor 40 Whitehall Road Rochester, New Hampshire 03867 Springfield C. C., Inc. Springfield Health and Rehab Center 105 Chester Road Springfield, Vermont 05156 Bennington C. C., Inc. Bennington Health and Rehab Center 360 Dewey Street Bennington, Vermont 05201 Burlington C. C., Inc. Burlington Health and Rehab Center 300 Pearl Street Burlington, Vermont 05401 The LP Corporation Hanson Court Convalescent Home 365 Summer Street Springfield, Vermont 05156 American Health Care, Inc. Rowan Court Health and Rehab Center Upper Prospect Street Barre, Vermont 05641 Schedule B Name of Seller Properties Held HRP Shares Allocated(1) Berlin C. C., Inc. Berlin Health and Rehab Center RR #3, Box 6684 Barre, Vermont 05641 St. Johnsbury C. St. Johnsbury Health and Rehab C., Inc. Center Hospital Drive St. Johnsbury, Vermont 05819 Redstone Villa 7 Forest Hills Drive St. Albans, Vermont 05478 Rochester C. C., Rochester Manor Inc. 40 Whitehall Road Rochester, New Hampshire 03867 Springfield C. C., Springfield Health and Rehab Inc. Center 105 Chester Road Springfield, Vermont 05156 Bennington C. C., Bennington Health and Rehab Inc. Center 360 Dewey Street Bennington, Vermont 05201 Burlington C. C., Burlington Health and Rehab Inc. Center 300 Pearl Street Burlington, Vermont 05401 The LP Corporation Hanson Court Convalescent Home 365 Summer Street Springfield, Vermont 05156 American Health Rowan Court Health and Rehab Care, Inc. Center Upper Prospect Street Barre, Vermont 05641 (1) Information shall be provided to HRP not later than three (3) business days prior to closing. -2- Schedule C-1 Berlin Health and Rehab Center Being all of the same land and premises conveyed to Berlin C. C., Inc., by Warranty Deed of Berlin Development Associates dated May 10, 1977, and recorded in Volume 43 at Page 421 of the Land Records of the Town of Berlin, and being all of the same lands and premises conveyed to Berlin C. C., Inc. by Warranty Deed of Irving Cohen, Executor of the Estate of Abraham J. Levinsky, and Bruce J. Levinsky, assignee of Berlin Development Associates, dated October 27, 1980, of record in Volume 47, Page 162 of the Land Records of the Town of Berlin and more particularly described as follows: Beginning at an iron pin set in the ground at the northeasterly corner of the Blanche Larose Home lot in the Town of Berlin, said point also being the southeasterly corner of the Diego Home lot, so-called; thence North 28 degrees 45 minutes 45 seconds West along the easterly line of the Diego lot, so-called, 282.9 feet, more or less, to a concrete monument set in the ground; thence North 80 degrees 09 minutes 30 seconds West 182.94 feet, more or less, to a concrete monument set in the ground, which monument marks the northwest corner of Diego lot so- called; and the northeasterly corner of Buxton lot, so-called; thence North 24 degrees 47 minutes 30 seconds West along the northeasterly line of the Buxton property 86.06 feet, more or less, to a concrete monument set in the ground; thence North 61 degrees 14 minutes 15 seconds East 732 feet, more or less, to a concrete monument set in the ground; thence South 28 degrees 45 minutes 45 seconds East 550.00 feet, more or less, to a concrete monument set in the ground near a spring house and stone wall; thence South 61 degrees 14 minutes 15 seconds West a distance of 108.67 feet, more or less, to a concrete monument set in the ground; thence South 28 degrees 09 minutes 30 seconds East a distance of 151.13 feet, more or less, to a concrete monument set in the ground; thence South 61 degrees 14 minutes 15 seconds West a distance of 33.15 feet, more or less, to a concrete monument set in the ground; thence turning left and proceeding along the circumference of a circle with a radius of 225.00 feet through an arc of 72 degrees 55 minutes 15 seconds for a distance of 286.36 feet, more or less, to a concrete monument set in the ground, which monument marks the corner of property of Raymond and Donna G. Johnson; thence North 79 degrees 59 minutes 15 seconds West a distance of 386.75 feet, more or less, along the north line of property of Raymond and Donna G. Johnson to a concrete monument set in the ground; thence North 04 degrees 37 minutes 15 seconds East a distance of 140.20 feet, more or less, to a concrete monument set in the ground which marks the point or place of beginning. Included herein is a right of way from Airport Road, so-called, over land owned by John F. Chapple, III as conveyed to Berlin Development Associates by Warranty Deed of Bruce J. Levinsky dated January 22, 1971, and of record in Volume 39, Page 222 of the Berlin Land Records. Meaning to convey hereby the 10.6 acre parcel as shown on Plan entitled "A survey of a portion of land of Bruce J. Levinsky in the Town of Berlin, Vermont, By Property Design, Montpelier, Vermont, September, -2- 1979" of record in the Land Records of the Town of Berlin in Map Volume 1, at Page 81-1. Schedule C-2 St. Johnsbury Health and Rehab Center Being certain premises consisting of 5.313 acres with a nursing home building and improvements thereon, located easterly of U. S. Route #5 and further located on the southerly side of the proposed town road running from U. S. Route #5 to the Breezy Hill Road, so-called; and being all of the same land and premises conveyed to St. Johnsbury C. C., Inc. by Warranty Deed of St. Johnsbury Development Associates, dated May 10, 1977, of record in Volume 158, Page 15 of the Land Records of the Town of St. Johnsbury; and being all of the same land and premises conveyed to St. Johnsbury Development Associates by deed of Northeastern Vermont Regional Hospital, Inc., dated January 15, 1971, and recorded in Book 139, at Page 226 of the St. Johnsbury Land Records; and being a part of the same land and premises conveyed to Northeastern Vermont Regional Hospital, Inc., by deed of Margaret R. Grapes, dated July 18, 1967 and recorded in Book 130, at Pages 372-375 of the St. Johnsbury Land Records. There is excepted and reserved from the conveyance of these premises herein those certain restrictions set out in the above mentioned deed from Northeastern Vermont Regional Hospital, Inc. to St. Johnsbury Development Associates concerning the operation of the nursing home on the premises herein conveyed. There is further excepted and reserved from the conveyance of these premises those certain pole line rights of way given over these premises. Reference is hereby had and made to the aforesaid deeds and the records and references thereof and to all prior deeds and their records for a more particular description of the land and premises herein conveyed. Excepting from this conveyance all water and sewer rights of way and rights of way as may exist of record against these land and premises. Schedule C-3 Springfield Health and Rehab Center Being all and the same lands and premises conveyed to Springfield C. C., Inc., by Warranty Deed of Springfield Development Associates dated May 10, 1977, of record in Volume 72 at Page 560 of the Land Records of the Town of Springfield, which premises are more particularly described as follows: Being a parcel of land of some 4.7 acres, more or less, from the southeasterly corner of the Mary L. Newton homestead located in the northerly side of Chester Road so-called, bounded and described as follows: Beginning at an iron pin set in the ground at the northerly boundary line of the highway right-of-way which iron pin is located 3.38 feet westerly of a Vermont Highway Department Monument, thence North 83 degrees 13 minutes W a distance of 242.59 feet to another Highway Monument, and continuing in the same line 43.23 feet to an iron pin set in the ground near or at the end of a section of stone wall; thence North 18 degrees 57 minutes E a distance of 69.96 feet to an iron pin set in the ground; thence North 10 degrees 23 minutes E a distance of 58.01 feet to a granite monument; thence North 67 degrees W a distance of 72.55 feet to a monument; thence North 19 degrees 17 minutes E 295.15 feet to an iron pin set in the ground; thence North 53 degrees 27 minutes 30 seconds E 170.14 feet to an iron pin set in the ground; thence S 76 degrees 59 minutes 30 seconds E a distance of 141.13 feet to an iron pin set in the ground; thence S 35 degrees 46 minutes 30 seconds E a distance of 117.6 feet to an iron pin set in the ground; thence S 26 degrees 24 minutes 30 seconds E 174.60 feet to an iron pin set in the ground; thence S 28 degrees 21 minutes 30 seconds W 205.68 feet to an iron pin set in the ground; thence S 41 degrees 23 minutes W 87.33 feet to an iron pin set in the ground; thence S 52 degrees 26 minutes W 56.52 feet to an iron pin; which iron pin marks the same place of beginning. EXCEPTING from this conveyance all pole line easements, water and sewer rights of way as may exist of record against these lands and premises. Schedule C-4 Bennington Health and Rehab Center Beginning at a point which marks the intersection of the southerly line of the Putnam Street right of way, so-called, the northeasterly line of a proposed street to be called Blackberry Lane, and the southerly and easterly lines of the right of way of Dewey Street, so-called, said point marking the northwest corner of the herein conveyed parcel; then running N 68 degrees 06 minutes E along said southerly line of the Putnam Street right of way 855.37 feet to a point; thence turning and running S 19 degrees 30 minutes W 134.4 feet to a point; thence turning and running S 69 degrees 31 minutes E 198.78 feet to a point; thence turning and running S 19 degrees 04 minutes W 152.37 feet to a point; thence turning and running S 50 degrees 38 minutes W 111.17 feet to an iron pipe; thence turning and running S 44 degrees 13 minutes W 260.46 feet to an iron pipe; thence turning and running N 45 degrees 17 minutes W 333.46 feet to an iron pipe; thence turning and running S 68 degrees 23 minutes W 211.65 feet to a point; thence turning and running S 52 degrees 52 minutes W 71.07 feet to a point in the northeasterly line of Blackberry Lane as proposed; thence turning and running N 37 degrees 08 minutes W along said northeasterly line of Blackberry Lane, as proposed, 213.79 feet to the place of beginning. EXCEPTING from this conveyance all pole line easements, water and sewer rights of way and rights of way as may exist of record against these lands and premises. This deed is conveyed subject to the possible rights of others in and to the uninterrupted flow of a small stream crossing the extreme northwesterly portion of these lands and premises, said stream being called "Dewey Brook." Being all and the same lands and premises conveyed to Bennington C. C., Inc. by Warranty Deed of Bennington Development Associates dated May 10, 1977, and recorded in Book 0-217, Page 239 of the Bennington Land Records. Included in this conveyance, however, by Notice and Order of Discontinuance of Highway for the untraveled portion of Putnam Street as filed by the Bennington Board of Selectmen with the Bennington Town Clerk on June 5, 1984, a strip of land from a portion of the northerly line as hereinabove mentioned to the centerline of the untraveled portion of Putnam Street, as more particularly described in said Notice and Order. Schedule C-5 Hanson Court Convalescent Home The land with the buildings thereon situated in Springfield, Vermont, and being a certain piece or parcel of land on the southerly side of Summer Street Extension, so-called, bounded as follows: BEGINNING at a point on the southerly side of Summer Street Extension which point marks the northeast corner of the premises described as Parcel One on a conveyance by Convalescent Homes, Inc. to Jonas R. and Margaret Welcome, dated January 4, 1963; which is recorded in Springfield Land Records in Book 58, Page 343; THENCE turning easterly along the southerly line of said Summer Street Extension to the northwesterly corner of Lot No. 23 as shown by "Lot Plan of 'White Acres' for Chas. W. Cutler, Sept. 17, 1953 and Dec. 23, Springfield, VT" by L. G. Basso, Engineer, a copy of which plan is on file in the Springfield Town Clerk's Office; THENCE turning and running southerly on the westerly boundary lines of Lots No. 23, 22 and 21 as shown by said plan to the southwesterly* corner of said Lot No. 21. *(incorrectly referenced in prior deed as southeasterly). THENCE turning and running westerly along lands described in a conveyance by Convalescent Homes, Inc. to Gerald E. and Helen S. McLaughlin dated January 1, 1963, which is recorded in Springfield Land Records in Book 59, Page 333 to the northeasterly corner of lands of Benjamin Levine and wife; THENCE continuing westerly along the northerly boundary line of said Levine's premises to the southeasterly corner of premises of Richard H. Lillie, Jr. and wife; THENCE turning and running northerly along the easterly boundary line of said Lillie premises and along the easterly boundary of premises of the aforesaid Welcomes to the place of beginning. Also conveying the right to drain water in substantially the same manner as now conducted from the lands of the Convalescent Homes, Inc. over and upon the lands described as Parcel One in a deed from Convalescent Homes, Inc. to Jonas R. and Margaret Welcome dated January 4, 1963, recorded in Springfield Land Records in Book 48, Page 343. Also conveying the right to enter the premises described as Parcel Two in the aforesaid deed to Jonas R. and Margaret Welcome all reasonable times and places for the purpose of repairing, maintaining and relaying water and sewer lines located thereon. Also conveying the right to enter the premises described in a deed from Convalescent Homes, Inc. to Richard H. and Beverly P. Lillie, dated January 4, 1963, recorded in Springfield Land Records in Book 58, Page -2- 357 at all reasonable times and places for the purpose of repairing, maintaining and relaying water and sewer lines located thereon or on premises conveyed to the aforesaid Jonas R. and Margaret Welcome. This conveyance is made subject to all of the various exceptions, reservations and outstanding rights, including rights of way, rights to discharge culverts, slope rights, pole line rights, water line rights, sewer pipe rights, all of which are more particularly set forth in the deed from Jeanne B. Cutler to Convalescent Homes, Inc. dated January 6, 1961, and recorded in Springfield Land Records (Book 58, Page 128) to the extent that these rights or any of them affect these premises. Being all and the same land and premises conveyed to The LP Corporation by Warranty Deed of Idak Convalescent Center of Springfield, Inc. dated April 1, 1982, of record in Volume 80, Page 406 of the Land Records of the Town of Springfield. Schedule C-6 Redstone Villa A lot of land, together with the buildings thereon, located on the north side of Forest Hill Drive, so-called; and more fully described as follows: Beginning at a stake Two Hundred Eighteen (218) feet, more or less, from the east line of Smith Street, so-called, which stake marks the northwest corner of the lot herein conveyed; thence running easterly along the north line of Forest Hill Subdivision One Hundred Fifty-Nine (159) feet, more or less, to an iron stake which marks the northeast corner of the lot herein conveyed; thence turning and running southerly One Hundred Fifty-Six (156) feet Nine (9) inches to an iron stake set in the north line of "Forest Hill Drive," so-called; thence turning and running westerly along the north line of said Forest Hill Drive One Hundred Seventy-Four (174) feet Eight (8) inches, more or less, to an iron stake; thence turning and running northerly One Hundred Thirty-Six (136) feet, more or less, to the point or place of beginning. Reference is further made to a certain Plan of Land captioned "Forest Hill Subdivision Revision No. 1" dated August 17, 1955, and recorded in Book 11, Page 316 of the St. Albans City Land Records. The land and premises herein conveyed consist of all of the large unnumbered lot, with an outline "Exist. Building," as shown on said Plan of Land, except that portion of said lot which was conveyed by Ralph O. Hurlburt and Joan C. Hurlburt to David H. Reissig and Ione C. Reissig by Warranty Deed dated April 22, 1970, of record in Volume 21, at Page 237 of the City of St. Albans Land Records. Central Vermont Public Service Corporation has an easement dated March 17, 1959 and recorded in Book 14, Page 21, of the St. Albans City Land Records. Schedule C-7 Rowan Court Health and Rehab Center Beginning at an iron pin set in the generally easterly line of Prospect Street in the City of Barre, Vermont; thence turning an angle to the right and proceeding S 54 degrees E 530.0 feet to an iron pin set in the ground; thence turning an angle to the right of 100 degrees 17 minutes and proceeding in a generally southwesterly direction 483.6 feet to an iron pin set in the ground; thence turning an angle to the right of 86 degrees 18 minutes and proceeding in a generally northwesterly direction 600.0 feet to an iron pin set in the ground; thence turning an angle to the right of 89 degrees 25 minutes and proceeding in a generally northeasterly direction 180.4 feet to an iron pin set in the ground; thence making a minor angle to the right and proceeding in a generally northeasterly direction 365.0 feet to an iron pin set in the ground, being the point of beginning. Meaning to convey a parcel having Prospect Street as a westerly boundary. Said parcel is part of a larger parcel of land as shown on a Survey Map prepared by A. B. Delano, Registered No. 1105 in said Survey, entitled "Plot of Land on Upper Prospect Street, Barre, Vermont Scale 1 inch = 40 feet" recorded June 2, 1971 at Page 4 in Plat Book 2 of the Land Records of the City of Barre. Included in this conveyance are all buildings and improvements on said parcel. Being all and the same lands and premises conveyed to American Health Care, Inc. (formerly known as Mirror, Inc.) by Rowan Court - Barre, Inc. by Warranty Deed dated April 3, 1981., of record in Volume 139 at Page 59 of the Land Records of the City of Barre. Schedule C-8 Rochester Manor Being a certain tract or parcel of land situated on the northeasterly side of Whitehall Road, so-called, in Rochester, County of Strafford, and State of New Hampshire, bounded and described as follows: Beginning on the northeasterly side of said Whitehall Road at a steel stake set in the ground at the southerly corner of land now or formerly of John Bisson; thence running N 12 degrees E along land of said Bisson a distance of 150.7 feet, to an iron pipe set in the ground; thence turning and running N 75 degrees 08 minutes W along land of said Bisson and along land now or formerly of Albert Creteau and land now or formerly of Alfred Chauvey a distance of 164.3 feet to a steel stake set in the ground; thence turning and running N 49 degrees 50 minutes E by land now or formerly of Gerard A. Burchell, Jr., a distance of 433 feet to an iron pipe set in the ground at land of the Boston and Maine Railroad; thence turning and running S 33 degrees 23 minutes E by said land of the Boston and Maine Railroad a distance of 742.9 feet to a steel stake set in the ground on the northeasterly side of Whitehall Road; thence turning and running N 76 degrees 06 minutes W along said Whitehall Road a distance of 630.6 feet to a steel stake set in the ground at the point of beginning. The above described premises are more particularly shown on "Boundary Plan, Land of Bruce Levinsky and others, Whitehall Road, Rochester, NH, Berry Construction Co., Inc., David A. Berry, R. L. S., dated August 27, 1971. EXCEPTING from this conveyance all pole line easements, water and sewer rights of way and rights of way as may exist of record against these lands and premises. EXCEPTING from this conveyance all rights of others in and to the uninterrupted flow of a small stream crossing the northwesterly corner of these lands as disclosed by a survey report by David A. Berry based on a survey made August 25, 1971, and such other matters occurring after August 25, 1971, as would be disclosed by an accurate survey and inspection of the premises. Being all of the same lands and premises conveyed to Rochester C. C., Inc. by Warranty Deed of Rochester Associates, dated May 10, 1977, of record in Book 996, Page 380 of the Strafford County Registry of Deeds. Schedule C-9 Burlington Health and Rehab Center Being a parcel of land situated northerly and westerly of 306-308 Pearl Street in the City of Burlington, County of Chittenden and State of Vermont, and bounded and described as follows: Commencing at a point on the northerly line of Pearl Street which point is the southwesterly comer of 306-308 Pearl Street and the southeasterly comer of the property herein conveyed; thence generally westerly along the northerly sideline of Pearl Street 82.4 feet to a point; thence turning to the right and proceeding in a generally northerly direction 124.5 feet to a point; thence turning to the left and running in a generally westerly direction 10.3 feet to a point; thence turning to the right and running in a generally northerly direction 130.2 feet to a point; thence turning to the right and proceeding in a generally easterly direction 47.0 feet to a point; thence turning to the right and proceeding in a generally southerly direction 15 feet to a point; thence turning to the left and proceeding a distance of 132.0 feet in a generally easterly direction to a point; thence turning to the right and proceeding in a generally southerly direction 25.5 feet to a point; thence turning to the left and proceeding in a generally westerly direction 22.7 feet to a point; thence turning to the right and proceeding in a generally southerly direction 124.0 feet to a point; thence turning to the right and proceeding in a generally westerly direction 104.5 feet to a point; thence turning to the left and proceeding in a generally southerly direction 114.5 feet along the common boundary line of this parcel and the property known and designated as 306-308 Pearl Street to the point of beginning. Being all and the same lands and premises conveyed to Burlington C.C., Inc. by Warranty Deed of Antonio B. Pomerleau dated July 2, 1982, of record in Volume 282, at Page 630 of the City of Burlington Land Records and by Warranty Deed of Sheraton Vermont Corporation, dated May 11, 1977, of record in Volume 243, Page 428 of the City of Burlington Land Records. The property is subject to easements and rights of way of record. Reference is made to said deeds, the records thereof, the references therein made, and their respective records and references in further aid of this description. Schedule D Liens & Encumbrances Liens - Mortgages Description Date Amount Facility Bank of Loan Financed Financed Berlin Vermont First 02/23/88 $1,000,000.00 National Bank Mortgage #3022465- 003 St. Vermont First 05/24/94 $1,000,000.00 Johnsbury National Bank Mortgage Rochester Vermont First 04/06/94 $1,270,000.00 National Bank Mortgage #3033272- 00001 Springfield Vermont First 04/06/94 $1,250,000.00 National Bank Mortgage #3033248- 00001 Bennington Vermont First 04/06/94 $1,200,000.00 National Bank Mortgage #3033264- 00001 Burlington Vermont First 03/30/94 $1,053,128.83 National Bank Mortgage #3015270- 00001 Redstone Paul E. First 04/20/79 $163,664.50 Dussault Mortgage Frank Cheney Second 12/05/85 $219,467.54 Mortgage Rowan F.N.M.A. First 11/29/92 $1,172,400.00 #1-44-791176-9 Mortgage Vermont Second 02/06/92 $850,000.00 National Bank Mortgage #3018589-00002 Encumbrances See preliminary title reports. Schedule E Opinion of Sellers' Counsel [to come] Schedule F Contracts & Agreements Licensed Bed Capacity & Medicare/Medicaid 1. Contracts & Agreements See individual contract sheet for each facility attached. American Health Care Software Enterprises, Inc. to each facility (Professional Services Agreement for financial and clinical software programs) 2. Licensed Bed Capacity Bed Facility Capacity SNF ICF Medicare/Medicaid Berlin Health and 152 48 104 Medicare/Medicaid Rehab Center St. Johnsbury Health 110 27 83 Medicare/Medicaid and Rehab Center Rochester Manor 108 25 83 Medicare/Medicaid Springfield Health and 102 26 76 Medicare/Medicaid Rehab Center Bennington Health and 100 51 49 Medicare/Medicaid Rehab Center Burlington Health and 168 42 126 Medicare/Medicaid Rehab Center Hanson Court 42 0 42 Medicaid Convalescent Home Redstone Villa 30 0 30 Medicaid Rowan Court Health and 104 21 83 Medicare/Medicaid Rehab Center BERLIN Health and Rehab Center Effective Date Type of Contractor Term Date Fee Service 05/24/94 EQUIPMENT - Green 30 days see contract Conservation Mountain notice for terms incentive Power 06/26/87 FIRE ALARM Simplex 60 days $250.00/system notice 11/17/88 GASOLINE Maplewood SUPPLIER 02/13/89 PROPANE Agway 02/13/99 or 60 days 05/31/93 SPRINKLER Firetech February, $430.00/year Sprinkler 1995 Corporation ST. JOHNSBURY Health and Rehab Center Effective Date Type of Contractor Term Date Fee Service 07/01/94 FIRE ALARM/ Firetech 1 year $295.00/year SPRINKLER Sprinkler Corp. 02/13/89 PROPANE Agway 60 days see contract notice 09/01/94 SNOW PLOWING Jennifer 94-95 $1600.00 for 16 Fleming season plowings ROCHESTER MANOR Effective Date Type of Contractor Term Date Fee Service 03/17/92 FIRE ALARM New England 30 days $96.00/ Protection notice quarterly 07/01/91 SPRINKLER/ Grinnell 30 days $440.00 SMOKE Fire notice DETECTORS Protection 05/01/94 GENERATOR Cummins 04/30/95 $445.53/year MAINTENANCE North Atlantic 03/12/89 PROPANE Agway 60 days see contract notice SPRINGFIELD Health and Rehab Center Effective Date Type of Contractor Term Date Fee Service 10/01/93 PLUMBING Michael completion $15.00/hour + PROJECT Bodi of proj. materials Plumbing 02/13/89 PROPANE Agway 60 days (see notice contract) 07/01/94 SPRINKLER Grinnell 30 days $220.00/year INSPECTION notice 03/01/93 TELEPHONE Long Distance North BENNINGTON Health and Rehab Center Effective Date Type of Contractor Term Date Fee Service 12/01/93 ELEVATOR Bay State 12/1/94 $163.36/month INSPECTION 05/19/94 FIRE SCH Alarm 05/19/95 $440.00/year ALARM/SMOKE Systems DETECTORS 11/01/89 SPRINKLER Grinnell 30 days $315.00/year Fire notice Protection 02/13/89 PROPANE Agway 60 days (see contract) notice or 02/13/99 BURLINGTON Health and Rehab Center Effective Date Type of Contractor Term Date Fee Service [none] HANSON COURT Convalescent Home Effective Date Type of Contractor Term Date Fee Service 09/14/89 PROPANE Agway SPRINKLER/AL Grinnell ARM SYS. TESTING 02/19/94 SPRINKLER Firetech 1 year $250.00 INSPECTION Sprinkler (02/19/95) Corp. REDSTONE VILLA Effective Date Type of Contractor Term Date Fee Service 07/10/90 SPRINKLER Cedar Ridge auto. renewal/ 60 days notice ROWAN COURT Health and Rehab Center Effective Date Type of Contractor Term Date Fee Service [none] Schedule G Compliance with Law The Properties and the Facilities were established prior to 1972. The Sellers therefore do not warrant or represent that the Properties or the Facilities conform to building codes, zoning ordinances or parking requirements currently in effect. Schedule H Hazardous Substances Underground propane gas tanks are located at the following properties: St. Johnsbury Health and Rehab Center Springfield Health and Rehab Center Bennington Health and Rehab Center Hanson Court Convalescent Home Schedule J Capitalization of HRP [to come] Schedule K Form of Surveyor's Certificate TO: _____________________ _____________________ _____________________ _____________________ RE: Survey Entitled "_______________________________________" dated _________ ___, 1994, prepared by The undersigned hereby certifies that the above-referenced survey was prepared from an actual on-the-ground instrument survey of the subject premises; that the same accurately shows the location of the boundaries of the subject premises and the location of all streets, highways, alleys and public ways crossing or abutting said premises; that the dimensions of the improvements and the locations thereof with respect to the boundaries are accurately shown as the same were situated on ____________, 1994; that there are no encroachments by improvements appurtenant to adjoining premises upon the subject premises, nor from the subject premises, unless shown thereon; that all buildings and structures, if any, lie wholly within all applicable building restriction lines, if any, and do not violate any restriction or other recorded agreements set forth in the title insurance commitment for the subject premises dated ___________, 1994, issued to you by ________________________, Commitment No. _______ (the "Title Policy"); that all easements and rights of way which are appurtenant to or burden the subject premises and (i) are referred to in the Title Commitment or (ii) are apparent from a visual inspection are delineated thereon, and are located other than through the existing building shown hereon; that all parking spaces, if any, are delineated thereon; and that, except as otherwise shown thereon, the subject premises are not located (x) within any flood hazard or flood way area or district as designed by Federal, state or municipal authority or (y) within any area subject to regulation by Federal, state or municipal authority as inland or coastal wetlands, beach, estuary or the like. Access to and egress from the subject premises and the improvements and structures thereon to ________ Street, a public way, are provided by the means indicated thereon. Municipal water, storm sewer facilities and telephone, gas and electric services of public utilities are available in the locations indicated thereon. The undersigned hereby certifies that the square footage of each parcel delineated on the above-referenced survey is as set forth thereon, that all such parcels are contiguous without any strips, gaps or gores existing between any of said parcels, and that said parcels, when combined, form and create one complete and uninterrupted parcel without any strips, gaps or gores. This survey is made in accordance with the "Minimum Standard Detail Requirements for Land Title Surveys" jointly established and adopted by ALTA and ACSM in 1986. -2- Dated: _______ __, 1994 _______________________________ Registered Land Surveyor __________ #_________________ [Surveyor's Seal] EX-2.2 3 HEALTH AND RETIREMENT PROPERTIES TRUST 400 Centre Street Newton, MA 02158 September 1, 1994 Connecticut SubAcute Corporation 955 South Main Street Middletown, CT 06457 RE: Letter of Intent re Purchase and Lease of Nine (9) Nursing Homes in Vermont and New Hampshire Gentlemen: Connecticut SubAcute Corporation (CSC) is negotiating with Mr. John R. Chapple pursuant to a letter dated July 13, 1994 for the purchase of nine (9) nursing homes in Vermont and New Hampshire. The purpose of this Letter of Intent is to set forth the terms upon which Health and Retirement Properties Trust (HRP) is willing to participate with CSC in this transaction, as follows: 1. Buyer/Lessor: HRP 2. Seller: John R. Chapple or corporations owned by him which are the current legal owner(s) of the Subject Properties. 3. Tenants: Two (2) newly formed corporations which are or will be under common control with CSC, one of which will lease and operate the Subject Properties located in Vermont and one of which will lease and operate the Subject Property located in New Hampshire. The only business of the Tenants will be the leasing and operations of the Subject Properties. 4. Purchase Price: Thirty-Five Million Dollars ($35,000,000). 5. Payment Terms: Cash via wire transfer and/or HRP common shares valued at current market value which stock will be subject to such voting and/or resale restrictions and on such other terms and conditions as may be agreed by HRP and Seller. Connecticut Subacute Corporation September 1, 1994 Page 2 6. Subject Properties: All the lands, buildings and equipment that constitute the following nine (9) nursing homes: Name/Location No. of Beds Berlin Health and Rehab Center 152 Barre, Vermont St. Johnsbury Health and 110 Rehab Center St. Johnsbury, Vermont Springfield Health and Rehab 102 Center Springfield, Vermont Bennington Health and Rehab 100 Center Burlington Health and Rehab Center 168 Burlington, Vermont Hanson Court Convalescent Home 42 Springfield, Vermont Redstone Villa 30 St. Albans, Vermont Rowan Court Health and Rehab Center 104 Barre, Vermont Rochester Manor 108 Rochester, New Hampshire _____ TOTAL: 916 beds 7. Leases' Term: Approximately fourteen years ending on December 31, 2008. 8. Renewal Options: Tenants shall have options to renew the Leases for three (3) successive ten (10) year terms by giving written notice at least one (1) year before the end of the initial Term, or any extended Terms, as the case may be. The renewal options may be exercised for all, but not less than all, of the Subject Properties. Connecticut Subacute Corporation September 1, 1994 Page 3 9. Rent: Rent shall be composed of Base Rent and Percentage Rent. Base Rent shall be Three Hundred Six Thousand Two Hundred Fifty Dollars ($306,250.00) per month. Percentage Rent shall be equal to three percent (3%) of increases in Net Patient Revenues derived from the Subject Properties in excess of Net Patient Revenues derived from the Subject Properties during calendar year 1995. Base Rent shall commence on the date of Closing and be payable monthly in advance on the Closing date and thereafter on or before the first day of each calendar month. Percentage Rent shall commence on January 1, 1996 and shall be payable quarterly in arrears on or before each April 30, July 31, October 30 and January 31 thereafter, based upon estimates of Net Patient Revenues during the calendar quarter ending in the prior month. Annually, on or before March 31 after each calendar year during which Percentage Rent is payable, the Percentage Rent shall be adjusted based upon an annual audit of Net Patient Revenues for the previous calendar year compared to the audited amount of Net Patient Revenues during 1995. Net Patient Revenues is defined as all revenues derived by Tenants and their affiliates from operation of the Subject Properties, less contractual adjustments and bad debts. Percentage Rent shall be calculated on a facility by facility basis. Percentage Rent for each of the Subject Properties payable in any one (1) year shall not exceed three percent (3%) of the Purchase Price allocated to that Subject Property. After it is established by annual audit, Percentage Rent for each of the Subject Properties may not decline in subsequent years. 10. Purchase Options and Rights of First Refusal. Tenants shall have the options to purchase all, but not less than all, of the Subject Properties at the end of the initial Term or any extended Terms. This Purchase Option shall be exercisable upon at least one (1) year's notice. The Purchase Option price shall be the higher of (i) fair market value determined by agreement, or failing agreement by appraisal; or (ii) the Purchase Price set forth above. During the initial Term and any extended Terms, and so long as there is no default by Tenants, Tenants shall have a thirty (30) day right of first refusal in the event Lessor determines to sell any or all of the Subject Properties. 11. Security: Tenants' obligations under the Leases will be secured as follows: (a) A first lien on all tangible personal property of the Tenants (except motor vehicles, if any) used in connection with the operations of the Subject Properties, provided, however, that after acquired tangible personal property may be subject to senior purchase money security interests. Connecticut Subacute Corporation September 1, 1994 Page 4 (b) Upon termination of the Leases, Lessor shall have the option to purchase any tangible and intangible personal property of Tenants, or of any affiliate of Tenants, which personal property is located on, or used in connection with the business conducted upon, the Subject Properties. The purchase option prices shall be equal to the Tenants' net book value of such property. (c) All obligations of the Tenants will be cross guaranteed and subject to cross default. All obligations of the Tenants will be guaranteed by CSC, by any affiliate of Tenants or CSC which conducts business upon the Subject Properties, and by any direct or indirect corporate parent or successor to Tenants which now exists or may hereafter be created. 12. Other Terms: HRP's obligations to proceed with this transaction is conditioned on the following additional terms: (a) Receipt by HRP prior to Closing of an appraisal report, from an appraiser and in form and substance acceptable to HRP, showing a value of the Subject Properties at least equal to the Purchase Price. (b) The Leases will be so called "triple net leases" requiring Tenants to pay all operating costs including real estate taxes, insurance, maintenance and repairs, and to make all capital improvements required during the Leases' Term. Any expenditures which HRP, in its discretion, may make in response to requests from Tenants, or as a result of defaults by Tenants, whether to improve or maintain the Subject Premises, or otherwise, will result in Rent increases. (c) Prior to Closing, Tenants will provide HRP a copy of all documentation of the transactions between Seller and Tenants, and these terms shall be subject to HRP's approval. (d) The Lease and guaranty documentation will contain covenants and restrictions which subordinate all payments from Tenants to affiliated parties to payments due HRP, provided, however, that such payments (including reasonable management fees or maintenance of a pooled cash management system among Tenants and its affiliates) may be made in the ordinary course so long as there is no default in obligations due HRP. (e) Assignment, sublease, or change of control of the Tenants will not be permitted without HRP's consent, in its discretion; provided, however, Tenants will be permitted to sublease space within the Subject Properties for incidental nursing home and medical use. (f) Tenants will be required to obtain and maintain all appropriate licenses, certifications, Medicare and Medicaid qualifications and the like throughout the Leases' Term. (g) Prior to Closing, HRP shall receive all survey, environmental, engineering, title insurance commitments, opinions of counsel and other third party reports and documents customary in Connecticut Subacute Corporation September 1, 1994 Page 5 transactions of this nature. All such reports and documents shall be in form and substance and from third parties acceptable to HRP. Connecticut Subacute Corporation September 1, 1994 Page 6 (h) Prior to Closing, HRP shall have completed a physical inspection of the Subject Properties and such further diligence as it may deem appropriate, and with such results as HRP deems acceptable. Depending upon the results of such diligence HRP may require as a condition of Closing that there be an agreement between HRP and Tenants concerning capital budgets for the Subject Properties and the funding and timing of improvements. (i) After the acceptance of this Letter of Intent, CSC, Tenants and their affiliates and representatives will not solicit other proposals for the financing or purchase of the Subject Properties from any party other than HRP unless and until HRP advises CSC that HRP is unwilling to proceed with this transaction, or twenty (20) days following written advice from CSC to HRP that any terms or conditions required by HRP are unacceptable, unless such terms or conditions are resolved to mutually acceptable terms or conditions within the twenty (20) day period. (j) The final form and substance of all documentation must be acceptable to HRP and its counsel. Except as may be otherwise agreed between HRP and Sellers or Tenants, all expenses of preparing for and concluding this transaction shall be borne by Sellers or Tenants including, but not limited to, the costs and expenses of preparing or obtaining appraisals and third party reports and documents, any brokerage fees, all property transfers and recording costs, the cost of HRP's title insurance, the out-of-pocket costs of HRP's diligence, and the costs and expenses of HRP's counsel. (k) It is specifically understood that HRP's undertaking to proceed with this transaction is conditioned upon final approval of this transaction by HRP's Board of Trustees. (l) During the Leases' Term, Tenants, CSC and their affiliates shall grant HRP a right of first refusal to provide sale lease or mortgage financing for any health care related facilities owned, leased, operated or to be acquired by Tenants, CSC, or any affiliate within the market area of the Subject Properties. The geographic limits of such market area will be defined in the transaction documentation, but it is generally expected to be a ten (10) mile radius from each of the Subject Properties. It is understood that this will be a right of first refusal, not a right to set terms. (m) Prior to Closing, the Purchase Price and the Base Rent shall be allocated among the separate Subject Properties on a basis mutually agreeable to HRP, Sellers and Tenants. 13. Closing: The Closing of this transaction will take place at the offices of Sullivan & Worcester, One Post Office Square, Boston, Massachusetts on September 30, 1994 or another mutually acceptable date. Connecticut Subacute Corporation September 1, 1994 Page 7 If the terms outlined in this Letter of Intent are acceptable please sign and return a copy of this Letter to the undersigned. Very truly yours, /s/ David J. Hegarty David J. Hegarty Executive Vice President ACCEPTED CONNECTICUT SUBACUTE CORPORATION By /s/ Mark J. Finkelstein Print: Mark J. Finkelstein Title: President Dated: September 19, 1994 EX-3.2 4 ARTICLES SUPPLEMENTARY TO THE DECLARATION OF TRUST OF HEALTH AND RETIREMENT PROPERTIES TRUST Pursuant to Section 8-203(b) of Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland Health and Retirement Properties Trust, a Maryland real estate investment trust (the "Trust"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Trustees of the Trust by Article VI of the Declaration of Trust of the Trust, the Board of Trustees has duly divided and classified 2,000,000 shares of the Preferred Shares of Beneficial Interest of the Trust into a series designated Series A Preferred Shares and has provided for the issuance of such series. SECOND: The terms of the Series A Preferred Shares are set by the Board of Trustees as follows: SERIES A PREFERRED SHARES SECTION I. Designation and Amount; Number of Shares. There is hereby established a series of the Trust's Preferred Shares of Beneficial Interest, par value $.01 per share ("Preferred Shares") consisting of 2,000,000 Preferred Shares. The designation of such series shall be "Series A Preferred Shares" (hereinafter "Series A Preferred Shares"). SECTION II. Voting Rights. Each Series A Preferred Share shall have, as to all matters submitted to a vote of the shareholders of the Trust, one-tenth the number of votes to which such share would be entitled if it were a common share of beneficial interest, $.01 par value per share, of the Trust (a "Common Share"). The holders of the Series A Preferred Shares shall not be entitled to vote separately as a class as to any matter. -2- SECTION III. Dividends. Except as otherwise provided in this Section III, the holders of the Series A Preferred Shares shall participate equally with holders of Common Shares in all dividends (other than dividends paid in Common Shares of the Trust, which dividends shall be paid in Series A Preferred Shares based upon the conversion ratio provided below) payable to shareholders of the Trust, when, as and if declared by the Board of Trustees. The holders of the Series A Preferred Shares shall not be entitled to receive any dividend declared by the Trust's Board of Trustees in respect of the Trust's operations during the fiscal quarter ending immediately prior to the date of issuance of the Series A Preferred Shares. The holders of the Series A Preferred Shares shall be entitled to receive only a portion of any dividend declared by the Board of Trustees on the Common Shares in respect of the Trust's operations during the fiscal quarter during which the Series A Preferred Shares are issued, prorated based on the following formula: P = (D/X) x N; where P = the dividend payable per Series A Preferred Share, D = the dividend payable per Common Share declared by the Board of Trustees, X = the number of days in the fiscal quarter during which the Series A Preferred Shares are issued, and N = the number of days during the fiscal quarter on which the Series A Preferred Shares were issued and outstanding. SECTION IV. Liquidation. Upon any liquidation, dissolution or winding up of the Trust, after payment or provision for payment of all debts and other obligations and liabilities of the Trust, the holders of the Series A Preferred Shares shall be entitled, before any distribution or payment is made upon any other shares of the capital stock of the Trust (other than Preferred Shares which have a senior or equal priority to the Series A Preferred Shares), to be paid an amount equal to $15.00 per Series A Preferred Share, and the holders of the Series A Preferred Shares shall not be entitled to any further payment. Upon any such liquidation, dissolution or winding up of the Trust, after the holders of the Series A Preferred Shares shall have been paid in full the amounts to which they shall be entitled, the remaining net assets of the Trust may be distributed to the holders of Preferred Shares subordinated to the Series A Preferred Shares or to the holders of the Common Shares. If, upon any such liquidation, dissolution or winding up of the Trust, the assets of the Trust distributable as aforesaid among the holders of the Series A Preferred Shares, and any other Preferred Shares having equal priority, at the time outstanding, shall be insufficient to permit the payment to them of the full preferential amounts to which they are entitled, then the entire assets of the Trust so available for distribution shall be distributed ratably among the holders of the Series A Preferred Shares, and any other Preferred Shares having equal priority, at the time outstanding, so that an equal amount (rounded down to the nearest whole cent) is paid with respect to each such Preferred -3- Share. -4- Neither the consolidation nor merger of the Trust into or with any other trust, corporation or corporations, nor the sale or transfer by the Trust of all or any part of its assets, nor the reorganization or recapitalization of the Trust, nor the reduction of the capital stock of the Trust, shall, in and of itself, be deemed to be a liquidation, dissolution or winding up of the Trust within the meaning of any of the provisions of this section; provided, however, that Section V.B. hereof may apply to such a transaction. SECTION V. Transfer of Shares; Conversion. A. Transfer and Conversion Procedures. 1. The Series A Preferred Shares will be issued by the Trust in connection with the Trust's acquisition of certain properties to the sellers of such properties. Such sellers shall hereafter be referred to as "Initial Holders". The Initial Holders may not sell, transfer or make any disposition or conversion of any Preferred Shares prior to the first to occur of (a) the day after the record date for the dividend declared by the Board of Trustees of the Trust in respect of the Trust's operations during the fiscal quarter during which the Series A Preferred Shares are initially issued, or (b) the day after the Board of Trustees of the Trust announces that no dividend will be declared for such fiscal quarter. 2. At any time on or after the date specified in Section V.A.1., an Initial Holder of any Series A Preferred Shares may transfer Series A Preferred Shares to any bona fide transferee who or which is unaffiliated with such Initial Holder, provided, however, that upon such transfer, the transferred Series A Preferred Shares shall automatically be converted into Common Shares on the basis of one (1) Common Share for each Series A Preferred Share (the "Conversion Ratio"). 3. Each conversion of Series A Preferred Shares will be deemed to have been effected simultaneously with the sale, transfer or other disposition in accordance with the terms of Section V.A.1. or V.A.2. At such time as the conversion of any Series A Preferred Share has been effected, the rights of the holder of such Series A Preferred Share as such holder will cease and the person or persons in whose name or names any certificate or certificates for Common Shares are to be issued upon such conversion will be deemed to have become the holder or holders of record of the number of Common Shares represented thereby. 4. As soon as practicable after a conversion has been effected, the Trust will deliver to the holder of such shares: a. a certificate or certificates representing the number of Common Shares issuable by reason of such conversion, in such name or names and such denomination or denominations as the Initial Holder has specified; and -5- 5. a certificate representing any Series A Preferred Shares which were represented by the certificate or certificates delivered to the Trust in connection with such conversion but which were not converted. 6. Failure of the Initial Holder to deliver to the Trust a certificate for Series A Preferred Shares converted pursuant to this Section V shall not affect the conversion of such Series A Preferred Shares which subsequent to such conversion shall for all purposes be and be treated as Common Shares. 7. The issuance of certificates for Common Shares upon conversion of Series A Preferred Shares will be made without charge to the holders of such Series A Preferred Shares for any issuance tax in respect thereof or other cost incurred by the Trust in connection with such conversion and the related issuance of Common Shares. 8. No voluntary or involuntary sale, transfer or other disposition of Series A Preferred Shares may be made or suffered to exist by an Initial Holder except in accordance with this Section V. B. Subdivision or Combination of Common Shares. If the Trust at any time subdivides (by any stock split, stock dividend or otherwise) its outstanding Common Shares into a greater number of shares, the Conversion Ratio in effect immediately prior to such subdivision will be proportionately increased, and if the Trust at any time combines (by reverse stock split or otherwise) its outstanding Common Shares into a smaller number of shares, the Conversion Ratio in effect immediately prior to such combination will be proportionately reduced. C. Reservation of Common Shares. So long as any Series A Preferred Shares remain outstanding, the Trust shall reserve and keep available out of its authorized but unissued Common Shares, solely for effecting the conversion of Series A Preferred Shares, the full number of Common Shares then deliverable upon the conversion of all Series A Preferred Shares outstanding. D. Notices. As soon as practicable after any adjustment of the Conversion Ratio, the Trust will send written notice thereof to all holders of Series A Preferred Shares, at their addresses as shown on the stock transfer records of the Trust. E. Mandatory Conversion. -6- 1. The Board of Trustees of the Trust, at any time, may declare that all, but not less than all, outstanding Series A Preferred Shares shall be converted into Common Shares at the Conversion Ratio then in effect. 2. The Trust will mail to each holder of Series A Preferred Shares, at such holder's address as shown on the stock transfer records of the Trust, written notice of a conversion pursuant to this paragraph not less than 10 and not more than 90 days before the date on which the Series A Preferred Shares are to be converted. Such notice will (a) make specific reference to this Section, (b) set forth the facts on which the conversion hereunder is based, and (c) state the date of the conversion (the "Mandatory Conversion Date"). 3. Any Series A Preferred Share not surrendered for conversion on or prior to the Mandatory Conversion Date will be deemed to have been converted on the Mandatory Conversion Date. No Series A Preferred Share will be entitled to any dividends accruing after such Mandatory Conversion Date and on such Mandatory Conversion Date all rights of the holder of such Series A Preferred Share as such holder will cease, and such Series A Preferred Share will not be deemed to be outstanding thereafter. 4. The Trust shall, within 20 days after the Mandatory Conversion Date (or as soon thereafter as the holder has tendered the certificate or certificates representing the Series A Preferred Shares), send or deliver to each former holder of Series A Preferred Shares, at such holder's address as shown on the stock transfer records of the Trust: a. a certificate or certificates representing the number of whole Common Shares issuable by reason of the conversion of such holder's Series A Preferred Shares, in such name or names and such denomination or denominations as the converting holder has specified, or, if the converting holder has not so specified, a single certificate representing such number of whole shares, in the name of such holder; and b. payment in cash in lieu of any fractional Common Share to which the converting holder would be entitled if such fractional share was issuable, based upon the closing price on the New York Stock Exchange (or such other exchange on which the Common Shares are then listed) for a Common Share as of such Mandatory Conversion Date (or, if no Common Shares were traded on such date, the most recent date on which Common Shares were traded). -7- IN WITNESS WHEREOF, the Trust has caused these presents to be signed in its name and on its behalf by the members of the Board of Trustees of the Trust and witnessed by its Secretary on __________, 1994. WITNESS: HEALTH AND RETIREMENT PROPERTIES TRUST _________________________ ______________________________ Secretary John L. Harrington, Trustee _____________________________ Arthur G. Koumantzelis, Trustee ____________________________ Rev. Justinian Manning, C.P., Trustee ____________________________ Gerard M. Martin, Trustee ___________________________ Barry M. Portnoy, Trustee EX-10.27 5 EXECUTION COPY HEALTH AND RETIREMENT PROPERTIES TRUST SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AGREEMENT DATED AS OF SEPTEMBER 27, 1994 This SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AGREEMENT (this "Amendment") is dated as of September 27, 1994, among HEALTH AND RETIREMENT PROPERTIES TRUST (formerly known as Health and Rehabilitation Properties Trust), a real estate investment trust formed under the laws of the State of Maryland ("Borrower"), the several lenders listed on the signature pages hereof (the "Lenders"), KLEINWORT BENSON LIMITED, a bank organized under the laws of England, as agent for itself and the other Lenders (in such capacity, together with any successor in such capacity in accordance with the terms of the Loan Agreement, as defined below, "Agent"), WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States of America, as administrative agent (in such capacity, together with any successor in such capacity in accordance with the terms of the Loan Agreement, "Administrative Agent"), and NATIONAL WESTMINSTER BANK, USA, a national banking association, as co-agent (in such capacity, "Co- Agent"), and is made with reference to the Amended and Restated Revolving Loan Agreement dated as of June 15, 1994, among Borrower, the Lenders, Agent, Administrative Agent and Co-Agent, as amended and supplemented to the date hereof (as so amended and supplemented, the "Loan Agreement"). Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Loan Agreement. WHEREAS, Borrower and Lenders desire to amend the Loan Agreement to change the definition of "EBI" and to amend Section 9.4, both as set forth herein. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: 1. Amendment to Loan Agreement. (a) The definition of "EBI" set forth in Section 1.1 of the Loan Agreement is hereby amended to read in its entirety as follows: " "EBI" means, with respect to Borrower and its Subsidiaries, if any, for any period of time, without duplication of counting, the sum of (i) the net income on a consolidated basis (determined in accordance with GAAP for such period), plus (ii) any losses for such period from the sale of assets (on a tax effected basis) outside the ordinary course of business, plus (iii) any non-cash extraordinary expenses from such period, minus, (iv) any gains for such period from the sale of assets (on a tax effected basis) outside the ordinary course of business, minus (v) any extraordinary gains from such period, plus (vi) to the extent deducted from gross income to calculate net income, Interest Charges of Borrower and its Subsidiaries, if any, on a consolidated basis for such period." (b) Section 9.4 of the Loan Agreement is hereby amended by inserting therein after the amount "$5,000,000" the following: "(or any lesser amount in the case of an assignment by one Lender to another Lender)". 2. Representations and Warranties. In order to induce the Lenders to enter into this Amendment and to amend the Loan Agreement in the manner provided herein, Borrower represents and warrants to each Lender that the following statements are true, correct and complete: (a) Borrower has the power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Loan Agreement as amended by this Amendment (the "Amended Agreement"). (b) The execution and delivery of this Amendment and the performance of the Amended Agreement have been authorized by all necessary action on the part of borrower. (c) The execution and delivery by Borrower of this Amendment and the performance by Borrower of the Amended Agreement do not violate any Requirement of Law or Contractual Obligation of Borrower and will not result in, or require, the creation or imposition of any Lien on any of its properties or revenues pursuant to any Requirement of Law or Contractual Obligation of Borrower, other than the Liens for the benefit of Lenders expressly contemplated by the Loan Agreement. (d) The Amendment and the Amended Agreement have been duly executed and delivered by Borrower and are the legally valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally. (e) The representations and warranties contained in Section 3 of the Loan Agreement are and will be true, correct and complete in all material respects on and as of the date hereof to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. (f) No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute a Default or an Event of Default. (g) The Declaration of Trust, By-Laws and other organizational documents of the Borrower have not been amended since June 15, 1994, except for an amendment to the Borrower's Declaration of Trust filed with the State of Maryland's Department of Assessments and Taxation on July 1, 1994 to effect the change of the Borrower's name. 3. Reference to and Effect on the Loan Agreement and Other Loan Documents. Except as specifically amended hereby, the terms, provisions and conditions of the Loan Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. 4. Fees and Expenses. The Borrower agrees to pay to the Agent on demand all reasonable costs, fees and expenses incurred by the Agent (including without limitation legal fees and expenses) with respect to this Amendment and the documents and transactions contemplated hereby. 5. Execution in Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts taken together shall constitute but one and the same instrument. This Amendment shall become effective upon the execution of a counterpart hereof by the Borrower and the Majority Lenders and receipt by the Agent of written or telephonic notification of such execution and authorization of delivery hereof. 6. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. 7. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 8. Limitation of Amendment. Without limiting the generality of the provisions of Section 9.4 of the Loan Agreement, the amendments set forth above shall be limited precisely as written, and nothing in this Amendment shall be deemed to prejudice any right or remedy that any Lender may now have (except to the extent such right or remedy was based upon existing defaults that will not exist after giving effect to this Amendment) or may have in the future under or in connection with the Loan Agreement or any other instrument or agreement referred to therein. [Remainder of page intentionally left blank.] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. HEALTH AND RETIREMENT PROPERTIES TRUST By: /s/ John G. Murray Title: Treasurer KLEINWORT BENSON LIMITED, as Agent and as a Lender \ By: /s/ Patrick Donelan Title: Director WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent and as a Lender By: /s/ Kathleen J. Harrison Title: Vice President NATIONAL WESTMINSTER BANK, USA, as Co-Agent and as a Lender By: /s/ Paul Chau Title: Assistant Vice President THE DAIWA BANK, LIMITED, as a Lender By: /s/ Daniel G. Eastman Title: Vice President and Manager By: /s/ Stephen O'Sullivan Title: Executive Officer FLEET BANK OF MASSACHUSETTS, as a Lender By: /s/ Ginger Stolzenthaler Title: Vice President MITSUI LEASING (USA) INC., as a Lender By: /s/ T. Nagano Title: Executive Vice President BANK HAPOALIM B.M., as a Lender By: /s/ Nancy Lushan Title: Vice President By: /s/ Martin B. Goodstein Title: Vice President DRESDNER BANK New York and Grand Cayman Branches, as a Lender By: /s/ Peter Becker Title: Vice President By: /s/ Richard W. Conroy Title: Vice President KREDIETBANK N.V., as a Lender By: /s/ Diane Grimmig Title: Vice President By: /s/ Robert Snauffer Title: Vice President CREDIT LYONNAIS Cayman Island Branch, as a Lender By: /s/ Xavier Ratouis Title:____________________________ EX-12.1 6 EXHIBIT 12.1 STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS The information required for this exhibit has been included in the prospectus contained within this registration statement at page 5. -----END PRIVACY-ENHANCED MESSAGE-----