-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HXLcAtxSPfbmW/KKg5sEbdIs6Q3Q+s+rENK69saZllJ5iIboE3+sjfGwnpTZd1/O uEG/mhUHdwEzoy0A/2wq1Q== 0000908737-98-000533.txt : 19980528 0000908737-98-000533.hdr.sgml : 19980528 ACCESSION NUMBER: 0000908737-98-000533 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980522 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980527 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTH & RETIREMENT PROPERTIES TRUST CENTRAL INDEX KEY: 0000803649 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 046558834 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-09317 FILM NUMBER: 98632120 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 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): May 22, 1998 HEALTH AND RETIREMENT PROPERTIES TRUST (Exact name of registrant as specified in its charter) Maryland 1-9317 04-6558834 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 400 Centre Street, Newton, Massachusetts 02158 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 617-332-3990 THIS CURRENT REPORT CONTAINS FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTITIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED OR PROJECTED. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE REGISTRANT UNDERTAKES NO OBLIGATION TO PUBLISH REVISED FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. Item 2. Acquisition or Disposition of Assets. On May 22, 1998, Health and Retirement Properties Trust and subsidiaries (the "Company") purchased at a discount a mortgage loan secured by 1735 Market Street (the "Property"), a commercial office property with approximately 1.3 million square feet located in Philadelphia, Pennsylvania, from a group of institutional lenders, for which Banque Paribas, New York Branch, acted as agent, for $226.0 million plus closing costs in a negotiated arms' length transaction. Concurrently with its purchase of the mortgage loan, the Company entered into an agreement (the "Related Agreement") with Nine Penn Center Associates, L.P., a Pennsylvania limited partnership that currently owns the Property, and other parties, pursuant to which the Company agreed not to exercise its remedies as lender under the mortgage and loan documents for a period of time, and the Company and the other parties agreed during such time to negotiate, based on certain agreed-upon terms, definitive agreements for the Company to acquire all effective beneficial ownership of the Property, subject to a carried interest in the property by certain partners of the Property owner. The Related Agreement contemplates that the closing under the Related Agreement would occur in early summer, 1998. The acquisition of beneficial ownership of the Property is subject to the parties' entering into definitive agreements, and resolving certain issues. No assurances can be given as to when or if such acquisitions will be consummated. The mortgage on the Property matured on May 26, 1998. If the acquisition of beneficial ownership of the Property is not consummated when scheduled under the Related Agreement (subject to extension by mutual agreement), the Related Agreement provides that the Company would be entitled to exercise its remedies as lender under the mortgage and loan documents. The mortgage loan is a non-recourse loan (subject to certain exceptions). Realization on collateral for a mortgage loan may involve foreclosure or other judicial proceedings. The consideration for the acquisition was funded initially by drawing under the Company's existing revolving line of credit with Dresdner Kleinwort Benson North America LLC, as agent, and Fleet National Bank, as administrative agent. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements Under Rule 3-14 of Regulation S-X Statements of Revenues and Certain Expenses for 1735 Market Street for the Year Ended December 31, 1997 and the Three Months Ended March 31, 1998 (unaudited) Report of Independent Public Accountants F-1 Statements of Revenues and Certain Expenses F-2 Notes to Statements of Revenues and Certain Expenses F-3 Neither the Company nor its affiliates were related to the seller of this property. The factors considered by the Company in determining the purchase price paid for this property include, among others, the following: (i) the historical and projected rents received and likely to be received from the property, (ii) the historic and expected operating expenses, including real estate taxes, incurred and expected to be incurred at the property, (iii) the credit quality and nature of the existing tenants, (iv) the existing lease terms and renewal options of the leases in place, (v) the market demand for similar space, the rent rates being paid compared to existing rents being paid in the building, and opportunities for alternative and new tenancies, (vi) the physical location and condition of the property, the need for repairs and likely cost of repairs, (vii) the expected tenant inducements (such as free rent, tenant improvement allowances, etc.) which might be necessary to fill vacant space or renew leases, and (viii) the pricing of comparable properties as evidenced by recent arms-length market sales. The Company, after investigation of the property, is not aware of any material factors, other than those enumerated above, which would cause the financial information reported not to be necessarily indicative of future operating results. (b) Pro Forma Financial and Other Data Pro Forma Consolidated Balance Sheet as of March 31, 1998 F-6 Pro Forma Consolidated Statement of Income for the Three Months Ended March 31, 1998 F-7 Pro Forma Consolidated Statement of Income for the Year Ended December 31, 1997 F-8 (c) Exhibits 2.1 Purchase Agreement between Health and Retirement Properties Trust ("HRP") and Banque Paribas as agent, dated as of April 29, 1998. 2.2 Forbearance and Restructuring Agreement among HRP and the other parties named therein, dated as of May 21, 1998. 23 Consent of Arthur Andersen LLP. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Health and Retirement Properties Trust: We have audited the statement of revenues and certain expenses of 1735 Market Street for the year ended December 31, 1997. This financial statement is the responsibility of the Property's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As discussed in Note 1, the statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in a Current Report on Form 8-K of Health and Retirement Properties Trust, and is not intended to be a complete presentation of the Property's revenue and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of 1735 Market Street for the year ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Philadelphia, Pennsylvania, May 26, 1998 F-1 1735 MARKET STREET STATEMENTS OF REVENUES AND CERTAIN EXPENSES (NOTE 1) For the Year Ended For the Three December 31, Months Ended 1997 March 31, 1998 ------------- --------------- (Unaudited) REVENUES: Minimum rent (Notes 2, 3 and 4) $20,412,000 $ 5,258,000 Tenant reimbursements 8,908,000 2,152,000 Other income 516,000 73,000 ----------- ----------- Total revenues 29,836,000 7,483,000 ----------- ----------- CERTAIN EXPENSES: Maintenance and other operating expenses 5,529,000 1,287,000 General and administrative expenses 312,000 60,000 Real estate taxes 4,011,000 1,006,000 Management fees (Note 3) 424,000 106,000 ----------- ----------- Total certain expenses 10,276,000 2,459,000 ----------- ----------- REVENUES IN EXCESS OF CERTAIN EXPENSES $19,560,000 $ 5,024,000 =========== =========== The accompanying notes are an integral part of these financial statements. F-2 1735 MARKET STREET NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES 1. BASIS OF PRESENTATION: The statements of revenues and certain expenses reflect the operations of 1735 Market Street (the "Property"), located in Philadelphia, Pennsylvania. The Property is expected to be acquired by Health and Retirement Properties Trust (the "Company") from Nine Penn Center Associates ("the Joint Venture") on or about June 1998. The Property has an aggregate net rentable area of approximately 1.3 million square feet (95% leased as of December 31, 1997). This statement of revenues and certain expenses is to be included in the Company's Current Report on Form 8-K, as the above described transaction has been deemed significant pursuant to the rules and regulations of the Securities and Exchange Commission. The accounting records of the Property are maintained on an accrual basis in accordance with generally accepted accounting principles. The accompanying financial statements exclude certain expenses such as interest, depreciation and amortization, and other costs not directly related to the future operations of the Property. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of contingent items as of the report date and the reported amounts of revenues and certain expenses during the reporting period. The ultimate results could differ from those estimates. The statement of revenues and certain expenses for the three months ended March 31, 1998 is unaudited; however, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for the fair presentation of the statement of revenues and certain expenses for the interim period have been included. The results of the interim periods are not necessarily indicative of the results for the full year. 2. OPERATING LEASES: Base rents for the periods presented include straight-line adjustments for rental revenue increases in accordance with generally accepted accounting principles. The aggregate rental revenue increase resulting from the straight-line adjustments was $1,680,000 for the year ended December 31, 1997, and $396,000 for the three months ended March 31, 1998 (unaudited). Major tenants are defined as those who contribute 10% or greater of the total rental revenue. During 1997, approximately 60% of total rental revenue was from three different tenants who were each individually responsible for between 17% and 23% of the total rental revenue, as follows: FMC Corp. 23% Mellon Bank 20% Ballard Spahr Andrews & Ingersoll 17% The Property is leased to tenants under operating leases with expiration dates extending to the year 2015. Future minimum rentals under noncancelable operating leases, excluding tenant reimbursements of operating expenses as of December_31, 1997, are as follows: 1998 $22,235,000 1999 21,439,000 2000 21,137,000 2001 17,316,000 2002 16,154,000 Thereafter 98,569,000 Certain leases also include provisions requiring tenants to reimburse the Property for management costs and other operating expenses up to stipulated amounts. F-3 3. RELATED PARTY TRANSACTIONS: The Joint Venture paid management fees of $ 424,000 to PREIT-RUBIN, Inc., a related party to the Joint Venture, based on percentages as defined in the management agreement. In addition, PREIT-RUBIN, Inc. earns leasing commissions upon execution of tenant leases based upon the base annual rent during the first ten years of the lease. In the normal course of operations, the Joint Venture reimburses an affiliate of one of the joint venturers for payroll and insurance costs related to the operations of the Property. Transactions with related parties for the year ended December 31, 1997 are summarized as follows: Payroll and insurance costs $663,000 Management fees 424,000 Minimum rent - affiliate of joint venturer 136,000 Leasing commissions incurred 77,000 4. COMMITMENTS: The Joint Venture has entered into certain operating agreements for maintenance. The aggregate minimum payments under noncancellable service contract obligations at December 31, 1997 are approximately $326,000. The Joint Venture has entered into a lease for certain equipment which has been accounted for as a capitalized lease. Under the terms of the lease agreement, monthly payments of $2,400 are due until 2001. Under provisions of a lease with a significant tenant, the Landlord, as defined, is obligated to make certain rent adjustment payments to such tenant of a minimum of $15,750,000 and a maximum of $18 million. Unless accelerated by the occurrence of certain payment events, as defined, including the sale or refinancing of the Property, such amount will become payable on January 1, 1999. The Property has been accruing rent payments since the inception of the lease. The effect of the future payments is being accrued at the maximum amount of $18 million as a reduction of rental revenue over the life of the related lease, which expires in 2015. Included in the accompanying statements of revenues and certain expenses are accrued rent adjustments of $720,000 for the year ended December 31, 1997 and $180,000 for the three months ended March 31, 1998 (unaudited). F-4 HEALTH AND RETIREMENT PROPERTIES TRUST Unaudited Pro Forma Consolidated Financial Statements The following unaudited pro forma consolidated balance sheet at March 31, 1998 is intended to present the consolidated financial position of the Company as if the transactions described in the notes hereto were consummated at March 31, 1998. The following unaudited pro forma consolidated statements of income are intended to present the consolidated results of operations of the Company as if the transactions were consummated as of the beginning of the periods presented. These unaudited pro forma consolidated financial statements should be read in conjunction with, and are qualified in their entirety by reference to, the separate consolidated financial statements of the Company for the year ended December 31, 1997, incorporated herein by reference to the Company's Current Report on Form 8-K dated February 27, 1998 and the Company's unaudited consolidated financial statements for the quarter ended March 31, 1998, incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998. These unaudited pro forma consolidated financial statements are not necessarily indicative of the expected consolidated financial position or results of operations of the Company for any future period. Differences would result from, among other considerations, future changes in the Company's portfolio of investments, changes in interest rates, changes in the capital structure of the Company, delays in the acquisition of certain properties and changes in property level operating expenses. F-5
HEALTH AND RETIREMENT PROPERTIES TRUST Pro Forma Consolidated Balance Sheet March 31, 1998 (dollars in thousands, except per share amounts) (unaudited) Recent 1735 Market Proposed Historical Acquisitions (A) Street (B) Offering (C) Pro Forma ----------- ---------------- ------------ ------------ ----------- ASSETS Real estate properties, at cost: Land $ 288,933 $ 5,185 $ 22,600 $ -- $ 316,718 Buildings and improvements 1,958,782 46,665 203,400 -- 2,208,847 ----------- ----------- ----------- ----------- ----------- 2,247,715 51,850 226,000 -- 2,525,565 Less accumulated depreciation (123,652) -- -- -- (123,652) ----------- ----------- ----------- ----------- ----------- 2,124,063 51,850 226,000 -- 2,401,913 Real estate mortgages and notes, net 84,195 -- -- -- 84,195 Investment in Hospitality Properties Trust 111,433 -- -- -- 111,433 Cash and cash equivalents 21,678 (11,850) (6,000) 33,305 37,133 Interest and rents receivable 20,419 -- -- -- 20,419 Deferred interest and finance costs, net, and other assets 27,463 -- -- -- 27,463 ----------- ----------- ----------- ----------- ----------- $ 2,389,251 $ 40,000 $ 220,000 $ 33,305 $ 2,682,556 =========== =========== =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Bank notes payable $ 160,000 $ 40,000 $ 220,000 $ (420,000) $ -- Senior notes payable, net 499,851 -- -- -- 499,851 Mortgage notes payable 26,157 -- -- -- 26,157 Convertible subordinated debentures 209,818 -- -- -- 209,818 Accounts payable and accrued expenses 32,371 -- -- -- 32,371 Deferred rents 33,448 -- -- -- 33,448 Security deposits 17,818 -- -- -- 17,818 Due to affiliates 7,141 -- -- -- 7,141 Dividend payable 40,377 -- -- -- 40,377 Shareholders' equity: Preferred shares of beneficial interest, $.01 par value; 50,000,000 authorized; none issued -- -- -- -- -- Common shares of beneficial interest, $.01 par value; 125,000,000 and 150,000,000 shares authorized and pro forma, 106,256,403 and 131,256,403 shares issued and outstanding and pro forma 1,063 -- -- 250 1,313 Additional paid-in capital 1,512,767 -- -- 453,055 1,965,822 Cumulative net income 451,679 -- -- -- 451,679 Dividends (603,239) -- -- -- (603,239) ----------- ----------- ----------- ----------- ----------- Total shareholders' equity 1,362,270 -- -- 453,305 1,815,575 ----------- ----------- ----------- ----------- ----------- $ 2,389,251 $ 40,000 $ 220,000 $ 33,305 $ 2,682,556 =========== =========== =========== =========== =========== -- -- -- -- -- F-6
HEALTH AND RETIREMENT PROPERTIES TRUST Pro Forma Consolidated Statement of Income For the Three Months Ended March 31, 1998 (amounts in thousands, except per share data) (unaudited) 1998 First Quarter 1600 Market Recent Historical Acquisitions (D) Street (E) Acquisitions (D) ----------- ---------------- ----------- ---------------- Revenues: Rental income $ 66,894 $ 2,455 $ 4,721 $ 1,854 Interest and other income 5,058 -- -- -- -------- -------- -------- -------- Total revenues 71,952 2,455 4,721 1,854 -------- -------- -------- -------- Expenses: Operating expenses 13,502 338 1,915 556 Interest 13,651 1,028 1,869 650 Depreciation and amortization 12,658 479 650 291 General and administrative 3,619 104 145 66 -------- -------- -------- -------- Total expenses 43,430 1,949 4,579 1,563 -------- -------- -------- -------- Income (loss) before equity in earnings of Hospitality Properties Trust 28,522 506 142 291 Equity in earnings of Hospitality Properties Trust 1,327 -- -- -- Gain on equity transaction of Hospitality Properties Trust 1,532 -- -- -- -------- -------- -------- -------- Income (loss) before extraordinary item $ 31,381 $ 506 $ 142 $ 291 ======== ======== ======== ======== Weighted average shares outstanding 101,471 ======== Basic and diluted earnings per common share: Income before extraordinary item $ 0.31 ======== 1735 Market Proposed Street (F) Other (G) Offering (H) Pro Forma ----------- ------------ ------------ ------------ Revenues: Rental income $ 7,483 $ -- $ -- $ 83,407 Interest and other income -- -- -- 5,058 -------- -------- -------- -------- Total revenues 7,483 -- -- 88,465 -------- -------- -------- -------- Expenses: Operating expenses 2,459 -- -- 18,770 Interest 3,575 (1,291) (6,825) 12,657 Depreciation and amortization 1,271 -- -- 15,349 General and administrative 283 -- -- 4,217 -------- -------- -------- -------- Total expenses 7,588 (1,291) (6,825) 50,993 -------- -------- -------- -------- Income (loss) before equity in earnings of Hospitality Properties Trust (105) 1,291 6,825 37,472 Equity in earnings of Hospitality Properties Trust -- -- -- 1,327 Gain on equity transaction of Hospitality Properties Trust -- -- -- 1,532 -------- -------- -------- -------- Income (loss) before extraordinary item $ (105) $ 1,291 $ 6,825 $ 40,331 ======== ======== ======== ======== Weighted average shares outstanding 130,941 ======== Basic and diluted earnings per common share: Income before extraordinary item $ 0.31 ========
F-7
HEALTH AND RETIREMENT PROPERTIES TRUST Pro Forma Consolidated Statement of Income For the Year Ended December 31, 1997 (amounts in thousands, except per share data) (unaudited) Second Quarter Third Quarter Historical GPI (I) CSMC (J) Acquisitions (K) Acquisitions (K) ---------- --------- --------- ---------------- ---------------- Revenues: Rental income $188,000 $ 11,959 $ 6,831 $ 2,948 $ 3,179 Interest and other income 20,863 (366) -- -- -- -------- -------- -------- -------- -------- Total revenues 208,863 11,593 6,831 2,948 3,179 -------- -------- -------- -------- -------- Expenses: Operating expenses 26,765 2,053 1,910 -- 954 Interest 36,766 (1,216) 3,232 1,087 1,463 Depreciation and amortization 39,330 4,156 1,119 627 501 General and administrative 11,670 2,105 249 139 111 -------- -------- -------- -------- -------- Total expenses 114,531 7,098 6,510 1,853 3,029 -------- -------- -------- -------- -------- Income (loss) before equity in earnings of Hospitality Properties Trust, gain on sale of properties and extraordinary item 94,332 4,495 321 1,095 150 Equity in earnings of Hospitality Properties Trust 8,590 -- -- -- -- Gain on equity transaction of Hospitality Properties Trust 9,282 -- -- -- -- -------- -------- -------- -------- -------- Income (loss) before gain on sale of properties and extraordinary item 112,204 4,495 321 1,095 150 Gain on sale of properties, net 2,898 -- -- -- -- -------- -------- -------- -------- -------- Income (loss) before extraordinary item $115,102 $ 4,495 $ 321 $ 1,095 $ 150 ======== ======== ======== ======== ======== Weighted average shares outstanding 92,168 ======== Basic and diluted earnings per common share: Income (loss) before extraordinary item $ 1.25 ======== West 34th Franklin Bridgepoint Fourth Quarter 1998 Street (L) Plaza (M) Square (N) Acquisitions(K) Acquisitions (Q) ---------- ----------- ----------- ---------------- --------------- Revenues: Rental income $ 10,771 $ 9,614 $ 5,599 $ 8,461 $ 26,039 Interest and other income -- -- -- -- -- -------- -------- -------- -------- -------- Total revenues 10,771 9,614 5,599 8,461 26,039 -------- -------- -------- -------- -------- Expenses: Operating expenses 3,641 4,904 2,162 2,634 5,583 Interest 2,876 2,486 3,216 4,338 9,100 Depreciation and amortization 1,869 1,334 1,175 1,269 4,601 General and administrative 415 296 262 283 1,024 -------- -------- -------- -------- -------- Total expenses 8,801 9,020 6,815 8,524 20,308 -------- -------- -------- -------- -------- Income (loss) before equity in earnings of Hospitality Properties Trust, gain on sale of properties and extraordinary item 1,970 594 (1,216) (63) 5,731 Equity in earnings of Hospitality Properties Trust -- -- -- -- -- Gain on equity transaction of Hospitality Properties Trust -- -- -- -- -- -------- -------- -------- -------- -------- Income (loss) before gain on sale of properties and extraordinary item 1,970 594 (1,216) (63) 5,731 Gain on sale of properties, net -- -- -- -- -- -------- -------- -------- -------- -------- Income (loss) before extraordinary item $ 1,970 $ 594 $ (1,216) $ (63) $ 5,731 ======== ======== ======== ======== ======== Weighted average shares outstanding Basic and diluted earnings per common share: Income (loss) before extraordinary item 1600 Market 1735 Market Proposed Street (O) Street (P) Other (R) Offering (S) Pro Forma ------------ ------------ ---------- ------------ ---------- Revenues: Rental income $ 18,883 $ 29,836 $ -- $ -- $322,120 Interest and other income -- -- -- -- 20,497 -------- -------- -------- -------- -------- Total revenues 18,883 29,836 -- -- 342,617 -------- -------- -------- -------- -------- Expenses: Operating expenses 7,659 10,276 -- -- 68,541 Interest 7,475 14,300 (6,395) (27,300) 51,428 Depreciation and amortization 2,601 5,085 -- -- 63,667 General and administrative 578 1,130 -- -- 18,262 -------- -------- -------- -------- -------- Total expenses 18,313 30,791 (6,395) (27,300) 201,898 -------- -------- -------- -------- -------- Income (loss) before equity in earnings of Hospitality Properties Trust, gain on sale of properties and extraordinary item 570 (955) 6,395 27,300 140,719 Equity in earnings of Hospitality Properties Trust -- -- -- -- 8,590 Gain on equity transaction of Hospitality Properties Trust -- -- -- -- 9,282 -------- -------- -------- -------- -------- Income (loss) before gain on sale of properties and extraordinary item 570 (955) 6,395 27,300 158,591 Gain on sale of properties, net -- -- -- -- 2,898 -------- -------- -------- -------- -------- Income (loss) before extraordinary item $ 570 $ (955) $ 6,395 $ 27,300 $161,489 ======== ======== ======== ======== ======== Weighted average shares outstanding 130,725 ======== Basic and diluted earnings per common share: Income (loss) before extraordinary item $ 1.24 ========
F-8 HEALTH AND RETIREMENT PROPERTIES TRUST Notes To Unaudited Pro Forma Consolidated Financial Statements (dollars in thousands, except per share data) Consolidated Balance Sheet Adjustments A. Represents the Company's acquisitions in April 1998 and May 1998 of two commercial office properties located in Massachusetts, a medical office property located in California and three commercial office properties located in New Jersey (the "Recent Acquisitions"). These acquisitions were funded with available cash and by drawings under the Company's revolving line of credit. B. Represents the Company's acquisition on May 22, 1998 of a mortgage secured by a commercial office property located in Philadelphia, Pennsylvania ("1735 Market Street"). The Company has also entered into an agreement with the current owners of 1735 Market Street to acquire a controlling interest in the property subject to definitive agreements and the resolution of certain issues. The acquisition is subject to various conditions and no assurances can be given as to when or if this acquisition will be consummated. In addition, the realization on the collateral may involve foreclosure or other judicial proceedings. This acquisition was funded with available cash and by drawings under the Company's revolving line of credit. C. Represents the proposed public offering of 25,000,000 common shares of beneficial interest of the Company ("Common Shares") at a per share price of $19.1875 (the "Proposed Offering"). Net proceeds will be used, in part, to repay amounts outstanding under the Company's revolving line of credit. Consolidated Statement of Income Adjustments for the Quarter Ended March 31, 1998 D. Represents the increases in rental income, operating expenses, depreciation and amortization and general and administrative expenses arising from the Recent Acquisitions and the Company's acquisitions during January 1998, February 1998 and March 1998 of two medical office properties and three commercial office properties located in Pennsylvania, four commercial office properties located in Texas, a medical office property located in Massachusetts, a commercial office property located in Maryland, one medical office property and two commercial office properties located in Minnesota and three medical office properties and a commercial office property located in Florida (collectively, "1998 First Quarter Acquisitions"), and the increase in interest expense from the use of the Company's revolving line of credit to fund these acquisitions. E. Represents the increase in rental income, operating expenses, depreciation and amortization and general and administrative expenses arising from the Company's acquisition on March 30, 1998 of a commercial office property located at 1600 Market Street in Philadelphia, Pennsylvania ("1600 Market Street") and the increase in interest expense from the use of the Company's revolving line of credit to fund this acquisition. F. Represents the increase in rental income, operating expenses, depreciation and amortization and general and administrative expenses arising from the Company's acquisition of 1735 Market Street, as well as the increase in interest expense from the use of the Company's revolving line of credit to fund this acquisition. G. Represents the net decrease in interest expense relating to the issuance of additional Remarketed Reset Notes and 6.7% Senior Notes due 2005 in February 1998 (collectively the "1998 Notes') and the issuance of 6,977,575 common shares in February 1998 and March 1998; the proceeds of these offerings were used to repay amounts then outstanding on the Company's revolving credit facility. H. Reflects the decrease in interest expense as a result of the Proposed Offering and the application of the net proceeds to the Company's revolving line of credit. F-9 HEALTH AND RETIREMENT PROPERTIES TRUST Notes To Unaudited Pro Forma Consolidated Financial Statements (dollars in thousands, except per share data) Consolidated Statement of Income Adjustments for the Year Ended December 31, 1997 I. Represents the increase in rental income, operating expenses, depreciation and amortization and general and administrative expenses arising from the Company's acquisition of the government office properties ("Government Office Properties") from Government Property Investors, Inc ("GPI"). Also reflects the decrease in interest expense arising from the Company's issuance of common shares in a March 1997 offering, the proceeds of which were used in part to repay amounts then outstanding under the Company' revolving line of credit, net of an increase in interest expense related to the Company's assumption of certain debt in connection with the acquisition of the Government Office Properties. J. Represents the increase in rental income, operating expenses, depreciation and amortization and general and administrative expenses arising from the Company's acquisition of two medical office properties and two parking structures located in Los Angeles, California ("CSMC"), as well as the increase in interest expense due to the use of the Company's revolving line of credit to fund this acquisition. K. Represents the increase in rental income, operating expenses, depreciation and amortization and general and administrative expenses arising from the Company's acquisition of a) a 200 unit retirement housing property located in Spokane, Washington and 20 medical office clinics and ancillary structures located in Massachusetts during the second quarter ("Second Quarter Acquisitions"), b) three medical and two commercial office buildings located in Pennsylvania during the third quarter ("Third Quarter Acquisitions") and c) a medical office property located in Colorado, a medical office property located in Maryland, a medical office property located in Rhode Island, three medical office properties located in California, and a medical office property located in Washington, D.C. during the fourth quarter ("Fourth Quarter Acquisitions"), as well as the increase in interest expense due to the use of the Company's revolving line of credit to fund these acquisitions. L. Represents the increase in rental income, operating expenses, depreciation and amortization and general and administrative expenses arising from the Company's acquisition of West 34th Street in New York City ("West 34th Street"), as well as the increase in interest expense due to the use of the Company's revolving line of credit to fund the acquisition. M. Represents the increase in rental income, operating expenses, depreciation and amortization and general and administrative expenses arising from the Company's acquisition of Franklin Plaza in Philadelphia, Pennsylvania ("Franklin Plaza"), as well as the increase in interest expense due to the use of the Company's revolving line of credit to fund the acquisition. N. Represents the increase in rental income, operating expenses, depreciation and amortization and general and administrative expenses arising from the Company's acquisition of Bridgepoint Square, Austin, Texas ("Bridgepoint Square"). Bridgepoint Square consists of five properties, of which one property was under construction at September 30, 1997 and one property was completed in July 1997. Also represents the increase in interest expense due to the use of the Company's revolving line of credit to fund the acquisition. O. Represents the increase in rental income, operating expenses, depreciation and amortization and general and administrative expenses arising from the Company's acquisition of 1600 Market Street, as well as the increase in interest expense due to the use of the Company's revolving line of credit to fund the acquisition. P. Represents the increase in rental income, depreciation and amortization and general and administrative expenses arising from the Company's acquisition of 1735 Market Street, as well as the increase in interest expense due to the use of the Company's revolving line of credit to fund the acquisition. F-10 HEALTH AND RETIREMENT PROPERTIES TRUST Notes To Unaudited Pro Forma Consolidated Financial Statements (dollars in thousands, except per share data) Consolidated Statement of Income Adjustments for the Year Ended December 31, 1997 - continued Q. Represents the increase in rental income, operating expenses, depreciation and amortization and general and administrative expenses arising from the Company's Recent Acquisitions and the 1998 First Quarter Acquisitions (collectively, "1998 Acquisitions"), as well as the increase in interest expense due to the use of the Company's revolving line of credit to fund these acquisitions. R. Represents the net decrease in interest expense relating to the issuance of Remarketed Reset Notes in July 1997, the issuance of 6.75% Senior Notes in December 1997, the issuance of the 1998 Notes, the prepayment of Floating Rate Senior Notes in July 1997, and the issuance of common shares in February 1998 and March 1998. S. Reflects the decrease in interest expense as a result of the Company's Proposed Offering and the application of net proceeds to the Company's revolving line of credit. F-11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has dully caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HEALTH AND RETIREMENT PROPERTIES TRUST By: /s/ Ajay Saini Ajay Saini, Treasurer and Chief Financial Officer Date: May 26, 1998 EX-2.1 2 EXHIBIT 2.1 PURCHASE AGREEMENT between HEALTH AND RETIREMENT PROPERTIES TRUST and BANQUE PARIBAS, AS AGENT Dated as of April 29, 1998 TABLE OF CONTENTS ARTICLE 1 PURCHASE AND SALE................................................2 Section 1.1. Agreement to Purchase..............................2 Section 1.2. Purchase Price.....................................2 Section 1.3. Closing Documents and Deliveries...................3 Section 1.4. Purchaser's Default................................4 Section 1.5. Seller's Default...................................5 Section 1.6. Escrow Agent.......................................5 Section 1.7. Transfer and Recordation Taxes; Responsibility for Recording...................5 Section 1.8. Closing Expenses...................................5 Section 1.9. Condition Precedent to Seller's Obligations....................................6 Section 1.10. Conditions Precedent to Purchaser's Obligations. .................................6 ARTICLE 2 REPRESENTATIONS, WARRANTIES AND COVENANTS........................6 Section 2.1. Representations and Warranties of Each Lender. ..................................6 Section 2.2. Representations and Warranties of Purchaser. ....................................8 ARTICLE 3 MISCELLANEOUS...................................................10 Section 3.1. Notices...........................................10 Section 3.2. Inspection by Seller..............................11 Section 3.3. Meaning of Certain Terms..........................11 Section 3.4. Purchaser's Indemnification Covenants.............................11 Section 3.5. Broker............................................11 Section 3.6. Confidentiality; Publicity........................12 Section 3.7. Severability of Provisions........................13 Section 3.8. Further Assurances................................13 Section 3.9. Captions; Internal References; Exhibits..............................13 Section 3.10. Successors and Assigns............................13 Section 3.11. Governing Law.....................................13 Section 3.12. Waiver of Trial by Jury...........................14 Section 3.13. Execution in Counterpart..........................14 Section 3.14. No Recording......................................14 Section 3.15. Miscellaneous. ...................................14 Section 3.16. Non-liability of Trustees. .......................14 Section 3.17. Loan Administration And Certain Other Matters During Executory Period........................................14 i THIS PURCHASE AGREEMENT (this "Agreement"), dated as of April 29, 1998, between BANQUE PARIBAS, a French banking corporation, acting through its New York Branch, as Agent (in such capacity, "Agent") for a group of lenders (each lender being, individually, a "Lender" and all Lenders being, collectively, the "Seller") set forth on Exhibit A, having an office at The Equitable Tower, 787 Seventh Avenue, New York, New York 10019, and HEALTH AND RETIREMENT PROPERTIES TRUST ("Purchaser"), a Maryland real estate investment trust, having an address at 400 Centre Street, Newton, MA 02158. W I T N E S S E T H: WHEREAS, Purchaser has agreed to purchase from Seller, and Seller has agreed to sell to Purchaser, that certain loan (the "Loan") evidenced by that certain Construction Loan Mortgage Note (the "Note"), dated May 25, 1998, made by Nine Penn Center Associates, L.P. ("Borrower"), as borrower, in favor of Agent in the original principal amount of Two Hundred Eighty-Five Million Dollars ($285,000,000), made pursuant to that Construction Loan Agreement among Borrower, Agent and Seller dated May 25, 1988 and amended by that certain First Amendment to Construction Loan Agreement dated as of February 27, 1990 (such agreement, as so amended, being the "Loan Agreement"), and secured, among other things, by that certain Construction Loan Mortgage, Assignment of Leases and Rents and Security Agreement (the "Mortgage") made as of May 25, 1988 by and among Borrower, the Lenders, and Agent; including without limitation, all of Seller's right, title and interest in (i) the Mortgage, covering certain real property located at Nine Penn Center, Philadelphia, Pennsylvania and the building and other improvements situated thereon (collectively, the "Mortgaged Property"), the land on which the same is situated (the "Land") being more particularly described in Exhibit B; (ii) that certain Assignment of Leases and Rents dated as of May 25, 1988 (the "Assignment of Leases"), made by Borrower in favor of Seller; (iii) that certain Guarantee of Interest, Taxes and Operating Expenses, made as of May 25, 1988, given by The Equitable Life Assurance Society of the United States ("Equitable") and Ronald Rubin ("Rubin"; Equitable and Rubin, being, collectively, the "Guarantors") in favor of Seller; (iv) that certain Guarantee of Completion and Performance made as of May 25, 1988, given by the Guarantors in favor of Seller; (v) that certain Security Agreement made as of May 25, 1988 between Borrower and Seller; and (vi) that certain Servicing Agreement (the "Servicing Agreement") made as of May 25, 1998 between Borrower and Agent (the documents described in items (i)-(vi) above, collectively, the "Loan Documents"). NOW THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, the receipt and sufficiency of which is hereby acknowledged by the parties, the parties hereto agree as follows: ARTICLE 1 PURCHASE AND SALE Section 1.1. Agreement to Purchase. (a) Seller agrees to sell, and Purchaser agrees to purchase, all of Seller's right, title and interest in and to, each of the Loan Documents (said right, title and interest being, hereinafter, the "Asset"). (b) The closing for the purchase and sale (the "Closing") shall take place at the offices of Carb, Luria, Cook & Kufeld LLP at 521 Fifth Avenue, Ninth Floor, New York, New York at 10:00 a.m. on the second business day (the "Closing Date") following the giving of the Acceptance Notice (as defined in Section 1.9), time being of the essence with respect to the obligations of Purchaser. Seller shall have the right to adjourn the Closing for up to five (5) business days by giving written notice thereof to Purchaser not less than three (3) business days prior to the Closing Date. Seller shall also have the right to adjourn the Closing for up to two (2) business days by giving written notice thereof to Purchaser at closing; provided that, in such event, notwithstanding anything to the contrary contained herein, all interest accrued on the Deposit shall be paid to Purchaser at Closing; provided, however, that (x) in no event shall the aggregate extensions hereunder exceed five (5) business days and (y) in no event shall the Closing occur later than May 24, 1998. (c) The Escrow Agent shall hold this Agreement until receipt of the Deposit, whereupon, Escrow Agent shall deliver this Agreement to Agent and Purchaser. In the event the Deposit shall not have been received by the Escrow Agent as provided below, this Agreement shall automatically terminate and be null and void and of no further effect, except that any portion of the Deposit received by Escrow Agent shall be paid to Seller. Section 1.2. Purchase Price. (a) The purchase price for the Asset (the "Purchase Price") shall be Two Hundred Twenty-Six Million Dollars ($226,000,000), to be paid as follows: (i) A deposit in the amount of Five Million Dollars ($5,000,000) will be paid by Purchaser by the wiring of immediately available funds to an account designated by the Escrow Agent (as defined in Section 1.6) on April 29, 1998. (ii) An additional deposit (such amount and the deposit paid pursuant to clause (i) above, the "Deposit") in the amount of Seventeen Million Six Hundred Thousand Dollars ($17,600,000) will be paid by Purchaser by the wiring of immediately available funds to an account designated by the Escrow Agent on April 30, 1998. 2 (iii) On the Closing Date, Purchaser will pay the balance of the Purchase Price (i.e., $203,400,000) in immediately available funds to Agent in accordance with wiring instructions to be provided by Agent. (b) Except for any prepayments of principal, the aggregate amount of which shall be credited against the Purchase Price, there shall be no adjustments to the Purchase Price, it being understood and agreed that all amounts (other than payments of principal) collected with respect to the Loan prior to the Closing Date shall be retained by Seller and all amounts collected with respect to the Loan on and after the Closing Date shall be paid over to and retained by Purchaser; provided, however, that (x) any interest payment received prior to maturity of the Loan shall be prorated between Purchaser and Seller and (y) if Purchaser shall, at any time, during the period expiring two (2) years after the Closing Date, collect interest payments expressly designated as attributable to periods prior to maturity, such interest payments shall be prorated between Purchaser and Seller. Section 1.3. Closing Documents and Deliveries. (a) On the Closing Date, the following documents shall be executed and delivered by the parties as stated below: (i) Seller shall deliver to Purchaser the original Note together with an assignment of the Note to Purchaser by allonge in the form of Exhibit C; (ii) An assignment and assumption agreement (the "Assignment") in recordable form, in the form of Exhibit D, containing an assignment by Seller to Purchaser of Seller's right, title and interest under the Loan Documents (other than the Note and the Servicing Agreement) and an assumption by Purchaser of the obligations of Seller's arising and accruing under those agreements and under the Note on and after the Closing Date; (iii) An assignment and assumption agreement in the form of Exhibit E containing an assignment of Agent's rights, if any, thereafter arising or accruing pursuant to the Servicing Agreement, and an assumption by Purchaser of the obligations of Agent arising and accruing under the Servicing Agreement on and after the Closing Date; (iv) UCC-3 Financing Statements signed by Seller or by Agent as agent for Seller giving notice of the assignment by Seller to Purchaser with respect to each of the three (3) presently existing UCC Financing Statements on file with respect to the Loan; (v) A certificate (the "Lender Certificate"), dated as of the Closing Date, from each Lender in the form of Exhibit F, and a certificate from Agent (the "Agent Certificate") from Agent in the form of Exhibit G; 3 (vi) A letter from Agent to Borrower notifying Borrower of the sale and assignment of the Loan pursuant to this Agreement, the name and address of Purchaser and the assignment of Agent's rights under the Servicing Agreement to Purchaser; and (vii) Such letters, affidavits and indemnities as Purchaser's title companies may reasonably require as a condition precedent to insuring Purchaser's interest with respect to the Loan and which are customary in a transaction of this nature. (b) At Closing, the following documents shall be delivered by Seller to Purchaser to the extent not previously delivered: (i) If in the possession of Seller, an ink signed original of each Loan Document, and a photocopy of any Loan Document for which an original is not in Seller's possession; (ii) If in the possession of Seller, an original (copy if original is not available) of the title insurance policy insuring the Loan issued by Chicago Title Insurance Company and all endorsements thereto, and all reinsurance agreements pertaining thereto, together with a non-recourse assignment of said policy; (iii) If in the possession of Seller, the survey, if any, referred to in the above referenced title insurance commitment made in connection with origination of the Loan (original if available); and (iv) If in the possession of Seller, copies of the UCC-1 financing statements filed in favor of Seller as secured party in connection with the Loan and any related continuation statements or subsequent UCC-1 financing statements filed in connection therewith. Section 1.4. Purchaser's Default. In the event of a default by Purchaser under this Agreement, the Deposit shall be paid to Seller as liquidated damages and shall constitute Seller's sole and exclusive remedy with regard to any such default, either at law or in equity. The parties acknowledge that it would be difficult to ascertain actual damages in the event of a default by Purchaser in its obligations to close hereunder and agree that they have determined that the Deposit constitutes a fair and reasonable estimate of the amount of such damages. Upon Seller's exercise of such remedy, this Agreement shall be of no further force and effect and no party hereto shall have any further rights or obligations hereunder or any claims against the other at law or in equity, without the need to execute any general releases in favor of any party. 4 Section 1.5. Seller's Default. The parties hereby agree that if Seller defaults hereunder, Purchaser's sole and exclusive remedy shall be to elect within ten (10) business days thereafter, either (i) to terminate this Agreement, in which event the Deposit shall be refunded to Purchaser, or (ii) to institute an action for specific performance. Section 1.6. Escrow Agent. The law firm of Carb, Luria, Cook & Kufeld LLP shall act as escrow agent (the "Escrow Agent") hereunder. The Escrow Agent will hold the Deposit in an interest-bearing account pursuant to the terms and provisions of that certain escrow agreement, dated as of the date hereof, among Purchaser, Seller and Escrow Agent. In the event of any dispute regarding the Deposit, the Escrow Agent shall have the right to pay the Deposit into a federal or state court and, upon doing so, will have no further liability regarding its role as Escrow Agent. In the event the Closing shall not occur, interest and income on the Deposit, if any, shall be paid to the party entitled to receive the Deposit. If the Closing shall occur, interest on the Deposit, if any, shall be paid to Seller and shall not be credited against the Purchase Price. Purchaser acknowledges that the Escrow Agent is acting as counsel to Seller in connection with the transaction herein and agrees that the Escrow Agent may represent Seller, adversely to Purchaser, in connection with any disputes hereunder, including, without limitation, disputes arising in connection with the Deposit. Section 1.7. Transfer and Recordation Taxes; Responsibility for Recording. Purchaser shall be responsible for, and shall pay when due and payable, all transfer, filing and recording fees and taxes, and any state or county documentary taxes, if any, with respect to the filing or recording of any document or instrument contemplated hereby if Purchaser elects to record the same. Purchaser shall bear sole responsibility for recording all mortgages, assignments, instruments or other documents delivered to Purchaser at the Closing or thereafter. Purchaser shall indemnify, save and keep Seller, and its successor and assigns, harmless against and from any and all liabilities, demands, claims, actions or causes of action, assessments, losses, fines, penalties, costs, damages and expenses, including without limitation, reasonable attorneys fees and disbursements, sustained or incurred by Seller or its successors and assigns, as a result of or arising out of Purchaser's failure to pay such fees or taxes. Section 1.8. Closing Expenses. Purchaser and Seller shall each be responsible for the payment of its own closing expenses and its expenses in negotiating and carrying out its obligations under this Agreement, including, without limitation, the costs of its counsel, and in the case of Purchaser, all of the costs of title insurance, if required by Purchaser, and all of the other expenses of Purchaser set forth in Section 1.7, or otherwise. 5 Section 1.9. Condition Precedent to Seller's Obligations. This Agreement and the obligations of Seller hereunder are conditioned in their entirety upon approval of this Agreement by each of the Lenders on or before May 14, 1998. Agent shall give written notice to Purchaser of the approval of this Agreement by the Lenders (the "Acceptance Notice") or its failure to obtain the same prior to expiration of such period. If Agent shall fail to give such notice within such period, this Agreement shall be deemed disapproved. If Agent shall fail to give the Acceptance Notice or any notice of disapproval within such period, the Deposit shall be returned to Purchaser, whereupon, this Agreement shall be of no further force or effect and neither Seller nor Purchaser shall have any further rights or obligations within respect to the other hereunder or any claims against the other at law or in equity without the need to execute general releases or any other writing in favor of such other party. Section 1.10. Conditions Precedent to Purchaser's Obligations. The obligations of Purchaser hereunder are also conditioned upon (i) the assignment of the Asset by Seller to Purchaser as of the Closing Date free and clear of any liens with respect to Seller's interest in and to the Asset and (ii) the representations and warranties of Seller contained in each Lender's Certificate and Agent's Certificate being true and correct in all material respects as of the Closing Date. If either condition is not satisfied as of the Closing Date, unless the same shall be waived in writing by Purchaser on or before the Closing Date, the Deposit shall be returned to Purchaser. Upon such delivery of the Deposit to Purchaser, this Agreement shall be of no further force or effect and neither Seller nor Purchaser shall have any further rights or obligations with respect to the other hereunder or any claims against the other at law or in equity, without the need to execute general releases or any other writing in favor of such other party. If Purchaser shall waive any such condition to Closing, there shall be no abatement in the Purchase Price and Seller shall have no liability whatsoever to Purchaser with respect thereto either at or subsequent to Closing. ARTICLE 2 REPRESENTATIONS, WARRANTIES AND COVENANTS Section 2.1. Representations and Warranties of Each Lender. As of the Closing, and subject to the approval of this Agreement by the Lenders as provided in Section 1.9, each Lender severally shall make the following representations and warranties to Purchaser, as of the Closing Date: (a) Such Lender has full and corporate power, authority and legal right to sell, assign and transfer its interest in the Asset to Purchaser and to execute and deliver, engage in the transactions contemplated by, and perform and observe the terms and conditions of this Agreement, the Assignment and any certificates delivered by such Lender pursuant to this Agreement. 6 (b) Such Lender has duly and validly authorized, executed and delivered each of the following documents to which it is a signatory: the Assignment and the Lender's Certificate. (c) Such Lender has the full right, power and authority to transfer its interest in the Loan, free of any liens or encumbrances thereon, and without the need for any consent to such transfer, except such consents as it has heretofore received and such Lender's interest in the Loan is accurately set forth in Exhibit A. (d) Such Lender knows of no amendment or modification to any of the Loan Documents, or of any other agreement which may have a material effect upon the rights and obligations of the parties pursuant to the Loan Documents. (e) As of the Closing Date, the outstanding principal amount due with respect to such Lender's interest in the Loan is amount set forth for such Lender on Exhibit A. Agent further represents and warrants as follows: (a) That, as of the Closing Date, there are no escrow accounts held by Seller pursuant to the terms of the Loan Documents. (b) As of the date of this Agreement and for the two year period preceding the date hereof, Agent has received no written notice of default by Agent or the Lenders under the Loan Documents. (c) Agent has duly and validly authorized, executed and delivered the Allonge, the Agent's Certificate and the UCC-3 Financing Statements. Except as set forth in this Section 2.1 and Section 3.5, Seller makes no other representations, warranties or covenants to Purchaser with respect to the Asset. It is expressly agreed that neither Agent nor any Lender shall be responsible for the accuracy of any representations or warranties or the performance of any covenants of any other Lender under any provisions of this Agreement or under any documents delivered at Closing pursuant to this Agreement, each Lender being solely and severally liable to Purchase for its own warranties, representations and covenants. It is agreed that Agent may, but shall not be obligated to make any such warranties or representation on behalf of any Lender(s), or to perform any such covenants on behalf of any Lender(s), provided that Agent shall expressly acknowledge that it is taking such action on behalf of such Lender(s). Purchaser agrees that, in any such event, Agent shall have no liability to Purchaser with respect thereto, except if Agent's representation that it was so authorized to take such action shall be untrue, Purchaser having recourse against the representing Lender as to the substance of the applicable 7 certificate. All representations and warranties made by the Lenders and Agent pursuant to any certificates shall survive only for the period set forth in the applicable certificates, and thereafter shall be null and void and of no further force and effect. Section 2.2. Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to Seller, each of which is true and correct as of the date hereof and as of the Closing Date, as follows: (a) Purchaser is duly organized, validly existing and in good standing under the laws of the State of Maryland. (b) Purchaser has the full power and authority to purchase the Asset and to execute, deliver and perform, and to enter into and consummate all the transactions contemplated by this Agreement, has duly authorized the execution, delivery and performance of this Agreement, has duly executed and delivered this Agreement. (c) Purchaser expressly acknowledges that, except as otherwise specifically set forth in this Agreement, neither Seller, nor any officer, director, employee, agent, representative, accountant, advisor, attorney, consultant or contractor of any of them has made any oral or written representations or warranties, whether expressed or implied, by operation of law or otherwise, with respect to the Mortgaged Property or the Asset or the existence of any litigation with respect thereto, the zoning and other laws, regulations and rules applicable thereto or the compliance by the Mortgaged Property therewith, the revenues and expenses generated by or associated with the Mortgaged Property, or any due diligence materials, or any statements or information contained in connection with the Asset or related thereto. Purchaser further acknowledges that all materials relating to the Mortgaged Property and the Asset which have been provided by Seller have been provided without any warranty or representation, expressed or implied as to their content, suitability for any purpose, accuracy, truthfulness or completeness and Purchaser shall not have any recourse against Seller, or its counsel, advisors, agents, officers, directors or employees or the preparers of any information in the event of any errors therein or omissions therefrom. Purchaser is acquiring the Asset based solely on its own independent investigation and inspection of the Mortgaged Property and the Asset (and such other due diligence that Purchaser and Purchaser's counsel have deemed necessary) and not in reliance on any information (whether written, oral or otherwise)provided by Seller, or any of its officers, directors, employees, agents, representatives, accountants, advisors, attorneys, consultants or contractors, except for the matters set forth in each Lender's Certificate and Agent's Certificate. (d) Purchaser acknowledges that Seller does not own the Property and, accordingly, is making no representations or warranties with respect to the Mortgaged Property. Purchaser 8 acknowledges and agrees that, except for the matters set forth in each Lender's Certificate and Agent's Certificate, Purchaser is purchasing the Asset "AS IS" and "WITH ALL FAULTS," based upon the status of the Asset as of the Closing Date. In amplification, and not in limitation of the foregoing, Seller does not and will not make any oral or written representations, warranties, promises or (e) guarantees whatsoever, whether express or implied, concerning or with regard to, and expressly disclaims any liability or obligation with respect to, concerning or relating to, any of the following: (i) the collectability of the Loan; (ii) the value or condition of the Mortgaged Property; (iii) title or ownership to or of the Mortgaged Property or any portion or part thereof or any materials, fixtures or furnishings located therein or thereon; (iv) Borrower's compliance with any environmental protection, pollution or land use laws; (v) the zoning and any other restrictions applicable to the Mortgaged Property; (vi) ownership of or obligations in respect of any air rights, zoning bonuses, floor area ratio bonuses or entitlements or other similar rights or benefits attributable to, burdening or otherwise pertaining to the Mortgaged Property; (vii) claims by Borrower or any Guarantor against Seller under the Loan Documents or otherwise or claims by third parties against Borrower or any Guarantor or the credit worthiness or ability of Borrower to fulfill its respective obligations or pay its respective debts as they mature; (viii) pending, existing or projected approvals, commitments or guarantees concerning or relating to, or rights of or from or claims against or relating to, any governmental or quasi-governmental entity regarding, assurances of assistance, compliance with programs or benefits, real estate taxes, tax reductions or benefits; (ix) the existence, validity, enforceability, terms, conditions or any other aspect of the leases affecting the Property; or (x) any other matter, fact or circumstance whatsoever. (f) Purchaser expressly acknowledges that it is a sophisticated investor and has been represented by and relied upon counsel in connection with this Agreement and the transactions 9 contemplated herein. Purchaser is acquiring the Asset for its own account and not as an agent or nominee on behalf of others. (g) Purchaser acknowledges that (x) the Note and other Loan Documents are being assigned to Purchaser without recourse to Seller for amounts payable thereunder and (y) each Lender's and Agent's liability hereunder and in connection with the transaction contemplated hereby shall be limited to matters arising in connection with breach of representation. (h) On the Closing Date, Purchaser covenants and agrees to and does hereby release Seller's attorneys and the Broker from all claims, actions, suits or proceedings relating to this Agreement and in connection with the transaction contemplated hereby other than those arising from the gross negligence or willful misconduct of the released party. (i) Purchaser acknowledges that it is aware that Section 5.15 of the Mortgage contains, among other things, a provision to the effect that the mortgagee will not become a "party in interest" (within the meaning of the Employee Retirement Income Security Act of 1974, as now or hereafter amended) to any pension or profit sharing plan which at any time has assets allocated to the Prime Property Fund of Equitable and prohibiting the sale conveyance or transfer of the Mortgage to a person or entity which would be such a "party in interest." Purchaser represents and warrants to Seller and Agent that the sale of the Assets to Purchaser pursuant to this Agreement will not result in a violation of the provisions of said Section 5.15 of the Mortgage. ARTICLE 3 MISCELLANEOUS Section 3.1. Notices. All demands, notices and communications hereunder shall be in writing and given by personal delivery, recognized overnight courier or transmitted by telecopy, if to Seller, addressed to Banque Paribas, New York Branch, The Equitable Tower, 787 Seventh Avenue, New York, New York 10019, Attention: William A. Wexler, Director, Fax number (212) 841-3565, Telephone number (212) 841-3306, with a copy sent by like manner to Carb, Luria, Cook & Kufeld LLP, 521 Fifth Avenue, New York, New York 10175, Attention: Kenneth Richter, Esq., Fax number (212) 682-2682, Telephone number (212) 503-0662, or to such other address as Seller may designate in writing to Purchaser; and if to Purchaser, addressed to Health and Retirement Properties Trust, 400 Centre Street, Newton, MA 02158, Attention: Mr. David J. Hegarty, Fax number (617) 332-2261, Telephone number (617) 332-3390, with a copy sent by like manner to Sullivan & Worcester LLP, One Post Office Square, Boston, MA 02109, Attention: Jennifer B. Clark, Esq., Fax number (617) 338-2880, Telephone number (617) 338-2406, or to such other address as Purchaser may designate in writing to Seller. A copy of any notices given by telecopy shall also be sent by 10 recognized overnight courier. Notices shall be deemed given upon receipt or refusal thereof. Section 3.2. Inspection by Seller. Seller shall be entitled to retain copies of the Loan Documents for its file. After the transfer of documents or files to Purchaser pursuant to the terms of this Agreement, Purchaser agrees that Seller, at Seller's expense, shall have the continuing right to use, inspect, and make extracts from or copies of any such documents or records, upon reasonable notice to Purchaser at the place where such documents are maintained by Purchaser. Purchaser further agrees to allow Seller, at Seller's expense, to review original documents for any lawful purpose and upon reasonable terms and conditions and upon reasonable notice to Purchaser. The provisions of this Section 3.2 shall survive the Closing. Section 3.3. Meaning of Certain Terms. (a) The use of the terms "herein," "hereunder," and "hereof" and terms of like import shall refer to this Agreement in its entirety and not to any particular Article, Section or other subdivision of this Agreement unless indicated to the contrary. (b) The term "business day" shall mean any day on which the New York Stock Exchange is open for business. Section 3.4. Purchaser's Indemnification Covenants. Purchaser shall indemnify, save and keep Seller and Agent, and its successors and assigns, harmless against and from all liabilities, demands, claims, actions or causes of action, assessments, losses, fines, penalties, costs, damages and expenses (including, without limitation, reasonable attorneys' fees and disbursements) sustained or incurred by Seller or Agent or its successors and assigns, as a result of or arising out of or by virtue of: (a) The inaccuracy of any representation or warranty made by Purchaser to Seller herein; (b) The breach by Purchaser of any of the covenants of this Agreement to be performed by it; and (c) The breach by Purchaser of any of the obligations under the Loan Documents assumed by Purchaser. The provisions of this Section shall survive the Closing or any other termination of this Agreement. Section 3.5. Broker. Purchaser, Agent and each Lender severally hereby warrants and represents to the others that it has not dealt with any broker in connection with this transaction except LaSalle Partners Corporate and Financial Services, Inc. (the "Broker"). Seller is responsible for any fee due to Broker with respect to the transactions contemplated in this Agreement pursuant to a separate written agreement. Further, each of Purchaser, Agent and each Lender, severally (each of the foregoing, in such capacity, the "Indemnifying Party"), agrees to indemnify and 11 hold harmless the others from any loss, cost or expense which any such non-indemnifying party or parties may incur as a result of any inaccuracy in the Indemnifying Party's warranties and representations as set forth in the prior sentence. Notwithstanding anything to the contrary set forth in this Agreement, the provisions of this Section 3.5 shall survive the Closing or any other termination of this Agreement or voidance of this Agreement. Section 3.6. Confidentiality; Publicity. (a) As used in this Agreement, "Confidential Information" shall mean any of the terms and conditions of this Agreement and the transactions contemplated thereby. During the term of this Agreement, and for a period ending at the first to occur of (i) Closing, or (ii) one year after the end of the term of this Agreement by any other means, Purchaser shall treat any Confidential Information disclosed by or otherwise obtained from Seller or Seller's affiliates under this Agreement or in connection therewith as confidential and proprietary and Purchaser shall not disclose such Confidential Information to any third party (other than its consultants and counsel who shall be instructed to preserve such confidentiality). Purchaser shall use the same care to keep Confidential Information confidential as Purchaser uses to preserve the confidentiality of its own confidential information having a high degree of competitive significance and shall take appropriate measures to ensure that its employees are bound to the same degree that Purchaser is under this Agreement. This obligation of confidentiality does not apply to any Confidential Information which: (i) is already known to Purchaser, (ii) is or becomes publicly known, (iii) is lawfully obtained by Purchaser from a third party on a non-confidential basis, (iv) if and to the extent that a judicial or governmental authority having jurisdiction over Purchaser orders or requires disclosure, or (v), if and to the extent, is disclosed in documents which are recorded and evidence the transfer and assignment of the Loan or are submitted to a judicial or governmental authority having jurisdiction over Purchaser in compliance with any applicable laws, rules or regulations pertaining to Purchaser. The provisions of this Section shall survive the Closing or any other termination of this Agreement. (b) The parties agree that no party shall, with respect to this Agreement and the transactions contemplated hereby, make any public pronouncements or issue any press release regarding this Agreement or the transactions contemplated hereby without the consent of the other party, which consent shall not be unreasonably withheld, delayed or conditioned; provided, however, that Purchaser acknowledges that no press release or other publicity shall refer by name to Agent or any of the Lenders without the express written consent of Agent or such Lender, as the case may be. Seller acknowledges that Purchaser's shares are publicly traded on the New York Stock Exchange. 12 Section 3.7. Severability of Provisions. Any part, provision, representation, warranty or covenant of this Agreement which is prohibited or which is held to be void or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any part, provision, representation, warranty or covenant of this Agreement which is prohibited or unenforceable or is held to be void or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction as to the Asset shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereto waive any provision of law which prohibits or renders void or unenforceable any provision hereof. Section 3.8. Further Assurances. Seller agrees, at no expense to Seller, to execute and deliver such instruments and take such actions as Purchaser may reasonably request in order to effectuate the purpose and to carry out the terms of this Agreement, provided that the same are consistent with the non-recourse, "as is" nature of the transaction and, except as set forth in each Lender's Certificate and the Agent's Certificate, the absence of representations or warranties on behalf of Seller and Agent. Section 3.9. Captions; Internal References; Exhibits. The Article, Section and Exhibit headings herein are for convenience only and shall not limit or otherwise affect the construction hereof. References to Articles, Sections, Subsections, Exhibits or other subdivisions contained herein are to the respective Articles, Sections, Subsections, Exhibits or other subdivisions of the Agreement unless stated to the contrary. All Exhibits annexed hereto are made a part hereof. Section 3.10. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. Except as expressly permitted by the terms hereof, this Agreement cannot be assigned, pledged or hypothecated by any Purchaser without the written consent of the Agent; provided, however, that Purchaser may assign its rights under this Agreement to any affiliate of Purchaser, provided that (i) no such assignment shall relieve Purchaser of its obligations hereunder or under the instruments contemplated to be executed by Purchaser pursuant to this Agreement including, without limitation, the Assignment, (ii) as a condition to such assignment, the assignee shall assume all of the obligations of Purchaser hereunder, by a writing reasonably acceptable to Agent, and (iii) no such assignment shall be effective, and the assignee shall have no rights hereunder, unless and until a copy of said written agreement, duly executed by Purchaser and the assignee, shall have been delivered to Agent. Section 3.11. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, 13 WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. The parties acknowledge that this Agreement was prepared and negotiated in New York, that the Agent is located in New York, that the closing is to occur in New York and that there is a substantial nexus with respect to this Agreement to the State of New York. Section 3.12. Waiver of Trial by Jury. PURCHASER AND SELLER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE (TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT. Section 3.13. Execution in Counterpart. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Section 3.14. No Recording. Neither this Agreement nor any memorandum hereof shall be recorded by Purchaser. Any violation by Purchaser of this section shall be deemed a material breach by Purchaser of its obligations under this Agreement. Section 3.15. Miscellaneous. This Agreement supersedes all prior Agreements and understandings relating to the subject matter hereof. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. Section 3.16. Non-liability of Trustees. The Declaration of Trust of Purchaser, a copy of which is duly filed with 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 such Declaration of Trust collectively as trustees, but not individually or personally, and that no trustee, officer, shareholder, employee or agent of Purchaser shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, Purchaser. All persons dealing with Purchaser, in any way shall look only to the assets of Purchaser for the payment of any sum or the performance of any obligation. Section 3.17. Loan Administration And Certain Other Matters During Executory Period. (a) In the event that, after the date hereof, Seller takes any of the following actions: (i) Agrees to any modification or amendment of the Loan Documents without Purchaser's prior written consent; 14 (ii) Exercises any right or remedy of Seller under the Loan Documents the effect of which is to accelerate payments due without the prior written consent of Purchaser; or (iii) Alienates, assigns, pledges or otherwise transfers any interest in the Loan Documents to any person or entity other than Purchaser; then, in such event, Seller shall give Purchaser notice thereof and Purchaser shall have the right to terminate this Agreement by notice given within three (3) business days after receipt of Seller's notice. (b) From and after the date hereof, Agent covenants and agrees with Purchaser that copies of all notices or communications sent to the Borrower or Guarantors by Seller or received by Seller with to the Loan Documents shall promptly be sent to Purchaser. (c) Whether or not (i) Borrower or any Guarantor seeks relief, or an involuntary proceeding is filled against any such party, under any applicable Federal or state bankruptcy, insolvency, reorganization or similar law, (ii) Borrower or any Guarantor institutes any litigation with respect to the Loan, or otherwise, against Purchaser or Seller, or (iii) any casualty or condemnation event occurs with respect to the Mortgaged Property, Purchaser shall continue to be obligated to perform all of its obligations in accordance with the terms of this Agreement. (d) During the term of this Agreement, Agent and its affiliates and representatives, including, without limitation, the Broker, shall not solicit or accept proposals with respect to the sale or discounted pay-off of the Loan from any party other than Purchaser. If this Agreement shall be terminated pursuant to Section 1.9 and, during the sixty (60) day period after the date of this Agreement, Agent shall transfer the Loan to any person or entity or accept a discounted payoff for an amount in excess of the Purchase Price, Agent shall pay such excess to Purchaser upon receipt thereof. Notwithstanding anything to the contrary set forth in this Agreement, the provisions of this paragraph shall survive any termination of this Agreement. (e) Agent shall cooperate with the reasonable requests of Purchaser, at Purchaser's expense, in connection with the defense by Purchaser of any claims made by the Borrower or the Guarantors relating to actions by Seller with respect to the Loan prior to the Closing Date. The provisions of this paragraph (e) shall survive the Closing. 15 IN WITNESS WHEREOF, the parties hereto have caused their names to be signed by their respective officers thereunto duly authorized as of the date first above written. SELLER: BANQUE PARIBAS, AS AGENT NEW YORK BRANCH By:/s/_____________________________ Name: Title: PURCHASER: HEALTH AND RETIREMENT PROPERTIES TRUST By:/s/_____________________________ Name: Title: 16 The following schedules and exhibits have been omitted and will be provided to the Securities and Exchange Commission upon request: EXHIBIT A LIST OF LENDERS EXHIBIT B DESCRIPTION OF THE LAND EXHIBIT C FORM OF ALLONGE EXHIBIT D FORM OF ASSIGNMENT AND ASSUMPTION OF MORTGAGE AND ASSIGNMENT OF RENTS AND CERTAIN OTHER LOAN DOCUMENTS EXHIBIT E FORM OF ASSIGNMENT AND ASSUMPTION FOR SERVICING AGREEMENT EXHIBIT F FORM OF LENDER'S CERTIFICATE EXHIBIT G FORM OF AGENT'S CERTIFICATE EX-2.2 3 EXHIBIT 2.2 FORBEARANCE AND RESTRUCTURING AGREEMENT THIS FORBEARANCE AND RESTRUCTURING AGREEMENT (this "Agreement") is made as of May 21, 1998 by and among NINE PENN CENTER ASSOCIATES, L.P., a Pennsylvania limited partnership ("NPCA"), having an address c/o PREIT-Rubin, The Bellevue, 3rd Floor, 200 South Broad Street, Philadelphia, PA 19102, THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, a New York corporation ("Equitable"), having an address at 1290 Avenue of the Americas, 12th Floor, New York, NY 10104, TRANSPORTATION ASSOCIATES, a Pennsylvania limited partnership ("Transportation"), having an address c/o PREIT-Rubin, The Bellevue, 3rd Floor, 200 South Broad Street, Philadelphia, PA 19102 (NPCA, Equitable, and Transportation are collectively referred to in this Agreement as the "NPCA Parties"), and HEALTH AND RETIREMENT PROPERTIES TRUST, a Maryland real estate investment trust ("HRPT") having an address at 400 Centre Street, Newton, MA 02158 and 1735 MARKET STREET PROPERTIES TRUST, a Maryland real estate investment trust having an address at 400 Centre Street, Newton, MA 02158 ("1735") (HRPT and 1735 are referred to collectively in this Agreement as the "REITS"). BACKGROUND A. NPCA is a Pennsylvania limited partnership composed of Equitable and Transportation, pursuant to that certain "Joint Venture Agreement" dated as of June 30, 1987, as amended by that certain "Supplement and Amendment to Joint Venture Agreement of Limited Partnership of Nine Penn Center Associates, L.P." dated as of April 24, 1992 (such Joint Venture Agreement as amended being referred to herein as the "Joint Venture Agreement"). B. NPCA is the owner of certain real property located in Philadelphia, Pennsylvania known as "Nine Penn Center" and/or "Mellon Bank Center", and the buildings, improvements, and certain other property (both real and personal) situated thereon or associated therewith (collectively, the "Real Estate"). On or about May 25, 1988 NPCA, as borrower, entered into a loan transaction (the "Loan") as detailed in that certain Construction Loan Agreement ("Construction Loan Agreement"), dated May 25, 1988, with Banque Paribas, a French banking corporation ("Paribas") acting through its New York branch as agent for a group of lenders (each lender being, individually, a "Lender" and all Lenders being, collectively, the "Lenders"). In connection with the Construction Loan Agreement, NPCA executed and delivered in favor of Paribas that certain "Construction Loan Mortgage Note" (the "Note"), dated May 25, 1988, together with that certain "Construction Loan Mortgage, Assignment of Leases and Rents and Security Agreement", dated May 25, 1988 (the "Mortgage"), and other related documents and instruments (the foregoing Construction Loan Agreement, the Note, the Mortgage, and all other such documents delivered in favor of Paribas being collectively referred to herein as the "Loan Documents"). C. HRPT and Paribas have entered into that certain "Purchase Agreement" dated as of April 29, 1998 (the "Note Purchase Agreement") by which HRPT has agreed to acquire from the Lenders the Note, together with all of the Lenders' right, title and interest in the Loan Documents. Closing under the Note Purchase Agreement and consummation of the transactions contemplated thereby (the "Note Closing") has been scheduled for Friday, May 22, 1998. D. HRPT will, at the Note Closing, assign the Note Purchase Agreement to 1735. E. In anticipation of the Note Closing under the Note Purchase Agreement, and conditioned upon the completion of the Note Closing as described in the Note Purchase Agreement, NPCA and the REITS have reached certain agreements and understandings which are set forth in this Agreement, including such agreements as relate to the REITS's acquisition of partnership interests in NPCA at a closing described in Section 5 of this Agreement (the "Equity Closing"). AGREEMENTS NOW, THEREFORE, for and in consideration of the Background and the mutual agreements provided in this Agreement, and intending to be legally bound hereby, the parties to this Agreement agree as follows: 1. Representations of NPCA Parties. Each of the NPCA Parties (as to itself only and not as to any other), in order to induce the REITS to enter into this Agreement and to complete the Equity Closing, makes the following representations and warranties to the REITS as of the date of this Agreement: 1.1 The subject NPCA Party is duly organized and validly existing under the laws of their respective State of organization. 1.2 The subject NPCA Party has obtained all consents, approvals, and authorizations from all persons, entities, and authorities required to enter into this Agreement, and to consummate the transactions contemplated hereby. 1.3 There has not been filed by or against the subject NPCA Party , a petition in bankruptcy or insolvency proceedings or for reorganization or for the appointment of receiver or trustee under any state or federal laws, nor has the subject NPCA Party made an assignment for the benefit of creditors or filed a petition for an arrangement or entered into an arrangement with creditors which petition, proceedings, assignment, or arrangement has not been dismissed by a final nonappealable order of the court or body having jurisdiction over the matter; and the subject NPCA Party has not admitted in writing the inability to pay its debts as they become due. 2 1.4 Each NPCA Party has the full, lawful, and unrestricted right and power to execute, deliver and perform its obligations under this Agreement and to complete the transactions contemplated hereby including the Equity Closing. 1.5 There are no rights, options, or other agreements of any kind to sell or otherwise dispose of the Real Property as a whole to which the subject NPCA Party is a party except as set forth in the Joint Venture Agreement and the Loan Documents. 1.6 Each NPCA Party's execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized and no other action is required by law, by the charter documents of any NPCA Party, or otherwise for such authorization; and this Agreement is the legal, valid and binding obligation of, and is enforceable against, each NPCA Party in accordance with its terms except to the extent such enforcement may be affected by general principles of equity, or other laws, including bankruptcy laws, affecting the rights of creditors generally; the execution of this Agreement and the compliance with its terms and conditions by each NPCA Party will not breach or conflict with the terms, conditions or provisions of any other agreement or instrument to which such NPCA Party is a party or by which such NPCA Party is bound, or constitute a default thereunder. 1.7 The Construction Loan Agreement, the Note, the Mortgage, and the other Loan Documents are the legal, valid and binding obligations of NPCA, and the same have not been modified or amended in any fashion except as described in this Agreement. 1.8 Notwithstanding the foregoing, no NPCA Party makes any representation or warranty to the REITS concerning the character, nature, or physical qualities of the Real Estate. 2. Representations of REITS. The REITS, in order to induce the NPCA Parties to enter into this Agreement and to complete the Equity Closing, make the following representations and warranties to the NPCA Parties as of the date of this Agreement: 2.1 Each of the REITS is a real estate investment trust duly organized and validly existing under the laws of the State of Maryland. 2.2 Each of the REITS has obtained all consents, approvals, and authorizations from all persons, entities, and authorities required to enter into this Agreement, and to consummate the transactions contemplated hereby including the Equity Closing. 2.3 There has not been filed by or against any of the REITS, a petition in bankruptcy or insolvency proceedings or for reorganization or for the appointment of receiver or trustee under any state or federal laws, nor has any of the REITS made an assignment for the benefit of creditors or filed a petition for an arrangement or entered into an arrangement with creditors which petition, proceedings, assignment, or arrangement has not been dismissed by final nonappealable order of the court or body having jurisdiction over the matter; and the REITS are not insolvent and have not admitted in writing the inability to pay its debts as they become due. 3 2.4 Each of the REITS has the full, lawful, and unrestricted right and power to execute, deliver, and perform its obligations under this Agreement and to complete the transactions contemplated hereby. 2.5 Each of the REITS' execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the boards of directors of the REITS and no other action is required by any REITS's organizational documents, or by law, by any of the REITSs' charter documents (including, without limitation, their Declarations of Trust ) or otherwise for such authorization; and this Agreement is the legal, valid and binding obligation of, and is enforceable against, the REITS in accordance with its terms except to the extent such enforcement may be affected by general principles of equity, or other laws, including bankruptcy laws, affecting the rights of creditors generally; the execution of this Agreement and the compliance with its terms and conditions by the REITS will not breach or conflict with the terms, conditions or provisions of any other agreement or instrument to which the REITS are a party or by which the REITS are bound, or constitute a default thereunder. 2.6 HRPT has no actual knowledge that any "Event of Default" (as defined under the "Loan Documents") exists as of the date of this Agreement under the Note or any of the other Loan Documents excepting only an interest payment otherwise due on or about May 18, 1998. 2.7 HRPT is aware that Section 5.15 of the Mortgage contains, among other things, a provision to the effect that the mortgagee will not become a "party in interest" (within the meaning of the Employee Retirement Income Security Act of 1974, as now or hereafter amended) to any pension or profit sharing plan which at any time has assets allocated to the Prime Property Fund of Equitable and prohibiting the sale conveyance or transfer of the Mortgage to a person or entity which would be such a "party in interest." HRPT represents and warrants to NPCA that (i) the sale of the Note and Loan Documents to HRPT will not result in a violation of the provisions of said Section 5.15 of the Mortgage.; and (ii) upon such sale HRPT shall not be a "party in interest" (as defined above). 2.8 Upon the Equity Closing, the REITS shall expressly acknowledge, represent, warrant, and agree (in a form reasonably satisfactory) that the "Guaranty of Interest, Taxes and Operating Expenses" and "Guaranty of Completion" which are part of the Loan Documents and which were delivered by Equitable and Mr. Ronald Rubin, will have expired and/or have terminated by their terms, and as of such date, there will be no surviving claims thereunder against any of the parties thereto. 4 3. Forbearance. 3.1 The parties to this Agreement acknowledge and agree that in accordance with the terms of the Note (and the other Loan Documents) and Pennsylvania law, the Note matures on May 26, 1998 and is payable in full on that date. The REITS hereby agree that, subject to the terms set forth in this Agreement, the REITS shall refrain from exercising or otherwise pursuing any Lender Remedies (as that term is hereinafter defined) on account of such maturity or otherwise until July 1, 1998 (the "Forbearance Date"). The term "Lender Remedies" shall mean any and all remedies available to Paribas or the Lenders (or any successor in interest to any of them, or any party claiming, by through, or under any of them including the REITS) which is provided under the terms of the Loan Documents, or otherwise available in equity or at law, including, without limitation, foreclosure, acceleration, declaration of default, notification of tenants, confession of judgment, ejectment, or other form of possession or dispossession. 3.2 The REITS may exercise any and all of the Lender Remedies at any time on or after the Forbearance Date to the extent provided and exercisable under the terms of the applicable Loan Documents, without the necessity of any additional or other notices or the passage of any grace periods. 3.3 In the event that any NPCA Party files any petition in bankruptcy, or any petition in bankruptcy is filed against any NPCA by any partner of NPCA, then upon such filing the agreements to forbear set forth in Section 3.1 above shall terminate and the REITS may exercise any and all of the Lender Remedies. 4. Sale of Paribas Note. Each of the NPCA Parties hereby consents to the sale of the Note and the other Loan Documents to HRPT under the terms set forth in the Note Purchase Agreement. 5. Restructuring Transaction. The REITS and the NPCA Parties agree that the Joint Venture Agreement, and the structure of NPCA itself, shall be amended as part of the Equity Closing, all as described and provided in Exhibit A attached hereto. 6. [Intentionally deleted] 7. Cost of a "Challenge". Each of the parties hereto agrees that in the event that any party brings a Challenge (as that term is hereinafter defined), such party shall be personally liable to, and indemnify and hold harmless, the non-challenging parties with respect to any harm, damage, cost, expense, injury, loss or the like, incurred by the non-challenging parties as a result of the Challenge including, without limitation, any reasonable attorneys' fees and expenses, court costs, filing costs, or the like, which shall be paid to the subject non-challenging parties immediately upon demand therefor, and such obligation shall not be subject to any limitation which may be set forth in any of the Loan Documents or elsewhere including any non-recourse language which may be set forth in any of the Loan Documents. The term "Challenge" shall mean the filing or initiation of any suit, action, contest, claim, request for investigation, 5 hearing, or other proceeding (whether legal, equitable, administrative, in bankruptcy, or otherwise) challenging the legal and binding nature of this Agreement or any element or component of this Agreement. For the avoidance of doubt, if the parties fail to close on the restructure transaction as set forth in Exhibit A attached hereto, any suit, action, contest, claim, request for investigation, hearing, or other proceeding (whether legal, equitable, administrative, in bankruptcy, or otherwise, including any such proceedings initiated for the purpose of enforcing this Agreement (as opposed to challenging its legality) shall be deemed not to be a "Challenge". Furthermore, it is agreed that (i) the obligations and liabilities under this Section 7 are the several (but not joint) obligations and liabilities of the parties to this Agreement; and (ii) Equitable shall have no responsibility or liability to either REIT with respect to any Challenge brought or effected by NPCA or Transportation unless Equitable affirmatively joins in such Challenge; at the request of either REIT, Equitable agrees to certify with respect to any Challenge brought by NPCA or Transportation whether it is or is not joining in such Challenge (and if Equitable is not joining in the subject Challenge Then Equitable shall cooperate with the REITS in opposing such Challenge). 8. Arm's Length Negotiations; Independent Counsel. The parties to this Agreement acknowledge that, all the terms of the Agreement were negotiated at arm's length and that this Agreement was prepared and executed without duress, undue influence or coercion of any kind exerted by any party upon the other. Each party stipulates that (i) it has been represented by, and has relied upon, independent counsel of its own choosing in the negotiation and preparation of this Agreement; and (ii) it and such counsel have each read this Agreement, have had its contents fully explained to it by such counsel; and (iii) it is fully aware of and understands all of the terms and the legal consequences of this Agreement. It is acknowledged that the parties have, through their respective counsel, mutually participated in the preparation of this Agreement. 9. Consent to Lifting of Automatic Stay. If NPCA (or any partner of NPCA) shall (i) file, or be the subject of, a bankruptcy petition in any state court or the United States Bankruptcy Court, (ii) be the subject of any order for relief issued under any state bankruptcy law or the U.S. Code, (iii) file, or be the subject of, any petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act, law or regulation relating to bankruptcy, insolvency or other relief for debtors, (iv) have sought, consented to or acquiesced in the appointment of any trustee, receiver, conservator or liquidation (v) be the subject of any order, judgment or decree entered by any court of competent jurisdiction approving a petition filed against such party for any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future federal or state act, law or regulation relating to bankruptcy, insolvency or relief for debtors, then, so long as NPCA or any partner of NPCA would not breach any duty owing to the bankruptcy estate or other constituencies in the bankruptcy proceeding, neither NPCA nor any partner of NPCA shall assert or request any other party to assert that the automatic stay provided by Section 362 of the Bankruptcy Code shall operate or be interpreted to stay, interdict, condition, reduce or inhibit the ability of the REITS to enforce any rights it has by virtue of this Agreement at law or equity, or any other rights any REIT has, 6 whether now or hereafter acquired, against NPCA or against any collateral owned by NPCA. Specifically, without limiting the foregoing, in the event of any such voluntary or involuntary bankruptcy filing following the execution and delivery of this Agreement, the REITS shall be entitled and each of NPCA and its partners irrevocably consents to an order granting the REITS immediate relief from all stays including the automatic stay imposed by Section 362 of the Bankruptcy Code so as to permit the REITS to exercise any and all other rights and remedies the REITS may have under this Agreement or at law or in equity, and NPCA and each of its partners hereby irrevocably waives any right to object to such relief. This provision shall be construed as liberally as the law permits to accomplish the purpose stated. 10. Limitation. Each of the parties to this Agreement hereby represents, warrants, acknowledges, and agrees that this Agreement shall not constitute or be deemed: (i) a novation of the Note or any of the other Loan Documents; (ii) an extension of any applicable notice or cure periods as provided under the Note or the other Loan Documents; (iii) a modification, deferral or waiver of any of the Lender's Remedies with respect to Events of Default occurring after the Forbearance Date or a waiver or forgiveness of such defaults; or (iv) a waiver, amendment, or modification of the "non-recourse" language and agreements benefiting any of the NPCA Parties under any of the Loan Documents. Nonetheless, in the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Note or any of the other Loan Documents, the terms of this Agreement shall govern and control. 11. Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND EXPRESSLY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT UNDER OR WITH RESPECT TO THIS AGREEMENT OR ANY DISPUTE ARISING UNDER THIS AGREEMENT. 12. No Partnership. Nothing in this Agreement or the Loan Documents, shall create or be deemed to create a partnership between the NPCA Parties or any of them and the REITS or any of their affiliates; and none of the REITS and none of the NPCA Parties shall be deemed liable for any of the debts, liabilities, or obligations of any of the others. 13. Entire Agreement. This Agreement represents the entire understanding and agreement among the parties with respect to the subject matter hereof, superseding all prior understandings or communications of any kind, written or oral. This Agreement may be modified only by an express written agreement signed by all parties hereto. 14. Miscellaneous. 14.1 Captions. The captions in this Agreement are inserted for convenience of reference only, and in no way define, describe, or limit the scope or intent of this Agreement of any of the provisions hereof. 7 14.2 Time Periods. Any time periods provided herein which shall end on a Saturday, Sunday, or legal U.S., Massachusetts or Pennsylvania holiday, shall extend to 5:00 p.m. of the next full business day. 14.3 Exhibits. All Exhibits to this Agreement are incorporated herein and made an integral part hereof. 14.4 Governing Law. This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the Commonwealth of Pennsylvania. 14.5 Recitals. The recitals set forth above are incorporated herein as though the same were set forth at length. 14.6 Authority and Capacity. Each party hereto (and each signatory therefor) hereby represents, warrants, and agrees that it, he, or she (as applicable) has full power, authority and/or capacity to execute and deliver this Agreement and the execution and delivery hereof does not require the consent or approval of any party which has not been obtained. 14.7 Successors and Assigns. This Agreement and its terms are binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns. 14.8 No Third Party Beneficiaries. Notwithstanding anything to the contrary contained herein, no provision of this Agreement is intended to benefit Paribas, the Lenders, or any party other than the signatories hereto and their permitted successors and assigns, and no provision of this Agreement shall be enforceable by any other party. 14.9 Gender; Plural Terms; Persons. The masculine, feminine, or neuter pronoun shall each include the masculine, feminine, and neuter genders. A reference to person or entity shall mean a natural person, a trustee, a corporation, a partnership, and any other form of legal entity. All references (including pronouns) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, as the context may require. 14.10 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which shall constitute one and the same agreement. 14.11 Non-Waiver. The failure of any party hereto in any one or more instances to insist upon the strict performance of any one or more of the agreements, terms, covenants, conditions or obligations of this Agreement, or to exercise any right, remedy or election herein contained, shall not be construed as a waiver or relinquishment of the right to insist upon such performance or exercise in the future, and such right shall continue and remain in full force and effect with respect to any subsequent breach, act or omission. 8 14.12 Partial Invalidity. If any of the provisions of this Agreement, or the application thereof to any person, entity, or circumstances, shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such provision or provisions to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby, and every provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 14.13 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 confirmation 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 notice shall be addressed, If to NPCA: Nine Penn Center Associates, L.P. c/o PREIT-Rubin Third Floor The Bellevue 200 South Broad Street Philadelphia, PA 19102 Attn: Mr. Ronald Rubin [Telecopier No. (215) 546-7311] 9 with a copy to: Obermayer Rebmann Maxwell & Hippel LLP One Penn Center 19th Floor 1617 John F. Kennedy Boulevard Philadelphia, PA 19103-1895 Attn: Jeffrey B. Rotwitt, Esq. [Telecopier No. (215) 665-3165] with a copy to: ERE Yarmouth One Boston Place Suite 2020 Boston, MA 02108 Attn: Mr. Dana J. Harrell [Telecopier No. (617) 523-2555] If to the REITS: Health and Retirement Properties Trust 400 Centre Street Newton, MA 02157 Attn: Mr. David J. Hegarty [Telecopier No. (617) 332-2261] with a copy to: Sullivan & Worcester LLP One Post Office Square Boston, MA 02109 Attn: Jennifer B. Clark, Esq. [Telecopier No. (617) 338-2880] If to Equitable: The Equitable Life Assurance Society of The United States c/o ERE Yarmouth One Boston Place Suite 2020 Boston, MA 02108 Attn: Mr. Dana J. Harrell [Telecopier No. (617) 523-2555] 10 with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, NY 10019-6064 Attn: Walter F. Leinhardt, Esquire [Telecopier No. (212) 373-2771] If to Transportation: Transportation Associates c/o PREIT-Rubin Third Floor The Bellevue 200 South Broad Street Philadelphia, PA 19102 [Telecopier No. (215) 546-7311] with a copy to: Klehr, Harrison, Harvey, Branzburg & Ellers LLP 1401 Walnut Street Philadelphia, PA 19102 Attn: Leonard M. Klehr, Esquire [Telecopier No. (215) 568-6603] (d) By notice given as herein provided, the parties hereto and their respective successor and assigns shall have the right from time to time and at any time during the terms 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. 14.14 Recording. Neither this Agreement nor any memorandum thereof, or the like, shall be recorded in any real estate records maintained for the benefit of the public in any jurisdiction for any purpose. 14.15 Condition Precedent. As provided in paragraph D of the Background of this Agreement, the agreements and understandings set forth herein are expressly conditioned upon the completion of the Note Closing under the terms of the Note Purchase Agreement. Furthermore, in the event that the Note Closing has not occurred (for any reason on or before May 26, 1998, then this Agreement shall terminate and be of no further force or effect (without notice or any act of any party required to effect such termination). 14.16 Financials. The NPCA Parties shall provide copies of audited financial statements for the NPCA partnership with respect to the 1995, 1996 and 1997 calendar years and unaudited financials for the period ending March 31, 1998, such financial statements having been prepared at NPCA's sole cost and expense. The NPCA shall, at the REITS' expense, cooperate with the REITS in the preparation of audited financial statements for the Real 11 Estate for the above listed periods. NPCA and its accountants shall provide the REITS and their accountants with such certifications with respect to such financials as the REITS shall from time to time reasonably require. Each of the REITS hereby agrees to indemnify, defend, and hold harmless each of the NPCA Parties with respect to any and all suits, claims, harms, expenses, and the like (including all reasonable attorneys fees) which arise out of any of the certifications provided under the terms of this Section 14.16 (excepting, however, the gross negligence or willful misconduct of the subject NPCA Party). To the extent that any of the foregoing requires any services from NPCA's auditors not already incurred by NPCA or ordinarily contracted for by NPCA, then HRPT shall pay for the same upon demand therefor. 14.17. NON-LIABILITY OF TRUSTEES. THE DECLARATIONS OF TRUST ESTABLISHING THE REITS, A COPY OF EACH OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (COLLECTIVELY, THE "DECLARATIONS"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAMES "HEALTH AND RETIREMENT PROPERTIES TRUST" AND "1735 MARKET STREET PROPERTIES TRUST", RESPECTIVELY, REFER TO THE TRUSTEES UNDER THE DECLARATIONS COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NOT TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE REITS SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATIONS OF, OR CLAIM AGAINST, THE REITS. ALL PERSONS DEALING WITH THE REITS, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE REITS FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATIONS. 12 IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their duly authorized representatives, intending to be legally bound, as of the date written above. NINE PENN CENTER ASSOCIATES, L.P. a Pennsylvania limited partnership, by its partners: BY: The Equitable Life Assurance Society of the United States, a New York corporation: By: /s/ Frederick F. Buchholz Name: Frederick F. Buchholz Title: Investment Officer BY: Transportation Associates, a Pennsylvania limited partnership, by a general partner: By: /s/ Ronald Rubin Name: Ronald Rubin Title: General Partner HEALTH AND RETIREMENT PROPERTIES TRUST, a Maryland real estate investment trust: BY: /s/ Name: Title: TRANSPORTATION ASSOCIATES, a Pennsylvania limited partnership: BY: /s/ Ronald Rubin Name: Ronald Rubin Title: General Partner THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, a New York corporation: BY: /s/ Frederick F. Buchholz Name: Frederick F. Buchholz Title: Investment Officer 13 1735 MARKET STREET PROPERTIES TRUST, a Maryland real estate investment trust: BY: /s/ John A. Mannix Name: John A. Mannix Title: 14 Exhibit A to the Forbearance and Restructuring Agreement has been omitted and will be provided to the Securities and Exchange Commission upon request. Exhibit A contains details regarding the tax structure of the transaction, pro ration of expenses and income pending the acquisition of the property and certain operational matters. EX-23 4 Exhibit 23 Consent of Independent Public Accountants As independent public accountants we hereby consent to the incorporation by reference in this registration statement and related Prospectus Supplement of Health and Retirement Properties Trust, and to the incorporation by reference into Health and Retirement Properties Trusts's previously filed Registration Statements Nos. 33-62135, 333-47815, 333-47817 and 333-52353 of our report dated May 26, 1998 on the statements of revenue and certain expenses of 1735 Market Street for the year ended December 31, 1997, included in Health and Retirement Properties Trust's Current Report on Form 8-K dated May 22, 1998 and to all references to our firm included in this Registration Statement (Registration Statement File No. 333-26887). /s/ Arthur Andersen LLP Philadelphia, Pennsylvania May 26, 1998 -----END PRIVACY-ENHANCED MESSAGE-----