-----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, He+oUry2HvmLBVAOblbtGsb9zZ2AJD6L1ZXp0FhxvbxS3IupNdqKx8mW+2gc0jIF NkRVEtJ1BvSOeBJ78l5KaA== 0001029869-98-001364.txt : 19981215 0001029869-98-001364.hdr.sgml : 19981215 ACCESSION NUMBER: 0001029869-98-001364 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19981211 ITEM INFORMATION: FILED AS OF DATE: 19981214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOSPITALITY PROPERTIES TRUST CENTRAL INDEX KEY: 0000945394 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 043262075 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11527 FILM NUMBER: 98768711 BUSINESS ADDRESS: STREET 1: 400 CENTRE ST CITY: NEWTON STATE: MA ZIP: 02158 BUSINESS PHONE: 6179648389 MAIL ADDRESS: STREET 1: 400 CENTRE STREET CITY: NEWTON STATE: MA ZIP: 02158 8-K 1 HOSPITALITY PROPERTIES TRUST FORM 8-K 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): December 11, 1998 HOSPITALITY PROPERTIES TRUST (Exact name of registrant as specified in charter) Maryland 1-11527 04-3262075 (State or other (Commission file (IRS employer jurisdiction of number) identification no.) incorporation) 400 Centre Street, Newton, Massachusetts 02458 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: 617-964-8389 CERTAIN IMPORTANT FACTORS This Current Report contains statements which constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements appear in a number of places in this Current Report and include statements regarding the intent, belief or expectations of Hospitality Properties Trust (the "Company"), its Trustees or its officers with respect to the declaration or payment of dividends, the consummation of additional acquisitions, policies and plans of the Company regarding investments, dispositions, financings, conflicts of interest or other matters, the Company's qualification and continued qualification as a real estate investment trust or trends affecting the Company's or any hotel's financial condition or results of operations. Readers are cautioned that any such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contained in the forward looking statements as a result of various factors. Such factors include, without limitation, changes in financing terms, the Company's ability or inability to complete acquisitions and financing transactions, results of operations of the Company's hotels and general changes in economic conditions not presently contemplated. The information contained in the Company's Form 8-K dated February 11, 1998, including the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations", and in the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 1997, including under the captions "Items 1. and 2. Business and Properties", identifies other important factors that could cause such differences. THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE COMPANY, DATED AUGUST 21, 1995 A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE TRUST. ALL PERSONS DEALING WITH THE TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (b) Pro Forma Financial Information. Index to Unaudited Consolidated Pro Forma Financial Statements and Other Data (see index on page F-1). (c) Exhibits. 1.1 Underwriting Agreement dated as of December 11, 1998 by and among Hospitality Properties Trust and the several Underwriters named therein pertaining to $150,000,000 in aggregate principal amount of 8-1/2% Monthly Income Senior Notes due 2009. 4.1 Form of Supplemental Indenture No. 3 dated as of December 16, 1998 by and between Hospitality Properties Trust and State Street Bank and Trust Company pertaining to $150,000,000 in aggregate principal amount of 8-1/2% Monthly Income Senior Notes due 2009. 8.1 Opinion of Sullivan & Worcester LLP re: tax matters. 12.1 Computation of Pro Forma Ratio of Earnings to Fixed Charges 23.1 Consent of Sullivan & Worcester LLP (contained in Exhibit 8.1). 23.2 Consent of Arthur Andersen LLP. 23.3 Consent of Ernst & Young LLP. -2- HOSPITALITY PROPERTIES TRUST Index to Unaudited Pro Forma Consolidated Financial Statements and Other Data 1. Introduction to Unaudited Pro Forma Consolidated Financial Statements and Other Data............................................F-2 2. Unaudited Pro Forma Consolidated Balance Sheet and Other Data as of September 30, 1998 ............................................F-3 3. Unaudited Pro Forma Consolidated Statement of Income and Other Data for the Nine Months Ended September 30, 1998.........................F-4 4. Unaudited Pro Forma Consolidated Statement of Income and Other Data for the Year Ended December 31, 1997.................................F-5 5. Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data.......................................................F-6
F-1 HOSPITALITY PROPERTIES TRUST Introduction to Unaudited Pro Forma Consolidated Financial Statements and Other Data The following unaudited pro forma consolidated balance sheet at September 30, 1998 is intended to present the consolidated financial position of the Company as if the transactions described in the notes hereto (the "Transactions") were consummated at September 30, 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 fiscal year 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 and of certain hotel properties the Company has acquired for the year ended January 2, 1998, incorporated herein by reference to the Company's Current Reports on Form 8-K dated February 11, 1998 and April 15, 1998 and to the Company's Annual Report on Form 10-K for its year ended December 31, 1997; and the Company's unaudited consolidated financial statements for the quarter ended September 30, 1998, incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998. These unaudited adjusted pro forma consolidated financial statements are not necessarily indicative of what the actual consolidated financial position or results of operations of the Company would have been as of the date or for the period indicated, nor do they purport to represent the expected consolidated financial position or results of operations of the Company for any future period. Differences may 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 or any determination not to complete the acquisition of any hotel properties and changes in operating expenses. The following unaudited pro forma consolidated balance sheet and unaudited pro forma consolidated statements of income were prepared pursuant to the Securities and Exchange Commission's rules for the presentation of pro forma data. The pro forma and adjusted pro forma other data give effect to the consummation by the Company of the Transactions. Certain properties expected to be acquired by the Company are currently under construction or development by the sellers. Other properties were under construction during the periods presented when they were owned or under development by the sellers. The accompanying pro forma information does not give further effect to the completion of construction or the related lease commencement for any period prior thereto. Construction projects not completed by September 30, 1998 are likewise not reflected in the pro forma balance sheet. Rather, the effect of completion of construction of these properties is presented separately from the pro forma information as described in the accompanying notes. The Company believes that a display of such adjusted pro forma data is meaningful and relevant to the understanding of the Transactions and, accordingly has presented such data in the final two columns, labeled "Other Data," on the accompanying pages. F-2 HOSPITALITY PROPERTIES TRUST Unaudited Pro Forma Consolidated Balance Sheet and Other Data As of September 30, 1998 (amounts in thousands)
Pro Forma Other Data --------------------------- --------------------------- Pro Forma Other Adjusted Pro Historical (A) Adjustments Pro Forma Adjustments Forma ------------ ----------- ---------- ----------- ----------- Assets Real estate properties $1,744,675 $ 8,543 (B) $1,753,218 $ 63,198(I) $1,816,416 Accumulated depreciation (97,784) -- (97,784) -- (97,784) ---------- -------- ---------- -------- ---------- 1,646,891 8,543 1,655,434 63,198 1,718,632 Cash and cash equivalents 1,421 136,907 (C) 138,328 (56,910)(J) 81,418 Restricted cash (FF&E Reserve) 16,588 -- 16,588 -- 16,588 Other assets, net 8,029 7,723 (D) 15,752 -- 15,752 ---------- -------- ---------- -------- ---------- $1,672,929 $153,173 $1,826,102 $ 6,288 $1,832,390 ========== ======== ========== ======== ========== Liabilities and Shareholders' Equity Senior notes due 2005 and 2008, net of discount $ 149,746 $115,000 (E) $ 264,746 $ -- $ 264,746 8-1/2% Monthly income senior notes due 2009 -- 150,000 (F) 150,000 -- 150,000 Revolving debt 182,000 (182,000)(G) -- -- -- Security and other deposits 191,250 850 (B) 192,100 6,288(K) 198,388 Other liabilities 10,183 -- 10,183 -- 10,183 Shareholder's equity: Common shares of beneficial interest 428 28 (H) 456 -- 456 Additional paid-in capital 1,161,567 69,295 (H) 1,230,862 -- 1,230,862 Cumulative net income 179,883 -- 179,883 -- 179,883 Dividends (202,128) -- (202,128) -- (202,128) ---------- -------- ---------- -------- ---------- Total shareholders' equity 1,139,750 69,323 1,209,073 -- 1,209,073 ---------- -------- ---------- -------- ---------- $1,672,929 $153,173 $1,826,102 $ 6,288 $1,832,390 ========== ======== ========== ======== ==========
See accompanying notes to unaudited pro forma consolidated financial statements and other data. F-3 HOSPITALITY PROPERTIES TRUST Unaudited Pro Forma Consolidated Statement of Income and Other Data For the Nine Months Ended September 30, 1998 (amounts in thousands, except per share and ratio amounts)
Pro Forma Other Data --------------------------- --------------------------- Pro Forma Other Adjusted Pro Historical (L) Adjustments Pro Forma Adjustments Forma ------------ ----------- ---------- ----------- ----------- Revenues: Rental income $113,702 $ 8,589(M) $122,291 $9,647(R) $131,938 FF&E reserve income 11,683 -- 11,683 -- 11,683 Interest income 1,354 -- 1,354 -- 1,354 ------- ------- ------- ------ ------- Total revenues 126,739 8,589 135,328 9,647 144,975 ------- ------- ------- ------ ------- Expenses: Depreciation and amortization of real estate assets 39,617 2,787(N) 42,404 3,329(S) 45,733 Interest 15,178 10,892(O) 26,070 -- 26,070 General and administrative 7,608 422(P) 8,030 504(T) 8,534 ------- ------- ------- ------ ------- Total expenses 62,403 14,101 76,504 3,833 80,337 ------- ------- ------- ------ ------- Income before extraordinary item $64,336 $(5,512) $58,824 $5,814 $64,638 ======= ======= ======= ====== ======= Weighted average shares outstanding 41,685 3,911(Q) 45,596 -- 45,596 ======= ======= ======= ====== ======= Income before extraordinary item per Share $ 1.54 $ 1.29 $ 1.42 ======= ======= ======= Earnings to Fixed Charges 5.2x 3.3x 3.5x ======= ======= =======
See accompanying notes to unaudited pro forma consolidated financial statements and other data. F-4 HOSPITALITY PROPERTIES TRUST Unaudited Pro Forma Consolidated Statement of Income and Other Data For the Year Ended December 31, 1997 (amounts in thousands, except per share and ratio amounts)
Pro Forma Other Data (unaudited) (unaudited) --------------------------- --------------------------- Historical(L) Pro Forma Other Adjusted Pro (audited) Adjustments Pro Forma Adjustments Forma ------------ ----------- ---------- ----------- ----------- Revenues: Rental income $ 98,561 $40,460(M) $139,021 $36,712(R) $175,733 FF&E reserve income 14,643 -- 14,643 -- 14,643 Interest income 928 -- 928 -- 928 -------- ------- -------- ------- -------- Total revenues 114,132 40,460 154,592 36,712 191,304 -------- ------- -------- ------- -------- Expenses: Depreciation and amortization of real estate assets 31,949 13,541(N) 45,490 12,558(S) 58,048 Interest 15,534 19,228(O) 34,762 -- 34,762 Terminated acquisition cost 713 -- 713 -- 713 General and administrative 6,783 2,049(P) 8,832 1,901(T) 10,733 -------- ------- -------- ------- -------- Total expenses 54,979 34,818 89,797 14,459 104,256 -------- ------- -------- ------- -------- Net income $59,153 $ 5,642 $ 64,795 $22,253 $ 87,048 ======== ======= ======== ======= ======== Weighted average shares outstanding 27,530 18,066(Q) 45,596 -- 45,596 ======== ======= ======== ======= ======== Net income per Share $ 2.15 $ 1.42 $ 1.91 ======== ======== ======== Earnings to Fixed Charges 4.8x 2.9x 3.5x ======== ======== ========
See accompanying notes to unaudited pro forma consolidated financial statements and other data. F-5 HOSPITALITY PROPERTIES TRUST Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data (dollars in thousands) Pro Forma Consolidated Balance Sheet Adjustments A. Represents the historical unaudited consolidated balance sheet of the Company at September 30, 1998. B. Represents the purchase of one Candlewood(R) hotel in November 1998 open but not acquired as of September 30, 1998 for a cash price of $7,693 (including closing costs), net of purchase price withheld for security deposit of $850. C. Represents the net effect of the pro forma adjustments on cash. D. Represents the recording of the deferred finance costs in connection with the issuance of $115 million of senior notes due 2005 and the issuance of $150 million of 8-1/2% Monthly Income Senior Notes due 2009 (the "Proposed Offering"). E. Represents issuance of senior notes due 2005 in November 1998. F. Represents issuance of the Proposed Offering. G. Represents repayment of amounts borrowed under the credit facility after completion of the Proposed Offering, the transaction described in Note E above, the issuance of 2.75 million common shares of beneficial interest in November 1998 and the purchase of one Candlewood(R) hotel acquired in November 1998. H. Represents issuance of 2.75 million common shares of beneficial interest in November 1998. Other Data Consolidated Balance Sheet Adjustments I. Represents the purchase of 7 hotels acquired or to be acquired, but not open as of September 30, 1998: Cash purchase prices: One Courtyard by Marriott(R) hotel $ 8,806 Six Candlewood(R) hotels 47,790 Purchase price withheld as security deposits 6,288 Closing costs 314 --------- Total $ 63,198 =========
Included in the above are certain hotel properties the Company has purchased or expects to purchase from sellers upon completion of construction, of which four have been purchased by the Company in November 1998 and December 1998 for an aggregate purchase price of $34,084. J. Represents the net effect of the other adjustments on cash. K. Represents security deposits held by the Company as a result of purchasing and leasing the following hotels: One Courtyard by Marriott(R) hotel $ 978 Six Candlewood(R) hotels 5,310 ------- Total $ 6,288 =======
Pro Forma Consolidated Income Statement Adjustments L. Represents the historical income statement of the Company for the periods presented. F-6 HOSPITALITY PROPERTIES TRUST Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data - continued (dollars in thousands) Pro Forma Consolidated Income Statement Adjustments - continued M. Represents the pro forma effect of leases entered and to be entered for hotels open during the periods presented. This pro forma effect is derived as follows:
Nine Months Year Ended Ended September 30, December 31, 1998 1997 ------------------- ------------ Pro forma Minimum Rent $120,310 $136,493 Pro forma Percentage Rent 1,981 2,528 Amounts included in historical Minimum Rent (111,721) (96,033) Amounts included in historical Percentage Rent (1,981) (2,528) -------- -------- $ 8,589 $ 40,460 ======== ========
Certain of the hotels owned by the Company as of September 30, 1998 were under development and others are currently under development by the sellers of these properties. The Company is not contractually obligated to acquire these hotels until they are substantially completed. The foregoing pro forma income statement assumes the hotels, which were completed prior to September 30, 1998 were acquired as of their completion date. N. Represents the impact of the pro forma transactions on depreciation expense for the entire periods presented. O. Represents the following adjustments to interest expense: o Elimination of interest on the $125 million CMBS Notes repaid upon the issuance of the 7% Senior Notes in February 1998 including amortization of deferred financing costs. o Elimination of interest on $182 million of the Company's $300 million credit facility repaid with the net proceeds of the senior notes due 2005 and of the 8-1/2% Monthly Income Senior Notes due 2009 and proceeds from HPT's November 1998 equity offering. o Record interest, including amortization of deferred financing costs, on the senior notes due 2005. o Record interest, including amortization of deferred financing costs, of $9.9 million and $13.2 million, respectively, for the nine months ended September 30, 1998 and the year ended December 31, 1997, on the proposed $150 million offering of 8-1/2% Monthly Income Senior Notes due 2009. o Record amortization of deferred financing costs related to the Company's $300 million credit facility. P. Represents the estimated impact of the pro forma transactions on general and administrative expenses of the Company for the periods presented. Q. Represents the impact of additional common shares of beneficial interest issued in the periods presented including the 2.75 million shares issued in November 1998. Other Data Consolidated Income Statement Adjustments R. Represents the effect of leases entered and to be entered for the transactions described in Note I above, since the beginning of the periods presented. The effect of these leases is derived as follows:
Nine Months Year Ended Ended September 30, December 31, 1998 1997 ------------------ -------------- Adjusted Pro forma Minimum Rent $129,957 $ 173,205 Adjusted Pro forma Percentage Rent 1,981 2,528 Amounts included in pro forma Minimum Rent (120,310) (136,493) Amounts included in pro forma Percentage Rent (1,981) (2,528) -------- --------- $ 9,647 $ 36,712 ======== =========
S. Represents the impact of the transactions described in Note I above, on depreciation expense for the entire periods presented. F-7 HOSPITALITY PROPERTIES TRUST Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data - continued (dollars in thousands) Other Data Consolidated Income Statement Adjustments - continued T. Represents the estimated impact of the transactions described in Note I above, on general and administrative expenses of the Company. F-8 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HOSPITALITY PROPERTIES TRUST By: /s/ Thomas M. O'Brien ----------------------------- Thomas M. O'Brien, Treasurer and Chief Financial Officer Date: December 11, 1998 EX-1.1 2 UNDERWRITING AGREEMENT HOSPITALITY PROPERTIES TRUST (a Maryland real estate investment trust) $150,000,000 8 1/2% Monthly Income Senior Notes due 2009 UNDERWRITING AGREEMENT December 11, 1998 MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED SALOMON SMITH BARNEY INC. A.G. EDWARDS & SONS, INC. LEGG MASON WOOD WALKER, INCORPORATED MORGAN STANLEY & CO. INCORPORATED PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES INCORPORATED c/o MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Ladies and Gentlemen: Hospitality Properties Trust, a Maryland real estate investment trust (the "Company"), confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Salomon Smith Barney Inc., A.G. Edwards & Sons, Inc., Legg Mason Wood Walker, Incorporated, Morgan Stanley & Co. Incorporated, PaineWebber Incorporated and Prudential Securities Incorporated (collectively, the "Underwriters", which term shall include any underwriter substituted as hereinafter provided in Section 10 hereof), with respect to the sale by the Company and the purchase by each such Underwriter, severally, of the principal amount of the Company's 8 1/2% Monthly Income Senior Notes due 2009 set forth opposite the name of each such Underwriter listed in Exhibit A hereto at a purchase price of 97.25% of the principal amount of the Notes and with respect to the grant by the Company to the Underwriters of the option described in Section 2 hereof to purchase all or any part of an additional $22,500,000 aggregate principal amount of such Notes to cover over-allotments. The aforesaid $150,000,000 principal amount of such Notes (the "Initial Notes"), together with all or any part of the $22,500,000 additional principal amount subject to the option described in Section 2 hereof (the "Option Notes"), are collectively hereinafter called the "Notes." The Notes are to be issued pursuant to an indenture dated as of February 25, 1998 and a supplemental indenture dated as of December 16, 1998 (together, the "Indenture"), each between the Company and State Street Bank and Trust Company (the "Trustee"). The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No. 333-43573) for the registration of debt securities, preferred shares of beneficial interest, depositary shares, common shares of beneficial interest and warrants under the Securities Act of 1933, as amended (the "1933 Act"), and the offering thereof from time to time in accordance with Rule 415 of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations"). Such registration statement has been declared effective by the Commission on January 15, 1998 and the Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act"), and the Company has filed such post-effective amendments thereto as may be required and each such post-effective amendment has been declared effective by the Commission. Such registration statement (as so amended, if applicable) is referred to herein as the "Registration Statement"; and the final prospectus and the final prospectus supplement relating to the offering of the Notes, in the form first furnished to the Underwriters by the Company for use in connection with the offering of the Notes, are collectively referred to herein as the "Prospectus"; provided, however, that all references to the "Registration Statement" and the "Prospectus" shall also be deemed to include all documents incorporated therein by reference pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"), prior to the date hereof; provided, further, that if the Company files a registration statement with the Commission pursuant to Rule 462(b) of the 1933 Act Regulations (the "Rule 462(b) Registration Statement"), then, after such filing, all references to "Registration Statement" shall also be deemed to include the Rule 462 Registration Statement. For purposes of this Underwriting Agreement, all references to the Registration Statement and Prospectus, or to any amendment or supplement to either of the foregoing shall be deemed to include any copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). All references in this Underwriting Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" (or other references of like import) in the Registration Statement or the Prospectus shall be deemed to mean and include all such financial statements and schedules and other information which is incorporated by reference in the Registration Statement or the Prospectus, as the case may be, prior to the execution of this Underwriting Agreement; and all references in this Underwriting Agreement to amendments or supplements to the Registration Statement, Prospectus or preliminary prospectus shall be deemed to mean and include the filing of any document under the 1934 Act which is incorporated by reference in the Registration Statement or Prospectus, as the case may be, after the execution of this Underwriting Agreement. The 164 hotels described in the Prospectus as being currently owned by the Company as of the date hereof are collectively referred to herein as the "Current Hotels". The 3 hotels described in the Prospectus as being proposed to be acquired by the Company as of the date hereof are collectively referred to herein as the "Additional Hotels". The Current Hotels and the Additional Hotels are collectively referred to herein as the "Hotels". It is understood that in connection with the proposed acquisition of the Additional Hotels, the Company has entered into purchase and sale agreements and agreements to lease (the "Acquisition Agreements") contemplating consummation of a series of related transactions (the "Acquisition Transactions") generally described in the Prospectus Supplement referred to below under the captions "Summary", "Recent Developments", "Use of Proceeds" and "The Company", pursuant to which the Company shall (i) acquire the Additional Hotels, (ii) lease the Additional Hotels to 2 hotel operating companies pursuant to separate operating leases and (iii) to the extent necessary to finance the pending acquisitions, borrow funds under the $300 million aggregate principal amount credit facility that the Company currently maintains with a syndicate of 14 banks (as more fully described in the Prospectus, the "Credit Facility") or a successor credit facility. SECTION 1. Representations and Warranties. (a) Representations and Warranties by the Company. The Company represents and warrants to each Underwriter, as of the date hereof, as follows: (1) Compliance with Registration Requirements. The Company meets the requirements for use of Form S-3 under the 1933 Act. The Registration Statement (including any Rule 462(b) Registration Statement) has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement (or such Rule 462(b) Registration Statement) has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. In addition, the Indenture has been duly qualified under the 1939 Act. At the respective times the Registration Statement (including any Rule 462(b) Registration Statement) and any post-effective amendments thereto (including the filing of the Company's most recent Annual Report on Form 10-K with the Commission (the "Annual Report on Form 10-K")) became effective and as of the date hereof, the Registration Statement (including any Rule 462(b) Registration Statement) and any amendments thereto complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and the 1939 Act and the rules and regulations of the Commission under the 1939 Act (the "1939 Act Regulations") and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. At the date of the Prospectus and at the Closing Time as defined below, neither the Prospectus nor any amendments and supplements thereto included or will include an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, the representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or the Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by any Underwriter through Merrill Lynch expressly for use in the Registration Statement or the Prospectus. Each preliminary prospectus and prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so filed in all material respects with the 1933 Act Regulations and the Prospectus delivered to the Underwriters for use in connection with the offering of the Notes will, at the time of such delivery, be identical to 3 any electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (2) Incorporated Documents. The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the "1934 Act Regulations") and, when read together with the other information in the Prospectus, at the date of the Prospectus and at the Closing Time did not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (3) Independent Accountants. The accountants who certified the financial statements and any supporting schedules thereto included in the Registration Statement and the Prospectus are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (4) Financial Statements. The financial statements of the Company included in the Registration Statement and the Prospectus, together with the related schedules and notes, as well as those financial statements, schedules and notes of any other entity included therein, present fairly the financial position of the Company and its consolidated subsidiaries, or such other entity, as the case may be, at the dates indicated and the statement of operations, stockholders' equity and cash flows of the Company and its consolidated subsidiaries, or such other entity, as the case may be, for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included in the Registration Statement and the Prospectus present fairly in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information included in the Prospectus present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement and the Prospectus. In addition, any pro forma financial statements of the Company and its subsidiaries and the related notes thereto included in the Registration Statement and the Prospectus present fairly the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and have been properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (5) No Material Adverse Change in Business. Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as otherwise stated therein, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"), (B) there have been no 4 transactions entered into by the Company or any of its subsidiaries, other than those arising in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise and (C) except for regular dividends on the Company's common stock or preferred stock, in amounts per share that are consistent with past practice or the applicable charter document or supplement thereto, respectively, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (6) Good Standing of the Company. The Company has been duly organized and is validly existing as a real estate investment trust in good standing under the laws of the State of Maryland and has power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and to enter into and perform its obligations under, or as contemplated under, this Underwriting Agreement. The Company is duly qualified to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not result in a Material Adverse Effect. (7) Good Standing of Subsidiaries. Each "significant subsidiary" of the Company (as such term is defined in Rule 1-02 of Regulation S-X promulgated under the 1933 Act) (each, a "Subsidiary" and, collectively, the "Subsidiaries"), if any, has been duly organized and is validly existing as a corporation or a real estate investment trust, as the case may be, in good standing under the laws of the jurisdiction of its incorporation or formation, as the case may be, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and is duly qualified as a foreign corporation or a real estate investment trust, as the case may be, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not result in a Material Adverse Effect. Except as otherwise stated in the Registration Statement and the Prospectus, all of the issued and outstanding capital stock of each Subsidiary has been duly authorized and is validly issued, fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. None of the outstanding shares of capital stock of any Subsidiary was issued in violation of preemptive or other similar rights of any securityholder of such Subsidiary. (8) Capitalization. The authorized, issued and outstanding shares of capital stock of the Company is as set forth in the column entitled "Actual" under "Capitalization" in the Prospectus (except for subsequent issuances thereof, if any, contemplated under this Underwriting Agreement, pursuant to reservations, agreements or employee benefit plans referred to in the Prospectus or pursuant to the exercise of convertible securities or options referred to in the Prospectus). Except for 500 common shares of beneficial interest, 250 of which are held by John A. Mannix and 250 of which are held by David M. Lepore, such shares of capital stock have been duly authorized and validly issued by the Company and are fully paid and non-assessable, and none of such shares of capital 5 stock was issued in violation of preemptive or other similar rights of any securityholder of the Company. (9) Authorization of this Underwriting Agreement. This Underwriting Agreement has been duly authorized, executed and delivered by the Company. (10) Authorization of the Notes. The Notes have been duly authorized by the Company for issuance and sale pursuant to this Underwriting Agreement. The Notes, when issued and authenticated in the manner provided for in the Indenture and delivered against payment of the consideration therefor specified herein, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally or by general equitable principles (regardless of whether enforcement is considered in a proceeding in equity or at law). (11) Authorization of the Indenture. The Indenture has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally or by general equitable principles (regardless of whether enforcement is considered in a proceeding in equity or at law). (12) Descriptions of the Notes and the Indenture. The Notes and the Indenture will conform in all material respects to the statements relating thereto contained in the Prospectus and will be in substantially the form filed or incorporated by reference, as the case may be, as an exhibit to the Registration Statement. (13) Absence of Defaults and Conflicts. Neither the Company nor any of its subsidiaries is in violation of its declaration of trust, charter or by-laws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound, or to which any of the assets, properties or operations of the Company or any of its subsidiaries is subject (collectively, "Agreements and Instruments"), except for such defaults that would not result in a Material Adverse Effect. The execution, delivery and performance of this Underwriting Agreement and the Indenture and any other agreement or instrument entered into or issued or to be entered into or issued by the Company in connection with the transactions contemplated hereby or thereby or in the Registration Statement and the Prospectus and the consummation of the transactions contemplated herein and in the Registration Statement and the Prospectus (including the issuance and sale of the Notes and the use of the proceeds from the sale of the Notes as described under the caption "Use of Proceeds") and compliance by the Company with its obligations hereunder and thereunder have been 6 duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any assets, properties or operations of the Company or any of its subsidiaries pursuant to, any Agreements and Instruments, nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of its subsidiaries. (14) Absence of Labor Dispute. To the knowledge of the Company, no labor problem exists or is imminent with employees of the Company or any of its subsidiaries that could have a Material Adverse Effect. (15) Absence of Proceedings. There is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or to the knowledge of the Company threatened, against or affecting the Company or any of its subsidiaries which is required to be disclosed in the Registration Statement and the Prospectus (other than as stated therein), or which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the consummation of the transactions contemplated under the Prospectus, this Underwriting Agreement, the Indenture or the performance by the Company of its obligations hereunder and thereunder. The aggregate of all pending legal or governmental proceedings to which the Company or any of its subsidiaries is a party or of which any of their respective assets, properties or operations is the subject which are not described in the Registration Statement and the Prospectus, including ordinary routine litigation incidental to the business, could not reasonably be expected to result in a Material Adverse Effect. (16) Accuracy of Exhibits. There are no contracts or documents which are required to be described in the Registration Statement, the Prospectus or the documents incorporated by reference therein or to be filed as exhibits thereto which have not been so described and filed as required. (17) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency, domestic or foreign, is necessary or required for the due authorization, execution and delivery by the Company of this Underwriting Agreement or for the performance by the Company of the transactions contemplated under the Prospectus, this Underwriting Agreement, or the Indenture, except such as may be required and will be obtained at or prior to the Closing Time and such as may be required by the securities or Blue Sky laws or real estate syndication laws of the various 7 states in connection with the offer and sale of the Notes and, in the case of the performance thereof, except as are contemplated by the express terms of such documents to occur after the Closing Time and except (x) such as are otherwise described in the Prospectus and (y) such that the failure to obtain would not have a Material Adverse Effect. (18) Possession of Intellectual Property. The Company and each of its subsidiaries owns, or possesses adequate rights to use, all patents, trademarks, trade names, service marks, copyrights, licenses and other rights necessary for the conduct of their respective businesses as described in the Registration Statement and in the Prospectus, and neither the Company nor any of its subsidiaries has received any notice of conflict with, or infringement of, the asserted rights of others with respect to any such patents, trademarks, trade names, service marks, copyrights, licenses and other such rights (other than conflicts or infringements that, if proven, would not have a Material Adverse Effect), and neither the Company nor any of its subsidiaries knows of any basis therefor. (19) Possession of Licenses and Permits. To the best knowledge of the Company, each lessee of the Current Hotels has, and as of the Closing Time will have, all permits, licenses, approvals, certificates, franchises and authorizations of governmental or regulatory authorities ("Approvals") as may be necessary to lease, operate or manage the Current Hotels in the manner described in or contemplated by the Prospectus, except for those Approvals the absence of which would not have a Material Adverse Effect. (20) Title to Property. The Company and its subsidiaries have good and marketable title to all real property owned by the Company and its subsidiaries and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind, except (A) as otherwise stated in the Registration Statement and the Prospectus, (B) in the case of personal property located at certain Hotels, such as are subject to equipment lease financing arrangements which have been entered into in the ordinary course of business and have an aggregate outstanding balance not in excess of $1 million or (C) those which do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its subsidiaries. All of the leases and subleases material to the business of the Company and its subsidiaries considered as one enterprise, and under which the Company or any of its subsidiaries holds properties described in the Prospectus, are in full force and effect, and neither the Company nor any of its subsidiaries has received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any of its subsidiaries under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such subsidiary of the continued possession of the leased or subleased premises under any such lease or sublease. (21) Commodity Exchange Act. The Notes, upon issuance, will be excluded or exempted under, or beyond the purview of, the Commodity Exchange Act, as amended (the "Commodity Exchange Act"), and the rules and regulations of the Commodity 8 Futures Trading Commission under the Commodity Exchange Act (the "Commodity Exchange Act Regulations"). (22) Investment Company Act. The Company is not, and upon the issuance and sale of the Notes as herein contemplated and the application of the net proceeds therefrom as described in the Prospectus will not be, an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"). (23) Environmental Laws. (a) The Company has received and reviewed certain environmental reports on each Current Hotel's property, has obtained certain representations and warranties relating to environmental matters from the sellers of the Current Hotels set forth in purchase agreements therefor and has conducted physical inspections of each Current Hotel's property. (b) Except as described in the Prospectus, (i) the Company, and, to its knowledge, each Current Hotel's property, is, and as of the Closing Time will be, in compliance with all applicable federal, state and local laws and regulations relating to the protection of human health and safety, the environment, hazardous or toxic substances and wastes, pollutants and contaminants ("Environmental Laws"), (ii) the Company, or, to its knowledge, its lessees have received, or as of the Closing Time will receive, all permits, licenses or other approvals required under applicable Environmental Laws to conduct the respective hotel businesses presently conducted at each Current Hotel's property and (iii) the Company or, to its knowledge, its lessees are, or as of the Closing Time will be, in compliance with all terms and conditions of any such permit, license or approval, except, in respect of clauses (i), (ii) and (iii), as otherwise disclosed in the Prospectus or as would not, singly or in the aggregate, have a Material Adverse Effect. (c) To the best knowledge of the Company, except as described in the Prospectus, there are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, remediation or closure of properties or compliance with Environmental Laws and any potential liabilities to third parties) that, as of the date hereof, would, or as of the Closing Time will, singly or in the aggregate, have a Material Adverse Effect. (d) The Company has received and reviewed engineering reports on each Current Hotel's property, has obtained certain representations and warranties from the sellers of the Current Hotels set forth in purchase agreements therefor and has conducted physical inspections of each Current Hotel's property. (e) In respect of each Current Hotel, (i) each Current Hotel is not in violation of any applicable building code, zoning ordinance or other law or regulation, except where such violation of any applicable building code, zoning ordinance or other law or regulation would not, singly or in the aggregate, have a Material Adverse Effect; (ii) the Company has not received notice of any proposed material special assessment or any proposed change in any property tax, zoning or land use laws or availability of water affecting any Current Hotel that would have, singly or in the aggregate, a Material Adverse Effect; (iii) except as disclosed in the Prospectus, there does not exist any 9 material violation of any declaration of covenants, conditions and restrictions with respect to any Current Hotel that would have, singly or in the aggregate, a Material Adverse Effect, or any state of facts or circumstances or condition or event which could, with the giving of notice or passage of time, or both, constitute such a violation; and (iv) the improvements comprising any portion of each Current Hotel (the "Improvements") are free of any and all material physical, mechanical, structural, design and construction defects that would have, singly or in the aggregate, a Material Adverse Effect and the mechanical, electrical and utility systems servicing the Improvements (including, without limitation, all water, electric, sewer, plumbing, heating, ventilation, gas and air conditioning) are in good condition and proper working order and are free of defects that would have, singly or in the aggregate, a Material Adverse Effect. (24) REIT Qualification. The Company is organized in conformity with the requirements for qualification, and, as of the date hereof the Company operates, and as of Closing Time the Company will use its best efforts to operate, in a manner that qualifies the Company as a "real estate investment trust" under the Internal Revenue Code of 1986, as amended (the "Code"), and the rules and regulations thereunder, for 1998 and subsequent years. The Company qualified as a real estate investment trust under the Code for each of the taxable years ended December 31, 1995 through December 31, 1997. (25) Possession of Insurance. The Company and its Current Hotels are, and as of the Closing Time will be, insured in the manner described in the Prospectus by insurers of recognized financial responsibility against such losses and risks and in such amounts as are customary in the businesses in which the Company is engaged and proposes to engage and the Company has no reason to believe that it or its tenants will not be able to renew such insurance coverage as and when such coverage expires or to obtain similar coverage as may be necessary to continue its business at economically viable rates. The Company and/or its subsidiaries, as applicable, has obtained an ALTA Extended Coverage Owner's Policy of Title Insurance or its local equivalent (or an irrevocable commitment to issue such a policy) on all of the Current Hotels owned by the Company or its subsidiaries and such title insurance is in full force and effect. (26) Acquisition Agreements. The Acquisition Agreements pursuant to which the Company expects to acquire the Additional Hotels (including any Additional Hotels which the Company may determine to acquire after the Closing Time) are in full force and effect. The Company intends and reasonably expects to consummate the acquisition and lease of all Additional Hotels not owned or acquired by it as of the Closing Time as expeditiously as possible after the Closing Time, including as and when the construction of certain of such properties is completed. (27) Absence of Indebtedness. At the Closing Time after giving effect to repayment of amounts then outstanding under the Credit Facility on or prior to such date, the Company will have no indebtedness for money borrowed except (i) the Credit Facility, (ii) the Company's 8 1/4% Monthly Income Senior Notes due 2005, (iii) the Company's 7% Senior Notes due 2008, (iv) equipment financing arrangements in respect of personal property located at certain Current Hotels which have been entered into in the 10 ordinary course of business and have an aggregate outstanding balance not in excess of $1 million, and (v) any indebtedness as to which Merrill Lynch shall have given its prior written consent. (28) Good Standing of the Advisor. Except as otherwise disclosed in the Prospectus, since the respective dates as of which information is given in the Prospectus, there has been no material adverse change in the business, operations, earnings, prospects, properties or condition (financial or otherwise) of REIT Management & Research, Inc. (the "Advisor"), whether or not arising in the ordinary course of business, that would have a Material Adverse Effect. The Advisor (A) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and (B) has the requisite corporate power and authority to conduct its business as described in the Prospectus and to own and operate its material properties. The Advisory Agreement, dated as of January 1, 1998 (the "Advisory Agreement"), between the Company and the Advisor, has been duly authorized, executed and delivered by the parties thereto and constitutes the valid agreement of the parties thereto, enforceable in accordance with its terms, except as limited by (a) the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws relating to or affecting the rights or remedies of creditors or (b) the effect of general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (b) Officers' Certificates. Any certificate signed by any officer of the Company or any of its subsidiaries and delivered to any Underwriter or to counsel for the Underwriters in connection with the offering of the Notes shall be deemed a representation and warranty by the Company to each Underwriter as to the matters covered thereby on the date of such certificate. SECTION 2. Sale and Delivery to Underwriters; Closing. (a) Notes. The several commitments of the Underwriters to purchase the Notes pursuant to the terms hereof shall be deemed to have been made on the basis of the representations, warranties and agreements herein contained and shall be subject to the terms and conditions herein set forth. (b) Over-allotment Option. In addition, on the basis of the representations and warranties herein included and subject to the terms and conditions herein set forth, the Company hereby grants an option to the Underwriters, severally and not jointly, to purchase up to an additional $22,500,000 principal amount of Notes at the purchase price set forth on the first page of this Agreement. The option hereby granted will expire 30 days after the date of this Agreement and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Initial Notes upon notice by Merrill Lynch to the Company setting forth the principal amount of Option Notes as to which the several Underwriters are then exercising the option and the time, date and place of payment and delivery for such Option Notes. Any such time and date of delivery (a "Date of Delivery") shall be determined by Merrill Lynch but shall not be later than seven full business days, nor earlier than two full business days, after the exercise of said option, nor in any event prior to Closing Time, unless otherwise agreed upon by the Underwriters and the Company. If the option is exercised as to all or any portion of the Option Notes, such Option 11 Notes shall be purchased by the Underwriters, severally and not jointly, in proportion to their respective Initial Note underwriting obligations as set forth in Exhibit A. (c) Payment. Payment of the purchase price for, and delivery of, the Initial Notes shall be made at the offices of Sullivan & Worcester LLP, Boston, Massachusetts, or at such other place as shall be agreed upon by Merrill Lynch and the Company, at 9:00 A.M. (Eastern time) on December 16, 1998 (unless postponed in accordance with the provisions of Section 10 hereof), or such other time not later than ten business days after such date as shall be agreed upon by Merrill Lynch and the Company (such time and date of payment and delivery being herein called "Closing Time"). In addition, in the event that the over-allotment option described in (b) above is exercised by the Underwriters, payment of the purchase price for and delivery of the Option Notes shall be made at the above-mentioned office of Sullivan & Worcester LLP, or at such other place as shall be agreed upon by Merrill Lynch and the Company on each Date of Delivery as specified in the notice to the Company. Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company, against delivery to Merrill Lynch for the respective accounts of the Underwriters of the Notes to be purchased by them. It is understood that each Underwriter has authorized Merrill Lynch, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Notes which it has severally agreed to purchase. Merrill Lynch, individually and not as representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Notes to be purchased by any Underwriter whose funds have not been received by the Closing Time or the Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder. (d) Denominations; Registration. The Notes shall be issued in such authorized denominations and registered in such names as Merrill Lynch shall request not later than one business day prior to the Closing Time or the Date of Delivery, as the case may be. The Notes shall be made available for inspection not later than 10:00 a.m. (Eastern Time) on the business day prior to the Closing Time or the Date of Delivery, as the case may be, at the office of The Depository Trust Company or its designated custodian. SECTION 3. Covenants of the Company. The Company covenants with each Underwriter as follows: (a) Immediately following the execution of this Agreement, the Company will prepare a Prospectus Supplement setting forth the aggregate principal amount of Notes covered thereby and their terms not otherwise specified in the Prospectus, the Underwriters' names, the price at which the Notes are to be purchased by the Underwriters from the Company, and such other information as the Underwriters and the Company deem appropriate in connection with the offering of the Notes; and the Company will promptly transmit copies of the Prospectus Supplement to the Commission for filing pursuant to Rule 424(b) of the 1933 Act Regulations and will furnish to the Underwriters as many copies of the Prospectus (including such Prospectus Supplement) as they shall reasonably request. (b) Until the termination of the initial offering of the Notes, the Company will notify the Underwriters immediately, and confirm the notice in writing, (i) of the effectiveness of any amendment to the Registration Statement, (ii) of the transmittal to the Commission for filing of 12 any supplement or amendment to the Prospectus or any document to be filed pursuant to the 1934 Act, (iii) of the receipt of any comments from the Commission with respect to the Notes, (iv) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus with respect to the Notes or for additional information relating thereto, and (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose. The Company will make every reasonable effort to prevent the issuance of any such stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (c) Until the termination of the initial offering of the Notes, the Company will give the Underwriters notice of its intention to file or prepare any post-effective amendment to the Registration Statement or any amendment or supplement to the Prospectus (including any revised prospectus which the Company proposes for use by the Underwriters in connection with the offering of the Notes which differs from the prospectus on file at the Commission at the time that the Registration Statement becomes effective, whether or not such revised prospectus is required to be filed pursuant to Rule 424(b) of the 1933 Act Regulations), will furnish the Underwriters with copies of any such amendment or supplement a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file any such amendment or supplement or use any such prospectus to which counsel for the Underwriters shall reasonably object. (d) The Company will deliver to each of the Underwriters a conformed copy of the Registration Statement as originally filed and of each amendment thereto filed prior to the termination of the initial offering of the Notes (including exhibits filed therewith or incorporated by reference therein and the documents incorporated by reference into the Prospectus pursuant to Item 12 of Form S-3). (e) The Company will furnish to the Underwriters, from time to time during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of the Prospectus (as amended or supplemented) as the Underwriters may reasonably request for the purposes contemplated by the 1933 Act, the 1933 Act Regulations, the 1934 Act or 1934 Act Regulations. (f) Until the termination of the initial offering of the Notes, if any event shall occur as a result of which it is necessary, in the opinion of counsel for the Underwriters, to amend or supplement the Prospectus in order to make the Prospectus not misleading in the light of the circumstances existing at the time it is delivered, the Company will either (i) forthwith prepare and furnish to the Underwriters an amendment of or supplement to the Prospectus or (ii) make an appropriate filing pursuant to Section 13, 14 or 15 of the 1934 Act, in form and substance reasonably satisfactory to counsel for the Underwriters, which will amend or supplement the Prospectus so that it will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered, not misleading. (g) The Company will endeavor in good faith, in cooperation with the Underwriters, to qualify the Notes for offering and sale under the applicable securities laws and real estate 13 syndication laws of such states and other jurisdictions of the United States as the Underwriters may designate; provided that, in connection therewith, the Company shall not be required to qualify as a foreign corporation or trust or to file any general consent to service of process. In each jurisdiction in which the Notes have been so qualified the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for so long as required for the distribution of the Notes. (h) The Company will make generally available to its security holders as soon as reasonably practicable, but not later than 90 days after the close of the period covered thereby, an earning statement of the Company (in form complying with the provisions of Rule 158 of the 1933 Act Regulations) covering a period of at least twelve months beginning not later than the first day of the Company's fiscal quarter next following the effective date of the Registration Statement. "Earning statement", "make generally available" and "effective date" will have the meanings contained in Rule 158 of the 1933 Act Regulations. (i) The Company will use the net proceeds received by it from the sale of the Notes in the manner specified in the Prospectus under the caption "Use of Proceeds" in all material respects. (j) The Company currently intends to continue to qualify as a "real estate investment trust" under the Code, and use its best efforts to continue to meet the requirements to qualify as a "real estate investment trust" under the Code. (k) The Company will timely file any document which it is required to file pursuant to the 1934 Act prior to the termination of the offering of the Notes. (l) The Company will not, between the date of this Agreement and the termination of any trading restrictions or Closing Time, whichever is later, with respect to the Notes, without Merrill Lynch's prior written consent, offer or sell, grant any option for the sale of, or enter into any agreement to sell, any debt securities of the Company with a maturity of more than one year (other than the Notes which are to be sold pursuant to this Agreement and additional or expanded commitments to participate in the Company's revolving line of credit) except as may otherwise be provided in this Agreement. SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay all expenses incident to the performance of its obligations under this Underwriting Agreement, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto, (ii) the preparation, issuance and delivery of the Notes and any certificates for the Notes to the Underwriters, including any transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Notes to the Underwriters, (iii) the fees and disbursements of the Company's counsel, accountants and other advisors or agents, as well as the fees and disbursements of the Trustee, and their respective counsel, (iv) the qualification of the Notes under state securities laws in accordance with the provisions of Section 3(g) hereof, including filing fees and the reasonable fees and disbursements of counsel in connection therewith and in connection with the preparation, printing and delivery of the Blue Sky Survey, 14 and any amendment thereto, (v) the printing and delivery to the Underwriters of copies of the Prospectus and any amendments or supplements thereto, (vi) the fees charged by nationally recognized statistical rating organizations for the rating of the Notes, (vii) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review, if any, by the National Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Notes, and (viii) the fees and expenses of any Underwriter acting in the capacity of a "qualified independent underwriter" (as defined in Section 2(l) of Schedule E of the bylaws of the NASD), if applicable. (b) Termination of Agreement. If this Underwriting Agreement is terminated by Merrill Lynch in accordance with the provisions of Section 5 or Section 9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters. SECTION 5. Conditions of Underwriters' Obligations. The obligations of the Underwriters to purchase and pay for the Notes pursuant to the terms hereof are subject to the accuracy of the representations and warranties of the Company contained in Section 1 hereof or in certificates of any officer of the Company or any of its subsidiaries delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions: (a) Effectiveness of Registration Statement. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act and no proceedings for that purpose shall have been instituted or be pending or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the Underwriters. A prospectus containing information relating to the description of the Notes, the specific method of distribution and similar matters shall have been filed with the Commission in accordance with Rule 424(b)(1), (2), (3), (4) or (5), as applicable. (b) Opinion of Counsel for Company. At Closing Time, Merrill Lynch shall have received the favorable opinion, dated as of Closing Time, of Sullivan & Worcester, LLP, counsel for the Company, in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters, to the effect set forth in Exhibit B hereto. In rendering their opinion, such counsel may rely on an opinion dated the Closing Time of Ballard Spahr Andrews & Ingersoll LLP, as to matters governed by the laws of the State of Maryland. In addition, in rendering their opinion, such counsel may state that their opinion as to laws of the State of Delaware is limited to the Delaware General Corporation Law. (c) Opinion of Special Maryland Counsel for Company. At Closing Time, Merrill Lynch shall have received the favorable opinion, dated as of Closing Time, of Ballard Spahr Andrews & Ingersoll LLP, special Maryland counsel for the Company, in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters, to the effect as counsel to the Underwriters may reasonably request. 15 (d) Opinion of Counsel for Underwriters. At Closing Time, Merrill Lynch shall have received the favorable opinion, dated as of Closing Time, of Brown & Wood LLP counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters, with respect to the matters set forth in paragraphs (7), (8), (9), (10), (18), (19) and (22) of Exhibit B and to the following effect: nothing has come to their attention that would lead them to believe that the Registration Statement (including any Rule 462(b) Registration Statement) or any post-effective amendment thereto (except for financial statements and supporting schedules and other financial data included therein or omitted therefrom and for the Form T-1s, as to which they make no statement), at the time the Registration Statement (including any Rule 462(b) Registration Statement) or any post-effective amendment thereto (including the filing of the Company's Annual Report on Form 10-K with the Commission) became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any amendment or supplement thereto (except for financial statements and supporting schedules and other financial data included therein or omitted therefrom, as to which they make no statement), at the time the Prospectus was issued, at the time any such amended or supplemented prospectus was issued or at the Closing Time, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. In giving such opinion, such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York, the federal law of the United States and the General Corporation Law of the State of Delaware, upon the opinions of counsel satisfactory to Merrill Lynch and may rely on an opinion dated the Closing time of Ballard, Spahr Andrews and Ingersoll LLP as to matters governed by the laws of the State of Maryland. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and its subsidiaries and certificates of public officials. (e) Officers' Certificate. At Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and Merrill Lynch shall have received a certificate of the President or a Vice President of the Company and of the chief financial officer or chief accounting officer of the Company, dated as of Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties in Section 1(a) are true and correct with the same force and effect as though expressly made at and as of the Closing Time, except with respect to any issuances of common shares of beneficial interest of the Company or with respect to transactions as to which Merrill Lynch shall have given its prior written consent, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted, are pending or, to the best of such officer's knowledge, are threatened by the Commission. 16 (f) Advisor's Certificate. At Closing Time, there shall not have been, since the respective dates as of which information is given in the Registration Statement and the Prospectus, any material adverse change in the business, operations, earnings, prospects, properties or condition (financial or otherwise) of the Advisor, whether or not arising in the ordinary course of business; and Merrill Lynch shall have received, at Closing Time, a certificate of the President or a Vice President of the Advisor evidencing compliance with this subsection (f). (g) Accountant's Comfort Letter. At the time of the execution of this Underwriting Agreement, Merrill Lynch shall have received from Arthur Andersen LLP a letter dated such date, in form and substance satisfactory to Merrill Lynch, together with signed or reproduced copies of such letter for each of the other Underwriters, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus. (h) Bring-down Comfort Letter. At Closing Time, Merrill Lynch shall have received from Arthur Andersen LLP a letter, dated as of Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (g) of this Section 5, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time. (i) Ratings. At Closing Time, the Notes shall have the ratings of Baa3 by Moody's Investors Service, Inc. and BBB- by Standard & Poor's Rating Service. Since the time of execution of this Underwriting Agreement, there shall not have occurred a downgrading in, or withdrawal of, the rating assigned to the Notes or any of the Company's other securities by any such rating organization, and no such rating organization shall have publicly announced that it has under surveillance or review its rating of the Notes or any of the Company's other securities. (j) No Objection. If the Registration Statement or the offering of the Notes has been filed with the NASD for review, the NASD shall not have raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements. (k) Additional Documents. At Closing Time, counsel for the Underwriters shall have been furnished with such documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Notes as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Notes as herein contemplated shall be reasonably satisfactory in form and substance to Merrill Lynch and counsel for the Underwriters. (l) Date of Delivery Documentation. In the event the Underwriters exercise the option described in Section 2 hereof to purchase all or any portion of the Option Notes, the representations and warranties of the Company included herein and the statements in any certificates furnished by the Company hereunder shall be true and correct as of the Date of Delivery (except those which speak as of a certain date, in which case as of such date), and the Underwriters shall have received: 17 (i) A certificate of the President or a Vice President and of the chief financial officer or chief accounting officer of the Company, dated such Date of Delivery, confirming that their certificate delivered at Closing Time pursuant to Section 5(e) hereof remain true as of such Date of Delivery, except with respect to any issuances of common shares of beneficial interest of the Company or with respect to transactions as to which Merrill Lynch shall have given its prior written consent. (ii) The favorable opinion of Sullivan & Worcester LLP, counsel for the Company, in form and substance satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Notes and otherwise to the same effect as the opinion required by Section 5(b) hereof. (iii) Certificate of the President of the Advisor confirming that his certificate delivered at Closing Time pursuant to Section 5(f) hereof remains true as of such Date of Delivery. (iv) The favorable opinion of Brown & Wood LLP, counsel for the Underwriters, dated such Date of Delivery, relating to the Option Notes and otherwise to the same effect as the opinion required by Section 5(d) hereof. (v) A letter from Arthur Andersen LLP, dated such Date of Delivery, substantially the same in scope and substance as the letter furnished to the Underwriters pursuant to Section 5(h) hereof. (m) Termination of this Agreement. If any condition specified in this Section 5 shall not have been fulfilled when and as required to be fulfilled, this Underwriting Agreement may be terminated by Merrill Lynch by notice to the Company at any time at or prior to the Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such termination and remain in full force and effect. SECTION 6. Indemnification. (a) Indemnification of Underwriters. The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; 18 (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Merrill Lynch expressly for use in the Registration Statement (or any amendment thereto), or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto); and provided, further, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter, or the benefit of any person controlling any Underwriter, if a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto and excluding documents incorporated or deemed to be incorporated by reference therein) was not sent or given by or on behalf of such Underwriter to such person asserting any such losses, claims, damages or liabilities at or prior to the written confirmation of the sale of such Notes to such person, if required by law so to have been delivered, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or expense. (b) Indemnification of Company, Trustees and Officers. Each Underwriter severally agrees to indemnify and hold harmless the Company, its trustees, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Underwriter through Merrill Lynch expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the Prospectus (or any amendment or supplement thereto). (c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the 19 extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. The indemnifying party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such indemnified parties and payment of all fees and expenses. The indemnified parties shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified parties unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense and employ counsel or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified parties and the indemnifying party and the indemnified parties shall have been advised by such counsel that there may be one or more legal defenses available to them which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified parties, it being understood, however, that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for the indemnified parties, which firm shall be designed in writing by indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred). No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. SECTION 7. Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, from the offering of the Notes pursuant hereto or (ii) if the allocation provided 20 by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other hand, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, in connection with the offering of the Notes pursuant hereto shall be deemed to be in the same respective proportions as the total net proceeds from the offering of such Notes (before deducting expenses) received by the Company and the total underwriting discount received by the Underwriters, in each case as set forth on the cover of the Prospectus, bear to the aggregate initial public offering price of such Notes as set forth on such cover. The relative fault of the Company, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Notes underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Underwriters' respective obligations 21 to contribute pursuant to this Section 7 are several in proportion to the number or aggregate principal amount, as the case may be, of the Notes set forth opposite their respective names in the Exhibit A hereto, and not joint. SECTION 8. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Underwriting Agreement or in certificates of officers of the Company or any of its subsidiaries submitted pursuant hereto or thereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or controlling person, or by or on behalf of the Company, and shall survive delivery of and payment for the Notes. SECTION 9. Termination. (a) The Underwriters may terminate this Agreement, by notice to the Company, at any time at or prior to Closing Time (i) if there has been, since the respective dates as of which information is given in the Registration Statement, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company or the Advisor, whether or not arising in the ordinary course of business, which would make it, in the Underwriters' reasonable judgment, impracticable or inadvisable to market the Notes or enforce contracts for the sale of the Notes, (ii) if there has occurred any material adverse change in the financial markets in the United States or any outbreak of hostilities or escalation of existing hostilities or other calamity or crisis the effect of which on the financial markets of the United States is such as to make it, in the Underwriters' reasonable judgment, impracticable or inadvisable to market the Notes or enforce contracts for the sale of the Notes, or (iii) if trading in the Company's common shares of beneficial interest has been suspended by the Commission, or if trading generally on either the New York Stock Exchange or the American Stock Exchange has been suspended, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities have been required, by either of said exchanges or by order of the Commission or any other governmental authority, or if a banking moratorium has been declared by Federal or New York authorities. (b) If this Agreement is terminated pursuant to this Section 9, such termination shall be without liability of any party to any other party except as provided in Section 4, and provided further that Sections 6 and 7 hereof shall survive such termination. SECTION 10. Default by One or More of the Underwriters. If one or more of the Underwriters shall fail at the Closing Time to purchase the Initial Notes which it or they are obligated to purchase hereunder (the "Defaulted Securities"), then Merrill Lynch shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, Merrill Lynch shall not have completed such arrangements within such 24-hour period, then: (a) if the aggregate principal amount of Defaulted Securities does not exceed 10% of the aggregate principal amount of the Initial Notes to be purchased on such date pursuant hereto, the non-defaulting Underwriters shall be obligated, severally and not 22 jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or (b) if the aggregate principal amount of Defaulted Securities exceeds 10% of the aggregate principal amount of the Initial Notes to be purchased on such date pursuant hereto, this Underwriting Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. No action taken pursuant to this Section 10 shall relieve any defaulting Underwriter from liability in respect of its default. In the event of any such default which does not result in a termination of the applicable Terms Agreement, either Merrill Lynch or the Company shall have the right to postpone the Closing Time for a period not exceeding seven days in order to effect any required changes in the Registration Statement or the Prospectus or in any other documents or arrangements. SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to Merrill Lynch at World Financial Center, North Tower, New York, New York 10281-1201, attention of Tjarda van S. Clagett; and notices to the Company shall be directed to it at 400 Centre Street, Newton, MA 02458, attention of John G. Murray. SECTION 12. Parties. This Underwriting Agreement shall inure to the benefit of and be binding upon the Company, Merrill Lynch and the other Underwriters and their respective successors. Nothing expressed or mentioned in this Underwriting Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters and the Company and their respective successors and the controlling persons and officers and trustees referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Underwriting Agreement or any provision herein contained. This Underwriting Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto and their respective successors, and said controlling persons and officers and trustees and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of the Notes from any Underwriter shall be deemed to be a successor by reason merely of such purchase. SECTION 13. GOVERNING LAW AND TIME. THIS UNDERWRITING AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. SECTION 14. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. 23 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this Underwriting Agreement, along with all counterparts, will become a binding agreement between the Underwriters and the Company in accordance with its terms. Very truly yours, HOSPITALITY PROPERTIES TRUST By: /s/ John G. Murray ------------------------------- Name: John G. Murray Title: President CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED SALOMON SMITH BARNEY INC. LEGG MASON WOOD WALKER, INCORPORATED A.G. EDWARDS & SONS, INC. MORGAN STANLEY & CO. INCORPORATED PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES INCORPORATED By: MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated By: /s/ Tjarda Clagett ------------------------------------------------ Name: Tjarda Clagett Title: Director Acting on behalf of itself and the other named Underwriters 24 Exhibit A Principal Amount Name of Underwriter of Initial Notes ------------------- ---------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated........................... $ 21,600,000 Salomon Smith Barney Inc............................. 21,400,000 A.G. Edwards & Sons, Inc............................. 21,400,000 Legg Mason Wood Walker, Incorporated................. 21,400,000 Morgan Stanley & Co. Incorporated.................... 21,400,000 PaineWebber Incorporated............................. 21,400,000 Prudential Securities Incorporated................... 21,400,000 ---------- Total........................................ $150,000,000 ============ A-1 Exhibit B FORM OF OPINION OF COMPANY'S COUNSEL TO BE DELIVERED PURSUANT TO SECTION 5(b) (1) The Company is a real estate investment trust duly formed and validly existing under and by virtue of the laws of the State of Maryland and is in good standing with the State Department of Assessments and Taxation of Maryland. (2) The Company has trust power and authority to own and lease its properties and to conduct its business in all material respects as described in the Prospectus and to enter into and perform its obligations under, or as contemplated under, the Underwriting Agreement. (3) The Company is duly qualified to transact business and is in good standing in each jurisdiction other than the State of Maryland in which the ownership or leasing of its properties requires such qualification, except where the failure to so qualify or be in good standing would not result in a Material Adverse Effect. (4) Each Subsidiary (a) is a real estate investment trust duly formed and validly existing under and by virtue of the laws of the State of Maryland and is in good standing with the State Department of Assessments and Taxation of Maryland, (b) has the trust power and authority to own and lease its properties and to conduct its business, in all material respects as described in the Prospectus, and (c) is duly qualified to transact business and is in good standing in each jurisdiction other than the State of Maryland in which the ownership or leasing of its properties requires such qualification, except where the failure to so qualify or be in good standing would not result in a Material Adverse Effect. (5) Except as otherwise stated in the Registration Statement and the Prospectus, all of the issued and outstanding shares of capital stock of each Subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable, and, to the best of our knowledge, are owned by the Company, directly or through subsidiaries, free and clear of any adverse claim. None of such shares of capital stock of any Subsidiary was issued in violation of preemptive or other similar rights of any holder (other than the Company) of capital stock of such Subsidiary. (6) The authorized, issued and outstanding shares of capital stock of the Company is as set forth in the column entitled "Actual" under the caption "Capitalization" in the Prospectus Supplement. Except as otherwise set forth in the opinions expressed in paragraph 4 of the opinion of Ballard Spahr Andrews & Ingersoll, LLP, set forth as Exhibit 1 hereto, all of such shares of capital stock have been duly authorized and validly issued by the Company and are fully paid and non-assessable (except as otherwise described in the Registration Statement), and none of such shares of capital stock was issued in violation of preemptive or, to such counsel's knowledge, other similar rights of any holder of capital stock of the Company. (7) The Underwriting Agreement has been duly authorized, executed and delivered by the Company. B-1 (8) The Notes have been duly authorized by the Company for issuance and sale pursuant to the Underwriting Agreement. When the Notes are issued and authenticated in the manner provided for in the Indenture and delivered against payment of the consideration therefor specified in the Underwriting Agreement, (a) the Notes will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, and (b) each registered holder thereof will be entitled to the benefits of the Indenture. The Notes are in the form contemplated by the Indenture. (9) The Indenture has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms. (10) The Notes and the Indenture conform in all material respects to the descriptions thereof in the Prospectus. (11) (a) The statements under the captions (i) "Recent Developments," "The Company -- Leases," "Management" and "Description of Notes" in the Prospectus Supplement and (ii) "Description of Debt Securities," "Limitation of Liability; Shareholder Liability" and "Redemption; Trustees; Business Combinations and Control Share Acquisitions" in the Prospectus, in each case as of the date of the Prospectus, and (b) the statements under the captions (i) "Items 1 and 2. Business and Properties -- The Company --Principal Lease Features," "Items 1 and 2. Business and Properties -- Investment Advisor," "Item 5. Market for Registrant's Common Equity and Related Stockholder Matters," and "Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition -- Overview" and "Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition -- Liquidity and Capital Resources" in the Annual Report on Form 10-K, (ii) "Other Information -- Certain Relationships and Related Transactions" in the Company's Proxy Statement relating to the May 19, 1998 Annual Meeting of Shareholders (incorporated by reference in the Form 10-K), other than the last paragraph thereof, as to which we express no opinion, and (iii) "Item 5. Other Events -- New Credit Facility" in the Company's Current Report on Form 8-K dated April 15, 1998, and in each case as of the date of filing of such Incorporated Document, insofar as such statements constitute a summary of legal matters, documents or proceedings referred to therein, fairly present in all material respects the information called for with respect to such legal matters, documents and proceedings. (12) The statements under the captions "Certain Federal Income Tax Considerations" in the Prospectus Supplement, as of the date of the Prospectus, and the statements under the captions "Federal Income Tax Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement Accounts" under the caption "Items 1 and 2. Business and Properties" in the Annual Report on Form 10-K, as of the date of filing of the Annual Report on Form 10-K, insofar as such statements constitute a summary of legal matters or documents referred to therein, fairly present in all material respects the information called for with respect to such legal matters and documents. (13) To such counsel's knowledge, except as disclosed in the Prospectus neither the Company nor any Subsidiary is in violation of its declaration of trust or by-laws and no default by the Company or any of the Subsidiaries exists in the due performance or observance of any B-2 obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument that is described or referred to in the Registration Statement or the Prospectus or filed or incorporated by reference as an exhibit to the Registration Statement and to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound or to which any of the assets, properties or operations of the Company or any Subsidiary is subject, except for such violations or defaults which would not result in a Material Adverse Effect. (14) The execution, delivery and performance of the Underwriting Agreement and the Indenture and the consummation of the transactions contemplated in the Underwriting Agreement and in the Registration Statement and the Prospectus (including the issuance and sale of the Notes and the Use of the proceeds from the sale of the Notes as described under the caption "Use of Proceeds" in the Prospectus Supplement) and compliance by the Company with its obligations thereunder do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event under, or result in the creation or imposition of any lien, charge or encumbrance upon any assets, properties or operations of the Company or of any Subsidiary pursuant to, any material contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other agreement or instrument that is described or referred to in the Registration Statement or the Prospectus or filed or incorporated by reference as an exhibit to the Registration Statement and to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound or to which any of the assets, properties or operations of the Company or any Subsidiary is subject, nor will such action result in any violation of the provisions of the declaration of trust or by-laws of the Company or any Subsidiary or in any material respect any applicable law, statute, rule, regulation, judgment, order, writ or decree, known to such counsel, of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their assets, properties or operations, in each case except as disclosed in the Prospectus. (15) To such counsel's knowledge, except as disclosed in the Prospectus there is not pending or threatened any action, suit, proceeding, inquiry or investigation to which the Company or any Subsidiary is a party or to which the assets, properties or operations of the Company or any Subsidiary is subject, before or by any court or government agency or body which would, if determined adversely to the Company or such Subsidiary, result in a Material Adverse Effect or materially and adversely affect the consummation of the transactions contemplated under the Underwriting Agreement or the Indenture or the right or ability of the Company to perform its obligations thereunder. (16) To such counsel's knowledge, there is no contract or other document which is required to be described in the Registration Statement or the Prospectus that is not described therein or is required to be filed as an exhibit to the Registration Statement which is not so filed. (17) To such counsel's knowledge, there are no statutes or regulations that are required to be described in the Prospectus that are not described as required. (18) The Registration Statement has been declared effective under the 1933 Act. Any required filing of the Prospectus pursuant to Rule 424(b) has been made in the manner and B-3 within the time period required by Rule 424(b). To such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been initiated or are pending or threatened by the Commission. (19) The Registration Statement and the Prospectus, excluding the documents incorporated by reference therein, and each amendment or supplement to the Registration Statement and Prospectus, excluding the documents incorporated by reference therein, as of their respective effective or issue dates (other than financial statements and other financial and statistical data and schedules and the Trustee's Statement of Eligibility on Form T-1, as to which such counsel need not express any opinion), complied as to form in all material respects with the requirements of the 1933 Act. (20) Each Incorporated Document (other than financial statements and other financial and statistical data and schedules, as to which such counsel need not express any opinion) complied as to form in all material respects with the 1934 Act when filed with the Commission. (21) No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any federal, Massachusetts, Delaware or Maryland court or governmental authority or agency is necessary or required for the due authorization, execution or delivery by the Company of the Underwriting Agreement or for the performance by the Company of the transactions contemplated under the Prospectus, the Underwriting Agreement or the Indenture, other than those which have already been made, obtained or rendered as applicable. (22) The Indenture has been duly qualified under the 1939 Act. (23) The Company is not, and upon the issuance and sale of the Notes as contemplated by the Underwriting Agreement and the application of the net proceeds therefrom as described in the Prospectus will not be, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (24) The Company has qualified to be taxed as a real estate investment trust pursuant to Sections 856-860 of the Code for each of the taxable years ended December 31, 1995 through December 31, 1997, and the Company's current anticipated investments and its current plan of operation will enable it to continue to meet the requirements for qualification and taxation as a real estate investment trust under the Code; actual qualification of the Company as a real estate investment trust, however, will depend upon the Company's continued ability to meet, and its meeting, through actual annual operating results and distributions, the various qualification tests imposed under the Code. (25) The Advisor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has the requisite corporate power and authority to conduct its business as described in the Prospectus and to own and operate its material properties. B-4 (26) The Advisory Agreement has been duly authorized, executed and delivered by the parties thereto and constitutes the valid agreement of the parties thereto, enforceable in accordance with its terms. (27) No facts have come to such counsel's attention that would lead them to believe that (x) the Registration Statement, as of the time it became effective under the 1933 Act, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading or (y) the Prospectus, as of the date of issuance thereof or at the date hereof, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that such counsel need not express any views as to the financial statements and other financial and statistical data and schedules included in the Registration Statement or the Prospectus. Such counsel need not express any opinion as to compliance with, or filings with or authorizations, approvals, consents, licenses, orders, registrations, qualifications or decrees under, state securities or "Blue Sky" laws. Such counsel's opinions with respect to the validity or enforceability of agreements may be qualified to the extent that the obligations, rights and remedies of parties may be limited to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting generally creditors' rights and remedies, and (ii) general principles of equity (regardless of whether considered in a proceeding at law or in equity), and otherwise in a manner acceptable to the Underwriters. EX-4.1 3 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDER SUPPLEMENTAL INDENTURE NO. 3 by and between HOSPITALITY PROPERTIES TRUST and STATE STREET BANK AND TRUST COMPANY as of December 16, 1998 SUPPLEMENTAL TO THE INDENTURE DATED AS OF FEBRUARY 25, 1998 ------------------------------------ HOSPITALITY PROPERTIES TRUST 8-1/2% Monthly Income Senior Notes due 2009 This SUPPLEMENTAL INDENTURE NO. 3 (this "Supplemental Indenture") made and entered into as of December 16, 1998 between HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment trust (the "Company"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company, as Trustee (the "Trustee"). WITNESSETH THAT: WHEREAS, the Company and the Trustee have executed and delivered an Indenture, dated as of February 25, 1998 (the "Indenture"), relating to the Company's issuance, from time to time, of various series of debt securities; and WHEREAS, the Company has determined to issue debt securities known as its 8-1/2 % Monthly Income Senior Notes due 2009; and WHEREAS, the Indenture provides that certain terms and conditions for each series of debt securities issued by the Company thereunder may be set forth in an indenture supplemental to the Indenture; NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: ARTICLE 1 DEFINED TERMS Section 1.1 The following definitions supplement, and, to the extent inconsistent with, replace the definitions in Section 101 of the Indenture: "Acquired Debt" means Debt of a Person (i) existing at the time such Person becomes a Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, in each case, other than Debt incurred in connection with, or in contemplation of, such Person becoming a Subsidiary or such acquisition. Acquired Debt shall be deemed to be incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Subsidiary. "Annual Debt Service" as of any date means the maximum amount which is expensed in any 12-month period for interest on Debt of the Company and its Subsidiaries. "Business Day" means any day, other than a Saturday or Sunday or a day on which banking institutions in The City of New York or in the city in which the Corporate Trust Office of the Trustee is located, are required or authorized to close. "Capital Stock" means, with respect to any Person, any capital stock (including preferred stock), shares, interests, participation or other ownership interests (however designated) of such Person and any rights (other than debt securities convertible into or exchangeable for capital stock), warrants or options to purchase any thereof. "Consolidated Income Available for Debt Service" for any period means Earnings from Operations of the Company and its Subsidiaries plus amounts which have been deducted, and minus amounts which have been added, for the following (without duplication): (i) interest on Debt of the Company and its Subsidiaries, (ii) cash reserves made by lessees as required by the Company's leases for periodic replacement and refurbishment of the Company's assets, (iii) provision for taxes of the Company and its Subsidiaries based on income, (iv) amortization of debt discount and deferred financing costs, (v) provisions for gains and losses on properties and property depreciation and amortization, (vi) the effect of any noncash charge resulting from a change in accounting principles in determining Earnings from Operations for such period and (vii) amortization of deferred charges. "Debt" of the Company or any Subsidiary means, without duplication, any indebtedness of the Company or any Subsidiary, whether or not contingent, in respect of (i) borrowed money or evidenced by bonds, notes, debentures or similar instruments, (ii) indebtedness for borrowed money secured by any Encumbrance existing on property owned by the Company or any Subsidiary, to the extent of the lesser of (x) the amount of indebtedness so secured and (y) the fair market value of the property subject to such Encumbrance, (iii) the reimbursement obligations, contingent or otherwise, in connection with any letters of credit actually issued (other than letters of credit issued to provide credit enhancement or support with respect to other indebtedness of the Company or any Subsidiary otherwise reflected as Debt hereunder) or amounts representing the balance deferred and unpaid of the purchase price of any property or services, except any such balance that constitutes an accrued expense or trade payable, or all conditional sale obligations or obligations under any title retention agreement, (iv) the principal amount of all obligations of the Company or any Subsidiary with respect to redemption, repayment or other repurchase of any Disqualified Stock, or (v) any lease of property by the Company or any Subsidiary as lessee which is reflected on the Company's consolidated balance sheet as a capitalized lease in accordance with GAAP, to the extent, in the case of items of indebtedness under (i) through (iii) above, that any such items (other than letters of credit) would appear as a liability on the Company's consolidated balance sheet in accordance with GAAP, and also includes, to the extent not otherwise included, any obligation by the Company or any Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise (other than for purposes of collection in the ordinary course of business), Debt of another Person (other than the Company or any Subsidiary) (it being understood that Debt shall be deemed to be incurred by the Company or any Subsidiary whenever the Company or such Subsidiary shall create, assume, guarantee or otherwise become liable in respect thereof). "Disqualified Stock" means, with respect to any Person, any Capital Stock of such Person which by the terms of such Capital Stock (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable), upon the happening of any event or otherwise (i) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise (other than Capital Stock which is redeemable solely in exchange for common stock or shares), (ii) is convertible into or exchangeable or exercisable for Debt or Disqualified Stock, or (iii) is redeemable at the option of the holder thereof, in whole or in part (other than Capital Stock which is redeemable solely in exchange for common stock or shares), in each case on or prior to the stated maturity of the Notes. "Earnings from Operations" for any period means net earnings excluding gains and losses on sales of investments, extraordinary items and property valuation losses, as reflected in the financial statements of the Company and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "Encumbrance" means any mortgage, lien, charge, pledge or security interest of any kind. "Notes" means the Company's 8-1/2% Monthly Income Senior Notes due 2009, issued under this Supplemental Indenture and the Indenture, as amended or supplemented from time to time. "Secured Debt" means Debt secured by any mortgage, lien, charge, pledge or security interest of any kind. "Subsidiary" means any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests of which are owned, directly or indirectly, by the Company or one or more other Subsidiaries of the Company. For the purposes of this definition, "voting equity securities" means equity securities having voting power for the election of directors, whether at all times or only so long as no senior class of security has such voting power by reason of any contingency. "Total Assets" as of any date means the sum of (i) the Undepreciated Real Estate Assets and (ii) all other assets of the Company and its Subsidiaries determined in accordance with GAAP (but excluding accounts receivable and intangibles). "Total Unencumbered Assets" means the sum of (i) those Undepreciated Real Estate Assets not subject to an Encumbrance for borrowed money and (ii) all other assets of the Company and its Subsidiaries not subject to an Encumbrance for borrowed money determined in accordance with GAAP (but excluding accounts receivable and intangibles). "Undepreciated Real Estate Assets" as of any date means the cost (original cost plus capital improvements) of real estate assets of the Company and its Subsidiaries on such date, before depreciation and amortization determined on a consolidated basis in accordance with GAAP. -2- "Unsecured Debt" means Debt which is not secured by any of the properties of the Company or any Subsidiary. ARTICLE 2 TERMS OF THE NOTES Section 2.1 Pursuant to Section 301 of the Indenture, the Notes shall have the following terms and conditions: (a) Title; Aggregate Principal Amount; Form of Notes. The Notes shall be Registered Securities under the Indenture and shall be known as the Company's "8-1/2% Monthly Income Senior Notes due 2009." The Notes will be limited to an aggregate principal amount of $172,500,000, subject to the right of the Company to reopen such series for issuances of additional securities of such series and except as provided in this Section and in Section 306 of the Indenture. The Notes (together with the Trustee's certificate of authentication) shall be substantially in the form of Exhibit A hereto, which is hereby incorporated in and made a part of this Supplemental Indenture. The Notes will be issued in the form of one or more registered global securities without coupons ("Global Notes") that will be deposited with, or on behalf of, The Depository Trust Company ("DTC"), and registered in the name of DTC's nominee, Cede & Co. Except under the circumstance described below, the Notes will not be issuable in definitive form. Unless and until it is exchanged in whole or in part for the individual notes represented thereby, a Global Note may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any nominee of DTC to a successor depositary or any nominee of such successor. So long as DTC or its nominee is the registered owner of a Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Global Note for all purposes under this Supplemental Indenture. Except as described below, owners of beneficial interest in Notes evidenced by a Global Note will not be entitled to have any of the individual Notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of any such Notes in definitive form and will not be considered the owners or holders thereof under the Indenture or this Supplemental Indenture. If DTC is at any time unwilling, unable or ineligible to continue as depositary and a successor depositary is not appointed by the Company within 90 days, the Company will issue individual Notes in exchange for the Global Note or Global Notes representing such Notes. In addition, the Company may at any time and in its sole discretion, subject to certain limitations set forth in the Indenture, determine not to have any of such Notes represented by one or more Global Notes and, in such event, will issue individual Notes in exchange for the Global Note or Global Notes representing the Notes. Individual Notes so issued will be issued in denominations of $1,000 and integral multiples thereof. (b) Interest and Interest Rate. The Notes will bear interest at a rate of 8-1/2% per annum, from December 16, 1998 (or, in the case of Notes issued upon the reopening of this series of Notes, from the date designated by the Company in connection with such reopening) or from the immediately preceding Interest Payment Date to which interest has been paid or duly provided for, payable monthly in arrears on the 15th of each month, commencing January 15, 1999 (each of which shall be an "Interest Payment Date"), to the Persons in whose names the Notes are registered in the Security Register at the close of business on the 1st of each month (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date (each, a "Regular Record Date"). (c) Principal Repayment; Currency. The stated maturity of the Notes is January 15, 2009, provided, however, the Notes may be earlier redeemed at the option of the Company as provided in paragraph (d) below. The principal of each Note payable on its maturity date shall be paid against presentation and surrender thereof at the Corporate Trust Office of the Trustee, located initially at Two International Place, Boston, Massachusetts 02110, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public or private debts. The Company will not pay Additional Amounts (as defined in the Indenture) on the Notes. -3- (d) Redemption at the Option of the Company; Acceleration. The Notes may not be redeemed prior to December 15, 2002. From and after December 15, 2002, the Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice to each Holder of Notes to be redeemed at its address appearing in the Security Register, at a price equal to the principal amount of the Notes being redeemed, plus accrued and unpaid interest to but excluding the applicable Redemption Date. Upon the acceleration of the Notes in accordance with Section 502 of the Indenture, the principal amount of the Notes, plus accrued and unpaid interest thereon shall become due and payable immediately. (e) Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Company shall be directed to it at 400 Centre Street, Newton, Massachusetts 02458, Attention: President; notices to the Trustee shall be directed to it at Two International Place, Boston, Massachusetts 02110, Attention: Corporate Trust Department, Re: Hospitality Properties Trust 8-1/2% Monthly Income Senior Notes due 2009; or as to either party, at such other address as shall be designated by such party in a written notice to the other party. (f) Global Note Legend. Each Global Note shall bear the following legend on the face thereof: UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. (g) Applicability of Discharge, Defeasance and Covenant Defeasance Provisions. The Discharge, Defeasance and Covenant Defeasance provisions in Article Fourteen of the Indenture will apply to the Notes. ARTICLE 3 ADDITIONAL COVENANTS Section 3.1 In addition to the covenants of the Company set forth in Article Ten of the Indenture, for the benefit of the holders of the Notes: (a) Limitations on Incurrence of Debt. (i) The Company will not, and will not permit any Subsidiary to, incur any Debt if, immediately after giving effect to the incurrence of such additional Debt and the application of the proceeds thereof, the aggregate principal amount of all outstanding Debt of the Company and its Subsidiaries on a consolidated basis determined in accordance with GAAP is greater than 60% of the sum ("Adjusted Total Assets") of (without duplication) (i) the Total Assets of the Company and its Subsidiaries as of the end of the calendar quarter covered in the Company's Annual Report on Form 10-K, or the Quarterly Report on Form 10-Q, as the case may be, most recently filed with the Securities and Exchange Commission (or, if such filing is not permitted under the Securities Exchange Act of 1934, as amended, with the Trustee) prior to the incurrence of such additional Debt and (ii) the purchase price of any real estate assets or mortgages receivable acquired, and the amount of any securities offering proceeds received (to the extent that such proceeds were not used to acquire real estate assets or mortgages receivable or used to reduce Debt), by the Company or any Subsidiary since the end of such calendar quarter, including those proceeds obtained in connection with the incurrence of such additional Debt. -4- (ii) In addition to the foregoing limitations on the incurrence of Debt, the Company will not, and will not permit any Subsidiary to, incur any Secured Debt if, immediately after giving effect to the incurrence of such additional Secured Debt and the application of the proceeds thereof, the aggregate principal amount of all outstanding Secured Debt of the Company and its Subsidiaries on a consolidated basis is greater than 40% of Adjusted Total Assets. (iii) In addition to the foregoing limitations on the incurrence of Debt, the Company will not, and will not permit any Subsidiary to, incur any Debt if the ratio of Consolidated Income Available for Debt Service to the Annual Debt Service for the four consecutive fiscal quarters most recently ended prior to the date on which such additional Debt is to be incurred shall have been less than 1.5 to 1.0, on a pro forma basis after giving effect thereto and to the application of the proceeds therefrom, and calculated on the assumption that (i) such Debt and any other Debt incurred by the Company and its Subsidiaries since the first day of such four-quarter period and the application of the proceeds therefrom, including to refinance other Debt, had occurred at the beginning of such period; (ii) the repayment or retirement of any other Debt by the Company and its Subsidiaries since the first date of such four-quarter period had been repaid or retired at the beginning of such period (except that, in making such computation, the amount of Debt under any revolving credit facility shall be computed based upon the average daily balance of such Debt during such period); (iii) in the case of Acquired Debt or Debt incurred in connection with any acquisition since the first day of such four-quarter period, the related acquisition had occurred as of the first day of such period with appropriate adjustments with respect to such acquisition being included in such pro forma calculation; and (iv) in the case of any acquisition or disposition by the Company or its Subsidiaries of any asset or group of assets since the first day of such four-quarter period, whether by merger, stock purchase or sale, or asset purchase or sale, such acquisition or disposition or any related repayment of Debt had occurred as of the first day of such period with the appropriate adjustments with respect to such acquisition or disposition being included in such pro forma calculation. If the Debt giving rise to the need to make the foregoing calculation or any other Debt incurred after the first day of the relevant four-quarter period bears interest at a floating rate then, for purposes of calculating the Annual Debt Service, the interest rate on such Debt shall be computed on a pro forma basis as if the average interest rate which would have been in effect during the entire such four-quarter period had been the applicable rate for the entire such period. (b) Maintenance of Total Unencumbered Assets. The Company and its Subsidiaries will maintain at all times Total Unencumbered Assets of not less than 200% of the aggregate outstanding principal amount of the Unsecured Debt of the Company and its Subsidiaries on a consolidated basis. -5- ARTICLE 4 ADDITIONAL EVENTS OF DEFAULT For purposes of this Supplemental Indenture and the Notes, in addition to the Events of Default set forth in Section 501 of the Indenture, it shall also constitute an "Event of Default" if a default under any bond, debenture, note or other evidence of indebtedness of the Company (including a default with respect to any other series of securities), or under any mortgage, indenture or other instrument of the Company under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company (or by any Subsidiary, the repayment of which the Company has guaranteed or for which the Company is directly responsible or liable as obligor or guarantor) having an aggregate principal amount outstanding of at least $20,000,000, whether such indebtedness now exists or shall hereafter be incurred or created, which default shall have resulted in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such indebtedness having been discharged or such acceleration having been rescinded or annulled within a period of ten days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the outstanding Notes, a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder. ARTICLE 5 EFFECTIVENESS This Supplemental Indenture shall be effective for all purposes as of the date and time this Supplemental Indenture has been executed and delivered by the Company and the Trustee in accordance with Article Nine of the Indenture. As supplemented hereby, the Indenture is hereby confirmed as being in full force and effect. ARTICLE 6 MISCELLANEOUS Section 6.1 In the event any provision of this Supplemental Indenture shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof or any provision of the Indenture. Section 6.2 To the extent that any terms of this Supplemental Indenture or the Notes are inconsistent with the terms of the Indenture, the terms of this Supplemental or the Notes shall govern and supersede such inconsistent terms. Section 6.3 This Supplemental Indenture shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts. Section 6.4 This Supplemental Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. [Remainder of page intentionally left blank.] -6- IN WITNESS WHEREOF, the Company and the Trustee have caused this Supplemental Indenture to be executed as an instrument under seal in their respective corporate names as of the date first above written. HOSPITALITY PROPERTIES TRUST By:__________________________________ John G. Murray President and Secretary STATE STREET BANK AND TRUST COMPANY, as Trustee By:__________________________________ Name: Title: -7- EXHIBIT A FORM OF NOTE ------------ (Face of Note) 8-1/2% Monthly Income Senior Note due 2009 No. $ HOSPITALITY PROPERTIES TRUST promises to pay to_____________ or registered assigns, the principal sum of _______________________________ on January 15, 2009 Interest Payment Dates: the 15th of each month. Record Dates: the 1st of each month. CUSIP No.: 44106M AC 6 HOSPITALITY PROPERTIES TRUST By:________________________________ Dated: CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Indenture: STATE STREET BANK AND TRUST COMPANY, as Trustee By:_________________________________ Authorized Officer [THE FOLLOWING CONSTITUTES THE REVERSE OF THE SECURITY] HOSPITALITY PROPERTIES TRUST 8-1/2% Monthly Income Senior Note due 2009 Capitalized terms used herein have the meanings assigned to them in the Indenture (as defined below) unless otherwise indicated. 1. Interest. Hospitality Properties Trust, a Maryland real estate investment trust (the "Company"), promises to pay interest on the principal amount of this Note at the rate and in the manner specified below. The Company shall pay in cash interest on the principal amount of this Note at the rate per annum of 8-1/2%. The Company will pay interest monthly in arrears on the 15th of each month, commencing on January 15, 1999 or if any such day is not a Business Day (as defined in the Indenture), on the next succeeding Business Day (each an "Interest Payment Date"), to Holders of record on the immediately preceding 1st of each month (whether or not a Business Day). Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from December 16, 1998. 2. Method of Payment. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the record date next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company, however, may pay principal, premium, if any, and interest by check payable in such money. It may mail an interest check to a Holder's registered address. 3. Indenture. The Company issued the Notes under an Indenture, dated as of February 25, 1998, and a Supplemental Indenture No. 3 thereto, dated as of December 16, 1998 (collectively, the "Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to all such terms, and Holders of the Notes are referred to the Indenture and such Act for a statement of such terms. The terms of the Indenture shall govern any inconsistencies between the Indenture and the Notes. The Notes are unsecured general obligations of the Company limited to $172,500,000 in aggregate principal amount, except as otherwise provided in the Indenture. 4. Optional Redemption. The Notes may not be redeemed prior to December 15, 2002. From and after December 15, 2002, the Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at a redemption price equal to the principal amount of the Notes being redeemed, plus accrued and unpaid interest to but excluding the applicable Redemption Date. 5. Mandatory Redemption. The Company shall not be required to make sinking fund or redemption payments with respect to the Notes. 6. Notice of Redemption. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. Notes may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. 7. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000 in excess thereof. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Security Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Security Registrar need not exchange or register the transfer of any Note or portion of a Note selected for redemption. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before the mailing of a notice of redemption of Notes, or during the period between a record date and the corresponding Interest Payment Date. 8. Defaults and Remedies. In case an Event of Default (as defined in the Indenture) with respect to the Notes shall have occurred and be continuing, the principal hereof may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the provisions provided in the Indenture. 9. Actions of Holders. The Indenture contains provisions permitting the holders of not less than a majority of the aggregate principal amount of the outstanding Notes, subject to certain exceptions as provided in the Indenture, on behalf of the holders of all such Notes at a meeting duly called and held as provided in the Indenture, to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided in the Indenture to be made, given or taken by the holders of the Notes, including without limitation, waiving (a) compliance by the Company with certain provisions of the Indenture, and (b) certain past defaults under the Indenture and their consequences. Any resolution passed or decision taken at any meeting of the holders of the Notes in accordance with the provisions of the Indenture shall be conclusive and binding upon such holders and upon all future holders of this Note and other Notes issued upon the registration of transfer hereof or in exchange heretofore or in lieu hereof 10. Persons Deemed Owners. The Company, the Trustee, and any agent of the Company or the Trustee may deem and treat the Person in whose name this Note is registered on the Security Register as its absolute owner for all purposes. 11. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 12. Governing Law. THE INTERNAL LAW OF THE COMMONWEALTH OF MASSACHUSETTS SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE AND THE NOTES. 13. No Personal Liability. THE DECLARATION OF TRUST OF THE COMPANY, AMENDED AND RESTATED ON AUGUST 21, 1995, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL PERSONS DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Request may be made to: Hospitality Properties Trust 400 Centre Street Newton, MA 02458 Telecopier No.: (617) 969-5730 Attention: President or such other address as the Company may specify pursuant to the Indenture. -2 - ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) and irrevocably appoint _______________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: _____________________ Your Signature: ________________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee: ________________________________________________ (The signature must be guaranteed by an officer of a participant in a recognized signature guarantee program. Notarized or witnessed signatures are not acceptable.) EX-8.1 4 OPINION RE: TAX MATTERS Exhibit 8.1 SULLIVAN & WORCESTER LLP One Post Office Square Boston, Massachusetts 02109 December 11, 1998 Hospitality Properties Trust 400 Centre Street Newton, Massachusetts 02458 Ladies and Gentlemen: In connection with the registration by Hospitality Properties Trust, a Maryland real estate investment trust (the "Company"), of its $150,000,000 8-1/2% Monthly Income Senior Notes due 2009, the following opinion is furnished to you to be filed with the Securities and Exchange Commission (the "SEC") as Exhibit 8.1 to the Company's Current Report on Form 8-K, to be filed within one week of the date hereof, under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have acted as counsel for the Company in connection with its Registration Statement on Form S-3, File No. 333-43573 (the "Registration Statement"), under the Securities Act of 1933, as amended (the "Act"), and we have examined originals or copies, certified or otherwise identified to our satisfaction, of the Registration Statement, corporate records, certificates and statements of officers and accountants of the Company and of public officials, and such other documents as we have considered relevant and necessary in order to furnish the opinion hereinafter set forth. Specifically, and without limiting the generality of the foregoing, we have reviewed the Company's declaration of trust, as amended and restated, the by-laws of the Company, the prospectus supplement dated December 11, 1998 (the "Prospectus Supplement") to the final prospectus dated January 15, 1998 (as supplemented by the Prospectus Supplement, the "Prospectus") which forms a part of the Registration Statement, and the Company's Annual Report on Form 10-K for the year ended December 31, 1997, filed under the Exchange Act (the "Annual Report"). We have reviewed the sections of the Annual Report captioned "Federal Income Tax Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement Accounts," as supplemented by the section in the Prospectus Supplement captioned "Certain Federal Income Tax Considerations." With respect to all questions of fact on which the opinion set forth below is based, we have assumed the accuracy and completeness of and have relied on the information set forth in the Prospectus and the Hospitality Properties Trust December 11, 1998 Page 2 Annual Report, and in the documents incorporated therein by reference, and on representations made to us by the officers of the Company. We have not independently verified such information. The opinion set forth below is based upon the Internal Revenue Code of 1986, as amended, the Treasury Regulations issued thereunder, published administrative interpretations thereof, and judicial decisions with respect thereto, all as of the date hereof (collectively, the "Tax Laws"), and upon the Employee Retirement Income Security Act of 1974, as amended, the Department of Labor regulations issued thereunder, published administrative interpretations thereof, and judicial decisions with respect thereto, all as of the date hereof (collectively, the "ERISA Laws"). No assurance can be given that the Tax Laws or the ERISA Laws will not change. In preparing the discussions with respect to Tax Laws and ERISA Laws matters in the sections of the Annual Report captioned "Federal Income Tax Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement Accounts," and in the section of the Prospectus Supplement captioned "Certain Federal Income Tax Considerations," we have made certain assumptions and expressed certain conditions and qualifications therein, all of which assumptions, conditions and qualifications are incorporated herein by reference. Based upon and subject to the foregoing, we are of the opinion that the discussions with respect to Tax Laws and ERISA Laws matters in the sections of the Annual Report captioned "Federal Income Tax Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement Accounts," as supplemented by the discussion in the Prospectus Supplement captioned "Certain Federal Income Tax Considerations," in all material respects are accurate and fairly summarize the Tax Laws issues and ERISA Laws issues addressed therein, and hereby confirm that the opinions of counsel referred to in said sections represent our opinions on the subject matter thereof. We hereby consent to the incorporation of this opinion by reference as an exhibit to the Registration Statement and to the reference to our firm in the Prospectus. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Act or under the rules and regulations of the SEC promulgated thereunder. Very truly yours, /s/ Sullivan & Worcester LLP SULLIVAN & WORCESTER LLP EX-12.1 5 COMPUTATION OF PRO FORMA RATIO OF EARNINGS Hospitality Properties Trust Computation of Pro Forma Ratio of Earnings to Fixed Charges (amounts in thousands, except ratio amounts)
For the Nine Months Ended September 30, 1998 For the Year Ended December 31, 1997 ----------------------------------------------- --------------------------------------- Adjusted Adjusted Historical Pro Forma Pro Forma Historical Pro Forma Pro Forma ---------- --------- --------- --------- --------- --------- Income before extraordinary item $64,336 $58,824 $64,638 $59,153 $64,795 $ 87,048 Fixed charges 15,178 26,070 26,070 15,534 34,762 34,762 ------- ------- ------- ------- ------- -------- Adjusted earnings $79,514 $84,894 $90,708 $74,687 $99,557 $121,810 ======= ======= ======= ======= ======= ======== Fixed charges: Interest on indebtedness and amortization of deferred finance costs $15,178 $26,070 $26,070 $15,534 $34,762 $ 34,762 ------- ------- ------- ------- ------- -------- Total fixed charges $15,178 $26,070 $26,070 $15,534 $34,762 $ 34,762 ======= ======= ======= ======= ======= ======== Ratio of earnings to fixed charges 5.2x 3.3x 3.5x 4.8x 2.9x 3.5x ======= ======= ======= ======= ======= ========
EX-23.2 6 CONSENTS OF EXPERTS AND COUNSEL Exhibit 23.2 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the use of our report dated January 16, 1998 included in this registration statement (File No. 333-43573) and prospectus supplement and to the incorporation by reference in this registration statement and prospectus supplement of our reports dated January 16, 1998 included in Hospitality Properties Trust's Form 8-K dated February 11, 1998 and our report dated February 27, 1998 included in Hospitality Property Trust's Form 10-K for the year ended December 31, 1997, and to all references to our Firm included in this registration statement. /s/ Arthur Andersen LLP Washington, D.C. December 9, 1998 EX-23.3 7 CONSENT OF INDEPENDENT AUDITORS Exhibit 23.3 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" in the Prospectus Supplement to the Registration Statement (Form S-3 No. 333-43573) of Hospitality Properties Trust for the registration of its $150,000,000 8-1/2% Monthly Income Senior Notes due 2009 and to the incorporation by reference therein of our report dated February 3, 1998, with respect to the combined financial statements of SC Suites Summerfield Partnerships included in Hospitality Properties Trust's Current Report on Form 8-K dated April 15, 1998, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Wichita, Kansas December 8, 1998 -----END PRIVACY-ENHANCED MESSAGE-----