-----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, K1qPxAK2MnO41WtWUZWk3ZiX1vVXaa8cJxDr+LcwQ5R0zn5lupK3YmeAC5dblWlh qdHNiAGhBzqHRkTPNYMo3w== 0001029869-99-000411.txt : 19990409 0001029869-99-000411.hdr.sgml : 19990409 ACCESSION NUMBER: 0001029869-99-000411 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990407 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990408 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: 99589775 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): April 7, 1999 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 Annual Report on Form 10-K for the year ended December 31, 1998, including the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations", 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 5. Other Events. On April 7, 1999, Hospitality Properties Trust agreed to issue and sell 3,000,000 shares of a new series of preferred shares, the 9 1/2% Series A Cumulative Redeemable Preferred Shares (the "Series A Preferred Shares"), in a public offering. We expect to issue and deliver the 3,000,000 Series A Preferred Shares on or about April 12, 1999. The price to the public will be $25 per share. We expect to use the $72.4 million of net proceeds (after estimated expenses and underwriters' discount) of the offering to reduce outstanding amounts under our bank credit facility, to buy additional hotels and for general business purposes. We also granted the underwriters an option to purchase an additional 450,000 Series A Preferred Shares to cover over- allotments. The following is a summary of some of the terms and conditions of the Series A Preferred Shares and does not purport to be complete. This summary is subject to, and is qualified by reference to all of the terms and conditions of the Series A Preferred Shares in the related Articles Supplementary and in our Declaration of Trust. The form of the Articles Supplementary is filed as an exhibit to this Report. Holders of Series A Preferred Shares will be entitled to receive cumulative cash dividends at a rate of 9 1/2% per annum of the $25 per share liquidation preference (equivalent to $2.375 per annum per share). Beginning in June 1999, distributions on the Series A Preferred Shares will be payable quarterly in arrears on the last day of each March, June, September and December or, if not a business day, the next business day. Dividends on the Series A Preferred Shares will be cumulative from (but excluding) the date of original issuance, which is expected to be April 12, 1999. The Series A Preferred Shares rank senior to our common shares with respect to the payment of dividends. The Series A Preferred Shares do not have any maturity date, and we are not required to redeem the Series A Preferred Shares. We may not redeem the Series A Preferred Shares prior to April 12, 2004, except in limited circumstances relating to our continuing qualification as a REIT. On and after April 12, 2004, we may, at our option, redeem the Series A Preferred Shares, in whole or from time to time in part, by payment of $25 per share, plus accrued and unpaid distributions through and including the date of redemption. If we liquidate, dissolve or wind up our Company, holders of the Series A Preferred Shares will have the right to receive $25 per share, plus accrued and unpaid distributions through the date of payment, before any payments are made to the holders of our common shares. -1- The holders of Series A Preferred Shares generally have no voting rights. However, if we do not pay dividends on the Series A Preferred Shares for six or more quarterly periods (whether or not consecutive), the holders of the Series A Preferred Shares, voting as a class with the holders of any other class or series of our capital shares which has similar voting rights, will be entitled to vote for the election of two additional trustees to serve on our Board of Trustees until we pay all dividends which we owe on the Series A Preferred Shares. In addition, the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Shares is required for us to authorize, create or increase capital shares ranking senior to the Series A Preferred Shares or to amend our Declaration of Trust in a manner that materially and adversely affects the rights of the Series A Preferred Shares. The Series A Preferred Shares are not convertible into or exchangeable for any other securities or property. 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 April 7, 1999, by and among Hospitality Properties Trust and the several underwriters named therein relating to 3,450,000 9 1/2% Series A Cumulative Redeemable Preferred Shares. 3.1 Form of Articles Supplementary relating to the 9 1/2% Series A Cumulative Redeemable Preferred Shares. 4.1 Form of temporary 9 1/2% Series A Cumulative Redeemable Preferred Share Certificate. 8.1 Opinion of Sullivan & Worcester LLP re: tax matters. 12.1 Computation of Pro Forma Ratio of Earnings to Fixed Charges. 12.2 Computation of Pro Forma Ratio of Earnings to Combined Fixed Charges and Preferred Dividends. 23.1 Consent of Sullivan & Worcester LLP (contained in Exhibit 8.1). -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 December 31, 1998....................................................... F-3 3. Unaudited Pro Forma Consolidated Statement of Income and Other Data for the Year Ended December 31, 1998........................................ F-4 4. Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data.............................................................. F-5 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 December 31, 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 December 31, 1998. The following unaudited pro forma consolidated statement of income is intended to present the consolidated results of operations of the Company as if the Transactions were consummated on January 1, 1998. 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, 1998, incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 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 period 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 December 31, 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 December 31, 1998 (amounts in thousands)
Pro Forma Other Data --------- ---------- Pro Forma Other Adjusted Pro Historical (A) Adjustments Pro Forma Adjustments Forma -------------- ----------- --------- ----------- ----- Assets Real estate properties $1,887,735 $200,395 (B) $2,088,130 $97,341(G) $2,185,471 Accumulated depreciation (112,924) -- (112,924) -- (112,924) ---------- -------- ---------- ------- ---------- 1,774,811 200,395 1,975,206 97,341 2,072,547 Cash and cash equivalents 24,610 (24,154)(C) 456 (200)(H) 256 Restricted cash (FF&E Reserve) 22,797 -- 22,797 -- 22,797 Other assets, net 15,420 -- 15,420 -- 15,420 ---------- -------- ---------- ------- ---------- $1,837,638 $176,241 $2,013,879 $97,141 $2,111,020 ========== ======== ========== ======= ========== Liabilities and Shareholders' Equity Senior notes, net of discount $414,753 $ -- $414,753 $ -- $ 414,753 Revolving debt -- 81,000(D) 81,000 87,000 (I) 168,000 Security and other deposits 206,018 22,803(E) 228,821 10,141 (J) 238,962 Other liabilities 43,010 -- 43,010 -- 43,010 Shareholders' equity: 9-1/2% Series A Cumulative Redeemable Preferred Shares -- 72,438(F) 72,438 -- 72,438 Common shares of beneficial interest 456 -- 456 -- 456 Additional paid-in capital 1,230,849 -- 1,230,849 -- 1,230,849 Cumulative net income 203,507 -- 203,507 -- 203,507 Dividends (260,955) -- (260,955) -- (260,955) ---------- -------- ---------- ------- ---------- Total shareholders' equity 1,173,857 72,438 1,246,295 -- 1,246,295 ---------- -------- ---------- ------- ---------- $1,837,638 $176,241 $2,013,879 $97,141 $2,111,020 ========== ======== ========== ======= ==========
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 Year Ended December 31, 1998 (amounts in thousands, except per share and ratio amounts)
Pro Forma Other Data --------- ---------- Pro Forma Other Adjusted Pro Historical (K) Adjustments Pro Forma Adjustments Forma -------------- ----------- --------- ----------- ----- Revenues: Rental income $157,223 $32,603 (L) $189,826 $26,718(S) $216,544 FF&E reserve income 16,108 1,104 (M) 17,212 -- 17,212 Interest income 1,630 -- 1,630 -- 1,630 -------- ------- -------- ------- -------- Total revenues 174,961 33,707 208,668 26,718 235,386 -------- ------- -------- ------- -------- Expenses: Depreciation and amortization of real estate assets 54,757 9,965 (N) 64,722 8,614(T) 73,336 Interest 21,751 18,520 (O) 40,271 5,873(U) 46,144 General and administrative 10,471 1,508 (P) 11,979 1,304(V) 13,283 ------- ------- -------- ------- -------- Total expenses 86,979 29,993 116,972 15,791 132,763 ------- ------- -------- ------- -------- Income before extraordinary item and preferred dividends 87,982 3,714 91,696 10,927 102,623 ------- ------- -------- ------- -------- 9-1/2% Series A preferred share dividends -- 7,125 (Q) 7,125 -- 7,125 ------- ------- -------- ------- -------- Income before extraordinary item available for common shareholders $87,982 $(3,411) $ 84,571 $10,927 $95,498 ======= ======= ======== ======= ======= Weighted average common shares outstanding 42,317 3,279 (R) 45,596 -- 45,596 ======= ======= ======== ======= ======= Income before extraordinary item available for common shareholders per share $2.08 $1.85 $2.09 ===== ===== ===== Ratio of Earnings to Fixed Charges 5.0x 3.3x 3.2x Ratio of Earnings to Combined Fixed Charges and Preferred Dividends 5.0x 2.8x 2.8x
See accompanying notes to unaudited pro forma consolidated financial statements and other data. F-4 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 audited historical consolidated balance sheet of the Company at December 31, 1998. B. Represents the purchase of 25 hotels open but not acquired as of December 31, 1998. Cash purchase prices: Three Candlewood Suites(R) hotels $ 22,668 Four TownePlace Suites by Marriott(R) hotels 24,887 Eighteen Homestead Village(R) hotels 129,040 Purchase price withheld as security deposit 22,803 Closing costs 997 -------- Total $200,395 ========
C. Represents the net effect of the pro forma adjustments on cash. D. Represents pro forma net borrowings under the credit facility after completion of the proposed issuance of $75 million Series A Cumulative Redeemable Preferred Shares (the "Proposed Offering") and the purchase of the hotels discussed in B, above. E. Represents security deposits held or to be held by the Company as a result of purchasing and leasing the following hotels: Three Candlewood Suites(R) hotels $ 3,932 Four TownePlace Suites by Marriott(R)hotels 2,911 Eighteen Homestead Village(R) hotels 15,960 ------- Total $22,803 =======
F. Represents net proceeds from the Proposed Offering. Other Data Consolidated Balance Sheet Adjustments G. Represents the purchase of 9 hotels acquired or to be acquired, but not open as of December 31, 1998: Cash purchase prices: Three Courtyard by Marriott(R)hotels $29,716 Three Residence Inn by Marriott(R)hotels 31,904 Three TownePlace Suites by Marriott(R)hotels 25,096 Purchase price withheld as security deposits 10,141 Closing costs 484 ------- Total $97,341 =======
H. Represents the net effect of the other adjustments on cash. I. Represents other pro forma net borrowings by the Company under the credit facility to complete the planned acquisition of hotels still under development as of December 31, 1998. J. Represents security deposits held by the Company as a result of purchasing and leasing the following hotels: Three Courtyard by Marriott(R)hotels $ 3,475 Three Residence Inn by Marriott(R)hotels 3,731 Three TownePlace Suites by Marriott(R)hotels 2,935 -------- Total $10,141 =======
F-5 HOSPITALITY PROPERTIES TRUST Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data - continued (dollars in thousands) Pro Forma Consolidated Income Statement Adjustments K. Represents the audited historical income statement of the Company for the year ended December 31, 1998. L. 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:
Year Ended December 31, 1998 ----------- Pro forma Minimum Rent $ 186,390 Pro forma Percentage Rent 3,436 Amounts included in historical Minimum Rent (153,787) Amounts included in historical Percentage Rent (3,436) --------- $ 32,603 =========
Certain of the hotels owned by the Company as of December 31, 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 December 31, 1998 were acquired as of their completion date. M. FF&E Reserve escrow accounts for all of HPT's Marriott(R) brand hotels are owned by HPT and periodic payments into these escrow accounts are recorded as additional rent under generally accepted accounting principles ("GAAP"). A pro forma adjustment to record additional rent relating to FF&E escrow contributions of $1,104 has been made for four hotels acquired in December 1998 which were open and operating throughout 1998. No pro forma adjustment for the FF&E Reserve income related to newly constructed hotels purchased and to be purchased by HPT from Marriott has been made, as this amount cannot be calculated. The FF&E Reserve for HPT's Wyndham(R), Sumner Suites(R), Candlewood Suites(R), Summerfield Suites(R) and Homestead Village(R) hotels remains the property of the respective tenants during the lease term. HPT has a security interest in these escrow accounts and at the end of the lease term, any remaining funds in these FF&E Reserves must be paid to HPT. Under GAAP, the FF&E Reserve for the leases relating to these hotels is not recorded as income by HPT. N. Represents the impact of the pro forma transactions on depreciation expense for the entire period presented. O. Represents the following adjustments to interest expense: o Eliminating 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 Adding interest on $81 million of proceeds from HPT's $300 million credit facility used to fund the acquisition Transactions discussed in B above. o Adding interest, including amortization of deferred financing costs, for the year ended December 31, 1998, on the senior notes issued during 1998. o Adding amortization of deferred financing costs related to the Credit Facility. P. Represents the estimated impact of the Transactions on general and administrative expenses of the Company for the periods presented. Q. Represents dividends accrued on the Proposed Offering at a rate of 9 1/2%. R. Represents the weighted average impact of 6.7 million common shares of beneficial interest issued by the Company during 1998. F-6 HOSPITALITY PROPERTIES TRUST Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data - continued (dollars in thousands) Other Data Consolidated Income Statement Adjustments S. Represents the effect of leases entered and to be entered for the transactions described in Note G above, since the beginning of the periods presented. The effect of these leases is derived as follows:
Year Ended December 31, 1998 ------------ Adjusted Pro forma Minimum Rent $213,108 Adjusted Pro forma Percentage Rent 3,436 Amounts included in pro forma Minimum Rent (186,390) Amounts included in pro forma Percentage Rent (3,436) -------- $ 26,718 ========
T. Represents the impact of the transactions described in Note G above, on depreciation expense for the entire period presented. U. Represents interest on the credit facility borrowings to be made in connection with the transactions described in Note G above, at LIBOR plus contractual spreads for the entire periods presented. The average applicable LIBOR rate was 5.6% for the year ended December 31, 1998. V. Represents the estimated impact of the transactions described in Note G above, on general and administrative expenses of the Company. F-7 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/ John G. Murray ------------------------------- John G. Murray, President Date: April 7, 1999 EX-1.1 2 UNDERWRITING AGREEMENT 3,000,000 Shares HOSPITALITY PROPERTIES TRUST (a Maryland real estate investment trust) 9 1/2% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest UNDERWRITING AGREEMENT April 7, 1999 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated Salomon Smith Barney Inc. A.G. Edwards & Sons, Inc. Morgan Stanley & Co. Incorporated Prudential Securities Incorporated as Representatives of the several Underwriters named in Schedule A hereto c/o 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. ("Salomon"), A.G. Edwards & Sons, Inc. ("A.G. Edwards"), Morgan Stanley & Co. Incorporated ("Morgan") and Prudential Securities Incorporated ("Prudential"), together with each of the other Underwriters named in Schedule A hereto (collectively, the "Underwriters" which term shall also include any underwriter substituted for an Underwriter), for whom Merrill Lynch, Salomon, A.G. Edwards, Morgan and Prudential are acting as representatives (in such capacity, Merrill Lynch, Salomon, A.G. Edwards, Morgan and Prudential are hereinafter collectively referred to as the "Representatives"), with respect to the issue and sale by the Company and the purchase by each such Underwriter, severally, of the respective numbers of 9 1/2% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, without par value (the "Preferred Shares"), of the Company set forth in Exhibit A hereto at a purchase price of $24.2125 per Preferred Share 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 450,000 Preferred Shares to cover over-allotments. The aforesaid 3,000,000 Preferred Shares (the "Initial Shares"), together with all or any part of the 450,000 Preferred Shares subject to the option described in Section 2 hereof (the "Option Shares"), are collectively hereinafter called the "Shares." 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 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 Shares, in the form first furnished to the Underwriters by the Company for use in connection with the offering of the Shares, 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(b) 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 197 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 7 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 Investments," pursuant to which the Company shall (i) acquire the Additional Hotels, and (ii) lease the Additional Hotels to a subsidiary of Marriott International, Inc. on a combined basis. 2 SECTION 1. Representations and Warranties. ------------------------------- (a) Representations and Warranties by the Company. The Company represents and warrants to you, 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. 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 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 you 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 you for use in connection with the offering of the Shares will, at the time of such delivery, be identical to 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 3 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, shareholders' 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" or a "Material Adverse Change"), (B) there have been no 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 shares or preferred shares, 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 shares. 4 (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; and the Articles Supplementary relating to the Preferred Shares will be in full force and effect as of the Closing Time. (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 shares 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 capital shares 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 capital shares of the Company (except for 500 common shares of beneficial intrest, par value $0.1 per share (the "Common Shares"), 250 of which are held by John A. Mannix and 250 of which are held by David M. Lepore) 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 capital shares 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 Shares. The Shares to be issued and sold pursuant to this Agreement have been duly authorized and, when issued and delivered to you against payment therefor as provided hereunder, will have been validly issued and will be fully paid, non-assessable (except as otherwise described in the Registration Statement) and free of preemptive or similar rights; the Preferred Shares conform to the provisions of the 5 Articles Supplementary; there are no outstanding subscriptions, rights, warrants, options, calls, convertible securities, commitments of sale or liens related to or entitling any person to purchase or otherwise to acquire any Common Shares of, or other ownership interest in, the Company, except as otherwise disclosed in the Registration Statement or the Prospectus and except for awards under the Company's Incentive Share Award Plan made in the ordinary course of business; all outstanding Common Shares, except for shares issued pursuant to the Company's Incentive Share Award Plan and shares issued to the Advisor (as defined below) and its affiliates, are listed on the New York Stock Exchange, Inc. (the "NYSE") and the company knows of no reason or set of facts which is likely to result in the delisting of such Common Shares or the inability to list the Shares; and there are no rights of holders of securities of the Company to the registration of Common Shares or other securities that would require inclusion of such Common Shares or other securities in the offering of the Shares. (11) Descriptions of the Shares. The Shares will conform in all material respects to the statements relating thereto contained in the Prospectus. (12) 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 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 Shares and the use of the proceeds from the sale of the Shares as described under the caption "Use of Proceeds") and compliance by the Company with its obligations hereunder and thereunder have been 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. 6 (13) 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. (14) 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, or the performance by the Company of its obligations hereunder. 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. (15) 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. (16) 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 or this Underwriting Agreement, 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 states in connection with the offer and sale of the Shares 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. (17) 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. 7 (18) 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. (19) 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. (20) Investment Company Act. The Company is not, and upon the issuance and sale of the Shares 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"). (21) Environmental Laws. The Company has received and reviewed certain environmental reports on (which included physical inspection of the surface of) each Current Hotel's property and has obtained certain representations and warranties relating to environmental matters from the sellers of the Current Hotels set forth in purchase agreements therefor. 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 8 Prospectus or as would not, singly or in the aggregate, have a Material Adverse Effect. 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. 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. 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 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. (22) 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 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 1999 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, 1998. (23) 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 9 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. (24) 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. (25) Absence of Indebtedness. At the Closing Time, the Company will have no indebtedness for money borrowed except (i) amounts outstanding under the Company's $300 million aggregate principal amount credit facility (the "Credit Facility"), (ii) the Company's 7% Senior Notes due 2008, (iii) the Company's 8 1/4% Monthly Income Senior Notes due 2005, (iv) the Company's 8 1/2% Monthly Income Senior Notes due 2009, (v) equipment financing arrangements in respect of personal property located at certain Current Hotels which have been entered into in the ordinary course of business and have an aggregate outstanding balance not in excess of $1 million, and (vi) any indebtedness as to which you shall have given your prior written consent. (26) 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 you or to your counsel in connection with the offering of the Shares shall be deemed a representation and warranty by the Company to you as to the matters covered thereby on the date of such certificate. 10 SECTION 2. Sale and Delivery to Underwriters; Closing. ------------------------------------------- (a) Shares. Your commitment to purchase the Shares 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. (a) 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 you to purchase up to an additional 450,000 Shares 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 Shares upon notice by you to the Company setting forth the number of Option Shares as to which you are then exercising the option and the time, date and place of payment and delivery for such Option Shares. Any such time and date of delivery (a "Date of Delivery") shall be determined by you 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 you and the Company. (b) Payment. Payment of the purchase price for, and delivery of, the Initial Shares shall be made at the offices of Sullivan & Worcester LLP, Boston, Massachusetts, or at such other place as shall be agreed upon by you and the Company, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day following the date of this Agreement, or such other time not later than ten business days after such date as shall be agreed upon by you 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 you, payment of the underwriting price for and delivery of the Option Shares shall be made at the above-mentioned office of Sullivan & Worcester LLP, or at such other place as shall be agreed upon by you 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 you of certificates for the Shares to be purchased by you. (c) Registration. The Shares shall be issued and registered in such names as you shall request not later than one business day prior to the Closing Time or the Date of Delivery, as the case may be. The Shares 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 you as follows: (a) Immediately following the execution of this Agreement, the Company will prepare a Prospectus Supplement setting forth the number of Shares covered thereby and their terms not otherwise specified in the Prospectus, your names, the price at which the Shares are to be purchased by you from the Company, and such other information as you and the Company deem appropriate in connection with the offering of the Shares; and the Company will promptly 11 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 you as many copies of the Prospectus (including such Prospectus Supplement) as you shall reasonably request. (b) Until the termination of the initial offering of the Shares, the Company will notify you 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 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 Shares, (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 Shares 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 Shares, the Company will give you 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 you in connection with the offering of the Shares 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 you 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 your counsel shall reasonably object. (d) The Company will deliver to you 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 Shares (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 you, 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 you 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 Shares, if any event shall occur as a result of which it is necessary, in the opinion of your counsel, 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 you 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 your counsel, 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. 12 (g) The Company will endeavor in good faith, in cooperation with you, to qualify the Shares for offering and sale under the applicable securities laws and real estate syndication laws of such states and other jurisdictions of the United States as you 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 Shares 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 Shares. (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 Shares 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 Shares. (l) The Company will use its best efforts to effect the listing of the Shares on the NYSE. (m) The Company will not, during a period of 30 days from the date of this Agreement, without Merrill Lynch's prior written consent, register, offer, sell, contract to sell, grant any option to purchase or otherwise dispose of Preferred Shares or any securities convertible into or exercisable or exchangeable for Preferred Shares, or warrants to purchase Preferred Shares, other than the Shares which are to be sold pursuant to 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 Shares and any certificates for the Shares to you, including any transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Shares to you, (iii) the fees and disbursements of the Company's counsel, accountants and other advisors or agents, as well as their respective counsel, (iv) the qualification of the Shares 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 13 of any Blue Sky Survey, and any amendment thereto, (v) the printing and delivery to you of copies of the Prospectus and any amendments or supplements thereto, (vi) the fees and expenses incurred in connection with the listing of the Shares on the NYSE, (vii) the filing fees incident to, and the reasonable fees and disbursements of your counsel 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 Shares and (viii) the cost of providing any CUSIP or other identification numbers for the Shares. (b) Termination of Agreement. If this Underwriting Agreement is terminated by you in accordance with the provisions of Section 5 or Section 9(a)(i) hereof, the Company shall reimburse you for all of your out-of-pocket expenses, including the reasonable fees and disbursements of your counsel. SECTION 5. Conditions of Underwriters' Obligations. Your obligations to purchase and pay for the Shares 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 your counsel. A prospectus containing information relating to the description of the Shares, 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. At Closing Time the rating assigned by any nationally recognized statistical rating organization to any preferred shares of the Company, as of the date hereof shall not have been lowered since such date nor shall any such rating organization have publicly announced that is has placed any preferred shares of the Company on what is commonly termed a "watch list" for possible downgrading. (b) Opinion of Counsel for Company. At Closing Time, you 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 your counsel, 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. 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. (c) Opinion of Special Maryland Counsel for Company. At Closing Time, you shall have received the favorable opinion, dated as of Closing Time, of Ballard Spahr Andrews & 14 Ingersoll, LLP, special Maryland counsel for the Company, in form and substance satisfactory to your counsel, to the effect as your counsel may reasonably request. (d) Opinion of Counsel for Underwriters. At Closing Time, you shall have received the favorable opinion, dated as of Closing Time, of Brown & Wood LLP, counsel for the Underwriters, with respect to the matters set forth in paragraphs (7), (8), (9), (17), and (18) 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, 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 you 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, and you 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 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, (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 officers' knowledge, are threatened by the Commission. (f) Advisor's Certificate. At Closing Time, there shall not have been, since the respective dates as of which information is given in 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 you shall have 15 received, at Closing Time, a certificate of the President or a Vice President of the Advisor evidencing compliance with this subsection (f). (g) Accountants' Comfort Letter. At the time of the execution of this Underwriting Agreement, you shall have received from Arthur Andersen LLP a letter dated such date, in form and substance satisfactory to you, 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, you 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) No Objection. If the Registration Statement or the offering of the Shares 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. (j) Additional Documents. At Closing Time, your counsel 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 Shares 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 Shares as herein contemplated shall be reasonably satisfactory in form and substance to you and your counsel. (a) Date of Delivery Documentation. In the event you exercise the option described in Section 2 hereof to purchase all or any portion of the Option Shares, 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 you shall have received: (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 remains true as of such Date of Delivery, except with respect to transactions as to which you shall have given your prior written consent. (ii) Certificate of the President or Vice 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. (iii) The favorable opinion of Sullivan & Worcester LLP, counsel for the Company, in form and substance satisfactory to your counsel, dated such Date of Delivery, relating to the Option Shares and otherwise to the same effect as the opinion required by Section 5(b) hereof. 16 (iv) The favorable opinion of Brown & Wood LLP, counsel for the Underwriters, dated such Date of Delivery, relating to the Option Shares 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 you pursuant to Section 5(h) hereof. (k) 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 you 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 each 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; (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 the Underwriters), 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 17 statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by the Underwriters 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 Shares 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 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 the Underwriters 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 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 18 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 Shares pursuant hereto or (ii) if the allocation provided 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 Shares pursuant hereto shall be deemed to be in the same respective proportions as the total net proceeds from the offering of such Shares (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 Shares 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 19 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 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, the Underwriters shall not be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by the Underwriters and distributed to the public were offered to the public exceeds the amount of any damages which the Underwriters have 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 each 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 trustee 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. 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 the Underwriters or controlling persons, or by or on behalf of the Company, and shall survive delivery of and payment for the Shares. SECTION 9. Termination. ------------ (a) You 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 and its subsidiaries considered as one enterprise or the Advisor, whether or not arising in the ordinary course of business, which would make it, in your reasonable judgment, impracticable or inadvisable to market the Shares or enforce contracts for the sale of the Shares, (ii) if there has occurred any material adverse change in the financial markets in the United States or any 20 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 your reasonable judgment, impracticable or inadvisable to market the Shares or enforce contracts for the sale of the Shares, (iii) if trading in the Company's Common Shares 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, or (iv) if the ratings assigned to preferred shares or unsecured debt securities of the Company by any "nationally recognized statistical rating organization" as that term is defined by the Commission for purposes of Rule 436(g)(2) under the 1933 Act, as of the date hereof shall have been lowered since such date or if any such rating organization shall have publicly announced that it has placed any preferred shares of the Company on what is commonly termed a "watch list" for possible downgrading. (a) 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. 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 you shall be directed to Merrill Lynch, 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 11. Parties. This Underwriting Agreement shall inure to the benefit of and be binding upon the Company and you and its and your 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 you and the Company and its 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 Shares from you shall be deemed to be a successor by reason merely of such purchase. SECTION 12. 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 13. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. 21 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 you 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. A.G. Edwards & Sons, Inc. Morgan Stanley & Co. Incorporated Prudential Securities Incorporated By: MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated By: /s/ Elizabeth Anne Casey -------------------------------------- Name: Elizabeth Anne Casey Title: Vice President For themselves and as Representatives of the several Underwriters named in Schedule A hereto. 22 Exhibit A
Number of Name of Underwriter Initial Securities ------------------- ------------------ Merrill Lynch, Pierce, Fenner & Smith Incorporated.............................................. 519,000 Salomon Smith Barney Inc. ................................................. 519,000 A.G. Edwards & Sons, Inc................................................... 519,000 Morgan Stanley & Co. Incorporated.......................................... 519,000 Prudential Securities Incorporated......................................... 519,000 ABN AMRO Incorporated...................................................... 15,000 BT Alex. Brown Incorporated................................................ 15,000 Robert W. Baird & Co. Incorporated......................................... 15,000 Bear, Stearns & Co. Inc.................................................... 15,000 CIBC Oppenheimer Corp...................................................... 15,000 Credit Lyonnaise Securities (USA) Inc...................................... 15,000 Dain Rauscher Incorporated................................................. 15,000 D.A. Davidson & Co......................................................... 15,000 Donaldson, Lufkin & Jenrette Securities Corporation........................ 15,000 Dresdner Kleinwort Benson North America LLC................................ 15,000 EVEREN Securities, Inc..................................................... 15,000 Fahnestock & Co. Inc....................................................... 15,000 J.J.B Hilliard, W.L. Lyons, Inc............................................ 15,000 Legg Mason Wood Walker, Incorporated....................................... 15,000 Lehman Brothers Inc........................................................ 15,000 NationsBanc Montgomery Securities LLC...................................... 15,000 NatWest Securities Limited................................................. 15,000 Raymond James & Associates, Inc............................................ 15,000 The Robinson-Humphrey Company, LLC......................................... 15,000 Roney Capital Markets, A Division of First Chicago Capital Markets, Inc................................ 15,000 SG Cowen Securities Corporation............................................ 15,000 Schroder & Co. Inc......................................................... 15,000 Sutro & Co. Incorporated................................................... 15,000 Tucker Anthony Incorporated................................................ 15,000 U.S. Bancorp Piper Jaffray Inc............................................. 15,000 Warburg Dillon Read LLC.................................................... 15,000 Wheat First Union, a Division of First Union Capital Markets Corp.................................. 15,000 ---------------- Total...................................................................... 3,000,000 ================
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 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 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 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 capital shares of each Subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable, and, to such counsel's knowledge, are owned by the Company, directly or through subsidiaries, free and clear of any adverse claim. None of such capital shares of any Subsidiary was issued in violation of preemptive or, to such counsel's knowledge, other similar rights of any holder (other than the Company) of capital shares of such Subsidiary. (6) 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 to such counsel's opinion, all the authorized, issued and outstanding capital shares of the Company 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 capital shares was issued in violation of preemptive or, to such counsel's knowledge, other similar rights of any holder of capital shares of the Company. B-1 (7) The Underwriting Agreement has been duly authorized, executed and delivered by the Company. (8) The Shares have been duly authorized and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms of the Underwriting Agreement, will be validly issued, fully paid and non-assessable (except as otherwise described in the Registration Statement), and will be free of any preemptive or, to such counsel's knowledge, other similar rights that entitle any person (other than the Underwriters and their successors and assigns) to acquire any Shares upon the issuance thereof by the Company. (9) The Preferred Shares conform as to legal matters in all material respects to the descriptions thereof in the Prospectus. (10) (a) The statements under the captions (i) "The Company," "Management" and "Description of the Series A Preferred Shares" in the Prospectus Supplement and (ii) "Description of Preferred Shares," "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 Our Common Equity and Related Stockholder Matters," and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" in the Annual Report on Form 10-K, and (ii) "Other Information -- Certain Relationships and Related Transactions" in the Company's Proxy Statement relating to the May 18, 1999 Annual Meeting of Shareholders (incorporated by reference in the Form 10-K), 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. (11) The statements under the captions "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. (12) 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 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 B-2 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. (13) The execution, delivery and performance of the Underwriting Agreement 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 Shares and the use of the proceeds from the sale of the Shares 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. (14) 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 right or ability of the Company to perform its obligations thereunder. (15) 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. (16) 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. (17) 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 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. B-3 (18) 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, 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. (19) 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. (20) The relative rights, preferences, interests and powers of the Preferred Shares are set forth in the Declaration of Trust, including the Articles Supplementary relating to the Preferred Shares, and all such provisions relating to the Preferred Shares are valid under Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland. (21) No authorization, approval, consent, license, order or decree of, or filing, registration or qualification with, 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 or the Underwriting Agreement, other than those which have already been made, obtained or rendered as applicable. (22) The Company is not, and upon the issuance and sale of the Shares 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. (23) 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, 1998, 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. (24) 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. (25) 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. (26) 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, B-4 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 Closing Time, 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 by (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 Underwriter. B-5 EX-3.1 3 ARTICLES SUPPLEMENTARY HOSPITALITY PROPERTIES TRUST ARTICLES SUPPLEMENTARY 9 1/2% SERIES A CUMULATIVE REDEEMABLE PREFERRED SHARES without par value HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment trust, having its principal office in Newton, Massachusetts (hereinafter called the "Trust"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Trustees by Section 5.1 of the Amended and Restated Declaration of Trust of the Trust, dated August 21, 1995, as amended (the "Declaration"), the Trustees have duly reclassified and designated 3,450,000 Preferred Shares of the Trust as 9 1/2% Series A Cumulative Redeemable Preferred Shares, without par value, of the Trust ("Series A Preferred Shares"). SECOND: The preferences, rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms or conditions of redemption of the Series A Preferred Shares are as follows, which upon any restatement of the Declaration shall be made part of Article V of the Declaration, with any necessary or appropriate changes to the enumeration or lettering of sections or subsections hereof. Capitalized terms used in this ARTICLE SECOND which are defined in the Declaration and not otherwise defined herein are used herein as so defined in the Declaration. 9 1/2% Series A Cumulative Redeemable Preferred Shares, without par value - ------------------------------------------------------------------------- 1. Designation and Number. A series of Preferred Shares, designated the 9 1/2% Series A Cumulative Redeemable Preferred Shares, without par value (the "Series A Preferred Shares"), is hereby established. The number of authorized Series A Preferred Shares is 3,450,000. 2. Relative Seniority. In respect of rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, the Series A Preferred Shares shall rank (i) senior to the Common Shares, the Junior Participating Preferred Shares and any other class or series of Shares of the Trust, the terms of which specifically provide that such class or series ranks, as to rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, junior to the Series A Preferred Shares (the Shares described in this clause (i) being, collectively, "Junior Shares"), (ii) on a parity with any other class or series of Shares of the Trust, the terms of which specifically provide that such class or series ranks, as to rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, on a parity with the Series A Preferred Shares, and (iii) junior to any class or series of Shares of the Trust, the terms of which specifically provide that such class or series ranks, as to rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, senior to the Series A Preferred Shares. For the avoidance of doubt, debt securities of the Trust which are convertible into or exchangeable for Shares of the Trust or any other debt securities of the Trust do not constitute a class or series of Shares for purposes of this Section 2. 3. Dividends and Distributions. (a) Subject to the preferential rights of the holders of any class or series of Shares of the Trust ranking senior to the Series A Preferred Shares as to dividends, the holders of the then outstanding Series A Preferred Shares shall be entitled to receive, when and as authorized by the Trustees, out of any funds legally available therefor, cumulative dividends at a rate of nine and one-half percent (9 1/2%) per annum of the Twenty-Five Dollars ($25.00) per share liquidation preference of the Series A Preferred Shares (equivalent to the annual rate of $2.375 per share). Such dividends shall accrue and be cumulative from (but excluding) April 12, 1999 (the "Original Issue Date") in the case of Series A Preferred Shares issued on or prior to May 12, 1999, and otherwise from (but excluding) the date of the original issuance thereof, and will be payable quarterly in arrears in cash on the last day of each March, June, September and December beginning on June 30, 1999 (each such day being hereinafter called a "Quarterly Dividend Date"); provided that if any Quarterly Dividend Date is not a Business Day (as hereinafter defined), then the dividend which would otherwise have been payable on such Quarterly Dividend Date may be paid on the next succeeding Business Day with the same force and effect as if paid on such Quarterly Dividend Date, and no interest or additional dividends or other sums shall accrue on the amount so payable from such Quarterly Dividend Date to such next succeeding Business Day. As used herein the term "Dividend Period" for Series A Preferred Shares means the period from but excluding the Original Issue Date or other date of the original issuance thereof, as applicable, and ending on and including the next following Quarterly Dividend Date, and each subsequent period from but excluding a Quarterly Dividend Date and ending on and including the next following Quarterly Dividend Date. The amount of any dividend payable for any full Dividend Period or portion thereof shall be computed on the basis of a 360-day year of twelve 30-day months (it being understood that the first Dividend Period is shorter than a full Dividend Period). Dividends shall be payable to holders of record as they appear in the share records of the Trust at the close of business on the applicable record date (the "Record Date"), which shall be a date designated by the Trustees for the payment of dividends that is not more than 60 nor less than 10 days prior to the applicable Quarterly Dividend Date. (b) Dividends on the Series A Preferred Shares shall accrue and be cumulative, whether or not the Trust has earnings, there are funds legally available for the payment of such dividends or such dividends have been declared. (c) If Series A Preferred Shares are outstanding, no full dividends shall be declared or paid or set apart for payment on any other class or series of Shares of the Trust ranking, as to dividends, on a parity with or junior to Series A Preferred Shares for any period, unless the full cumulative dividends on the Series A Preferred Shares have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods. When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Series A Preferred Shares and the Shares of any other class or series -2- ranking on a parity as to dividends with the Series A Preferred Shares, all dividends declared upon Series A Preferred Shares and any such other class or series of Shares shall in all cases bear to each other the same ratio that accrued dividends per share on the Series A Preferred Shares and such other class or series of Shares (which shall not include any accumulation in respect of unpaid dividends for prior dividend periods if such other class or series does not have a cumulative dividend) bear to each other. (d) Except as provided in Section 3(c) above, unless full cumulative dividends on the Series A Preferred Shares have been or contemporaneously are declared and paid or declared and a sum sufficient for the repayment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, no dividends (other than in Common Shares or other Junior Shares or options, warrants or rights to subscribe for or purchase Common Shares or other Junior Shares) shall be declared or paid or set apart for payment and no other distribution shall be declared or made upon the Common Shares or any other Shares ranking junior to the Series A Preferred Shares as to rights to receive dividends or to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, nor shall any Common Shares or any other such Shares be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such Shares) by the Trust except (i) by conversion into or exchange for Common Shares or other Junior Shares, (ii) pursuant to pro rata offers to purchase or a concurrent redemption of all, or a pro rata portion of, the outstanding Series A Preferred Shares and any other class or series of Shares ranking on a parity with Series A Preferred Shares as to rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, (iii) by redemption, purchase or other acquisition of Common Shares made for purposes of an incentive, benefit or share purchase plan of the Trust or any of its subsidiaries for officers, Trustees or employees or others performing or providing similar services, (iv) by redemption, purchase or other acquisition of rights to purchase Junior Participating Preferred Shares pursuant to the Rights Agreement, dated as of May 30, 1997, between the Trust and State Street Bank and Trust Company, as rights agent, or pursuant to any replacement agreement therefor relating to such rights, each as in effect from time to time, or of any similar rights from time to time issued by the Trust in connection with a successor or supplemental shareholder rights protection plan adopted by the Trustees, and (v) for redemptions, purchases or other acquisitions by the Trust, whether pursuant to any provision of the Declaration or otherwise, for the purpose of preserving the Trust's status as a real estate investment trust (a "REIT") for Federal income tax purposes. (e) No interest, or sum of money in lieu thereof, shall be payable in respect of any dividend payment or payments on Series A Preferred Shares which may be in arrears, and the holders of Series A Preferred Shares are not be entitled to any dividends, whether payable in cash, securities or other property, in excess of the full cumulative dividends described in this Section 3. Except as otherwise expressly provided herein, the Series A Preferred Shares shall not be entitled to participate in the earnings or assets of the Trust. (f) Any dividend payment made on the Series A Preferred Shares shall be first credited against the earliest accrued but unpaid dividend due with respect to such Shares which remains payable. Any cash dividends paid in respect of Series A Preferred Shares, including any -3- portion thereof which the Trust elects to designate as "capital gain dividends" (as defined in Section 857 (or any successor provision) of the Internal Revenue Code) or as a return of capital, shall be credited to the cumulative dividends on the Series A Preferred Shares. (g) No dividends on the Series A Preferred Shares shall be authorized by the Trustees or be paid or set apart for payment by the Trust at such time as the terms and provisions of any agreement of the Trust, including any agreement relating to its indebtedness, directly or indirectly prohibit authorization, payment or setting apart for payment or provide that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration, payment or setting apart for payment shall be restricted or prohibited by law. (h) The Trust shall remain entitled to receive and retain any interest or other earnings on any money set aside for the payment of dividends on Series A Preferred Shares and holders thereof shall have no claim to such interest or other earnings. Any funds for the payment of dividends on Series A Preferred Shares which have been set apart by the Trust and which remain unclaimed by the holders of the Series A Preferred Shares entitled thereto on the first anniversary of the applicable Quarterly Dividend Date, or other dividend payment date shall revert and be repaid to the general funds of the Trust, and thereafter the holders of the Series A Preferred Shares entitled to the funds which have reverted or been repaid to the Trust shall look only to the general funds of the Trust for payment, without interest or other earnings thereon. (i) "Business Day" shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York, New York or Boston, Massachusetts are authorized or required by law, regulation or executive order to close. 4. Liquidation Rights. (a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Trust, then, before any distribution or payment shall be made to the holders of any Common Shares or any other Shares ranking junior to the Series A Preferred Shares as to rights to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, but subject to the preferential rights of holders of any class or series of Shares ranking senior to the Series A Preferred Shares as to rights to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, the holders of Series A Preferred Shares shall be entitled to receive, out of assets of the Trust legally available for distribution to shareholders, liquidating distributions in cash or property at its fair market value as determined by the Trustees in the amount of Twenty-Five Dollars ($25.00) per Series A Preferred Share, plus an amount equal to all dividends accrued and unpaid thereon. (b) After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series A Preferred Shares will have no right or claim to any of the remaining assets of the Trust. -4- (c) In the event that upon any voluntary or involuntary liquidation, dissolution or winding up of the Trust, the available assets of the Trust are insufficient to pay the full amount of the liquidating distributions on all outstanding Series A Preferred Shares and the full amount amounts payable as liquidating distributions on all Shares of other classes or series of Shares of the Trust ranking on a parity with the Series A Preferred Shares as to rights to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, then the holders of the Series A Preferred Shares and all other such classes or series of Shares shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. (d) For purposes of this Section 4, neither the sale, lease, transfer or conveyance of all or substantially all of the property or business of the Trust, nor the merger or consolidation of the Trust into or with any other entity or the merger or consolidation of any other entity into or with the Trust or a statutory share exchange by the Trust, shall be deemed to be a dissolution, liquidation or winding up of the Trust. (e) In determining whether a distribution (other than upon voluntary or involuntary liquidation), by dividend, redemption or other acquisition of Shares or otherwise, is permitted under Maryland law, amounts that would be needed, if the Trust were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of the holders of Series A Preferred Shares will not be added to the Trust's total liabilities. 5. Redemption by the Trust. (a) Optional Redemption. The Series A Preferred Shares are not redeemable prior to April 12, 2004, except as otherwise provided in Section 5(b) below. On and after April 12, 2004, the Trust may, at its option, redeem Series A Preferred Shares in whole or from time to time in part, for cash at a redemption price per share of Twenty-Five Dollars ($25.00), together with all accrued and unpaid dividends to the date fixed for redemption, except as otherwise provided in Section 5(c)(vi) below (the "Series A Redemption Price"), and without interest. Each date fixed for redemption of Series A Preferred Shares pursuant to this Section 5(a) or to Section 5(b) below is referred to in these provisions of the Series A Preferred Shares as a "Series A Redemption Date." The Series A Preferred Shares have no stated maturity and are not subject to any sinking fund or mandatory redemption. Any redemption of Series A Preferred Shares pursuant to this Section 5(a) shall be made in accordance with the applicable provisions of Section 5(c) below. (b) Special Optional Redemption. The Trust may, at its option, redeem at any time all or from time to time any Series A Preferred Shares which constitute Excess Series A Preferred Shares (as defined in Section 9 below) for cash at a redemption price per share equal to the Series A Redemption Price, subject, with respect to the portion of the Series A Redemption Price constituting accrued and unpaid dividends to the date fixed for redemption, to the provisions of the second paragraph of subsection (c) of Section 5.14 of the Declaration and to Section 5(c)(vi) below, and without interest. The Trust's right to redeem Excess Series A Preferred Shares shall be in addition to, and shall not limit, its rights with respect to such Series A Preferred Shares set forth in Section 9 below or in Section 5.14 of the Declaration. Any redemption of Series A Preferred Shares -5- pursuant to this Section 5(b) shall be made in accordance with the applicable provisions of Section 5(c) below. (c) Procedures and Terms for Redemption. (i) Notice of redemption will be mailed at least 30 days but not more than 60 days before the Series A Redemption Date to each holder of record of Series A Preferred Shares to be redeemed at the address shown on the share transfer books of the Trust; provided that if the Trust shall have reasonably concluded, based on advice of independent tax counsel experienced in such matters, that a redemption pursuant to Section 5(b) must be made on a date (the "Special Redemption Date") which is earlier than 30 days after the date of such mailing in order to preserve the status of the Trust as a REIT for Federal income tax purposes or to comply with Federal tax laws relating to the Trust's qualification as a REIT, then the Trust may give such shorter notice as is necessary to effect such redemption on the Special Redemption Date. Each notice of redemption shall state: (A) the applicable Series A Redemption Date; (B) the number of Series A Preferred Shares to be redeemed; (C) the applicable Series A Redemption Price; (D) the place or places where certificates for such Series A Preferred Shares are to be surrendered for payment of the Series A Redemption Price; and (E) that dividends on the Series A Preferred Shares to be redeemed will cease to accrue on such Series A Redemption Date. If fewer than all the Series A Preferred Shares are to be redeemed, the notice mailed to each such holder thereof shall also specify the number of Series A Preferred Shares to be redeemed from each such holder or the method for calculating that number. No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any Series A Preferred Shares except as to the holder to whom the Trust has failed to give notice or to whom notice was defective. (ii) If notice of redemption of Series A Preferred Shares has been mailed in accordance with Section 5(c)(i) above and if the funds necessary for such redemption have been set aside by the Trust in trust for the benefit of the holders the Series A Preferred Shares so called for redemption, subject to the provisions of Section 5(c)(v) below, then from and after the Series A Redemption Date specified in the notice dividends will cease to accumulate, and such Shares shall no longer be deemed to be outstanding and shall not have the status of Series A Preferred Shares and all rights of the holders thereof as Shareholders of the Trust (except the right to receive the Series A Redemption Price) shall terminate. (iii) Upon surrender, in accordance with the Trust's notice of redemption, of the certificates for any Series A Preferred Shares redeemed (properly endorsed or assigned for transfer and with applicable signature guarantees, if the Trust shall so require and the notice shall so state), the Series A Preferred Shares shall be redeemed by the Trust at the Series A Redemption Price. In case fewer than all the Series A Preferred Shares evidenced by any such certificate are redeemed, a new certificate or certificates shall be issued evidencing the unredeemed Series A Preferred Shares without cost to the holder thereof. -6- (iv) If fewer than all of the outstanding Series A Preferred Shares are to be redeemed, the number of Series A Preferred Shares to be redeemed will be determined by the Trust and such Shares may be redeemed pro rata from the holders of record of such Shares in proportion to the number of such Shares held by such holders (with adjustments to avoid redemption of fractional Shares), by lot or by any other equitable method determined by the Trust. (v) Any funds for the redemption of Series A Preferred Shares which have been set aside by the Trust pursuant to Section 5(c)(ii) above, shall be irrevocably set aside separate and apart from the Trust's other funds in trust for the pro rata benefit of the holders of the Series A Preferred Shares called for redemption, except that: (A) the Trust shall be entitled to receive any interest or other earnings, if any, earned on any money so set aside in trust, and the holders of any Shares redeemed shall have no claim to such interest or other earnings; and (B) any balance of monies deposited by the Trust and unclaimed by the holders of the Series A Preferred Shares entitled thereto at the expiration of one year from the applicable Series A Redemption Date shall be repaid, together with any interest or other earnings earned thereon, to the general funds of the Trust, and after any such repayment, the holders of the Shares entitled to the funds which have been repaid to the Trust shall look only to the general funds of the Trust for payment without interest or other earnings thereon. (vi) Anything in these provisions of the Series A Preferred Shares to the contrary notwithstanding, the holders of record of Series A Preferred Shares at the close of business on a Record Date will be entitled to receive the dividend payable with respect to such Shares on the corresponding Quarterly Dividend Date notwithstanding the redemption of such Shares after such Record Date and on or prior to such Quarterly Dividend Date or the Trust's default in the payment of the dividend due on such Quarterly Dividend Date, in which case the amount payable upon redemption of such Series A Preferred Shares will not include such dividend (and the full amount of the dividend payable for the applicable Dividend Period shall instead be paid on such Quarterly Dividend Date to the holders of record on such Record Date as aforesaid). Except as provided in this clause (vi) and except to the extent that accrued and unpaid dividends are payable as a part of the Series A Redemption Price pursuant to Section 5(a) or 5(b), the Trust will make no payment or allowance for unpaid dividends, regardless of whether or not in arrears, on Series A Preferred Shares called for redemption. (vii) Notwithstanding the foregoing, unless the full cumulative dividends on all Series A Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, no Series A Preferred Shares shall be redeemed unless all outstanding Series A Preferred Shares are simultaneously redeemed; provided, however, that (i) the foregoing shall not prevent the redemption of Series A -7- Preferred Shares pursuant to Section 5(b) above or the purchase or acquisition of Series A Preferred Shares pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series A Preferred Shares, and (ii) the foregoing shall not in any respect limit the terms and provisions of Section 5.14 of the Declaration or Section 9 hereof. In addition, unless the full cumulative dividends on all outstanding Shares of Series A Preferred Shares have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, the Trust shall not purchase or otherwise acquire directly or indirectly any Series A Preferred Shares (except by conversion into or exchange for Common Shares or other Junior Shares); provided, however, that (i) the foregoing shall not prevent the redemption of Series A Preferred Shares pursuant to Section 5(b) above or the purchase or acquisition of Series A Preferred Shares pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series A Preferred Shares, and (ii) the foregoing shall not in any respect limit the terms and provisions of Section 5.14 of the Declaration or Section 9 hereof. (viii) For the avoidance of doubt, the provisions of this Section 5 shall not limit any direct or indirect purchase or acquisition by the Trust of all or any Series A Preferred Shares on the open market (including in privately negotiated transactions), except as otherwise expressly provided in Section 5(c)(vii) above. 6. Voting Rights. Notwithstanding anything to the contrary contained in the Declaration, except as set forth below in this Section 6, the holders of the Series A Preferred Shares shall not be entitled to vote at any meeting of the shareholders for election of Trustees or for any other purpose or otherwise to participate in any action taken by the Trust or the shareholders thereof, or to receive notice of any meeting of shareholders (except for such notices as may be expressly required by law). (a) At any time dividends on the Series A Preferred Shares shall be in arrears for six or more quarterly periods, whether or not the quarterly periods are consecutive, the holders of Series A Preferred Shares (voting separately as a class with all other series of Preferred Shares of the Trust upon which like voting rights have been conferred and are exercisable) will be entitled to vote for the election of two additional Trustees of the Trust at the next annual meeting of shareholders and at each subsequent meeting (and the number of Trustees then constituting the Board of Trustees will automatically increase by two, if not already increased by two by reason of the election of Trustees by the holders of such Preferred Shares), until all dividends accumulated on Series A Preferred Shares for the past Dividend Periods and the then current Dividend Period shall have been fully paid or declared and a sum sufficient for the payment thereof set apart for payment. (i) Upon the full payment of all such dividends accumulated on Series A Preferred Shares for the past Dividend Periods and the then current Dividend Period or the declaration in full thereof and the Trust's setting aside a sum sufficient for the payment thereof, the right of the holders of Series A Preferred Shares to elect such two Trustees shall cease, and (unless there are one or more other series of Preferred Shares of the Trust upon which like voting rights have been conferred and are exercisable) the term of office of such -8- Trustees previously so elected shall automatically terminate and the authorized number of Trustees of the Trust will thereupon automatically return to the number of authorized Trustees otherwise in effect, but subject always to the same provisions for the reinstatement and divestment of the right to elect two additional Trustees in the case of any such future dividend arrearage. (ii) If at any time when the voting rights conferred upon the Series A Preferred Shares pursuant to this Section 6(a) are exercisable any vacancy in the office of a Trustee elected pursuant to this Section 6(a) shall occur, then such vacancy may be filled only by the written consent of the remaining such Trustee or by vote of the holders of record of the outstanding Series A Preferred Shares and any other series of Preferred Shares of the Trust upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series A Preferred Shares in the election of Trustees pursuant to this Section 6(a). (iii) Any Trustee elected or appointed pursuant to this Section 6(a) may be removed only by the holders of the outstanding Series A Preferred Shares and any other series of Preferred Shares of the Trust upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series A Preferred Shares in the election of Trustees pursuant to this Section 6(a), and may not be removed by the holders of the Common Shares. (iv) The term of any Trustees elected or appointed pursuant to this Section 6(a) shall be from the date of such election or appointment and their qualification until the next annual meeting of the Shareholders and until their successors are duly elected and qualify, except as otherwise provided above in this Section 6(a). (b) So long as any Series A Preferred Shares remain outstanding, the Trust shall not, without the affirmative vote or consent of the holders of at least two-thirds of the Series A Preferred Shares outstanding at the time, given in person or by proxy, either in writing or at a meeting (the holders of Series A Preferred Shares voting separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of Shares ranking senior to the Series A Preferred Shares with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of the Trust, or reclassify any authorized Shares of the Trust into any such Shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such Shares; or (ii) amend, alter or repeal the provisions of the Declaration or the terms of the Series A Preferred Shares, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series A Preferred Shares; provided, however, that any increase in the amount of authorized Preferred Shares, any issuance of or increase in the amount of Series A Preferred Shares or any creation or issuance of or increase in the amount of authorized shares of any class or series of Preferred Shares which rank on a parity with the Series A Preferred Shares with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of the Trust or which are Junior Shares shall not be deemed to materially and adversely affect the rights, preferences, privileges or voting powers of the Series A Preferred Shares. -9- (c) The voting provisions set forth in clauses (a) and (b) above will not apply if, at or prior to the time when the act with respect to which a vote would otherwise be required shall be effected, all outstanding Series A Preferred Shares shall have been redeemed or called for redemption and sufficient funds shall have been deposited in trust pursuant to the provisions of Sections 5(c)(ii) and 5(c)(v) hereof to effect the redemption. (d) On each matter submitted to a vote of the holders of Series A Preferred Shares or on which the holders of Series A Preferred Shares are otherwise entitled to vote as provided herein, each Series A Preferred Share shall be entitled to one vote, except that when Shares of any other class or series of Preferred Shares of the Trust have the right to vote with the Series A Preferred Shares as a single class on any matter, the Series A Preferred Shares and the Shares of each such other class or series will have one vote for each Twenty-Five Dollars ($25.00) of liquidation preference. 7. Conversion. The Series A Preferred Shares are not convertible into or exchangeable for any other property or securities of the Trust. This provision will not prevent the Trust from offering to convert or exchange the Series A Preferred Shares. 8. Status of Redeemed and Reacquired Series A Preferred Shares. In the event any Series A Preferred Shares shall be redeemed pursuant to Section 5 hereof or otherwise reacquired by the Trust, the Shares so redeemed or reacquired shall become authorized but unissued Shares of Series A Preferred Shares, available for future issuance and reclassification by the Trust or, if so determined by the Trustees, may be retired and canceled by the Trust. 9. Restrictions on Transfer. (a) As a condition to the transfer (including, without limitation, any sale, transfer, gift, assignment, devise or other disposition of Series A Preferred Shares, whether voluntary or involuntary, whether beneficially or of record, and whether effected constructively, by operation of law or otherwise) and/or registration of transfer of any Series A Preferred Shares ("Excess Series A Preferred Shares") which could in the opinion of the Trustees result in (i) direct or indirect ownership (as defined in Section 5.14 of the Declaration) of Series A Preferred Shares representing more than 9.8% in number, value or voting power of the total Series A Preferred Shares outstanding becoming concentrated in the hands of one owner other than an Excepted Person (as such term is defined in the Declaration), (ii) the outstanding Series A Preferred Shares of the Trust being owned by fewer than one hundred (100) persons, or (iii) the Trust being "closely held" within the meaning of Section 856(h) of the Internal Revenue Code, -10- such potential owner (a "Proposed Transferee") shall file with the Trust the statement or affidavit described in Section 5.14(b) of the Declaration no later than the fifteenth (15th) day prior to any proposed transfer, registration of transfer or transaction which, if consummated, would have any of the results set forth above; provided, however, that the Trustees may waive such requirement of prior notice upon determination that such waiver is in the best interests of the Trust. Subject to Section 5.14(i) of the Declaration, the Trustees shall have the power and right (i) to refuse to transfer or issue Excess Series A Preferred Shares or share certificates to any Proposed Transferee whose acquisition of such Excess Series A Preferred Shares would, in the opinion of the Trustees, result in the direct or indirect beneficial ownership of any Excess Series A Preferred Shares by a Person other than an Excepted Person and (ii) to treat such Excess Series A Preferred Shares as having been transferred not to the Proposed Transferee but rather to a trustee for the benefit of one or more Charitable Beneficiaries (as defined in the Declaration) selected and otherwise as described in Section 5.14(c) of the Declaration. Any such trust shall be deemed to have been established by the holder of such Excess Series A Preferred Shares for the benefit of the applicable Charitable Beneficiary or Charitable Beneficiaries on the day prior to the date of the purported transfer to the Proposed Transferee, which purported transfer shall be void ab initio and the Proposed Transferee shall be deemed never to have acquired any interest in or with respect to the Excess Series A Preferred Shares purportedly transferred. (b) Any Excess Series A Preferred Shares shall automatically be deemed to constitute Excess Shares (within the meaning of the Declaration) and shall be treated in the manner prescribed for Excess Shares, including those set forth in Section 5.14(c) thereof. (c) Notwithstanding any other provision of the Declaration or hereof to the contrary, but subject to Section 5.14(i) of the Declaration, any purported acquisition of Series A Preferred Shares (whether such purported acquisition results from the direct or indirect acquisition or ownership (as defined for purposes of the Declaration) of Series A Preferred Shares) which would result in the disqualification of the Trust as a REIT shall be null and void. Any such Shares may be treated by the Trustees in the manner prescribed for Excess Series A Preferred Shares in these provisions of the Series A Preferred Shares and for Excess Shares in Section 5.14(c) of the Declaration. (d) The provisions of this Section 9 shall not limit the applicability of Section 5.14 of the Declaration to Series A Preferred Shares in accordance with the terms thereof, and the provisions of this Section 9 and of Section 5.14 of the Declaration shall not limit the right of the Trust to elect to redeem Excess Series A Preferred Shares pursuant to Section 5(b) hereof. Subject only to Section 5.14(i) of the Declaration, nothing contained in this Section 9 or in any other provision of the Series A Preferred Shares in these provisions of the Series A Preferred Shares shall limit the authority of the Trustees to take such other action as they deem necessary or advisable to protect the Trust and the interests of the Shareholders by preserving the Trust's status as a REIT. The provisions of subsections (f) through (i) of Section 5.14 of the Declaration shall be applicable to this Section 9 as though (i) the references therein to Section 5.14 of the Declaration referred instead to this Section 9 and (ii) the references therein to subsections of Section 5.14 of the Declaration referred to the comparable provisions of this Section 9. -11- 10. Severability. If any preference, right, voting power, restriction, limitation as to dividends, qualification, term or condition of redemption or other term of the Series A Preferred Shares is invalid, unlawful or incapable or being enforced by reason of any rule of law or public policy, then, to the extent permitted by law, all other preferences, rights, voting powers, restrictions, limitations as to dividends, qualifications, terms and conditions of redemption and other terms of the Series A Preferred Shares which can be given effect without the invalid, unlawful or unenforceable preference, right, voting power, restriction, limitation as to dividends, qualification, term or condition of redemption or other term of the Series A Preferred Shares shall remain in full force and effect and shall not be deemed dependent upon any invalid, unlawful or unenforceable preference, right, voting power, restriction, limitation as to dividends, qualification, term or condition of redemption or other term of the Series A Preferred Shares. THIRD: The Series A Preferred Shares have been classified and designated by the Board of Trustees under the authority contained in the Declaration. FOURTH: These Articles Supplementary have been approved by the Board of Trustees in the manner and by the vote required by law. FIFTH: The undersigned President of the Trust acknowledges these Articles Supplementary to be the trust act of the Trust and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and this statement is made under the penalties for perjury. IN WITNESS WHEREOF, HOSPITALITY PROPERTIES TRUST has caused these Articles Supplementary to be signed in its name and on its behalf by its President and witnessed by its Assistant Secretary on April 7, 1999. WITNESS: HOSPITALITY PROPERTIES TRUST ______________________________ By: _____________________________ Alexander A. Notopoulos, Jr., John G. Murray, President Assistant Secretary -12- EX-4.1 4 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS [FRONT OF CERTIFICATE] Temporary Certificate - Exchangeable for Definitive Engraved Certificate when Available for Delivery HOSPITALITY PROPERTIES TRUST A MARYLAND REAL ESTATE INVESTMENT TRUST [Graphic which contains: Number [Graphic which contains: Shares PAT ______ ] _____________ ] 9 1/2% SERIES A CUMULATIVE 9 1/2% SERIES A CUMULATIVE REDEEMABLE PREFERRED SHARES REDEEMABLE PREFERRED SHARES THIS CERTIFICATE IS TRANSFERABLE CUSIP 44106M 30 0 IN BOSTON OR IN NEW YORK CITY SEE REVERSE FOR IMPORTANT NOTICE ON TRANSFER RESTRICTIONS AND OTHER INFORMATION THIS CERTIFIES THAT --SPECIMEN-- IS THE REGISTERED HOLDER OF FULLY PAID AND NONASSESSABLE 9 1/2% SERIES A CUMULATIVE REDEEMABLE PREFERRED SHARES OF BENEFICIAL INTEREST, WITHOUT PAR VALUE, IN [Superimposed over the following paragraph are the words "PREFERRED SHARES"] Hospitality Properties trust (the "Trust"), a Maryland real estate investment trust established by Declaration of Trust made as of May 12, 1995, as amended from time to time, a copy of which, together with all amendments thereto (the "Declaration") is on file with the State Department of Assessments and Taxation of Maryland. The provisions of the Declaration and the Bylaws of the Trust, and all amendments thereto, are hereby incorporated in and made a part of this certificate as fully as if set forth herein in their entirety, to all of which provisions the holder and every transferee or assignee hereof by accepting or holding the same agrees to be bound. See reverse for existence of Trustees' authority to determine preferences and other rights of subsequent series of shares, and of restriction on transfer provisions governing the shares evidenced by this certificate. This certificate and the shares evidenced hereby are negotiable and transferable on the books of the Trust by the registered holder hereof in person or by its duly authorized agent upon surrender of this certificate properly endorsed or assigned to the same extent as a stock certificate and the shares of a Maryland corporation. This certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar. Witness the facsimile seal of the Trust and the facsimile signatures of its duly authorized officers. Dated: Countersigned and Registered STATE STREET BANK AND TRUST COMPANY (BOSTON) Transfer Agent and Registrar BY Authorized Signature [Signature of Thomas M. O'Brien] [Seal of the Trust] [Signature of John G. Murray] Treasurer President THE DECLARATION OF TRUST PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION OF TRUST, COLLECTIVELY, AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND NO TRUSTEE, SHAREHOLDER, EMPLOYEE OR AGENT OF THE TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, IN CONNECTION WITH THIS INSTRUMENT. ALL PERSONS DEALING WITH THE TRUST IN ANY WAY SHALL LOOK ONLY TO THE ASSETS OF THE TRUST FOR PAYMENT OF ANY SUM OR PERFORMANCE OF ANY OBLIGATION. [The borders of the front of the Certificate contain a graphic design] (ii) [REVERSE OF CERTIFICATE] HOSPITALITY PROPERTIES TRUST IMPORTANT NOTICE THE TRUST WILL FURNISH TO ANY SHAREHOLDER, ON REQUEST AND WITHOUT CHARGE, A FULL STATEMENT OF THE INFORMATION REQUIRED BY SECTION 8-203(d) OF THE CORPORATIONS AND ASSOCIATIONS ARTICLE OF THE ANNOTATED CODE OF MARYLAND WITH RESPECT TO THE DESIGNATIONS AND ANY PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER DISTRIBUTIONS, QUALIFICATIONS, AND TERMS AND CONDITIONS OF REDEMPTION OF THE SHARES OF EACH CLASS OF BENEFICIAL INTEREST WHICH THE TRUST HAS AUTHORITY TO ISSUE AND, IF THE TRUST IS AUTHORIZED TO ISSUE ANY PREFERRED OR SPECIAL CLASS IN SERIES, (i) THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES TO THE EXTENT SET, AND (ii) THE AUTHORITY OF THE BOARD OF TRUSTEES TO SET SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. THE FOREGOING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DECLARATION OF TRUST OF THE TRUST, A COPY OF WHICH WILL BE SENT WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS. SUCH REQUEST MUST BE MADE TO THE SECRETARY OF THE TRUST AT ITS PRINCIPAL OFFICE OR TO THE TRANSFER AGENT. IF NECESSARY TO EFFECT COMPLIANCE BY THE TRUST WITH REQUIREMENTS OF THE INTERNAL REVENUE CODE RELATING TO REAL ESTATE INVESTMENT TRUSTS, OWNERSHIP OF THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE RESTRICTED BY THE TRUST AND/OR THE TRANSFER THEREOF MAY BE PROHIBITED ALL UPON THE TERMS AND CONDITIONS SET FORTH IN THE DECLARATION OF TRUST. THE TRUST WILL FURNISH A COPY OF SUCH TERMS AND CONDITIONS TO THE REGISTERED HOLDER OF THIS CERTIFICATE UPON REQUEST AND WITHOUT CHARGE. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -as tenants in common UNIF GIFT MIN ACT-_________Custodian__________ TEN ENT -as tenants by the entireties (Cust) (Minor) JT TEN -as joint tenants with right under Uniform Gifts to Minors of survivorship and not as Act_________________ tenants in common (State)
Additional abbreviations may also be used though not in the above list For value received _______________________________________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF NEW OWNER [Box]___________________________________________ - -------------------------------------------------------------------------------- PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Shares of Beneficial Interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ________________________________________________________________________________ Attorney to transfer the said shares on the books of the within-named Trust with full power of substitution in the premises. Dated _______________________ (Sign here) _________________________________________________ NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER. SIGNATURE(S) GUARANTEED: _______________________________________________________ THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. (ii) EX-8.1 5 OPINION RE: TAX MATTERS Exhibit 8.1 Sullivan & Worcester LLP One Post Office Square Boston, Massachusetts 02109 (617) 338-2800 Fax No. 617-338-2880 April 7, 1999 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 9 1/2% Series A Cumulative Redeemable Preferred Shares, 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 April 7, 1999 (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, 1998, 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 sections in the Prospectus Supplement captioned "Federal Income Tax Considerations" and "ERISA Plan Investors, Individual Retirement Accounts, and Other Plan Investors." 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 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. Hospitality Properties Trust April 7, 1999 Page 2 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. 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 sections of the Prospectus Supplement captioned "Federal Income Tax Considerations" and "ERISA Plan Investors, Individual Retirement Accounts, and Other Plan Investors," are based on certain assumptions and subject to 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 discussions in the Prospectus Supplement captioned "Federal Income Tax Considerations" and "ERISA Plan Investors, Individual Retirement Accounts, and Other Plan Investors," 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 6 STATEMENT RE: COMPUTATION OF RATIOS Hospitality Properties Trust Computation of Pro Forma Ratio of Earnings to Fixed Charges (amounts in thousands, except ratio amounts)
For the Year Ended December 31, 1998 ------------------------------------ Adjusted Historical Pro Forma Pro Forma ---------- --------- --------- Income before extraordinary item and preferred dividends $ 87,982 $ 91,696 $102,623 Fixed charges 21,751 40,271 46,144 -------- -------- -------- Adjusted earnings $109,733 $131,967 $148,767 ======== ======== ======== Fixed charges and preferred dividends: Interest on indebtedness and amortization of deferred finance costs $ 21,751 $ 40,271 $ 46,144 -------- -------- -------- Total fixed charges $ 21,751 $ 40,271 $ 46,144 ======== ======== ======== Ratio of earnings to fixed charges 5.0x 3.3x 3.2x ======== ======== ========
The above computation should be read in conjunction with the unaudited pro forma consolidated financial statements and other data included elsewhere in the Form 8-K to which this computation is an exhibit. EX-12.2 7 STATEMENT RE: COMPUTATION OF RATIOS Hospitality Properties Trust Computation of Pro Forma Ratio of Earnings to Combined Fixed Charges and Preferred Dividends (amounts in thousands, except ratio amounts)
For the Year Ended December 31, 1998 ------------------------------------ Adjusted Historical Pro Forma Pro Forma ---------- --------- --------- Income before extraordinary item available for common shareholders $ 87,982 $ 84,571 $ 95,498 Fixed charges and preferred dividends 21,751 47,396 53,269 -------- -------- -------- Adjusted earnings $109,733 $131,967 $148,767 ======== ======== ======== Fixed charges and preferred dividends: Interest on indebtedness and amortization of deferred finance costs $ 21,751 $ 40,271 $ 46,144 Preferred dividends declared -- 7,125 7,125 -------- -------- -------- Total fixed charges and preferred dividends $ 21,751 $ 47,396 $ 53,269 ======== ======== ======== Ratio of earnings to combined fixed charges and preferred dividends 5.0x 2.8x 2.8x ===== ===== =====
The above computation should be read in conjunction with the unaudited pro forma consolidated financial statements and other data included elsewhere in the Form 8-K to which this computation is an exhibit. -----END PRIVACY-ENHANCED MESSAGE-----