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WINSTON HOTELS, INC.
9.25% SERIES A CUMULATIVE PREFERRED STOCK
UNDERWRITING AGREEMENT
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September 8, 1997
XXXXXX XXXXXX & COMPANY, INC.
X.X. XXXXXXXX & CO.
XXXXXXX XXXXX & ASSOCIATES, INC.
c/o Xxxxxx Xxxxxx & Company, Inc.
00 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Dear Sirs:
Winston Hotels, Inc., a North Carolina corporation (the "Company"),
proposes to issue and sell to Xxxxxx Xxxxxx & Company, Inc., X. X. Xxxxxxxx &
Co. and Xxxxxxx Xxxxx & Associates, Inc. (the "Underwriters," which term shall
also include any underwriters substituted as provided in Section 10 hereof) an
aggregate of 3,000,000 shares of 9.25% Series A Cumulative Preferred Stock, $.01
par value per share (the "Preferred Stock") of the Company (the "Shares"). The
Shares are to be sold to each Underwriter, acting severally and not jointly, in
such amounts as are set forth in Schedule A opposite the name of such
Underwriter. Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in the Registration Statement, as defined below.
Upon consummation of the transactions contemplated hereby and
application of the net proceeds from the sale of the Shares, the Company will
own an approximate 89.77% general partnership interest in XXXX Limited
Partnership, a North Carolina limited partnership (the "Partnership") and will
own 100% of the Preferred Units (as defined herein) of the Partnership. The
Company currently owns one hotel directly and the Partnership currently owns 34
hotels as described in the Prospectus (individually, a "Hotel" and collectively,
the "Hotels"). The Partnership has entered into agreements (the "Acquisition
Agreements") as described in the Prospectus to acquire three additional hotels
(the "Acquisition Hotels"). The Partnership or the Company, as applicable,
leases the Hotels to Winston Hospitality, Inc., a North Carolina corporation
(the "Lessee"), pursuant to separate leases (the "Leases"). The Partnership will
lease the Acquisition Hotels to the Lessee pursuant to leases (the "Proposed
Leases") substantially similar to the Leases. Twenty-five of the Hotels are
operated by the Lessee pursuant to the terms of the Leases. Nine of the Hotels
are operated by Interstate Management and Investment Company, a South Carolina
corporation ("IMIC"), and one Hotel is managed by Promus Hotels, Inc ("Promus")
pursuant to separate management agreements (the "Management Agreements").
Section 1. Representations and Warranties of the Company. The Company
and the Partnership jointly and severally represent and warrant to each of the
Underwriters as follows:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-3
(Commission File No. 333-32713) and Amendment No. 1 thereto, with
respect to the Shares, including the related preliminary prospectus
included in the Registration Statement, for the registration under the
Securities Act of 1933, as amended (the "1933 Act"), and the rules and
regulations of the Commission thereunder (the "1933 Act Regulations"),
of the offering and sale of up to $200,000,000 aggregate issue price of
securities, including the Shares. The Company has filed with, or shall
promptly hereafter file with the Commission a final prospectus
supplement specifically relating to the Shares pursuant to Rule 424
under the 1933 Act. The Company has included in such Registration
Statement and the Preliminary Prospectus (as defined herein), each as
amended or supplemented at the time of execution of this Agreement (the
"Execution Time"), and has included or will include in the Prospectus
(as defined herein) all information required by the 1933 Act to be
included therein with respect to the
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Shares and the offering thereof, which information, except to the
extent the Underwriters shall agree in writing to a modification, shall
be in all substantive respects in the form furnished to the
Underwriters prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such additional
information and other changes as the Company has advised the
Underwriters, prior to the Execution Time, will be included or made
therein.
The term "Registration Statement" as used in this Agreement
shall mean such registration statement at the time such registration
statement became effective (the "Effective Time") including any
prospectus included with such Registration Statement, each document
incorporated therein by reference and, in the event any post-effective
amendment thereto becomes effective prior to the Closing Time (as
hereinafter defined), shall also mean such registration statement as so
amended; provided, however, that such term shall also include (i) all
Rule 430A Information (as hereinafter defined) deemed to be included in
such registration statement at the time such registration statement
becomes effective as provided by Rule 430A of the 1933 Act Regulations
and (ii) the information contained in the form of any final prospectus
or prospectus supplement filed with the Commission pursuant to Rule
424(b) of the 1933 Act. The term "Preliminary Prospectus" shall mean
any preliminary prospectus supplement describing the Shares and the
form of base prospectus included in the Registration Statement at the
Effective Time and each document incorporated therein by reference. The
term "Prospectus" as used in this Agreement shall mean the final
prospectus supplement relating to the Shares, accompanied by such base
prospectus, in the form in which it is filed with the Commission after
the Execution Time pursuant to Rule 424(b) of the 1933 Act Regulations
and each document incorporated therein by reference. The term "Rule
430A Information" means information with respect to the Shares and the
offering thereof permitted pursuant to Rule 430A of the 1933 Act
Regulations to be omitted from the Registration Statement when it
becomes effective.
(b) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and no
proceedings for that purpose have been instituted or, to the knowledge
of the Company, threatened by the Commission or the state securities or
blue sky authority of any jurisdiction, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the 1933 Act and the 1933 Act
Regulations, and did not contain any 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, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
expressly authorizing its use in the Registration Statement.
(c) The Registration Statement has been declared effective by
the Commission under the 1933 Act; no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or, to the knowledge of
the Company, threatened by the Commission.
(d) When the Prospectus is first filed pursuant to Rule 424(b)
of the 1933 Act Regulations, when any amendment to the Registration
Statement becomes effective, when any amendment or supplement to the
Prospectus is filed with the Commission and at the Closing Time (as
hereinafter defined), (i) the Registration Statement, the Prospectus
and any amendments thereof and supplements thereto will conform in all
material respects with the applicable requirements of the 1933 Act and
the 1933 Act Regulations, and (ii) neither the Registration Statement,
the Prospectus nor any amendment or supplement thereto will contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter expressly
authorizing its use in the Registration Statement.
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(e) Each document incorporated by reference in the
Registration Statement (an "Incorporated Document"), as of the date
such Incorporated Document became effective with or was filed with the
Commission, as the case may be, conformed in all material respects to
the requirements of the 1933 Act or the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission
thereunder (the "Exchange Act") (as applicable), and when read together
with the other information in the Preliminary Prospectus or Prospectus
(as applicable), as of the Execution Time and at the Closing Date, did
not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus, when such documents become effective with
or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the 1933 Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and when read together with the other
information in the Prospectus, as of the Execution Time and at the
Closing Date, did not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by an Underwriter expressly authorizing its use therein.
(f) The conditions for the use by the Company of a
registration statement on Form S-3 set forth in the General
Instructions to Form S-3 have been satisfied and the Company is
entitled to use such form for the transactions contemplated herein.
(g) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of North Carolina with all requisite corporate power and authority to
own, lease and operate its properties and the properties it proposes to
own, lease and operate as described in the Registration Statement and
the Prospectus and to conduct its business as now conducted and as
proposed to be conducted as described in the Registration Statement and
the Prospectus. The Company has been duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction in
which the ownership or leasing of its properties or the nature or
conduct of its business as now conducted requires such qualification,
except where the failure to do so would not have a material adverse
effect on the Company, the Partnership or any Hotel. The Company will
be duly qualified (at the time of closing of the acquisition of the
Acquisition Hotels) in each jurisdiction in which the ownership or
leasing of its properties or the nature or conduct of its business as
proposed to be conducted as described in the Registration Statement and
the Prospectus requires such qualification, except where the failure to
do so would not have a material adverse effect on the Company, the
Partnership, any Hotel or any Acquisition Hotel. Except for the
Partnership, the Company does not own or control, directly or
indirectly, or own any capital stock or other beneficial interest in,
any corporation, association or other entity.
(h) The Partnership has been duly formed and is validly
existing as a limited partnership in good standing under the North
Carolina Revised Uniform Limited Partnership Act (the "North Carolina
Act") with all requisite partnership power and authority to own, lease
and operate its properties and the properties it proposes to own, lease
and operate as described in the Registration Statement and the
Prospectus and to conduct its business as now conducted and as proposed
to be conducted as described in the Registration Statement and the
Prospectus. The Partnership has been duly qualified or registered to do
business and is in good standing as a foreign partnership in each other
jurisdiction in which the ownership or leasing of its properties or the
nature or conduct of its business as now conducted or proposed to be
conducted as described in the Registration Statement and the Prospectus
requires such qualification, except where the failure to do so would
not have a material adverse effect on the Company, the Partnership or
any Hotel. The Partnership will be duly qualified (at the time of
closing of the acquisition of the Acquisition Hotels) in each
jurisdiction in which the ownership or leasing of its properties or the
nature or conduct of its business as proposed to be conducted as
described in the Registration Statement and the
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Prospectus requires such qualification, except where the failure to do
so would not have a material adverse effect on the Company, the
Partnership, any Hotel or any Acquisition Hotel. The Company is the
sole general partner of the Partnership, and at the Closing Time, will
be the sole general partner of the Partnership and will be the holder
of 15,523,864 units of limited partnership interest in the Partnership
("Units") or approximately 89.77% of the outstanding Units, and the
holder of 3,000,000 9.25% Series A Cumulative Preferred Units of
Partnership ("Preferred Units"), or 100% of the outstanding Preferred
Units.
(i) The Lessee has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of North Carolina. The Lessee has all requisite corporate power and
authority to own, lease and operate its properties and conduct its
business now conducted and as proposed to be conducted as described in
the Registration Statement and the Prospectus. The Lessee has been duly
qualified to do business and is in good standing as a foreign
corporation in each other jurisdiction in which the ownership or
leasing of its properties or the nature or conduct of its business as
now conducted requires such qualification, except where the failure to
do so would not have a material adverse effect on the Lessee. The
Lessee will be duly qualified (at the time of closing of the
acquisition of the Acquisition Hotels) in each jurisdiction in which
the ownership or leasing of its properties or the nature or conduct of
its business as proposed to be conducted as described in the
Registration Statement or the Prospectus requires such qualification,
except where the failure to do so would not have a material adverse
effect on the Lessee.
(j) The Company has full corporate right, power and authority
to enter into and perform its obligations under this Agreement, to
issue, sell and deliver the Shares as provided herein and to consummate
the transactions contemplated herein. This Agreement has been duly
authorized, executed and delivered by the Company and constitutes a
valid and binding agreement of the Company, enforceable in accordance
with its terms, except to the extent that enforceability may be limited
by bankruptcy, insolvency, reorganization or other laws of general
applicability relating to or affecting creditors' rights, or by general
equity principles and except to the extent the indemnification
provisions set forth in Section 6 of this Agreement may be limited by
federal or state securities laws or the public policy underlying such
laws.
(k) The Partnership has full partnership right, power and
authority to enter into and perform this Agreement and to consummate
the transactions contemplated herein. This Agreement has been duly
authorized, executed and delivered by the Partnership and constitutes a
valid and binding agreement of the Partnership enforceable in
accordance with its terms, except to the extent that enforceability may
be limited by bankruptcy, insolvency, reorganization or other laws of
general applicability relating to or affecting creditors' rights, or by
general equity principles and except to the extent the indemnification
provisions set forth in Section 6 of this Agreement may be limited by
federal or state securities laws or the public policy underlying such
laws.
(l) The Second Amended and Restated Agreement of Limited
Partnership of the Partnership (the "Partnership Agreement") has been
duly authorized, executed and delivered by the Company, as general
partner, and by the limited partners named therein, and constitutes a
valid and binding agreement of the parties thereto, enforceable in
accordance with its terms; provided, however, that the enforceability
of the Partnership Agreement may be limited by bankruptcy, insolvency,
reorganization or other laws of general applicability relating to or
affecting creditors' rights or by general equity principles. Each of
the Proposed Leases, when duly authorized, executed and delivered by
the parties thereto, will constitute valid and binding agreements,
enforceable in accordance with their respective terms, except to the
extent enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws of general applicability relating to or
affecting creditors' rights or by general equity principles. (This
Agreement, the Partnership Agreement, the Leases and the Proposed
Leases sometimes are hereinafter referred to as the "Operative
Documents.")
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(m) The Partnership and, to the best of the Company's
knowledge, each of the other parties to the Acquisition Agreements has
full legal right, power and authority to enter into and perform such
agreements and to consummate the transactions contemplated thereby. The
Acquisition Agreements, without qualification with respect to the
Partnership and to the best of the Company's knowledge with respect to
each other party thereto, have been duly and validly authorized,
executed and delivered by the parties thereto and constitute valid and
binding agreements of the parties thereto, enforceable in accordance
with their terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization or other laws of general
applicability relating to or affecting creditors' rights or by general
equity principles.
(n) The amendment to the Company's articles of incorporation
creating the 9.25% Series A Cumulative Preferred Stock, $.01 par value
per share and designating the rights, preferences and restrictions
thereof (the "Designating Amendment") has been duly and validly
authorized by all necessary corporation action on behalf of the
Company. Each consent, approval, authorization, order, license,
certificate, permit, registration, designation or filing by or with any
governmental agency or body necessary for the valid authorization,
issuance, sale and delivery of the Shares and the execution, delivery
and performance of this Agreement and the consummation by the Company
and the Partnership of the transactions contemplated hereby has been
made or obtained and is in full force and effect.
(o) Neither the issuance, sale and delivery by the Company of
the Shares, nor the execution, delivery and performance of this
Agreement, nor the consummation of the transactions contemplated hereby
by the Company or the Partnership, as applicable, will conflict with or
result in a breach or violation of any of the terms and provisions of,
or (with or without the giving of notice or the passage of time or
both) constitute a default under, the articles of incorporation,
by-laws, certificate of limited partnership or Partnership Agreement,
as the case may be, of the Company or the Partnership; any indenture,
mortgage, deed of trust, loan agreement, note, lease or other agreement
or instrument to which the Company or the Partnership is a party or to
which they, either of them, any of their respective properties or other
assets or any Hotel or Acquisition Hotel is subject; or any applicable
statute, judgment, decree, order, rule or regulation of any court or
governmental agency or body applicable to the Company or the
Partnership or any of their respective properties; or result in the
creation or imposition of any lien, charge, claim or encumbrance upon
any property or asset of the Company or the Partnership.
(p) The issuance and sale of the Shares to the Underwriters
hereunder have been duly authorized by the Company. When issued and
delivered against payment therefor as provided in this Agreement, the
Shares will be duly authorized and validly issued, fully paid and
nonassessable. No preemptive rights of shareholders exist with respect
to any of the Shares. The Shares conform to the description of the
Preferred Stock contained in the Prospectus. No person or entity holds
a right to require or participate in the registration under the 1933
Act of the Shares pursuant to the Registration Statement; and no person
holds a right to require registration under the 1933 Act of any shares
of Preferred Stock of the Company at any other time. No person or
entity has a right of participation or first refusal with respect to
the sale of the Shares by the Company. The form of certificates
evidencing the Shares complies with all applicable requirements of
North Carolina law.
(q) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus under the caption
"Capitalization." Immediately after the Closing Time, 16,194,480 shares
of Common Stock will be issued and outstanding, 3,000,000 shares of
Preferred Stock will be issued and outstanding and no shares of any
other class of capital stock will be issued and outstanding. The
Designating Amendment has been approved by all necessary corporate
action. All of the issued and outstanding shares of capital stock of
the Company have been duly authorized and validly issued, are fully
paid and nonassessable and conform to the description of the Common
Stock and Preferred Stock contained in the Prospectus. None of the
issued shares of capital stock of the Company have been issued or are
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owned or held in violation of any preemptive or similar rights of
shareholders. Except as disclosed in the Prospectus, there is no
outstanding option, warrant or other right calling for the issuance
of, and no commitment, plan or arrangement to issue, any shares of
capital stock of the Company or any security convertible into or
exchangeable for capital stock of the Company.
(r) All offers and sales of the Company's capital stock prior
to the date hereof were at all relevant times duly registered under
the 1933 Act or exempt from the registration requirements of the 1933
Act by reason of Sections 3(b), 4(2) or 4(6) thereof and were duly
registered or the subject of an available exemption from the
registration requirements of the applicable state securities or blue
sky laws.
(s) All of the issued Units have been duly and validly
authorized and issued and are fully paid. None of the issued Units has
been issued or is owned or held in violation of any preemptive or
similar right. The issuance of the Preferred Units to the Company has
been approved by all necessary action on behalf of the Partnership and
its partners. Immediately after the Closing Time, 17,293,257 Units and
3,000,000 Preferred Units will be issued and outstanding and all of
such Units and Preferred Units will be validly issued, fully paid and
nonassessable. None of the issued Units or Preferred Units has been or
will be issued, or is owned or held, in violation of any preemptive
right. The Units and Preferred Units have been or will be offered,
sold and issued by the Partnership in compliance with all applicable
laws (including, without limitation, federal and state securities
laws).
(t) The financial statements (including the related notes)
included or incorporated by reference in the Registration Statement and
the Prospectus present fairly the financial position of the Company and
the Lessee as of the dates indicated and the results of operations and
cash flows for the Company and the Lessee for the periods specified,
all in conformity with generally accepted accounting principles applied
on a consistent basis throughout the periods specified. The financial
statement schedules included in the Registration Statement and the
amounts in the Prospectus under the caption "Prospectus Summary -
Summary Financial Data" present fairly the information required to be
shown therein and have been compiled on a basis consistent with the
financial statements included or incorporated by reference in the
Registration Statement and the Prospectus. No other financial
statements or schedules are required by Form S-3 or otherwise to be
included in the Registration Statement or the Prospectus. The
unaudited pro forma combined financial information (including the
related notes) included in the Prospectus complies as to form in all
material respects to the applicable accounting requirements of the
1933 Act and the 1933 Act Regulations and management of the Company
believes that the assumptions underlying the pro forma adjustments are
reasonable. Such pro forma adjustments have been properly applied to
the historical amounts in the compilation of the information and such
information fairly presents with respect to the Company and the Lessee
the financial position, results of operations and other information
purported to be shown therein at the respective dates and for the
respective periods specified.
(u) Coopers & Xxxxxxx L.L.P., who have examined and reported
upon the audited financial statements and schedules included or
incorporated by reference in the Registration Statement, are, and were
during the periods covered by their reports included or incorporated by
reference in the Registration Statement and the Prospectus, independent
public accountants within the meaning of the 1933 Act and the 1933 Act
Regulations.
(v) Neither the Company, the Partnership nor the Lessee has
sustained, since December 31, 1996, any material loss or interference
with its business from fire, explosion, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or from any labor
dispute or arbitrators' or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Prospectus;
and, since the respective dates as of which information is given in the
Registration Statement and the Prospectus, and except as otherwise
stated in the Registration Statement and Prospectus, there has not been
(i) any material change in the capital stock or partnership interests,
as applicable, long-term debt, obligations under capital leases or
short-term borrowings of the Company and the Partnership, taken as a
whole, (ii) any
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material adverse change, or any development involving a prospective
material adverse change, in or affecting the business, prospects,
properties, assets, results of operations or condition (financial or
other) of the Company, the Partnership or the Lessee, (iii) any
liability or obligation, direct or contingent, incurred or undertaken
by the Company, the Partnership or the Lessee, which is material to the
business or condition (financial or other) of the Company and the
Partnership, taken as a whole, except for liabilities or obligations
incurred in the ordinary course of business, (iv) any declaration or
payment of any dividend or distribution of any kind on or with respect
to the capital stock of the Company or with respect to the partnership
interests of the Partnership, or (v) any transaction that is material
to the Company and the Partnership, except transactions in the ordinary
course of business or as otherwise disclosed in the Registration
Statement and the Prospectus.
(w) The Company or the Partnership, as applicable, will have,
at the Closing Time, and with respect to the Acquisition Hotels, will
have at the time of closing of the acquisition of the Acquisition
Hotels, good and marketable title in fee simple to all real property
and the improvements located thereon owned by them and described in the
Prospectus, free and clear of all liens, encumbrances, claims, security
interests, restrictions and defects except such as are described in the
Prospectus. Upon consummation of the transactions contemplated by the
Acquisition Agreements, the Partnership will have good and marketable
title in fee simple to the Acquisition Hotels and all real property,
free and clear of all liens, encumbrances, claims, security interests,
restrictions and defects. Neither the Company nor the Partnership owns
or leases any real property as lessee. No person has an option or right
of first refusal to purchase all or part of any Hotel, any Acquisition
Hotel or any interest therein. Each of the Hotels and the Acquisition
Hotels complies with all applicable codes, laws and regulations
(including, without limitation, building and zoning codes, laws and
regulations and laws relating to access to the Hotels and the
Acquisition Hotels), except to the extent disclosed in the Prospectus
and except for such failures to comply that would not individually or
in the aggregate have a material adverse impact on the condition,
financial or otherwise, or on the earnings, assets, business affairs or
business prospects of such hotel, the Company or the Partnership.
Neither the Company nor the Partnership has knowledge of any pending or
threatened condemnation proceedings, zoning change, or other proceeding
or action that will in any manner affect the size of, use of,
improvements on, construction on or access to any Hotel or any
Acquisition Hotel, except such proceedings or actions that would not
have a material adverse effect on the condition, financial or
otherwise, or on the earnings, assets, business affairs or business
prospects of such hotel, the Company or the Partnership.
(x) None of the Company, the Partnership or the Lessee is in
violation of its articles of incorporation, by-laws, certificate of
limited partnership or partnership agreement, as the case may be, and
except as disclosed in the Prospectus, no default exists, and no event
has occurred, nor state of facts exists, which, with notice or after
the lapse of time to cure or both, would constitute a default in the
due performance and observance of any obligation, agreement, term,
covenant, consideration or condition contained in any material
indenture, mortgage, deed of trust, loan agreement, note, lease or
other agreement or instrument to which any such entity is a party or to
which any such entity or any of its properties is subject. Neither the
Company nor the Partnership is in violation of, or in default with
respect to, any statute, rule, regulation, order, judgment or decree,
except as may be properly described in the Prospectus or such as in the
aggregate do not now have and will not in the future reasonably be
expected to have a material adverse effect on the financial position,
results of operations or business of each such entity, respectively.
(y) Except as described in the Prospectus, there is not
pending or, to the knowledge of the Company or the Partnership,
threatened, any action, suit, proceeding, inquiry or investigation
against the Company, the Partnership or the Lessee or any of their
respective officers, directors or partners, or to which the properties,
assets or rights of such entities are subject, before or brought by any
court or governmental agency or body or board of arbitrators, which
could result in any material adverse change in the business, prospects,
properties, assets, results of operations or condition (financial or
otherwise) of
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any of such entities or which could adversely affect the consummation
of the transactions contemplated by this Agreement and the Acquisition
Agreements.
(z) The descriptions in the Registration Statement and the
Prospectus of the contracts, leases and other legal documents therein
described present fairly the information required to be shown, and
there are no contracts, leases, or other documents of a character
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
which are not described or filed as required. To the knowledge of the
Company and the Partnership, there are no statutes or regulations
applicable to the Company or the Partnership or certificates, permits
or other authorizations from governmental regulatory officials or
bodies required to be obtained or maintained by the Company or the
Partnership of a character required to be disclosed in the Registration
Statement or the Prospectus which have not been so disclosed and
properly described therein. All agreements between the Company or the
Partnership and third parties expressly referenced in the Prospectus
are legal, valid and binding obligations of the Company or the
Partnership, enforceable in accordance with their respective terms,
except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization or other laws of general applicability
relating to or affecting creditors' rights or by general equity
principles.
(aa) Except as disclosed in the Prospectus, the Company, the
Partnership, the Lessee or IMIC owns, possesses or has obtained all
material permits, licenses, franchises, certificates, consents, orders,
approvals and other authorizations of governmental or regulatory
authorities or other entities as are necessary to own or lease, as the
case may be, and to operate its respective properties (limited, with
respect to IMIC, to the Hotels managed by IMIC) and to carry on its
business as presently conducted, or as contemplated in the Prospectus
to be conducted, and neither the Company, the Partnership nor the
Lessee nor, to the knowledge of the Company or the Partnership, IMIC,
has received any notice of proceedings relating to revocation or
modification of any such licenses, permits, certificates, consents,
orders, approvals or authorizations.
(ab) Each of the Company, the Partnership, the Lessee and IMIC
owns or possesses adequate license or other rights to use all patents,
trademarks, service marks, trade names, copyrights, software and design
licenses, trade secrets, manufacturing processes, other intangible
property rights and know-how (collectively "Intangibles") necessary to
entitle any of them to conduct their respective businesses now, and as
proposed to be, conducted or operated as described in the Prospectus
(limited, with respect to IMIC, to the Hotels managed by IMIC), and
none of the Company, the Partnership, the Lessee or IMIC has received
notice of infringement upon or of conflict with (and the Company and
the Partnership know of no such infringement upon or of conflict with)
asserted rights of others with respect to any Intangibles which could
materially and adversely affect the business, prospects, properties,
assets, results of operation or condition (financial or otherwise) of
the Company, the Partnership, the Lessee or IMIC (limited, with respect
to IMIC, to the Hotels managed by IMIC).
(ac) To the Company's and the Partnership's knowledge, the
Company's, the Partnership's and the Lessee's system of internal
accounting controls taken as a whole is sufficient to meet the broad
objectives of internal accounting controls insofar as those objectives
pertain to the prevention or detection of errors or irregularities in
amounts that would be material in relation to the Company's, the
Partnership's or the Lessee's financial statements; and, to the
Company's and the Partnership's knowledge, none of the Company, the
Partnership or the Lessee, nor any employee or agent thereof, has made
any payment of funds of the Company, the Partnership or the Lessee, as
the case may be, or received or retained any funds, and no funds of the
Company, the Partnership or the Lessee, as the case may be, have been
set aside to be used for any payment, in each case in violation of any
law, rule or regulation.
(ad) Each of the Company and the Partnership (to the extent
not consolidated with the Company) and the Lessee has filed on a timely
basis all necessary federal, state, local and foreign income and
franchise tax returns required to be filed through the date hereof and
has paid all taxes shown as due
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9
thereon; and no tax deficiency has been asserted against either such
entity, nor does either such entity know of any tax deficiency which is
likely to be asserted against any such entity which, if determined
adversely to any such entity, could materially adversely affect the
business, prospects, properties, assets, results of operations or
condition (financial or otherwise) of any such entity. All tax
liabilities are adequately provided for on the respective books of such
entities.
(ae) The Company, the Partnership, the Lessee and IMIC
maintain insurance (issued by insurers of recognized financial
responsibility) of the types and in the amounts generally deemed
adequate for their respective businesses (limited, with respect to
IMIC, to the Hotels managed by IMIC) and, to the Company's and the
Partnership's knowledge, consistent with insurance coverage maintained
by similar companies in similar businesses, including, but not limited
to, insurance covering real and personal property owned or leased by
the Company, the Partnership, the Lessee and IMIC against theft,
damage, destruction, acts of vandalism and all other risks, including
liability for personal injury, customarily insured against, all of
which insurance is in full force and effect.
(af) To the best of the Company's knowledge, no general labor
problem exists or is imminent with the employees of the Company or the
Lessee. The Partnership has no employees.
(ag) Each of the Company and the Partnership, and each of
their officers, directors and controlling persons, has not taken and
will not take, directly or indirectly, any action resulting in a
violation of Rule 102 under Regulation M promulgated under the Exchange
Act, or designed to, or that might reasonably be expected to, cause or
result in or that has constituted or that reasonably might be expected
to constitute the stabilization or manipulation of the price of any
security of the Company or to facilitate the sale (other than to the
Underwriters pursuant to this Agreement) or resale of the Shares.
(ah) The Company has not incurred any liability for a fee,
commission or other compensation on account of the employment of a
broker or finder in connection with the transactions contemplated by
this Agreement other than as contemplated hereby.
(ai) Except as otherwise disclosed in the Prospectus, neither
the Company, the Partnership, the Lessee nor, to the knowledge of the
Company and the Partnership, any entity ("Selling Entity") from which
the Company or the Partnership acquired a Hotel or from which the
Partnership proposes to,acquire an Acquisition Hotel has authorized or
conducted or has knowledge of the generation, transportation, storage,
presence, use, treatment, disposal, release, or other handling of any
hazardous substance, hazardous waste, hazardous material, hazardous
constituent, toxic substance, pollutant, contaminant, asbestos, radon,
polychlorinated biphenyls ("PCBs"), petroleum product or waste
(including crude oil or any fraction thereof), natural gas, liquefied
gas, synthetic gas or other material defined, regulated, controlled or
potentially subject to any remediation requirement under any
environmental law (collectively, "Hazardous Materials"), on, in, under
or affecting (i) any real property currently leased or owned or by any
means controlled by the Company or the Partnership, including the
Hotels, or (ii) the Acquisition Hotels (the "Real Property") except in
material compliance with applicable laws; to the knowledge of the
Company and the Partnership, the Real Property and the Company's, the
Partnership's, the Lessee's and the Selling Entities' operations with
respect to the Real Property are in compliance with all federal, state
and local laws, ordinances, rules, regulations and other governmental
requirements relating to pollution, control of chemicals, management of
waste, discharges of materials into the environment, health, safety,
natural resources, and the environment (collectively, "Environmental
Laws"), and the Company, the Partnership, the Lessee and the Selling
Entities (as relates to the Acquisition Hotels) have, and are in
compliance with, all licenses, permits, registrations and government
authorizations necessary to operate under all applicable Environmental
Laws. Except as otherwise disclosed in the Prospectus, none of the
Company, the Partnership, the Lessee or, to the knowledge of the
Company or the Partnership, any Selling Entity (as relates to the
Acquisition Hotels) has received any written or oral notice from any
governmental entity or any other person and there is no pending or
threatened claim, litigation or any administrative
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10
agency proceeding that: alleges a violation of any Environmental Laws
by the Company, the Partnership, the Lessee or any Selling Entity;
alleges that the Company, the Partnership, the Lessee or any Selling
Entity is a liable party or a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. Section 9601, et seq., or any state superfund law; has
resulted in or could result in the attachment of an environmental lien
on any of the Real Property; or alleges that the Company, the
Partnership, the Lessee or any Selling Entity is liable for any
contamination of the environment, contamination of the Real Property,
damage to natural resources, property damage, or personal injury based
on their activities or the activities of their predecessors or third
parties (whether at the Real Property or elsewhere) involving
Hazardous Materials, whether arising under the Environmental Laws,
common law principles, or other legal standards.
(aj) The Company is organized in conformity with the
requirements for qualification as a real estate investment trust under
the Internal Revenue Code of 1986, as amended (the "Code"), and the
Company's method of operation will enable it to meet the requirements
for taxation as a real estate investment trust under the Code. The
Partnership is treated as a partnership for federal income purposes and
not as a corporation or a association taxable as a corporation.
(ak) None of the Company, the Partnership or the Lessee will
become as a result of the transactions contemplated hereby, or will
conduct their respective businesses in a manner in which any such
entity would become, "an investment company," or a company "controlled"
by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended (the "1940 Act") and is not required to
be registered under the 1940 Act.
(al) The Partnership is not currently prohibited, directly or
indirectly, from making distributions to the Company, from repaying to
the Company any loans or advances to the Partnership or from
transferring any of the Partnership's property or assets to the
Company, except as disclosed in the Prospectus.
(am) The Company has applied to list the Shares on The New
York Stock Exchange (the "NYSE") and knows of no reason why trading of
the Shares on the NYSE will not commence within a 30- day period after
the Closing Time.
(an) The statements set forth in the Prospectus under the
caption "Federal Income Tax Considerations," insofar as they purport to
describe the provisions of the laws and documents referred to therein,
are accurate and complete in all material respects.
(ao) The Proposed Leases, except for their economic terms,
will be in substantially the same form as the Leases.
(ap) Neither the Company nor the Partnership, nor any of their
respective affiliates, does no business with the Government of Cuba or
with any person or affiliate located in Cuba within the meaning of
Section 517.075 of the Florida Securities and Investor Protection Act,
and all regulations thereunder relating to issuers doing business with
Cuba.
Any certificate signed by any officer of the Company on behalf of the
Company or the Partnership and delivered to you or to counsel for the
Underwriters shall be deemed a representation and warranty by such entity to
each Underwriter as to the matters covered thereby.
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11
Section 2. Sale and Delivery of the Shares to the Underwriters;
Closing.
(a) On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, the Company
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Company the number of Shares set forth
opposite the name of such Underwriter in Schedule A (the proportion which each
Underwriter's share of the total number of the Shares bears to the total number
of Shares is hereinafter referred to as such Underwriter's "underwriting
obligation proportion"), at a purchase price of $24.03125 per share.
(b) Payment of the purchase price for and delivery of certificates in
definitive form representing the Shares shall be made at the offices of Xxxxxx
Xxxxxx & Company, Inc., 00 Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxx 00000 or at such
other place as shall be agreed upon by the Company and you, at 10:00 a.m.
E.D.T., on September 11, 1997 (the "Closing Time"). The place of closing for the
Shares and the Closing Time may be varied by agreement between you and the
Company. Payment for the Shares shall be made to the Company by next day funds
payable to the order of the Company, against delivery to you for the respective
accounts of the Underwriters of the Shares to be purchased by them.
(c) The certificates representing the Shares to be purchased by the
Underwriters shall be in such denominations and registered in such names as you
may request in writing at least two full business days before the Closing Time.
The certificates representing the Shares will be made available at the offices
of Xxxxxx Xxxxxx & Company, Inc. or at such other place as Xxxxxx Xxxxxx &
Company, Inc. may designate for examination and packaging not later than 10:00
a.m. on the last business day prior to the Closing Time.
(d) You intend to offer the Shares to the public as set forth in the
Prospectus, but after the initial public offering of such Shares you may in your
discretion vary the public offering price.
Section 3. Certain Covenants of the Company and the Partnership. The
Company and the Partnership covenant and agree with each Underwriter as follows:
(a) To file with the Secretary of State of North Carolina and
cause to become effective prior to the Closing Time the Designating
Amendment in such form as has been approved by the Underwriters and
their counsel.
(b) To amend the Partnership Agreement to create the
Preferred Units effective upon issuance of the Shares.
(c) If the Company elects to rely upon Rule 430A of the 1933
Act Regulations or the filing of the Prospectus is otherwise required
under Rule 424(b) of the 1933 Act Regulations, the Company will comply
with the requirements of Rule 430A and will file the Prospectus,
properly completed, pursuant to the applicable provisions of Rule
424(b) within the time period prescribed. The Company will notify you
immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall have
become effective, or any amended Prospectus shall have been filed, (ii)
of any request by the Commission to amend the Registration Statement or
amend or supplement the Prospectus or for additional information, and
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus or the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, or of the institution or
threatening of any proceeding for any such purposes. The Company will
use every reasonable effort to prevent the issuance of any such stop
order or of any order preventing or suspending such use and, if any
such order is issued, to obtain the withdrawal thereof at the earliest
possible moment.
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12
(d) The Company will not at any time file or make any
amendment to the Registration Statement or any amendment or supplement
to the Prospectus if you shall not have previously been advised and
furnished a copy thereof a reasonable time prior to the proposed
filing, or if you or counsel for the Underwriters shall reasonably
object to such amendment or supplement.
(e) The Company has furnished or will furnish to you, at its
expense, as soon as available, one signed and two conformed copies of
the Registration Statement as originally filed and of all amendments
thereto, whether filed before or after the Registration Statement
became effective, copies of all exhibits and documents filed therewith
and signed copies of all consents and certificates of experts, as you
may reasonably request, and has furnished or will furnish to each
Underwriter one (1) conformed copy of the Registration Statement as
originally filed and of each amendment thereto (but without exhibits).
(f) The Company will deliver to each Underwriter, at the
Company's expense, from time to time, as many copies of each
Preliminary Prospectus as such Underwriter may reasonably request, and
the Company hereby consents to the use of such copies for purposes
permitted by the 1933 Act. The Company will deliver to each
Underwriter, at the Company's expense, from time to time as requested
during the period when the Prospectus is required to be delivered under
the 1933 Act, such number of copies of the Prospectus (as supplemented
or amended) as each Underwriter may reasonably request. The Company
will comply to the best of its ability with the 1933 Act and the 1933
Act Regulations so as to permit the completion of the distribution of
the Shares as contemplated in this Agreement and in the Prospectus. If
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of Shares and if at such time any
event shall have occurred as a result of which the Prospectus as then
amended or supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances existing at
the time such Prospectus is delivered to a purchaser, not misleading,
or, if for any reason it shall be necessary to amend or supplement the
Prospectus in order to comply with the 1933 Act or the Exchange Act,
the Company will notify you and, upon your request, prepare and furnish
without charge to each Underwriter and to any dealer in securities as
many copies as you may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus (in form and
substance reasonably satisfactory to counsel for the Underwriters)
which will amend or supplement the Prospectus so that it will not
contain an untrue statement or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances
existing at the time it is delivered to a purchaser, not misleading,
and in case any Underwriter is required to deliver a prospectus in
connection with the sale of any Shares at any time nine months or more
after the time of issue of the Prospectus, upon your request but at the
expense of such Underwriter the Company will prepare and deliver to the
Underwriters a reasonable number of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the 1933 Act.
(g) To timely file all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act for so long as the delivery of a Prospectus is required in
connection with the offering or sale of the Shares.
(h) The Company will use its best efforts to qualify the
Shares for offering and sale under the applicable securities laws and
real estate syndication laws of such states and other jurisdictions as
you may designate. 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 a period of not less than one year from the
effective date of the Registration Statement; provided, however, that
the Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or to make any
undertakings in respect of doing business in any jurisdiction in which
it is not otherwise so subject.
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13
The Company will file such statements and reports as may be required by
the laws of each jurisdiction in which the Shares have been qualified
as above provided.
(i) The Company will make generally available to its security
holders as soon as practicable, but in any event not later than the end
of the fiscal quarter first occurring after the first anniversary of
the effective date of the Registration Statement, an earnings statement
complying with the provisions of Rule 158 of the 1933 Act Regulations
and covering a period of twelve (12) months beginning not later than
the first day of the Company's fiscal quarter next following the
effective date (as defined in Rule 158) of the Registration Statement.
(j) The Company and the Partnership will use the net proceeds
received from the sale of the Shares in the manner specified in the
Prospectus under the caption "Use of Proceeds."
(k) The Company will furnish to its security holders, as soon
as practicable after the end of each respective period, annual reports
(including financial statements audited by independent public
accountants) and unaudited quarterly reports of operations for each of
the first three quarters of the fiscal year. During a period of five
years after the date hereof, the Company will furnish to you promptly
upon becoming available: (i) statements of operations of the Company
for each of the first three quarters in the form furnished to the
Company's security holders; (ii) a balance sheet of the Company as of
the end of such fiscal year, together with statements of operations, of
cash flows and of security holders' equity of the Company for such
fiscal year, accompanied by a copy of the certificate or report thereon
of independent public accountants; (iii) copies of all reports
(financial or otherwise) mailed to security holders; (iv) copies of all
reports and financial statements furnished to or filed with the
Commission or any securities exchange; (v) every material press release
in respect of the Company or its affairs which is released or prepared
by the Company, and (vi) any additional information of a public nature
concerning the Company, the Partnership or the Hotels that you may
reasonably request. During such five-year period, the foregoing
financial statements shall be on a consolidated basis to the extent
that the accounts of the Company are consolidated with any
subsidiaries, and shall be accompanied by similar financial statements
for any significant subsidiary that is not so consolidated.
(l) For a period of 90 days from the date hereof, the Company
will not, without your prior written consent, directly or indirectly,
sell, offer to sell, grant any option for the sale of, or otherwise
dispose of, any shares of capital or securities convertible into
Preferred Stock, other than (i) to the Underwriters pursuant to this
Agreement; or (ii) the issuance of Units or of other securities
convertible into Preferred Stock issued in connection with the
acquisition of hotel properties.
(m) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a
registrar (which may be the same entity as the transfer agent) for its
Preferred Stock.
(n) The Company will use its best efforts to maintain the
listing of the Shares on the NYSE.
(o) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
(p) The Company and the Partnership will conduct their affairs
in such a manner so as to ensure that neither the Company nor the
Partnership will be an "investment company" or an entity "controlled"
by an "investment company" within the meaning of the 1940 Act.
(q) The Company will not, and will use its best efforts to
cause its officers, directors and affiliates not to (i) take, directly
or indirectly, prior to completion of the distribution of the Shares
contemplated by this Agreement, any action resulting in a violation of
Rule 102 under Regulation M
- 13 -
14
promulgated under the Exchange Act, or designed to, or that might
reasonably be expected to, cause or result in or that has constituted
or that reasonably might be expected to constitute the stabilization or
manipulation of the price of any security of the Company or to
facilitate the sale (other than to the Underwriters pursuant to this
Agreement) or resale of the Shares, (ii) sell, bid for, purchase or pay
anyone any compensation for soliciting purchases of the Shares, or
(iii) pay or agree to pay to any person any compensation for soliciting
any order to purchase any other securities of the Company.
(r) If at any time during the 30-day period after the
Registration Statement became effective, any rumor, publication or
event relating to or affecting the Company shall occur as a result of
which in your reasonable opinion the market price of the Preferred
Stock has been or is likely to be materially affected (regardless of
whether such rumor, publication or event necessitates a supplement to
or amendment of the Prospectus) and after written notice from you
advising the Company to the effect set forth above, the Company agrees
to forthwith prepare, consult with you concerning the substance of, and
disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor,
publication or event.
(s) The Company will use its best efforts (i) to meet the
requirements to qualify as a real estate investment trust under the
Code and (ii) to cause the Partnership to be treated as a partnership
for federal income tax purposes.
(t) Subject to the terms hereof, the Company and the
Partnership will do and perform their respective obligations to the
extent required to consummate the transactions contemplated hereby.
(u) Prior to the Closing Time, the Company and the Partnership
will notify you in writing immediately if any event occurs that renders
any of the representations and warranties of the Company or the
Partnership contained herein inaccurate or incomplete in any respect.
(v) The Company will endeavor to comply with all provisions of
Section 517.075 of the Florida Securities and Investor Protection Act,
and all regulations thereunder relating to issuers doing business with
Cuba.
Section 4. Payment of Expenses. The Company will pay and bear all
costs, fees and expenses incident to the performance of its obligations under
this Agreement (excluding fees and expenses of counsel for the Underwriters,
except as specifically set forth below), including (a) the preparation, printing
and filing of the Registration Statement (including financial statements and
exhibits), as originally filed and as amended, the Preliminary Prospectuses and
the Prospectus and any amendments or supplements thereto, and the cost of
furnishing copies thereof to the Underwriters, (b) the preparation, printing and
distribution of this Agreement, any Selected Dealers Agreement, the certificates
representing the Shares and any instruments relating to any of the foregoing,
(c) the issuance and delivery of the Shares to the Underwriters, including any
transfer taxes payable upon the sale of the Shares to the Underwriters (other
than transfer taxes on resales by the Underwriters), (d) the fees and
disbursements of the Company's counsel and accountants, (e) all costs, fees and
expenses in connection with the application for listing the Shares on the NYSE,
(f) the transfer agent's and registrar's fees and all miscellaneous expenses
referred to in Item 14 of the Registration Statement, (g) costs related to
travel and lodging incurred by the Company and its representatives relating to
meetings with and presentations to prospective purchasers of the Shares
reasonably determined by the Underwriters to be necessary or desirable to effect
the sale of the Shares to the public, and (h) all other costs and expenses
incident to the performance of the Company's obligations hereunder that are not
otherwise specifically provided for in this section.
If the sale of the Shares provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 5 hereof is not satisfied, because of any termination pursuant to
Section 9 hereof or because of any refusal, inability or failure on the part of
the Company to perform any agreement herein or comply with any provision hereof
other than by reason of default by any of the Underwriters, the Company will
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15
reimburse the Underwriters severally on demand for all reasonable out-of-pocket
expenses, including fees and disbursements of Underwriters' counsel, reasonably
incurred by the Underwriters in reviewing the Registration Statement and the
Prospectus, and in investigating and making preparations for the marketing of
the Shares.
Section 5. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase and pay for the Shares that they have respectively
agreed to purchase pursuant to this Agreement are subject to the accuracy of the
representations and warranties of the Company and the Partnership contained
herein or in certificates of any officer of the Company and the Partnership
delivered pursuant to the provisions hereof, to the performance by the Company
and the Partnership of their obligations hereunder, and to the following further
conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424 within the applicable time prior prescribed for
such filing by such Rule.
(b) At the Closing Time 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 shall be pending or, to your knowledge or the knowledge
of the Company, shall be contemplated by the Commission, and any
request on the part of the Commission for additional information shall
have been complied with to the satisfaction of counsel for the
Underwriters.
(c) The Designating Amendment shall have been filed with the
Secretary of State of North Carolina and become effective.
(d) At the Closing Time, you shall have received a favorable
opinion of King & Spalding, counsel for the Company and the
Partnership, dated as of the Closing Time in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of North Carolina, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the Prospectus.
(ii) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued shares of
capital stock of the Company (including the Shares being
delivered at the Closing Time) have been duly and validly
authorized and issued and are fully paid and non-assessable;
and the Shares conform to the description thereof contained in
the Prospectus.
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it
or the Partnership owns Hotels or other material property or
is subject to no material liability or disability by reason of
failure to be so qualified in any such jurisdiction (such
counsel being entitled to rely in respect of the opinion in
this clause with respect to matters of fact upon certificates
of officers of the Company and public officials in such
jurisdictions, provided that such counsel shall state that
they believe that both you and they are justified in relying
upon such opinions and certificates)).
(iv) The Partnership is a limited partnership duly formed
and validly existing under the North Carolina Act, with the
partnership power and authority to own and lease its
properties and to conduct its business as described in the
Prospectus. The Partnership has been qualified as a foreign
partnership for the transaction of business under the laws of
each other jurisdiction in which it owns Hotels or other
material property or is subject to no material liability or
disability by reason of failure to be so qualified in any such
jurisdiction (such counsel being entitled to rely in respect
of the opinion in this sentence with respect to matters of
fact upon certificates of
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16
officers of the Company, the general partner of the
Partnership, and of public officials of such jurisdictions
provided that such counsel shall state that they believe that
both you and they are justified in relying upon such opinions
and certificates). Based solely on a review of the Partnership
Agreement, the Company is the sole general partner of the
Partnership, and at the Closing Time, will be the sole general
partner of the Partnership and hold approximately 89.77% of
the Units and 100% of the outstanding Preferred Units. To such
counsel's knowledge, the Company has no other subsidiaries.
(v) The Lessee has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the State of North Carolina. The Lessee has all requisite
power and authority to own, lease and operate its properties
and conduct its business as described in the Prospectus. The
Lessee has been qualified as a foreign corporation for the
transaction of business and is in good standing under the laws
of each other jurisdiction in which it leases Hotels or owns
material property or is subject to no material liability or
disability by reason of failure to be so qualified in any such
jurisdiction (such counsel being entitled to rely in respect
of the opinion in this sentence with respect to matters of
fact upon certificates of officers of the Company and of
public officials of such jurisdictions, provided that such
counsel shall state that they believe that both you and they
are justified in relying upon such opinions and certificates).
(vi) To the best of such counsel's knowledge and other
than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company, the
Partnership or the Lessee is a party or of which any property
of the Company, the Partnership or the Lessee is the subject
which, if determined adversely to the Company, the Partnership
or the Lessee would individually or in the aggregate have a
material adverse effect on the current or future consolidated
financial position, shareholders' equity (or, in the case of
the Partnership, partners' capital) or results of operations
of the Company, the Partnership or the Lessee; and, to the
best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others.
(vii) This Agreement has been duly authorized, executed
and delivered by the Company and the Partnership and, assuming
due authorization, execution and delivery by the other parties
hereto, constitutes a valid and binding agreement of the
Company and the Partnership, respectively, enforceable in
accordance with its terms, except to the extent enforceability
may be limited by bankruptcy, insolvency, reorganization or
other laws of general applicability relating to or affecting
creditors' rights and by general equity principles and except
to the extent that enforcement of the indemnification
provisions set forth in Section 6 of this Agreement may be
limited by federal or state securities laws or the public
policy underlying such laws.
(viii) The issue and sale of the Shares being delivered at
the Closing Time by the Company and the compliance by the
Company and the Partnership with all of the provisions of this
Agreement and the consummation of the transactions herein
contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument known to
such counsel to which the Company or the Partnership is a
party or by which the Company or the Partnership is bound or
to which any of the property or assets of the Company or the
Partnership is subject (except any conflict, breach, violation
or default that (i) would not affect the issuance and sale of
the Shares or consummation of the transactions herein
contemplated or (ii) individually or in the aggregate would
not have a material adverse effect on the current or future
consolidated financial position, shareholders' equity (or in
the case of the Partnership, partners' capital) or results of
operations of the Company or Partnership), nor will such
action result in any violation of the provisions of the
Articles of Incorporation or Bylaws of the Company, the
certificate of limited partnership and the Partnership
Agreement of the
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17
Partnership or any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or
body having jurisdiction over the Company or the Partnership
or any of their properties.
(ix) The Designating Amendment has been approved by all
necessary corporate action on behalf of the Company, has been
duly executed on behalf of the Company and has been duly filed
with the Secretary of State of the State of North Carolina. No
other filing, consent, approval, authorization, order,
license, certificate, permit, registration, designation or
filing with any such court or governmental agency or body is
required for the valid authorization, issue, delivery and sale
of the Shares or the consummation by the Company and the
Partnership of the transactions contemplated by this
Agreement, except the registration under the 1933 Act of the
Shares, and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the Underwriters.
(x) To such counsel's knowledge, neither the Company
nor the Partnership is in violation of its Articles of
Incorporation or Bylaws or certificate of limited partnership
and Partnership Agreement, as applicable.
(xi) Neither the Company nor the Partnership is an
"investment company" or an entity "controlled" by an
"investment company", as such terms are defined in the
Investment Company Act.
(xii) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made
by the Company prior to the Closing Time (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may
be, complied as to form in all material respects with the
requirements of the 1933 Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission
thereunder; and they have no reason to believe that any of
such documents, when such documents became effective or were
so filed, as the case may be, contained, in the case of a
registration statement which became effective under the 1933
Act, 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,
in the case of other documents which were field under the
Exchange Act with the Commission, an untrue statement of a
material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the
circumstance under which they were made when such documents
were so field, not misleading.
(xiii) The Registration Statement and the Prospectus
and any further amendments and supplements thereto made by the
Company prior to the Closing Time (other than the financial
statements and related schedules and other financial,
statistical and operating data included therein, as to which
such counsel need express no opinion) comply as to form in all
material respects with the requirements of the 1933 Act and
the rules and regulations thereunder; although they do not
assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration
Statement or the Prospectus, they have no reason to believe
that, as of its effective date, the Registration Statement or
any further amendment thereto made by the Company prior to the
Closing Time (other than the financial statements and related
schedules and other financial, statistical and operating data
included therein, as to which such counsel need express no
opinion) 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 no misleading or
that, as of its date, the Prospectus or any further amendment
or supplement thereto made by the Company prior to the Closing
Time (other than the financial statements and related
schedules and
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18
other financial, statistical and operating data included
therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading or that, as of the Closing Time,
either the Registration Statement or the Prospectus or any
further amendment or supplement thereto made by the Company
prior to the Closing Time (other than the financial statements
and related schedules and other financial, statistical and
operating data included therein, as to which such counsel need
express no opinion) contains an untrue statement of a material
fact 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; and they do not know of
any amendment to the Registration Statement required to be
filed or of any contracts or other documents of a character
required to be filed as an exhibit to the Registration
Statement or required to be incorporated by reference into the
Prospectus or required to be described in the Registration
Statement or the Prospectus which are not filed or
incorporated by reference or described as required.
(xiv) The Company has all requisite corporate power
and authority to execute, deliver and perform this Agreement,
to issue, sell and deliver the Shares as provided herein and
to consummate the transactions contemplated herein.
(xv) The Partnership has the partnership power and
authority to execute this Agreement and to consummate the
transactions contemplated herein.
(xvi) The Partnership has partnership power and
authority to enter into the Acquisition Agreements and to
consummate the transactions contemplated therein. The
Acquisition Agreements have been duly authorized, executed and
delivered by the Partnership and, assuming due authorization,
execution and delivery by the other parties thereto,
constitute valid and binding agreements, enforceable in
accordance with their respective terms, except to the extent
enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws of general applicability relating
to or affecting creditors' rights and by general principles of
equity whether considered at law or in equity. Assuming due
authorization, execution and delivery by the parties thereto,
the Lease for the Newly Acquired Hotel in Massachusetts and
the Proposed Leases for the Acquisition Hotels in Michigan
will effect valid and binding agreements, enforceable in
accordance with their terms in Massachusetts and Michigan,
respectively, except to the extent enforceability may be
limited by bankruptcy, insolvency, reorganization or other
laws of general applicability relating to or affecting
creditors' rights and by principles of equity whether
considered at law or in equity.
(xvii) All of the issued Units of the Partnership
have been duly and validly authorized and issued by the
Partnership and are fully paid. The Preferred Units to be
issued to the Company at the Closing Time have been duly and
validly authorized by the Partnership. When issued and
delivered against payment therefor as provided in the
Partnership Agreement, such Preferred Units will be duly and
validly issued and fully paid.
(xviii) The Registration Statement has become
effective under the 1933 Act and, to the knowledge of such
counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for
that purpose has been instituted or is pending or contemplated
under the 1933 Act.
(xix) To such counsel's knowledge, the conditions
for use of a Registration Statement on Form S-3 have been
satisfied with respect to the Company and the transactions
contemplated by this Agreement and the Registration Statement.
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19
In rendering the foregoing opinion, such counsel may
rely on the following:
(A) as to matters involving the application
of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the
extent such counsel deems proper and to the extent
specified in such opinion, upon an opinion or
opinions of other counsel familiar with the
applicable laws (in form and substance and from
counsel reasonably satisfactory to Underwriters'
counsel),
(B) as to matters of fact, to the extent
they deem proper, on certificates of responsible
officers of the Company, the Lessee and the
Partnership. The opinion of counsel for the Company
shall state that the opinion of any other counsel, or
certificate or written statement, on which such
counsel is relying is in form satisfactory to such
counsel and that you and they are justified in
relying thereon. Copies of all such opinions or
certificates shall be delivered to Underwriters'
counsel.
(e) At the Closing Time, you shall have received a favorable
opinion from Hunton & Xxxxxxxx, counsel for the Underwriters, dated as
of the Closing Time, with respect to (i) the incorporation of the
Company, the issuance and sale of the Shares, the Registration
Statement, the Prospectus and other related matters as the Underwriters
may reasonably require, and the Company shall have furnished to such
counsel such documents as they may reasonably request for the purpose
of enabling them to pass on such matters; and (ii) that (A) the Company
is organized in conformity with the requirements for qualification as a
real estate investment trust pursuant to Sections 856 through 860 of
the Code, and the Company's proposed method of operation will enable it
to meet the requirements for qualification and taxation as a real
estate investment trust under the Code and (B) the Partnership will be
treated as a partnership for federal income purposes and not as a
corporation or an association taxable as a corporation.
(f) At the Closing Time, (i) the Registration Statement and
the Prospectus, as they may then be amended or supplemented, shall
contain all statements that are required to be stated therein under the
1933 Act and the 1933 Act Regulations and shall conform to the
requirements of the 1933 Act and the 1933 Act Regulations; the Company
shall have complied with Rule 430A and neither the Registration
Statement nor the Prospectus, as they may then be amended or
supplemented, shall 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, (ii) there
shall not have been, since the respective dates as of which information
is given in the Registration Statement, any material adverse change in
the business, prospects, properties, assets, results of operations or
condition (financial or otherwise) of the Company, the Lessee, the
Partnership or the Lessee, whether or not arising in the ordinary
course of business, (iii) no action, suit or proceeding at law or in
equity shall be pending or, to the best of the Company's knowledge,
threatened against the Company, the Lessee or the Partnership that
would be required to be set forth in the Prospectus other than as set
forth therein and no proceedings shall be pending or, to the best
knowledge of the Company, threatened against the Company, the Lessee or
the Partnership before or by any federal, state or other commission,
board or administrative agency wherein an unfavorable decision, ruling
or finding could materially adversely affect the business, prospects,
assets, results of operations or condition (financial or otherwise) of
the Company or the Partnership, other than as set forth in the
Prospectus, (iv) the Company and the Partnership shall have complied
with all agreements and satisfied all conditions on their part to be
performed or satisfied at or prior to the Closing Time, and (v) the
representations and warranties of the Company and the Partnership set
forth in Section 1 shall be accurate as though expressly made at and as
of the Closing Time. At the Closing Time, you shall have received a
certificate executed by the President and Chief Financial Officer of
the Company and the general partner of the Partnership, dated as of the
Closing Time, to such effect and with respect to the following
additional matters: (A) the Registration Statement has become effective
under the 1933 Act and no stop order suspending the effectiveness of
the Registration Statement or preventing or suspending the use of the
Prospectus has been issued, and no proceedings for that purpose have
been instituted or are pending or, to the best of their
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20
knowledge, threatened under the 1933 Act; (B) they have reviewed the
Registration Statement and the Prospectus and, when the Registration
Statement became effective and at all times subsequent thereto up to
the delivery of such certificate, the Registration Statement and the
Prospectus and any amendments or supplements thereto contained all
statements and information required to be included therein or necessary
to make the statements therein not misleading and neither the
Registration Statement nor the Prospectus nor any amendment or
supplement thereto included any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and, since the
effective date of the Registration Statement, there has occurred no
event required to be set forth in an amended or supplemented Prospectus
that has not been so set forth; and (C) certain other factual matters
specified by you.
(g) At the time that this Agreement is executed by the
Company, you shall have received from Coopers & Xxxxxxx L.L.P. a
letter, dated the date hereof, in form and substance satisfactory to
you, confirming that they are independent public accountants with
respect to the Company, the Partnership and the Lessee within the
meanings of the 1933 Act and 1933 Act Regulations, and stating in
effect that:
(i) in their opinion, the financial statements and any
supplementary financial information and schedules included or
incorporated by reference in the Registration Statement and
covered by their opinion therein comply as to form in all
material respects with the applicable accounting requirements
of the 1933 Act and the 1933 Act Regulations;
(ii) on the basis of limited procedures (set forth in
detail in such letter and made in accordance with such
procedures as may be specified by you) not constituting an
audit in accordance with generally accepted auditing
standards, consisting of (but not limited to) a reading of the
latest available unaudited financial statements of the
Company, a reading of the minute books of the Company,
inquiries of officials of the Company responsible for
financial and accounting matters, a reading of the unaudited
pro forma financial statements included or incorporated by
reference in the Registration Statement and Prospectus, and
such other inquiries and procedures as may be specified in
such letter, nothing came to their attention that caused them
to believe that:
(A) the unaudited financial statements and
supporting schedules and other unaudited financial
data of the Company included or incorporated by
reference in the Registration Statement do not comply
as to form in all material respects with the
applicable accounting requirements of the 1933 Act
and the 1933 Act Regulations or that any material
modifications should be made to such financial
information for them to be in conformity with
generally accepted accounting principles ;
(B) any other unaudited income statement
data and balance sheet items included or incorporated
by reference in the Prospectus do not agree with the
corresponding items in the unaudited financial
statements from which such data and items were
derived or that any such unaudited data and items
were not determined on a basis substantially
consistent with the basis for the corresponding items
in the audited financial statements included in the
Prospectus;
(C) any unaudited pro forma financial
information included in the Prospectus does not
comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act
and the 1933 Act Regulations or that the pro forma
adjustments have not been properly applied to
historical amounts in the compilation of that
information;
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21
(D) at a specified date not more than three
(3) days prior to the date of delivery of such
letter, there was any change in the Company's capital
stock, any increase in the Company's notes payable or
any decrease in shareholders' equity or in the
Company's real estate assets less accumulated
depreciation (except for normal depreciation) or
total assets from that set forth in the Company's
balance sheet at June 30, 1997, or changes in any
other items specified by the Underwriters, from that
set forth in the Company's consolidated balance sheet
as of June 30, 1997, except as described in such
letter, and
(E) for the period from June 30, 1997 to a
specified date not more than three (3) days prior to
the date of delivery of such letter, there were any
decreases in total revenues or net income for the
Company, in each case as compared with the
corresponding period of the preceding year, except in
each case for decreases which the Prospectus
discloses have occurred or may occur or which are
described in such letter; and
(iii) in addition to the procedures referred to in
clause (ii) above and the examination referred to in their
reports included or incorporated by reference in the
Registration Statement, they have carried out certain
specified procedures, not constituting an audit in accordance
with generally accepted auditing standards, with respect to
certain amounts, percentages and financial information
specified by you which are derived from the general accounting
records of the Company, which appear or are incorporated by
reference in the Registration Statement or the exhibits or
schedules thereto or the Prospectus and are specified by you,
and have compared such amounts, percentages and financial
information with the accounting records of the Company and
with material derived from such records and have found them to
be in agreement for a period of three (3) years.
(h) At the Closing Time, you shall have received from
Coopers & Xxxxxxx L.L.P. a letter, in form and substance satisfactory
to you and dated as of the Closing Time, to the effect that they
reaffirm the statements made in the letter furnished pursuant to
subsection (h) above, except that the specified date referred to shall
be a date not more than three days prior to the Closing Time.
(i) In the event that either of the letters to be
delivered pursuant to subsections (h) and (i) above sets forth any such
changes, decreases or increases, it shall be a further condition to
your obligations that you shall have reasonably determined, after
discussions with officers of the Company responsible for financial and
accounting matters and with Coopers & Xxxxxxx L.L.P. that such changes,
decreases or increases as are set forth in such letters do not reflect
a material adverse change in the capital stock, long-term debt, total
assets, real estate assets less accumulated depreciation, net current
assets or shareholders' equity of the Company as compared with the
amounts shown in the condensed consolidated balance sheet of the
Company at June 30, 1997, or a material adverse change in revenues or
net income for the Company, in each case as compared with the results
of the Company for the corresponding period of the prior year.
(j) At the Closing Time, counsel for the Underwriters
shall have been furnished with all such letters, documents,
certificates and opinions as they may request for the purpose of
enabling them to pass upon the issuance and sale of the Shares as
contemplated in this Agreement and the matters referred to in Section
5(e) and in order to evidence the accuracy and completeness of any of
the representations, warranties or statements of the Company or the
Partnership, the performance of any of the covenants of the Company or
the Partnership, or the fulfillment of any of the conditions herein
contained; and all proceedings taken by the Company at or prior to the
Closing Time in connection with the authorization, issuance and sale of
the Shares as contemplated in this Agreement shall be satisfactory in
form and substance to you and to counsel for the Underwriters. The
Company and the Partnership will furnish you
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22
with such number of conformed copies of such opinions, certificates,
letters and documents as you shall reasonably request.
(k) Subsequent to the date hereof there shall not have
occurred any of the following: (i) a suspension or material limitation
in trading in securities generally or in securities of the Company on
the New York Stock Exchange, on the American Stock Exchange or in the
over-the-counter market, (ii) a general moratorium on commercial
banking activities in North Carolina or New York declared by either
federal or state authorities, as the case may be, or (iii) the outbreak
or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war if the
effect of any such event specified in this clause (iii) in your
reasonable judgment makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares on the terms and
in the manner contemplated in the Prospectus.
(l) The Partnership shall have provided to the Underwriters
copies of owner's title insurance commitments for title insurance
policies relating to each of the Acquisition Hotels.
If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement may be terminated by you on 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. Notwithstanding
any such termination, the provisions of Section 6 shall remain in effect.
Section 6. Indemnification and Contribution. (a) The Company and the
Partnership, jointly and severally, will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject under the 1933 Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
breach of any warranty or covenant of the Company or the Partnership herein
contained or any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company or the Partnership shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
expressly for use therein, provided, further, that the indemnity agreement
contained in this Section 6(a) with respect to any Preliminary Prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages or liabilities purchased the Shares which are the
subject thereof (or to the benefit of any person controlling such Underwriter),
if such Underwriter failed to send or give a copy of the Prospectus to such
person at or prior to the written confirmation of the sale of such Shares to
such person in any case where delivery is required by the 1933 Act of the 1933
Act Regulations and if the Prospectus would have cured any untrue statement or
alleged untrue statement or omission or alleged omission giving rise to such
loss, claim, damage or liability. In addition to their other obligations under
this Section 6(a), the Company and the Partnership agree that, as an interim
measure during the pendency of any such claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 6(a), they will
reimburse the Underwriters on a monthly basis for all reasonable legal and other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Company's and the Partnership's obligation to reimburse the Underwriters for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. Any such interim
reimbursement payments that are not made to an Underwriter within thirty (30)
days of a request for reimbursement shall bear interest at the prime rate (or
reference rate or other commercial
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23
lending rate for borrowers of the highest credit standing) published from time
to time by The Wall Street Journal (the "Prime Rate") from the date of such
request. This indemnity agreement shall be in addition to any liabilities that
the Company and the Partnership may otherwise have. Neither the Company nor the
Partnership will, without the prior written consent of each Underwriter, settle
or compromise or consent to the entry of any judgment in any pending or
threatened action or claim or related cause of action or portion of such cause
of action in respect of which indemnification may be sought hereunder (whether
or not such Underwriter is a party to such action or claim), unless such
settlement, compromise or consent includes an unconditional release of such
Underwriter from all liability arising out of such action or claim (or related
cause of action or portion thereof).
The indemnity agreement in this Section 6(a) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if any,
who controls any Underwriter within the meaning of the 1933 Act or the Exchange
Act to the same extent as such agreement applies to the Underwriters.
(b) Each Underwriter, severally, but not jointly, and in proportion to
their respective underwriting commitments, will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the Company
may become subject, under the 1933 Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any breach of any warranty or covenant by such
Underwriters herein contained or any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter expressly for use therein; and will reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such loss, claim, damage,
liability or action. In addition to its other obligations under this Section
6(b), the Underwriters agree that, as an interim measure during the pendency of
any such claim, action, investigation, inquiry or other proceeding arising out
of or based upon any statement or omission, or any alleged statement or
omission, described in this Section 6(b), they will reimburse the Company on a
monthly basis for all reasonable legal and other expenses incurred in connection
with investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of their obligation to reimburse the Company
for such expenses and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. Any such interim
reimbursement payments that are not made to the Company within 30 days of a
request for reimbursement shall bear interest at the Prime Rate from the date of
such request. This indemnity agreement shall be in addition to any liabilities
that the Underwriters may otherwise have.
The indemnity agreement in this Section 6(b) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each officer and
director of the Company and each person, if any, who controls the Company within
the meaning of the 1933 Act or the Exchange Act to the same extent as such
agreement applies to the Company.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; no indemnification provided for in Section 6(a) or 6(b)
shall be available to any party who shall fail to give notice as provided in
this Section 6(c) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was materially prejudiced
by the failure to give such notice, but the failure so to notify the
indemnifying party will not relieve the indemnifying party from any liability
that it may have to any indemnified party otherwise than under this Section 6.
In case any such action shall be brought against any indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party
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24
shall be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof with counsel satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified party, be counsel to the
indemnifying party), except that if the indemnified party has been advised by
counsel in writing that there are one or more defenses available to the
indemnified party which are different from or additional to those available to
the indemnifying party, then the indemnified party shall have the right to
employ separate counsel and in that event the reasonable fees and expenses of
such separate counsel for the indemnified party shall be paid by the
indemnifying party; provided, however, that if the indemnifying party is the
Company, the Company shall only be obligated to pay the reasonable fees and
expenses of a single law firm (in addition to those of its own counsel and any
reasonably necessary local counsel) employed by all of the indemnified parties
and the persons referred to in Section 6(a) hereof. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Section 6(a) and 6(b)
hereof, including the amounts of any requested reimbursement payments, the
method of determining such amounts and the basis on which such amounts shall be
apportioned among the indemnifying parties, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the National
Association of Securities Dealers, Inc. ("NASD") Any such arbitration must be
commenced by service of a written demand for arbitration or a written notice of
intention to arbitrate, therein electing the arbitration tribunal. In the event
the party demanding arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to said demand or
notice is authorized to do so. Any such arbitration will be limited to the
operation of the interim reimbursement provisions contained in Sections 6(a) and
6(b) hereof and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for expenses that is created by the provisions of
Sections 6(a) and 6(b).
(e) In order to provide for just and equitable contribution in
circumstances under which the indemnity provided for in this Section 6 is for
any reason judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the right of appeal) to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company and the
Partnership, on the one hand, and the Underwriters, on the other hand, shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity incurred by the Company and the
Partnership and one or more of the Underwriters, as incurred, in such
proportions that (a) the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus bears to the initial public offering price (before
deducting expenses) appearing thereon, and (b) the Company and the Partnership
are responsible for the balance, provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 0000
Xxx) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation; provided, further, that if the allocation
provided above is not permitted by applicable law, the Company and the
Partnership, on the one hand, and the Underwriters, on the other, shall
contribute to the aggregate losses in such proportion as is appropriate to
reflect not only the relative benefits referred to above but also the relative
fault of the Company and the Partnership, on the one hand, and the Underwriters,
on the other, in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the Company or the Partnership, on the one hand, or by the Underwriters, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company,
the Partnership and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 6(e) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 6(e). The amount paid
or payable by a party as a result of the losses, claims, damages or liabilities
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by
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such party in connection with investigating or defending such action or claim.
Notwithstanding the provisions of this Section 6(e), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. The Underwriters' obligations in this
Section 6(e) to contribute are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section 6(e), each
person, if any, who controls an Underwriter within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company.
Section 7. Representations, Warranties and Agreements to Survive
Delivery. The representations, warranties, indemnities, agreements and other
statements of the Company or the Partnership or officers of the Company set
forth in or made pursuant to this Agreement will remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Company, the Partnership or any Underwriter or controlling person, with respect
to an Underwriter or the Company or the Partnership, and will survive delivery
of and payment for the Shares or termination of this Agreement.
Section 8. Effective Date of Agreement and Termination. (a) This
Agreement shall become effective immediately as to Sections 4 and 6 and, as to
all other provisions at 10:00 a.m. E.D.T. on the first full business day
following the date of execution of this Agreement; but this Agreement shall
nevertheless become effective at such earlier time as you may determine on and
by notice to the Company or by release of any of the Shares for sale to the
public. For the purposes of this Section 8, the Shares shall be deemed to have
been so released upon the release of publication of any newspaper advertisement
relating to the Shares or upon the release by you of telegrams or facsimile
transmission (i) advising the Underwriters that the Shares are released for
public offering, or (ii) offering the Shares for sale to securities dealers,
whichever may occur first. By giving notice before the time this Agreement
becomes effective, you or the Company, may prevent this Agreement from becoming
effective, without liability of any party to any other party, except that the
Company shall remain obligated to pay costs and expenses to the extent provided
in Section 4 hereof.
(b) You may terminate this Agreement, by notice to the Company, at any
time at or prior to the Closing Time (i) in accordance with the last paragraph
of Section 5 of this Agreement, or (ii) if there has been since the respective
dates as of which information is given in the Registration Statement, any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the business, prospects, management, properties,
assets, results of operations or condition (financial or otherwise) of the
Company and the Partnership, whether or not arising in the ordinary course of
business, or (iii) if there has occurred or accelerated any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions the effect of which on the financial markets of
the United States is such as to make it, in your judgment, impracticable to
market the Shares or enforce contracts for the sale of the Shares, or (iv) if
trading in any securities of the Company has been suspended by the Commission or
by the NASD, or if trading generally on the New York Stock Exchange, the
American Stock Exchange or in the over-the-counter market has been suspended, or
limitations on prices for trading (other than limitations on hours or numbers of
days of trading) have been fixed, or minimum or maximum ranges for prices for
securities have been required, by the New York Stock Exchange, the American
Stock Exchange or the NASD or by order of the Commission or any other
governmental authority, or (v) if a banking moratorium has been declared by
federal or New York or North Carolina authorities, or (vi) any federal or state
statute, regulation, rule or order of any court or other governmental authority
has been enacted, published, decreed or otherwise promulgated which in your
reasonable opinion materially adversely affects or will materially adversely
affect the business or operations of the Company or the Partnership, or
(vii) any action has been taken by any federal, state or local government or
agency in respect of its monetary or fiscal affairs which in your reasonable
opinion has a material adverse effect on the securities markets in the United
States.
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(c) If this Agreement is terminated pursuant to this Section 8, such
termination shall be without liability of any party to any other party, except
to the extent provided in Section 4. Notwithstanding any such termination, the
provisions of Section 6 shall remain in effect.
Section 9. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at the Closing Time to purchase the Shares that
it or they are obligated to purchase pursuant to this Agreement (the "Defaulted
Securities"), you shall have the right, within 36 hours thereafter, to make
arrangements for the non-defaulting Underwriters or any other underwriters, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms set forth in this Agreement; if,
however, you have not completed such arrangements within such 36-hour period,
then:
(a) If the aggregate number of Shares which are Defaulted
Securities does not exceed 10% of the aggregate number of Shares to be
purchased pursuant to this Agreement, the non-defaulting Underwriter
shall be obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligation proportions
bear to the aggregate underwriting obligation proportions of all
non-defaulting Underwriters, and
(b) If the aggregate number of Shares which are Defaulted
Securities exceeds 10% of the aggregate number of Shares to be
purchased pursuant to this Agreement, this Agreement shall terminate
without liability on the part of the non-defaulting Underwriter.
No action taken pursuant to this Section 9 shall relieve the
defaulting Underwriter from liability in respect of its default.
In the event of any such default that does not result in a
termination of this Agreement, either you or the Company shall have the
right to postpone the Closing Time for a period not exceeding seven
days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements, and
the Company agrees promptly to file any amendments to the Registration
Statement or supplements to the Prospectus that may thereby be made
necessary. As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section 9.
Section 10. Default by the Company. If the Company shall fail at the
Closing Time to sell and deliver the aggregate number of Shares that it is
obligated to sell, then this Agreement shall terminate without any liability on
the part of any non-defaulting party, except to the extent provided in Section 4
and except that the provisions of Section 6 shall remain in effect.
No action taken pursuant to this Section 10 shall relieve the Company
from liability, if any, in respect to such default.
Section 11. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication.
Notices to the Underwriters shall be directed c/o Xxxxxx Xxxxxx & Company, Inc.,
00 Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxx 00000, Attention: Xxxxxxxx X. Xxxxx,
Managing Director (with a copy sent in the same manner to Hunton & Xxxxxxxx,
Riverfront Plaza, East Tower, 000 Xxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000-
4074, Attention: Xxxxx X. Xxxxxx, Esq.); and notices to the Company and the
Partnership shall be directed to them at Winston Hotels, Inc., 0000 Xxxxxxx
Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx Xxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxxx,
III (with a copy sent in the same manner to King & Spalding, 000 Xxxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxx 00000, Attention: Xxxx X. Xxxxxx, Esq.).
Section 12. Parties. This Agreement is made solely for the benefit of
and is binding upon the Underwriters, the Company and the Partnership and, to
the extent provided in Section 6, any person controlling the
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27
Company, the Partnership, or any of the Underwriters, the officers and directors
of the Company, and their respective executors, administrators, successors and
assigns and, subject to the provisions of Section 10, no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from any of the several Underwriters of the Shares.
All of the obligations of the Underwriters hereunder are several and
not joint.
Section 13. Governing Law and Time. This Agreement shall be governed
by the laws of the State of Tennessee. Specified time of the day refers to
United States Eastern Time. Time shall be of the essence of this Agreement.
Section 14. Counterparts. This Agreement may be executed in one or
more counterparts and when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement.
Section 15. Power of Attorney. Each of X.X. Xxxxxxxx & Co. and
Xxxxxxx Xxxxx & Associates, Inc.
hereby confer upon Xxxxxx Xxxxxx & Company, Inc. full power and authority to act
for it in connection with all matters pertaining to this Agreement.
[Signatures Appear on Following Page]
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28
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Company, the Partnership
and the several Underwriters in accordance with its terms.
Very truly yours,
WINSTON HOTELS, INC.
By:/S/ Xxxxxx Xxxxxx
------------------------------
Name: Xxxxxx Xxxxxx
----------------------------
Title: Senior Vice President
---------------------------
and Chief Financial Officer
---------------------------
XXXX LIMITED PARTNERSHIP
By:/s/ Xxxxxx Xxxxxx
-------------------------------
Name: Xxxxx Xxxxxx
-----------------------------
Title: Senior Vice President
----------------------------
and Chief Financial Officer
----------------------------
Confirmed and accepted as of the date first above written:
XXXXXX XXXXXX & COMPANY, INC.
By: /s/ Xxxxxxxx X. Xxxxx
----------------------
Name: Xxxxxxxx X. Xxxxx
--------------------
Title: Managing Director
-------------------
X.X. XXXXXXXX & CO.
By: /s/ Xxxxxxx X. Menzal
----------------------
Name: Xxxxxxx X. Menzal
--------------------
Title: Vice President
-------------------
XXXXXXX XXXXX & ASSOCIATES, INC.
By: /s/ Xxxx X. Xxxxxx
----------------------
Name: Xxxx X. Xxxxxx
--------------------
Title: Managing Director
-------------------
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29
SCHEDULE A
NUMBER OF
SHARES
UNDERWRITERS TO BE PURCHASED
------------ ---------------
Xxxxxx Xxxxxx & Company, Inc............................... 1,200,000
X.X. Xxxxxxxx & Co.. . . . . . . . . . . . . . . . . ...... 900,000
Xxxxxxx Xxxxx & Associates, Inc. . . . . . . . . . . ...... 900,000
---------
Total........................... 3,000,000
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