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EXHIBIT 10.21
RIGHT OF FIRST OPPORTUNITY AGREEMENT
THIS RIGHT OF FIRST OPPORTUNITY AGREEMENT (the "Agreement") is made
and entered into as of the 10th day of June, 1999, by and between Xxxxxxxx
Hospitality Trust, Inc. ("HHTI"), Xxxxxxxx Hospitality Limited Partnership, a
Virginia limited partnership (the "Operating Partnership") (HHTI and the
Operating Partnership are sometimes referred to herein collectively as the "REIT
Entities" and individually as a "REIT Entity") and Xxxxxxxx Hospitality
Management, Inc., a Maryland corporation ("HHMI").
W I T N E S S E T H:
WHEREAS, HHTI owns, directly or indirectly, a 84.21 percent
partnership interest in the Operating Partnership;
WHEREAS, the REIT Entities may in certain circumstances determine
that they are precluded from pursuing, or is limited in the manner in which they
pursue, various business opportunities due to the status of HHTI as a real
estate investment trust ("REIT") under sections 856 through 860 of the Internal
Revenue Code of 1986, as amended (the "Code");
WHEREAS, HHMI is a corporation that was formed for the purposes of,
among other things, becoming a lessee and operator of various types of assets,
including real estate owned by the REIT Entities and others;
WHEREAS, Supertel Hospitality, Inc. ("STH") has entered into, or
will enter into, an agreement to merge with and into HHTI (the "Merger") and as
a precondition to the Merger, HHMI will enter into leases relating to hotels
owned by STH on terms and conditions agreed upon by the parties (the "STH Hotel
Leases") and will purchase certain assets of STH (the "Asset Purchase"); and
WHEREAS, the REIT Entities acknowledge that they are executing this
Agreement in connection with, and as an inducement to, HHMI to complete the
Asset Purchase and enter into the STH Hotel Leases, and have determined that, in
connection with the Merger, it is desirable to provide HHMI with a right of
first opportunity with respect to certain business opportunities available to
the REIT Entities.
NOW, THEREFORE, in consideration of the premises and mutual
undertakings herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by each of the parties hereto,
the undersigned parties hereby agree as follows:
1. Definitions. Except as may be otherwise herein expressly provided, the
following terms and phrases shall have the meanings set forth below:
(a) "Tenant Opportunity" means the opportunity to become the lessee under a
"master" lease arrangement of a property owned or subsequently acquired by a
REIT Entity if such REIT Entity, in its sole discretion, determines that,
consistent with the status of HHTI as a REIT, such
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REIT Entity is required to enter into such a "master" lease arrangement for such
property, including, without limitation, a hotel or similar type of facility, so
long as such REIT Entity determines, in its reasonable discretion, that HHMI or
an entity that HHMI controls is qualified to be the lessee based on experience
in the industry and financial and legal qualifications, provided that all
determinations relating to both (i) the ability or inability of a REIT Entity to
pursue an opportunity or acquire assets and (ii) the necessity for a REIT Entity
to enter into a "master" lease arrangement for a property, shall be made by such
REIT Entity in its sole discretion. A Tenant Opportunity shall not include (1) a
property which already has an existing "master" lessee as of the date of this
Agreement (or, with respect to a property acquired subsequent to the date of
this Agreement, which has an existing binding "master" lessee arrangement that
predates the acquisition of the property by a REIT Entity), provided that the
REIT Entity shall offer any such "master" lessee interest to HHMI if the lessee
interest subsequently becomes available, or (2) an opportunity in which the
seller of the property (or any affiliate or designee of the seller) desires to
enter into a "master" lease agreement with one of the REIT Entities.
(b) "REIT-Qualified Investment" means an investment, the income for which
would be qualifying income under applicable provisions of federal income tax
law, the ownership of which would not cause a REIT to violate the asset
limitations set forth in applicable provisions of federal income tax law, and
which otherwise meets the federal income tax requirements applicable to REITs.
Any expenses incurred that are directly related to structuring an investment as
a REIT-Qualified Investment shall be borne solely by the applicable REIT Entity.
2. HHMI Right of First Opportunity for Tenant Opportunity.
(a) During the term of this Agreement, if a REIT Entity develops a Tenant
Opportunity, or if a Tenant Opportunity otherwise becomes available to a REIT
Entity, such REIT Entity shall first offer such Tenant Opportunity to HHMI. The
offer shall be made by written notice (the "REIT Entity Notice") from the REIT
Entity to HHMI, which REIT Entity Notice shall contain a detailed description of
the material terms and conditions under which such REIT Entity proposes to offer
such Tenant Opportunity to HHMI. Such REIT Entity shall thereafter provide or
cause to be provided promptly to HHMI such additional information relating to
the Tenant Opportunity as HHMI reasonably may request. For a period of 30 days
after the date that a REIT Entity delivers a REIT Entity Notice to HHMI, such
REIT Entity and HHMI shall negotiate with each other on an exclusive basis with
respect to such Tenant Opportunity. If such REIT Entity and HHMI are unable to
enter into a mutually satisfactory arrangement with respect to the Tenant
Opportunity within such 30-day period, or if HHMI indicates that it is not
interested in pursuing such Tenant Opportunity (in which event HHMI shall
provide written notice to such REIT Entity as soon as HHMI decides against
pursuing such opportunity), then the REIT Entity shall be free for a period of
one year after the expiration of such 30-day period to enter into a binding
agreement with respect to such Tenant Opportunity with any party at a price and
on terms and conditions that are not more favorable to such REIT Entity in any
material respect than the price, terms and conditions last proposed in writing
by such REIT Entity to HHMI. If such REIT Entity does not enter into a binding
agreement with respect to such Tenant Opportunity within such one-year period,
or if the price, terms and conditions are more favorable to the REIT Entity in
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any material respect than the price, terms and conditions last proposed in
writing by the REIT Entity to HHMI, the REIT Entity shall again be required to
comply with the procedures set forth above in this Section 3(a) if it desires to
pursue such Tenant Opportunity.
(b) Notwithstanding anything to the contrary contained in this Agreement,
(1) a REIT Entity shall not be required to offer to HHMI any Tenant Opportunity
in connection with a proposed acquisition until a binding contract has been
entered into with respect to such acquisition, and the consummation of any
agreement between a REIT Entity and HHMI with respect to a Tenant Opportunity
shall be subject to the actual closing of such acquisition by the REIT Entity,
(2) each REIT Entity shall have the right in its sole discretion to decide not
to pursue, or to discontinue at any time pursuing, any investment opportunity,
even if such opportunity, if pursued, would create a Tenant Opportunity, and (3)
the REIT Entities shall have no obligation to offer any opportunity other than a
Tenant Opportunity to HHMI.
(c) HHMI agrees to cooperate with the REIT Entities in structuring all
dealings with outside parties in connection with any Tenant Opportunity that
HHMI and a REIT Entity agree to enter into pursuant to Section 3(a) above. HHMI
agrees to cooperate with the REIT Entities in structuring any Tenant Opportunity
with a REIT Entity as a REIT-Qualified Investment for such REIT Entity. Each
REIT Entity shall have the right, in its sole discretion, to structure any
investment as a REIT-Qualified Investment, even if such structuring prevents the
REIT Entity from creating a Tenant Opportunity for HHMI.
3. General Terms and Conditions for Right of First Opportunity.
(a) Unless waived or unless agreed to as part of an investment, each party
shall bear its own expenses with respect to any opportunity to which this
Agreement is applicable, and each party agrees that it shall not be entitled to
any compensation from the other party with respect to any such opportunity.
(b) The REIT Entities shall not be required to comply with the right of
first opportunity set forth in this Agreement during any period in which HHMI or
any Controlled Affiliate of HHMI (as hereinafter defined) is in default of this
Agreement or any other agreement entered into by the parties hereto or any of
their Controlled Affiliates, if such default is material and remains uncured for
thirty days after receipt of notice thereof. A "Controlled Affiliate" of a party
means any entity controlled by, controlling or under common control with such
party.
(c) Any opportunity which is offered to and accepted by HHMI under this
Agreement may be entered into by or on behalf of HHMI or by any designee which
is a Controlled Affiliate of HHMI.
(d) The right of first opportunity set forth in this Agreement shall be
subordinated to any seller consent and confidentiality requirements; the REIT
Entities shall not be required to comply with the first opportunity right set
forth in this Agreement if such compliance would violate any seller consent or
confidentiality requirements.
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(e) While it is the intention of the parties to align their businesses in
accordance with the terms of this Agreement, each party shall act independently
in its own best interests, and neither party shall be considered a partner or
agent of the other party or to owe any fiduciary or other common law duties to
the other party.
(f) Specific Performance. Each party hereto hereby acknowledges that the
obligations undertaken by it pursuant to this Agreement are unique and that the
other parties hereto would likely have no adequate remedy at law if such party
shall fail to perform its obligations hereunder, and such party therefor
confirms that the other party's right to specific performance of the terms of
this Agreement is essential to protect the rights and interests of the other
party. Accordingly, in addition to any other remedies that a party hereto may
have at law or in equity, such party shall have the right to have all
obligations, covenants, agreements and other provisions of this Agreement
specifically performed by the other party hereto and the right to obtain a
temporary restraining order or a temporary or permanent injunction to secure
specific performance and to prevent a breach or threatened breach of this
Agreement by the other party hereto. Each party submits to the jurisdiction of
the courts of the Commonwealth of Virginia for this purpose.
4. Affiliates. Each party hereto shall cause all entities that are under its
control to comply with the terms hereof. HHTI, by its signature below, hereby
agrees that it and Xxxxxxxx Hospitality REIT Trust shall comply with the terms
of this Agreement applicable to the Operating Partnership.
5. Term. The term of the Agreement shall commence as of the date first written
above and, unless sooner terminated pursuant to this paragraph, shall terminate
on December 31, 2009. Notwithstanding the foregoing, (A) a party hereto may
terminate this Agreement if the other party or any Controlled Affiliate of such
other party is in default of this Agreement or any other agreement entered into
by the parties hereto or any of their Controlled Affiliates, if such default is
material and remains uncured for thirty days after receipt of notice thereof,
(B) the REIT Entities may terminate this Agreement if the Agreement and Plan of
Merger between HHTI and Supertel is not executed or is terminated, and (C) the
REIT Entities may terminate this Agreement if Xxxxx X. Xxxxxxxx and his
Controlled Affiliates no longer control at least 50 percent of the outstanding
capital stock of HHMI.
6. Miscellaneous.
(a) Notices. Notices shall be sent to the parties at the following
addresses:
To HHMI:
Xx. Xxxxx X. Xxxxx
Xxxxxxxx Hospitality Management, Inc.
00000 Xxx Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
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To HHTI:
Xx. Xxxxx X. Xxxxxxxx, Xx.
Xxxxxxxx Hospitality Trust, Inc.
00000 Xxx Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
To the Operating Partnership:
Xx. Xxxxx X. Xxxxxxxx, Xx.
Xxxxxxxx Hospitality Limited Partnership
00000 Xxx Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
Notices may be sent be certified mail, return receipt requested,
Federal Express or comparable overnight delivery service, or facsimile. Notice
will be deemed received on the fourth business day following deposit in U.S.
mail and on the first business day following deposit with Federal Express or
other overnight delivery service, or transmission by facsimile. Any party to
this Agreement may change its address for notice by giving written notice to the
other party at the address and in accordance with the procedures provided above.
(b) Reasonable and Necessary Restrictions. Each of the parties hereto
hereby acknowledges and agrees that the restrictions, prohibitions and other
provisions of this Agreement are reasonable, fair and equitable in scope, term
and duration, are necessary to protect the legitimate business interests of the
parties hereto and are a material inducement to the parties hereto to enter into
the transactions described in and contemplated by the recitals hereto. Each
party hereto covenants that it will not xxx to challenge the enforceability of
this Agreement or raise any equitable defense to its enforcement.
(c) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns. This Agreement shall not be assigned without the express written
consent of each of the parties hereto. Notwithstanding the foregoing, this
Agreement may be assigned without the consent of any party hereto in connection
with any merger, consolidation, reorganization or other combination of a party
with or into another entity where the party is not the surviving entity.
(d) Amendments; Waivers. No termination, cancellation, modification,
amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless such change or waiver is specifically set forth
in a writing signed by the party or parties to be bound thereby. The waiver of
any right or remedy with respect to any occurrence on one occasion shall not be
deemed a waiver of such right or remedy with respect to such occurrence on any
other occasion.
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(e) Choice of Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by the laws of the Commonwealth of Virginia,
without regard to the principles of choice of law thereof.
(f) Severability. In the event that one or more of the terms or provisions
of this Agreement or the application thereof to any person(s) or in any
circumstance(s) shall, for any reason and to any extent be found by a court of
competent jurisdiction to be invalid, illegal or unenforceable, such court shall
have the power, and hereby is directed, to substitute for or limit such invalid
term(s), provision(s) or application(s) and to enforce such substituted or
limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
(g) Entire Agreement; No Third-Party Beneficiaries. This Agreement (i)
constitutes the entire agreement and supersedes all prior agreements,
understandings, negotiations and discussions, whether written or oral, between
the parties hereto with respect to the subject matter hereof, so that no such
external or separate agreement relating to the subject matter of this Agreement
shall have any effect or be binding, unless the same is referred to specifically
in this Agreement or is executed by the parties after the date hereof; and (ii)
is not intended to confer upon any other person any rights or remedies
hereunder, and shall not be enforceable by any party not a signatory to this
Agreement.
(h) Gender; Number. As the context requires, any word used herein in the
singular shall extend to and include the plural, any word used in the plural
shall extend to and include the singular and any word used in any gender or the
neuter shall extend to and include each other gender or be neutral.
(i) Headings. The headings of the sections hereof are inserted for
convenience of reference only and are not intended to be a part of or affect the
meaning or interpretation of this Agreement or of any term or provision hereof.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by one of its duly authorized corporate officers, as of
the date first above written.
XXXXXXXX HOSPITALITY
LIMITED PARTNERSHIP, a Virginia limited
partnership
By: Xxxxxxxx Hospitality REIT Trust
a Maryland business trust, its sole general
partner
By: /s/ Xxxxx X. Xxxxxxxx , Xx.
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Name: Xxxxx X. Xxxxxxxx, Xx.
Title: President and Chief Executive Officer
XXXXXXXX HOSPITALITY MANAGEMENT, INC.,
a Maryland corporation
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: President
XXXXXXXX HOSPITALITY TRUST, INC.
a Virginia corporation
By: /s/ Xxxxx X. Xxxxxxxx, Xx.
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Name: Xxxxx X. Xxxxxxxx, Xx.
Title: President and Chief Executive Officer
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The undersigned, in its capacity as the sole shareholder of Xxxxxxxx
Hospitality REIT Trust, hereby agrees to the restrictions imposed upon Xxxxxxxx
Hospitality REIT Trust pursuant to Section 4 of the Agreement.
XXXXXXXX HOSPITALITY TRUST, INC.
a Virginia corporation
By: /s/ Xxxxx X. Xxxxxxxx, Xx.
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Name: Xxxxx X. Xxxxxxxx, Xx.
Title: President and Chief Executive Officer
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