HERSHA HOSPITALITY TRUST
(a Maryland real estate investment trust)
1,833,334 Priority Class A Common Shares
($6.00 per share)
UNDERWRITING AGREEMENT
December ____, 1998
Xxxxxxxx & Xxxxxxxxx, Incorporated
000 X. Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, XX 00000
Ladies and Gentlemen:
The undersigned, Hersha Hospitality Trust, a Maryland real estate
investment trust (the "Company"), and Hersha Hospitality Limited Partnership, a
Virginia limited partnership (the "Partnership"), hereby confirm their agreement
with you as follows:
1. Introduction. This Agreement sets forth the understandings and
agreements among the Company and you whereby, subject to the terms and
conditions herein contained, the Company will sell to you, as provided in
Section 3.(a), at a price of $5.52 per share, 1,833,334 Priority Class A common
shares (the "Initial Shares"), par value $0.01 per share (the "Common Shares"),
to be issued by the Company. In addition, as provided in Section 3.(b), the
Company will give you the option to purchase up to an additional 275,000 Common
Shares (the "Option Shares", and together with the Initial Shares, the "Shares")
at a price of $5.52 per share. Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Prospectus
prepared by the Company and dated September ___, 1998 (the "Prospectus"). It is
our understanding that you intend to make a public offering of the Shares (the
"Offering") as soon as you deem it advisable to do so after the Registration
Statement has become effective. The Shares are to be initially offered to the
public at the initial offering price set forth in the Prospectus. You may from
time to time thereafter change the public offering price and other selling
terms. The term "Offering" shall include the Shares to be offered by you as well
as 166,666 Common Shares to be offered directly by the Company (the "Company
Offered Shares").
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On or prior to the Initial Closing Date (as hereinafter defined),
the Company will complete a series of transactions described in the Prospectus
under the heading "FORMATION TRANSACTIONS." As part of the Formation
Transactions, (i) the Company will contribute to the Partnership substantially
all of the net proceeds from the sale of the Shares, (ii) the Partnership will
acquire all of the partnership interests in, or as the case may be,
substantially all of the assets of, the various limited partnerships (the
"Selling Partnerships") that own the ten (10) hotel properties described in the
Prospectus (individually a "Hotel" and collectively, the "Hotels") pursuant to
the terms and conditions of Contribution Agreements (collectively, the
"Contribution Agreements"), (iii) the Partnership will assume a total of
approximately $____ million of outstanding indebtedness of the Selling
Partnerships, approximately $____ million of which (the "Assumed Indebtedness")
will remain outstanding after the immediate repayment of approximately $____
million of such indebtedness, (iv) the Partnership will issue to the Selling
Partnerships and/or the partners of the Selling Partnerships, as the case may be
(collectively, the "Selling Entities"), an aggregate of ________ units of
limited partnership interest (assuming no exercise of the Option Shares) in the
Partnership ("Units"), which are convertible into common shares of the Company
under certain conditions, (v) the Partnership will lease each of the Hotels
pursuant to separate leases (the "Leases") to Hersha Hospitality Management,
L.P., a Pennsylvania limited partnership (the "Lessee"). As used herein, the
term "Formation Transactions" shall mean the occurrence of all the events
described in this paragraph and the other transactions described in the section
of the Prospectus captioned "FORMATION TRANSACTIONS."
2. Representations and Warranties of the Company and the Partnership.
The Company and the Partnership jointly and severally represent and
warrant to and agree with you that:
(a) Registration Statement and Prospectus. The Company has prepared
and filed with the Securities and Exchange Commission (the "Commission") a
registration statement on Form S-11 (File No. 333-56087) (as defined below, the
"Registration Statement") conforming in all material respects to the
requirements of the Securities Act of 1933, as amended (the "1933 Act"), and the
applicable rules and regulations (the "Rules and Regulations") of the
Commission. Such amendments to such Registration Statement as may have been
required prior to the date hereof have been filed with the Commission, and such
amendments have been similarly prepared. Copies of the Registration Statement,
any and all amendments thereto prepared and filed with the Commission, and each
related Preliminary Prospectus, and the exhibits, financial statements and
schedules, as finally amended and revised, have been delivered to you for
review.
The term "Registration Statement" as used in this Agreement
shall mean the Company's Registration Statement on Form S-11, including the
Prospectus, any documents incorporated by reference therein, and all financial
schedules and exhibits thereto, as amended
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on the date that the Registration Statement becomes effective. The term
"Prospectus" as used in this Agreement shall mean the prospectus relating to the
Shares in the form in which it was filed with the Commission pursuant to Rule
424(b) of the 1933 Act or, if no filing pursuant to Rule 424(b) of the 1993 Act
is required, shall mean the form of the final prospectus included in the
Registration Statement when the Registration Statement becomes effective. The
term "Preliminary Prospectus" shall mean any prospectus included in the
Registration Statement before it becomes effective. The terms "effective date"
and "effective" refer to the date the Commission declares the Registration
Statement effective pursuant to Section 8 of the 1933 Act.
(b) Adequacy of Disclosure. Each Preliminary Prospectus, at the time
of filing thereof, conformed in all material respects to the requirements of the
1933 Act and the Rules and 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 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 to
the Company by you expressly for use in the Registration Statement. For the
purposes of the closing conditions contained in Section 6.(b), this
representation and warranty shall be deemed as of the Closing Date (as
hereinafter defined) also to constitute a representation and warranty that when
the Registration Statement became effective, when the Prospectus was first filed
pursuant to Rule 424(b) of the Rules and Regulations, when any amendment to the
Registration Statement was filed, and when any pre-Closing supplement to the
Prospectus was filed with the Commission and on each Closing Date, (i) the
Registration Statement, the Prospectus and any amendments thereof and
supplements thereto conformed in all material respects with the applicable
requirements of the 1933 Act and the Rules and Regulations, and (ii) neither the
Registration Statement, the Prospectus nor any amendment or supplement thereto
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading; 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 to the Company by you expressly for use in
the Registration Statement.
(c) No Stop Order. The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus with respect to
the Shares, 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.
(d) Company: Organization and Qualification. The Company has been
duly organized and is validly existing in good standing as a real estate
investment trust under the laws of the State of Maryland with all requisite
power and authority to enter into this Agreement, to conduct its business as now
conducted and as proposed to be conducted, and to
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own, lease and operate its properties, and the properties it proposes to own,
lease and operate, as described in the Registration Statement and Prospectus,
and is qualified to do business and is in good standing in each other
jurisdiction in which the failure so to qualify could reasonably be expected to
have a material adverse effect on the Company, the Partnership or any Hotel,
taken as a whole. The Company is not in violation of any provision of its
declaration of trust, bylaws or other governing documents and is not in default
under or in breach of, and does not know of the occurrence of any event that
with the giving of notice or the lapse of time or both would constitute a
default under or breach of, any term or condition of any material agreement or
instrument to which it is a party or by which any of its properties is bound,
except as disclosed in the Registration Statement and Prospectus. No consent,
approval, authorization, or order from any court, governmental agency or body is
required in connection with the execution and delivery of this Agreement by the
Company, the consummation by the Company of the transactions contemplated herein
and in the Registration Statement and Prospectus or the issuance and sale of the
Shares, except such as may be required by the 1933 Act, the Securities Exchange
Act of 1934, as amended (the "1934 Act"), or applicable state securities or blue
sky laws. Except for the Partnership, the Company does not own or control,
directly or indirectly, any corporation, association, or other entity.
(e) Partnership: Organization and Qualification. The Partnership has
been duly formed and is validly existing as a limited partnership under the laws
of the Commonwealth of Virginia with all requisite partnership power to conduct
its business as now conducted and as proposed to be conducted, and to own, lease
and operate its properties and the properties it proposes to own, lease and
operate, as described in the Registration Statement and Prospectus, and is
qualified to do business and is in good standing as a foreign limited
partnership in each other jurisdiction in which the failure so to qualify could
reasonably be expected to have a material adverse effect on the Company, the
Partnership or any Hotel, taken as a whole. The Partnership is not in violation
of any provision of its partnership agreement or other governing documents and
is not in default under or in breach of, and does not know of the occurrence of
any event that with the giving of notice or the lapse of time or both would
constitute a default under or breach of, any term or condition of any material
agreement or instrument to which it is a party or by which any of its properties
is bound, except as disclosed in the Registration Statement and Prospectus. No
consent, approval, authorization or order from any court, governmental agency or
body is required in connection with the execution and delivery of this Agreement
by the Partnership, or the consummation by the Partnership of the transactions
contemplated herein and in the Registration Statement and Prospectus, except
such as may be required by the 1933 Act, the 1934 Act, or applicable state
securities or blue sky laws. The Company is and at each Closing Date will be the
sole general partner of the Partnership. Immediately subsequent to the Initial
Closing Date, the Company will be the holder of approximately ____% of the Units
in the Partnership, and the limited partners of the Partnership will be the
holders, in the aggregate, of approximately ____% of the Units in the
Partnership.
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(f) Lessee: Organization and Qualification. The Lessee has been duly
incorporated and is validly existing as a limited partnership under the laws of
the Commonwealth of Pennsylvania with all requisite partnership power and
authority to enter into the Leases, and to conduct its business as now conducted
and as proposed to be conducted, and to own, lease and operate its properties,
as described in the Registration Statement and Prospectus, and is qualified to
do business and is in good standing as a foreign limited partnership in each
other jurisdiction in which the failure so to qualify could reasonably be
expected to have a material adverse effect on the Lessee. The Lessee is not in
violation of any provision of its partnership agreement or other governing
documents and is not in default or in breach of, and does not know of the
occurrence of any event that with the giving of notice or the lapse of time or
both would constitute a default under or breach of, any term or condition of any
material agreement or instrument to which it is a party or by which any of its
properties is bound, except as disclosed in the Registration Statement and
Prospectus. No consent, approval, authorization or order from any court,
governmental agency or body is required in connection with the consummation by
the Lessee of the transactions contemplated herein and in the Registration
Statement and Prospectus, except such as may be required by the 1933 Act, the
1934 Act, and applicable state securities or blue sky laws.
(g) Selling Partnerships: Organization and Qualification. The
Selling Partnerships have each been duly formed and are validly existing as
limited partnerships under the laws of the states in which they operate, with
all requisite partnership power and authority to enter into the Contribution
Agreements and to conduct their respective businesses and to own, lease and
operate their respective properties, as described in the Registration Statement
and Prospectus, and are qualified to do business and in good standing as foreign
limited partnerships in each other jurisdiction in which the failure so to
qualify could reasonably be expected to have a material adverse effect on the
Company, the Partnership, a Selling Partnership or any Hotel, taken as a whole.
None of the Selling Partnerships is in violation of any provision of its
partnership agreement or other governing documents, or is in default under or in
breach of, or knows of the occurrence of any event that with the giving of
notice or the lapse of time or both would constitute a default under or breach
of, any term or condition of any material agreement or instrument to which it is
a party or by which any of its properties is bound, except as disclosed in the
Registration Statement and Prospectus. No consent, approval, authorization or
order from any court, governmental agency or body is required in connection with
the consummation by any Selling Partnership of the transactions contemplated
herein and in the Registration Statement and Prospectus, except such as may be
required by the 1933 Act, the 1934 Act, and applicable state securities or blue
sky laws.
(h) Validity of Shares. The Shares have been duly and validly
authorized by the Company, and upon issuance, will be validly issued, fully paid
and nonassessable, with no personal liability attaching to the ownership
thereof, and will conform to the description thereof contained in the
Prospectus. The preferences, rights and limitations of the Shares are set forth
in the Prospectus under the caption "Description of Shares of Beneficial
Interest". There are no preemptive rights with respect to any of the Shares. 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,
except as set forth in the Prospectus, no person holds a right to require
registration under the 1933 Act of any securities 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 Maryland law.
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(i) Company Capitalization. The Company has 100 issued and
outstanding Common Shares, which will be redeemed on the Closing Date. The
Company has no other issued and outstanding Common Shares. The Company's
authorized capitalization is as set forth in the Prospectus under the caption
"Description of Shares of Beneficial Interest". 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
the Company or any security convertible into or exchangeable for shares of the
Company.
(j) Validity of Units. The Units to be issued to the Company and the
Selling Entities in connection with the Formation Transactions (i) have been
duly and validly authorized by the Partnership, and upon issuance, will be
validly issued, and (ii) have been and will be issued, offered and sold at or
prior to each Closing Date in compliance with all applicable laws (including,
without limitation, federal and state securities laws). The portion of the
Formation Transactions between the Company, the Partnership and the Selling
Entities will be effected in compliance with the partnership agreements of the
Selling Partnerships and all applicable laws (including, without limitation,
federal and state securities laws and laws regarding partnership fiduciary
obligations).
(k) Full Power: Company. The Company has full legal right, power,
and authority to enter into this Agreement, to issue and deliver the Shares as
provided herein and to consummate the transactions contemplated herein.
(l) Full Power: Partnership. The Partnership has full legal right,
power, and authority to enter into this Agreement and to consummate the
transactions contemplated herein.
(m) Full Power: Operative Documents. Each of the parties to the
Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement"), the Leases and the Contribution Agreements has full legal right,
power, and authority to enter into each such agreement and to consummate the
transactions contemplated therein. (This Agreement, the Partnership Agreement,
the Leases and the Contribution Agreements are sometimes hereinafter referred to
as the "Operative Documents.")
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(n) Disclosed Agreements. All agreements between or among the
Company, the Partnership, the Selling Entities and the Lessee, respectively, and
third parties listed as exhibits to the Registration Statement, are legal,
valid, and binding obligations of the Company, the Partnership, the Selling
Entities and the Lessee, respectively, enforceable in accordance with their
respective terms, except to the extent enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, liquidation, reorganization, or similar laws
affecting creditors' rights generally, regardless of whether such enforceability
is considered in equity or at law, (ii) general equity principles and (iii)
limitations imposed by federal or state securities laws or the public policy
underlying such laws regarding the enforceability of indemnification or
contribution provisions.
(o) Consents. 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, the execution, delivery and performance of this
Agreement or any of the other Operative Documents and the consummation by the
parties thereto of the transactions contemplated hereby or thereby, has been
made or obtained and is in full force and effect.
(p) Litigation. There is not pending or, to the knowledge of the
Company or the Partnership, threatened or contemplated, any action, suit,
proceeding, inquiry, or investigation before or by any court or any federal,
state, or local governmental authority or agency to which the Company, the
Partnership, any Selling Entity or the Lessee or any of their respective
officers, directors or partners are or may be a party, or to which any of the
properties or rights of any such entity or person may be subject, that is not
described in the Registration Statement and Prospectus and (i) that could
reasonably be expected to result in any material adverse change in the condition
(financial or otherwise) or business of the Company, the Partnership, the Lessee
or any Selling Entity, taken as a whole; or (ii) that could reasonably be
expected to materially adversely affect any of the material properties of any
such entity; or (iii) that could reasonably be expected to adversely affect the
consummation of the transactions contemplated by this Agreement, any of the
other Operative Documents, or any of the Formation Transactions, nor, to the
knowledge of the Company or the Partnership, is there any meritorious basis
therefor.
(q) Financial Statements. The financial statements of the Combined
Selling Entities-Initial Hotels, together with related schedules and notes
included in the Registration Statement and the Prospectus, present fairly the
financial position of the Combined Selling Entities-Initial Hotels as of the
dates indicated and the results of operations and cash flows for the Combined
Selling Entities-Initial Hotels for the periods specified. Such financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis during the periods involved. The
financial statement schedules included in the Registration Statement and the
amounts in the Prospectus under the captions "Prospectus Summary-Summary
Financial Data" and "Selected Financial Information" fairly
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present the information shown therein and have been compiled on a basis
consistent with the financial statements included in the Registration Statement
and the Prospectus. No other financial statements or schedules are required by
Form S-11 or otherwise to be included in the Registration Statement, the
Prospectus or any Preliminary Prospectus. The unaudited pro forma combined
financial information (including the related notes) included in the Prospectus
or any Preliminary Prospectus complies as to form in all material respects to
the applicable accounting requirements of the 1933 Act and the Rules and
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 Combined Selling Entities-Initial Hotels the financial position, results of
operations and other information purported to be shown therein at the respective
dates and for the respective periods specified.
(r) Independent Accountants. Xxxxx Xxxxxxxx, P.C., the accountants
that have expressed an opinion on the financial statements that are included in
the Registration Statement and Prospectus are, and were during the period
covered by their Reports included in the Registration Statements and Prospectus,
with respect to the Company, independent public accountants as required by the
1933 Act and the Rules and Regulations.
(s) Disclosed Liabilities. None of the Company, the Partnership, the
Lessee or any Selling Entity has sustained, since December 31, 1997, 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 shares or partnership interests or membership interests, as applicable,
long-term debt, obligations under capital leases, or short-term borrowings of
the Company, the Partnership, the Lessee or any Selling Entity, taken as a
whole, (ii) any material adverse change, or any development that could
reasonably be seen as 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, the Lessee or
any Selling Entity, taken as a whole, (iii) any liability or obligation, direct
or contingent, incurred or undertaken by the Company, the Partnership, the
Lessee or any Selling Entity that is material to the business or condition
(financial or other) of such entities, 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
shares of the Company, or the partnership interests of the Partnership, the
Lessee or any Selling Entity, respectively, or (v) any transaction that is
material to the Company, the Partnership, the Lessee or any Selling Entity,
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taken as a whole, except transactions in the ordinary course of business or as
otherwise disclosed in the Registration Statement and the Prospectus.
(t) Hotels. The Selling Partnerships that currently own the Hotels
have, and on the Closing Date the Partnership will have, good and marketable
title in fee simple to all real property owned by them, including the Hotels,
free and clear of all liens, encumbrances, claims, security interests,
restrictions, and defects, except such as are described in the Prospectus and
the policies of title insurance previously provided to you. The Company does not
own or lease any real property. No person other than the Company has an option
or right of first refusal to purchase all or part of any Hotel or any interest
therein. Each of the 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 Hotels), except if and 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 Partnership, the Company or any Selling
Entity, taken as a whole. 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 effect the size of, use of,
improvements on, construction on, or access to any of the Hotels, 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 Partnership, the Company or any Selling
Entity, taken as a whole.
(u) Required Licenses and Permits. Except as disclosed in the
Prospectus, the Company, the Partnership or the Lessee owns, possesses, has
obtained or has commitments to obtain, and has made available for your review,
all material permits, licenses, franchises (including, with respect to the
Lessee, the franchises relating to the Hotels), certificates, consents, orders,
approvals, and other authorizations of governmental or regulatory authorities as
are necessary to own or lease, as the case may be, and to operate their
respective properties and to carry on their respective businesses as presently
conducted, or as contemplated in the Prospectus to be conducted (the "Permits"),
and none of the Company, the Partnership or the Lessee has received any notice
of proceedings relating to revocation or modification of any such Permits.
(v) Trademarks, etc. Each of the Company, the Partnership and the
Lessee owns or possesses adequate licenses 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 each of
the Company, the Partnership and the Lessee to conduct their respective
businesses now, and as proposed to be, conducted or operated as described in the
Prospectus, and none of the Company, the Partnership or the Lessee has received
notice of infringement or of conflict with (or knows of such infringement of or
conflict with) asserted
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rights of others with respect to any intangible that could materially and
adversely affect the business, prospects, properties, assets, results of
operation, or condition (financial or otherwise) of the Company, the Partnership
or the Lessee, taken as a whole.
(w) Internal Accounting Measures. To the knowledge of the Company
and the Partnership, the Company's, the Partnership's, the Lessee's and each
Selling Partnership's systems of internal accounting controls taken as a whole
are sufficient to meet the broad objectives of internal accounting control
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, the Lessee's or any Selling Partnership's financial
statements; and, to the knowledge of the Company and the Partnership, none of
the Company, the Partnership, the Lessee or any Selling Partnership, or any
employee or agent thereof, has made any payment of funds of the Company, the
Partnership, the Lessee or any Selling Partnership, as the case may be, or
received or retained any funds and no funds of the Company, the Partnership, the
Lessee or any Selling Partnership, 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.
(x) Taxes. Each of the Company, the Partnership (to the extent not
consolidated with the Company), the Lessee and the Selling Partnerships has
timely filed all required federal and state tax returns, has paid all taxes that
have become due and have no tax deficiency asserted against any such entity, nor
does any such entity know of any tax deficiency that is likely to be asserted
against any such entity that if determined adversely to any such entity, would,
either individually or in the aggregate, have a material adverse effect on the
business, prospects, properties, assets, results of operations, or condition
(financial or otherwise) of any such entity or any Hotel, respectively. All tax
liabilities are adequately provided for on the respective books of such
entities.
(y) Compliance with Instruments. The execution, delivery and
performance of this Agreement and the Operative Documents, the compliance with
the terms and provisions hereof and the consummation of the transactions
contemplated herein, therein and in the Registration Statement and Prospectus by
the Company, the Partnership, the Lessee or the Selling Entities do not and will
not violate or constitute a breach of, or default under (i) the articles of
incorporation, charter, bylaws, declaration of trust, certificate of limited
partnership, partnership agreement, articles of organization or operating
agreement, as the case may be, of the Company, the Partnership, the Lessee or
any Selling Entity; (ii) any of the terms, provisions, or conditions of any
material instrument, agreement, or indenture to which the Company, the
Partnership, the Lessee or any Selling Entity is a party or by which they are
bound or by which their respective businesses, assets, investments, properties,
or any Hotel may be affected; or (iii) any order, statute, rule, or regulation
applicable to the Company, the Partnership, the Lessee or any Selling Entity, or
any of their respective businesses, investments, assets, properties, or Hotel,
of any court or any federal, state or local governmental authority or agency
having jurisdiction over the Company, the Partnership, the Lessee or any Selling
Entity or any of their respective businesses, investments, properties, assets,
or Hotels; and do not and will not result in the creation or imposition of any
lien, charge, claim, or encumbrance upon any property or asset of any of the
foregoing.
(z) Insurance. The Company, the Partnership and the Lessee maintain
insurance (issued by insurers of recognized financial responsibility) of the
types and in the amounts generally deemed adequate for their respective
businesses and, to the knowledge of the Company and the Partnership, consistent
with insurance coverage maintained by similar companies and similar businesses,
including, but not limited to, insurance covering real and personal property
owned or leased by the Company, the Partnership and the Lessee against theft,
damage, destruction, acts of vandalism, and all other risks customarily insured
against, all of which insurance is in full force and effect.
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(aa) Work Force. To the knowledge of the Company and the
Partnership, no general labor problem exists or is imminent with respect to the
employees of the Lessee.
(bb) Share Restriction. The Company has obtained the agreement of
______________________________________ that, for a period of ninety (90) days
from the date hereof, they 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 Common Shares of the Company or securities
convertible into shares held by such persons (including, without limitation,
Common Shares deemed to be beneficially owned by such person in accordance with
the Rules and Regulations promulgated under the 1934 Act), other than in
connection with a bona fide pledge for security purposes or a transfer for
estate planning purposes.
(cc) Securities Matters. Each of the Company, the Partnership and
their officers, trustees, partners or affiliates have not taken and will not
take, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in or constitute the stabilization or
manipulation of any security of the Company or to facilitate the sale or resale
of the Shares.
(dd) Registration. The Common Shares are registered pursuant to
Section 12(g) of the 1934 Act and are listed on the American Stock Exchange.
(ee) Environmental Status. Except as otherwise disclosed in the
Prospectus, none of the Company, the Partnership, the Lessee or any Selling
Partnership 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,
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regulated, controlled, or potentially subject to any remediation requirement
under any environmental law (collectively, "Hazardous Materials"), on, in,
under, or affecting any real property currently leased, owned or by any means
controlled by the Company, the Partnership or any Selling Partnership, including
the Hotels (the "Real Property") except as in material compliance with
applicable laws; to the knowledge of the Company, the Partnership or any Selling
Partnership, the Real Property and the Company's, the Partnership's, the
Lessee's and each Selling Partnership's operations with respect to the Real
Property are in compliance in all material respects 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 each Selling Partnership 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 any Selling Partnership has received any written or oral notice from
any governmental entity or any other person and there is no pending or, to the
knowledge of the Company, the Partnership, the Lessee or any Selling
Partnership, threatened claim, litigation, or any administrative agency
proceeding that: alleges a violation of any Environmental Laws by the Company,
the Partnership, the Lessee or any Selling Partnership; alleges that the
Company, the Partnership, the Lessee or any Selling Partnership is a liable
party or a potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss.9601, et seq., or any
state superfund law; has resulted in or could reasonably be expected to 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 Partnership
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.
(ff) Real Estate Investment Trust. Upon completion of the Formation
Transactions and the sale of the Shares hereunder, the Company will have been
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 proposed method of operation will enable it to meet
the requirements for qualification and taxation as a real estate investment
trust under the Code. Immediately after Closing, the Partnership will be treated
as a partnership for federal income tax purposes and not as a corporation or an
association taxable as a corporation.
(gg) Environmental Reports. Dawood Engineering, Inc., which prepared
Phase I environmental assessment reports with respect to the Hotels, was not
employed for such purpose on a contingent basis, and does not have any
substantial interest in the Company, the Partnership, any Selling Entity or the
Lessee.
(hh) Changes, etc. Since the respective dates as of which
information is given in the Prospectus except as may otherwise be stated in or
contemplated by the Prospectus: (i) there has not been any material adverse
change in the condition (financial or otherwise) of the Company, the
Partnership, any Selling Entity or the Lessee, or in the personnel, earnings,
affairs, properties, investments, assets or business of the Company, the
Partnership or the Lessee, whether or not arising in the ordinary course of
business; (ii) there has not been any transaction entered into by the Company,
the Partnership, any Selling Entity or the Lessee that is material to the
Company, the Partnership, any Selling Entity or the Lessee, other than in the
ordinary course of business; (iii) there has not been any increase in
indebtedness or borrowings of the Company, the Partnership, any Selling Entity
or the Lessee; and (iv) the Company has not issued or sold any Common Shares or
any other equity securities or any right or option to acquire any such Common
Shares or equity securities except for the sale of Shares pursuant to this
Agreement.
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(ii) Investment Company Act. None of the Company, the Partnership or
the Lessee will become as a result of the consummation of the Formation
Transactions an "investment company" or an entity that "controls" or is
"controlled by" an "investment company," as such terms are defined under the
Investment Company Act of 1940, as amended (the "1940 Act").
(jj) Receipt of Commissions and Fees. Except as stated in or
contemplated by the Prospectus, neither the Company nor any affiliate of the
Company has received or is entitled to receive, directly or indirectly, any
compensation or other benefit, including, but not limited to, any finder's fee,
acquisition fee, selection fee, nonrecurring management fee or other fee or
commission, relating to the investments of the Company.
(kk) Payment of Commissions and Fees. Except as stated in or
contemplated by the Prospectus, neither the Company nor any affiliate of the
Company has paid or awarded, nor will any such person pay or award, directly or
indirectly, any commission or other compensation to any person engaged to render
investment advice to a potential purchaser of Shares as an inducement to advise
the purchase of Shares.
Any certificates of any officer of the Company on behalf of the Company and/or
the Partnership and delivered to you or your counsel, shall be deemed a
representation and warranty by such entity to you as to the matters covered
thereby.
3. Sales of Shares.
(a) Initial Shares. The Company hereby agrees to sell to you, and on
the basis of the representations and warranties herein contained but subject to
the terms and conditions herein set forth, you agree to purchase from the
Company, at a price of $5.52 per Share, the Initial Shares. Subject to your
commitment to purchase the Initial Shares, nothing in this Agreement shall
prevent you from entering into an agency agreement, underwriting agreement, or
other similar agreement governing the offer and sale of securities with any
other issuer of securities, and nothing contained herein shall be construed in
any way as precluding or restricting your right to sell or offer for sale
securities issued by any other person, including securities similar to, or
competing with, the Shares.
(b) Option Shares. The Company hereby grants an option to you to
purchase the Option Shares at the price of $5.52 per share. The option granted
hereby may be exercised in whole or in part at any time upon written notice from
you to the Company, given within thirty (30) days after the effective date of
the Registration Statement. Such notice will set forth the number of Option
Shares as to which you are exercising the option, the names and denominations in
which the Option Shares are to be registered and the time and date at which such
Option Shares are to be delivered. The time and date at which certificates for
Option Shares are to be delivered shall be determined by you but shall not be
earlier than two (2) nor later than ten (10) full business days after the
exercise of the option, nor in any event prior to the Initial Closing Date (as
defined in Section 3.(d) below) (the "Option Closing Date"). The option with
respect to the Option Shares granted hereunder may be exercised only to cover
over-allotments in the sale of the Shares by you. You may cancel such option at
any time prior to its expiration by giving written notice of such cancellation
to the Company. If the option is exercised as to all or any portion of the
Option Shares, the Option Shares as to which the option is exercised shall be
purchased by you.
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(c) Obligation to Purchase Shares. Your obligation to purchase any
of the Shares is subject to receipt by you of satisfactory evidence that the
Registration Statement is effective, is subject to the Shares being qualified
for offering under applicable laws in the states as may be reasonably designated
by you, is subject to the absence of any prohibitory action by any governmental
body, agency, or official, and is subject to the terms and conditions contained
in this Agreement and in the Registration Statement.
(d) Closing Date. On the date of the closing of the purchase of the
Initial Shares (the "Initial Closing Date" and together with the "Option Closing
Date", each a "Closing Date"), and at such time and place as determined by you
(which determination shall be subject to the satisfaction on such date of the
conditions contained herein), you shall pay to the Company, by wire transfer of
immediately available funds on the Initial Closing Date, the purchase price for
the Initial Shares. To the extent your option to purchase the Option Shares is
exercised as provided in Section 3.(b), you shall pay to the Company on the
Option Closing Date, by wire transfer of immediately available funds, the
purchase price for the Option Shares.
(e) Finder's Fees. Except as set forth in the Registration Statement
or Prospectus, neither you nor the Company, directly or indirectly, shall pay or
award any finder's fee, commission, or other compensation to any person engaged
by a potential purchaser for investment advice as an inducement to such advisor
to advise the purchase of Shares or for any other purpose.
(f) Delivery of Share Certificates. Delivery of certificates in
definitive form representing the Initial Shares shall be made at the offices of
Citicorp Securities Services, Inc. or at such other place as shall be agreed
upon by the Company and you, on September ____, 1998 (the "Initial Date of
Delivery"). The certificates representing the Initial Shares shall be in such
denominations and registered in such names as you may request in writing at
least three full business days before the Initial Date of Delivery. The
certificates representing the Initial Shares will be made available for
examination and packaging at the offices of Citicorp Securities Services, Inc.
or at such other place as shall be agreed upon by the Company and you, not later
than at least two full business days prior to the Initial Date of Delivery. The
certificates representing the Option Shares shall be delivered in the same
manner as with respect to the Initial Shares, and the date of the delivery for
the certificates shall be two (2) full business days prior to the Option Closing
Date.
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(g) Warrants. On the Initial Closing Date, the Company will issue to
you warrants for the purchase of 183,333 Common Shares, substantially in the
form of Exhibit A attached to this Agreement.
4. Covenants.
(a) Covenants of the Company and the Partnership. The Company and
the Partnership covenant with you as follows:
(i) Notices. Through and including the Closing Date, the
Company and the Partnership immediately will notify you, and confirm such notice
in writing, (A) of any fact that would make inaccurate any representation or
warranty by the Company and the Partnership, and (B) of any change in facts on
which your obligation to perform under this Agreement is dependent.
(ii) Effectiveness of Registration Statement. The Company will use
its best efforts to cause the Registration Statement to become effective (if not
yet effective at the date and time this Agreement is executed and delivered by
the parties hereto). If the Company elects to rely upon Rule 430A of the Rules
and Regulations or the filing of the Prospectus is otherwise required under Rule
424(b) of the Rules and Regulations, and subject to the provisions of Section
4.(a)(iii) of this Agreement, 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 prescribed. The Company
will notify you immediately, and confirm the notice in writing, (i) when the
Registration Statement, or any post-effective amendment to the Registration
Statement, shall have become effective, or any supplement to the Prospectus, or
any amended Prospectus shall have been filed, (ii) of the receipt of any
comments from the Commission, (iii) of any request by the Commission to amend
the Registration Statement or amend or supplement the Prospectus or for
additional information, and (iv) 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 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 all reasonable efforts 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.
(iii) Amendments to Registration Statement and Prospectus. The
Company will not at any time file or make any amendment to the Registration
Statement, or any amendment or supplement (i) to the Prospectus, if the Company
has not elected to rely upon Rule 430A, or (ii) if the Company has elected to
rely upon Rule 430A, to either the Prospectus included in the Registration
Statement at the time it becomes effective or to the Prospectus filed in
accordance with Rule 424(b), in either case 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 your counsel shall reasonably object to such
amendment or supplement.
15
(iv) Delivery of Registration Statement. The Company has
delivered to you or will deliver to you, without expense to you, at such
locations as you shall request, as soon as the Registration Statement or any
amended Registration Statement is available, such number of signed copies of the
Registration Statement as originally filed and of amended Registration
Statements, if any, copies of all exhibits and documents filed therewith, and
signed copies of all consents and certificates of experts, as you may reasonably
request.
(v) Delivery of Prospectus. The Company will deliver to you at its
expense, from time to time, as many copies of each Preliminary Prospectus as you
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 you
at its expense, as soon as the Registration Statement shall have become
effective and thereafter 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 you may reasonably
request. The Company will comply to the best of its ability with the 1933 Act
and the Rules and 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 equired 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 the Shares and if at such time any events shall have occurred as
result of which the Prospectus as then amended or supplemented would include an
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 under
which they were made when such Prospectus is delivered not misleading or, if for
any reason it shall be necessary during the same period to amend or supplement
the Prospectus in order to comply with the 1933 Act, the Company will notify you
and upon your request prepare and furnish without charge to you 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 that will
correct such statement or omission or effect such compliance, and in case you
are required to deliver a prospectus in connection with sales of any of the
Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at your expense, the Company will prepare and
deliver to you as many copies as you may request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the 1933 Act.
(vi) Blue Sky Qualification. The Company, in good faith and in
cooperation with you, will use its best efforts to qualify the Shares for
offering and sale under the applicable "blue sky" or securities laws and real
estate syndication laws of such jurisdictions as you from time to time may
reasonably designate and to maintain such qualifications in effect for as long
as may be necessary to complete the sale and distribution of the Shares;
provided, however, that the Company shall not be obligated 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. 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.
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(vii) Financial and Other Information.
A. Earnings Statement. The Company will make generally
available to its security holders, in the manner specified in Rule 158(b) under
the 1933 Act and deliver to you as soon as practicable and in any event not
later than 60 days after the end of its fiscal quarter in which the first
anniversary date of the effective date of the Registration Statement occurs, an
earnings statement meeting the requirements of Rule 158(a) under the 1933 Act
covering a period of at least twelve consecutive months beginning after the
effective date of the Registration Statement.
B. Annual and Quarterly Reports. The Company will
furnish to its securityholders, 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. For a period of five
years after the Closing Date, the Company will furnish to you:
(i) concurrently with the date on which the same shall be sent to the
securityholders of the Company, if applicable, and in any event not later than
sixty (60) days after the end of each fiscal quarter of the Company, statements
of operations of the Company for each of the first three quarters in the form
furnished to the Company's securityholders; (ii) concurrently with the date on
which the same shall be sent to the securityholders of the Company, if
applicable, and in any event not later than one hundred twenty (120) days after
the end of each fiscal year of the Company, a balance sheet of the Company as of
the end of such fiscal year, together with statements of operations, of cash
flows, and of securityholders' equity of the Company for such fiscal year,
accompanied by a copy of the certificate or report thereon of independent public
accountants; (iii) as soon as they are available, copies of all reports
(financial or otherwise) mailed to securityholders; and (iv) as soon as they are
available, copies of all reports and financial statements furnished to or filed
with the Commission, any securities exchange, or the National Association of
Securities Dealers, Inc. ("NASD"). During such five year period, the foregoing
financial statements shall be made 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.
C. Press Releases. For a period of five years after the
Closing Date, the Company will furnish to you, concurrently with the release
thereof, two copies of every press release to be issued and every material news
item and article in respect of the Company or its affairs to be released by the
Company; and promptly, such additional documents and information with respect to
the Company and its affairs as you from time to time may reasonably request.
17
D. Other Information. For a period of five years after
the Closing Date, the Company will furnish to you any additional information of
a public nature concerning the Company or its business that you may reasonably
request in writing.
(viii) Application of Net Proceeds. The Company and the
Partnership will apply the net proceeds received from the sale of the Shares in
all material respects as set forth in the Prospectus under the caption
"Use of Proceeds."
(ix) Solicitation of Purchasers.
A. Except as hereinafter specified, the Company will not, and will
not permit the Partnership or any of its other affiliates or agents to, (1)
engage in any offering or placement of any debt or equity security or long-term
debt (other than the refinancing of the Assumed Indebtedness as described in the
Prospectus) for a period of three (3) years from the effective date of the
Registration Statement for which you are not acting as the underwriter or sales
or placement agent, unless you shall have been given a right of first refusal to
act as the underwriter or sales agent with respect to such offering, and shall
have failed to agree to act as the underwriter or sales agent for the proposed
offering within thirty (30) days of a notice from the Company of the proposed
terms of the offering, (2) solicit the purchasers of Shares in connection with
any other offering of any security for a period of three (3) years from the
effective date of the Registration Statement, unless you shall have been given a
right of first refusal to conduct such solicitation or you are notified and
compensated therefor in an amount equal to 8.0% of the purchase price of any
securities purchased by any such purchaser, or (3) furnish the names of such
purchasers or of other potential investors obtained through you to any person
other than as may be required in connection with the normal and usual conduct by
the Company of its business or required by court order or law.
B. The Company agrees and understands that a violation
of the provisions of Section 4(a)(ix)(A) of this Agreement will cause you
irreparable harm and injury and that any money damages you receive will not
compensate you for any breach thereof. Accordingly, the Company agrees that, in
addition to monetary damages, you will be entitled to all such equitable relief
including, without limitation, injunctive relief, as a court of equity or proper
jurisdiction shall deem appropriate in the circumstances. Such relief shall not
be exclusive of any rights you may have at law or in equity. All of the rights
and remedies you have hereunder shall be cumulative and not alternative. The
provisions of this Section shall not limit your remedies upon the breach by the
Company of any other Section of this Agreement.
(x) Cooperation with Your Due Diligence. At all times prior to
each Closing Date, the Company will cooperate with you in such investigation as
you may make or cause to be made of all the business and operations (including
all Hotels) of the Company, the Partnership and the Lessee in connection with
the sale of the Shares, and will make available to you in connection therewith
such information in its possession as you may reasonably request.
18
(xi) Transfer Agent. The Company will maintain a transfer
agent and, if necessary under applicable jurisdictions, a registrar (which may
be the same entity as the transfer agent) for its Common Shares.
(xii) American Stock Exchange. The Company will use its
reasonable best efforts to maintain the listing of its Common Shares on the
American Stock Exchange.
(xiii)Compliance with Investment Company Act. The Company and
the Partnership are familiar with the Investment Company Act of 1940, as
amended, as the rules and regulations thereunder, and have in the past conducted
their affairs, and will in the future conduct their affairs, in such a manner so
as to ensure that the Company and the Partnership will not be an "investment
company" or an entity "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(xiv) Actions of Company, Officers, Directors, and Affiliates.
The Company will not and will use its reasonable best efforts to cause its
officers, directors, and affiliates not to (i) take, directly or indirectly,
prior to termination of the offering contemplated by this Agreement, any action
designed to stabilize or manipulate the price of any security of the Company, or
that may cause or result in, or that might in the future reasonably be expected
to cause or result in, the stabilization or manipulation of the price of any
security of the Company, to facilitate the sale or resale of any of the Shares,
(ii) other than under this Agreement, 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.
(xv) Additional Issuances. For a period of ninety (90) days
from the Initial Closing Date, 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 Common Shares or securities convertible
into Common Shares, other than pursuant to this agreement and other than
partnership interests or other securities convertible into Common Shares issued
in connection with the acquisition of a hotel property.
(xvi) Company Offered Shares. The Company has not provided and
will not provide to the purchasers of Company Offered Shares any written or oral
information regarding the business of the Company, including any representations
regarding the Company's financial condition or financial prospects, other than
such information as is contained in the Prospectus or such information as may
have come to their attention in the ordinary course of their service as
employees of one or more of the Selling Partnerships or the Lessee.
(xvii) Termination of Priority Rights. In the event that the
Company gives notice to the holders of the Company's Priority Class A Common
Shares, as contemplated by Article VI, Section 2(a) of the Company's Declaration
of Trust, that their "Priority Rights" (as defined in the Company's Declaration
of Trust) will terminate in fifteen (15) trading days, the Company will ensure
that such notice is delivered by overnight courier, with delivery confirmed, (A)
to you and your counsel, at the addresses specified in accordance with Section
10 of this Agreement, and (B) to each of the two largest record holders of the
Priority Class A Common Shares.
(b) Your Covenants. You covenant with the Company that you have not
provided and will not provide to the purchasers of Shares any written or oral
information regarding the business of the Company, including any representations
regarding the Company's financial condition or financial prospects, other than
such information as is contained in the Prospectus.
19
5. Payment of Expenses. Whether or not the transactions contemplated
by this Agreement are consummated or this Agreement is terminated, and subject
to the provisions of Section 9 of this Agreement, the Company hereby agrees that
it will pay all fees and expenses incident to the performance of its obligations
under this Agreement (excluding fees and expenses of counsel for you, 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 you, (b) the preparation, printing, and
distribution of this Agreement, any Selected Dealer Agreement, the certificates
representing the Shares, the Blue Sky Memoranda, and any instruments relating to
any of the foregoing, (c) the issuance and delivery of the Shares, including any
transfer taxes payable thereon, (d) the fees and disbursements of the Company's
counsel and accountants, (e) the qualification of the Shares under applicable
securities and real estate syndication laws in accordance with Section 4.(a) of
this Agreement and any filing fee paid in connection with the review of the
offering by the NASD, including filing fees and fees and disbursements made in
connection therewith and in connection with the Blue Sky Memoranda supplied to
you by counsel for the Company, (f) all costs, fees, and expenses in connection
with the application for listing the Shares on the American Stock Exchange, (g)
the transfer agent's and registrar's fees and all miscellaneous expenses
referred to in Item 30 of the Registration Statement, (h) 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 you to be necessary or desirable to effect the sale of
the Shares to the public, (i) 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.
6. Conditions of Your Obligations. Your obligations hereunder shall be
subject to, in your discretion, the following terms and conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement shall have become effective not later than 5:30 p.m. on the date of
this Agreement or, at such later time or on such later date as you may agree to
in writing; and as of each Closing Date 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
your counsel.
20
(b) Closing Date Matters. On each Closing Date, (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 Rules and Regulations and in all material respects shall conform to the
requirements of the 1933 Act and the Rules and Regulations; the Company shall
have complied in all material respects with Rule 430A (if it shall have elected
to rely thereon) 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 Partnership, the Lessee or any Selling Partnership, taken as
a whole, 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
Company's knowledge, threatened against the Company 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 knowledge of the Company,
threatened against the Company or the Partnership before or by any federal,
state or other commission, board or administrative agency wherein an unfavorable
decision, ruling or finding could reasonably be expected to materially adversely
affect the business, prospects, assets, results of operations or condition
(financial or otherwise) of the Company or the Partnership, taken as a whole,
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 on or prior to each Closing Date, and (v) the
representations and warranties of the Company and the Partnership set forth in
Section 2 of this Agreement shall be accurate as though expressly made at and as
of each Closing Date. On each Closing Date, you shall have received certificates
executed by the President of the Company and the general partner of the
Partnership, dated as of each Closing Date, 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 their knowledge, threatened under the 1933 Act; and (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 contained 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.
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(c) Opinions of Hunton & Xxxxxxxx. At each Closing Date, you shall
receive the opinions of Hunton & Xxxxxxxx, counsel for the Company and the
Partnership, dated as of that Closing Date, in form and substance satisfactory
to you and your counsel, to the effect that:
(i) No consent, approval, authorization or order from any
court, governmental agency or body is required in connection with the execution
and delivery by the Company of this Agreement, the other Operative Documents to
which it is a party, or the consummation by the Company of the transactions
contemplated hereby or thereby, except such as has been obtained or as may be
required by applicable state securities, blue sky or real estate syndication
laws or required by the NASD, as to which such counsel need express no opinion.
Such counsel also need not express an opinion on local laws relating to the
leasing or operation of real estate.
(ii) The Partnership has been duly formed and is validly
existing as a limited partnership under the Virginia Revised Uniform Limited
Partnership Act with the partnership power and authority to execute, deliver and
perform this Agreement and to conduct its business as described in the
Prospectus, and is qualified to do business or is registered to transact
business as a foreign limited partnership and is in good standing as a foreign
limited partnership in Pennsylvania. No consent, approval, authorization or
order from any court, governmental agency or body is required in connection with
the execution and delivery by the Partnership of this Agreement, the other
Operative Documents to which it is a party, or the consummation by the
Partnership of the transactions contemplated hereby or thereby, except such as
has been obtained or as may be required by applicable state securities, blue sky
or real estate syndication laws or required by the NASD, as to which such
counsel need express no opinion. Such counsel also need not express an opinion
on local laws relating to the leasing or operation of real estate. The Company
is the sole general partner of the Partnership.
(iii) The Partnership has the partnership power and authority
to execute, deliver and perform this Agreement and the other Operative Documents
to which it is a party and to consummate the transactions contemplated herein
and therein. Each of this Agreement and the other Operative Documents to which
it is a party have been duly authorized, executed, and delivered by the
Partnership, and this Agreement and the other Operative Documents to which it is
a party constitute valid and binding agreements of the Partnership, enforceable
in accordance with their respective terms, except to the extent enforceability
may be limited by bankruptcy, insolvency, moratorium, liquidation,
reorganization, or similar laws affecting creditors' rights generally, (b)
general equity principles, regardless of whether such enforceability is
considered in equity or at law, and (c) limitations imposed by federal or state
securities laws or the public policy underlying such laws regarding the
enforceability of indemnification provisions.
(iv) The Units to be issued to the Selling Entities in
connection with the Formation Transactions have been duly and validly authorized
by the Partnership. The offer and sale of the Units by the Partnership will
constitute an exempted transaction pursuant to Section 4(2) of the 1933 Act and
will not require registration of the Units under Section 5 of the 1933 Act.
22
(v) The execution, delivery, and performance of this Agreement
and the other Operative Documents to which the Company and/or the Partnership
are a party, the compliance with the terms and provisions hereof and thereof and
the consummation of the transactions contemplated herein and therein and in the
Registration Statement and Prospectus, by the Company and/or the Partnership do
not and will not:
A. violate or constitute a breach of or default under
the certificate of limited partnership or partnership agreement of the
Partnership;
B. result in a breach of, or constitute a default under,
any contract that was filed, or the form of which was filed, as an exhibit to
the Registration Statement;
C. to such counsel's knowledge, violate any applicable
statute, rule or regulation, order of any court or any federal, state, or local
governmental authority or agency binding on the Company or the Partnership, or
any of their respective businesses, investments, properties, assets or Hotels;
D. to such counsel's knowledge, result in the creation
or imposition of any lien, charge, claim, or encumbrance upon any property or
asset of any of the foregoing.
(vi) The Common Shares, including the Shares, have been
approved for listing on the American Stock Exchange.
(vii) The Company is organized in conformity with the
requirements for qualification as real estate investment trust under the Code,
and the Company's method of operation (as presently conducted and proposed to be
conducted immediately after Closing) enables it to meet the requirements for
qualification and taxation as a real estate investment trust under the Code. The
descriptions of the law and the legal conclusions contained in the Prospectus
under the caption "Federal Income Tax Considerations" are correct in all
material respects, and the discussion thereunder fairly summarizes the federal
tax considerations that are material to a holder of the Common Shares. The
Partnership will be treated as a partnership for federal income purposes and not
as a corporation or association taxable as a corporation.
(viii)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. Other than financial statements and other financial and operating data
and schedules contained therein, as to which counsel need express no opinion,
the Registration Statement, when it became effective, the Prospectus, as of its
date and as of the date hereof, comply as to form in all material respects with
the requirements of the 1933 Act and the Rules and Regulations.
23
(ix) Nothing has come to such counsel's attention that leads it to
believe that the Registration Statement, or any further amendment thereto made
prior to the Closing Date, on its effective date, contained or contains any
untrue statement of a material fact or omitted or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus or any amendment or supplement thereto
made prior to the Closing Date, as of its date and as of the Closing Date,
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (provided that such counsel need express no belief regarding the
financial statements and related schedules and other financial data contained in
the Registration Statement, any amendment thereto, or the Prospectus, or any
amendment or supplement thereto).
(x) Neither the Company nor the Partnership is, or solely as a
result of the consummation of the Formation Transactions will become, an
"investment company," or an entity that controls or is "controlled by" an
"investment company," as such terms are defined under the 1940 Act.
(xi) The information in the Prospectus under the captions
"Shares Available for Future Sale" and "Federal Income Tax Considerations," to
the extent that it constitutes matters of law or legal conclusions, has been
reviewed by such counsel, is correct, and presents fairly the information
required to be disclosed therein under the 1933 Act and the Rules and
Regulations.
(xii) To such counsel's knowledge, except as described in the
Prospectus, there is not pending or threatened, any action, suit, proceeding,
inquiry or investigation before or by any court or any federal, state or local
governmental authority or agency to which the Company, the Partnership or any of
their respective officers, directors or partners are or may be a party, or to
which any of the properties, assets or rights of any such entity or person may
be subject, which, if determined adversely to any of the Company or the
Partnership would individually or in the aggregate (A) could reasonably be
expected to have a material adverse effect on the financial position, results of
operations, business or material assets of the Company or the Partnership, taken
as a whole, or (B) that could reasonably be expected to adversely affect the
consummation of the transactions contemplated by this Agreement.
(xiii)Each Operative Document to which the Lessee and/or any
Selling Entity is a party that is governed by Virginia law constitutes a valid
and binding agreement of the parties thereto, enforceable in accordance with its
terms, except to the extent enforceability may be limited by (a) bankruptcy,
insolvency, moratorium, liquidation, reorganization, or similar laws affecting
creditors' rights generally, (b) general equity principles, regardless of
whether such enforceability is considered in equity or at law, and (c)
limitations imposed by federal or state securities laws or the public policy
underlying such laws regarding the enforceability of indemnification provisions.
24
In rendering the opinions set forth above, Hunton & Xxxxxxxx, with
your consent as to matters of form and substance, may adopt forms of opinion
that are consistent with the Legal Opinion Accord of the ABA Section of Business
Law (1991) (the "Accord") and may rely, as to certain matters of Maryland and
Pennsylvania law, upon the opinions being rendered pursuant to Sections 6.(d)
and 6.(e) of this Agreement.
(d) Pennsylvania Legal Opinion. At each Closing Date, you shall have
received a favorable opinion of Xxx X. Xxxx, counsel for the Lessee and the
Selling Entities, dated as of that Closing Date, in form and substance
satisfactory to your counsel to the effect that:
(i) The Lessee has been duly formed and is validly existing as
a limited partnership under the laws of the Commonwealth of Pennsylvania with
the partnership power and authority to conduct its business as described in the
Prospectus. The Lessee is not in violation of any provision of its certificate
of limited partnership, partnership agreement or other governing documents. The
Lessee is not in default under or in breach of, or subject to any event that
with the giving of notice or the lapse of time or both would constitute a
default under or breach of, any term or condition of any material agreement or
instrument to which the Lessee is a party or by which any of its properties is
bound, except as disclosed in the Prospectus. No consent, approval,
authorization or order from any court, governmental agency or body is required
in connection with the execution and delivery by the Lessee of the Operative
Documents to which it is a party, or the consummation by the Lessee of the
transactions contemplated hereby or thereby, except such as may be required by
applicable state securities, blue sky or real estate syndication laws or
required by the NASD, as to which such counsel need express no opinion.
(ii) Each of the Selling Partnerships has been duly formed and
is validly existing as a limited partnership under the laws of _______________,
with the partnership power and authority to conduct its business as described in
the Prospectus. None of the Selling Partnerships is in violation of any
provision of its respective certificate of partnership, partnership agreement or
other governing documents. None of the Selling Partnerships is in default under
or in breach of, or subject to any event that with the giving of notice or the
lapse of time or both would constitute a default under or breach of, any term or
condition of any material agreement or instrument to which any Selling
Partnership is a party or by which any of their respective properties is bound,
except as disclosed in the Prospectus. No consent, approval, authorization or
order from any court, governmental agency or body is required in connection with
the execution and delivery by any of the Selling Entities of the respective
Operative Documents to which they are parties, or the consummation by any of the
Selling Entities of the transactions contemplated hereby or thereby, except such
as may be required by applicable state securities, blue sky or real estate
syndication laws or required by the NASD, as to which such counsel need express
no opinion.
(iii) The Lessee has the power and authority to execute,
deliver and perform each of the Operative Documents to which it is a party and
to consummate the transactions contemplated therein. Each such Operative
Document has been duly authorized,
25
executed, and delivered by the Lessee, and each such Operative Document
constitutes a valid and binding agreement of the Lessee, enforceable in
accordance with its terms, except to the extent enforceability may be limited by
(a) bankruptcy, insolvency, moratorium, liquidation, reorganization, or similar
laws affecting creditors' rights generally, (b) general equity principles,
regardless of whether such enforceability is considered in equity or at law, and
(c) limitations imposed by federal or state securities laws or the public policy
underlying such laws regarding the enforceability of indemnification provisions.
(iv) Each of the Selling Entities has the power and authority
to execute, deliver and perform each of the Operative Documents to which it is a
party and to consummate the transactions contemplated therein. Each such
Operative Document has been duly authorized, executed, and delivered by the
respective Selling Entities and constitutes a valid and binding agreement of the
respective Selling Entities, enforceable in accordance with its terms, except to
the extent enforceability may be limited by (a) bankruptcy, insolvency,
moratorium, liquidation, reorganization, or similar laws affecting creditors'
rights generally, (b) general equity principles, regardless of whether such
enforceability is considered in equity or at law, and (c) limitations imposed by
federal or state securities laws or the public policy underlying such laws
regarding the enforceability of indemnification provisions.
(v) The Lessee and each of the Selling Partnerships owns,
possesses or has obtained such Permits as are necessary to own or lease their
respective properties and to carry on their respective businesses in the manner
described in the Prospectus; the Lessee and the Selling Partnerships have
fulfilled and performed all of their respective obligations with respect to all
such Permits, and no event has occurred that allows, or after notice or lapse of
time or both would allow, revocation or modification thereof or would result in
any other impairment of the rights of the holder of any such Permit.
(vi) The execution, delivery, and performance of this
Agreement and the other Operative Documents to which the Lessee and the Selling
Entities are respectively parties, the compliance with the terms and provisions
hereof and thereof and the consummation of the transactions contemplated herein
and therein and in the Registration Statement and Prospectus, by the Lessee
and/or the Selling Entities do not and will not:
26
A. violate or constitute a breach of or default under or
the certificate of limited partnership, partnership agreement or other governing
documents of the Lessee or any Selling Partnership;
B. result in a breach of, or constitute a default under,
any contract that was filed, or the form of which was filed, as an exhibit to
the Registration Statement;
C. to such counsel's knowledge, violate any applicable
statute, rule or regulation, order of any court or any federal, state, or local
governmental authority or agency binding on the Lessee, the Selling Entities, or
any of their respective businesses, investments, properties, assets or Hotels;
D. to such counsel's knowledge, result in the creation
or imposition of any lien, charge, claim, or encumbrance upon any property or
asset of any of the foregoing.
(vii) To the knowledge of such counsel, neither the Lessee nor
any of the Selling Entities is in violation of, or in default with respect to,
any statute, rule, regulations, 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 have a materially adverse effect on the financial
position, results of operations, or business or each of such entities,
respectively.
(viii)To such counsel's knowledge, except as described in the
Prospectus, there is not pending, threatened or contemplated, any action, suit,
proceeding, inquiry or investigation before or by any court or any federal,
state or local governmental authority or agency to which the Lessee or any of
the Selling Entities or any of their respective officers, directors or partners
are or may be a party, or to which any of the properties, assets or rights of
any such entity or person may be subject, which, if determined adversely to any
of the Lessee or the Selling Entities, (A) could reasonably be expected to have
a material adverse effect on the financial position, results of operations,
business or material assets of any of the Lessee or the Selling Entities, or (B)
that could reasonably be expected to adversely affect the consummation of the
transactions contemplated by this Agreement or any of the other Formation
Transactions.
(ix) Each Operative Document to which the Company or the
Partnership is a party that is governed by Pennsylvania law constitutes a valid
and binding agreement of the parties thereto, enforceable in accordance with its
terms, except to the extent enforceability may be limited by (a) bankruptcy,
insolvency, moratorium, liquidation, reorganization, or similar laws affecting
creditors' rights generally, (b) general equity principles, regardless of
whether such enforceability is considered in equity or at law, and (c)
limitations imposed by federal or state securities laws or the public policy
underlying such laws regarding the enforceability of indemnification provisions.
In rendering the opinion set forth above, Xxx X. Xxxx, with your consent
as to matters of form and substance, may adopt a form of opinion that is
consistent with the Legal Opinion Accord of the ABA Section of Business Law
(1991) (the "Accord").
27
(e) Maryland Legal Opinion. At each Closing Date, you shall have
received a favorable opinion of __________________________, special Maryland
counsel to the Company, dated as of that Closing Date, in form and substance
satisfactory to your counsel to the effect that:
(i) The Company has been duly organized and is validly
existing as a real estate investment trust in good standing under the laws of
the State of Maryland, with the power and authority to execute, deliver and
perform this Agreement and to conduct its business as described in the
Prospectus, and is qualified to do business or registered to transact business
as a foreign ____________ and is in good standing as a foreign ______________ in
Pennsylvania. No consent, approval, authorization or order from any court,
governmental agency or body is required in connection with the execution and
delivery by the Company of this Agreement, the other Operative Documents to
which it is a party, or the consummation by the Company of the transactions
contemplated hereby or thereby, except such as has been obtained or as may be
required by applicable state securities, blue sky or real estate syndication
laws or required by the NASD, as to which such counsel need express no opinion.
Such counsel also need not express an opinion on local laws relating to the
leasing or operation of real estate.
(ii) The Company has the power and authority to execute,
deliver and perform this Agreement and the other Operative Documents to which it
is a party, to issue, sell and deliver the Shares as provided herein and to
consummate the transactions contemplated herein and therein. Each of this
Agreement and the other Operative Documents to which it is a party have been
duly authorized, executed, and delivered by the Company, and this Agreement and
the other Operative Documents to which it is a party constitute valid and
binding agreements of the Company, enforceable in accordance with their
respective terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, moratorium, liquidation, reorganization, or similar laws
affecting creditors' rights generally, (b) general equity principles, regardless
of whether such enforceability is considered in equity or at law, and (c)
limitations imposed by federal or state securities laws or the public policy
underlying such laws regarding the enforceability of indemnification provisions.
(iii) The Shares have been duly and validly authorized by the
Company, and, when issued and delivered against payment as provided in this
Agreement, will be validly issued, fully paid, and nonassessable. No person or
entity holds preemptive rights with respect to any of the Shares. The form of
the certificates evidencing the Shares comply with all applicable requirements
of Maryland law.
(iv) The execution, delivery, and performance of this
Agreement and the other Operative Documents to which the Company is a party, the
compliance with the terms and provisions hereof and thereof and the consummation
of the transactions contemplated herein and therein and in the Registration
Statement and Prospectus, by the Company do not and will not violate or
constitute a breach of or default under the declaration of trust, bylaws or
other governing documents of the Company.
(v) The statements set forth in the Prospectus under the
caption "Description of Shares of Beneficial Interest" and "Certain Provisions
of Maryland Law and of the Company's Declaration of Trust and Bylaws," insofar
as they purport to constitute a summary of the terms of the Common Shares and
laws related thereto, fairly summarize such terms and applicable law, and
present the information called for by the 1933 Act and the Rules and
Regulations. The Common Shares conform in all material respects as to legal
matters to the description thereof contained in the Registration Statement and
the Prospectus.
(vi) Each Operative Document to which the
_____________________ is a party that is governed by Maryland law constitutes a
valid and binding agreement of the parties thereto, enforceable in accordance
with its terms, except to the extent enforceability may be limited by (a)
bankruptcy, insolvency, moratorium, liquidation, reorganization, or similar laws
affecting creditors' rights generally, (b) general equity principles, regardless
of whether such enforceability is considered in equity or at law, and (c)
limitations imposed by federal or state securities laws or the public policy
underlying such laws regarding the enforceability of indemnification provisions.
In rendering the opinions set forth above, _________________________, with
your consent as to matters of form and substance, may adopt forms of opinion
that are consistent with the Legal Opinion Accord of the ABA Section of Business
Law (1991) (the "Accord").
(f) Opinion of Your Counsel. At each Closing Date, you shall receive
the favorable opinion of Xxxxxxx & Savage, P.C., your counsel, with respect to
such matters as you 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.
(g) Independent Public Accountants. At the time that this Agreement
is executed by the Company, you shall have received from Xxxxx Xxxxxxxx, P.C. 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 within the meanings of the 1933 Act and the Rules and Regulations, and
stating in effect that:
(i) in their opinion, the financial statements and any
supplementary financial information and schedule included in the Registration
Statement and covered by their opinion therein comply as to form and in all
material respects with the applicable accounting requirements of the 1933 Act
and the Rules and Regulations;
28
(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
internal 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, and such other inquiries and procedures as may
be specified in such letter, nothing came to their attention to cause them to
believe that:
A. the unaudited financial statements and supporting
schedule and other unaudited financial data of the Company included 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 Rules and
Regulations or are not presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited financial statements included in the Registration Statement;
B. any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the corresponding items
in the unaudited financial statements from which such data and items were
derived, and any such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding amounts 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 Rules and
Regulations or the pro forma adjustments have not been properly applied to
historical amounts in the compilation of that information;
D. at a specified date not more than five (5) days prior
to the date of such letter, there was any change in the capital shares or
long-term debt or obligations of the Company or the Combined Selling
Entities-Initial Hotels or there were any decreases in net current assets or net
assets, shareholders' equity, or other items specified by you from that set
forth in the Company's or the Combined Selling Entities-Initial Hotels' balance
sheet at December 31, 1997, except as described in such letter; and
E. for the period from December 31, 1997 to a specified
date not more than five (5) days prior to the date of delivery of such letter,
there were any decreases in room revenues, food revenues, beverage revenues, or
operating income before interest, depreciation and amortization for the Combined
Selling Entities-Initial Hotels, in each case as compared with the corresponding
period of the preceding year, except in each case for decreases that the
Prospectus discloses have occurred or may occur or that are described in such
letter; and
29
(iii) in addition to the procedures referred to in clause (ii)
above and the examination referred to in their Reports including 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 that are derived from the general accounting records of the
Company, that appear in the Registration Statement or the exhibits or schedules
thereto 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.
(h) Updated Comfort Letter. At each Closing Date, you shall have
received from Xxxxx Xxxxxxxx, P.C. a letter, in form and substance satisfactory
to you and dated as of that Closing Date, to the effect that they reaffirm the
statements made in the letter furnished pursuant to Section 6.(g) above, except
that the specified date referred to shall be a date not more than five (5) days
prior to that Closing Date.
(i) Post-Financial Developments. In the event that either of the
letters to be delivered pursuant to Sections 6.(g) and 6.(h) above sets forth
any 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 Xxxxx Xxxxxxxx, P.C., that such changes, decreases or increases as are set
forth in such letter do not reflect a material adverse change in the capital
shares, long-term debt, obligations under capital leases, total assets, net
current assets, or shareholders' equity of the Company as compared with the
amounts shown in the latest consolidated pro forma balance sheet of the Company,
or a material adverse change in the room revenues, food revenues, beverage
revenues, or operating income before interest, depreciation and amortization for
the Hotels in each case as compared with the corresponding period of the prior
year.
(j) Additional Information. On each Closing Date, your counsel shall
have been furnished with all such 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 6.(b) 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 that Closing Date 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 your
counsel. The Company and the Partnership will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall reasonably request. Any certificate signed by any officer, partner, or
other official of the Company or the Partnership and delivered to you or your
counsel shall be
30
deemed a representation and warranty by the Company and the Partnership to you
as to the statements made therein.
(k) Adverse Events. 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 on the New York Stock Exchange or American Stock
Exchange or the Nasdaq National Market, (ii) a general moratorium on commercial
banking activities in Virginia, Pennsylvania or New York declared by either
federal or state authorities, as the case may be, (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, or
(iv) such a substantial adverse change in general economic, political, financial
or international conditions affecting financial markets in the United States
having a substantial adverse impact on trading prices of securities in general,
as, in your reasonable judgment, makes it impracticable or inadvisable to
proceed with the public offering of the Shares or the delivery of the Shares on
the terms and in the manner contemplated in the Prospectus.
(l) Share Restrictions. As described in Section 2.(bb) hereof,
_______________________ shall have agreed in writing as to the matters set forth
in such section.
(m) NASD Review. The NASD, upon review of the terms of the public
offering of the Shares, shall not have objected to such offering, the terms of
the offering or your participation in the offering.
(n) AMEX Listing. The Shares are listed on the American Stock
Exchange.
(o) Formation Transactions. Each of the Formation Transactions have
occurred or shall occur simultaneously with the Closing Date.
(p) Title Insurance. On the Closing Date, the Partnership shall
receive an owner's title insurance policy or endorsement thereof through the
Closing Date, in form and substance satisfactory to you and your counsel, with
respect to each of the Hotels as contemplated by the Contribution Agreements.
(q) Company Offering. The separate offering of the Company Offered
Shares shall have been effected in compliance with all applicable laws,
including, without limitation, all federal and state securities laws.
31
If any of the conditions specified in this Section 6 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
Initial Closing Date, and such termination shall be without liability of any
party to any other party, except as provided in Sections 5 and 9.
Notwithstanding any such termination, the provisions of Section 7 shall remain
in effect.
7. Indemnification and Contribution.
(a) Indemnification by the Company and Partnership. The Company and
the Partnership, jointly and severally, will indemnify and hold you harmless
against any losses, claims, damages, or liabilities, joint or several, to which
you may become subject under the 1933 Act, the 1934 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, or arise out of or are based upon the
Formation Transactions, and will reimburse you for any legal or other expenses
reasonably incurred by you 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 you expressly
for use therein; provided further, that the indemnity agreement contained in
Section 7.(a) with respect to any Preliminary Prospectus shall not inure to your
benefit if you 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 such delivery is required by the 1933 Act or the Rules and
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 its other obligations under
this Section 7.(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 7.(a), they will
reimburse you 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 you for such expenses and the
possibility that such payments might
32
later be held to have been improper by a court of competent jurisdiction. Any
such interim reimbursement payments that are not made to you within thirty (30)
days of a request for reimbursement shall bear interest at the prime rate (or
reference rate or other commercial 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. For purposes of this Section 7, the information set forth in the
last paragraph on the front cover page (insofar as such information relates to
you) and under "Underwriting" in any Preliminary Prospectus and in the
Prospectus constitutes the only information furnished by you to the Company for
inclusion in any Preliminary Prospectus, the Prospectus, or the Registration
Statement. Neither the Company nor the Partnership will, without your prior
written consent, 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 you are a party to such action or claim), unless such
settlement, compromise, or consent includes an unconditional release of you from
all liability arising out of such action or claim (or related cause of action or
portion thereof).
The indemnity agreement in this Section 7.(a) shall extend
upon the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls you within the meaning of the 1933 Act or the 1934
Act to the same extent as such agreement applies to you.
(b) Indemnification by You. You will indemnify and hold harmless the
Company and the Partnership against any losses, claims, damages, or liabilities
to which the Company or the Partnership may become subject, under the 1933 Act,
the 1934 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 you 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 or the Partnership by you expressly for use
therein; and will reimburse the Company or the Partnership for any legal or
other expenses reasonably incurred by the Company or the Partnership in
connection with investigating or defending any such loss, claim, damage,
liability, or action. In addition to its other obligations under this Section
7.(b), you 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
33
omission, or any alleged statement or omission, described in this Section 7.(b),
you will reimburse the Company or the Partnership 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 or the Partnership
for such expenses and the possibility that such payments might later been held
to have been improper by a court of competent jurisdiction. Any such interim
reimbursement payments that are not made to the Company within thirty (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 you may otherwise have.
The indemnity agreement in this Section 7.(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 the Partnership and each person, if any,
who controls the Company or the Partnership within the meaning of the 1933 Act
or the 1934 Act to the same extent as such agreement applies to the Company or
the Partnership.
(c) Notices of Claims; Employment of Counsel. Any party that
proposes to assert the right to be indemnified under this Section 7 promptly
shall notify in writing each party against which a claim is to be made under
this Section 7 of the institution of such action but the omission so to notify
such indemnifying party of any such action shall not relieve it from any
liability it may have to any indemnified party except (i) to the extent that the
omission to notify shall have caused or increased the indemnifying party's
liability, and (ii) that the indemnifying party shall be relieved of its
indemnity obligation for expenses of the indemnified party incurred before the
indemnifying party is notified. Such indemnifying party or parties shall assume
the defense of such action, including the employment of counsel (satisfactory to
the indemnified party) and payment of fees and expenses. An indemnified party
shall have the right to employ its own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless the employment of such counsel shall have been authorized in writing by
the indemnifying party or parties in connection with the defense of such action
or the indemnifying party or parties shall not have employed counsel to have
charge of the defense of such action or such indemnified party or parties
reasonably shall have concluded that there may be defenses available to it or
them that are different from or additional to those available to such
indemnifying party or parties (in which case such indemnifying party or parties
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses
shall be borne by such indemnifying party or parties. Anything in this paragraph
to the contrary notwithstanding, an indemnifying party shall not be liable for
any settlement of any such claim or action effected without its written consent.
34
(d) Arbitration. It is agreed that any controversy arising out of
the operation of the interim reimbursement arrangements set forth in Sections
7.(a) and 7.(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 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 7.(a) and 7.(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 7.(a) and 7.(b).
(e) Contribution. If the indemnification provided for in Section
7.(a) or 7.(b) is unavailable to or insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages, or liabilities (or actions in
respect thereof) referred to therein, then the Company and the Partnership on
the one hand and you on the other shall contribute to the amount paid or payable
as a result of such losses, claims, damages, or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Partnership on the one hand and you on
the other from the offering of the Shares. If, however, the allocation provided
by the immediately preceding sentence is not permitted by applicable law, then
the Company and the Partnership and you shall contribute to such amount paid or
payable in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company and the Partnership on the
one hand and you on the other in connection with the statements or omissions
that resulted in such losses, claims, damages, or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Partnership on the one hand
and you on the other shall be deemed to be in the same proportion as the total
net proceeds from the Offering (before deducting expenses) received by the
Company and the Partnership bear to the total selling commissions received by
you in each case as set forth in the table on the cover page of the Prospectus.
The relative fault shall be determined by reference to, among other things,
whether the untrue or allegedly untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Partnership on the one hand or to information
with respect to you and furnished by you respectively, in writing specifically
for inclusion in the Prospectus on the other and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission. The Company and the Partnership and you agree that it
would not be just and equitable if contribution pursuant to this Section 7.(e)
were determined by pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to above in this
Section 7.(e). The amount paid or payable as a result of the losses, claims,
damages or liabilities (or
35
actions in respect thereof) referred to above in this Section 7.(e) shall be
deemed to include any legal or other expenses reasonably incurred by any such
party in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) with respect to the transactions giving rise to the
right of contribution provided in this Section 7.(e) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations in this Section 7.(e) for you to contribute
are several in proportion to your respective underwriting obligations and not
joint. For purposes of this Section 7.(e), each person, if any, who controls you
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as you, and each director of the Company who signed the
Registration Statement, and each person, if any, who controls the Company or the
Partnership within the meaning of Section 15 of the 1933 Act shall have the same
rights to contribution as the Company or the Partnership.
8. Representations and Agreements to Survive. Except as the context
otherwise requires, all representations, warranties, covenants and agreements
contained in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by you, or on your behalf, or by any
controlling person, or by or on behalf of the Company or the Partnership, and
shall survive until the fifth anniversary of the date of this Agreement.
9. Termination of Agreement.
(a) Termination of Agreement. You shall have the right to terminate
this Agreement at any time prior to the Initial Closing Date (i) if any
representation or warranty of the Company or the Partnership hereunder shall be
found to have been incorrect or misleading when made or the Company or the
Partnership shall fail, refuse, or be unable to perform any of their respective
agreements hereunder or to fulfill any condition of your obligations hereunder,
(ii) if any other condition of your obligations hereunder shall not be
satisfied, (iii) if there shall have been since the respective dates as of which
information is given in the Registration Statement, a 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, the
Partnership, or any Hotel, taken as a whole, whether or not arising in the
ordinary course of business, or (iv) any federal or state statute, regulation,
rule, or order of any court or other governmental authority has been enacted,
published, decreed, or otherwise promulgated that in your reasonable judgment
materially adversely affects or could reasonably be expected to materially
adversely affect the business or operations of the Company, the Partnership or
any Selling Entity. You shall have no liability to the Company or the
Partnership pursuant to this Agreement or otherwise as a result of any such
termination.
36
(b) Result of Termination.
(i) If the sale of the Shares provided for herein is not
consummated (A) because of any termination of this Agreement pursuant to Section
9.(a)(i), (B) because of any refusal, inability or failure on the part of the
Company or the Partnership to perform any agreement herein or comply with any
provision hereof other than by reason of your default, (C) by ______________,
1998 due to reasons within the control of the Company, the Partnership or any of
their affiliates, (D) because the Company does not sell all of the Company
Offered Shares, or (E) because the Company abandons this Offering and obtains
financing from other sources and you are not retained as a senior investment
banker in connection with such financing, then in addition to its obligations
with respect to expenses as set forth in Section 5, the Company will reimburse
you on demand for all your reasonable out-of-pocket expenses (including the fees
and expenses of your counsel), including disbursements reasonably incurred by
you in reviewing the Registration Statement and the Prospectus, and in
investigating and making preparations for the marketing of the Shares.
(ii) If the sale of the Shares provided for herein is not
consummated for any other reason, the Company and the Partnership shall pay
expenses as required by Section 5, and the Company and the Partnership shall
have no additional liability to you except for such liabilities, if any, as may
exist or thereafter arise under Section 7.
10. Notices.
(a) Method and Location of Notices. All communications hereunder,
except as herein otherwise specifically provided, shall be in writing and shall
be sent by overnight courier, hand-delivered or telecopied and confirmed as
follows:
To the Company or the Partnership:
Hersha Hospitality Trust
000 Xxxxxxxx Xxxxx, Xxx X
Xxx Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xx. Xxxx X. Xxxx
Telecopier No.: (000) 000-0000
37
with a copy to:
Hunton & Xxxxxxxx
Riverfront Plaza, East Tower
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esquire
Telecopier No.: (000) 000-0000
To You:
Xxxxxxxx & Strudwick, Incorporated
000 X. Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xx. X. XxXxxxxx Xxxxx, III
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxxx & Savage, P.C.
0000 XxxxxxxXxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telecopier No.: (000) 000-0000
(b) Time of Notices. Notice shall be deemed to be given by you to
the Company or the Partnership or by the Company or the Partnership to you when
it is sent by overnight courier, hand-delivered or telecopied as provided in
Section 10.(a).
11. Parties. This Agreement shall inure solely to the benefit of and shall
be binding upon you, the Company and the Partnership and the controlling persons
referred to in Section 7, and their respective successors, legal representatives
and assigns, and no other person shall have or be construed to have a legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provision herein contained.
12. Governing Law, Construction, and Time. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Virginia. Specified time of day refers to United States Eastern Time. Time shall
be of the essence of this Agreement.
13. Description Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
14. Counterparts. This Agreement may be executed in one or more
counterparts, and if executed in more than one counterpart, the executed
counterparts shall together constitute a single instrument.
38
If the foregoing correctly sets forth the understanding between you, the
Company and the Partnership, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
HERSHA HOSPITALITY TRUST
By:
----------------------
Xxxx X. Xxxx
Chief Executive Officer
HERSHA HOSPITALITY LIMITED
PARTNERSHIP
By: Hersha Hospitality Trust,
General Partner
By:
----------------------
Xxxx X. Xxxx
Chief Executive Officer
Confirmed and accepted as of the date first above written:
XXXXXXXX & STRUDWICK, INCORPORATED
By:
-------------------------
X. XxXxxxxx Xxxxx, III
Senior Vice President
39
