EXHIBIT 10.5
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT dated as of the 17th day of
November, 1997 by and among WINSTON HOTELS, INC., a North
Carolina corporation (the "REIT") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III and
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. (collectively, the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Shareholders are the holders of all of the
issued and outstanding capital stock of Winston Hospitality,
Inc., a North Carolina corporation ("Winston Hospitality");
WHEREAS, Winston Hospitality, the Shareholders, CapStar
Management Company, L.P., a Delaware limited partnership
("CapStar") and CapStar Hotel Company, a Delaware corporation,
have entered into an Asset Contribution Agreement and an Asset
Purchase Agreement (the "Asset Purchase Agreement"), each dated
as of October 29, 1997 (collectively, the "Acquisition
Agreements"), which collectively provide for the acquisition of
all of Winston Hospitality's right, title and interest in and to
all of Winston Hospitality's assets, business and properties
other than certain excluded assets as set forth in the
Acquisition Agreements;
WHEREAS, in order to induce the REIT to consent to the
transactions contemplated by the Acquisition Agreements and
execute the lease amendments and related documents contemplated
in connection therewith, the Shareholders and the REIT desire
that a portion of the consideration to be paid pursuant to the
Acquisition Agreements be used to fund the purchase of additional
shares of the common stock, $.01 par value per share, of the REIT
("Shares");
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Best Efforts Investment. The Shareholders shall use their
best efforts to purchase an aggregate of 400,000 Shares (the
"Investment Amount") between the date hereof and the second
anniversary of the date hereof. The Shareholders may purchase
such Shares either (i) in the open market (subject to compliance
with Rule 10b-5 and Rule 10b-18 under the Securities Exchange Act
of 1934, as amended, and other applicable law and regulations) or
(ii) with the approval of the Board of Directors of the REIT,
directly from the REIT on terms and conditions set by the Board
of Directors.
2. Put Option. In the event that the Shareholders shall not
have purchased an aggregate number of Shares equal to the
Investment Amount between the date hereof and the second
anniversary of the date hereof, inclusive, the REIT shall have
the option to sell (the "Option"), and the Shareholders shall
have the obligation to purchase, the number of Shares equal to
the difference of (i) the Investment Amount, less (ii) the
aggregate number of Shares purchased by
Page 2
Shareholders between the date hereof and the second anniversary of
the date hereof, inclusive, at a per Share purchase price equal to
the average of the closing sales prices of the Shares on the
principal trading market thereof for the five trading days
immediately preceding the REIT's exercise of the Option, or, in the
absence of an established trading market for the Shares, the fair
market value of the Shares as reasonably determined by the Board of
Directors. The Option shall expire on the earlier of the third
anniversary of the date hereof or the termination of this Agreement.
The option may be exercised, in whole or in part, by
delivery of written notice to the Shareholders. The purchase
price for Shares to be sold upon exercise of the Option shall be
paid in cash at a closing on the twentieth day following such
notice at the REIT's principal place of business or such other
time and place as may be agreed. Each Shareholder shall be
severally, but not jointly, obligated to purchase a pro rata
portion of the Shares to be sold upon exercise of the Option
based on each Shareholder's relative ownership of Winston
Hospitality as of the date hereof unless otherwise agreed in
writing. Each Shareholder agrees to provide such information,
representations and certifications as the REIT may reasonably
request in connection with establishing the availability of an
exemption from the registration requirements of the Securities
Act of 1933, as amended, in connection with the sale of the
Shares.
3. Adjustments. In the event that the Asset Purchase Agreement
is terminated without consummation of the transactions
contemplated thereby, the Investment Amount shall be reduced from
400,000 Shares to 282,353 Shares. All references to any number
of Shares shall be adjusted as appropriate to reflect stock
splits, stock dividends, combinations, reclassifications or
similar capital transactions.
4. Representations. Each Shareholder has the absolute and
unrestricted right, power, authority and capacity to execute and
deliver this Agreement and to perform his obligations hereunder.
This Agreement constitutes the legal, valid and binding
obligation of each Shareholder enforceable against such
Shareholder in accordance with its terms.
5. Termination. This Agreement and the Option shall
immediately terminate in the event (a) the REIT enters into any
agreement with a person that involves the transfer of ownership
of the REIT or of more than fifty percent (50%) of the REIT's
total assets or earnings power on a consolidated basis, as
reported in the REIT's consolidated financial statements filed
with the Securities and Exchange Commission (including an
agreement for the acquisition of the REIT by merger,
consolidation, or statutory share exchange - regardless of
whether the REIT is intended to be the surviving or resulting
entity after the merger, consolidation, or statutory share
exchange - or for the sale of substantially all of the REIT's
assets to that person), (b) any person is or becomes an Acquiring
Person, or (c) the Continuing Directors cease for any reason to
constitute a majority of the Board. For purposes of the
preceding sentence, "Continuing Director" means any member of the
Board, while a member of the Board and (a) who was a member of
the Board as of the date hereof or (b) whose subsequent
nomination for election or election to the Board was recommended
or approved by a majority of the Continuing Directors. Acquiring
Person means that (a) a Person, considered alone or together with
all affiliates and associates of that person, becomes directly or
indirectly the beneficial owner of securities representing at
least twenty percent (20%) of the REIT's outstanding securities
entitled to vote
Page 3
generally in the election of the Board, or (b) a person enters into
an agreement that would result in that person satisfying the
conditions in clause (a).
6. Notice. Any notice, communication, request, reply or
advice (collectively, "Notice") provided for or permitted by this
Agreement to be made or accepted by either party must be in
writing. Notice shall be given or served by personal delivery,
by delivery by nationally-recognized overnight courier, or by
facsimile transmission. Notice by personal delivery shall be
effective on the business day delivered. Notice by overnight
courier shall be effective one business day after deposit with
the courier service. Notice given by facsimile transmission
shall be effective on the business date delivered. For the
purposes of Notice, the addresses of the Shareholders shall be as
set forth on the signature page hereto and the address of the
REIT shall be:
Winston Hotels, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
The parties shall have the right from time to time to change
their respective addresses for notice by at least five days'
written notice to the other party.
7. Miscellaneous. This Agreement and the rights and
obligations hereunder may not be assigned. The terms of this
Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina without effect to the
conflict of laws principles thereof. This Agreement embodies the
entire agreement of the parties on the subject matter hereof. No
amendment or modification of this Agreement shall be binding
unless made in writing and signed by the REIT and the Shareholder
to be charged. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all
of which, taken together, shall constitute a single agreement.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
Page 4
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement as of the day and year first above written.
WINSTON HOTELS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
Title: President
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
