20,157,894.7 SHARES
APPLE HOSPITALITY TWO, INC.
COMMON SHARES AND SERIES A PREFERRED SHARES
AGENCY AGREEMENT
__________, 2001
▇▇▇▇▇ ▇▇▇▇▇▇ Associates, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Apple Hospitality Two, Inc., a Virginia corporation (the "Company"), is a
corporation that will elect to qualify as a real estate investment trust
pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended ( the "Code"). Subject to the terms and conditions stated herein, the
Company proposes to engage ▇▇▇▇▇ ▇▇▇▇▇▇ Associates, Inc. as its managing dealer
(the "Agent") to solicit offers to buy and obtain purchasers for shares of
common stock, no par value, and Series A Preferred Shares of the Company, as
offered by the Prospectus which is part of the Form S-11 Registration Statement
under the Securities Act of 1933 (File No. 333-53984) as filed with the
Securities and Exchange Commission on January 19, 2001. The term "Shares" refers
to the shares of common stock, no par value, and Series A Preferred Shares of
the Company registered pursuant to the Registration Statement referred to in the
preceding sentence. This will confirm our agreement respecting your engagement
as the exclusive agent to solicit offers to buy and obtain purchasers for the
Shares on a "best efforts" basis.
1. Representations and Warranties. The Company represents and warrants
to, and agrees with, the Agent that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-11 (File No.
333-53984), and as a part thereof a preliminary prospectus, both as amended by
such amendments thereto as may have been required to the date hereof, with
respect to the registration of the Shares under the Securities Act of 1933, as
amended (the "Act"); any preliminary prospectus included in such registration
statement or filed with the Commission pursuant to Rule 424 of the Commission
under the Act is hereinafter called a "Preliminary Prospectus"; the registration
statement, as amended at the time it becomes effective under the Act, and the
prospectus filed as a part thereof or mailed for filing pursuant to Rule 424(b)
of the Act are hereinafter called the "Registration Statement" and "Prospectus,"
respectively; except that (A) if the Company files a post-effective amendment to
the registration statement, then the term "Registration Statement" shall refer
to the registration statement as amended by such post-effective amendment
thereto and the term "Prospectus" shall refer to the amended prospectus then on
file with the Commission, and (B) if the prospectus, including any sticker
supplement thereto not theretofore consolidated into a post-effective amendment,
filed by the Company pursuant to either Rule 424(b) or (c) of the rules and
regulations of the Commission under the Act (the "Regulations"), shall differ
from the prospectus on file at the time the Registration Statement or any
post-effective amendment thereto shall have become effective, the term
"Prospectus" shall refer to the prospectus, including any such sticker
supplement, filed pursuant to either Rule 424(b) or (c), as the case may be,
from and after the date on which it shall have been filed. The Company will not
at any time after the Registration Statement initially becomes effective file
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus to which you shall object in writing or which shall be
disapproved by your counsel;
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the Regulations, and did not contain any untrue
statement of a material fact required to be stated therein or necessary 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, and relating to you, expressly for use therein;
(c) The Registration Statement and the Prospectus, when effective
or filed with the Commission, as the case may be, conformed or will conform, in
all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and did not and will not as of the
applicable effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and any
amendment or supplement thereto 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; 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, and relating to you, expressly for use therein;
(d) There are no contracts or other documents that are required to
be filed as exhibits to the Registration Statement which have not been so filed;
(e) The Company and each of its subsidiaries has been duly
incorporated or organized, is validly existing, and if a corporation is in good
standing, under the laws of Virginia, with power and authority (corporate or
other) to own its properties and conduct its business as described in the
Prospectus, and has been duly qualified as a foreign entity for the transaction
of business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership of property or the
conduct of business, except such jurisdictions, if any, in which the failure to
be so qualified will not have a material adverse effect on the respective
company;
(f) The Company and each of its subsidiaries possesses all
material licenses, permits, authorizations, consents and orders required for the
contemplated method of operation of its business as described in the Prospectus;
(g) The Company has an authorized capitalization as set forth in
the Prospectus; all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and nonassessable
and conform to the description of the capital stock of the Company contained in
the Prospectus; there are no preemptive or other rights to subscribe for or to
purchase any shares of capital stock of the Company; except as described in the
Prospectus, there are no warrants or options to purchase any shares of capital
stock of the Company; and neither the filing of the Registration Statement nor
the offering or sale of the Shares as contemplated by this Agreement gives rise
to any rights for or relating to the registration of any shares of the capital
stock of the Company;
(h) The Shares to be issued and sold by the Company pursuant to
this Agreement have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein, will be duly and validly
issued and fully paid and nonassessable and will conform to the description of
the Shares contained in the Prospectus;
(i) The Company has the corporate power to enter into this
Agreement, and the issue and sale of the Shares by the Company and the
performance of such Agreement and the consummation by the Company of the
transactions herein contemplated will not result in a breach or violation of any
terms or provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which the
Company, is subject, nor will such action result in any violation of the
provisions of the Articles of Incorporation or Bylaws of the Company, or any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties; and no
consent, approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the issue and
sale of the Shares or the consummation by the Company of the transactions
contemplated by this Agreement, except such consents, approvals, authorizations,
registrations or qualifications as may be required under the Act and under state
securities or Blue Sky laws in connection with the distribution of the Shares by
the Agent;
(j) This Agreement has been duly authorized executed and delivered
by the Company, and constitutes a valid and binding agreement of the Company,
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency or other laws affecting
the enforcement of creditors' rights generally or by general principles of
equity, and except to the extent that the enforceability of the indemnity and
contribution provisions contained in this Agreement may be limited under
applicable laws;
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(k) The Advisory Agreement has been duly authorized and when
executed and delivered by the parties thereto will constitute a valid and
binding agreement of the parties thereto enforceable in accordance with its
terms, except to the extent that enforceability may be limited by bankruptcy,
insolvency or other laws affecting the enforcement of creditors' rights
generally or by general principles of equity;
(l) Ernst & Young LLP, which has certified the financial
statements of the Company, constitutes an independent public accountant as
required by the Act and the rules and regulations of the Commission thereunder;
(m) The financial statements of the Company, together with related
notes, as set forth in the Registration Statement and the Prospectus, presently
fairly the financial position of the Company at the indicated date;
(n) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, neither the Company nor any of
its subsidiaries has experienced any material adverse change or any development
involving a prospective material adverse change in the general affairs,
management, financial position, properties or results of operations of the
Company, or any of its subsidiaries, otherwise than as set forth in the
Prospectus; and neither the Company nor any of its subsidiaries have entered
into any material transactions other than as described in the Prospectus; and
the capitalization, indebtedness, properties, material liabilities and business
of the Company and its subsidiaries conform to the descriptions thereof
contained in the Prospectus;
(o) There are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any property
of the Company or any of its subsidiaries is the subject, other than as set
forth or contemplated in the Prospectus, which, individually or in the
aggregate, would have a material adverse effect on the financial position,
stockholders' equity or results of operations of the Company or any of its
subsidiaries and, to the best of their knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened or
contemplated by others;
(p) The Company is not and will not be an "investment company," or
under the control of an investment company as defined in the Investment Company
Act of 1940, as amended; and
(q) The Company is organized in conformity with the requirements
for qualification as a real estate investment trust under Sections 856 through
860 of the Code and the rules and regulations thereunder. The contemplated
method of operation of the Company's business as described in the Prospectus
will allow the Company to satisfy the operational requirements for qualification
as a real estate investment trust under such Sections and such rules and
regulations.
2. Offering and Sale of Shares -- Closing Dates
(a) On the basis of the representations, warranties and covenants
herein contained, but subject to the terms and conditions herein set forth, the
Agent is hereby appointed the selling agent of the Company during the term
herein specified (the "Offering Period") for the purpose of finding subscribers
for the Shares for the account and risk of the Company through a public
offering. Your agency hereunder, which is subject to the conditions of Section 6
hereof, shall continue as long as Shares are being offered through the
Commission filing 333-53984 and any amendments thereto. However, your agency may
be terminated by the Company if you cease to be a member in good standing of the
NASD or if you become subject to an order or other action of or by the
Securities and Exchange Commission or other securities authority substantially
restricting or impairing your ability to offer and sell the Shares under this
Agreement, or if there is a material default by you under this Agreement which
is not promptly cured. Subject to the performance by the Company of all of its
obligations to be performed hereunder, and to the completeness and accuracy of
all the representations and warranties contained herein, the Agent hereby
accepts such agency and agrees on the terms and conditions herein set forth to
use its best efforts during the Offering Period to find subscribers for the
Shares at the current public offering price (each subscriber being required to
invest at least $5,000, or $2,000 in the case of a Qualified Plan, as defined in
the Prospectus). The time for each issuance of and payment for Shares is herein
referred to as a "Closing Date."
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(b) If less than all the Shares shall have been subscribed and
paid for at the initial Closing Date (the "Initial Closing Date"), then, at
periodic intervals to be mutually agreed upon by you and the Company during the
Offering Period, there shall be subsequent closings for the payment to the
Company of the purchase price of additional Shares sold by you ("Subsequent
Closing Date(s)") as described in Section 2(c).
(c) Subsequent closing(s) will take place at such time(s), date(s)
and place(s) as determined by the Company, with the concurrence of the Agent.
Shares will be issued to subscribers and compensation will be paid to the Agent
at each Closing Date.
(d) As compensation for your services under this Agreement, you
will be paid, on each Closing Date, a commission equal to 7.5% of the public
offering price for each Share subscribed and paid for at each Closing Date which
was sold by you or a Selected Dealer engaged by you. In addition, you will be
paid, on each Closing Date, a non-accountable Marketing Expense Allowance equal
to 2.5% of the public offering price for each Share subscribed and paid for on
the applicable Closing Date which was sold by you or a Selected Dealer engaged
by you.
(e) Subscriptions for Shares may be solicited by certain dealers
selected by you (the "Selected Dealers") and sales by Selected Dealers shall be
made under a Selected Dealer Agreement in substantially the form attached as
Exhibit A, which sets forth the terms and conditions, including compensation, of
the other dealers participating. Each such Selected Dealer shall be a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD").
Subscribers' checks are to be made payable to the Agent. Selected Dealers must
transmit all such checks directly to the Agent by noon of the next business day
after receipt.
(f) Neither you, the Company, the Agent, nor any Selected Dealer
participating in the offering of the Shares shall, directly or indirectly, pay
or award any finder's fees, commissions or other compensation to any person
engaged by a potential investor for investment advice as an inducement to such
adviser to advise the purchase of Shares; provided, however, that normal sales
commissions payable to a registered broker-dealer or other properly licensed
person for selling Shares shall not be prohibited hereby.
3. Covenants of the Company
The Company agrees that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and will notify you immediately and
confirm in writing (i) when the Registration Statement and any amendments
thereto shall have become effective, or any supplement to the Prospectus or any
amended Prospectus shall have been filed, (ii) of any request by the Commission
for any amendment to the Registration Statement or any amendment or supplement
to the Prospectus or for additional information, (iii) of the happening of any
event which makes untrue any statement of a material fact made in the
Registration Statement or the Prospectus, or which requires the making of a
change in the Registration Statement or the Prospectus, in order to make any
material statement therein not misleading; and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of the initiation of any proceedings for that purpose, or of the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, or of the institution of any proceedings for such purpose; and the
Company will make every reasonable effort to prevent the issuance by the
Commission or any governmental agency pursuant to the securities laws of any
jurisdiction of any stop order and, if such stop order shall at any time be
issued, to obtain the lifting thereof at the earliest possible moment;
(b) It will, promptly from time to time take such actions as you
may reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales of Shares therein in such
jurisdictions for so long as may be necessary to complete the distribution of
the Shares, provided that in connection therewith neither the Company, the
Advisor nor the Broker shall be required to qualify as a foreign corporation or
to file a general consent to service of process in any jurisdiction;
(c) The Company will deliver to you, as soon as available, a copy
of the Registration Statement as originally filed and each amendment thereto
(including exhibits);
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(d) The Company will deliver promptly to you, as soon as the
Registration Statement becomes effective and thereafter from time to time during
the period when the Prospectus is required to be delivered under the Act, such
number of copies of the Prospectus (as amended or supplemented), as you may
reasonably request; and the Company consents to the use of the Prospectus and
any amendments or supplements thereto by you and by any Selected Dealers for the
purposes contemplated by the Act and this Agreement;
(e) During the period when the Prospectus is required to be
delivered under the Act, the Company will comply, so far as it is able and at
the Company's expense, with all requirements imposed upon it by the Act, as now
and as hereafter amended, so far as necessary to permit the continuation of
sales of the Shares during such period in accordance with the provisions of this
Agreement and of the Prospectus;
(f) If any event relating to or affecting the Company shall occur
as a result of which it is necessary, in the opinion of your counsel, to amend
or supplement the Prospectus in order to make the Prospectus not misleading in
the light of the circumstances existing at the time it is delivered to a
subscriber, the Company will forthwith prepare and furnish to you, without
expense to you, a reasonable number of copies of an amendment or amendments of,
or a supplement or supplements to, the Prospectus (in form and substance
reasonably satisfactory to your counsel) which will amend or supplement the
Prospectus so that, as amended or supplemented, it will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances existing at
the time the Prospectus is delivered to a subscriber, not misleading. For the
purposes of this subsection, the Company will furnish such information with
respect to the Company and any Company properties as you may from time to time
reasonably request;
(g) The Company will furnish to its Shareholders as soon as
practicable after the end of each fiscal year an annual report (including a
balance sheet and statements of income and cash flows of the Company certified
by independent public accountants) and, as soon as practicable after the end of
each of the first three quarters of each fiscal year (beginning with the fiscal
quarter ending after the effective date of the Registration Statement), summary
financial information of the Company for such quarter in reasonable detail;
(h) During a period of five years from the effective date of the
Registration Statement, the Company will furnish to you copies of all reports or
other communications (financial or other) furnished to securityholders, and
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company is listed;
and (ii) such additional information concerning the business and financial
condition of the Company as you may from time to time reasonably request;
(i) The Company, will not, at any time before or after the
Registration Statement becomes effective, file any amendment to the Registration
Statement or any amendment or supplement to the Prospectus to which you shall
reasonably object in writing or which shall be reasonably disapproved by your
counsel promptly after notice thereof; will deliver to you, from time to time,
all supplemental sales materials (whether designated solely for broker-dealer
use or otherwise) proposed to be used or delivered by the Company in connection
with the offering of Shares, prior to the use or delivery to third parties of
such material, and it will not use or deliver any such material to which you
shall object or which shall be disapproved by your counsel; and
(j) Subsequent to the date of this Agreement and through each
Closing Date, except as described, contemplated or permitted in the Registration
Statement, the Company will not take any action (or refrain from taking any
action) that will result in the Company incurring any material liability or
obligation, direct or contingent, or enter into any material transaction not in
the ordinary course of business, and there will not be any material change in
the capital stock, long-term debt, notes payable or short-term borrowings of the
Company or any issuance of options, warrants or rights to purchase capital stock
of the Company, or any declaration or payment or commitment to pay or
anticipated payment of any dividend or other distribution on the capital stock
of the Company, except as contemplated in the Prospectus, which has resulted in
or reasonably could be expected to result in a material adverse change in the
business or financial position of the Company, taken as a whole.
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4. Expenses. The Company covenants and agrees with you that, except as
otherwise agreed by you and the Company, the Company will pay the following: (i)
the fees, disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement and the Prospectus and amendments and supplements thereto
and the mailing and delivering of copies thereof to you and the Selected
Dealers; (ii) the cost of printing or producing this Agreement, any Blue Sky
Surveys, all sales material and any other documents in connection with the
offering, purchase, sale and delivery of the Shares; (iii) the cost of preparing
stock certificates, if any; (iv) the costs or expenses of any depositary, escrow
agent, transfer agent or registrar; (v) all travel, lodging and other expenses
incurred by the Company for advertising, publicity and selling materials used in
connection therewith; and (vi) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that you will pay all
of your own costs and expenses, including the fees of your counsel and any
advertising expenses incurred by you in making offers and sales of the Shares.
5. Covenants of Agent. Insofar as the distribution of the offering is
within your control and not the Company's, you agree that the distribution of
the offering will comply with the terms of the Prospectus, the Act, the
Securities Exchange Act of 1934 and the securities laws (including applicable
suitability standards, if any) of all jurisdictions in which you offer the
Shares or whose laws are applicable to your offering of the Shares, and all
rules promulgated under such Acts and laws, and all applicable rules of the
NASD. Without limited the generality of the foregoing, for so long as
subscription payments for Shares are held by an escrow agent under an Escrow
Agreement, upon receipt by Agent of any Cash Investment Instrument (as defined
in that Escrow Agreement) for the purchase of Shares, Agent shall by noon of the
next business day after receipt, wire to Escrow Agent funds aggregating the sum
total of all Cash Investment Instruments received the prior business day. You
agree to provide, from time to time as requested by the Company, written
certificates of compliance by you with the terms of this Agreement.
6. Conditions to Closing. Your obligations hereunder shall be subject,
in your discretion, to the condition that all representations and warranties and
other statements of the Company herein are, at and as of the date hereof, and
each Closing Date, true and correct, and the condition that the Company shall
have performed all of its obligations hereunder theretofore to be performed, and
the following additional conditions:
(a) If required by law, the Prospectus shall have been filed with
the Commission pursuant to Rule 424(b) under the Act within the applicable time
period prescribed for such filing by the rules and regulations under the Act and
in accordance with Section 1(a) of this Agreement; no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to your reasonable satisfaction;
(b) (i) The Company shall not have sustained since the date of the
latest audited financial statement included in the Prospectus, any loss or
interference with its business, fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and (ii) since the respective dates as of which
information is given in the Prospectus there shall not have been any change in
the capital stock or long-term debt of the Company as a whole or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, shareholders' equity or results of
operation of the Company otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause (i) or
(ii), is in your reasonable judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being issued at such Closing Date on the terms and in the manner
contemplated by the Prospectus;
(c) On or after 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 the American Stock
Exchange; (ii) a general moratorium on commercial banking activities in New York
declared by either Federal or New York State Authorities; (iii) the engagement
by the United States in hostilities which have resulted in the declaration of a
national emergency or war if the effect of any such event specified in this
clause in your reasonable judgment makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being issued at
such Closing Date on the terms and in the manner contemplated in the Prospectus;
or (iv) such a material adverse change in general economic, political, financial
or international conditions affecting financial markets in the United States
having a material adverse impact on trading prices of securities in general, as,
in your reasonable judgment makes it inadvisable to proceed with the sale of the
Shares through you; and
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(d) If requested by you, the Company shall have furnished or
caused to be furnished to you at such Closing Date certificates of officers of
the Company satisfactory to you as to the accuracy of the representations and
warranties of the Company, herein at and as of such Closing Date and as to the
performance by the Company of all of its obligations hereunder to be performed
at or prior to such Closing Date.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless you and each Selected Dealer against any losses, claims, damages
or liabilities, joint or several, to which you and such Selected Dealer may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, any Preliminary Prospectus or the
Prospectus, or any amendment or supplement thereto (including any sales
literature furnished to you by any of them), 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 any misrepresentation or breach of warranty or
any alleged misrepresentation or breach of warranty set forth in Section 1 of
this Agreement, or arise out of or are based upon the failure of the Company to
comply with Sections 1 or 3 of this Agreement; and will reimburse you and each
Selected Dealer for any legal or other expenses reasonably incurred by you and
such Selected Dealer in connection with investigating or defending any such
action or claim; provided, however, that the Company 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 the Registration Statement or Prospectus or
any such amendment or supplement in reliance upon and in conformity with
information furnished to the Company by you or any Selected Dealer, relating to
you or such Selected Dealer, expressly for use therein; and provided further
that as to any Preliminary Prospectus, this agreement to indemnify and hold
harmless shall not inure to the benefit of you or any Selected Dealer if such
person failed to give or send a copy of the Prospectus, as the same may be
amended or supplemented, to an investor within the time required by the Act and
Regulations, and the untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact in such
Preliminary Prospectus was corrected in the Prospectus or any supplement or
amendment thereto.
(b) You and each Selected Dealer will indemnify and hold harmless
the Company (which term shall be deemed to include its subsidiaries) against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of a failure by you or a
Selected Dealer to comply with any covenants contained in Section 5 of or
elsewhere in this Agreement or a Selected Dealer Agreement, or arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in 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 the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with information furnished to the Company by you or such Selected
Dealer relating to you or such Selected Dealer expressly for use therein; and
will reimburse the Company for any legal or other expenses reasonably incurred
by it in connection with investigating or defending any such action or claim.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof,
other than reasonable costs of investigation.
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(d) If the indemnification provided for in this Section 7 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party 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 on the one hand and you or a Selected
Dealer 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 or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of Company, on the one hand and you or a Selected Dealer on the other in
connection with the statements or omissions which resulted in such losses,
claims, and damages or liabilities (or actions in respect thereof), as well as
any other relevant equitable considerations. The relative benefits received by
the Company, on the one hand and you or a Selected Dealer on the other shall be
deemed to be in the same proportion as the total proceeds from the offering
received by the Company bear to the total compensation received by you or such
Selected Dealer. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand or you or a Selected Dealer
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 you agree that it would not be just and equitable if contributions pursuant
to this subsection (d) were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. No person guilty of fraudulent misrepresentation (within the meaning
of Section ll(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company under this Section 7 shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
you and any Selected Dealer within the meaning of the Act; and the obligations
of you or any Selected Dealer under this Section 7 shall be in addition to any
liability which you and the respective Selected Dealers may otherwise have and
shall extend, upon the same terms and conditions, to each officer and director
of the Company, the Advisor and the Broker (including any person who, with his
consent, is named in the Registration Statement as proposed to become a director
of the Company) and to each person, if any, who controls the Company within the
meaning of the Act.
8. Survival. The respective indemnities, agreements, representations,
warranties and other statements of the Company and you, as set forth in this
Agreement or made by you or on your behalf pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation (or any
statement as to the results thereof) made by you or on behalf of you or any
controlling person of you or the Company, or any officer or director or
controlling person of the Company, and shall survive each Closing Date.
9. Effective Date of This Agreement. This Agreement shall become
effective (the "Effective Date") upon the date of your acceptance hereof, as set
forth below.
10. Notices. All statements, requests, notices and agreements hereunder
shall be in writing, and if to you shall be sufficient in all respects if
delivered by hand or sent by registered or certified mail, or by reputable
overnight courier service, to you in care of ▇▇▇▇▇ ▇▇▇▇▇▇ Associates, Inc., at
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and
if to the Company shall be sufficient in all respects if delivered by hand or
sent by registered or certified mail, or by reputable overnight courier service,
to the address of the Company as set forth in the Registration Statement,
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
8
11. Binding Effect. This Agreement shall be binding upon, and inure
solely to the benefit of you and the Company (including its subsidiaries) and to
the extent provided in Sections 7 and 8 hereof, the officers and directors of
the Company (including its subsidiaries) and each person who controls the
Company (including its subsidiaries) or you, and their respective heirs,
executors, administrators, and successors under or by virtue of this agreement.
12. Governing Law. This Agreement shall be construed in accordance with
the laws of the Commonwealth of Virginia.
13. Counterparts. This Agreement may be executed by any one or more of
the parties in any number of counterparts, each of which shall be deemed to be
an original, but all such counterparts shall together constitute one and the
same instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us four counterparts hereof, and upon the acceptance hereof by
you, this letter and such acceptance hereof shall constitute a binding agreement
among you and the Company.
Very truly yours,
APPLE HOSPITALITY, INC
By:
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Vice President
Accepted as of the __ day of ________, 2001.
▇▇▇▇▇ ▇▇▇▇▇▇ ASSOCIATES, INC., AS
MANAGING DEALER
By:
----------------------------
Title:
-------------------------
9
Exhibit A
APPLE HOSPITALITY TWO, INC.
Common Shares
SELECTED DEALER AGREEMENT
_______________, 2001
Gentlemen:
We have agreed to use our best efforts to sell up to 20,157,894.7
common shares and Series A Preferred Shares (collectively the "Shares") in Apple
Hospitality Two, Inc., a Virginia corporation (the "Company"), as described in
the enclosed prospectus (the "Prospectus"). The Shares are being offered by
▇▇▇▇▇ ▇▇▇▇▇▇ Associates, Inc., as Sales Agent for the Company ("DLA"), pursuant
to an agency agreement (the "Agency Agreement") among us and the Company. We
have been advised by the Company that the registration statement relating to the
Shares (and including the Prospectus) (the "Registration Statement") filed by
the Company under the Securities Act of 1933, as amended (the "Act"), has become
effective with the Securities and Exchange Commission.
We are hereby inviting you, subject to the other terms and conditions
set forth below and in the Prospectus, to solicit subscriptions for the Shares.
You confirm that you are a member in good standing of the National Association
of Securities Dealers, Inc. (the "NASD") and that you are currently registered
as a dealer under the Securities Exchange Act of 1934, as amended (the "1934
Act"). You confirm that you do not operate pursuant to the net capital provision
in SEC Rule 15c3-1(a)(2)(vi). You hereby agree to comply with the provisions of
Rule 2810 of the Rules of Fair Practice of the NASD. In addition, you hereby
agree to comply with the provisions of Rules 2420, 2730, 2740 and 2750 of the
Rules of Fair Practice of the NASD to the extent such sections are applicable to
your activities in connection with this offering.
1. You agree to offer the Shares at a purchase price of $10.00 per
Share. Upon the admission of subscribers to the Company, you shall be paid a
commission equal to $___ (____%) per Share for each Share purchased by an
Investor provided by you. Commissions will be payable to you only with respect
to transactions that are lawful in the jurisdiction wherein they occur.
2. Subscriptions may be taken by you from your customers in accordance
with the procedures described in the Prospectus. Each subscription solicited by
you shall be promptly forwarded by you, in accordance with the requirements of
SEC Rule 15c2-4, together with a check payable to "▇▇▇▇▇ ▇▇▇▇▇▇ Associates,
Inc.," for the full purchase price of the Shares subscribed for, to: ▇▇▇▇▇
▇▇▇▇▇▇ Associates, Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. Such
forwarding shall take place by noon of the next business day after receipt by
you from your customer of such subscription and payment. Notwithstanding the
foregoing, any subscribers' checks not properly completed as described above
shall be promptly returned to such subscribers not later than the next business
day following receipt by you of such checks. With respect to each subscription
solicited by you, you shall obtain and furnish to the Company in the case of
United States residents, (i) the subscriber's name, address, taxpayer
identification number, the number of Shares to be acquired by each subscriber,
(ii) the certification as to non-foreign status as required by Temp. Treas. Reg.
ss. 1.1445-2T(b), and (iii) Form W-9.
All acceptable subscriptions solicited by you will be strictly subject
to acceptance thereof by the Company, which has reserved the right to refuse to
accept in whole or in part any subscription and related payment and to refuse to
accept as a purchaser any person for any reason whatsoever. Subscriptions
delivered to the Company will be accepted or rejected within 30 days of their
receipt; provided, however that the Company may at any time reject in whole or
in part any subscription in its sole and absolute discretion if the total
offering for the Company is oversubscribed, or if the Company would be
prohibited from accepting such subscription by any Blue Sky or other applicable
securities law or regulation. If the Company rejects a subscription in whole or
in part, it will arrange for the Sales Agent to return to such subscriber within
____ days after rejection of the subscription by the Company, any payment made
by him applicable to the portion of the subscription which has been rejected.
3. Neither you nor any other person is authorized to give any
information or make any representations in connection with the sale of any of
the Shares other than those contained in the Prospectus or in the supplemental
sales material authorized for use in connection with this offering, as described
below. No dealer is authorized to act as agent for us when offering any of the
Shares to the public or otherwise, it being understood that you and each other
Selected Dealer are independent contractors with us. Nothing herein contained
shall constitute you or any other Selected Dealer an association or partner with
us.
4. We understand that the Company will provide you with such number of
copies of the enclosed Prospectus and such number of copies of amendments and
supplements thereto as you may reasonably request. We also understand that the
Company may provide you with certain supplemental sales literature for Shares in
the Company. You agree that such material shall not be used in connection with
the solicitation of subscribers for Shares unless accompanied or preceded by the
Prospectus as then currently in effect and as it may be amended or supplemented
in the future. You agree that neither you nor any person under your control will
deliver or show to any prospective subscriber for Shares any supplementary sales
material other than the Prospectus (including, inter alia, transmittal letters,
underwriting memoranda, summary descriptions, graphics, supplemental exhibits,
media advertising, charts, pictures, written scripts or outlines), except as
supplied by the Company and described under the caption "SALES LITERATURE" in
the Prospectus, or otherwise specifically described in written advice from the
Company authorizing the type and manner of use. The delivery or showing of any
such other supplementary sales materials to prospective subscribers is expressly
prohibited except to the extent specified in such written advice.
5. You agree that neither you nor any person under your control shall
directly or indirectly pay or award any finder's fees, commissions or other
compensation to any person engaged by a potential investor for investment advice
as an inducement to such advisor to advise the purchase of Shares; provided,
however, that this provision shall not prohibit the normal sales commission
payable to any registered broker-dealer or other properly licensed person for
selling Shares. In addition, you agree not to receive any rebates or give-ups or
participate in any reciprocal business arrangements which would violate any
restriction on the Company contained in the Prospectus.
6. You represent that neither you nor any of your directors, officers,
partners or "persons associated with" you (as defined in the By-laws of the
NASD), nor, to your knowledge, any related person (as defined by the NASD in its
Interpretation with respect to Review of Corporate Financing) have participated
or intend to participate in any transaction or dealing as to which documents or
information are required to be filed with the NASD pursuant to such
Interpretation.
7. This Agreement shall terminate simultaneously with the termination
of the Agency Agreement, but may be terminated by us prior thereto at any time
by written or telegraphic notice. Upon termination, rights and obligations
hereunder shall cease, except rights and obligations accrued or unsatisfied at
the date of termination.
8. You agree that in selling Shares of the Company you will comply with
the applicable provisions of the Act, the 1934 Act, the applicable rules and
regulations of the Securities and Exchange Commission thereunder, the laws of
the jurisdictions in which the Shares are offered and sold and the applicable
rules and regulations of the NASD. We shall have full authority to take such
action as we may deem advisable in respect to all matters pertaining to the
offering. We shall be under no liability to you except for lack of good faith
and for obligations expressly assumed by us in this Agreement. Nothing contained
in this paragraph is intended to operate as, and the provisions of this
paragraph shall not constitute, a waiver by you of compliance with any provision
of the Act, the 1934 Act, or the rules and regulations thereunder.
2
9. Upon application to us, we will inform you as to the states and
other jurisdictions of the United States in which we believe the Shares have
been qualified for the sale under, or are exempt from the requirements of, the
respective securities laws of such jurisdictions, but we assume no
responsibility or obligation as to your right to sell the Shares in any
jurisdiction. You covenant and agree that you will not effect sales in any
jurisdiction where the Shares are not qualified or exempt from qualification.
You further agree to provide us, promptly upon our request, with geographic
distribution information, setting forth (a) the number of Shares sold, (b) the
number of transactions done, (c) the jurisdictions where sold, and (d) the types
of purchasers.
10. You confirm that you are familiar with Securities Act Release No.
4968 and Rule 15c2-8 under the 1934 Act, relating to the distribution of
preliminary and final prospectuses, and that you have complied and will continue
to comply therewith.
11. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless DLA and each Selected
Dealer against any losses, claims, damages or liabilities, joint or several, to
which they may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, any Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto (including
any sales literature furnished to you by the Company), 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 any misrepresentation or breach of
warranty or any alleged misrepresentation or breach of warranty set forth in
Section 1 of the Agency Agreement, or arise out of or are based upon the failure
of the Company to comply with Sections 1 or 3 of the Agency Agreement; and will
reimburse DLA and each Selected Dealer for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such action or claim; provided, however, that the Company 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 the Registration Statement or Prospectus
or any such amendment or supplement in reliance upon and in conformity with
information furnished to the Company by DLA or any Selected Dealer, relating to
them, expressly for use therein; and provided further that as to any Preliminary
Prospectus, this agreement to indemnify and hold harmless shall not inure to the
benefit of DLA or any Selected Dealer if such person failed to give or send a
copy of the Prospectus, as the same may be amended or supplemented, to an
investor within the time required by the Act and Regulations, and the untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact in such Preliminary Prospectus was corrected
in the Prospectus or any supplement or amendment thereto.
(b) DLA and each Selected Dealer will indemnify and hold harmless the
Company (which term shall be deemed to include its subsidiaries) against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of a failure by DLA or a
Selected Dealer to comply with any covenants contained in Section 8 of or
elsewhere in this Agreement, or arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in 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 the Registration Statement or the Prospectus or
any such amendment or supplement in reliance upon and in conformity with
information furnished to the Company by you or such Selected Dealer relating to
you or such Selected Dealer expressly for use therein; and will reimburse the
Company for any legal or other expenses reasonably incurred by any of them in
connection with investigating or defending any such action or claim.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate
3
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation.
(d) If the indemnification provided for in this Section is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party 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 on the one hand and DLA or a Selected Dealer 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 or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of Company on the one hand
and DLA or a Selected Dealer on the other in connection with the statements or
omissions which 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 on the one hand
and DLA or a Selected Dealer on the other shall be deemed to be in the same
proportion as the total proceeds from the offering received by the Company bear
to the total compensation received by DLA or such Selected Dealer. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or DLA or a Selected Dealer 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 we agree that it would not
be just and equitable if contributions pursuant to this subsection (d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section ll(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls DLA and
any Selected Dealer within the meaning of the Act; and the obligations of DLA or
any Selected Dealer under this Section shall be in addition to any liability
which DLA and the respective Selected Dealers may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company, the Advisor and the Broker (including any person who, with his consent,
is named in the Registration Statement as about to become a director of the
Company) and to each person, if any, who controls the Company (including its
subsidiaries) within the meaning of the Act.
12. This Agreement shall be subject to and interpreted consistently
with the Agency Agreement. All representations, warranties, and covenants and
agreements made by you herein shall inure to the benefit of ▇▇▇▇▇ ▇▇▇▇▇▇
Associates, Inc. and the Company (including its subsidiaries).
Any notice from us to you shall be deemed to have been duly given if
mailed or telegraphed to you at your address as specified below.
Please confirm your agreement hereby by signing and returning to us at
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an
original of this letter.
4
Upon receipt thereof, this letter and such signed copy will evidence the
agreement among us.
Very truly yours,
▇▇▇▇▇ ▇▇▇▇▇▇ ASSOCIATES, INC.
By:
------------------------------------
Title:
--------------------------------
READ AND AGREED TO:
-----------------------------------
By:
--------------------------------
Title:
----------------------------
Address:
--------------------------
-----------------------------------
5
