Exhibit 1.3
FORM OF ESCROW AGREEMENT
This Escrow Agreement is made and entered into as of the ____ day of
___________, 1998, by and among XXXXXXXX & XXXXXXXXX, INCORPORATED, a Virginia
corporation (the AUnderwriter@), HERSHA HOSPITALITY TRUST, a Maryland real
estate investment trust (the "Company"), and FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, a national bank (the "Escrow Agent").
R E C I T A L S:
A. The Company proposes to sell 2,666,667 common shares (the "Shares")
of the Company at a price of $6.00 per Share (the "Offering").
B. The Company has retained the Underwriter, as agent for the Company
on a best efforts all-or-none basis, to sell 2,500,000 of the Shares in the
Offering, and the Underwriter has agreed to sell the Shares in the Offering as
the Company's agent on a best efforts all-or-none basis.
C. The Company intends to sell directly to shareholders the
remaining 166,667 Shares available in the Offering.
D. The Escrow Agent is willing to hold the proceeds of the Offering in
escrow pursuant to this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, it is hereby agreed as
follows:
1. Establishment of the Escrow Account. Contemporaneously herewith, the
parties have established a non-interest-bearing account with the Escrow Agent,
which escrow account is entitled AHersha Hospitality Trust Escrow Account@ (the
AEscrow Account@). The Underwriter and the Company will transfer funds (and the
Underwriter will instruct selected dealers (ASelected Dealers@) to transfer
funds) directly to the Escrow Agent as directed by its customers and will
instruct other purchasers of the Shares to make checks payable to AFirst Union
National Bank - Hersha Hospitality Trust Escrow Account.@
2. Escrow Period. The escrow period (the "Escrow Period") shall begin
with the commencement of the Offering and shall terminate upon the earlier to
occur of the following dates:
(a) the date on which the Escrow Agent confirms that it has
received in the Escrow Account gross proceeds of $16,000,002 (the "Minimum");
(b) ________________, 1998; or
(c) the date on which the Underwriter and the Company notify
the Escrow Agent that the Offering has been terminated.
During the Escrow Period, the Company is aware and understands that it is not
entitled to any funds received into escrow and no amounts deposited in the
Escrow Account shall become the property of the Company or any other entity, or
be subject to the debts of the Company or any other entity.
3. Deposits into the Escrow Account. The Underwriter and the Company
agree that they shall deliver to the Escrow Agent (and the Underwriter will
instruct Selected Dealers to deliver to the Escrow Agent) for deposit in the
Escrow Account all monies received from purchasers of the Shares by noon of the
next business day after receipt together with a written account of each sale,
which account shall set forth, among other things, (i) the purchaser's name and
address, (ii) the number of Shares purchased by the purchaser, (iii) the amount
paid therefor by the purchaser, (iv) whether the consideration received from the
purchaser was in the form of a check, draft or money order, and (v) the
purchaser's social security or tax identification number. The Escrow Agent
agrees to hold all monies so deposited in the Escrow Account (the AEscrow
Amount@) for the benefit of the parties hereto until authorized to disburse such
monies under the terms of this Agreement. The Company agrees that it will cause
the portion of the Minimum attributable to the 166,667 Shares it is selling
directly to be delivered to the Escrow Agent not less than three (3) business
days prior to the Closing Date (as defined in Section 8 of this Agreement).
4. Disbursements from the Escrow Account. In the event the Escrow Agent
does not receive the Minimum deposits totaling $16,000,002 prior to the
termination of the Escrow Period, or if the Underwriter and the Company notify
the Escrow Agent that the Offering has been terminated, the Escrow Agent shall
promptly refund to each purchaser the amount received from the purchaser,
without deduction, penalty, or expense to the purchaser, and the Escrow Agent
shall notify the Company and the Underwriter of its distribution of the funds.
The purchase money returned to each purchaser shall be free and clear of any and
all claims of the Company or any of its creditors.
In the event the Escrow Agent does receive the Minimum prior
to termination of the Escrow Period, on the Closing Date, the Escrow Agent shall
disburse the Escrow Amount pursuant to the provisions of Section 6, provided,
however, in no event will the Escrow Amount be released to the Company until
such amount is received by the Escrow Agent in collected funds. For purposes of
this Agreement, the term Acollected funds@ shall mean all funds, including fed
funds, received by the Escrow Agent which have cleared normal banking channels.
5. Collection Procedure.
(a) The Escrow Agent is hereby authorized to deposit each
check in the Escrow Account.
(b) In the event any check paid by a purchaser and deposited
in the Escrow Account shall be returned, the Escrow Agent shall notify the
Underwriter or the Company, as the case may be, by telephone of such occurrence
and advise it of the name of the purchaser, the amount of the check returned,
and any other pertinent information. The Escrow Agent shall then transmit the
returned check directly to the purchaser and shall transmit the statement
previously delivered by the Underwriter or the Company, as the case may be,
relating to such purchase to the Underwriter.
(c) If the Company rejects any purchase of Shares for which
the Escrow Agent has already collected funds, the Escrow Agent shall promptly
issue a refund check to the rejected purchaser. If the Underwriter rejects any
purchase for which the Escrow Agent has not yet collected funds but has
submitted the purchaser's check for collection, the Escrow Agent shall promptly
issue a check in the amount of the purchaser's check to the rejected purchaser
after the Escrow Agent has cleared such funds. If the Escrow Agent has not yet
submitted a rejected purchaser=s check for collection, the Escrow Agent shall
promptly remit the purchaser's check directly to the purchaser.
6. Delivery of Escrow Account and the Shares.
(a) Prior to the Closing (as defined in Section 8 of this
Agreement), the Underwriter and the Company shall provide the Escrow Agent with
a statement, executed by each party, containing the following information:
(i) The total number of Shares sold by the
Underwriter directly to purchasers and a list of each purchaser, and the number
of Shares purchased by such purchaser, and specification of the manner in which
the Shares should be issued; and
(ii) The total number of Shares sold by the Company
directly to purchasers and a
list of each purchaser, and the number of Shares purchased by such purchaser,
and specification of the manner in which the Shares should be issued; and
(iii) A calculation by the Underwriter and the
Company as to the manner in which the
Escrow Account should be distributed to the Company, the Underwriter and
Selected Dealers and in the event of oversubscription or rejection of certain
purchases, the aggregate amount to be returned to individual purchasers and a
listing of the exact amount to be returned to each such purchaser.
The Escrow Agent shall hold the Escrow Account and distribute it in accordance
with the above-described statement on the date of Closing or such later date
that it receives the above-described statement.
(b) The Company shall deliver the certificates representing
the Shares to the Escrow Agent prior to each Closing. On the day of the Closing
and in the event the Minimum is met, the Escrow Agent shall deliver the
certificates representing the Shares to the Company, the Underwriter and
Selected Dealers, as the case may be, or in the manner specified in writing to
the Escrow Agent by the Underwriter.
(c) Upon termination of the Offering by the Company or the
Underwriter for any reason, the Escrow Agent shall return to the purchasers who
contributed to the Escrow Account the exact amount contributed by them.
7. Investment of Escrow Account. The Escrow Agent shall deposit funds
received from purchasers in the Escrow Account, which shall be a
non-interest-bearing bank account at First Union National Bank of North
Carolina.
8. Closing Date. A AClosing@ shall be a date of closing of the
Offering, and a AClosing Date@ shall be a date on or subsequent to the date on
which the Escrow Agent has received the Minimum deposits in collected funds that
is designated to the Escrow Agent by the Underwriter and the Company as a
Closing Date.
9. Compensation of Escrow Agent. The Company shall pay the Escrow Agent
a fee for its services hereunder in an amount equal to Five Hundred Dollars
($500.00), which amount shall be paid on the initial Closing Date. In the event
the Offering is canceled for any reason, the Company shall pay the Escrow Agent
its fee within ten (10) days after the Escrow Amount is refunded to purchasers.
No such fee or any other monies whatsoever shall be paid out of or chargeable to
the funds on deposit in the Escrow Account.
10. Disbursement Into Court. If, at any time, there shall exist any
dispute between the Company, the Underwriter and/or the purchasers with respect
to the holding or disposition of any portion of the Escrow Amount or any other
obligations of the Escrow Agent hereunder, or if at any time the Escrow Agent is
unable to determine, to the Escrow Agent's sole satisfaction, the proper
disposition of any portion of the Escrow Amount or the Escrow Agent's proper
actions with respect to its obligations hereunder, or if the Company and the
Underwriter have not within 30 days of the furnishing by the Escrow Agent of a
notice of resignation appointed a successor Escrow Agent to act hereunder, then
the Escrow Agent may, in its sole discretion, take either or both of the
following actions:
(a) suspend the performance of any of its obligations under
this Escrow Agreement until such dispute or uncertainty shall be resolved to the
sole satisfaction of the Escrow Agent or until a successor Escrow Agent shall
have been appointed (as the case may be); provided however, that the Escrow
Agent shall continue to hold the Escrow Amount in accordance with Section 7
hereof; and/or
(b) petition (by means of an interpleader action or any other
appropriate method) any court of competent jurisdiction in Charlotte, North
Carolina, for instructions with respect to such dispute or uncertainty, and pay
into such court all funds held by it in the Escrow Account for holding and
disposition in accordance with the instructions of such court.
The Escrow Agent shall have no liability to the Company, the Underwriter or any
other person with respect to any such suspension of performance or disbursement
into court, specifically including any liability or claimed liability that may
arise, or be alleged to have arisen, out of or as a result of any delay in the
disbursement of funds held in the Escrow Account or any delay in or with respect
to any other action required or requested of the Escrow Agent.
11. Duties and Rights of the Escrow Agent. The foregoing agreements and
obligations of the Escrow Agent are subject to the following provisions:
(a) The Escrow Agent=s duties hereunder are limited solely to
the safekeeping of the Escrow Account and the delivery of the certificates
representing the Shares in accordance with the terms of this Agreement. It is
agreed that the duties of the Escrow Agent are only such as herein specifically
provided, being purely of a ministerial nature, and the Escrow Agent shall incur
no liability whatsoever except for negligence, willful misconduct or bad faith.
The Escrow Agent shall have no duty with respect to the certificates
representing the Shares other than to exercise reasonable care in acquiring and
delivering the same in accordance with this Agreement.
(b) The Escrow Agent is authorized to rely on any document
believed by the Escrow Agent to be authentic in making any delivery of the
Escrow Account or the certificates representing the Shares. It shall have no
responsibility for the genuineness or the validity of any document or any other
item deposited with it and it shall be fully protected in acting in accordance
with this Agreement or instructions received.
(c) The Company and the Underwriter hereby waive any suit,
claim, demand or cause of action of any kind which they may have or may assert
against the Escrow Agent arising out of or relating to the execution or
performance by the Escrow Agent of this Agreement, unless such suit, claim,
demand or cause of action is based upon the negligence, willful misconduct, or
bad faith of the Escrow Agent.
12. Notices. It is further agreed as follows:
(a) All notices given hereunder will be in writing, served by
registered or certified mail, return receipt requested, postage prepaid, or by
hand-delivery, to the parties at the following addresses:
To the Company:
Xx. Xxxx X. Xxxx
Hersha Hospitality Trust
000 Xxxxxxxx Xxxxx, Xxx X
Xxx Xxxxxxxxxx, Xxxxxxxxxxxx 00000
With a copy to:
Xxxxxxx X. Xxxxx, Esquire
Hunton & Xxxxxxxx
Riverfront Plaza, East Tower
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
To the Underwriter:
Xx. X. XxXxxxxx Xxxxx, III
Xxxxxxxx & Strudwick Incorporated
0000 X. Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxxx X. Xxxxxxx, Esquire
Xxxxxxx & Savage, P.C.
1800 NationsBank Center
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
To the Escrow Agent:
First Union National Bank of North Carolina
c/o Shareholder Services Division
000 Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: ___________________
13. Miscellaneous.
(a) This Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties hereto and their respective successors and
assigns.
(b) If any provision of this Agreement shall be held invalid
by any court of competent jurisdiction, such holding shall not invalidate any
other provision hereof.
(c) This Agreement shall be governed by the applicable laws of
the Commonwealth of Virginia.
(d) This Agreement may not be modified except in writing
signed by the parties hereto.
(e) All demands, notices, approvals, consents, requests and
other communications hereunder shall be given in the manner provided in this
Agreement.
(f) 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their respective names, all as of the date first above written.
XXXXXXXX & XXXXXXXXX, INCORPORATED
By:
X. XxXxxxxx Downs, III
Senior Vice President
HERSHA HOSPITALITY TRUST
By:
Xxxx X. Xxxx
Chief Executive Officer
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Escrow Agent
By:
----------------------
Trust Officer
