<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission File Number: 0-25060
HUMPHREY HOSPITALITY TRUST, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Virginia 52-1889548
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
12301 Old Columbia Pike, Silver Spring MD 20904 (301) 680-4343
(Address of principal executive offices) (Registrant's telephone number
(zip code) including area code)
</TABLE>
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------- ------
The number of shares of Common Stock, $.01 par value per share, outstanding on
August 4, 1999 was 4,631,700.
Page 1 of 25
<PAGE> 2
HUMPHREY HOSPITALITY TRUST, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. HUMPHREY HOSPITALITY TRUST, INC.
--------------------------------
Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998 3
Consolidated Statements of Operations
for the three and six months ended June 30, 1999 and June 30, 1998 4
Consolidated Statements of Cash Flows for the six months ended June 30, 1999 and
June 30, 1998 5
Notes to Consolidated Financial Statements 6
HUMPHREY HOSPITALITY MANAGEMENT, INC.
-------------------------------------
Balance Sheets as of June 30, 1999 and December 31, 1998 12
Summary Statements of Operations and Changes in Retained Earnings (Deficit)
for the three and six months ended June 30, 1999 and June 30, 1998 13
Statement of Cash Flows for the six months ended June 30, 1999 and June 30, 1998 14
Notes to Financial Statements 15
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures about Market Risk 24
PART II. OTHER INFORMATION
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 25
SIGNATURES 25
</TABLE>
-2-
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HUMPHREY HOSPITALITY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of
June 30, 1999 December 31, 1998
------------- -----------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Investment in hotel properties, net of accumulated depreciation $ 71,434,793 $ 72,804,561
Cash and cash equivalents 5,675 541,864
Note receivable from sale of asset 250,000 --
Accounts receivable from Lessee 2,890,719 3,024,585
Deferred expenses, net of accumulated amortization 1,456,766 1,778,083
Other assets 851,815 695,197
----------- ------------
Total assets $ 76,889,768 $ 78,844,290
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage notes and bonds payable $ 42,328,471 $ 44,195,724
Due to affiliates 1,293,686 --
Accounts payable and accrued expenses 1,429,733 1,733,211
------------ ------------
Total liabilities 45,051,890 45,928,935
----------- -----------
Minority interest 5,027,266 5,197,334
------------ ------------
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 10,000,000 shares
authorized, no shares issued and outstanding -- --
Common stock. $.01 par value, 25,000,000 shares
authorized, 4,631,700 shares issued and outstanding 46,317 46,317
Additional paid-in capital 29,039,282 29,039,282
Distributions in excess of net earnings (2,274,987) (1,367,578)
------------- --------------
26,810,612 27,718,021
----------- -----------
Total liabilities and shareholders' equity $ 76,889,768 $ 78,844,290
=========== ==========
</TABLE>
- -----------------------
See notes to consolidated financial statements.
-3-
<PAGE> 4
HUMPHREY HOSPITALITY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six Months ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Percentage lease revenue $ 3,192,465 $ 2,354,422 $ 6,040,233 $ 4,258,727
Other revenue 3,978 3,831 13,114 7,357
--------- --------- ---------- ----------
Total revenue 3,196,443 2,358,253 6,053,347 4,266,084
--------- --------- --------- ---------
Expenses
Interest 870,435 486,884 1,749,191 1,145,880
Property operating expenses 266,703 169,021 518,683 345,950
General and administrative 124,708 147,277 233,446 249,694
Depreciation and amortization 1,026,333 563,291 2,076,014 1,115,551
--------- ------- --------- ---------
Total expenses 2,288,179 1,366,473 4,577,334 2,857,075
--------- --------- --------- ---------
Income from operations 908,264 991,780 1,476,013 1,409,009
Gain (loss) on sale of asset (78,487) 195,001 (78,487) 195,001
Income allocated to minority interest (131,022) (163,071) (220,669) (229,327)
--------- --------- --------- -----------
Net income $ 698,755 $ 1,023,710 $ 1,176,857 $ 1,374,683
Distributions in excess of net earnings,
beginning of period (1,931,611) (577,992) (1,367,578) (223,920)
Distributions declared (1,042,131) (1,007,395) (2,084,266) (1,712,440)
----------- ----------- ----------- -----------
Distributions in excess of net earnings,
end of period $(2,274,987) $ (561,677) $(2,274,987) $ (561,677)
=========== =========== =========== ===========
Basic earnings per common share $ 0.15 $ 0.24 $ 0.25 $ 0.35
Diluted earnings per common share $ 0.15 $ 0.24 $ 0.25 $ 0.35
Weighted average shares :
Basic 4,631,700 4,303,129 4,631,700 3,894,683
Diluted 5,500,004 (2) 4,989,734(1) 5,500,004 (2) 4,566,753 (1)
</TABLE>
- ---------------------
(1) Includes 746,043 units, which are redeemable on a one-for-one basis for
shares of common stock.
(2) Includes 868,304 units, which are redeemable on a one-for-one basis for
shares of common stock.
See notes to consolidated financial statements.
-4-
<PAGE> 5
HUMPHREY HOSPITALITY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,176,857 $1,374,683
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 2,076,014 1,115,551
Income allocated to minority interest 220,669 229,327
Loss (gain) on sale of asset 78,487 (195,001)
Changes in assets and liabilities
Decrease in accounts receivable from Lessee 133,866 120,990
Increase in other assets (91,242) (16,966)
Franchise costs paid -- (204,500)
Increase in due to affiliates 19,276 --
Increase in accounts payable
and accrued expenses 63,131 219,770
------------ ----------
Net cash provided by operating activities 3,677,058 2,643,854
--------- ---------
Cash flows from investing activities
Investment in hotel properties (714,293) (11,791,873)
Proceeds from sale of hotel 1,131,443 1,457,603
Deposit to replacement reserve (689,516) (480,061)
Withdrawals from replacement reserve 624,141 628,285
------- -------
Net cash provided by (used in) investing activities 351,775 (10,186,046)
------- ------------
Cash flows from financing activities
Draw on line of credit 3,182,566 11,810,000
Repayment of line of credit (6,260,183) (11,954,942)
Principal payments on long-term debt (48,634) (50,000)
Principal payments on capital leases (14,178) (34,184)
Net proceeds from issuance of stock -- 10,929,599
Proceeds from long term debt 5,054,000 --
Repayment of bonds payable (3,795,000) --
Financing costs paid (210,266) (100,000)
Distributions paid (2,473,327) (1,753,948)
----------- -----------
Net cash provided by financing activities (4,565,022) 8,846,525
----------- ---------
Net (decrease) increase in cash and cash equivalents (536,189) 1,304,333
Cash and cash equivalents, beginning of period 541,864 204,065
------- -------
Cash and cash equivalents, end of period $ 5,675 $1,508,398
======= ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 1,968,797 $1,234,328
=========== ==========
</TABLE>
Supplemental disclosure of non-cash investing and financing activities:
During 1999, the Company acquired $51,894 of equipment subject to capital
leases.
As of June 30, 1999, investment in hotel property includes $1,274,410 of amounts
included in due to affiliates.
During 1999, the Company received a note receivable in the amount of $250,000 in
connection with the sale of hotel assets.
See notes to consolidated financial statements.
-5-
<PAGE> 6
HUMPHREY HOSPITALITY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
Note 1. Organization and Summary of Significant Accounting Policies
Humphrey Hospitality Trust, Inc. was incorporated under the laws of
the Commonwealth of Virginia on August 23, 1994. The Company is a
self-administered real estate investment trust ("REIT") for federal income tax
purposes. Humphrey Hospitality Trust, Inc., through its wholly-owned subsidiary
Humphrey Hospitality REIT Trust (collectively, the "Company") owns a controlling
partnership interest in Humphrey Hospitality Limited Partnership (the
"Partnership") and through the Partnership owns interests in twenty-five
existing limited-service hotels (including seven hotel properties acquired
during 1998). The Partnership owns a 99% general partnership interest and the
Company owns a 1% limited partnership interest in Solomons Beacon Inn Limited
Partnership (the "Subsidiary Partnership"). As of June 30, 1999, the Company
owns an 84.21% interest in the Partnership. The Company began operations on
November 29, 1994.
Since inception, the Partnership has leased all of its hotel
facilities to Humphrey Hospitality Management, Inc. (the "Lessee"), a
corporation majority owned by James I. Humphrey, Jr., the President and Chairman
of the Board of the Company. The Lessee operates and leases the hotel properties
pursuant to separate percentage lease agreements (the "Percentage Leases"),
which provide for both fixed rents and percentage rents based on the revenues of
the hotels.
The Company has completed the following public offerings since its inception:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Offering price per Net proceeds
Offering Date completed share Shares sold (in thousands)
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Initial public offering November 29, 1994 $ 6.00 1,321,700 $ 6,950
------------------------------------------------------------------------------------------------------------------
Second offering July 21, 1995 $ 7.75 1,010,000 $ 6,957
------------------------------------------------------------------------------------------------------------------
Third offering December 6, 1996 $ 8.25 1,150,000 $ 8,645
------------------------------------------------------------------------------------------------------------------
Fourth offering April 24, 1998 $ 10.50 1,150,000 $ 10,945
------------------------------------------------------------------------------------------------------------------
</TABLE>
On April 1, 1999, the Company paid off the bonds secured by its
Rodeway Inn hotel located in Wytheville, VA. The Company utilized funds from
its credit facility with Mercantile Safe Deposit and Trust Company (the
"Mercantile Credit Facility") and obtained a short term loan with Crestar Bank
to pay off the bonds. The Crestar Bank loan is for a period of one year and
bears interest at the rate of LIBOR plus 300 basis points.
On April 17, 1999, the Company chose to reduce its loan commitment
from BankBoston from $35 million to $20 million. The remaining terms of the
commitment are unchanged. In connection with the reduction in the commitment,
$83,409 in unamortized loan costs were expensed through amortization on the
Statement of Operations.
On April 22, 1999, the Company executed an agreement to sell its
Rodeway Inn hotel in Wytheville, VA for $1,450,000. The sale of the Rodeway Inn
in Wytheville, VA closed on June 24, 1999 for $1,200,000 in cash and $250,000 in
a note receivable. The note receivable shall be repaid in equal monthly
installments of principal and interest based on a fifteen year amortization
schedule, and will bear interest at 6.50% per annum. The Company utilized
approximately $759,000 of the cash proceeds to pay off its short-term loan with
Crestar Bank. The Company had executed an agreement on December 30, 1998, to
sell the Wytheville hotel, to another purchaser for $1,450,000. The purchasers
subsequently breached their obligations under the agreement and, on March 19,
1999, the Company filed an action in the Circuit Court of Wythe County, VA
against the purchasers to, among other things, compel specific performance and
recover damages under the agreement. The Company will continue with its suit
for damages against the previous purchaser.
On May 5, 1999, Mercantile Safe-Deposit and Trust Company extended
the term of the Mercantile Credit Facility for an additional three years.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, the Partnership and the Subsidiary Partnership. All significant
intercompany balances and transactions have been eliminated.
-6-
<PAGE> 7
HUMPHREY HOSPITALITY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1999
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Investment in Hotel Properties
The hotel properties are recorded at cost. Depreciation is computed
using the straight-line method over estimated useful lives of the assets, which
range from 31 to 40 years for buildings and 5 to 12 years for furniture and
equipment. Maintenance and repairs are generally the responsibility of the
Lessee and are charged to the Lessee's operations as incurred; major
replacements, renewals and improvements are capitalized. Upon disposition, both
the asset and accumulated depreciation accounts are relieved and the related
gain or loss is credited or charged to the statement of income.
The Company reviews the carrying value of each hotel property in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 121 to
determine if circumstances exist indicating an impairment in the carrying value
of the investment in the hotel property or that depreciation periods should be
modified. If facts or circumstances support the possibility of impairment, the
Company will prepare a projection of the undiscounted future cash flows of the
specific hotel property and determine if the investment in the hotel property is
recoverable based on the undiscounted future cash flows. If impairment is
indicated, an adjustment will be made to the carrying value of the hotel
property based on the discounted future cash flows. The Company does not believe
that there are any current facts or circumstances indicating impairment of any
of its investment in hotel properties, except as noted above.
Revenue Recognition
Lease income is recognized when earned from the Lessee under the
lease agreements from the date of acquisition of each hotel property. Contingent
lease income is deferred until the specified target is achieved.
Earnings Per Common Share
The Company calculates earning per share in accordance with SFAS No.
128, Earnings Per Share.
Distributions
The Company intends to pay regular monthly dividends, which are
dependent upon the receipt of distributions from the Partnership.
Minority Interest
Minority interest in the Partnership represents the limited
partners' proportionate share of the equity of the Partnership. Income is
allocated to minority interest based on weighted average percentage ownership
throughout the year.
Income Taxes
The Company intends to continue to qualify as a REIT under Sections
856 through 860 of the Internal Revenue Code of 1986, as amended. Accordingly,
no provision for Federal income taxes has been reflected in the financial
statements.
Basis of Presentation
The accompanying consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, accordingly, do
not include all of the disclosures normally required by generally accepted
accounting principles or those made in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission. The financial
-7-
<PAGE> 8
HUMPHREY HOSPITALITY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1999
information has been prepared in accordance with the Company's customary
accounting practices. In the opinion of management, the information presented
reflects all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of the Company's financial position as of June
30, 1999, and the results of operations for the three and six months ended June
30, 1999 and June 30, 1998. The results of operations for the three and six
months ended June 30, 1999 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1999. The unaudited consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
In June 1998, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities," which requires that an entity recognize all derivative instruments
as either assets or liabilities in the statement of financial position and
measures those instruments at fair value. This statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. The Company is
currently in the process of evaluating the effect this new standard will have
on its financial statements.
Note 2. Merger Information
On June 11, 1999 the Company announced plans to merge with Supertel
Hospitality, Inc. ("Supertel"). Supertel owns and operates limited service
hotel properties under the Super 8, Comfort Inn and Wingate Inn names located
primarily in the Midwest and Texas. Under the merger agreement, Humphrey
Hospitality would exchange 1.30 shares of Humphrey Hospitality Trust, Inc.
common stock for each share of Supertel common stock. The boards of both
companies have approved the merger. The merger is subject to a number of
conditions, including approval by the shareholders of Humphrey Hospitality
Trust, Inc. and the stockholders of Supertel. The Company has scheduled a
shareholders meeting to vote on the merger on September 27, 1999, in Richmond,
Virginia. Completion of the merger is expected in the fall of 1999.
The merger agreement provides for the stockholders of Supertel to
receive a pre-closing dividend of Supertel's earnings and profits, which
Supertel presently expects to be in the range of $4.50 to $4.80 per share. The
special dividend would be payable only if the merger occurs. Supertel has the
right to terminate the agreement if the dividend is less than $4.00 per share
of Supertel common stock. Under the merger agreement, the Company would acquire
the hotel assets of Supertel. The 63 hotels (containing 4,558 rooms) and one
office building acquired by the Company under the merger will be leased to a
subsidiary of Humphrey Hospitality Management, Inc. Humphrey Hospitality
Management, Inc. also leases and manages 25 hotels owned by the Company. After
the merger, the Company will own 88 hotels with approximately 6,200 rooms
located in 19 states.
-8-
<PAGE> 9
HUMPHREY HOSPITALITY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1999
The following pro forma information for the six months ended June 30, 1999 is
presented for informational purposes as if the merger with Supertel had occurred
on January 1, 1999.
Humphrey Hospitality Trust, Inc.
SELECTED PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
Six months ended
June 30, 1999
-------------
<S> <C>
Revenues $16,351,000
Expenses 12,070,000
Minority Interest 309,000
------------
Net income $ 3,972,000
============
Earnings per common share $ 0.36
============
</TABLE>
Note 3. Distributions
The Company declares and pays dividends to its shareholders on a
monthly basis. On June 30, 1999, the Company paid a $.075 per share distribution
on each share of Common Stock outstanding (including the distribution to
minority interest) to shareholders of record as of May 31, 1999. The
distribution declared for shareholders of record as of June 30, 1999 was paid on
July 30, 1999, at a rate of $.075 per share.
Note 4. Commitments and Contingencies
Pursuant to the Humphrey Hospitality Limited Partnership Agreement,
the limited partners have certain redemption rights (the "Redemption Rights"),
which enable them to cause the Partnership to redeem their Units in exchange for
shares of Common Stock or for cash at the election of the Company. The
Redemption Rights may be exercised by the limited partners at any time. At June
30, 1999, the aggregate number of shares of Common Stock issuable to the limited
partners upon exercise of the Redemption Rights is 868,304. The number of shares
issuable upon exercise of the Redemption Rights will be adjusted upon the
occurrence of stock splits, mergers, consolidations or similar pro rata share
transactions, that otherwise would have the effect of diluting the ownership
interests of the limited partners or the shareholders of the Company.
The Company is the sole general partner in the Partnership, which is
the sole general partner in the Subsidiary Partnership and, as such, is liable
for all recourse debt of the partnerships to the extent not paid by the
partnerships. In the opinion of management, the Company does not anticipate any
losses as a result of its general partner obligations.
The Company has entered into percentage leases with the Lessee
relating to each of the hotels. Each such lease has a term of 10 years, with a
five-year renewal option at the option of the Lessee. Pursuant to the terms of
the Percentage Leases, the Lessee is required to pay both base rent and
percentage rent and certain other additional charges and is entitled to all
profits from the operations of the hotels after the payment of certain specified
operating expenses. Also pursuant to the terms of the Percentage Leases, the
Company is obligated to make available to the Lessee an amount equal to 6% of
room revenue on a quarterly, cumulative basis for capital improvements and
refurbishments.
The Company has future lease commitments from the Lessee through September 2008.
Minimum future rental income under these noncancelable operating leases at
December 31, 1998 is as follows:
-9-
<PAGE> 10
HUMPHREY HOSPITALITY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1999
<TABLE>
<CAPTION>
Year (in thousands)
---- --------------
<S> <C>
1999 5,352
2000 5,352
2001 5,352
2002 5,352
2003 5,352
Thereafter 15,977
------
$42,737
=======
</TABLE>
For the three and six months ended June 30, 1999, the Company earned
base rents of $1,409,070 and $2,813,473, respectively, as compared to base rents
of $1,032,702 and $2,053,185 for the three and six months ended June 30, 1998.
For the three and six months ended June 30, 1999, the Company earned percentage
rents of $1,783,395 and $3,226,760, respectively, as compared to percentage
rents of $1,321,720 and $2,205,542, for the three and six months ended June 30,
1998. As of June 30, 1999, $2,890,719 was due from the Lessee. The percentage
rents are based on a percentage of gross room and other revenue.
During the six months ended June 30, 1999, the Lessee provided for
capital improvements totaling $1,843,913, which are the responsibility of the
Company and have been capitalized and included in investment in hotel
properties. As of June 30, 1999, $1,274,410 of that amount remained payable and
is recorded in due to Lessee.
The hotel properties are operated under franchise agreements with
various franchisors assumed by the Lessee that have an eight to twenty year life
but may be terminated by the franchisor on certain anniversary dates specified
in the agreements. The agreements require annual payments for franchise
royalties, reservation, and advertising services, which are based upon
percentages of gross room revenue. These fees are paid by the Lessee.
Note 5. Mortgages and Bonds Payable
The Company can borrow up to $25.5 million under the Mercantile
Credit Facility which was renewed in May 1999 and has a term of three years.
The Mercantile Credit Facility bears interest at the prime rate plus 25 basis
points (presently 8.25%) and will mature on April 11, 2002. The Mercantile
Credit Facility is secured by the Company's hotels located in Solomons, MD;
Farmville, VA (2 hotels); Culpeper, VA; New Castle, PA; Harlan, KY; Danville,
KY; Murphy, NC; Chambersburg, PA; Allentown, PA; Morgantown, WV and Rocky
Mount, VA.
On August 18, 1998, the Company obtained a $35 million credit
facility from BankBoston (the "BankBoston Credit Facility"). On April 17, 1999
the Company reduced the commitment from $35 million to $20 million. In
connection with the reduction in the commitment , $83,409 in unamortized loan
costs were expensed through amortization on the Statement of Operations. The
term of the BankBoston Credit Facility is for three years and bears interest at
LIBOR plus between 165 and 215 basis points. The Company entered into an
interest swap agreement that fixed the interest rate on a notional amount of
approximately $11.2 million at a ceiling of 7.79%. The line is
cross-collaterized by the Company's hotels located in Jackson, TN; Key Largo,
FL; Ellenton, FL (2 hotels); Shelby, NC; Cleveland, TN; Dahlgren, VA; Princeton,
WV and Dover, DE.
On February 8, 1999, the Company obtained a $5.054 million, ten
year, 7.75% fixed rate mortgage, from Susquehanna Bank on the Company's Comfort
Inn and Holiday Inn Express hotels located in Gettysburg, PA.
On February 26, 1999, the Company satisfied the bonds secured by
its Comfort Inn hotel located in Morgantown, WV. This hotel was subsequently
placed as additional collateral on the Mercantile Credit Facility. In connection
with this transaction, $97,225 in unamortized loan costs were expensed through
amortization on the Statement of Operations.
On April 1, 1999, the Company paid off the bonds secured by the
Rodeway Inn hotel located in Wytheville, VA. The Company utilized funds from the
Mercantile Credit Facility and executed a short term note with Crestar Bank of
approximately $763,000 (the "Note") to pay off the bonds. The Note bears
interest at LIBOR plus 300 basis points and was paid off on June 24, 1999 with
proceeds from the sale of the Rodeway Inn hotel in Wytheville, VA.
-10-
<PAGE> 11
HUMPHREY HOSPITALITY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1999
Note 6. Pro Forma Financial Information
The following pro forma information for the six months ended June 30, 1998 is
presented for informational purposes as if the acquisition of all hotels by the
Partnership and the commencement of the Percentage Leases had occurred on
January 1, 1998. Historical information is presented for the six months ended
June 30, 1999.
Humphrey Hospitality Trust, Inc.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 1999 June 30, 1998
------------- -------------
(Historical) (Proforma)
<S> <C> <C>
Total revenue 6,053,347 6,050,556
Total expenses 4,577,334 4,079,945
--------- ---------
Income from operations 1,476,013 1,970,611
Loss on sale of asset (78,487) --
Income allocated to minority interest (220,669) (311,159)
-------- --------
Net income $ 1,176,857 $ 1,659,452
============= ==============
Earnings per common share $ 0.25 $ 0.36
============= ==============
Weighted average shares 4,631,700 4,631,700
</TABLE>
-11-
<PAGE> 12
HUMPHREY HOSPITALITY MANAGEMENT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---- ----
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $2,625,924 $3,262,524
Accounts receivable 492,346 389,536
Prepaid expenses 9,797 41,095
Due from affiliates 1,313,637 405,765
Other assets 67,114 71,973
--------- ---------
Total current assets $4,508,818 $4,170,893
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 561,435 $ 426,685
Accrued expenses 777,686 465,666
Advance deposit 20,603 24,669
Prepaid slip rental 76,767 32,817
Due to affiliates 2,890,719 3,024,324
--------- ---------
Total current liabilities 4,327,210 3,974,161
--------- ---------
COMMITMENTS -- --
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 1,000 shares authorized,
134 and 100 shares, respectively issued and outstanding 1 1
Paid-in capital 50,369 --
Retained earnings 171,238 196,731
----------- ----------
221,608 196,732
Less: Note receivable - shareholder (40,000) --
------------ ----------
Total shareholders' equity 181,608 196,732
---------- ----------
Total liabilities and shareholders' equity $4,508,818 $4,170,893
========= =========
</TABLE>
See notes to financial statements.
-12-
<PAGE> 13
HUMPHREY HOSPITALITY MANAGEMENT, INC.
STATEMENTS OF OPERATIONS AND
CHANGES IN RETAINED EARNINGS (DEFICIT)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
<TABLE>
<CAPTION>
Three months ended Six Months ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Room revenue $7,306,385 $5,413,665 $13,159,236 $9,075,645
Telephone revenue 110,070 83,221 221,174 157,633
Slip revenue 89,311 90,528 149,175 162,246
Interest revenue 11,805 15,229 25,507 25,124
Other revenue 146,133 145,231 316,105 234,931
------- ------- ------- -------
Total revenue 7,663,704 5,747,874 13,871,197 9,655,579
--------- --------- ---------- ---------
Expenses
Salaries and wages 1,827,838 1,252,186 3,396,097 2,373,000
Room expense 499,888 295,581 895,959 511,153
Telephone 114,058 73,544 222,764 151,362
Marina expense 7,835 8,415 18,073 15,696
General and administrative 424,205 274,711 749,204 489,785
Marketing and promotion 272,632 190,688 500,078 364,246
Utilities 307,512 231,578 631,598 465,891
Repairs and maintenance 215,990 142,755 375,130 240,119
Taxes and insurance 69,303 85,648 177,659 158,010
Franchise fees 389,257 272,427 658,981 461,611
Lease payments 3,307,923 2,354,422 6,271,147 4,258,727
--------- --------- --------- ---------
Total expenses 7,436,441 5,181,955 13,896,690 9,489,600
--------- --------- ---------- ---------
Net income (loss) $ 227,263 $ 565,919 $ (25,493) $ 165,979
Retained earnings (deficit),
beginning of period (56,025) (214,996) 196,731 184,944
Distributions paid -- (90,000) -- (90,000)
----------- -------- ----------- --------
Retained earnings,
end of period $ 171,238 $ 260,923 $ 171,238 $ 260,923
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
-13-
<PAGE> 14
HUMPHREY HOSPITALITY MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (25,493) $ 165,979
Adjustments to reconcile net income (loss) to net cash
used in operating activities
Changes in assets and liabilities
Increase in accounts receivable (102,810) (248,351)
Decrease in prepaid expenses 31,298 55,916
Decrease (increase) in other assets 4,859 (3,175)
Increase (decrease) in accounts payable 134,750 (1,505)
Increase in prepaid slip rentals 43,950 43,310
Decrease in due to affiliates (133,605) (105,453)
Increase (decrease) in accrued expenses 312,020 (2,155)
(Decrease) increase in advance deposits (4,066) 14,543
------------ ----------
Net cash provided by (used in) operating activities 260,903 (80,891)
----------- -----------
Cash flows from investing activities
Advances to affiliates (907,872) --
--------- ----------
Net cash used in investing activities (907,872) --
---------- ----------
Cash flows from financing activities
Issuance of common stock 10,369 --
Distributions paid -- (90,000)
Advance from shareholder 400,000(a) 200,000
Repayment of advance from shareholder (400,000)(a) (200,000)
----------- --------
Net cash provided by (used in) financing activities 10,369 (90,000)
--------- ---------
Net decrease in cash and
cash equivalents (636,600) (170,891)
Cash and cash equivalents, beginning of period 3,262,524 2,483,403
--------- ---------
Cash and cash equivalents, end of period $2,625,924 $2,312,512
========= ==========
</TABLE>
- ---------------------
(a) Mr. Humphrey provided a $400,000 line of credit to the Lessee in
January 1999, at an interest rate equal to the prime rate plus 25
basis points. The line of credit was repaid to Mr. Humphrey in April
1999.
See notes to financial statements.
-14-
<PAGE> 15
HUMPHREY HOSPITALITY MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
Note 1. Organization and Summary of Significant Accounting Policies
Humphrey Hospitality Management, Inc. (the "Lessee") was
incorporated under the laws of the State of Maryland on August 18, 1994 to lease
and operate hotel properties from Humphrey Hospitality Limited Partnership. As
of December 31, 1998, James I. Humphrey, Jr. was the sole shareholder of the
Lessee. On June 1, 1999, the Lessee sold shares of stock to certain of its
officers, constituting a 25% interest in the company, in exchange for $10,369 in
cash and a $40,000 note receivable.
Basis of Presentation
The accompanying financial statements have been prepared in
accordance with the instructions to Form 10-Q and accordingly, do not include
all of the disclosures normally required by generally accepted accounting
principles. The financial information has been prepared in accordance with the
Lessee's customary accounting practices. In the opinion of management, the
information presented reflects all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the Lessee's financial
position as of June 30, 1999, and the results of operations for the three and
six months ended June 30, 1999 and June 30, 1998. The results of operations for
the three and six months ended June 30, 1999 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1999. The
unaudited financial statements should be read in conjunction with the audited
financial statements and footnotes thereto included in Humphrey Hospitality
Trust, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998.
Accounts Receivable
The Lessee considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required. If amounts become
uncollectible, they will be charged to operations when that determination is
made.
Income Taxes
The Lessee has elected to be treated as an S Corporation for federal
and state income tax purposes. Therefore, no provision or benefit for income
taxes has been included in these financial statements since taxable income or
loss passes through to, and is reportable by, the shareholders individually.
Lease Expense
Lease expense is recognized when accrued under the lease agreements
from the date of acquisition of each hotel property. Contingent lease expense is
accrued based on the probability of the future revenue target being achieved, in
accordance with Emerging Issues Task Force ("EITF") 98-9.
Note 2. Related Party Transactions
Shared Expenses
Humphrey Associates, Inc. and HAI Management, Inc., affiliates of
the Lessee, share certain operating expenses with the Lessee. Expenditures are
allocated based on each entity's pro rata share of the expense. At June 30,
1999, $39,227 was due from affiliates for such allocated expenses. During the
six months ended June 30, 1999, the Lessee provided for capital improvements
totaling $1,843,913, which are the responsibility of the Company and have been
capitalized and included in investment in hotel properties. As of June 30, 1999,
$1,274,410 of that amount remained payable and is recorded as due from
affiliates.
Note 3. Commitments
The Lessee has entered into percentage leases with the Partnership
and the Subsidiary Partnership relating to each of
-15-
<PAGE> 16
HUMPHREY HOSPITALITY MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1999
their hotels. Each such lease has a term of 10 years with a 5 year renewal
option at the option of the Lessee. Pursuant to the terms of the Percentage
Leases, the Lessee is required to pay both base rent and percentage rent and
certain other additional charges. The Lessee has future lease commitments
through September 2008. Minimum future lease payments due under these
noncancellable operating leases at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Year
----
<S> <C>
1999 $ 5,351,650
2000 5,351,650
2001 5,351,650
2002 5,351,650
2003 5,351,650
Thereafter 15,976,885
----------
$42,735,135
===========
</TABLE>
For the three months and six months ended June 30, 1999, the Lessee
incurred base rents of $1,409,070 and $2,813,473 respectively, as compared to
base rents of $1,032,702 and $2,053,185 for the three and six months ended June
30, 1998. For the three and six months end June 30, 1999 the Company incurred
percentage rents of $1,898,853 and $3,457,674 which includes contingent rents
of $115,458 and $230,914 respectively, as compared to percentage rents of
$1,321,720 and $2,205,542 for the three and six months ended June 30, 1998. As
of June 30, 1999, the amount due the Partnership and the Subsidiary Partnership
for lease payments was $2,890,719 collectively, and is included in due to
affiliates on the balance sheet.
-16-
<PAGE> 17
HUMPHREY HOSPITALITY MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1999
Note 4. Pro Forma Financial Information
The following pro forma information for the six months ended June 30, 1998 is
presented for informational purposes as if the acquisition of all hotels by the
Partnership and the commencement of the Percentage Leases had occurred on
January 1, 1998. Historical information is presented for the six months ended
June 30, 1999.
Humphrey Hospitality Management, Inc.
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 1999 June 30, 1998
------------- -------------
(Historical) (Pro Forma)
<S> <C> <C>
Revenues
Room revenue $ 13,159,236 $ 13,190,231
Telephone revenue 221,174 246,091
Slip revenue 149,175 162,246
Interest revenue 25,507 25,124
Other revenue 316,105 289,282
------- -------
Total revenue 13,871,197 13,912,974
---------- ----------
Expenses
Salaries and wages 3,396,097 3,328,773
Room expense 895,959 763,925
Telephone 222,764 220,503
Marina expense 18,073 15,696
General and administrative 749,204 702,654
Marketing and promotion 500,078 496,462
Utilities 631,598 656,874
Repairs and maintenance 375,130 368,954
Taxes and insurance 177,659 235,271
Franchise fees 658,981 668,453
Lease payments 6,271,147 6,043,199
--------- ---------
Total expenses 13,896,690 13,500,764
---------- ----------
Net (loss) income $ (25,493) $ 412,210
============ ============
</TABLE>
-17-
<PAGE> 18
Item 2.
HUMPHREY HOSPITALITY TRUST, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q may include forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements are
identified by phrases such as the Company "expects" or "anticipates" and words
of similar import. The Company's actual results may differ materially from those
projected. Factors that could cause such differences include difficulties in
integrating and operating acquired properties; termination of franchise
agreements; default of the Lessee under operating leases; and general risks
associated with investments in real estate, including the effect of changes in
economic, competitive and other market conditions in the markets where the
Company's properties are concentrated, the inability of properties to generate
adequate cash flow to fund debt service and operating expenses, financing and
refinancing risks related to the Company's floating rate debt and new debt
necessary to support growth. The Company cautions readers not to place undue
reliance on any such forward-looking statements, which statements are made
pursuant to the Private Securities Litigation Reform Act of 1995.
Humphrey Hospitality Trust, Inc. is a Virginia corporation that
operates as a real estate investment trust (a "REIT") under the Internal
Revenue Code of 1986, as amended (the "Code"). The Company, through Humphrey
Hospitality REIT Trust, the Company's wholly-owned subsidiary, is the sole
general partner of Humphrey Hospitality Limited Partnership and owns an 84.21%
interest in the Partnership at June 30, 1999. As of June 30, 1999, the
Partnership owned directly or indirectly twenty-five hotel properties (the
"Hotels"). Eight of the Hotels were acquired by the Company in connection with
its initial public stock offering in November 1994, one Hotel was acquired in
July 1995, one Hotel was developed in 1996 and opened for business in January
1997, ten Hotels were acquired between February 1997 and September 1997 and
seven Hotels were acquired between June 1998 and September 1998. One Hotel was
sold in June 1998 and one in June 1999.
In order for the Company to qualify as a REIT under the Code,
neither the Company nor the Partnership can operate hotels. Therefore, the
Partnership leases the Hotels pursuant to percentage leases to Humphrey
Hospitality Management, Inc., which is substantially owned by James I. Humphrey,
a limited partner in the Partnership and Chairman of the Board of Directors and
President of the Company. The Partnership's, and therefore the Company's,
principal source of revenue is lease payments by the Lessee under the Percentage
Leases. The Lessee's ability to make payments to the Partnership under the
Percentage Leases is dependent on its ability to generate cash flow from the
operation of the Hotels.
RESULTS OF OPERATIONS
Three months ended June 30, 1999 compared to the three months ended June 30,
1998
The Company's total revenues for the three month period ended June 30,
1999, substantially consisted of Lease revenue recognized pursuant to the
Leases. The Company's revenue during the three month period ended June 30, 1999
was $3,196,443 an increase of $838,190, or 35.6%, as compared to Company
revenue of $2,358,253 for the same period during 1998. The improvement in
revenues is primarily attributable to additional Lease revenue derived from the
increase through acquisitions, in the total number of Hotels. Net income
declined by $324,955, or 31.7% to $698,755, for the three months ended June 30,
1999, as compared to net income of $1,023,710 for the same period during 1998.
The decline in net income is primarily attributable to adjustments to
amortization expense of $83,409, due to the reduction in the BankBoston line of
credit from $35 million to $20 million and $97,225 from the early retirement of
bonds secured by the Comfort Inn-Morgantown, WV and the recognition of a
$78,487 loss on the sale of the Rodeway Inn Hotel in Wytheville, VA. The
decline is also the result of additional interest and depreciation and
amortization expense, associated with the financing and acquisition of new
Hotels. Depreciation expense also increased due to over $1 million of capital
improvements during 1999. Net income for the three month period ended June 30,
1998 was aided by the $195,001 gain on the sale of the Comfort Inn located in
Elizabethton, TN.
The Lessee's room revenues from the Hotels increased by $1,892,720, or
34.9%, to $7,306,385 for the three months ended June 30, 1999, as compared to
$5,413,665 of room revenue for the same period of 1998. The improvement in
revenues is primarily attributable to the increase in the total number of
Hotels leased. The average daily rate of the Hotels increased to $60.52 for the
three months ended June 30, 1999, as compared to the pro forma average daily
rate of $58.96 for the same period of 1998. Revenue per available room
("Revpar") was $45.07 for the three months ended June 30, 1999 as compared to
pro forma Revpar of $44.10 for the same period of 1998, an increase of 2.2%.
Lessee operating expenses increased by $2,254,486, or 43.5% primarily as the
result of the increased number of Hotels under management, to $7,436,441, for
the three months ended June 30, 1999, as compared to $5,181,955 for the same
period of 1998. The net income for the three months ended June 30, 1999 was
$227,263 as compared to a net income of $565,919 for the same period in 1998.
The reduction in net income is primarily the result of the increase in the
number of hotels and partly because of the
-18-
<PAGE> 19
HUMPHREY HOSPITALITY TRUST, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Lessee accrued $115,457 in contingent leases for the three months ended
June 30, 1999.
Six months ended June 30, 1999 compared to the six months ended June 30, 1998
The Company's total revenues for the six month period ended June 30,
1999, substantially consisted of Lease revenue recognized pursuant to the
Leases. The Company's revenue during the six month period ended June 30, 1999
was $6,053,347 an increase of $1,787,263, or 41.9%, as compared to revenue of
$4,266,084 for the same period during 1998. The improvement in revenues is
attributed to the additional Lease revenue derived from the increase through
acquisitions, in the number of Hotels. Net income decreased by $197,826 to
$1,176,857, or 14.4% for the six months ended June 30, 1999 as compared to net
income of $1,374,683 for the same period of 1998. The decline in net income is
primarily attributable to adjustments to amortization expense of $83,409 due to
the reduction in the BankBoston line of credit from $35 million to $20 million
and $97,225 from the early retirement of bonds secured by the Comfort Inn-
Morgantown, WV and the recognition of a $78,487 loss on the sale of the Rodeway
Inn-Wytheville, VA. The decline is also the result of additional interest,
depreciation and amortization expense associated with the financing and
acquisition of new hotels. Depreciation expense also increased due to over
$1 million of capital improvements during 1999. June 30, 1998 net income was
aided by the $195,001 gain on the sale of the Comfort Inn-Elizabethton, TN.
The Lessee's room revenues from the Hotels increased by $4,083,591, or
45%, to $13,159,236 for the six months ended June 30, 1999, as compared to
$9,075,645 of room revenue for the same period of 1998. The improvement in
revenues is primarily attributable to the increase in the number of Hotels. The
average daily rate of the Hotels increased to $59.50 for the six months ended
June 30, 1999, as compared to pro forma average daily rate of $58.42 for the
same period of 1998. REVPAR was $40.72 for the six months ended June 30, 1999
as compared to pro forma REVPAR of $39.76 for the same period during 1998.
Lessee operating expenses increased by $4,407,090, to $13,896,690 for the six
months ended June 30, 1999, as compared to $9,489,600 or 46.4% for the same
period during 1998. The Lessee experienced a net loss for the six months ended
June 30, 1999 primarily due to the accrual of $230,914 in contingent lease
payments.
The following table shows certain other pro forma information as if the
hotels acquired by the Partnership during 1998 had occurred on January 1, 1998.
Historical information is presented for the three and six months ended June 30,
1999.
<TABLE>
<CAPTION>
Three Months ended Six Months ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Occupancy rate 74% 75% 68% 68%
ADR $60.52 $58.96 $59.50 $58.42
REVPAR $45.07 $44.10 $40.72 $39.76
Room Revenues $7,306,385 $7,179,459 $13,159,236 $12,875,746
Room nights available 162,099 162,799 323,109 323,809
Room nights occupied 120,734 121,757 221,101 220,384
Operating Hotels (at period end) 25 22 25 22
Rooms available (at period end) 1,687 1,470 1,687 1,470
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of cash to meet its cash requirements,
including distributions to shareholders, is its share of the Partnership's cash
flow. The Partnership's principal source of revenue is rent payments under the
Leases. The Lessee's obligations under the Leases are unsecured. The Lessee's
ability to make rent payments, and the Company's liquidity, including its
ability to make distributions to common shareholders, is dependent on the
Lessee's ability to generate sufficient cash flow from the operation of the
Hotels.
For the three and six months ended June 30, 1999, the Company
expended approximately $1.3 and 1.8 million respectively, for capital
improvements to the Hotels. During the quarter, the Company's
-19-
<PAGE> 20
HUMPHREY HOSPITALITY TRUST, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Hotels located in Jackson, TN; Allentown, PA; Cleveland, TN; Brandon, FL;
Shelby, NC; and Gettysburg, PA, underwent substantial capital improvements.
The hotel business is seasonal, with hotel revenue generally greater
in the second and third quarters than in the first and fourth quarters, with the
exception of the Company's Hotels in Florida. These Hotels are busiest in the
first and fourth quarters of the year. To the extent that cash flow from
operating activities is insufficient to provide all of the estimated monthly
distributions (particularly in the first quarter), the Company anticipates that
it will be able to fund any such deficit from future working capital. As of June
30, 1999, the Company's cash and current accounts receivable balances exceed its
current obligations by $210,691.
The Company's Funds From Operations (net income plus minority
interest and depreciation and amortization) ("FFO") was $1,735,319 for the three
months ended June 30, 1999, which is an increase of $212,764, or 14% over FFO in
the comparable period in 1998, which was $1,522,555. For the six months ended
June 30, 1999, the Company's FFO was $3,140,314 which is an increase of
$680,761, or 27.8% over FFO in the comparable period in 1998, which was
$2,459,553. The improvements in FFO can be attributed to the addition of seven
Hotels purchased during 1998. Management considers FFO to be a market accepted
measure of an equity REIT's operating performance, which management believes
reflects on the value of real estate companies such as the Company in connection
with the evaluation of other measures of operating performances. All REITs do
not calculate FFO in the same manner, therefore, the Company's calculation may
not be the same as the calculation of FFO for similar REITs. Beginning with the
year ended December 31, 1997, the Company changed the way it computes FFO. The
Company believes that its new method of computing FFO is more consistent with
the guidelines established by the National Association of Real Estate Investment
Trusts ("NAREIT") for calculating FFO. FFO, as defined under the NAREIT
standard, consists of net income, computed in accordance with generally accepted
accounting principles ("GAAP"), excluding non-recurring items, gains or losses
from debt restructuring and sales of properties, plus depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures.
The computation of historical FFO is as follows:
<TABLE>
<CAPTION>
Historical Three Historical Three
Month Period Ended Month Period Ended
June 30, 1999 Per Share June 30, 1998 Per Share
------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Net income applicable to
common shares $ 698,755 $ 1,023,710
Add (less):
Minority interest 131,022 163,071
Amortization of franchise costs 25,580 13,231
Depreciation 801,475 517,544
Loss (gain) on sale of asset 78,487 (195,001)
----------- ------------
Funds From Operations $ 1,735,319 $ .32 $ 1,522,555 $ .31
=========== ===== ============ =====
</TABLE>
-20-
<PAGE> 21
HUMPHREY HOSPITALITY TRUST, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Historical Six Historical Six
Month Period Ended Month Period Ended
June 30, 1999 Per Share June 30, 1998 Per Share
------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Net income applicable to
common shares $ 1,176,857 $ 1,374,683
Add (less):
Minority interest 220,669 229,327
Amortization of franchise costs 50,959 27,536
Depreciation 1,613,342 1,023,008
Loss (gain) on sale of asset 78,487 (195,001)
----------- ------------
Funds From Operations $ 3,140,314 $ .57 $ 2,459,553 $ .54
=========== ===== ============ =====
</TABLE>
Long-term debt as of June 30, 1999, of approximately $42.3 million, consisted
of:
Approximately $2.3 million, secured by a first deed of trust on the
Comfort Inn Hotel located in Dublin, VA. The outstanding balance bears
interest at a rate equal to 7.75% per annum with additional
underwriters' fees increasing the interest rate to approximately 8%.
Approximately $2.9 million, secured by a first deed of trust on the
Hampton Inn Hotel located in Brandon, FL. The outstanding balance bears
interest at a rate of 8% per annum.
Approximately $5 million, secured by a mortgage on the Comfort Inn and
Holiday Inn Express Hotels located in Gettysburg, PA. The outstanding
balance bears interest at a rate of 7.75%.
Approximately $10.9 million, under the BankBoston Credit Facility,
which is secured and cross-collateralized by the Company's Hotels
located in Jackson, TN; Ellenton, FL (2 hotels): Shelby, NC; Key Largo,
FL; Cleveland, TN; Dahlgren, VA; Princeton, WV and Dover, DE. The
interest rate on the BankBoston Credit Facility is LIBOR plus between
165 and 215 basis points. The Company entered into an interest rate
swap agreement that fixes the interest on approximately $11.2 at a
ceiling of 7.79%. The rate at June 30, 1999 was 7.79%.
Approximately $21.2 million, under the Mercantile Credit Facility which
is secured and cross-collateralized by, and cross-defaulted on the
Company's Hotels located in Solomons, MD; Farmville, VA (2 hotels);
Culpeper, VA; New Castle, PA; Harlan, KY; Danville, KY; Murphy, NC;
Chambersburg, PA; Allentown, PA, Morgantown, WV, and Rocky Mount, VA .
The interest rate on the Mercantile Credit Facility is variable at 25
basis points above the prime rate. The rate was 8% at June 30, 1999.
The Company's debt policy provides that it may not carry
consolidated indebtedness in excess of 55% of the aggregate purchase prices of
the Hotels in which it has invested. The aggregate total purchase price paid by
the Company for the Hotels as of June 30, 1999 is approximately $78.7 million.
As of June 30, 1999, the Company's total outstanding indebtedness represents
approximately 53.7% of the aggregate amount paid by the Company for the Hotels.
The Board of Directors has adopted a policy that will govern all of
the Company's investment in hotel properties (the "Investment Policy") including
the acquisition of existing hotels and the development of hotels, until such
time as the Board amends such policy. Under the Investment Policy, the Company
will make no investment in a hotel property unless the Company can demonstrate
that it can reasonably expect an annual return on its investment (net of
insurance, real estate and personal property taxes and reserves for furniture,
fixtures and capital expenditures of 4% of room revenue ("FFE Reserves")), that
is greater than or equal to 12% of the total purchase price to be paid by the
Company for such property. Under the Bylaws, the approval of a majority of the
Board of Directors, including a majority of the Independent Directors, is
required for the Company to acquire any property. In addition, the Investment
Policy will be applied to a hotel property prior to its acquisition
-21-
<PAGE> 22
HUMPHREY HOSPITALITY TRUST, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
or development by the Company, and therefore, there can be no assurance that
increases in insurance rates, real estate or personal property tax rates or FFE
Reserves, which are based on room revenues, will not decrease the Company's
annual return on its investments in any hotel property to a level below that set
out in the Investment Policy. The Company has elected to be taxed as a REIT
under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended.
So long as the Company continues to qualify as a REIT, the Company will not be
subject to a federal income tax on its net income. REITs are subject to a number
of organizational and operational requirements. For example, a REIT, and
therefore the Company, is required to pay dividends to its shareholders of at
least 95% of its taxable income for federal income tax purposes. The Company
intends to pay these dividends from operating cash flows. The Company intends to
retain as a reserve such amounts as it considers necessary for the acquisition,
expansion and renovation of hotel properties consistent with continuing to
distribute to its shareholders amounts sufficient to maintain the Company's
qualification as a REIT.
The Company expects to meet its short-term liquidity requirements
generally through net cash provided by operations and existing cash balances.
The Company believes that its net cash provided by operations will be adequate
to fund both operating requirements and payment of dividends by the Company in
accordance with REIT requirements.
The Company expects to meet its long-term liquidity requirements,
such as scheduled debt maturities and property acquisitions, through long-term
secured and unsecured borrowings, the issuance of additional equity securities
of the Company, or, in connection with acquisitions of hotel properties,
issuance of units of limited partnership interest in the Partnership.
Seasonality of Hotel Business and the Hotels
The hotel industry is seasonal in nature. Generally, hotel revenues
for hotels operating in the geographic areas in which the Hotels operate are
greater in the second and third quarters than in the first and fourth quarters,
with the exception of the Company's Florida Hotels. The Company's Florida
Hotels are busiest in the first and fourth quarters of the year. The Hotels'
operations historically reflect this trend. Although the hotel business is
seasonal in nature, the Company believes that it generally will be able to make
its expected distributions by using undistributed cash flow from the second and
third quarters to fund any shortfall in cash flow from operating activities from
the Hotels in the first and fourth quarters.
YEAR 2000
Until recently, many computer systems and software products used
only two digit entries to define a year. As a result, computer programs that
have date sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. Computer programs that do not recognize the proper
date could generate erroneous data or cause systems to fail.
In response to the Year 2000 issue, the Company modified its
existing information systems during 1998 to make them year 2000 compliant. The
Company believes it has made all necessary modifications to its existing systems
and does not expect that additional costs associated with Year 2000 compliance,
if any, will be material to the Company's results of operations or financial
condition.
Because of the interdependence of information systems today, Year
2000 compliant companies may be affected by the Year 2000 readiness of their
material suppliers, customers and other third parties, including the Lessee. The
Lessee has completed an assessment of its information systems and is in the
process of replacing noncompliant systems. Approximately 90% of the systems are
currently compliant and the Lessee expects to replace all remaining noncompliant
systems by early in the third fiscal quarter.
The Company does not have any material suppliers or customers,
however, as part of the Company's evaluation of the Year 2000 readiness of the
Lessee, the Company has required that the Lessee obtain written assurances from
its material suppliers and third party vendors that they have Year 2000
readiness programs in place as well as an affirmation that they will be
compliant when necessary. Responses to these inquiries are currently being
gathered and reviewed. To date, no such parties have informed the Lessee that
they do not expect to be Year 2000 compliant in a timeframe that would expose
the Lessee and, therefore, the Company to material business risks.
-22-
<PAGE> 23
HUMPHREY HOSPITALITY TRUST, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
While the Company believes its efforts are adequate to address its
Year 2000 concerns, the Company could experience a material adverse effect on
its results of operations and financial condition if the Lessee's Year 2000
compliance schedule is not met or if the Lessee encounters serious problems in
its Year 2000 remediation efforts. Therefore, the Company and the Lessee are in
the process of developing plans to address such contingencies. Such contingency
plan will include, among other things, the development of back-up procedures.
The Company and the Lessee expect to complete their contingency plans in
the third quarter of 1999.
-23-
<PAGE> 24
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market Risks & Sensitivity Analysis
The Company is exposed to various market risks, including
fluctuations in interest rates. To manage these natural business exposures, the
Company has entered into derivative transactions. The Company does not hold or
issue derivative instruments for trading purposes. These contracts are entered
into with major financial institutions thereby minimizing the risk of credit
loss. The following analyses presents the sensitivity of the market value,
earnings and cash flows of the Company's financial instruments to hypothetical
changes in the interest rates as if these changes occurred at June 30, 1999.
Market values are the present values of projected future cash flows based on the
interest rate assumptions. These forward-looking disclosures are selective in
nature and only address the potential impacts from financial instruments. They
do not include other potential effects that could impact the Company's business
as a result of these changes in interest rates.
Interest Rate and Debt Sensitivity Analysis
At June 30, 1999, the Company has debt totaling $42,328,471,
including fixed rate debt totaling $7,984,560 and variable rate debt totaling
$34,343,911. Included in the variable rate debt is $10,891,345 of debt subject
to an interest rate swap agreement which effectively changes the characteristics
of the interest rate without actually changing the debt instrument. At June 30,
1999, the Company's interest rate swap agreement converted outstanding variable
rate debt totaling $10,891,345 to fixed rate debt for a period of time. At June
30, 1999, after adjusting for the effect of the interest rate swap agreement,
the Company had fixed rate debt of $18,875,905 and variable rate debt of
$23,452,566. Holding other variables constant, a one percentage point increase
in interest rates would decrease the fair value of the fixed rate debt by
$600,004. However , for variable rate debt, interest rate changes do not affect
the fair value of the debt but do impact future earnings and cash flows. The
earnings and cash flow impact for the next year resulting from a one percentage
point increase in interest rates would be $118,023, holding other variables
constant.
PART II. OTHER INFORMATION
Item 5. Other Information
On June 11, 1999, the Company entered into an Agreement and Plan of
Merger with Supertel Hospitality, Inc. Under the terms of the merger agreement,
Supertel will merge with and into the Company. See Note 2 to the Notes to
Consolidated Financial Statements.
As a result of the proposed merger with Supertel, and the
shareholders vote in conjunction therewith, the date of the Company's 1999
annual meeting of shareholders has been postponed to September 27, 1999. Since
the 1999 annual meeting of shareholders is scheduled for a date that is more
than thirty days from the anniversary of the Company's 1998 annual meeting of
shareholders, pursuant to Rules 14a-5(f) and 14a-8(c), shareholder proposals
that are to be included in the proxy materials related to the Company's 1999
annual meeting of shareholders must be received at the Company's principal
executive offices on or before August 9, 1999.
Item 6. Exhibits and Reports on Form 8-K
Exhibits -
2.1 Agreement and Plan of Merger dated June 11, 1999 between the
Company and Supertel Hospitality, Inc. (incorporated by reference
to Exhibit 99.2 to the Company's Current Report on Form 8-K filed
on June 14, 1999).
3.1 Amended and Restated Articles of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-11 (Registration No. 33-83658)).
3.2 Second Amended and Restated Bylaws of the Registrant.
10.1 Declaration of Trust of Humphrey Hospitality REIT Trust
(incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-11 (Registration No. 333-48583)).
10.2 Bylaws of Humphrey Hospitality REIT Trust (incorporated by
reference to Exhibit 10.2 to the Company's Registration Statement
on Form S-11 (Registration No. 333-48583)).
10.3 Second Amended and Restated Agreement of Limited Partnership of
Humphrey Hospitality Limited Partnership (incorporated by
reference to Exhibit 10.7 to the Company's Registration Statement
on Form S-11 (Registration No. 333-48583)).
10.4 Second Amended and Restated Agreement of Limited Partnership of
Solomons Beacon Inn Limited Partnership (incorporated by reference
to Exhibit 10.2 to the Company's Registration Statement on Form
S-11 (Registration No. 33-93346)).
10.5 Agreement of Purchase and Sale dated March 26, 1997, between 344
Associates Limited Partnership and Humphrey Hospitality Limited
Partnership for the Comfort Inn-Gettysburg, Pennsylvania
(incorporated by reference to Exhibit 10.17 to the Company's
Registration Statement on Form S-11 (Registration No. 333-48583)).
10.6 Agreement of Purchase and Sale dated March 26, 1997, between 144
Associated Limited Partnership and Humphrey Hospitality Limited
Partnership for the Holiday Inn Express-Gettysburg, Pennsylvania
(incorporated by reference to Exhibit 10.18 to the Company's
Registration Statement on Form S-11 (Registration No. 333-48583)).
10.7 Purchase Agreement dated March 26, 1997, between 644 Associates
Limited Partnership and Humphrey Hospitality Limited Partnership
for the Holiday Inn Express - Allentown, Pennsylvania
(incorporated by reference to Exhibit 10.19 to the Company's
Registration Statement on Form S-11 (Registration No. 333-48583)).
10.8 Purchase Agreement, dated March 26, 1997, between 544 Associates
Limited Partnership and Humphrey Hospitality Limited Partnership
for the Comfort Inn-Chambersburg, Pennsylvania Hotel (incorporated
by reference to Exhibit 10.20 to the Company's Registration
Statement on Form S-11 (Registration No. 333-48583)).
10.9 Option Agreement (incorporated by reference to Exhibit 10.6 to the
Company's Registration Statement on Form S-11 (Registration No.
33-83658)).
10.10 Non-Competition Agreement (incorporated by reference to Exhibit
10.7 to the Company's Registration Statement on Form S-11
(Registration No. 33-83658)).
10.11 Services Agreement dated as of January 1, 1996 between the Company
and Humphrey Hospitality Management, Inc. (incorporated by
reference to Exhibit 10.22 to the Company's Registration Statement
on Form S-11 (Registration No. 333-15897)).
10.12 First Amendment to Services Agreement, dated as of October 1,
1996, between the Company and Humphrey Hospitality Management,
Inc. (incorporated by reference to Exhibit 10.23 to the Company's
Registration Statement on Form S-11 (Registration No. 333-15897)).
10.13 Development Services Agreement, dated as of April 4, 1996, between
Humphrey Hospitality Limited Partnership and Humphrey Development
(incorporated by reference to Exhibit 10.25 to the Company's
Registration Statement on Form S-11 (Registration No. 333-15897)).
10.14 First Amendment to Development Services Agreement dated November
6, 1996 between the Partnership and Humphrey Development
(incorporated by reference to Exhibit 10.26 to the Company's
Registration Statement on Form S-11 (Registration No. 333-15897)).
10.15 Agreement of Purchase and Sale dated May 31, 1998 between Allen
Investments, Inc. and Humphrey Hospitality Limited Partnership for
the Best Western - Ellenton, FL, the Shoney's Inn, Ellenton, FL
and the Hampton Inn, Brandon, FL (incorporated by reference to
Exhibit 2.1 to Form 8-K/A filed August 6, 1998).
10.16 Revolving Credit and Guaranty Agreement dated August 18,1998 among
the Company, Humphrey Hospitality Limited Partnership, Humphrey
Hospitality REIT Trust and Solomons Beacon Limited Partnership and
BankBoston, N.A. and other banks that may become parties to the
agreement (incorporated by reference to Exhibit 10.8 to Form
10-K405 filed on March 31, 1999).
10.17 First Amendment to BankBoston Revolving Credit and Guaranty
Agreement dated November 30, 1998 (incorporated by reference to
Exhibit 10.9 to Form 10-K405 filed on March 31, 1999).
10.18 Shareholders' Agreement dated June 11, 1999, between Supertel
Hospitality, Inc., Jeffrey Zwerdling, George R. Whittemore, Leah
T. Robinson and Andrew A. Mayer.
10.19 Shareholders' Agreement dated June 11, 1999, between the Company,
Supertel Hospitality, Inc., Paul J. Schulte and Steve H. Borgmann.
10.20 Agreement dated June 11, 1999 between the Company, Humphrey
Hospitality Limited Partnership, Supertel Hospitality, Inc. and
James I. Humphrey, Jr.
10.21 Right of First Opportunity Agreement dated June 10, 1999, between
the Company, Humphrey Hospitality Limited Partnership and Humphrey
Hospitality Management, Inc.
27.1 Financial Data Schedule
Reports on Form 8-K -
On June 14, 1999, the Company filed a Report on Form 8-K
reporting that it had executed an Agreement and Plan of Merger with Supertel
Hospitality Inc., whereby Supertel will merge with and into Humphrey Hospitality
Trust Inc.
-24-
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUMPHREY HOSPITALITY TRUST, INC.
By: /s/ James I Humphrey, Jr
-------------------------
James I. Humphrey, Jr.
Chairman of the Board,
President and Secretary
Date: 8/04/99
-----------------------
-25-
<PAGE> 1
EXHIBIT 3.2
SECOND AMENDED AND RESTATED
BYLAWS
OF
HUMPHREY HOSPITALITY TRUST, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I Offices...........................................................................1
Section 1. Principal Office.....................................................1
Section 2. Additional Offices...................................................1
Section 3. Fiscal and Taxable Years.............................................1
ARTICLE II Meetings of Shareholders.........................................................2
Section 1. Place................................................................2
Section 2. Annual Meeting.......................................................2
Section 3. Special Meetings.....................................................2
Section 4. Notice...............................................................3
Section 5. Scope of Notice......................................................4
Section 6. Organization.........................................................4
Section 7. Quorum...............................................................4
Section 8. Voting...............................................................5
Section 9. Proxies..............................................................5
Section 10. Voting of Shares by Certain Holders.................................6
Section 11. Inspectors..........................................................7
Section 12. Fixing Record Date..................................................7
Section 13. Action Without a Meeting............................................8
Section 14. Voting by Ballot....................................................8
Section 15. Voting List.........................................................8
Section 16. Shareholder Proposals...............................................9
ARTICLE III Directors......................................................................10
Section 1. General Powers......................................................10
Section 2. Number, Tenure and Qualifications...................................10
Section 3. Changes in Number; Vacancies........................................11
Section 4. Resignations........................................................11
Section 5. Removal of Directors................................................12
Section 6. Annual and Regular Meetings.........................................12
Section 7. Special Meetings....................................................12
Section 8. Notice..............................................................12
Section 9. Quorum..............................................................13
Section 10. Voting.............................................................13
Section 11. Telephone Meetings.................................................13
Section 12. Action Without a Meeting...........................................14
Section 13. Compensation.......................................................14
Section 14. Policies and Resolutions...........................................14
Section 15. Nominations........................................................15
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV Committees......................................................................16
Section 1. Committees of the Board.............................................16
Section 2. Telephone Meetings..................................................17
Section 3. Action By Committees Without a Meeting..............................18
ARTICLE V Officers.........................................................................18
Section 1. General Provisions..................................................18
Section 2. Subordinate Officers, Committees and Agents.........................18
Section 3. Removal and Resignation.............................................19
Section 4. Vacancies...........................................................19
Section 5. General Powers......................................................19
Section 6. Duties of the Chairman of the Board.................................19
Section 7. Duties of the President.............................................20
Section 8. Duties of the Vice-Presidents.......................................21
Section 9. Duties of the Treasurer.............................................21
Section 10. Duties of the Secretary............................................21
Section 11. Other Duties of Officers...........................................22
Section 12. Salaries...........................................................22
ARTICLE VI Contracts, Notes, Checks and Deposits...........................................22
Section 1. Contracts...........................................................22
Section 2. Checks and Drafts...................................................22
Section 3. Deposits............................................................23
ARTICLE VII Shares of Stock................................................................23
Section 1. Certificates of Stock...............................................23
Section 2. Lost Certificate....................................................24
Section 3. Transfer Agents and Registrars......................................24
Section 4. Transfer of Stock...................................................24
Section 5. Stock Ledger........................................................25
ARTICLE VIII Dividends.....................................................................25
Section 1. Declaration.........................................................25
Section 2. Contingencies.......................................................26
ARTICLE IX Seal............................................................................26
Section 1. Seal................................................................26
Section 2. Affixing Seal.......................................................26
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE X Waiver of Notice.................................................................26
ARTICLE XI Amendment of Bylaws.............................................................27
Section 1. By Directors........................................................27
Section 2. By Shareholders.....................................................27
</TABLE>
- iii -
<PAGE> 5
SECOND AMENDED AND RESTATED
BYLAWS
OF
HUMPHREY HOSPITALITY TRUST, INC.
The Board of Directors of Humphrey Hospitality Trust, Inc. (the
"Corporation") hereby sets out the Bylaws of the Corporation in their entirety,
as follows:
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the Corporation
shall be located at 12301 Old Columbia Pike, Silver Spring, Maryland 20904, or
at any other place or places as the Board of Directors may designate.
Section 2. Additional Offices. The Corporation may have additional
offices at such places as the Board of Directors may from time to time determine
or the business of the Corporation may require.
Section 3. Fiscal and Taxable Years. The fiscal and taxable years of the
Corporation shall begin on January 1 and end on December 31.
<PAGE> 6
ARTICLE II
Meetings of Shareholders
Section 1. Place. All meetings of shareholders shall be held at
12301 Old Columbia Pike, Silver Spring, Maryland 20904, or at such other place
within the United States as shall be stated in the notice of the meeting.
Section 2. Annual Meeting. The President or the Board of Directors
may fix the time of the annual meeting of the shareholders for the election of
Directors and the transaction of any business as may be properly brought before
the meeting, but if no such date and time is fixed by the President or the Board
of Directors, the meeting for any calendar year shall be held on the fourth
Thursday in May, if that day is not a legal holiday. If that day is a legal
holiday, the annual meeting shall be held on the next succeeding business day
that is not a legal holiday.
Section 3. Special Meetings. The Chairman of the Board, the
President, a majority of the Board of Directors or a majority of the Independent
Directors may call special meetings of the shareholders. Special meetings of
shareholders also shall be called by the Secretary upon the written request of
the holders of shares entitled to cast not less than ten percent (10%) of all
the votes entitled to be cast at such meeting. Such request shall state the
purpose of such meeting and the matters proposed to be acted on at such meeting.
The Secretary shall inform such shareholders of the reasonably estimated cost of
preparing and mailing notice of the meeting and, upon payment to the Corporation
of such costs, the Secretary shall give notice to each shareholder entitled to
notice of the meeting. Unless requested by shareholders entitled to cast a
majority of all the votes entitled to be cast at such meeting, a special meeting
need not be called
- 2 -
<PAGE> 7
to consider any matter which is substantially the same as a matter voted on at
any annual or special meeting of the shareholders held during the preceding
twelve months.
Section 4. Notice. Not less than 10 nor more than 60 days before
each meeting of shareholders, the Secretary shall give to each shareholder
entitled to vote at such meeting and to each shareholder not entitled to vote
who is entitled to notice of the meeting, written or printed notice stating the
time and place of the meeting and, in the case of a special meeting or as
otherwise may be required by statute, the purpose for which the meeting is
called, either by mail or by presenting it to such shareholder personally or by
leaving it at his residence or usual place of business. If mailed, such notice
shall be deemed to be given when deposited in the United States mail addressed
to the shareholder at his post office address as it appears on the records of
the Corporation, with postage thereon prepaid.
Notice of a meeting of shareholders to act on (i) an amendment of
the Articles of Incorporation of the Corporation (the "Articles of
Incorporation"), (ii) plan of merger or share exchange, (iii) the sale, lease,
exchange or other disposition of all, or substantially all, the property of the
Corporation otherwise than in the usual and regular course of its business, or
(iv) the dissolution of the Corporation, shall be given in the manner provided
above, to each shareholder, whether or not entitled to vote, not less than
twenty-five nor more than sixty days before the date of the meeting. Any such
notice shall state that one of the purposes of the meeting is to consider the
particular extraordinary corporate act and, when applicable, shall be
accompanied by a copy of the (i) proposed amendment, (ii) plan of merger or
share exchange, or (iii) agreement pursuant to which the disposition of all or
substantially all of the Corporation's property will be effected.
- 3 -
<PAGE> 8
Section 5. Scope of Notice. No business shall be transacted at a
special meeting of shareholders except that specifically designated in the
notice of the meeting. Subject to the provisions of Section 16 of this Article
II, any business of the Corporation may be transacted at the annual meeting
without being specifically designated in the notice, except such business as is
required by statute to be stated in such notice.
Section 6. Organization. At every meeting of the shareholders, the
Chairman of the Board, if there be one, shall conduct the meeting or, in the
case of vacancy in office or absence of the Chairman of the Board, one of the
following officers present shall conduct the meeting and act as Chairman in the
order stated: the Vice Chairman of the Board, if there be one, the President,
the Vice Presidents in their order of rank and seniority, or a Chairman chosen
by the shareholders entitled to cast a majority of the votes which all
shareholders present in person or by proxy are entitled to cast. The Secretary,
or, in his absence, an assistant secretary, or in the absence of both the
Secretary and assistant secretaries, a person appointed by the Chairman shall
act as Secretary.
Section 7. Quorum. At any meeting of shareholders, the presence in
person or by proxy of shareholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this Section
7 shall not affect any requirement under any statute, the Articles of
Incorporation or these Bylaws for the vote necessary for the adoption of any
measure. If such quorum shall not be present at any meeting of the shareholders,
the shareholders representing a majority of the shares entitled to vote at such
meeting, present in person or by proxy, may vote to adjourn the meeting from
time to time to a date not more than 120 days after the original record date
without notice other than announcement at the meeting until such
- 4 -
<PAGE> 9
quorum shall be present. At such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted at the
meeting as originally notified. Any meeting at which Directors are to be elected
shall be adjourned only from day to day, as may be directed by shareholders
representing a majority of the shares who are present in person or by proxy and
who are entitled to vote on the election of Directors.
Section 8. Voting. A plurality of all the votes cast at a meeting of
shareholders duly called and at which a quorum is present shall be sufficient to
elect a director. There shall be no cumulative voting. Each share of stock may
be voted for as many individuals as there are Directors to be elected and for
whose election the share is entitled to be voted. A majority of the votes cast
at a meeting of shareholders duly called and at which a quorum is present shall
be sufficient to approve any other matter which may properly come before the
meeting, unless more than a majority of the votes cast is required by statute,
by the Articles of Incorporation or by these Bylaws. Each shareholder of record
shall have the right, at every meeting of shareholders, to one vote for each
share held.
Section 9. Proxies. A shareholder may vote the shares of stock owned
of record by him, either in person or by proxy executed in writing by the
shareholder or by his duly authorized attorney in fact. Such proxy shall be
filed with the Secretary of the Corporation before or at the time of the
meeting. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
- 5 -
<PAGE> 10
Section 10. Voting of Shares by Certain Holders. Shares registered
in the name of another corporation, if entitled to be voted, may be voted by the
president, a vice president or a proxy appointed by the president or a vice
president of such other corporation, unless some other person who has been
appointed to vote such shares pursuant to a bylaw or a resolution of the board
of directors of such other corporation presents a certified copy of such bylaw
or resolution, in which case such person may vote such shares. Any fiduciary may
vote shares registered in his name as such fiduciary, either in person or by
proxy.
Shares of its own stock indirectly owned by this Corporation shall
not be voted at any meeting and shall not be counted in determining the total
number of outstanding shares entitled to be voted at any given time, unless they
are held by it in a fiduciary capacity, in which case they may be voted and
shall be counted in determining the total number of outstanding shares at any
given time.
The Board of Directors may adopt by resolution a procedure by which
a shareholder may certify in writing to the Corporation that any shares of stock
registered in the name of the shareholder are held for the account of a
specified person other than the shareholder. The resolution shall set forth the
class of shareholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set
- 6 -
<PAGE> 11
forth in the certification, the shareholder of record of the specified stock in
place of the shareholder who makes the certification.
Section 11. Inspectors. At any meeting of shareholders, the Chairman
of the meeting may, or upon the request of any shareholder shall, appoint one or
more persons as inspectors for such meeting. Such inspectors shall ascertain and
report the number of shares represented at the meeting based upon their
determination of the validity and effect of proxies, count all votes, report the
results and perform such other acts as are proper to conduct the election and
voting with impartiality and fairness to all the shareholders.
Each report of an inspector shall be in writing and signed by him or
by a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
Section 12. Fixing Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of the shareholders
or any adjournment thereof, or entitled to receive payment for any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than seventy
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If no record date is fixed for
the determination of shareholders entitled to notice of or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of
- 7 -
<PAGE> 12
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section such determination shall apply to any adjournment
thereof.
Section 13. Action Without a Meeting. Any action required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting if a consent in writing, setting forth such action, is signed by each
shareholder entitled to vote on the matter and any other shareholder entitled to
notice of a meeting of shareholders (but not to vote thereat) has waived in
writing any right to dissent from such action, and such consent and waiver are
filed with the minutes of proceedings of the shareholders.
Section 14. Voting by Ballot. Voting on any question or in any
election may be viva voce unless the presiding officer shall order or any
shareholder shall demand that voting be by ballot.
Section 15. Voting List. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make, at least ten (10)
days before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, with the address of
and the number of shares held by each. Such list, for a period of ten (10) days
prior to such meeting, shall be kept on file at the registered office of the
Corporation or at its principal place of business or at the office of its
transfer agent or registrar and shall be subject to inspection by any
shareholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be
- 8 -
<PAGE> 13
subject to the inspection of any shareholder during the whole time of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the shareholders entitled to examine such list or transfer books or to
vote at any meeting of shareholders. If the requirements of this section have
not been substantially complied with, the meeting shall, on the demand of any
shareholder in person or by proxy, be adjourned until the requirements are
complied with.
Section 16. Shareholder Proposals. To be properly brought before an
annual meeting of shareholders, business must be (i) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (iii) otherwise properly brought before
the meeting by a shareholder. In addition to any other applicable requirements,
for business to be properly brought before an annual meeting by a shareholder,
the shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice must be
given, either by personal delivery or by United States mail, postage prepaid, to
the Secretary of the Corporation not later than ninety (90) days in advance of
the annual meeting. A shareholder's notice to the Secretary shall set forth as
to each matter the shareholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting (including the specific proposal to be presented) and the reasons for
conducting such business at the annual meeting, (ii) the name and record address
of the shareholder proposing such business, (iii) the class and number of shares
of the Corporation that are beneficially owned by the shareholder, and (iv) any
material interest of the shareholder in such business.
- 9 -
<PAGE> 14
In the event that a shareholder attempts to bring business before an
annual meeting without complying with the provisions of this Section 16, the
Chairman of the meeting shall declare to the meeting that the business was not
properly brought before the meeting in accordance with the foregoing procedures,
and such business shall not be transacted.
No business shall be conducted at the annual meeting except in
accordance with the procedures set forth in this Section 16; provided, however,
that nothing in this Section 16 shall be deemed to preclude discussion by any
shareholder of any business properly brought before the annual meeting.
ARTICLE III
Directors
Section 1. General Powers. The Board of Directors shall have full
power to conduct, manage, and direct the business and affairs of the
Corporation, and all powers of the Corporation, except those specifically
reserved or granted to the shareholders by statute or by the Articles of
Incorporation or these Bylaws, shall be exercised by, or under the authority of,
the Board of Directors.
Section 2. Number, Tenure and Qualifications. The number of
Directors of the Corporation shall be not less than three (3) nor more than nine
(9). Directors need not be shareholders in the Corporation.
At all times (except during a period not to exceed sixty (60) days
following the death, resignation, incapacity or removal from office of a
Director prior to expiration of the Director's term of office), a majority of
the Board of Directors shall be comprised of Independent Directors.
- 10 -
<PAGE> 15
Section 3. Changes in Number; Vacancies. Any vacancy occurring on
the Board of Directors may, subject to the provisions of Section 5 of this
Article III, be filled by a majority of the remaining members of the Board of
Directors, although such majority is less than a quorum; provided, however, that
a majority of Independent Directors shall nominate replacements for vacancies
among the Independent Directors, which replacements must be elected by a
majority of the Directors, including a majority of the Independent Directors.
Any vacancy occurring by reason of an increase in the number of Directors may be
filled by action of a majority of the entire Board of Directors including a
majority of Independent Directors. If the shareholders of any class or series
are entitled separately to elect one or more Directors, a majority of the
remaining Directors elected by that class or series or the sole remaining
Director elected by that class or series may fill any vacancy among the number
of Directors elected by that class or series. A Director elected by the Board of
Directors to fill a vacancy shall be elected to hold office for the balance of
the term of the Director he is replacing or until his successor is elected and
qualified. The Board of Directors may declare vacant the office of a Director
who has been declared of unsound mind by an order of court, who has pled guilty
or nolo contendere to, or been convicted of, a felony involving moral turpitude,
or who has willfully violated the Company's Articles of Incorporation or these
Bylaws.
Section 4. Resignations. Any Director or member of a committee may
resign at any time. Such resignation shall be made in writing and shall take
effect at the time specified therein, or if no time be specified, at the time of
the receipt by the Chairman of the Board, the President or the Secretary.
- 11 -
<PAGE> 16
Section 5. Removal of Directors. The shareholders may, at any time,
remove any Director, with or without cause, by the affirmative vote of the
holders of not less than a majority of all the shares entitled to vote on the
election of Directors and may elect a successor to fill any resulting vacancy
for the balance of the term of the removed Director.
Section 6. Annual and Regular Meetings. An annual meeting of the
Board of Directors shall be held immediately after and at the same place as the
annual meeting of shareholders, no notice other than this bylaw being necessary.
The Board of Directors may provide, by resolution, the time and place, either
within or without the Commonwealth of Virginia, for the holding of regular
meetings of the Board of Directors without other notice than such resolution.
Section 7. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board, the
President, a majority of the Board of Directors or a majority of the Independent
Directors then in office. The person or persons authorized to call special
meetings of the Board of Directors may fix any place, either within or without
the Commonwealth of Virginia, as the place for holding any special meeting of
the Board of Directors called by them.
Section 8. Notice. Notice of any special meeting of the Board of
Directors shall be given by written notice delivered personally, telegraphed,
telecopied or mailed to each Director at his business or resident address.
Personally delivered, telegraphed or telecopied notices shall be given at least
two days prior to the meeting. Notice by mail shall be given at least five days
prior to the meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail properly addressed, with postage thereon
prepaid. If given by telegram, such notice
- 12 -
<PAGE> 17
shall be deemed to be given when the telegram is delivered to the telegraph
company. Neither the business to be transacted at, nor the purpose of, any
annual, regular or special meeting of the Board of Directors need be stated in
the notice, unless specifically required by statute or these Bylaws.
Section 9. Quorum. Subject to the provisions of Section 10 of this
Article III, a majority of the entire Board of Directors shall constitute a
quorum for transaction of business at any meeting of the Board of Directors,
provided that, if less than a quorum is present at said meeting, a majority of
the Directors present may adjourn the meeting from time to time without further
notice.
Subject to the provisions of Section 10 of this Article III, the
Directors present at a meeting which has been duly called and convened may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough Directors to leave less than a quorum.
Section 10. Voting. The action of the majority of the Directors
present at a meeting at which a quorum is present shall be the action of the
Board of Directors, unless the concurrence of a greater proportion is required
for such action by the Articles of Incorporation, these Bylaws, or applicable
statute.
Section 11. Telephone Meetings. Members of the Board of Directors
may participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting.
- 13 -
<PAGE> 18
Section 12. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
Director and such written consent is filed with the minutes of proceedings of
the Board of Directors.
Section 13. Compensation. Directors shall receive such reasonable
compensation for their services as Directors as the Board of Directors may fix
or determine from time to time; such compensation may include a fixed sum,
shares of capital stock of the Corporation and reimbursement of reasonable
expenses incurred in traveling to and from or attending regular or special
meetings of the Board of Directors or of any committee thereof.
Section 14. Policies and Resolutions. It shall be the duty of the
Board of Directors to insure that the purchase, sale, retention and disposal of
the Corporation's assets, the investment policies and the borrowing policies of
the Corporation and the limitations thereon or amendment thereof are at all
times:
(a) consistent with such policies, limitations and restrictions
as are contained in these Bylaws, or in the Corporation's Articles of
Incorporation, or as described in the Corporation's ongoing periodic reports
filed with the SEC, subject to revision from time to time at the discretion of
the Board of Directors without shareholder approval unless otherwise required by
law; and
(b) in compliance with the restrictions applicable to real estate
investment trusts pursuant to the Internal Revenue Code of 1986, as amended.
- 14 -
<PAGE> 19
Section 15. Nominations. Subject to the rights of holders of any
class or series of stock having a preference over the common stock as to
dividends or upon liquidation, nominations for the election of Directors shall
be made by the Company's notice of the meeting of shareholders for such
election, the Board of Directors, or by any shareholder entitled to vote in the
election of Directors generally.
Any shareholder entitled to vote in the election of Directors
generally may nominate one or more persons for election as Directors at a
meeting only if written notice of such shareholder's intent to make such
nomination or nominations has been given, either by personal delivery or by
United States mail, postage prepaid, to the Secretary of the Corporation not
later than (i) with respect to an election to be held at an annual meeting of
shareholders, ninety (90) days in advance of such meeting, and (ii) with respect
to an election to be held at a special meeting of shareholders for the election
of Directors, the close of business on the seventh (7th) day following the date
on which notice of such meeting is first given to shareholders. Each notice
shall set forth: (a) the name and address of the shareholder who intends to make
the nomination and of the person or persons to be nominated; (b) a
representation that the shareholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the shareholder; (d) such other information regarding each nominee proposed by
such shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee
- 15 -
<PAGE> 20
been nominated, or intended to be nominated, by the Board of Directors;
and (e) the consent of each nominee to serve as a Director of the Corporation if
so elected. The Chairman of the meeting may refuse to acknowledge the nomination
of any person not made in compliance with the foregoing procedure.
ARTICLE IV
Committees
Section 1. Committees of the Board. The Board of Directors may
appoint from among its members an executive committee and other committees
comprised of two or more Directors. A majority of the members of any committee
so appointed shall be Independent Directors. The Board of Directors shall
appoint (i) an acquisition committee which is comprised of not less than two
members, a majority of whom are Independent Directors and (ii) an audit
committee of which is comprised entirely of Independent Directors. The Board of
Directors may delegate to any committee any of the powers of the Board of
Directors except the power to elect Directors, declare dividends or
distributions on stock, recommend to the shareholders any action which requires
shareholder approval, amend or repeal these Bylaws, approve any merger or share
exchange which does not require shareholder approval, or issue stock. However,
if the Board of Directors has given general authorization for the issuance of
stock, a committee of the Board of Directors, in accordance with a general
formula or method specified by the Board of Directors by resolution or by
adoption of a stock option plan, may fix the terms of stock, subject to
classification or reclassification, and the terms on which any stock may be
issued.
Notice of committee meetings shall be given in the same manner as
notice for special meetings of the Board of Directors.
- 16 -
<PAGE> 21
One-third, but not less than two, of the members of any committee
shall be present in person at any meeting of such committee in order to
constitute a quorum for the transaction of business at such meeting, and the act
of a majority present shall be the act of such committee. The Board of Directors
may designate a chairman of any committee, and such chairman or any two members
of any committee may fix the time and place of its meetings unless the Board
shall otherwise provide. In the absence or disqualification of any member of any
such committee, the members thereof present at any meeting and not disqualified
from voting, whether or not they constitute a quorum, may unanimously appoint
another Director to act at the meeting in the place of such absent or
disqualified members; provided, however, that in the event of the absence or
disqualification of an Independent Director, such appointee shall be an
Independent Director.
Each committee shall keep minutes of its proceedings and shall
report the same to the Board of Directors at the meeting next succeeding, and
any action by the committees shall be subject to revision and alteration by the
Board of Directors, provided that no rights of third persons shall be affected
by any such revision or alteration.
Subject to the provisions hereof, the Board of Directors shall have
the power at any time to change the membership of any committee, to fill all
vacancies, to designate alternative members to replace any absent or
disqualified member, or to dissolve any such committee.
Section 2. Telephone Meetings. Members of a committee of the Board
of Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
- 17 -
<PAGE> 22
Section 3. Action By Committees Without a Meeting. Any action
required or permitted to be taken at any meeting of a committee of the Board of
Directors may be taken without a meeting, if a consent in writing to such action
is signed by each member of the committee and such written consent is filed with
the minutes of proceedings of such committee.
ARTICLE V
Officers
Section 1. General Provisions. The officers of the Corporation may
consist of a Chairman of the Board, a Vice Chairman of the Board, a President,
one or more Vice Presidents, a Treasurer, one or more assistant treasurers, a
Secretary, and one or more assistant secretaries and such other officers as may
be elected in accordance with the provisions of Section 2 of this Article V. The
officers of the Corporation shall be elected annually by the Board of Directors
at the first meeting of the Board of Directors held after each annual meeting of
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as may be convenient. Each
officer shall hold office until his successor is elected and qualifies or until
his death, resignation or removal in the manner hereinafter provided. Any two or
more offices may be held by the same person. In its discretion, the Board of
Directors may leave unfilled any office except that of President and Secretary.
Election or appointment of an officer or agent shall not of itself create
contract rights between the Corporation and such officer or agent.
Section 2. Subordinate Officers, Committees and Agents. The Board of
Directors may from time to time elect such other officers and appoint such
committees, employees, other agents as the business of the Corporation may
require, including one or more assistant secretaries, and
- 18 -
<PAGE> 23
one or more assistant treasurers, each of whom shall hold office for such
period, have such authority, and perform such duties as are provided in these
Bylaws, or as the Board of Directors may from time to time determine. The
Directors may delegate to any officer or committee the power to elect
subordinate officers and to retain or appoint employees or other agents.
Section 3. Removal and Resignation. Any officer or agent of the
Corporation may be removed by the Board of Directors if in its judgment the best
interests of the Corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed. Any
officer of the Corporation may resign at any time by giving written notice of
his resignation to the Board of Directors, the Chairman of the Board, the
President or the Secretary. Any resignation shall take effect at the time
specified therein or, if the time when it shall become effective is not
specified therein, immediately upon its receipt. The acceptance of a resignation
shall not be necessary to make it effective unless otherwise stated in the
resignation.
Section 4. Vacancies. A vacancy in any office may be filled by the
Board of Directors for the balance of the term.
Section 5. General Powers. All officers of the Corporation as
between themselves and the Corporation shall, respectively, have such authority
and perform such duties in the management of the property and affairs of the
Corporation as may be determined by resolution of the Board of Directors, or in
the absence of controlling provisions in a resolution of the Board of Directors,
as may be provided in these Bylaws.
Section 6. Duties of the Chairman of the Board. The Chairman of the
Board shall be the chief executive officer of the Corporation and shall be
primarily responsible for the execution of
- 19 -
<PAGE> 24
policies of the Board of Directors. He shall have authority over the general
management and direction of the business and operations of the Corporation and
its divisions, if any, subject only to the ultimate authority of the Board of
Directors. He may sign and execute in the name of the Corporation share
certificates, deeds, mortgages, bonds, contracts or other instruments except in
cases where the signing and the execution thereof shall be expressly delegated
by the Board of Directors or by these Bylaws to some other officer or agent of
the Corporation or shall be required by law otherwise to be signed or executed.
In addition, he shall perform all duties incident to the office of the Chairman
of the Board and such other duties as from time to time may be assigned to him
by the Board of Directors.
Section 7. Duties of the President. In the absence of a Chairman of
the Board, the President shall be the chief executive officer of the Corporation
and shall be primarily responsible for the execution of policies of the Board of
Directors and shall have authority over the general management and direction of
the business and operations of the Corporation and its divisions, if any,
subject only to the ultimate authority of the Board of Directors. In the absence
of the Chairman of the Board, or if there are no such officers, the President
shall preside at all corporate meetings and he may sign and execute in the name
of the Corporation share certificates, deeds, mortgages, bonds, contracts or
other instruments except in cases where the signing and the execution thereof
shall be expressly delegated by the Board of Directors or by these Bylaws to
some other officer or agent of the Corporation or shall be required by law
otherwise to be signed or executed. In addition, he shall perform all duties
incident to the office of the President and such other duties as from time to
time may be assigned to him by the Board of Directors.
- 20 -
<PAGE> 25
Section 8. Duties of the Vice-Presidents. Each Vice-President, if
any, shall have such powers and duties as may from time to time be assigned to
him by the President or the Board of Directors. Any Vice-President may sign and
execute in the name of the Corporation deeds, mortgages, bonds, contracts or
other instruments authorized by the Board of Directors, except where the signing
and execution of such documents shall be expressly delegated by the Board of
Directors or the President to some other officer or agent of the Corporation or
shall be required by law or otherwise to be signed or executed.
Section 9. Duties of the Treasurer. The Treasurer shall have such
powers and duties as may be assigned to him by the President of the Board of
Directors. The Treasurer may sign and execute in the name of the Corporation
share certificates, deeds, mortgages, bonds, contracts or other instruments,
except in cases where the signing and the execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer or
agent of the Corporation or shall be required by law or otherwise to be signed
or executed.
Section 10. Duties of the Secretary. The Secretary shall act as
secretary of all meetings of the Board of Directors, the Executive Committee and
all other Committees of the Board and shareholders of the Corporation. He shall
keep and preserve the minutes of all such meetings in the proper book or books
provided for that purpose. He shall see that all notices required to be given by
the Corporation are duly given and served; shall have custody of the seal of the
Corporation and shall affix the seal or cause it to be affixed to all share
certificates of the Corporation and to all documents the execution of which on
behalf of the Corporation under its corporate seal is duly authorized in
accordance with law or the provisions of these Bylaws; shall have custody of all
deeds, leases, contracts and other important corporate documents; shall have
- 21 -
<PAGE> 26
charge of the books, records and papers of the Corporation relating to its
organization and management as a Corporation; shall see that all reports,
statements and other documents required by law (except tax returns) are properly
filed; and shall, in general perform, all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors or the President.
Section 11. Other Duties of Officers. Any officer of the Corporation
shall have, in addition to the duties prescribed herein or by law, such other
duties as from time to time shall be prescribed by the Board of Directors or the
President.
Section 12. Salaries. The salaries of the officers shall be fixed
from time to time by the Board of Directors and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a Director of
the Corporation.
ARTICLE VI
Contracts, Notes, Checks and Deposits
Section 1. Contracts. The Board of Directors may authorize any
officer or agent to enter into any contract or to execute and deliver any
instrument in the name of and on behalf of the Corporation and such authority
may be general or confined to specific instances.
Section 2. Checks and Drafts. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by the Board of Directors.
- 22 -
<PAGE> 27
Section 3. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may designate.
ARTICLE VII
Shares of Stock
Section 1. Certificates of Stock. Each shareholder shall be entitled
to a certificate or certificates which shall represent and certify the number of
shares of each kind and class of shares held by him in the Corporation. Each
certificate shall be signed by the Chairman of the Board or the President or a
Vice President and countersigned by the Secretary or an assistant secretary or
the Treasurer or an assistant treasurer and may be sealed with the corporate
seal.
The signatures may be either manual or facsimile. Certificates shall
be consecutively numbered; and if the Corporation shall, from time to time,
issue several classes of stock, each class may have its own number series. A
certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued. Each certificate representing stock which
is restricted as to its transferability or voting powers, which is preferred or
limited as to its dividends or as to its share of the assets upon liquidation or
which is redeemable at the option of the Corporation, shall have a statement of
such restriction, limitation, preference or redemption provision, or a summary
thereof, plainly stated on the certificate. In lieu of such statement or
summary, the Corporation may set forth upon the face or back of the certificate
a statement that the Corporation will furnish to any shareholder, upon request
and without charge, a full statement of such information.
- 23 -
<PAGE> 28
Section 2. Lost Certificate. The Board of Directors may direct a new
certificate to be issued in place of any certificate previously issued by the
Corporation alleged to have been lost, stolen or destroyed upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing the issuance of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or his legal representative to advertise the same in such manner as
it shall require and/or to give bond, with sufficient surety, to the Corporation
to indemnify it against any loss or claim which may arise as a result of the
issuance of a new certificate.
Section 3. Transfer Agents and Registrars. At all such times that
the Corporation's securities are listed on a national securities exchange or
qualified for trading in the over-the-counter market, the Board of Directors
shall appoint one or more banks or trust companies in such city or cities as the
Board of Directors may deem advisable, from time to time, to act as transfer
agents and/or registrars of the shares of stock of the Corporation; and, upon
such appointments being made, no certificate representing shares shall be valid
until countersigned by one of such transfer agents and registered by one of such
registrars.
Section 4. Transfer of Stock. No transfers of shares of stock of the
Corporation shall be made if (i) void ab initio pursuant to any provision of the
Corporation's Articles of Incorporation or (ii) the Board of Directors, pursuant
to any provision of the Corporation's Articles of Incorporation, shall have
refused to permit the transfer of such shares. Permitted transfers of shares of
stock of the Corporation shall be made on the stock records of the Corporation
only upon the instruction of the registered holder thereof, or by his attorney
thereunto authorized by
- 24 -
<PAGE> 29
power of attorney duly executed and filed with the Secretary or with a transfer
agent or transfer clerk, and upon surrender of the certificate or certificates,
if issued, for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, as to any transfers not prohibited by any provision of
the Corporation's Articles of Incorporation or by action of the Board of
Directors thereunder, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 5. Stock Ledger. The Corporation shall maintain at its
principal office or at the office of its counsel, accountants or transfer agent,
an original or duplicate stock ledger containing the name and address of each
shareholder and the number of shares of stock of each class held by such
shareholder.
ARTICLE VIII
Dividends
Section 1. Declaration. Dividends upon the shares of stock of the
Corporation may be declared by the Board of Directors, subject to applicable
provisions of law and the Articles of Incorporation. Dividends may be paid in
cash, property or shares of the Corporation, subject to applicable provisions of
law and the Articles of Incorporation.
- 25 -
<PAGE> 30
Section 2. Contingencies. Before payment of any dividends, there may
be set aside out of any funds of the Corporation available for dividends such
sum or sums as the Board of Directors may from time to time, in its absolute
discretion, think proper as a reserve fund for contingencies, for equalizing
dividends, for repairing or maintaining the property of the Corporation, its
subsidiaries or any partnership for which it serves as general partner, or for
such other purpose as the Board of Directors shall determine to be in the best
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
ARTICLE IX
Seal
Section 1. Seal. The Corporation may have a corporate seal, which
may be altered at will by the Board of Directors. The Board of Directors may
authorize one or more duplicate or facsimile seals and provide for the custody
thereof.
Section 2. Affixing Seal. Whenever the Corporation is required to
place its corporate seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a corporate seal to
place the word "(SEAL)" adjacent to the signature of the person authorized to
execute the document on behalf of the Corporation.
ARTICLE X
Waiver of Notice
Whenever any notice is required to be given pursuant to the Articles
of Incorporation or
- 26 -
<PAGE> 31
these Bylaws of the Corporation or pursuant to applicable law, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the purpose
of any meeting need be set forth in the waiver of notice, unless specifically
required by statute. The attendance of any person at any meeting shall
constitute a waiver of notice of such meeting, except where such person attends
a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
ARTICLE XI
Amendment of Bylaws
Section 1. By Directors. The Board of Directors shall have the power
to adopt, alter or repeal any Bylaws of the Corporation and to make new Bylaws,
except that the Board of Directors shall not alter or repeal this Article XI or
any Bylaws made by the shareholders and provided that any amendment to Section
2, Section 3, Section 5 or Section 9 of Article III requires the affirmative
vote of 80% of the entire Board of Directors, including a majority of the
Independent Directors.
Section 2. By Shareholders. The shareholders shall have the power to
adopt, alter or repeal any Bylaws of the Corporation and to make new Bylaws,
provided that any amendment to Section 2, Section 3, Section 5 or Section 9 of
Article III requires the affirmative vote of the holders of two-thirds of all
outstanding shares entitled to vote on the election of Directors, voting
separately as a class.
- 27 -
<PAGE> 32
The foregoing are certified as the Bylaws of the Corporation adopted
by the Board of Directors and the Shareholders of the Corporation effective June
10, 1999.
/s/ James I. Humphrey, Jr.
---------------------------------
Secretary
- 28 -
<PAGE> 1
EXHIBIT 10.18
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this "Agreement") is made and entered into
as of June 11, 1999 by and among SUPERTEL HOSPITALITY, INC., a Delaware
corporation ("STH"), JEFFREY ZWERDLING, GEORGE R. WHITTEMORE, LEAH T. ROBINSON,
and ANDREW A. MAYER (in their individual capacities and on behalf of their
respective Affiliates listed on Attachment 1 hereto). Each of Messrs. Zwerdling,
Whittemore, Mayer and Dr. Robinson and their respective Affiliates is
hereinafter referred to individually as a "Shareholder" and collectively as the
"Shareholders."
WHEREAS, the Shareholders desire that Humphrey Hospitality Trust, Inc.
("HHTI") and STH enter into an Agreement and Plan of Merger dated the date
hereof (as the same may be amended or supplemented, the "Merger Agreement") with
respect to the merger of STH with and into HHTI (the "Merger"); and
WHEREAS, the Shareholders are executing this Agreement as an inducement
to STH to enter into and execute the Merger Agreement;
NOW, THEREFORE, in consideration of the execution and delivery by STH of
the Merger Agreement and the mutual covenants, conditions and agreements
contained herein and therein, the parties agree as follows:
1. Definitions. The following terms as used in this Agreement shall have
the following meanings (applicable in both the singular and plural forms of the
terms defined):
a. "Affiliate" means (i) any person directly or indirectly owning,
controlling, or holding, with power to vote ten percent or more of the
outstanding voting securities of such other person, (ii) any person ten percent
or more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held, with power to vote, by such other person, (iii) any person
directly or indirectly controlling, controlled by, or under common control with
such other person, (iv) any executive officer, director, trustee or general
partner of such other person, and (v) any legal entity for which such person
acts as an executive officer, director, trustee or general partner. The term
"person" means and includes any natural person, corporation, partnership,
association, limited liability company or any other legal entity. An indirect
relationship shall include circumstances in which a person's spouse is
associated with a person.
b. Capitalized terms used and not otherwise defined in this Agreement
shall have the respective meanings assigned to them in the Merger Agreement.
2. Representations and Warranties. Each Shareholder represents and
warrants to STH as follows:
a. The Shareholder is the record and beneficial owner of the number
of shares (such "Shareholder's Shares") of common stock, $.01 par value, of HHTI
("HHTI Stock")
<PAGE> 2
set forth below such Shareholder's name on the signature page hereof. Except for
the Shareholder's Shares, the Shareholder is not the record or beneficial owner
of any shares of HHTI Stock. This Agreement has been duly authorized, executed
and delivered by, and constitutes a valid and binding agreement of, the
Shareholder, enforceable in accordance with its terms.
b. Neither the execution and delivery of this Agreement nor the
consummation by the Shareholder of the transactions contemplated hereby will
result in a violation of, or a default under, or conflict with, any contract,
trust, commitment, agreement, understanding, arrangement or restriction of any
kind to which the Shareholder is a party or bound or to which the Shareholder's
Shares are subject. If the Shareholder is married and the Shareholder's Shares
constitute community property, this Agreement has been duly authorized, executed
and delivered by, and constitutes a valid and binding agreement of, the
Shareholder's spouse, enforceable against such person in accordance with its
terms. Consummation by the Shareholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or regulation
applicable to the Shareholder or the Shareholder's Shares.
c. The Shareholder's Shares and the certificates representing such
Shares are now, and at all times prior to the Merger will be, held by the
Shareholder, or by a nominee or custodian for the benefit of such Shareholder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising hereunder.
d. No broker, investment banker, financial adviser or other person is
entitled to any broker's, finder's, financial adviser's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Shareholder.
e. The Shareholder understands and acknowledges that STH is entering
into the Merger Agreement in reliance upon the Shareholder's execution and
delivery of this Agreement. The Shareholder acknowledges that the irrevocable
proxy set forth in Section 4 is granted in consideration for the execution and
delivery of the Merger Agreement by STH.
3. Voting Agreements. The Shareholder agrees with, and covenants to, STH
as follows:
a. At any meeting of shareholders of HHTI called to vote upon the
Merger and the Merger Agreement or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval with respect to the
Merger and the Merger Agreement is sought (the "Shareholders Meeting"), the
Shareholder shall vote (or cause to be voted) the Shareholder's Shares in favor
of the Merger, the execution and delivery by STH of the Merger Agreement, and
the approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement, including the amendment and restatement of
the Articles of Incorporation and Bylaws of HHTI, as set forth on Exhibits M and
N to the Merger Agreement.
-2-
<PAGE> 3
b. At any meeting of shareholders of HHTI or at any adjournment
thereof or in any other circumstances upon which their vote, consent or other
approval is sought, the Shareholder shall vote (or cause to be voted) such
Shareholder's Shares against (i) any merger agreement or merger (other than the
Merger Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution, liquidation
or winding up of or by STH or (ii) any amendment of HHTI's Articles of
Incorporation or Bylaws or other proposal or transaction involving HHTI or any
of its subsidiaries which amendment or other proposal or transaction would in
any manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger Agreement
(each of the foregoing in clause (i) or (ii) above, a "Competing Transaction").
4. Grant of Irrevocable Proxy; Appointment of Proxy.
a. The Shareholder hereby irrevocably grants to, and appoints, STH and
Paul J. Schulte, individually and in his capacity as an officer of STH, and any
individual who shall hereafter succeed to such office of STH, the Shareholder's
proxy and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of the Shareholder, to vote the Shareholder's Shares, or
grant a consent or approval in respect of such Shares (i) in favor of the
Merger, the execution and delivery of the Merger Agreement and approval of the
terms thereof and each of the other transactions contemplated by the Merger
Agreement, including the amendment and restatement of the Articles of
Incorporation and Bylaws of HHTI, as set forth on Exhibits M and N to the Merger
Agreement, provided that the terms of the Merger Agreement shall not have been
amended to materially and adversely impair the Shareholder's rights or increase
the Shareholder's obligations thereunder, and (ii) against any Competing
Transaction. The proxy granted pursuant to this Section 4 shall be strictly
limited to the matters set forth herein and the Shareholder shall have the right
to vote the Shareholder's Shares with respect to all other matters.
b. The Shareholder represents that any proxies heretofore given in
respect of the Shareholder's Shares are not irrevocable, and that any such
proxies are hereby revoked.
c. The Shareholder hereby affirms that the irrevocable proxy set forth
in this Section 4 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of the Shareholder under this Agreement. The Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked. The Shareholder hereby ratifies and confirms
all that such irrevocable proxy may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be irrevocable in
accordance with the laws of the Commonwealth of Virginia.
-3-
<PAGE> 4
5. Certain Events. The Shareholder agrees that this Agreement and the
obligations hereunder shall attach to the Shareholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of such
Shares shall pass, whether by operation of law or otherwise, including without
limitation the Shareholder's successors or assigns. In the event of any stock
split, stock dividend, merger, reorganization, recapitalization or other change
in the capital structure of HHTI affecting the HHTI Stock, or the acquisition of
additional shares of HHTI Stock or other voting securities of HHTI by any
Shareholder, the number of Shares subject to the terms of this Agreement shall
be adjusted appropriately and this Agreement and the obligations hereunder shall
attach to any additional shares of HHTI Stock or other voting securities of HHTI
issued to or acquired by the Shareholder.
6. Further Assurances. The Shareholder shall, upon request of STH,
execute and deliver any additional documents and take such further actions as
may reasonably be deemed by STH to be necessary or desirable to carry out the
provisions hereof and to vest the power to vote such Shareholder's Shares as
contemplated by Section 4 in STH and the other irrevocable proxies described
therein at the expense of STH.
7. Termination. This Agreement and all rights and obligations of the
parties hereunder shall terminate upon the first to occur of (x) the Effective
Time of the Merger or (y) the date upon which the Merger Agreement is terminated
in accordance with its terms.
8. Miscellaneous.
a. All notices, requests, claims, demands and other communications
under this Agreement shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice): (i) if to STH, to the address provided in
the Merger Agreement; and (ii) if to the Shareholder; to its address shown below
its signature on the last page hereof.
b. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
c. This Agreement may be executed in multiple counterparts, all of
which shall be considered one and the same agreement.
d. This Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof.
e. As to the rights and obligations relating to STH, this Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware without regard to its rules of conflicts of laws. As to the rights and
obligations relating to HHTI Stock and the holders thereof, this Agreement shall
be governed by, and construed in accordance with, the laws of the Commonwealth
of Virginia without regard to its rules of conflicts of laws.
-4-
<PAGE> 5
f. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by any of the parties without the prior written
consent of the other parties, except as expressly contemplated by Section 5. Any
assignment in violation of the foregoing shall be void.
g. The Shareholder agrees that irreparable damage would occur and that
STH would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that STH
shall be entitled to an injunction or injunctions to prevent breaches by the
Shareholder of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any court of the United States located in the
Commonwealth of Virginia or in Virginia state court, this being in addition to
any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (i) consents to submit such party to the personal
jurisdiction of any Federal court located in the Commonwealth of Virginia or any
Virginia state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (iii) agrees that such party will not
bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a Federal court sitting in the
Commonwealth of Virginia or a Virginia state court.
h. If any term, provision, covenant or restriction herein, or the
application thereof to any circumstance, shall, to any extent, be held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law.
i. No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
[SIGNATURE PAGE FOLLOWS]
-5-
<PAGE> 6
IN WITNESS WHEREOF, the undersigned parties have executed and
delivered this Shareholders' Agreement as of the day and year first above
written.
SUPERTEL HOSPITALITY, INC.
By: /s/ Paul J. Schulte
---------------------------------
Paul J. Schulte
President and Chief Executive Officer
JEFFREY ZWERDLING:
/s/ Jeffrey Zwerdling
-------------------------------------
Address:
-----------------------------
-------------------------------------
Number of HHTI Shares
Beneficially Owned: 22,936
------------------
GEORGE R. WHITTEMORE:
/s/ George R. Whittemore
-------------------------------------
Address:
-----------------------------
-------------------------------------
Number of HHTI Shares
Beneficially Owned: 90,825
------------------
-6-
<PAGE> 7
LEAH T. ROBINSON:
/s/ Leah T. Robinson
----------------------------------
Address:
--------------------------
----------------------------------
Number of HHTI Shares
Beneficially Owned: 86,814
---------------
ANDREW A. MAYER:
/s/ Andrew A. Mayer
----------------------------------
Address:
--------------------------
----------------------------------
Number of HHTI Shares
Beneficially Owned: 90,551
---------------
-7-
<PAGE> 1
EXHIBIT 10.19
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this "Agreement") is made and entered into
as of June 11, 1999 by and among HUMPHREY HOSPITALITY TRUST, INC., a Virginia
corporation ("HHTI"), SUPERTEL HOSPITALITY, INC., a Delaware corporation
("STH"), PAUL J. SCHULTE and STEVE H. BORGMANN (in the case of Messrs. Schulte
and Borgmann, in their individual capacities and on behalf of their respective
Affiliates listed on Attachment 1 hereto). Each of Messrs. Schulte and Borgmann
and their respective Affiliates is hereinafter referred to individually as a
"Shareholder" and collectively as the "Shareholders".
WHEREAS, the Shareholders desire that HHTI and STH enter into an
Agreement and Plan of Merger dated the date hereof (as the same may be amended
or supplemented, the "Merger Agreement") with respect to the merger of STH with
and into HHTI (the "Merger"); and
WHEREAS, pursuant to the Merger Agreement and in connection with the
Merger, shares of common stock of HHTI ("HHTI Shares") will be issued to the
Shareholders of record of STH on the Effective Date of the Merger in exchange
for all of the shares of common stock of STH held by such Shareholders; and
WHEREAS, the Shareholders and STH are executing this Agreement as an
inducement to HHTI to enter into and execute the Merger Agreement;
NOW, THEREFORE, in consideration of the execution and delivery by HHTI of
the Merger Agreement and the mutual covenants, conditions and agreements
contained herein and therein, the parties agree as follows:
1. Definitions. The following terms as used in this Agreement shall have
the following meanings (applicable in both the singular and plural forms of the
terms defined):
a. "Affiliate" means (i) any person directly or indirectly owning,
controlling, or holding, with power to vote ten percent or more of the
outstanding voting securities of such other person, (ii) any person ten percent
or more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held, with power to vote, by such other person, (iii) any person
directly or indirectly controlling, controlled by, or under common control with
such other person, (iv) any executive officer, director, trustee or general
partner of such other person, and (v) any legal entity for which such person
acts as an executive officer, director, trustee or general partner. The term
"person" means and includes any natural person, corporation, partnership,
association, limited liability company or any other legal entity. An indirect
relationship shall include circumstances in which a person's spouse is
associated with a person.
b. "Transfer" shall include, without limitation, for the purposes of
this Agreement, any offer to sell, sale, gift, pledge or other disposition;
provided however, the term "Transfer" shall not include (i) any bona fide gift,
pledge or other disposition to a charitable organization, as defined by Section
501(c)(3) of the Internal Revenue Code of 1986, as amended, or (ii) any Transfer
upon the death of a Shareholder.
<PAGE> 2
c. Capitalized terms used and not otherwise defined in this Agreement
shall have the respective meanings assigned to them in the Merger Agreement.
2. Representations and Warranties. Each Shareholder represents and
warrants to HHTI as follows:
a. The Shareholder is the record and beneficial owner of the number of
shares (such "Shareholder's Shares") of common stock, $.01 par value, of STH
("STH Stock") set forth below such Shareholder's name on the signature page
hereof. Except for the Shareholder's Shares, the Shareholder is not the record
or beneficial owner of any shares of STH Stock. This Agreement has been duly
authorized, executed and delivered by, and constitutes a valid and binding
agreement of, the Shareholder, enforceable in accordance with its terms.
b. Neither the execution and delivery of this Agreement nor the
consummation by the Shareholder of the transactions contemplated hereby will
result in a violation of, or a default under, or conflict with, any contract,
trust, commitment, agreement, understanding, arrangement or restriction of any
kind to which the Shareholder is a party or bound or to which the Shareholder's
Shares are subject. If the Shareholder is married and the Shareholder's Shares
constitute community property, this Agreement has been duly authorized, executed
and delivered by, and constitutes a valid and binding agreement of, the
Shareholder's spouse, enforceable against such person in accordance with its
terms. Consummation by the Shareholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or regulation
applicable to the Shareholder or the Shareholder's Shares.
c. The Shareholder's Shares and the certificates representing such
Shares are now, and at all times prior to the Merger will be, held by the
Shareholder, or by a nominee or custodian for the benefit of such Shareholder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising hereunder.
d. No broker, investment banker, financial adviser or other person is
entitled to any broker's, finder's, financial adviser's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Shareholder.
e. The Shareholder understands and acknowledges that HHTI is entering
into the Merger Agreement in reliance upon the Shareholder's execution and
delivery of this Agreement. The Shareholder acknowledges that the irrevocable
proxy set forth in Section 5 is granted in consideration for the execution and
delivery of the Merger Agreement by HHTI.
3. Voting Agreements. The Shareholder agrees with, and covenants to, STH
and HHTI as follows:
a. At any meeting of shareholders of STH called to vote upon the
Merger and the Merger Agreement or at any adjournment thereof or in any other
circumstances upon which a
-2-
<PAGE> 3
vote, consent or other approval with respect to the Merger and the Merger
Agreement is sought (the "Shareholders Meeting"), the Shareholder shall vote (or
cause to be voted) the Shareholder's Shares in favor of the Merger, the
execution and delivery by STH of the Merger Agreement, and the approval of the
terms thereof and each of the other transactions contemplated by the Merger
Agreement.
b. At any meeting of shareholders of STH or at any adjournment thereof
or in any other circumstances upon which their vote, consent or other approval
is sought, the Shareholder shall vote (or cause to be voted) such Shareholder's
Shares against (i) any merger agreement or merger (other than the Merger
Agreement and the Merger), consolidation, combination, sale of substantial
assets, reorganization, recapitalization, dissolution, liquidation or winding up
of or by STH or (ii) any amendment of STH's Certificate of Incorporation or
Bylaws or other proposal or transaction involving STH or any of its subsidiaries
which amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement (each of the foregoing
in clause (i) or (ii) above, a "Competing Transaction").
4. Covenants. Each Shareholder agrees with, and covenants to, HHTI as
follows:
a. The Shareholder shall not (i) Transfer, or consent to any Transfer
of, any or all of the Shareholder's Shares or any interest therein, except
pursuant to the Merger; (ii) enter into any contract, option or other agreement
or understanding with respect to any Transfer of any or all of such Shares or
any interest therein, (iii) grant any proxy, power of attorney or other
authorization in or with respect to such Shares, except for this Agreement, or
(iv) deposit such Shares into a voting trust or enter into a voting agreement or
arrangement with respect to such Shares; provided, that the Shareholder may
Transfer up to 15,000 Shares per year of the Shareholder's Shares to any other
person who is on the date hereof, or to any family member of a person who prior
to the Shareholders Meeting and prior to such Transfer becomes, a party to this
Agreement bound by all the obligations of the "Shareholder" hereunder.
b. If a majority of the holders of STH Stock approve the Merger and
the Merger Agreement, the Shareholder's Shares shall, pursuant to the terms of
the Merger Agreement, be exchanged for the consideration provided in the Merger
Agreement. The Shareholder hereby waives any rights of appraisal, or rights to
dissent from the Merger, that such Shareholder may have.
c. The Shareholder shall not, without the prior written consent of
HHTI, Transfer, or consent to any Transfer of, any or all of the HHTI Common
Stock issued to the Shareholder in the Merger for a period of 180 days following
the Effective Date of the Merger.
5. Grant of Irrevocable Proxy; Appointment of Proxy.
a. The Shareholder hereby irrevocably grants to, and appoints, HHTI
and James I. Humphrey, Jr., individually and in his capacity as an officer of
HHTI, and any individual who shall hereafter succeed to such office of HHTI, the
Shareholder's proxy and attorney-in-fact (with full power of substitution), for
and in the name, place and stead of the Shareholder, to vote
-3-
<PAGE> 4
the Shareholder's Shares, or grant a consent or approval in respect of such
Shares (i) in favor of the Merger, the execution and delivery of the Merger
Agreement and approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement, provided that the terms of the Merger
Agreement shall not have been amended to materially and adversely impair the
Shareholder's rights or increase the Shareholder's obligations thereunder, and
(ii) against any Competing Transaction. The proxy granted pursuant to this
Section 5 shall be strictly limited to the matters set forth herein and the
Shareholder shall have the right to vote the Shareholder's Shares with respect
to all other matters.
b. The Shareholder represents that any proxies heretofore given in
respect of the Shareholder's Shares are not irrevocable, and that any such
proxies are hereby revoked.
c. The Shareholder hereby affirms that the irrevocable proxy set forth
in this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of the Shareholder under this Agreement. The Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked. The Shareholder hereby ratifies and confirms
all that such irrevocable proxy may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be irrevocable in
accordance with Delaware law.
6. Certain Events. The Shareholder agrees that this Agreement and the
obligations hereunder shall attach to the Shareholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of such
Shares shall pass, whether by operation of law or otherwise, including without
limitation the Shareholder's successors or assigns. In the event of any stock
split, stock dividend, merger, reorganization, recapitalization or other change
in the capital structure of STH affecting the STH Stock, or the acquisition of
additional shares of STH Stock or other voting securities of STH by any
Shareholder, the number of Shares subject to the terms of this Agreement shall
be adjusted appropriately and this Agreement and the obligations hereunder shall
attach to any additional shares of STH Stock or other voting securities of STH
issued to or acquired by the Shareholder.
7. Stop Transfer; Legends. STH agrees with, and covenants to, HHTI that
STH shall not register the transfer of any certificate representing any of the
Shareholder's Shares, unless such transfer is made to HHTI or otherwise in
compliance with this Agreement. Each Shareholder covenants and agrees that any
and all certificates representing HHTI Shares issued to and in the name of the
Shareholder as a result of the Merger shall bear the following legend: "The
shares of Common Stock, $.01 par value, of Supertel Hospitality, Inc.
represented by this certificate are subject to a Shareholders' Agreement dated
as of ____________, 1999, and may not be sold or otherwise transferred, except
in accordance therewith. Copies of such Agreement may be obtained at the
principal executive offices of Humphrey Hospitality Trust Inc. at 12301 Old
Columbia Pike, Silver Spring, Maryland 20904." Upon the expiration of the
180-day period described in Section 4(c), the Company will, at the request of
the Shareholder, cause the foregoing legend to be removed.
-4-
<PAGE> 5
8. Registration Rights. To the extent the shares of HHTI Stock issued to
a Shareholder as a result of the Merger are subject to any resale restrictions
under the federal securities laws, rules or regulations, and such resale
restrictions remain effective after expiration of the 180-day period following
the Effective Time, if HHTI shall propose to file on its own behalf and/or on
the behalf of any other shareholders a registration statement under the
Securities Act for an offering of HHTI Stock solely for cash on a form that
would also permit registration of shares of HHTI Stock held by the Shareholder,
HHTI shall give notice of such proposed registration to the Shareholder as
promptly as possible, but in any event, at least forty-five (45) days before the
initial filing with the SEC of such registration statement, which notice shall
set forth the intended method of disposition of the shares proposed to be
registered by HHTI. The notice shall offer to include in such filing the
aggregate number of shares of HHTI Common Stock as the Shareholder may request
(not to exceed the aggregate number of shares received by the Shareholder in the
Merger, less the number of shares as to which the Shareholder has previously
exercised registration rights pursuant to this Section), subject to this Section
8. The Shareholder desiring to have HHTI Stock registered under this Section 8
shall advise HHTI in writing within ten business days after the date of notice
of such offer from HHTI, setting forth the amount of such HHTI Stock for which
registration is requested. HHTI shall thereupon include in such filing the
number of shares of HHTI Stock for which registration is so requested, subject
to the provisions of Section 8(i)-(vii), and shall use its best efforts to
effect registration under the Securities Act of such shares. Notwithstanding the
foregoing: (i) HHTI shall not be required to give notice or to include shares in
any such registration if the proposed registration is (A) a registration of a
dividend reinvestment, stock option, employee benefit or compensation plan or of
securities issued or issuable pursuant to any such plan, or (B) a registration
of securities proposed to be issued in exchange for securities or assets of, or
in connection with a merger or consolidation with, another entity; (ii) HHTI may
exclude from registration shares owned by the Shareholder to the extent that the
total number of shares requested to be included by the Shareholders pursuant to
this Section 8 exceeds 15 percent of the total number of shares to be registered
in the proposed offering; (iii) if HHTI is advised in writing by its
underwriters that the inclusion of all or any portion of such shares would in
their reasonable opinion jeopardize the success of the proposed offering, HHTI
may exclude all or such portion of such shares from registration; (iv) the
offering of such shares by the Shareholder shall be on the same terms as the
offering by HHTI; (v) in the event other parties have similar registration
rights at the time of the offering, the number of shares to be registered may be
limited by HHTI pursuant to clause (ii) and (iii) of this Section 8 on a pro
rata basis according to the total amount of shares owned by such parties or on
such other basis as may be agreed upon by such parties; provided, that no
limitation shall apply to shares offered by HHTI for its own account; (vi) HHTI
may, without the consent of the Shareholder, withdraw such registration
statement and abandon the proposed offering in which such persons had requested
to participate; and (vii) HHTI shall be under no obligation to the Shareholder
pursuant to this Section 8 unless such person accepts the terms of underwriting
agreed upon by HHTI and its underwriters.
-5-
<PAGE> 6
9. Regulatory Approvals. Each of the provisions of this Agreement is
subject to compliance with applicable regulatory conditions and receipt of any
required regulatory approvals.
10. Further Assurances. The Shareholder shall, upon request of HHTI,
execute and deliver any additional documents and take such further actions as
may reasonably be deemed by HHTI to be necessary or desirable to carry out the
provisions hereof and to vest the power to vote such Shareholder's Shares as
contemplated by Section 5 in HHTI and the other irrevocable proxies described
therein at the expense of HHTI.
11. Termination. This Agreement, and all rights and obligations of the
parties hereunder, except the rights and obligations set out in Sections 4(c), 7
and 8 shall terminate upon the first to occur of (x) the Effective Time of the
Merger or (y) the date upon which the Merger Agreement is terminated in
accordance with its terms. If the Merger becomes effective in accordance with
the terms of the Merger Agreement, the provisions contained in Sections 4(c), 7
and 8 shall survive the Effective Time of the Merger in accordance with their
terms.
12. Miscellaneous.
a. All notices, requests, claims, demands and other communications
under this Agreement shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice): (i) if to HHTI, to the address provided in
the Merger Agreement; and (ii) if to the Shareholder; to its address shown below
its signature on the last page hereof.
b. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
c. This Agreement may be executed in multiple counterparts, all of
which shall be considered one and the same agreement.
d. This Agreement (including the documents and instruments referred
to herein) constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof.
e. As to the rights and obligations relating to STH, the STH Stock
and the holders thereof, this Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules of
conflicts of laws. As to the rights and obligations relating to HHTI Shares and
the holders thereof, this Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Virginia without regard to its
rules of conflicts of laws.
f. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by any of
-6-
<PAGE> 7
the parties without the prior written consent of the other parties, except as
expressly contemplated by Section 6. Any assignment in violation of the
foregoing shall be void.
g. The Shareholder agrees that irreparable damage would occur and
that HHTI would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that HHTI
shall be entitled to an injunction or injunctions to prevent breaches by the
Shareholder of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any court of the United States located in the
Commonwealth of Virginia or in Virginia state court, this being in addition to
any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (i) consents to submit such party to the personal
jurisdiction of any Federal court located in the Commonwealth of Virginia or any
Virginia state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (iii) agrees that such party will not
bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a Federal court sitting in the
Commonwealth of Virginia or a Virginia state court.
h. If any term, provision, covenant or restriction herein, or the
application thereof to any circumstance, shall, to any extent, be held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law.
i. No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
[SIGNATURE PAGE FOLLOWS]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the undersigned parties have executed and delivered
this Shareholders' Agreement as of the day and year first above written.
HUMPHREY HOSPITALITY TRUST, INC
By: /s/ James I. Humphrey, Jr.
--------------------------------------------
Name: James I. Humphrey, Jr.
Title: President and Chief Executive Officer
SUPERTEL HOSPITALITY, INC.
By: /s/ Paul J. Schulte
--------------------------------------------
Name: Paul J. Schulte
Title: President and Chief Executive Officer
PAUL J. SCHULTE:
/s/ Paul J. Schulte
------------------------------------------------
Address:
----------------------------------------
------------------------------------------------
Number of STH Shares
Beneficially Owned: 712,635
-----------------------------
STEVE H. BORGMANN:
/s/ Steve H. Borgmann
------------------------------------------------
Address:
----------------------------------------
Number of STH Shares
Beneficially Owned: 771,958
-----------------------------
-8-
<PAGE> 9
Attachment 1
Affiliates
Paul J. Schulte:
Karen Schulte
Supertel, Inc.
Steve H. Borgmann:
Supertel, Inc.
<PAGE> 1
EXHIBIT 10.20
AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of June 11,
1999 by and among HUMPHREY HOSPITALITY LIMITED PARTNERSHIP, a Virginia limited
partnership ("HHLP"), HUMPHREY HOSPITALITY TRUST, INC., a Virginia corporation
("HHTI"), SUPERTEL HOSPITALITY, INC., a Delaware corporation ("STH") and JAMES
I. HUMPHREY, JR. (in his individual capacity and on behalf of his Affiliates
listed on Attachment 1 hereto) (the "Shareholder").
WHEREAS, the Shareholder desires that HHTI and STH enter into an
Agreement and Plan of Merger dated the date hereof (as the same may be amended
or supplemented, the "Merger Agreement") with respect to the merger of STH with
and into HHTI (the "Merger"); and
WHEREAS, pursuant to the Merger Agreement and in connection with the
Merger, shares of common stock of HHTI ("HHTI Shares") will be issued to the
Shareholders of record of STH on the Effective Date of the Merger in exchange
for all of the shares of common stock of STH held by such Shareholders; and
WHEREAS, the Shareholders are executing this Agreement as an inducement
to STH to enter into and execute the Merger Agreement;
NOW, THEREFORE, in consideration of the execution and delivery by STH of
the Merger Agreement and the mutual covenants, conditions and agreements
contained herein and therein, the parties agree as follows:
1. Definitions. The following terms as used in this Agreement shall have
the following meanings (applicable in both the singular and plural forms of the
terms defined):
a. "Affiliate" means (i) any person directly or indirectly owning,
controlling, or holding, with power to vote ten percent or more of the
outstanding voting securities of such other person, (ii) any person ten percent
or more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held, with power to vote, by such other person, (iii) any person
directly or indirectly controlling, controlled by, or under common control with
such other person, (iv) any executive officer, director, trustee or general
partner of such other person, and (v) any legal entity for which such person
acts as an executive officer, director, trustee or general partner. The term
"person" means and includes any natural person, corporation, partnership,
association, limited liability company or any other legal entity. An indirect
relationship shall include circumstances in which a person's spouse is
associated with a person.
b. "Transfer" shall include, without limitation, for the purposes of
this Agreement, any offer to sell, sale, gift, pledge or other disposition;
provided however, the term "Transfer" shall not include (i) any bona fide gift,
pledge or other disposition to a charitable
<PAGE> 2
organization, as defined by Section 501(c)(3) of the Internal Revenue Code of
1986, as amended, or (ii) any Transfer upon the death of the Shareholder.
c. Capitalized terms used and not otherwise defined in this Agreement
shall have the respective meanings assigned to them in the Merger Agreement.
2. Representations and Warranties. The Shareholder represents and
warrants to STH as follows:
a. The Shareholder is the record and beneficial owner of the number of
units of limited partnership interest in HHLP (the "Shareholder's Units") set
forth below such Shareholder's name on the signature page hereof, which
Shareholder's Units are convertible into an equal number of shares of common
stock, $.01 par value, of HHTI ("HHTI Stock"). Except for the Shareholder's
Units, the Shareholder is not the record or beneficial owner of any shares of
HHTI Stock or other securities convertible into shares of HHTI Stock. This
Agreement has been duly authorized, executed and delivered by, and constitutes a
valid and binding agreement of, the Shareholder, enforceable in accordance with
its terms.
b. Neither the execution and delivery of this Agreement nor the
consummation by the Shareholder of the transactions contemplated hereby will
result in a violation of, or a default under, or conflict with, any contract,
trust, commitment, agreement, understanding, arrangement or restriction of any
kind to which the Shareholder is a party or bound or to which the Shareholder's
Units are subject. If the Shareholder is married and the Shareholder's Units
constitute community property, this Agreement has been duly authorized, executed
and delivered by, and constitutes a valid and binding agreement of, the
Shareholder's spouse, enforceable against such person in accordance with its
terms. Consummation by the Shareholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or regulation
applicable to the Shareholder or the Shareholder's Units.
c. The Shareholder's Units and any certificates representing such
Units are now, and at all times prior to the Merger will be, held by the
Shareholder, or by a nominee or custodian for the benefit of such Shareholder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising hereunder.
d. No broker, investment banker, financial adviser or other person is
entitled to any broker's, finder's, financial adviser's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Shareholder.
e. The Shareholder understands and acknowledges that STH is entering
into the Merger Agreement in reliance upon the Shareholder's execution and
delivery of this Agreement. The Shareholder acknowledges that the irrevocable
proxy set forth in Section 5 is granted in consideration for the execution and
delivery of the Merger Agreement by STH.
-2-
<PAGE> 3
3. Voting Agreements. The Shareholder agrees with, and covenants to, STH
and HHTI as follows:
a. In the event that Shareholder acquires shares of HHTI Stock on or
prior to the record date for any meeting of HHTI shareholders called to vote on
the Merger and Merger Agreement, at any such meeting of shareholders of HHTI or
at any adjournment thereof or in any other circumstances upon which a vote,
consent or other approval with respect to the Merger and the Merger Agreement is
sought (the "Shareholders Meeting"), the Shareholder shall vote (or cause to be
voted) the shares of HHTI Stock owned by him in favor of the Merger, the
execution and delivery by HHTI of the Merger Agreement, and the approval of the
terms thereof and each of the other transactions contemplated by the Merger
Agreement.
b. At any meeting of shareholders of HHTI or at any adjournment
thereof or in any other circumstances upon which their vote, consent or other
approval is sought and at which Shareholder is entitled to vote, the Shareholder
shall vote (or cause to be voted) any shares of HHTI Stock owned by him against
(i) any merger agreement or merger (other than the Merger Agreement and the
Merger), consolidation, combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by HHTI or (ii)
any amendment of HHTI"s Certificate of Incorporation or Bylaws or other proposal
or transaction involving HHTI or any of its subsidiaries which amendment or
other proposal or transaction would in any manner impede, frustrate, prevent or
nullify the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement (each of the foregoing in clause (i) or
(ii) above, a "Competing Transaction").
4. Covenants. The Shareholder agrees with, and covenants to, STH as
follows:
The Shareholder shall not (i) Transfer, or consent to any Transfer of,
any or all of the Shareholder's Units or any interest therein, or any shares of
HHTI Stock owned by him; (ii) enter into any contract, option or other agreement
or understanding with respect to any Transfer of any or all of such Units or any
interest therein, or any shares of HHTI Stock owned by him; (iii) grant any
proxy, power of attorney or other authorization in or with respect to such any
shares of HHTI Stock owned by him, except for this Agreement, or (iv) deposit
any shares of HHTI Stock owned by him into a voting trust or enter into a voting
agreement or arrangement with respect to such shares of HHTI Stock; provided,
that the Shareholder may Transfer his Shareholder's Units or shares of HHTI
Stock to any other person who is on the date hereof, or to any family member of
a person who prior to the Shareholders Meeting and prior to such Transfer
becomes, a party to this Agreement bound by all the obligations of the
"Shareholder" hereunder.
5. Grant of Irrevocable Proxy; Appointment of Proxy.
a. The Shareholder hereby irrevocably grants to, and appoints, STH and
Paul J. Schulte individually and in his capacity as an officer of STH, and any
individual who shall hereafter succeed to such office of STH, the Shareholder's
proxy and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of the Shareholder, to vote any shares of HHTI Stock
acquired by Shareholder on or prior to the record date for the Shareholders
Meeting, or grant a consent or approval in respect of such shares (i) in favor
of the Merger, the
-3-
<PAGE> 4
execution and delivery of the Merger Agreement and approval of the terms thereof
and each of the other transactions contemplated by the Merger Agreement,
provided that the terms of the Merger Agreement shall not have been amended to
materially and adversely impair the Shareholder's rights or increase the
Shareholder's obligations thereunder, and (ii) against any Competing
Transaction. The proxy granted pursuant to this Section 5 shall be strictly
limited to the matters set forth herein and the Shareholder shall have the right
to vote any shares of HHIT Common Stock owned by him with respect to all other
matters.
b. The Shareholder hereby affirms that the irrevocable proxy set forth
in this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of the Shareholder under this Agreement. The Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked. The Shareholder hereby ratifies and confirms
all that such irrevocable proxy may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be irrevocable in
accordance with Virginia law.
6. Certain Events. The Shareholder agrees that this Agreement and the
obligations hereunder shall attach to the Shareholder's Units and any shares of
HHTI Stock owned by him and shall be binding upon any person or entity to which
legal or beneficial ownership of such Units or shares shall pass, whether by
operation of law or otherwise, including without limitation the Shareholder's
successors or assigns. In the event of any stock split, stock dividend, merger,
reorganization, recapitalization or other change in the capital structure of
HHTI or HHLP affecting the HHTI Stock or Shareholder's Units, or the acquisition
of additional units of interest in HHLP or shares of HHTI Stock or other voting
securities of HHTI by the Shareholder, the number of Shareholder's Units and
shares of HHTI Stock subject to the terms of this Agreement shall be adjusted
appropriately and this Agreement and the obligations hereunder shall attach to
any additional Units and shares of HHTI Stock or other voting securities of HHTI
issued to or acquired by the Shareholder.
7. Stop Transfer; Legends. HHLP agrees with, and covenants to, STH that
HHLP shall not register the transfer of any certificate representing any of the
Shareholder's Units, and HHTI agrees with, and covenants to, STH that HHTI shall
not register the transfer of any certificate representing any shares of HHTI
Stock owned by the Shareholder, unless such transfer is made to STH or otherwise
in compliance with this Agreement.
-4-
<PAGE> 5
8. Regulatory Approvals. Each of the provisions of this Agreement is
subject to compliance with applicable regulatory conditions and receipt of any
required regulatory approvals.
9. Further Assurances. The Shareholder shall, upon request of STH,
execute and deliver any additional documents and take such further actions as
may reasonably be deemed by STH to be necessary or desirable to carry out the
provisions hereof and to vest the power to vote any shares of HHTI Stock owned
by the Shareholder as contemplated by Section 5 in STH and the other irrevocable
proxies described therein at the expense of STH.
10. Termination. This Agreement, and all rights and obligations of the
parties hereunder shall terminate upon the first to occur of (x) the Effective
Time of the Merger or (y) the date upon which the Merger Agreement is terminated
in accordance with its terms.
11. Miscellaneous.
a. All notices, requests, claims, demands and other communications
under this Agreement shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice): (i) if to HHTI, to the address provided in
the Merger Agreement; (ii) if to STH, to the address provided in the Merger
Agreement, (iii) if to HHLP, to Humphrey Hospitality Limited Partnership, 12301
Old Columbia Pike, Silver Spring, MD 20904, Attn: Mr. James I. Humphrey, Jr.,
and (iv) if to the Shareholder; to its address shown below his signature on the
last page hereof.
b. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
c. This Agreement may be executed in multiple counterparts, all of
which shall be considered one and the same agreement.
d. This Agreement (including the documents and instruments referred
to herein) constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof.
e. As to the rights and obligations relating to HHTI, the
Shareholder's Units, the HHTI Stock and the holders thereof, this Agreement
shall be governed by and construed in accordance with the laws of the
Commonwealth of Virginia without regard to its rules of conflicts of laws.
f. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by any of the parties without the prior written
consent of the other parties, except as expressly contemplated by Section 6. Any
assignment in violation of the foregoing shall be void.
g. The Shareholder agrees that irreparable damage would occur and
that STH would not have any adequate remedy at law in the event that any of the
provisions of this
-5-
<PAGE> 6
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that STH shall be entitled to an
injunction or injunctions to prevent breaches by the Shareholder of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in any court of the United States located in the Commonwealth of Virginia or in
Virginia state court, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit such party to the personal jurisdiction of any Federal court
located in the Commonwealth of Virginia or any Virginia state court in the event
any dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) agrees that such party will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (iii) agrees that such party will not bring any action relating to this
Agreement or any of the transactions contemplated hereby in any court other than
a Federal court sitting in the Commonwealth of Virginia or a Virginia state
court.
h. If any term, provision, covenant or restriction herein, or the
application thereof to any circumstance, shall, to any extent, be held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law.
i. No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
[SIGNATURE PAGE FOLLOWS]
-6-
<PAGE> 7
IN WITNESS WHEREOF, the undersigned parties have executed and
delivered this Agreement as of the day and year first above written.
HUMPHREY HOSPITALITY TRUST, INC.
By: /s/ James I. Humphrey, Jr.
-----------------------------------------
James I. Humphrey, Jr.
President and Chief Executive Officer
HUMPHREY HOSPITALITY LIMITED
PARTNERSHIP, L.P.
By: Humphrey Hospitality REIT Trust, a
Maryland business Trust
By: /s/ James I. Humphrey, Jr.
-----------------------------------------
James I. Humphrey, Jr.
President and Chief Executive Officer
SUPERTEL HOSPITALITY, INC.
By: /s/ Paul J. Schulte
-----------------------------------------
Paul J. Schulte
President and Chief Executive Officer
JAMES I. HUMPHREY, JR.:
/s/ James I. Humphrey, Jr.
------------------------------------
Address:
----------------------------
------------------------------------
Number of HHLP Units
Beneficially Owned: 708,798
-----------------
-7-
<PAGE> 8
Attachment 1
Affiliates
Humphrey Development, Inc.
12301 Old Columbia Pike, Suite 300
Silver Spring, MD 20904
Humphrey Associates, Inc.
12301 Old Columbia Pike, Suite 300
Silver Spring, MD 20904
<PAGE> 1
EXHIBIT 10.21
RIGHT OF FIRST OPPORTUNITY AGREEMENT
THIS RIGHT OF FIRST OPPORTUNITY AGREEMENT (the "Agreement") is made
and entered into as of the 10th day of June, 1999, by and between Humphrey
Hospitality Trust, Inc. ("HHTI"), Humphrey Hospitality Limited Partnership, a
Virginia limited partnership (the "Operating Partnership") (HHTI and the
Operating Partnership are sometimes referred to herein collectively as the "REIT
Entities" and individually as a "REIT Entity") and Humphrey Hospitality
Management, Inc., a Maryland corporation ("HHMI").
W I T N E S S E T H:
WHEREAS, HHTI owns, directly or indirectly, a 84.21 percent
partnership interest in the Operating Partnership;
WHEREAS, the REIT Entities may in certain circumstances determine
that they are precluded from pursuing, or is limited in the manner in which they
pursue, various business opportunities due to the status of HHTI as a real
estate investment trust ("REIT") under sections 856 through 860 of the Internal
Revenue Code of 1986, as amended (the "Code");
WHEREAS, HHMI is a corporation that was formed for the purposes of,
among other things, becoming a lessee and operator of various types of assets,
including real estate owned by the REIT Entities and others;
WHEREAS, Supertel Hospitality, Inc. ("STH") has entered into, or
will enter into, an agreement to merge with and into HHTI (the "Merger") and as
a precondition to the Merger, HHMI will enter into leases relating to hotels
owned by STH on terms and conditions agreed upon by the parties (the "STH Hotel
Leases") and will purchase certain assets of STH (the "Asset Purchase"); and
WHEREAS, the REIT Entities acknowledge that they are executing this
Agreement in connection with, and as an inducement to, HHMI to complete the
Asset Purchase and enter into the STH Hotel Leases, and have determined that, in
connection with the Merger, it is desirable to provide HHMI with a right of
first opportunity with respect to certain business opportunities available to
the REIT Entities.
NOW, THEREFORE, in consideration of the premises and mutual
undertakings herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by each of the parties hereto,
the undersigned parties hereby agree as follows:
1. Definitions. Except as may be otherwise herein expressly provided, the
following terms and phrases shall have the meanings set forth below:
(a) "Tenant Opportunity" means the opportunity to become the lessee under a
"master" lease arrangement of a property owned or subsequently acquired by a
REIT Entity if such REIT Entity, in its sole discretion, determines that,
consistent with the status of HHTI as a REIT, such
<PAGE> 2
REIT Entity is required to enter into such a "master" lease arrangement for such
property, including, without limitation, a hotel or similar type of facility, so
long as such REIT Entity determines, in its reasonable discretion, that HHMI or
an entity that HHMI controls is qualified to be the lessee based on experience
in the industry and financial and legal qualifications, provided that all
determinations relating to both (i) the ability or inability of a REIT Entity to
pursue an opportunity or acquire assets and (ii) the necessity for a REIT Entity
to enter into a "master" lease arrangement for a property, shall be made by such
REIT Entity in its sole discretion. A Tenant Opportunity shall not include (1) a
property which already has an existing "master" lessee as of the date of this
Agreement (or, with respect to a property acquired subsequent to the date of
this Agreement, which has an existing binding "master" lessee arrangement that
predates the acquisition of the property by a REIT Entity), provided that the
REIT Entity shall offer any such "master" lessee interest to HHMI if the lessee
interest subsequently becomes available, or (2) an opportunity in which the
seller of the property (or any affiliate or designee of the seller) desires to
enter into a "master" lease agreement with one of the REIT Entities.
(b) "REIT-Qualified Investment" means an investment, the income for which
would be qualifying income under applicable provisions of federal income tax
law, the ownership of which would not cause a REIT to violate the asset
limitations set forth in applicable provisions of federal income tax law, and
which otherwise meets the federal income tax requirements applicable to REITs.
Any expenses incurred that are directly related to structuring an investment as
a REIT-Qualified Investment shall be borne solely by the applicable REIT Entity.
2. HHMI Right of First Opportunity for Tenant Opportunity.
(a) During the term of this Agreement, if a REIT Entity develops a Tenant
Opportunity, or if a Tenant Opportunity otherwise becomes available to a REIT
Entity, such REIT Entity shall first offer such Tenant Opportunity to HHMI. The
offer shall be made by written notice (the "REIT Entity Notice") from the REIT
Entity to HHMI, which REIT Entity Notice shall contain a detailed description of
the material terms and conditions under which such REIT Entity proposes to offer
such Tenant Opportunity to HHMI. Such REIT Entity shall thereafter provide or
cause to be provided promptly to HHMI such additional information relating to
the Tenant Opportunity as HHMI reasonably may request. For a period of 30 days
after the date that a REIT Entity delivers a REIT Entity Notice to HHMI, such
REIT Entity and HHMI shall negotiate with each other on an exclusive basis with
respect to such Tenant Opportunity. If such REIT Entity and HHMI are unable to
enter into a mutually satisfactory arrangement with respect to the Tenant
Opportunity within such 30-day period, or if HHMI indicates that it is not
interested in pursuing such Tenant Opportunity (in which event HHMI shall
provide written notice to such REIT Entity as soon as HHMI decides against
pursuing such opportunity), then the REIT Entity shall be free for a period of
one year after the expiration of such 30-day period to enter into a binding
agreement with respect to such Tenant Opportunity with any party at a price and
on terms and conditions that are not more favorable to such REIT Entity in any
material respect than the price, terms and conditions last proposed in writing
by such REIT Entity to HHMI. If such REIT Entity does not enter into a binding
agreement with respect to such Tenant Opportunity within such one-year period,
or if the price, terms and conditions are more favorable to the REIT Entity in
2
<PAGE> 3
any material respect than the price, terms and conditions last proposed in
writing by the REIT Entity to HHMI, the REIT Entity shall again be required to
comply with the procedures set forth above in this Section 3(a) if it desires to
pursue such Tenant Opportunity.
(b) Notwithstanding anything to the contrary contained in this Agreement,
(1) a REIT Entity shall not be required to offer to HHMI any Tenant Opportunity
in connection with a proposed acquisition until a binding contract has been
entered into with respect to such acquisition, and the consummation of any
agreement between a REIT Entity and HHMI with respect to a Tenant Opportunity
shall be subject to the actual closing of such acquisition by the REIT Entity,
(2) each REIT Entity shall have the right in its sole discretion to decide not
to pursue, or to discontinue at any time pursuing, any investment opportunity,
even if such opportunity, if pursued, would create a Tenant Opportunity, and (3)
the REIT Entities shall have no obligation to offer any opportunity other than a
Tenant Opportunity to HHMI.
(c) HHMI agrees to cooperate with the REIT Entities in structuring all
dealings with outside parties in connection with any Tenant Opportunity that
HHMI and a REIT Entity agree to enter into pursuant to Section 3(a) above. HHMI
agrees to cooperate with the REIT Entities in structuring any Tenant Opportunity
with a REIT Entity as a REIT-Qualified Investment for such REIT Entity. Each
REIT Entity shall have the right, in its sole discretion, to structure any
investment as a REIT-Qualified Investment, even if such structuring prevents the
REIT Entity from creating a Tenant Opportunity for HHMI.
3. General Terms and Conditions for Right of First Opportunity.
(a) Unless waived or unless agreed to as part of an investment, each party
shall bear its own expenses with respect to any opportunity to which this
Agreement is applicable, and each party agrees that it shall not be entitled to
any compensation from the other party with respect to any such opportunity.
(b) The REIT Entities shall not be required to comply with the right of
first opportunity set forth in this Agreement during any period in which HHMI or
any Controlled Affiliate of HHMI (as hereinafter defined) is in default of this
Agreement or any other agreement entered into by the parties hereto or any of
their Controlled Affiliates, if such default is material and remains uncured for
thirty days after receipt of notice thereof. A "Controlled Affiliate" of a party
means any entity controlled by, controlling or under common control with such
party.
(c) Any opportunity which is offered to and accepted by HHMI under this
Agreement may be entered into by or on behalf of HHMI or by any designee which
is a Controlled Affiliate of HHMI.
(d) The right of first opportunity set forth in this Agreement shall be
subordinated to any seller consent and confidentiality requirements; the REIT
Entities shall not be required to comply with the first opportunity right set
forth in this Agreement if such compliance would violate any seller consent or
confidentiality requirements.
3
<PAGE> 4
(e) While it is the intention of the parties to align their businesses in
accordance with the terms of this Agreement, each party shall act independently
in its own best interests, and neither party shall be considered a partner or
agent of the other party or to owe any fiduciary or other common law duties to
the other party.
(f) Specific Performance. Each party hereto hereby acknowledges that the
obligations undertaken by it pursuant to this Agreement are unique and that the
other parties hereto would likely have no adequate remedy at law if such party
shall fail to perform its obligations hereunder, and such party therefor
confirms that the other party's right to specific performance of the terms of
this Agreement is essential to protect the rights and interests of the other
party. Accordingly, in addition to any other remedies that a party hereto may
have at law or in equity, such party shall have the right to have all
obligations, covenants, agreements and other provisions of this Agreement
specifically performed by the other party hereto and the right to obtain a
temporary restraining order or a temporary or permanent injunction to secure
specific performance and to prevent a breach or threatened breach of this
Agreement by the other party hereto. Each party submits to the jurisdiction of
the courts of the Commonwealth of Virginia for this purpose.
4. Affiliates. Each party hereto shall cause all entities that are under its
control to comply with the terms hereof. HHTI, by its signature below, hereby
agrees that it and Humphrey Hospitality REIT Trust shall comply with the terms
of this Agreement applicable to the Operating Partnership.
5. Term. The term of the Agreement shall commence as of the date first written
above and, unless sooner terminated pursuant to this paragraph, shall terminate
on December 31, 2009. Notwithstanding the foregoing, (A) a party hereto may
terminate this Agreement if the other party or any Controlled Affiliate of such
other party is in default of this Agreement or any other agreement entered into
by the parties hereto or any of their Controlled Affiliates, if such default is
material and remains uncured for thirty days after receipt of notice thereof,
(B) the REIT Entities may terminate this Agreement if the Agreement and Plan of
Merger between HHTI and Supertel is not executed or is terminated, and (C) the
REIT Entities may terminate this Agreement if James I. Humphrey and his
Controlled Affiliates no longer control at least 50 percent of the outstanding
capital stock of HHMI.
6. Miscellaneous.
(a) Notices. Notices shall be sent to the parties at the following
addresses:
To HHMI:
Mr. Randy P. Smith
Humphrey Hospitality Management, Inc.
12301 Old Columbia Pike
Silver Spring, MD 20904
4
<PAGE> 5
To HHTI:
Mr. James I. Humphrey, Jr.
Humphrey Hospitality Trust, Inc.
12301 Old Columbia Pike
Silver Spring, MD 20904
To the Operating Partnership:
Mr. James I. Humphrey, Jr.
Humphrey Hospitality Limited Partnership
12301 Old Columbia Pike
Silver Spring, MD 20904
Notices may be sent be certified mail, return receipt requested,
Federal Express or comparable overnight delivery service, or facsimile. Notice
will be deemed received on the fourth business day following deposit in U.S.
mail and on the first business day following deposit with Federal Express or
other overnight delivery service, or transmission by facsimile. Any party to
this Agreement may change its address for notice by giving written notice to the
other party at the address and in accordance with the procedures provided above.
(b) Reasonable and Necessary Restrictions. Each of the parties hereto
hereby acknowledges and agrees that the restrictions, prohibitions and other
provisions of this Agreement are reasonable, fair and equitable in scope, term
and duration, are necessary to protect the legitimate business interests of the
parties hereto and are a material inducement to the parties hereto to enter into
the transactions described in and contemplated by the recitals hereto. Each
party hereto covenants that it will not sue to challenge the enforceability of
this Agreement or raise any equitable defense to its enforcement.
(c) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns. This Agreement shall not be assigned without the express written
consent of each of the parties hereto. Notwithstanding the foregoing, this
Agreement may be assigned without the consent of any party hereto in connection
with any merger, consolidation, reorganization or other combination of a party
with or into another entity where the party is not the surviving entity.
(d) Amendments; Waivers. No termination, cancellation, modification,
amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless such change or waiver is specifically set forth
in a writing signed by the party or parties to be bound thereby. The waiver of
any right or remedy with respect to any occurrence on one occasion shall not be
deemed a waiver of such right or remedy with respect to such occurrence on any
other occasion.
5
<PAGE> 6
(e) Choice of Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by the laws of the Commonwealth of Virginia,
without regard to the principles of choice of law thereof.
(f) Severability. In the event that one or more of the terms or provisions
of this Agreement or the application thereof to any person(s) or in any
circumstance(s) shall, for any reason and to any extent be found by a court of
competent jurisdiction to be invalid, illegal or unenforceable, such court shall
have the power, and hereby is directed, to substitute for or limit such invalid
term(s), provision(s) or application(s) and to enforce such substituted or
limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
(g) Entire Agreement; No Third-Party Beneficiaries. This Agreement (i)
constitutes the entire agreement and supersedes all prior agreements,
understandings, negotiations and discussions, whether written or oral, between
the parties hereto with respect to the subject matter hereof, so that no such
external or separate agreement relating to the subject matter of this Agreement
shall have any effect or be binding, unless the same is referred to specifically
in this Agreement or is executed by the parties after the date hereof; and (ii)
is not intended to confer upon any other person any rights or remedies
hereunder, and shall not be enforceable by any party not a signatory to this
Agreement.
(h) Gender; Number. As the context requires, any word used herein in the
singular shall extend to and include the plural, any word used in the plural
shall extend to and include the singular and any word used in any gender or the
neuter shall extend to and include each other gender or be neutral.
(i) Headings. The headings of the sections hereof are inserted for
convenience of reference only and are not intended to be a part of or affect the
meaning or interpretation of this Agreement or of any term or provision hereof.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
6
<PAGE> 7
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by one of its duly authorized corporate officers, as of
the date first above written.
HUMPHREY HOSPITALITY
LIMITED PARTNERSHIP, a Virginia limited
partnership
By: Humphrey Hospitality REIT Trust
a Maryland business trust, its sole general
partner
By: /s/ James I. Humphrey , Jr.
----------------------------------------------
Name: James I. Humphrey, Jr.
Title: President and Chief Executive Officer
HUMPHREY HOSPITALITY MANAGEMENT, INC.,
a Maryland corporation
By: /s/ Randy P. Smith
----------------------------------------------
Name: Randy P. Smith
Title: President
HUMPHREY HOSPITALITY TRUST, INC.
a Virginia corporation
By: /s/ James I. Humphrey, Jr.
----------------------------------------------
Name: James I. Humphrey, Jr.
Title: President and Chief Executive Officer
7
<PAGE> 8
The undersigned, in its capacity as the sole shareholder of Humphrey
Hospitality REIT Trust, hereby agrees to the restrictions imposed upon Humphrey
Hospitality REIT Trust pursuant to Section 4 of the Agreement.
HUMPHREY HOSPITALITY TRUST, INC.
a Virginia corporation
By: /s/ James I. Humphrey, Jr.
----------------------------------------------
Name: James I. Humphrey, Jr.
Title: President and Chief Executive Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 5,675
<SECURITIES> 0
<RECEIVABLES> 3,140,719
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,454,975
<PP&E> 77,654,360
<DEPRECIATION> (6,219,567)
<TOTAL-ASSETS> 76,889,768
<CURRENT-LIABILITIES> 2,723,419
<BONDS> 42,328,471
0
0
<COMMON> 46,317
<OTHER-SE> 29,039,282
<TOTAL-LIABILITY-AND-EQUITY> 76,889,768
<SALES> 0
<TOTAL-REVENUES> 6,053,347
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,577,334
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,476,013
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,476,013
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,176,857
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.25
</TABLE>
