Exhibit 10.22
HERSHA HOSPITALITY TRUST
WARRANT AGREEMENT
June 3, 1998
2744 Associates, L.P.
c/o Shreenathji Enterprises Limited
148 Sheraton Drive, Box A
New Cumberland, Pennsylvania 17070
Ladies and Gentlemen:
Hersha Hospitality Limited Partnership (the "Partnership"), hereby
agrees to issue and sell to you warrants (the "Warrants") to purchase the number
of units of limited partnership interest ("Units") in the Partnership set forth
herein, subject to the terms and conditions contained herein.
1. Issuance of Warrants; Exercise Price. The Warrants, which shall be
in the form attached hereto as Exhibit A, shall be issued to you concurrently
with the execution hereof in consideration of the payment by you to the
Partnership of the sum of $0.001 cash per Unit subject to the Warrants, the
receipt and sufficiency of which are hereby acknowledged. The Warrants shall
provide that you and such other holder or holders of the Warrants shall have the
right to purchase an aggregate of 250,000 Units for an exercise price equal to
$9.90 per Unit (the "Exercise Price") or $2,475,000 in the aggregate. The
number, character and Exercise Price of such Units are subject to adjustment as
hereinafter provided, and the term "Units" shall mean, unless the context
otherwise requires, the Units and other securities and property receivable upon
exercise of the Warrants. The term "Exercise Price" shall mean, unless the
context otherwise requires, the price per Unit of the Units purchasable under
the Warrants as set forth in this Section 1, as adjusted from time to time
pursuant to Section 5.
2. Notices of Record Date; Etc.. In the event of (i) any taking by the
Partnership of a record date with respect to the holders of any class of
securities or the Partnership for purposes of determining which of such holders
are entitled to dividends or other distributions (other than regular quarterly
distributions), or any right to subscribe for, purchase or otherwise acquire
Units or any other securities or property, or to receive any other right, (ii)
any capital reorganization of the Partnership, or reclassification or
recapitalization of ownership interests in the Partnership or any transfer in
one or more related transactions of all or a majority of the assets or revenue
or income generating capacity of the Partnership to, or consolidation or merger
of the Partnership with or into, any other entity or person, or (iii) any
voluntary or involuntary dissolution or winding up of the Partnership, then and
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in each such event the Partnership will mail or cause to be mailed to each
holder of a Warrant at the time outstanding a notice specifying, as the case may
be, (A) the date on which any such record is to be taken for the purpose of such
distribution or right, and stating the amount and character of such distribution
or right; or (B) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, conveyance, dissolution,
liquidation or winding-up is to take place and the time, if any is to be fixed,
as of which the holders of record of Units (or any other class of securities of
the Partnership, or another issuer pursuant to Section 5, receivable upon the
exercise of the Warrants) shall be entitled to exchange their Units (or such
other securities) for securities or other property deliverable upon such event.
Any such notice shall be deposited in the United States mail, postage prepaid,
at least ten (10) days prior to the date therein specified, and the holders of
the Warrants may exercise the Warrants and participate in such event as a
registered holder of Units, upon exercise of the Warrants so held, within the
ten (10) day period from the date of mailing of such notice.
3. No Impairment. The Partnership shall not, by amendment of its
organizational documents or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
action, avoid or seek to avoid the observance or performance of any of the terms
of this Agreement or of the Warrants, but will at all times in good faith take
any and all action as may be necessary in order to protect the rights of the
holders of the Warrants against impairment. Without limiting the generality of
the foregoing, the Partnership (a) will at all times reserve and keep available,
solely for issuance and delivery upon exercise of the Warrants, the Units
issuable from time to time upon exercise of the Warrants , (b) will not increase
the par value of any Units receivable upon exercise of the Warrants above the
amount payable in respect thereof upon such exercise, and (c) will take all such
action as may be necessary or appropriate in order that the Partnership may
validly and legally issue fully paid and non-assessable Units upon the exercise
of the Warrants.
4. Exercise of Warrants. At any time and from time to time on and after
the date of this Agreement, and expiring at 5:00 p.m., Richmond, Virginia time,
on the fifth anniversary of the closing of the initial public offering of Hersha
Hospitality Trust (the "Company") and subject to the conditions herein, Warrants
may be exercised as to all or any portion of the number of Units covered by the
Warrants by the holder thereof by surrender of the Warrants, accompanied by a
subscription for Units to be purchased in the form attached hereto as Exhibit B
and by a check payable to the order of the Partnership in the amount required
for purchase of the Units as to which the Warrants are being exercised,
delivered to the Partnership at its principal office at 148 Sheraton Drive, Box
A, New Cumberland, Pennsylvania 17070, Attention: President; provided however,
that no Warrant holder may exercise Warrants at such time as the Warrant holder
does not qualify as an "accredited investor" as that term is defined in Rule 501
under the Securities Act of 1993, as amended. Upon the exercise of a Warrant in
whole or in part, the Partnership will within five (5) days thereafter, at its
expense (including the payment of any applicable issue or transfer taxes), cause
to be issued in the name of and delivered to the Warrant holder the number of
Units to which such holder is entitled upon exercise of the Warrant. In the
event such holder is entitled to a fractional amount of Units, in lieu thereof
such holder shall be paid a cash amount equal to such fraction, multiplied by
the Current Value of one full Unit on the date of exercise. The issuance of
Units upon exercise of the Warrants shall be effective as of the date of the
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surrendering of the Warrant for exercise, notwithstanding any delays in the
actual issuance or delivery of the Units so purchased. In the event Warrants are
exercised as to less than the aggregate amount of all Units issuable upon
exercise of all Warrants held by such person, the Partnership shall issue new
Warrants to the holder of the Warrants so exercised covering the aggregate
number of Units as to which Warrants remain unexercised.
For purposes of this section, "Current Value" of a Unit is
defined (i) in the case for which a public market exists for the Company's
common shares of beneficial interest, par value $.01 per share, (the "Common
Shares") at the time of such exercise, at a price per Unit equal to (A) the
average of the means between the closing bid and asked prices of the Common
Shares in the over-the-counter market for 20 consecutive business days
commencing 30 business days before the date of such notice, (B) if the Common
Shares are quoted on Nasdaq, at the average of the means of the daily closing
bid and asked prices of the Common Shares for 20 consecutive business days
commencing 30 business days before the date of such notice, or (C) if the Common
Shares are listed on any national securities exchange or the Nasdaq National
Market, at the average of the daily closing prices of the Common Shares for 20
consecutive business days commencing 30 business days before the date of such
notice, and (ii) in the case no public market for the Common Shares exists at
the time of such exercise, at the Appraised Value of the Units issuable upon
exercise of the Warrant. For the purposes of this Agreement, "Appraised Value"
is the value determined in accordance with the following procedures. For a
period of five (5) days after the date of an event (a "Valuation Event")
requiring determination of Current Value at a time when no public market exists
for the Common Shares (the "Negotiation Period"), each party to this Agreement
agrees to negotiate in good faith to reach agreement upon the Appraised Value of
the Units or property at issue, as of the date of the Valuation Event, which
will be the fair market value of such Units or property, without premium for
control or discount for minority interests, illiquidity or restrictions on
transfer. In the event that the parties are unable to agree upon the Appraised
Value of such Units or other property by the end of the Negotiation Period, then
the Appraised Value of such Units or property will be determined for purposes of
this Agreement by a recognized appraisal or investment banking firm mutually
agreeable to the holders of the Warrants and the Partnership (the "Appraiser").
If the holders of the Warrants and the Partnership cannot agree on an Appraiser
within two (2) business days after the end of the Negotiation Period, the
Partnership, on the one hand, and the holders of the Warrants, on the other
hand, will each select an Appraiser within ten (10) business days after the end
of the Negotiation Period and those Appraisers will determine the fair market
value of such Units or property, without premium for control or discount for
minority interests. Such independent Appraiser(s) will be directed to determine
fair market value of such Units or property as soon as practicable, but in no
event later than thirty (30) days from the date of its selection. The
determination by Appraiser(s) of the fair market value will be conclusive and
binding on all parties to this Agreement. If there are two Appraisers, and they
do not agree as to fair market value, then fair market value shall be determined
to be the average of the fair market values as determined by each Appraiser.
Appraised Value of each Unit at a time when (i) the Company is not a reporting
Company under the Securities Exchange Act of 1934 and (ii) the Common Shares are
not traded in the organized securities markets, will, in all cases, be
calculated by determining the Appraised Value of the entire Partnership taken as
a whole and dividing that value by the number of Units then outstanding, without
premium for control or discount for minority interests, illiquidity or
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restrictions on transfer. The costs of the Appraiser(s) will be borne by the
Partnership. In no event will the Appraised Value of the Units be less than the
per share consideration received or receivable with respect to the Units or
other securities or property of the same class in connection with a pending
transaction involving a sale, merger, recapitalization, reorganization,
consolidation, or share exchange, dissolution of the Partnership, sale or
transfer of all or a majority of its assets or revenue or income generating
capacity, or similar transaction.
5. Protection Against Dilution. The Exercise Price for the Units and
number of Units issuable upon exercise of the Warrants is subject to adjustment
from time to time as follows:
(a) Distributions, Subdivisions, Reclassifications, Etc.. In
case at any time or from time to time after the date of execution of this
Agreement, the Partnership shall (i) take a record of the holders of Units for
the purpose of entitling them to receive a distribution on Units payable in
Units or other class of securities, (ii) subdivide or reclassify its outstanding
Units into a greater number, or (iii) combine or reclassify its outstanding
Units into a smaller number, then, and in each such case, the Exercise Price in
effect at the time of the record date for such distribution or the effective
date of such subdivision, combination or reclassification shall be adjusted in
such a manner that the Exercise Price for the Units issuable upon exercise of
the Warrants immediately after such event shall bear the same ratio to the
Exercise Price in effect immediately prior to any such event as the total number
of Units outstanding immediately prior to such event shall bear to the total
number of Units outstanding immediately after such event.
(b) Adjustment of Number of Units Purchasable. When any
adjustment is required to be made in the Exercise Price under this Section 5,
(i) the number of Units issuable upon exercise of the Warrants shall be changed
(upward to the nearest full Unit) to the number of Units determined by dividing
(x) an amount equal to the number of Units issuable pursuant to the exercise of
the Warrants immediately prior to the adjustment, multiplied by the Exercise
Price in effect immediately prior to the adjustment, by (y) the Exercise Price
in effect immediately after such adjustment, and (ii) upon exercise of the
Warrant, the holder will be entitled to receive the number of Units or other
securities referred to in Section 5(a) that such holder would have received had
the Warrants been exercised prior to the events referred to in Section 5(a).
(c) Adjustment for Reorganization, Consolidation, Merger,
Etc.. In case of any reorganization or consolidation of the Partnership with, or
any merger of the Partnership with or into, another entity (other than a
consolidation or merger in which the Partnership is the surviving corporation)
or in case of any sale or transfer to another entity of the majority of assets
of the Partnership, the entity resulting from such reorganization or
consolidation or surviving such merger or to which such sale or transfer shall
be made, as the case may be, shall make suitable provision (which shall be fair
and equitable to the holders of Warrants) and shall assume the obligations of
the Partnership hereunder (by written instrument executed and mailed to each
holder of the Warrants then outstanding) pursuant to which, upon exercise of the
Warrants, at any time after the consummation of such reorganization,
consolidation, merger or conveyance, the holder shall be entitled to receive the
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Units or other securities or property that such holder would have been entitled
to upon consummation if such holder had exercised the Warrants immediately prior
thereto, all subject to further adjustment as provided in this Section 5.
(d) Certificate as to Adjustments. In the event of adjustment
as herein provided in this Section 5, the Partnership shall promptly mail to
each Warrant holder a certificate setting forth the Exercise Price and number of
Units issuable upon exercise after such adjustment and setting forth a brief
statement of facts requiring such adjustment. Such certificate shall also set
forth the kind and amount of Units or other securities or property into which
the Warrants shall be exercisable after any adjustment of the Exercise Price as
provided in this Agreement.
(e) Minimum Adjustment. Notwithstanding the foregoing, no
certificate as to adjustment of the Exercise Price hereunder shall be made if
such adjustment results in a change in the Exercise Price then in effect of less
than five cents ($0.05) and any adjustment of less than five cents ($0.05) of
any Exercise Price shall be carried forward and shall be made at the time of and
together with any subsequent adjustment that, together with the adjustment or
adjustments so carried forward, amounts to five cents ($0.05) or more; provided
however, that upon the exercise of a Warrant, the Partnership shall have made
all necessary adjustments (to the nearest cent) not theretofore made to the
Exercise Price up to and including the date upon which such Warrant is
exercised.
6. Registration Rights. The holders of Units issued upon exercise of
the Warrants will be entitled to the registration rights set forth in the
Partnership's limited partnership agreement, as amended.
7. Restrictive Legend. Executed copies of this Agreement shall be filed
in the principal office of the Partnership. Instruments evidencing all or part
of the Warrants shall contain the legend shown on Exhibit A.
9. Successors and Assigns; Binding Effect. This Agreement shall be
binding upon and inure to the benefit of you and the Partnership and their
respective successors and permitted assigns.
10. Notices. Any notice hereunder shall be given by registered or
certified mail, if to the Partnership, at its principal office referred to in
Section 5 and, if to the holders, to their respective addresses shown in the
Warrant ledger of the Partnership, provided that any holder may at any time on
three (3) days' written notice to the Partnership, designate or substitute
another address where notice is to be given. Notice shall be deemed given and
received after a certified or registered letter, properly addressed with postage
prepaid, is deposited in the U.S. mail.
11. Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the remainder of this
Agreement.
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12. Assignment; Replacement of Warrants. If a Warrant or Warrants are
assigned, in whole or in part, the Warrants shall be surrendered at the
principal office of the Company, and thereupon, in the case of a partial
assignment, a new Warrant shall be issued to the holder thereof covering the
number of Units not assigned, and the assignee shall be entitled to receive new
Warrants covering the number of Units so assigned. Upon receipt of evidence
reasonably satisfactory to the Partnership of the loss, theft, destruction or
mutilation of any Warrants and appropriate bond or indemnification protection,
the Partnership shall issue a new Warrant of like tenor.
13. Rights of Holders. Until exercised, the Warrants shall not entitle
the holders thereof to any of the rights of a limited partner of the
Partnership.
14. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Virginia without giving effect
to the principles of choice of laws thereof.
15. Definition. All references to the word "you" in this Agreement
shall be deemed to apply with equal effect to any persons or entities to whom
Warrants have been transferred in accordance with the terms hereof, and, where
appropriate, to any persons or entities holding Units issuable upon exercise of
Warrants.
16. Headings. The headings herein are for purposes of reference only
and shall not limit or otherwise affect the meaning of any of the provisions
hereof.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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Very truly yours,
HERSHA HOSPITALITY LIMITED PARTNERSHIP
By: Hersha Hospitality Trust, as general partner
By: /s/ HASU P. SHAH
------------------------------------
Hasu P. Shah
Chairman and Chief Executive Officer
Accepted as of the 3rd day of June, 1998.
2744 ASSOCIATES, L.P.
By: Shreenathji Enterprises Limited, as
general partner
By: /s/ HASU P. SHAH
-------------------------------
Hasu P. Shah
President
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EXHIBIT A
No. _________
250,000 Shares
HERSHA HOSPITALITY LIMITED PARTNERSHIP
UNITS PURCHASE WARRANT
THIS IS TO CERTIFY that 2744 Associates, L.P. or its assigns as
permitted in that certain Warrant Agreement (the "Warrant Agreement") dated June
3, 1998 (the "Warrant Date") between the Partnership (as hereafter defined) and
2744 Associates, L.P. is entitled to purchase at any time or from time to time
on or after the Warrant Date until 5:00 p.m., Richmond, Virginia time, on the
fifth anniversary of the closing of the initial public offering of Hersha
Hospitality Trust, 250,000 Units of limited partnership interest ("Units") of
Hersha Hospitality Limited Partnership, a Virginia limited partnership (the
"Partnership"), for an exercise price per share as set forth in the Warrant
Agreement referred to herein. This Warrant is issued pursuant to the Warrant
Agreement, and all rights of the holder of this Warrant are further governed by,
and subject to the terms and provisions of such Warrant Agreement, copies of
which are available upon request to the Partnership. The holder of this Warrant
and the Units issuable upon the exercise hereof shall be entitled to the
benefits, rights and privileges and subject to the obligations, duties and
liabilities provided in the Warrant Agreement.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW. ACCORDINGLY, THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY
NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR APPLICABLE
STATE SECURITIES LAW OR AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP
THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR ANY APPLICABLE STATE
SECURITIES LAW.
The partnership is authorized to issue different classes of partnership
interests. The partnership will furnish Warrant holders, without charge, upon
request in writing, a statement of the designations, relative rights,
preferences and limitations applicable to each class of partnership interests in
the partnership.
Subject to the provisions of the Securities Act of 1933, of the Warrant
Agreement and of this Warrant, this Warrant and all rights hereunder are
transferable, in whole or in part, only to the extent expressly permitted in
such documents and then only at the office of the Partnership c/o Hersha
Hospitality Trust, 148 Sheraton Drive, Box A, New Cumberland, Pennsylvania
17070, Attention: President, by the holder hereof or by a duly authorized
attorney-in-fact, upon surrender of this Warrant duly endorsed, together with
the Assignment hereof duly endorsed. Until transfer hereof on the books of the
Partnership, the Partnership may treat the registered holder hereof as the owner
hereof for all purposes.
IN WITNESS WHEREOF, the Partnership has caused this Warrant to be
executed and its seal to be hereunto affixed by its proper officers thereunto
duly authorized.
HERSHA HOSPITALITY LIMITED PARTNERSHIP
By: Hersha Hospitality Trust, as general partner
By: (SEAL)
----------------------------------------------
Hasu P. Shah
Chairman and Chief Executive Officer
ATTEST:
Secretary:
-------------------------
EXHIBIT B
FORM OF SUBSCRIPTION
To Hersha Hospitality Limited Partnership:
The undersigned, the holder of Warrant Number ________, hereby
irrevocably elects to exercise the purchase right represented by such
Warrant, and to purchase thereunder _______________* units of limited
partnership interest ("Units") in Hersha Hospitality Limited Partnership and
herewith makes a payment in cash or by check of $________________ thereof and
requests that the certificate or certificates for such Units be issued in the
name of and delivered to the undersigned. The undersigned acknowledges and
agrees that the Units to be received by the undersigned are subject to the
restrictions on transfer set forth in the Warrant.
(Signature)
(Address)
Dated: _________________________
*Insert here the number of Units set forth on the face of the Warrant
(or, in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised), in either case without making any adjustment (which
adjustment will be made in the issuance of such Units, other securities,
property, or cash) for additional Units or any other securities or property or
cash that, pursuant to the adjustment provisions of the Warrant, is deliverable
upon exercise.
FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto _______________________ the right represented by Warrant Number ________to
purchase _______________________________ units of limited partnership interest
("Units") of Hersha Hospitality Limited Partnership to which the attached
Warrant related, and appoints _______________________ as
Attorney-in-Fact to transfer such right on the books of Hersha Hospitality
Limited Partnership with the full power of substitution in the premises.
The undersigned represents and warrants that the transfer of the
attached Warrant is permitted by the terms of the Warrant Agreement pursuant to
which the attached Warrant has been issued, and the transferee hereof, by
acceptance of this Assignment, agrees to be bound by the terms of the Warrant
Agreement with the same force and effect as if a signatory thereto.
(Signature)
(Address)
Dated: __________________________