Exhibit 3.1
HERSHA HOSPITALITY TRUST
ARTICLES OF AMENDMENT AND RESTATEMENT
Hersha Hospitality Trust, a Maryland real estate investment trust (the
"Trust") formed under Title 8 of the Corporation and Associations Article of the
Annotated Code of Maryland ("Title 8"), desires to amend and restate its
Declaration of Trust as currently in effect as hereinafter amended.
FIRST: The following provisions are all of the provisions of the
Declaration of Trust currently in effect and as hereinafter amended:
ARTICLE I
FORMATION
The Trust is a real estate investment trust (a "REIT") within the
meaning of Title 8. The Trust shall not be deemed to be a general partnership,
limited partnership, joint venture, joint stock company or a corporation (but
nothing herein shall preclude the Trust from being treated for tax purposes as
an association under the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE II
NAME
The name of the Trust is:
Hersha Hospitality Trust
Under circumstances in which the Board of Trustees of the Trust (the
"Board of Trustees" or "Board") determines that the use of the name of the Trust
is not practicable, the Trust may use any other designation or name for the
Trust.
ARTICLE III
PURPOSES AND POWERS
Section 1. Purposes. The purposes for which the Trust is formed are to
invest in and to acquire, hold, manage, administer, control and dispose of
property and interests in property, including, without limitation or obligation,
engaging in business as a REIT under the Code.
Section 2. Powers. The Trust shall have all of the powers granted to
REITs by Title 8 and all other powers set forth in the Declaration of Trust as
filed for record with the State Department of Assessment and Taxation of
Maryland, and any amendments or supplements thereto (the "Declaration of Trust")
that are not inconsistent with law and are appropriate to promote and attain the
purposes set forth in the Declaration of Trust.
ARTICLE IV
RESIDENT AGENT
The name of the resident agent of the Trust in the State of Maryland is
James J. Hanks, Jr., c/o Ballard Spahr Andrews & Ingersoll, whose post office
address is 300 East Lombard Street, Baltimore, Maryland 21202. The resident
agent is a citizen of and resides in the State of Maryland. The Trust may have
such offices or places of business within or outside the State of Maryland as
the Board of Trustees of the Trust may from time to time determine.
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ARTICLE V
BOARD OF TRUSTEES
Section 1. Powers.
(A) Subject to any express limitations contained in the
Declaration of Trust or in the Bylaws of the Trust ("Bylaws"), (i) the business
and affairs of the Trust shall be managed under the direction of the Board of
Trustees and (ii) the Board shall have full, exclusive and absolute power,
control and authority over any and all property of the Trust. The Board may take
any action as it, in its sole judgment and discretion, deems necessary or
appropriate to conduct the business and affairs of the Trust. The Declaration of
Trust shall be construed with a presumption in favor of the grant of power and
authority to the Board. Any construction of the Declaration of Trust or
determination made in good faith by the Board concerning its powers and
authority hereunder shall be conclusive. The enumeration and definition of
particular powers of the Trustees included in the Declaration of Trust or in the
Bylaws shall in no way be construed or deemed by inference or otherwise in any
manner to exclude or limit the powers conferred upon the Board of Trustees under
the general laws of the State of Maryland or any other applicable laws.
(B) Except as otherwise provided in the Bylaws, the Board,
without any action by the shareholders of the Trust, shall have and may
exercise, on behalf of the Trust, without limitation, the power to adopt, amend
and repeal Bylaws; to elect officers in the manner prescribed in the Bylaws; to
solicit proxies from holders of shares of beneficial interest of the Trust; and
to do any other acts and deliver any other documents necessary or appropriate to
the foregoing powers.
(C) It shall be the duty of the Board of Trustees to use any
and all commercially
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reasonable efforts to ensure that the Trust satisfies the requirements for
qualification as a REIT under the Code, including, but not limited to, the
ownership of outstanding shares of its beneficial interest, the nature of its
assets, the sources of its income, and the amount and timing of its
distributions to its shareholders. The Board of Trustees shall take no action to
disqualify the Trust as a REIT or to otherwise revoke the Trust's election to be
taxed as a REIT without the affirmative vote of two-thirds of the number of
Common Shares entitled to vote on such matter at a meeting of the shareholders.
Section 2. Classification and Number. (A) The Trustees of the Trust
(hereinafter the "Trustees") (other than any Trustee elected solely by holders
of one or more classes or series of Preferred Shares) shall be classified, with
respect to the terms for which they severally hold office, into two classes, as
nearly equal in number as possible, one class ("Class I") to hold office
initially for a term expiring at the first annual meeting of shareholders (1999)
and another class ("Class II") to hold office initially for a term expiring at
the second succeeding annual meeting of shareholders (2000), with the Trustees
of each class to hold office until their successors are duly elected and
qualified. At each annual meeting of shareholders, the successors to the class
of Trustees whose term expires at such meeting shall be elected to hold office
for a term expiring at the annual meeting of shareholders held in the second
year following the year of their election. Shareholder votes to elect Trustees
shall be conducted in the manner provided in the Bylaws.
(B) The number of Trustees initially shall be seven, which
number may be increased or decreased pursuant to the Bylaws. The name, address
and class of the Trustees who shall serve until their successors are duly
elected and qualified are:
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Name Address Class
- ---- ------- -----
Hasu P. Shah 148 Sheraton Drive Class II
Box A
New Cumberland, PA 17070
Bharat C. Mehta 148 Sheraton Drive Class II
Box A
New Cumberland, PA 17070
K.D. Patel 148 Sheraton Drive Class II
Box A
New Cumberland, PA 17070
L. McCarthy Downs, III 707 E. Main Street Class I
20th Floor
Richmond, VA 23219
Everette G. Allen, Jr. The Federal Reserve Bank Building Class I
701 East Byrd Street
Richmond, Virginia 23219
Thomas S. Capello 2951 Whiteford Road Class II
York, Pennsylvania 17402
Mark R. Parthemer Penn National Insurance Tower Class I
2 North Second Street, 7th Floor
Harrisburg, Pennsylvania 17101
The Trustees may increase the number of Trustees and fill any vacancy, whether
resulting from an increase in the number of Trustees or otherwise, on the Board
of Trustees in the manner provided in the Bylaws. The Independent Trustees (as
hereinafter defined) shall nominate replacements for vacancies among the
Independent Trustees' positions. In the event that, after the closing of the
Initial Public Offering (as hereinafter defined), three members of the Board of
Trustees are not Independent Trustees by reason of the resignation or removal of
one or more Independent Trustees
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or otherwise, it shall be a qualification for any individual elected to fill
such vacancy that he satisfy the requirements of Section 4 of this Article V for
being an Independent Trustee. It shall not be necessary to list in the
Declaration of Trust the names and addresses of any Trustees hereinafter
elected.
Section 3. Resignation or Removal. Any Trustee may resign by written
notice to the Board, effective upon execution and delivery to the Trust of such
written notice or upon any future date specified in the notice. Subject to the
rights of holders of one or more classes or series of Preferred Shares to elect
or remove one or more Trustees, a Trustee may be removed at any time, with or
without cause, at a meeting of the shareholders, by the affirmative vote of the
holders of not less than two-thirds of the Shares then outstanding and entitled
to vote generally in the election of Trustees.
Section 4. Independent Trustees. Notwithstanding anything herein to the
contrary, at all times (except during a period not to exceed sixty (60) days
following the death, resignation, incapacity or removal from office of a Trustee
prior to expiration of the Trustee's term of office), three members of the Board
of Trustees shall be comprised of persons who are not officers, directors or
employees of the Trust, any lessee of the Trust's or the Partnership's
properties or any underwriter or placement agent of the shares of beneficial
interest of the Trust that has been engaged by the Trust within the past three
years, or any "Affiliates" thereof (each such person serving on the Board of
Trustees being an "Independent Trustee").
Section 5. Definition of Affiliate. For purposes of Section 4 above,
"Affiliate" of a person shall mean (i) any person that, directly or indirectly,
controls or is controlled by or is under
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common control with such person, (ii) any other person that owns, beneficially,
directly or indirectly, five percent (5%) or more of the outstanding capital
shares, shares or equity interests of such person, or (iii) any officer,
director, employee, partner or trustee (including any family member of the
foregoing) of such person or of any person controlling, controlled by or under
common control with such person (excluding trustees and persons serving in
similar capacities who are not otherwise an Affiliate of such person). The term
"person" means and includes individuals, corporations, general and limited
partnerships, stock companies or associations, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts, real
estate investment trusts or other entities and governments and agencies and
political subdivisions thereof. For the purpose of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, through the ownership
of voting securities, partnership interests or other equity interests.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 1. Authorized Shares. The beneficial interest of the Trust
shall be divided into shares of beneficial interest (the "Shares"). The Trust
has authority to issue : (i) one hundred million (100,000,000) common shares of
beneficial interest, $.01 par value per share ("Common Shares"), of which fifty
million (50,000,000) will be Priority Class A Common Shares (the "Priority
Common Shares") and fifty million (50,000,000) will be Class B Common Shares
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(the "Class B Common Shares"); and (ii) ten million (10,000,000) preferred
shares of beneficial interest, $.01 par value per share ("Preferred Shares"). If
Shares of one class are classified or reclassified into Shares of another class
pursuant to this Article VI, the number of authorized Shares of the former class
shall be automatically decreased and the number of Shares of the latter class
shall be automatically increased, in each case by the number of Shares so
classified or reclassified, so that the aggregate number of Shares of all
classes that the Trust has the authority to issue shall not be more than the
total number of Shares set forth in the second sentence of this paragraph. The
Board of Trustees, without any action by the shareholders of the Trust, may
amend the Declaration of Trust from time to time to increase or decrease the
aggregate number of Shares or the number of Shares of any class that the Trust
has authority to issue.
Section 2. Common Shares. Subject to the provisions of Article VII,
each Common Share shall entitle the holder thereof to one vote on each matter
upon which holders of Common Shares are entitled to vote. The holders of the
Priority Common Shares and the Class B Common Shares shall vote together as a
single class. The Board of Trustees may reclassify any unissued Common Shares
from time to time in one or more classes or series of Shares.
(a) Priority Class A Common Shares. The holders of the Priority Common
Shares shall be entitled to the following rights (the "Priority Rights") during
the period beginning on the date of the closing of the initial public offering
of the Priority Common Shares (the "Offering"), and ending on the earlier of:
(i) the date that is 15 trading days after the Company sends notice to the
record holders of the Priority Common Shares that their Priority
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Rights will terminate in 15 trading days, provided that the closing bid
price of the Priority Common Shares is at least $7.00 on each trading
day during such 15-day period; or (ii) the fifth anniversary of the
closing of the Offering (the "Priority Period"). A "trading day" shall
mean a day on which the principal national securities exchange on which
the Priority Common Shares are listed or admitted to trading is open for
the transaction of business or, if the Priority Common Shares are not
listed or admitted to trading on any national securities exchange, shall
mean any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law
or executive order to close.
Notwithstanding the foregoing, the Priority Period shall not end until
the holders of the Priority Common Shares have received any accrued, but
unpaid, Priority Distributions.
(i) The Dividend Priority. The holders of the
Priority Common Shares shall be entitled to receive, prior to
any distributions to the holders of the Class B Common Shares,
cumulative dividends in an amount per Priority Common Share
equal to $.18 per quarter (the "Priority Distribution"). After
the holders of the Class B Common Shares have received an
amount per Class B Common Share equal to the Priority
Distribution, the holders of the Priority Common
Shares shall be entitled to receive any further
distributions on a pro rata basis with the holders of
the Class B Common Shares. After the Priority Period,
the holders of the Priority Common Shares shall be
entitled to receive any further distributions on a pro
rata basis with the holders of the Class B Common
Shares. The dividends paid to the holders of the
Priority Common Shares will be subject to the rights
of any class or series of Preferred Shares.
No dividend will be declared or paid or other
distribution of cash or other property declared or made
directly by the Company or any person acting on behalf of the
Company on any shares of beneficial interest that rank junior
to the Priority Common Shares as to the payment of dividends
or
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amounts upon liquidation, dissolution and winding up ("Junior
Shares") unless full cumulative dividends have been declared
and paid or are contemporaneously declared and funds
sufficient for payment set aside on the Priority Common Shares
for all prior and contemporaneous dividend periods; provided,
however, that if accumulated and accrued dividends on the
Priority Common Shares for all prior and contemporaneous
dividend periods have not been paid in full then any dividend
declared on the Priority Common Shares for any dividend period
and on any shares of beneficial interest of the Company that
rank on parity with the Priority Common Shares as to the
payment of dividends or amounts upon liquidation, dissolution
and winding up ("Parity Shares") will be declared ratably in
proportion to accumulated, accrued and unpaid dividends on the
Priority Common Shares and such Parity Shares.
No distributions on the Priority Common Shares shall
be authorized by the Board of Trustees or paid or set apart
for payment by the Company at such time as the terms and
provisions of any agreement of the Company, including any
agreement relating to its indebtedness, prohibits such
authorization, payment or setting apart for payment or
provides that such authorization, payment or setting apart for
payment would constitute a breach thereof or a default
thereunder, or if such authorization or payment shall be
restricted or prohibited by law. Any distribution payment made
on
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the Priority Common Shares shall first be credited against
the earliest accrued but unpaid distribution due with respect
to such shares which remains payable.
(ii) Liquidation Preference. In the event of any
liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, during the Priority Period, the
holders of the Priority Common Shares shall be entitled to
receive, prior to any liquidating payments to the holders of
the Class B Common Shares, $6.00 per Priority Common Share (the
"Liquidation Preference"), plus any accumulated and unpaid
Priority Distributions (whether or not declared) on the
Priority Common Shares to the date of distribution. After the
holders of the Class B Common Shares have received an amount
equal to the Liquidation Preference plus any accumulated and
unpaid Priority Distributions (whether or not declared) on the
Class B Common Shares to the date of distribution, the holders
of the Priority Common Shares shall share ratably with the
holders of the Class B Common Shares in the assets of the
Company. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary,
after the Priority Period, the holders of the Priority Common
Shares shall share ratably with the holders of the Class B
Common Shares in the assets of the Company. The rights of the
holders of the Priority Common Shares to liquidating payments
shall be subject to rights of any class or series of
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Preferred Shares.
If, upon any liquidation, dissolution or winding up
of the Company, the assets of the Company, or proceeds
thereof, distributable among the holders of the Priority
Common Shares are insufficient to pay in full the Liquidation
Preference and all accumulated and unpaid dividends with
respect to any of the Parity Shares, then such assets or the
proceeds thereof will be distributed among the holders of the
Priority Common Shares and any such Parity Shares ratably in
accordance with the respective amounts that would be payable
on the Priority Common Shares and such Parity Shares if all
amounts payable thereon were paid in full. None of (i) a
consolidation or merger of the Company with another
corporation, (ii) a statutory share exchange by the Company or
(iii) a sale or transfer of all or substantially all of the
Company's assets will be considered a liquidation, dissolution
or winding up, voluntary or involuntary, of the Company.
(b) The Class B Common Shares
(i) Dividends. Subject to the preferential
rights of the Priority Common Shares during the Priority
Period or of any other shares or series of beneficial interest
and to the provisions of this Declaration of Trust
regarding the restriction on the transfer of shares of
beneficial interest, holders of Class B Common Shares are
entitled to receive dividends on shares if, as and when
authorized and declared by the Board of
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Trustees of the Company out of assets legally available
therefor and to share ratably in the assets of the Company
legally available for distribution to its shareholders in the
event of its liquidation, dissolution or winding-up after
payment of, or adequate provision for, all known debts and
liabilities of the Company. In the event that the Company at
any time is unable to pay to the holders of the Class B Common
Shares an amount per Class B Common Share equal to the
Priority Distribution, during the Priority Period the holders
of the Class B Common Shares shall be entitled to receive an
amount such that the cumulative amount received per Class B
Common Share is equal to the cumulative Priority Distribution
received per Priority Common Share. The Company shall pay such
amounts at such subsequent dividend payment dates that the
Company has cash available for distribution to shareholders to
pay such dividends.
(ii) Conversion. Upon termination of the Priority
Period, the Class B Common Shares automatically will be
converted into Priority Common Shares on a one-for-one basis,
subject to adjustment as described in this Article VI, Section
2(b)(ii) (the "Conversion Ratio"). A notice informing holders
of the Class B Common Shares of such conversion will be mailed
by the Company to the holders of record of the Class B Common
Shares as of the dividend payment record date for the next
dividend payable after the expiration of the Priority Period,
together with the dividend payable on such
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shares, at their respective addresses as they appear on the
share transfer records of the Company. No fewer than all of
the outstanding Class B Common Shares shall be converted.
If the expiration of the Priority Period falls after
a dividend payment record date and prior to the related
payment date, the holders of the Class B Common Shares at the
close of business on such record date will be entitled to
receive the dividend payable on such shares on the
corresponding dividend payment date, notwithstanding the
conversion of such shares prior to such dividend payment date.
Upon expiration of the Priority Period, each holder
of Class B Common Shares (unless the Company defaults in the
delivery of the Priority Common Shares) will be, without any
further action, deemed a holder of the amount of Priority
Common Shares, as the case may be, for which such Class B
Common Shares are convertible. Fractional Priority Common
Shares will not be issued upon conversion of the Class B
Common Shares.
(iii) Conversion Ratio Adjustments. The Conversion
Ratio is subject to adjustment upon certain events, including
(i) the payment of dividends (and other distributions) payable
in Priority Common Shares on any class of shares of beneficial
interest of the Company, (ii) subdivisions, combinations and
reclassifications of Priority Common Shares and (iii)
distributions to all holders of Priority Common Shares of
evidences of indebtedness of the
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Company or assets (including securities, but excluding those
dividends, rights, warrants and distributions referred to in
clause (i) or (ii) above and dividends and distributions paid
in cash). In addition to the foregoing adjustments, the
Company will be permitted to make such reductions in the
Conversion Ratio as it considers to be advisable in order that
any event treated for Federal income tax purposes as a
dividend of Shares or share rights will not be taxable to the
holders of the Class B Common Shares or, if that is not
possible, to diminish any income taxes that are otherwise
payable because of such event.
No adjustment of the Conversion Ratio is required to
be made in any case until cumulative adjustments amount to 1%
or more of the Conversion Ratio. Any adjustments not so
required to be made will be carried forward and taken into
account in subsequent adjustments.
Section 3. Preferred Shares. The Board of Trustees may classify any
unissued Preferred Shares and reclassify any previously classified but unissued
Preferred Shares of any class or series from time to time, in one or more
classes or series of Shares.
Section 4. Classified or Reclassified Shares. Prior to issuance of
classified or reclassified Shares of any class or series, the Board of Trustees
by resolution shall (a) designate that class or series to distinguish it from
all other classes and series of Shares; (b) specify the number of Shares to be
included in the class or series; (c) set, subject to the provisions of Article
VII and subject to the express terms of any class or series of Shares
outstanding at the time, the preferences,
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conversion or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications and terms and conditions of
redemption for each series; and (d) cause the Trust to file articles
supplementary with the State Department of Assessments and Taxation of Maryland
("SDAT"). Any of the terms of any class or series of Shares set pursuant to
clause (c) of this Section 3 may be made dependent upon facts or events
ascertainable outside the Declaration of Trust (including the occurrence of any
event, including a determination by the Trust or any other person or body) and
may vary among holders thereof, provided that the manner in which such facts,
events or variations shall operate upon the terms of such class or series of
Shares is clearly and expressly set forth in articles supplementary filed with
the SDAT.
Section 5. Authorization by Board of Share Issuance. The Board of
Trustees may authorize the issuance from time to time of Shares of any class or
series, whether now or hereafter authorized, or securities or rights convertible
into Shares of any class or series, whether now or hereafter authorized, for
such consideration (whether in cash, property, past or future services,
obligation for future payment or otherwise) as the Board of Trustees may deem
advisable (or without consideration in the case of a Share split or Share
dividend), subject to such restrictions or limitations, if any, as may be set
forth in the Declaration of Trust or the Bylaws. Notwithstanding any other
provision in the Declaration of Trust, no determination shall be made by the
Board of Trustees nor shall any transaction be entered into by the Trust that
would cause any Shares or other beneficial interest in the Trust not to
constitute "transferable shares" or "transferable certificates of beneficial
interest" under Section 856(a)(2) of the Code or which would cause any
distribution to constitute a preferential dividend as described in Section
562(c) of
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the Code.
Section 6. Dividends and Distributions. The Board of Trustees may from
time to time authorize to shareholders dividends or distributions, in cash or
other assets of the Trust or in securities of the Trust or from any other source
as the Board of Trustees in its discretion shall determine. The Board of
Trustees shall endeavor to authorize the Trust to pay such dividends and
distributions as shall be necessary for the Trust to qualify as a REIT under the
Code; however, shareholders shall have no right to any dividend or distribution
unless and until authorized by the Board. The exercise of the powers and rights
of the Board of Trustees pursuant to this Section shall be subject to the
provisions of any class or series of Shares at the time outstanding.
Notwithstanding any other provision in the Declaration of Trust, no
determination shall be made by the Board of Trustees nor shall any transaction
be entered into by the Trust that would cause any Shares not to constitute
"transferable shares" or "transferable certificates of beneficial interest"
under Section 856(a)(2) of the Code or that would cause any distribution to
constitute a preferential dividend as described in Section 562(c) of the Code.
Section 7. General Nature of Shares. All Shares shall be personal
property entitling the shareholders only to those rights provided in the
Declaration of Trust. The shareholders shall have no interest in the property of
the Trust and shall have no right to compel any partition, division, dividend or
distribution of the Trust or of the property of the Trust. The death of a
shareholder shall not terminate the Trust. The Trust is entitled to treat as
shareholders only those persons in whose names Shares are registered as holders
of Shares on the beneficial interest ledger of the Trust.
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Section 8. Fractional Shares. The Trust may, without the consent or
approval of any shareholder, issue fractional Shares, eliminate a fraction of a
Share by rounding up or down to a full Share, arrange for the disposition of a
fraction of a Share by the person entitled to it, or pay cash for the fair value
of a fraction of a Share.
Section 9. Declaration of Trust and Bylaws. All shareholders are
subject to the provisions of the Declaration of Trust and the Bylaws of the
Trust.
Section 10. Divisions and Combinations of Shares. Subject to an express
provision to the contrary in the terms of any class or series of beneficial
interest hereafter authorized, the Board of Trustees shall have the power to
divide or combine the outstanding shares of any class or series of beneficial
interest, without a vote of the shareholders, so long as the number of shares
combined into one share in any such combination or series of combinations within
any period of twelve months is not greater than four.
ARTICLE VII
RESTRICTIONS ON TRANSFER AND SHARES-IN-TRUST
Section 1. Restrictions on Transfer.
(A) Definitions. For the purpose of this Article VII, the
following terms shall have the following meanings:
(i) "Beneficial Ownership" shall mean ownership of
Equity Shares (or options to acquire Equity Shares) by a Person who would be
treated as an owner of such Equity Shares either (a) directly (including through
a nominee or similar arrangement) or (b) indirectly through the application of
Section 544 of the Code, as modified by Section 856(h)(1)(B) of the
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Code. The terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned"
shall have correlative meanings.
(ii) "Beneficiary" shall mean, with respect to any
Share Trust, one or more organizations described in each of Section 170(b)(1)(A)
(other than clause (vii) or (viii) thereof) and Section 170(c)(2) of the Code
that are named by the Share Trust as the beneficiary or beneficiaries of such
Share Trust, in accordance with the provisions of Section 2(A) hereof.
(iii) "Board of Trustees" shall mean the Board of
Trustees of the Trust.
(iv) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(v) "Constructive Ownership" shall mean ownership of
Equity Shares (or options to acquire Equity Shares) by a Person , whether the
interest in the Equity Shares is held directly or indirectly (including a
nominee or similar arrangement), and shall include interests that would be
treated as owned through the application of Section 318 of the Code, as modified
by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Owns" and "Constructively Owned" shall have correlative
meanings.
(vi) "Equity Shares" shall mean Shares of all classes
or series, including without limitation Preferred Shares or Common Shares. The
term "Equity Shares" shall include all Preferred Shares and Common Shares that
are held as Shares-in-Trust in accordance with the provisions of Section 2(A)
hereof.
(vii) "Hersha Hospitality Partnership Agreement"
shall mean the
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agreement of limited partnership of Hersha Hospitality Limited Partnership, a
Virginia limited partnership, as amended and restated.
(viii) "Initial Public Offering" means the sale of
Common Shares pursuant to the Trust's first effective registration statement for
such Common Shares filed under the Securities Act of 1933, as amended.
(ix) "Market Price" on any date shall mean, with
respect to any class or series of outstanding Equity Shares, the average of the
Closing Price for the five consecutive Trading Days ending on such date. The
"Closing Price" on any date shall mean the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Equity Shares are
not listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Equity Shares are listed or admitted to trading or, if the Equity Shares are not
listed or admitted to trading on any national securities exchange, the last
quoted price, or if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System or, if such system is no
longer in use, the principal other automated quotations system that may then be
in use or, if the Equity Shares are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Equity Shares selected by the Board of
Trustees or, in the
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event that no trading price is available for such Equity Shares, the fair market
value of the Equity Shares, as determined in good faith by the Board of
Trustees. "Trading Day" shall mean a day on which the principal national
securities exchange on which the Equity Shares are listed or admitted to trading
is open for the transaction of business or, if the Equity Shares are not listed
or admitted to trading on any national securities exchange, shall mean any day
other than a Saturday, a Sunday or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive order to
close.
(x) "Non-Transfer Event" shall mean an event (other
than a purported Transfer) that would result in a change in Beneficial or
Constructive Ownership of the Equity Shares, including, but not limited to, the
granting of any option or entering into any agreement for the sale, transfer or
other disposition of Equity Shares or the sale, transfer, assignment or other
disposition of any securities or rights convertible into or exchangeable for
Equity Shares.
(xi) "Ownership Limit" shall mean 9.9% of the
aggregate number of outstanding Common Shares and 9.9% of the aggregate number
of outstanding shares of any class or series of Preferred Shares, in each case
considered separately on a class by class or series by series basis.
(xii) "Partnership" shall mean Hersha Hospitality
Limited Partnership, a Virginia limited partnership.
(xiii) "Partnership Unit" shall mean a fractional,
undivided share of the partnership interests of Hersha Hospitality Limited
Partnership, a Virginia limited partnership.
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(xiv) "Permitted Transferee" shall mean any Person
designated as a Permitted Transferee in accordance with the provisions of
Section 2(E) hereof.
(xv) "Person" shall mean an individual, corporation,
partnership, estate, trust, a portion of a trust permanently set aside for or to
be used exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity and also includes a "group" as that
term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended.
(xvi) "Prohibited Owner" shall mean, with respect to
any purported Transfer or Non-Transfer Event, any Person who, but for the
provisions of Section 1(C) hereof, would own record title to Equity Shares.
(xvii) "Redemption Rights" shall mean the rights
granted under the Hersha Hospitality Partnership Agreement to the limited
partners to redeem, under certain circumstances, their Partnership Units for
cash (or, at the option of the Trust, Common Shares).
(xviii) "REIT" shall mean a real estate investment
trust under Section 856 of the Code.
(xix) "Restriction Termination Date" shall mean the
first day after the date of the Initial Public Offering on which the Board of
Trustees and the shareholders of the Trust determine, pursuant to Article V,
Section 1(C), that it is no longer in the best interests of the Trust to attempt
to, or continue to, qualify as a REIT or for any other reason, the Board of
Trustees and the shareholders amend the Declaration of Trust to terminate the
provisions of this Article VII.
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(xx) "Shares-in-Trust" shall mean any Equity
Shares designated Shares-in-Trust pursuant to Section 1(C) hereof.
(xxi) "Share Trust" shall mean any separate trust
created pursuant to Section 1(C) hereof and administered in accordance with the
terms of Section 2 hereof, for the exclusive benefit of any Beneficiary.
(xxii) "Share Trustee" shall mean any person or
entity unaffiliated with both the Trust and any Prohibited Owner designated by
the Trust to act as trustee of any Share Trust, or any successor trustee
thereof.
(xxiii) "Transfer" (as a noun) shall mean any
issuance, sale, transfer, gift, assignment, devise or other disposition of
Equity Shares, whether voluntary or involuntary, whether of record,
constructively or beneficially and whether by operation of law or otherwise.
"Transfer" (as a verb) shall have the correlative meaning.
(B) Restriction on Transfers.
(1) Except as provided in Section 1(G) hereof, from
the date of the Initial Public Offering and prior to the Restriction Termination
Date, no Person shall Beneficially Own or Constructively Own outstanding Equity
Shares in excess of the Ownership Limit.
(2) Except as provided in Section 1(G) hereof and
subject to Section 1(H) hereof, from the date of the Initial Public Offering and
prior to the Restriction Termination Date, any Transfer that, if effective,
would result in any Person Beneficially Owning or Constructively Owning Equity
Shares in excess of the Ownership Limit shall be void ab initio as to the
Transfer of that number of Equity Shares that would be otherwise Beneficially
Owned or Constructively
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Owned by such Person in excess of the Ownership Limit and the intended
transferee shall acquire no rights in such excess Equity Shares.
(3) Except as provided in Section 1(G) hereof, and
subject to Section 1(H) hereof, from the date of the Initial Public Offering and
prior to the Restriction Termination Date, any Transfer that, if effective,
would result in the Equity Shares being beneficially owned by fewer than 100
Persons (determined without reference to any rules of attribution) shall be void
ab initio as to the Transfer of that number of shares that would be otherwise
beneficially owned (determined without reference to any rules of attribution) by
the transferee, and the intended transferee shall acquire no rights in such
excess Equity Shares.
(4) Subject to Section 1(G) and 1(H) hereof, from the
date of the Initial Public Offering and prior to the Restriction Termination
Date, any Transfer of Equity Shares that, if effective, would result in the
Trust being "closely held" within the meaning of Section 856(h) of the Code
shall be void ab initio as to the Transfer of that number of Equity Shares that
would cause the Trust to be "closely held" within the meaning of Section 856(h)
of the Code, and the intended transferee shall acquire no rights in such excess
Equity Shares; provided, however, that this Section 1(B)(4) shall not apply to
the Transfer of Equity Shares from the Trust to the underwriters of the Initial
Public Offering.
(5) Except as provided in Section 1(G) hereof and
subject to Section 1(H) hereof, from the date of the Initial Public Offering and
prior to the Restriction Termination Date, any Transfer of Equity Shares that,
if effective, would cause the Trust to Constructively Own 10% or more of the
ownership interests in a tenant of the Trust's or the Partnership's real
property,
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within the meaning of Section 856(d)(2)(B) of the Code, shall be void ab initio
as to the Transfer of that number of Equity Shares that would cause the Trust to
Constructively Own 10% or more of the ownership interests in a tenant of the
Trust's or the Partnership's real property, within the meaning of Section
856(d)(2)(B) of the Code, and the intended transferee shall acquire no rights in
such excess Equity Shares.
(C) Transfer to Share Trust.
(1) If, notwithstanding the other provisions
contained in this Section 1, at any time after the date of the Initial Public
Offering and prior to the Restriction Termination Date, there is a purported
Transfer or Non-Transfer Event such that any Person would either Beneficially
Own or Constructively Own Equity Shares in excess of the Ownership Limit, then
(x) except as otherwise provided in Section 1(G) hereof, the purported
transferee shall acquire no right or interest (or, in the case of a Non-Transfer
Event, the person holding record title to the Equity Shares Beneficially Owned
or Constructively Owned by such Beneficial Owner or Constructive Owner, shall
cease to own any right or interest) in such number of Equity Shares that would
cause such Beneficial Owner or Constructive Owner to Beneficially Own or
Constructively Own Equity Shares in excess of the Ownership Limit, (y) such
number of Equity Shares in excess of the Ownership Limit (rounded up to the
nearest whole share) shall be designated Shares-in-Trust and, in accordance with
the provisions of Section 2 hereof, transferred automatically and by operation
of law to a Share Trust to be held in accordance with that Section 2, and (z)
the Prohibited Owner shall submit such number of Equity Shares to the Trust for
registration in the name of the Share Trust. Such transfer to a Share Trust and
the designation of shares as Shares-in-Trust shall be
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effective as of the close of business on the business day prior to the date of
the Transfer or Non-Transfer Event, as the case may be.
(2) If, notwithstanding the other provisions
contained in this Section 1, at any time after the date of the Initial Public
Offering and prior to the Restriction Termination Date, there is a purported
Transfer or Non-Transfer Event that, if effective, would (i) result in the
Equity Shares being beneficially owned by fewer than 100 Persons (determined
without reference to any rules of attribution), (ii) result in the Trust being
"closely held" within the meaning of Section 856(h) of the Code, or (iii) cause
the Trust to Constructively Own 10% or more of the ownership interests in a
tenant of the Trust's or the Partnership's real property, within the meaning of
Section 856(d)(2)(B) of the Code, then (x) the purported transferee shall not
acquire any right or interest (or, in the case of a Non-Transfer Event, the
person holding record title of the Equity Shares with respect to which such
Non-Transfer Event occurred, shall cease to own any right or interest) in such
number of Equity Shares, the ownership of which by such purported transferee or
record holder would (A) result in the Equity Shares being beneficially owned by
fewer than 100 Persons (determined without reference to any rules of
attribution), (B) result in the Trust being "closely held" within the meaning of
Section 856(h) of the Code or (C) cause the Trust to Constructively Own 10% or
more of the ownership interests in a tenant of the Trust's or the Partnership's
real property, within the meaning of Section 856(d)(2)(B) of the Code, (y) such
number of Equity Shares (rounded up to the nearest whole share) shall be
designated Shares-in-Trust and, in accordance with the provisions of Section 2
hereof, transferred automatically and by operation of law to the Share Trust to
be held in accordance with that Section 2 and (z) the Prohibited Owner
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shall submit such number of Equity Shares to the Trust for registration in the
name of the Share Trust. Such transfer to a Share Trust and the designation of
shares as Shares-in-Trust shall be effective as of the close of business on the
business day prior to the date of the Transfer or Non-Transfer Event, as the
case may be.
(D) Remedies For Breach. If the Trust, or its designees, shall
at any time determine in good faith that a Transfer has taken place in violation
of Section 1(B) hereof or that a Person intends to acquire or has attempted to
acquire Beneficial Ownership or Constructive Ownership of any Equity Shares in
violation of Section 1(B) hereof, the Trust shall take such action as it deems
advisable to refuse to give effect to or to prevent such Transfer or
acquisition, including, but not limited to, refusing to give effect to such
Transfer on the books of the Trust or instituting proceedings to enjoin such
Transfer or acquisition.
(E) Notice of Restricted Transfer. Any Person who acquires or
attempts to acquire Equity Shares in violation of Section 1(B) hereof, or any
Person who owned Equity Shares that were transferred to the Share Trust pursuant
to the provisions of Section 1(C) hereof, shall immediately give written notice
to the Trust of such event and shall provide to the Trust such other information
as the Trust may request in order to determine the effect, if any, of such
Transfer or Non-Transfer Event, as the case may be, on the Trust's status as a
REIT.
(F) Owners Required To Provide Information. From the date of
the Initial Public Offering and prior to the Restriction Termination Date:
(1) Every Beneficial Owner or Constructive Owner of
more than 5%, or such lower percentages as required pursuant to regulations
under the Code, of the outstanding
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Equity Shares of the Trust shall, within 30 days after December 31 of each year,
provide to the Trust a written statement or affidavit stating the name and
address of such Beneficial Owner or Constructive Owner, the number of Equity
Shares Beneficially Owned or Constructively Owned, and a description of how such
shares are held. Each such Beneficial Owner or Constructive Owner shall provide
to the Trust such additional information as the Trust may request in order to
determine the effect, if any, of such Beneficial Ownership or Constructive
Ownership on the Trust's status as a REIT and to ensure compliance with the
Ownership Limit.
(2) Each Person who is a Beneficial Owner or
Constructive Owner of Equity Shares and each Person (including the shareholder
of record) who is holding Equity Shares for a Beneficial Owner or Constructive
Owner shall provide to the Trust a written statement or affidavit stating such
information as the Trust may request in order to determine the Trust's status as
a REIT and to ensure compliance with the Ownership Limit.
(G) Exception to Ownership Limit. The Ownership Limit shall
not apply to the acquisition of Equity Shares by an underwriter that
participates in a public offering of such shares, for a period of 90 days
following the purchase by such underwriter of such shares. In addition, the
Board of Trustees, upon receipt of advice of counsel or other evidence
satisfactory to the Board of Trustees, in its sole and absolute discretion, in
each case to the effect that the restrictions contained in Sections 1(B)(3), (4)
and (5) hereof will not be violated and that REIT status will not otherwise be
lost, may, in its sole and absolute discretion, exempt a Person from the
Ownership Limit if such Person is not an individual for purposes of Section
542(a)(2) of the Code, provided that (i) the Board of Trustees obtains such
representations and undertakings from such Person as are
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reasonably necessary to ascertain that no individual's Beneficial Ownership or
Constructive Ownership of Equity Shares will violate the Ownership Limit as a
result of the exemption and (ii) such Person agrees that any violation or
attempted violation of the terms of the exemption will result in a transfer to
the Share Trust of Equity Shares pursuant to Section 1(C) hereof.
(H) New York Stock Exchange Transactions. Notwithstanding any
provision contained herein to the contrary, nothing in this Declaration of Trust
shall preclude the settlement of any transaction entered into through the
facilities of the New York Stock Exchange. The fact that the settlement of any
transaction occurs shall not negate the effect of any other provision of this
Article VII and any transferee in such a transaction shall be subject to all of
the provisions and limitations set forth in this Article VII.
Section 2. Shares-in-Trust.
(A) Share Trust. Any Equity Shares transferred to a Share
Trust and designated Shares-in-Trust pursuant to Section 1(C) hereof shall be
held for the exclusive benefit of a Beneficiary. The Trust shall name a
Beneficiary of each Share Trust within five days after discovery of the
existence thereof. Any transfer to a Share Trust, and subsequent designation of
Equity Shares as Shares-in-Trust, pursuant to Section 1(C) hereof shall be
effective as of the close of business on the business day prior to the date of
the Transfer or Non-Transfer Event that results in the transfer to the Share
Trust. Shares-in-Trust shall remain issued and outstanding Equity Shares of the
Trust and shall be entitled to the same rights and privileges on identical terms
and conditions as are all other issued and outstanding Equity Shares of the same
class and series. When transferred to a Permitted Transferee in accordance with
the provisions of Section 2(E) hereof, such
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Shares-in-Trust shall cease to be designated as Shares-in-Trust.
(B) Dividend Rights. The Share Trust, as record holder of
Shares-in-Trust, shall be entitled to receive all dividends and distributions as
may be declared by the Board of Trustees on such Equity Shares and shall hold
such dividends or distributions in trust for the benefit of the Beneficiary. The
Prohibited Owner with respect to Shares-in-Trust shall repay to the Share Trust
the amount of any dividends or distributions received by it that (i) are
attributable to any Equity Shares designated Shares-in-Trust and (ii) the record
date for which was on or after the date that such shares became Shares-in-Trust.
The Trust shall take all measures that it determines reasonably necessary to
recover the amount of any such dividend or distribution paid to a Prohibited
Owner, including, if necessary, withholding any portion of future dividends or
distributions payable on Equity Shares Beneficially Owned or Constructively
Owned by the Person who, but for the provisions of Section 1(C) hereof, would
Constructively Own or Beneficially Own the Shares-in-Trust; and, as soon as
reasonably practicable following the Trust's receipt or withholding thereof,
shall pay over to the Share Trust for the benefit of the Beneficiary the
dividends so received or withheld, as the case may be.
(C) Rights Upon Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of, or any distribution of
the assets of, the Trust, each holder of Shares-in-Trust shall be entitled to
receive, ratably with each other holder of Equity Shares of the same class or
series, that portion of the assets of the Trust that is available for
distribution to the holders of such class and series of Equity Shares. The Share
Trust shall distribute to the Prohibited Owner the amounts received upon such
liquidation, dissolution or winding up, or distribution;
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provided, however, that the Prohibited Owner shall not be entitled to receive
amounts pursuant to this Section 2(C) in excess of (i) in the case of a
purported Transfer in which the Prohibited Owner gave value for Equity Shares
and which Transfer resulted in the transfer of the shares to the Share Trust,
the price per share, if any, such Prohibited Owner paid for the Equity Shares
and (ii) in the case of a Non-Transfer Event or Transfer in which the Prohibited
Owner did not give value for such shares (e.g., if the shares were received
through a gift or devise) and which Non-Transfer Event or Transfer, as the case
may be, resulted in the transfer of shares to the Share Trust, the price per
share equal to the Market Price on the date of such Non-Transfer Event or
Transfer. Any remaining amount in such Share Trust shall be distributed to the
Beneficiary.
(D) Voting Rights. The Share Trustee shall be entitled to vote
all Shares-in-Trust. Any vote by a Prohibited Owner as a holder of Equity Shares
prior to the discovery by the Trust that the Equity Shares are Shares-in-Trust
shall, subject to Maryland law, be rescinded and shall be void ab initio with
respect to such Shares-in-Trust and the Prohibited Owner shall be deemed to have
given, as of the close of business on the business day prior to the date of the
purported Transfer or Non-Transfer Event that results in the transfer to the
Share Trust of Equity Shares under Section 1(C) hereof, an irrevocable proxy to
the Share Trustee to vote the Shares-in-Trust in the manner in which the Share
Trustee, in its sole and absolute discretion, desires; provided, however, that
if the Trust has already taken irreversible trust action, the Share Trustee
shall not have the authority to rescind and recast such vote.
(E) Designation of Permitted Transferee. The Share Trustee
shall have the exclusive and absolute right to designate a Permitted Transferee
of any and all Shares-in-Trust. In
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an orderly fashion so as not to materially adversely affect the Market Price of
the Shares-in-Trust, the Share Trustee shall designate any Person as Permitted
Transferee, provided, however, that (i) the Permitted Transferee so designated
purchases for valuable consideration (whether in a public or private sale), at a
price as set forth in Section 2(G) hereof, the Shares-in-Trust and (ii) the
Permitted Transferee so designated may acquire such Shares-in-Trust without such
acquisition resulting in a transfer to a Share Trust and the redesignation of
such Equity Shares so acquired as Shares-in-Trust under Section 1(C) hereof.
Upon the designation by the Share Trustee of a Permitted Transferee in
accordance with the provisions of this Section 2(E), the Share Trustee shall (i)
cause to be transferred to the Permitted Transferee that number of
Shares-in-Trust acquired by the Permitted Transferee, (ii) cause to be recorded
on the books of the Trust that the Permitted Transferee is the holder of record
of such number of Equity Shares, (iii) cause the Shares-in-Trust to be canceled
and (iv) distribute to the Beneficiary any and all amounts held with respect to
the Shares-in-Trust after making the payment to the Prohibited Owner pursuant to
Section 2(F) hereof.
(F) Compensation to Record Holder of Equity Shares that Become
Shares-in-Trust. Any Prohibited Owner shall be entitled (following discovery of
the Shares-in-Trust and subsequent designation of the Permitted Transferee in
accordance with Section 2(E) hereof or following the acceptance of the offer to
purchase such shares in accordance with Section 2(G) hereof) to receive from the
Share Trustee following the sale or other disposition of such Shares-in-Trust
the lesser of (i) in the case of (a) a purported Transfer in which the
Prohibited Owner gave value for Equity Shares and which Transfer resulted in the
transfer of the shares to the Share Trust, the price per share, if any, such
Prohibited Owner paid for the Equity Shares, or (b) a Non-Transfer Event or
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Transfer in which the Prohibited Owner did not give value for such shares (e.g.,
if the shares were received through a gift or devise) and which Non-Transfer
Event or Transfer, as the case may be, resulted in the transfer of shares to the
Share Trust, the price per share equal to the Market Price on the date of such
Non-Transfer Event or Transfer and (ii) the price per share received by the
Share Trustee from the sale or other disposition of such Shares-in-Trust in
accordance with Section 2(E) hereof. Any amounts received by the Share Trustee
in respect of such Shares-in-Trust and in excess of such amounts to be paid the
Prohibited Owner pursuant to this Section 2(F) shall be distributed to the
Beneficiary in accordance with the provisions of Section 2(E) hereof. Each
Beneficiary and Prohibited Owner waive any and all claims that they may have
against the Share Trustee and the Share Trust arising out of the disposition of
Shares-in-Trust, except for claims arising out of the gross negligence or
willful misconduct of, or any failure to make payments in accordance with this
Section 2 by, such Share Trustee or the Trust.
(G) Purchase Right in Shares-in-Trust. Shares-in-Trust shall
be deemed to have been offered for sale to the Trust, or its designee, at a
price per share equal to the lesser of (i) the price per share in the
transaction that created such Shares-in-Trust (or, in the case of devise, gift
or Non-Transfer Event, the Market Price at the time of such devise, gift or
Non-Transfer Event) and (ii) the Market Price on the date the Trust, or its
designee, accepts such offer. The Trust shall have the right to accept such
offer for a period of ninety days after the later of (i) the date of the
Non-Transfer Event or purported Transfer that resulted in such Shares-in-Trust
and (ii) the date the Trust determines in good faith that a Transfer or
Non-Transfer Event resulting in Shares-in-Trust has occurred, if the Trust does
not receive a notice of such Transfer or Non-Transfer Event pursuant to
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Section 1(E) hereof.
Section 3. Remedies Not Limited. Subject to Section 1(H) hereof,
nothing contained in this Article VII shall limit the authority of the Trust to
take such other action as it deems necessary or advisable to protect the Trust
and the interests of its shareholders by preservation of the Trust's status as a
REIT and to ensure compliance with the Ownership Limit.
Section 4. Ambiguity. In the case of an ambiguity in the application of
any of the provisions of Article VII, including any definition contained in
Section 1(A) hereof, the Board of Trustees shall have the power to determine the
application of the provisions of this Article VII with respect to any situation
based on the facts known to it.
Section 5. Legend. Each certificate for Equity Shares shall bear
substantially the following legend:
"The [Common or Preferred] Shares evidenced by this certificate are
subject to restrictions on transfer. Subject to certain further restrictions and
except as provided in the Declaration of Trust of the Trust, no Person may (i)
Beneficially or Constructively Own Common Shares in excess of 9.9% of the number
of outstanding Common Shares, (ii) Beneficially or Constructively Own Preferred
Shares of any class or series of Preferred Shares in excess of 9.9% of the
number of outstanding Preferred Shares of such class or series, (iii)
Beneficially Own Equity Shares that would result in the Equity Shares being
beneficially owned by fewer than 100 Persons (determined without reference to
any rules of attribution), (iv) Beneficially Own Equity Shares that would result
in the Trust being "closely held" under Section 856(h) of the Internal Revenue
Code of 1986, as amended (the "Code"), or (v) Constructively Own Equity Shares
that would cause the
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Trust to Constructively Own 10% or more of the ownership interests in a tenant
of the Trust's or the Partnership's real property, within the meaning of Section
856(d)(2)(B) of the Code. Any Person who attempts to Beneficially or
Constructively Own shares of Equity Shares in excess of the above limitations
must immediately notify the Trust in writing. If any restrictions above are
violated, the Equity Shares evidenced hereby will be transferred automatically
to a Share Trust and shall be designated Shares-in-Trust to a trustee of a trust
for the benefit of one or more charitable beneficiaries. In addition, upon the
occurrence of certain events, attempted transfers in violation of the
restrictions described above may be void ab initio. All capitalized terms in
this legend have the meanings defined in the Trust's Declaration of Trust, as
the same may be further amended from time to time, a copy of which, including
the restrictions on transfer, will be sent without charge to each shareholder
who so requests. Such requests must be made to the Secretary of the Trust at its
principal office or to the transfer agent."
In place of the foregoing legend, the certificate may state that the
Trust will furnish a full statement about certain restrictions or
transferability to a shareholder on request and without charge.
Section 6. Severability. If any provision of this Article VII or any
application of any such provision is determined to be invalid by any federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.
Section 7. Non-Waiver. No delay or failure on the part of the Trust or
the Board of Trustees in exercising any right hereunder shall operate as a
waiver of any right of the Trust or
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the Board of Trustees, as the case may be, except to the extent specifically
waived in writing.
ARTICLE VIII
SHAREHOLDERS
Section 1. Meetings. There shall be an annual meeting of the
shareholders, to be held on proper notice at such time (after the delivery of
the annual report) and convenient location as shall be determined by or in the
manner prescribed in the Bylaws, for the election of the Trustees, if required,
and for the transaction of any other business within the powers of the Trust. If
there are no Trustees, the officers of the Trust shall promptly call a special
meeting of the shareholders entitled to vote for the election of successor
Trustees. Any meeting may be adjourned and reconvened as the Trustees determine
or as provided in the Bylaws.
Section 2. Voting Rights. Subject to the provisions of any class or
series of Shares then outstanding, the shareholders shall be entitled to vote
only on the following matters: (a) termination of REIT status as provided in
Article V, Section (1)(C), (b) election of Trustees as provided in Article V,
Section 2(A) and the removal of Trustees as provided in Article V, Section 3;
(c) amendment of the Declaration of Trust as provided in Article X; (d)
termination of the Trust as provided in Article XII, Section 2; (e) merger or
consolidation of the Trust, or the sale or disposition of substantially all of
the Trust Property (as hereinafter defined), as provided in Article XI; and (f)
such other matters with respect to which a vote of the shareholders is required
by applicable law or the Board of Trustees has adopted a resolution declaring
that a proposed action is advisable and directing that the matter be submitted
to the shareholders for approval or ratification. Except with respect to the
foregoing matters, no action taken by the shareholders at any meeting
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shall in any way bind the Board of Trustees.
Section 3. Preemptive and Appraisal Rights. Except as may be provided
by the Board of Trustees in setting the terms of classified or reclassified
Shares pursuant to Article VI, Section 4 or as otherwise may be provided by
contract, no holder of Shares shall, as such holder, (a) have any preemptive or
preferential right to purchase or subscribe for any additional Shares of the
Trust or any other security of the Trust that it may issue or sell or (b),
except as expressly required by Title 8, have any right to require the Trust to
pay him the fair value of his Shares in an appraisal or similar proceeding.
Section 4. Extraordinary Actions. Except as specifically provided in
Article V, Sections 1(C) and 3, Article X, Section 3 and Article XII, Section 2
of this Declaration of Trust, notwithstanding any provision of law permitting or
requiring action to be taken or authorized by the affirmative vote of the
holders of a greater number of votes, any such action shall be effective and
valid if taken or approved by the affirmative vote of holders of Shares entitled
to cast a majority of all of the votes entitled to be cast on the matter.
Section 5. Board Approval. The submission of any action to the
shareholders for their consideration shall first be approved as advised by the
Board of Trustees.
Section 6. Action By Shareholders Without a Meeting. The Bylaws may
provide that any action required or permitted to be taken by the shareholders
may be taken without a meeting by the written consent of the shareholders
entitled to cast a sufficient number of votes to approve the matter as required
by statute, the Declaration of Trust or the Bylaws, as the case may be.
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ARTICLE IX
LIABILITY LIMITATION, INDEMNIFICATION
AND TRANSACTIONS WITH THE TRUST
Section 1. Limitation of Shareholder Liability. No shareholder shall be
liable for any debt, claim, demand, judgment or obligation of any kind of,
against or with respect to the Trust by reason of his being a shareholder, nor
shall any shareholder be subject to any personal liability whatsoever, in tort,
contract or otherwise, to any person in connection with the property or the
affairs of the Trust by reason of his being a shareholder.
Section 2. Limitation of Trustee and Officer Liability. To the maximum
extent that Maryland law in effect from time to time permits limitation of the
liability of trustees and officers of a REIT, no Trustee or officer of the Trust
shall be liable to the Trust or to any shareholder for money damages. Neither
the amendment nor repeal of this Section, nor the adoption or amendment of any
other provision of the Declaration of Trust or Bylaws inconsistent with this
Section, shall apply to or affect in any respect the applicability of the
preceding sentence with respect to any act or failure to act that occurred prior
to such amendment, repeal or adoption. In the absence of any Maryland statute
limiting the liability of trustees and officers of a Maryland REIT for money
damages in a suit by or on behalf of the Trust or by any shareholder, no Trustee
or officer of the Trust shall be liable to the Trust or to any shareholder for
money damages except to the extent that (a) the Trustee or officer actually
received an improper benefit or profit in money, property or services, for the
amount of the benefit or profit in money, property or services actually
received; or (b) a judgment or other final adjudication adverse to the Trustee
or officer is entered in a proceeding based on a finding in the proceeding that
the Trustee's or officer's action or failure to act was the
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result of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding.
Section 3. Express Exculpatory Clauses in Instruments. Neither the
shareholders nor the Trustees, officers, employees or agents of the Trust shall
be liable under any written instrument creating an obligation of the Trust, and
all Persons shall look solely to the Trust Property for the payment of any claim
under or for the performance of that instrument. The omission of the foregoing
exculpatory language from any instrument shall not affect the validity or
enforceability of such instrument and shall not render any Shareholder, Trustee,
officer, employee or agent liable thereunder to any third party, nor shall the
Trustees or any officer, employee or agent of the Trust be liable to anyone for
such omission. As used in this Declaration of Trust, "Trust Property" means any
and all property, real, personal or otherwise, tangible or intangible, which is
transferred or conveyed to the Trust or the Trustees (including all rents,
income, profits and gains therefrom), which is owned or held by, or for the
account of, the Trust or the Trustees.
Section 4. Indemnification. The Trust shall have the power, to the
maximum extent permitted by Maryland law in effect from time to time, to
obligate itself to indemnify, and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to, (a) any individual who is a
present or former shareholder, Trustee or officer of the Trust or (b) any
individual who, while a Trustee of the Trust and at the request of the Trust,
serves or has served as a director, officer, partner, trustee, employee or agent
of another corporation, partnership, joint venture, trust, real estate
investment trust, employee benefit plan or other enterprise from and against any
claim or liability to which such person may become subject or which such person
may incur by reason of
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his status as a present or former shareholder, Trustee or officer of the Trust.
The Trust shall have the power, with the approval of its Board of Trustees, to
provide such indemnification and advancement of expenses to a person who served
as a predecessor of the Trust in any of the capacities described in (a) or (b)
above, and to any employee or agent of the Trust or a predecessor of the Trust.
Section 5. Transactions Between the Trust and its Trustees, Officers,
Employees and Agents. Subject to any express restrictions in the Declaration of
Trust or adopted by the Trustees in the Bylaws or by resolution, the Trust may
enter into any contract or transaction of any kind with any person, including
any Trustee, officer, employee or agent of the Trust or any person affiliated
with a Trustee, officer, employee or agent of the Trust, whether or not any of
them has a financial interest in such transaction.
ARTICLE X
AMENDMENTS
Section 1. General. The Trust reserves the right from time to time to
make any amendment to the Declaration of Trust, now or hereafter authorized by
law, including any amendment altering the terms or contract rights, as expressly
set forth in the Declaration of Trust, of any Shares. All rights and powers
conferred by this Declaration of Trust on shareholders, Trustees and officers
are granted subject to this reservation. An amendment to the Declaration of
Trust (a) shall be signed and acknowledged by at least a majority of the
Trustees or an officer duly authorized by at least a majority of the Trustees,
(b) shall be filed for record with SDAT as provided in Article XIII, Section 5
and (c) shall become effective as of the later of the time the SDAT accepts
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the amendment for record or the time established in the amendment, not to exceed
30 days after the amendment is accepted for record. All references to the
Declaration of Trust shall include all amendments thereto.
Section 2. By Trustees. The Trustees by a majority vote may amend the
Declaration of Trust from time to time in the manner provided by Title 8,
without any action by the shareholders, to qualify as a REIT under the Code or
under Title 8.
Section 3. By Shareholders. Other than amendments pursuant to Section 2
of this Article X and Section 1 of Article VI, any amendment to the Declaration
of Trust shall be valid only if approved by the affirmative vote of at least a
majority of all the votes entitled to be cast on the matter, except that any
amendment to Article V, Article VII, Article X, Sections 2 and 3 and Article
XII, Section 2 of this Declaration of Trust shall be valid only if approved by
the affirmative vote of two-thirds of all the votes entitled to be cast on the
matter; but in each case only after due authorization, advice and approval of
the Board of Trustees.
ARTICLE XI
MERGER, CONSOLIDATION OR SALE OF TRUST PROPERTY
Subject to the provisions of any class or series of Shares at the time
outstanding, the Trust may (a) merge the Trust into another entity, (b)
consolidate the Trust with one or more other entities into a new entity or (c)
sell, lease, exchange or otherwise transfer all or substantially all of the
Trust Property. Any such action must be approved as advised by the Board of
Trustees and, after notice to all shareholders entitled to vote on the matter,
by the affirmative vote of a majority of all the votes entitled to be cast on
the matter, except where approval of the shareholders is not
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required by Title 8 or would not be required by the Maryland General Corporation
Law if the Trust were a Maryland corporation.
ARTICLE XII
DURATION AND TERMINATION OF TRUST
Section 1. Duration. The Trust shall continue perpetually unless
terminated pursuant to Section 2 of this Article XII or pursuant to any
applicable provision of Title 8.
Section 2. Termination.
(a) Subject to the provision of any class or series of Shares
at the time outstanding, the Trust may be terminated at any meeting of
shareholders, by the affirmative vote of two thirds of all the votes entitled to
be cast on the matter, after due authorization, advice and approval thereof by a
majority of the entire Board of Trustees. Upon the termination of the Trust:
(i) The Trust shall carry on no business
except for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the
affairs of the Trust and all of the powers of the Trustees under the Declaration
of Trust shall continue, including the powers to fulfill or discharge the
Trust's contracts, collect its assets, sell, convey, assign, exchange, transfer
or otherwise dispose of all or any part of the remaining Trust Property to one
or more persons at public or private sale for consideration that may consist in
whole or in part of cash, securities or other property of any kind, discharge or
pay its liabilities and do all other acts appropriate to liquidate its business.
(iii) After paying or adequately providing for the
payment of all
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liabilities, and upon receipt of such releases, indemnities and agreements as it
deems necessary for its protection, the Trust may distribute the remaining Trust
Property among the shareholders so that after payment in full or the setting
apart for payment of such preferential amounts, if any, to which the holders of
any Shares at the time outstanding shall be entitled, the remaining Trust
Property shall, subject to any participating or similar rights of Shares at the
time outstanding, be distributed ratably among the holders of Common Shares at
the time outstanding.
(b) After termination of the Trust, the liquidation of its
business and the distribution to the shareholders as herein provided, a majority
of the Trustees shall execute and file with the Trust's records a document
certifying that the Trust has been duly terminated, and the Trustees shall be
discharged from all liabilities and duties hereunder, and the rights and
interests of all shareholders shall cease.
ARTICLE XIII
MISCELLANEOUS
Section 1. Governing Law. The Declaration of Trust is executed by the
undersigned Trustees and delivered in the State of Maryland with reference to
the laws thereof, and the rights of all parties and the validity, construction
and effect of every provision hereof shall be subject to and construed according
to the laws of the State of Maryland without regard to conflicts of laws
provisions thereof.
Section 2. Reliance by Third Parties. Any certificate shall be final
and conclusive as to any person dealing with the Trust if executed by the
Secretary or an Assistant Secretary of the Trust or a Trustee, and if certifying
to: (a) the number or identity of Trustees, officers of the Trust or
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shareholders; (b) the due authorization of the execution of any document; (c)
the action or vote taken, and the existence of a quorum, at a meeting of the
Board of Trustees or shareholders; (d) a copy of the Declaration of Trust or of
the Bylaws as a true and complete copy as then in force; (e) an amendment to the
Declaration of Trust; (f) the termination of the Trust; or (g) the existence of
any fact relating to the affairs of the Trust. No purchaser, lender, transfer
agent or other person shall be bound to make any inquiry concerning the validity
of any transaction purporting to be made by the Trust on its behalf or by any
officer, employee or agent of the Trust.
Section 3. Severability.
(A) The provisions of the Declaration of Trust are severable,
and if the Board of Trustees shall determine, with the advice of counsel, that
any one or more of such provisions (the "Conflicting Provisions") are in
conflict with the Code, Title 8 or other applicable federal or state laws, the
Conflicting Provisions, to the extent of the conflict, shall be deemed never to
have constituted a part of the Declaration of Trust, even without any amendment
of the Declaration of Trust pursuant to Article X and without affecting or
impairing any of the remaining provisions of the Declaration of Trust or
rendering invalid or improper any action taken or omitted prior to such
determination. No Trustee shall be liable for making or failing to make such a
determination. In the event of any such determination by the Board of Trustees,
the Board shall amend the Declaration of Trust in the manner provided in Article
X, Section 2.
(B) If any provision of the Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such holding shall apply only to
the extent of any such invalidity or unenforceability and shall not in any
manner affect, impair or render invalid or unenforceable
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such provision in any other jurisdiction or any other provision of the
Declaration of Trust in any jurisdiction.
Section 4. Construction. In the Declaration of Trust, unless the
context otherwise requires, words used in the singular or in the plural include
both the plural and singular and words denoting any gender include all genders.
The title and headings of different parts are inserted for convenience and shall
not affect the meaning, construction or effect of the Declaration of Trust. In
defining or interpreting the powers and duties of the Trust and its Trustees and
officers, reference may be made by the Trustees or officers, to the extent
appropriate and not inconsistent with the Code or Title 8, to Titles 1 through 3
of the Corporations and Associations Article of the Annotated Code of Maryland.
In furtherance and not in limitation of the foregoing, in accordance with the
provisions of Title 3, Subtitles 6 and 7, of the Corporations and Associations
Article of the Annotated Code of Maryland, the Trust shall be included within
the definition of "corporation" for purposes of such provisions.
Section 5. Recordation. The Declaration of Trust and any amendment
hereto shall be filed for record with the SDAT and may also be filed or recorded
in such other places as the Trustees deem appropriate, but failure to file for
record the Declaration of Trust or any amendment hereto in any office other than
in the State of Maryland shall not affect or impair the validity or
effectiveness of the Declaration of Trust or any part thereof. A restated
Declaration of Trust shall, upon filing, be conclusive evidence of all
amendments contained therein and may thereafter be referred to in lieu of the
original Declaration of Trust and the various amendments thereto.
SECOND: These Articles of Amendment and Restatement have been duly
adopted by
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the Board of Trustees and approved by the Shareholders of the Trust as required
by law.
THIRD: The total number of shares of beneficial interest which the
Trust had authority to issue immediately prior to the filing of these Articles
of Amendment and Restatement was 1,000, all of which were common shares of
beneficial interest, par value $.01 per share. The aggregate par value of all
shares of beneficial interest having par value was $10.00.
The total number of shares of beneficial interest which the
Trust has authority to issue pursuant to these Articles of Amendment and
Restatement is 110,000,000, consisting of 100,000,000 common shares of
beneficial interest, par value $.01 per share and 10,000,000 of
preferred shares of beneficial interest, par value $.01 per share. The
aggregate par value of all authorized shares of beneficial interest
having par value is $110,000,000.
FOURTH: The undersigned Chairman of the Board of Trustees and Chief
Executive Officer acknowledges these Articles of Amendment and Restatement to be
the trust act of the Trust and, as to all matters or facts required to be
verified under oath, the undersigned Chairman of the Board of Trustees and Chief
Executive Officer acknowledges that, to the best of his knowledge, information
and belief, these matters are true in all material respects and that this
statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Trust has caused these Articles of Amendment
and Restatement to be signed in its name and on its behalf by its Chairman of
the Board of Trustees and Chief Executive Officer, and attest to by its
Secretary, on this ____ day of _________, 1998.
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HERSHA HOSPITALITY TRUST
ATTEST:
______________________________ ____________________________________
Secretary Hasu P. Shah
Chairman of the Board of Trustees
and Chief Executive Officer
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