EXHIBIT 1.1
ASHFORD HOSPITALITY TRUST, INC
DOCS(R) FINANCING PROGRAM
2,400,000 SHARES OF COMMON STOCK,
$0.01 PAR VALUE
SALES AGREEMENT
AUGUST 30, 2004
DOCS(R) is a registered service mark of Brinson Patrick Securities Corporation
THIS SALES AGREEMENT (the "Agreement") dated as of August __, 2004
between Brinson Patrick Securities Corporation, having its principal office at
330 Madison Avenue, 9th Floor, New York, New York 10017 (the "Sales Manager")
and Ashford Hospitality Trust, Inc, a corporation organized and existing under
the laws of the State of Maryland (the "Company").
WHEREAS, the Company desires to issue and sell through the Sales
Manager up to 2,400,000 shares (the "Maximum Amount") of its common stock, $0.01
par value (the "Stock"), on the terms set forth in Article II below. The Maximum
Amount shall be appropriately adjusted for stock splits and reverse splits.
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company and the Sales Manager agree as follows:
ARTICLE I.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
1.1 For purposes of this Agreement, unless the context requires to the
contrary, the term "Company" shall also include all significant subsidiaries (as
defined by Section 1-02 of Regulation S-X) of the Company. The Company
represents and warrants to, and agrees with, the Sales Manager that:
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
thereunder ("Rules and Regulations"). The Company agrees to file a registration
statement on Form S-3 (the "Registration Statement") to register, among other
securities, up to 2,400,000 shares of common stock of the Company which may be
sold by the Sales Manager and to use its best efforts to have such Registration
Statement declared effective. The Registration Statement including a form of
prospectus, have been prepared by the Company in conformity with the
requirements of the Act and the Rules and Regulations. Copies of the
Registration Statement and Prospectus, and all documents incorporated by
reference in each of the foregoing that were filed with the Commission have been
delivered to the Sales Manager. The Registration Statement, as amended from time
to time, is referred to herein as the "Registration Statement," and the final
form of prospectus included in the Registration Statement, as amended or
supplemented from time to time, is referred to herein as the "Prospectus." Any
reference herein to the Registration Statement, the Prospectus, or any amendment
or supplement thereto shall be deemed to refer to and include the documents
incorporated (or deemed to be incorporated) by reference therein, and any
reference herein to the terms "amend," "amendment" or "supplement" with respect
to the Registration Statement or Prospectus shall be deemed to refer to and
include the filing after the execution hereof of any document with the
Commission deemed to be incorporated by reference therein.
(b) Each part of the Registration Statement, when such part became or
becomes effective, and the Prospectus and any amendment or supplement thereto,
on the date of filing thereof with the Commission and at each Settlement Date
(as hereinafter defined), conformed or will conform in all material respects
with the requirements of the Act and the Rules and Regulations; each part of the
Registration Statement, when such part became or becomes effective, did not or
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Prospectus and any amendment or
supplement thereto, on the date of filing thereof with the Commission and at
each Settlement Date, did not or will not include an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; except that the foregoing shall not apply to statements in or
omissions from any such document in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of the Sales
Manager, specifically for use in the Registration Statement, the Prospectus or
any amendment or supplement thereto.
(c) The documents incorporated by reference in the Registration
Statement or the Prospectus, or any amendment or supplement thereto, when they
became or become effective under the Act or were or are filed with the
Commission under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as the case may be, conformed or will conform in all material respects
with the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder.
(d) The financial statements of the Company, together with the related
schedules and notes thereto, set forth or included or incorporated by reference
in the Registration Statement and Prospectus, fairly present the financial
condition of the Company as of the dates indicated and the results of
operations, changes in financial position, stockholders' equity, and cash flows
for the periods therein specified, in conformity with generally accepted
accounting principles consistently applied throughout the periods involved
(except as otherwise stated therein). The summary and selected financial and
statistical data included or incorporated by reference in the Registration
Statement and the Prospectus present fairly the information shown therein and,
to the extent based upon or derived from the financial statements, have been
compiled on a basis consistent with the financial statements presented therein.
(e) The accountants who certified the financial statements and the
supporting schedules included in the Registration Statement are and, during the
periods covered by their reports, were qualified and independent public
accountants as required by Rule 2-01 of Regulation S-X.
(f) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Maryland. The
Company is duly qualified and in good standing as a foreign corporation in each
jurisdiction in which the character or location of its assets or properties
(owned, leased or licensed) or the nature of its business makes such
qualification necessary (including every jurisdiction in which it owns or leases
real property), except for such jurisdictions where the failure to so qualify
would not have a Material Adverse Effect on the Company. For purposes of this
Agreement, "Material Adverse Effect" means any adverse effect on the business,
operations, properties or financial condition of the Company that is (either
alone or together with all other adverse effects) material to the Company, and
any material adverse effect on the transactions contemplated under this
Agreement or any other agreement or document contemplated hereby or thereby.
Each of the Company's significant subsidiaries is validly existing as a
corporation, limited liability company or partnership, as applicable, in its
respective jurisdiction of formation. Schedule 1.1(f) hereto identifies each of
the Company's subsidiaries that is a significant subsidiary (as defined in
Section 1-02 of Regulation S-X) of the Company. All of the issued and
outstanding capital stock, limited liability company interests or partnership
interests, as applicable, of each significant subsidiary has been duly
authorized and validly issued, is fully paid and nonassessable and (except as
otherwise disclosed or incorporated by reference in the Registration Statement
and the Prospectus) is owned by the Company, directly or indirectly, free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity. Except as disclosed or
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incorporated by reference in the Registration Statement and the Prospectus, the
Company does not own, lease or license any asset or property or conduct any
business outside the United States of America. The Company has all requisite
corporate power and authority and all necessary authorizations, approvals,
consents, orders, licenses, certificates and permits of and from all
governmental orders or regulatory bodies or any other person or entity, to own,
lease, license and operate its assets and properties and conduct its business as
now being conducted and as described or incorporated by reference in the
Registration Statement and the Prospectus; except for such authorizations,
approvals, consents, orders, licenses, certificates and permits the absence of
which would not have a Material Adverse Effect; and no such authorization,
approval, consent, order, license, certificate or permit contains a materially
burdensome restriction other than as disclosed or incorporated by reference in
the Registration Statement and the Prospectus.
(g) The Company has good and marketable title to, or leasehold
interests in, all properties and assets (including, without limitation,
mortgaged assets) as described in the Registration Statement and the Prospectus
owned by the Company, free and clear of all liens, charges, encumbrances or
restrictions, except such as are described in the Registration Statement and the
Prospectus and except such as would not have a Material Adverse Effect on the
Company. The Company has such consents, easements, rights-of-way or licenses
(collectively, "rights-of-way") from any person as are necessary to conduct its
business in the manner described in the Registration Statement, except for those
which if not obtained would not, singly or in the aggregate, have a Material
Adverse Effect on the Company, and none of such rights-of-way contains any
restriction that is materially burdensome to the Company.
(h) The debt financing employed by the Company to acquire its portfolio
of mortgage assets is not convertible into shares of common stock of the Company
or other equity interests in the Company.
(i) There is no litigation or governmental or other proceeding or
investigation before any court or before or by any public body or board pending
or, to the knowledge of the Company, threatened against, or involving the
assets, properties or businesses of the Company which would materially adversely
affect the value or the operation of any such assets or otherwise have a
Material Adverse Effect on the Company except as described or incorporated by
reference in the Registration Statement.
(j) The Company maintains insurance (issued by insurers of recognized
financial responsibility) of the types and in the amounts generally deemed
adequate for its businesses and, to the knowledge of the Company, consistent
with insurance coverage maintained by similar companies in similar businesses,
including, but not limited to, insurance covering real and personal property
owned or leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
(k) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as described therein,
(i) there has not been any material adverse change in the assets or properties,
business, results of operations, or condition (financial or otherwise) of the
Company, whether or not arising from transactions in the ordinary course of
business; (ii) the Company has not sustained any material loss or interference
with its assets, businesses or properties (whether owned or leased) from fire,
explosion, earthquake, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree; (iii) since the date of the latest balance
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sheet, included or incorporated by reference in the Registration Statement and
the Prospectus, except as reflected therein, the Company has not undertaken any
liability or obligation, direct or contingent, except such liabilities or
obligations undertaken in the ordinary course of business; and (iv) there has
not been any transaction that is material to the Company, except transactions in
the ordinary course of business or as otherwise disclosed in the Registration
Statement and the Prospectus.
(l) There is no document or contract of a character required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement that is not described or filed as
required. Each document, instrument, contract and agreement of the Company
described in the Registration Statement or the Prospectus or incorporated by
reference therein or listed as exhibits to the Registration Statement is in full
force and effect and is valid and enforceable by and against the Company in
accordance with their terms, assuming the due authorization, execution and
delivery thereof by each of the other parties thereto except as otherwise
disclosed in the Registration Statement or Prospectus. The Company is not, nor
to the knowledge of the Company is any other party, in default in the observance
or performance of any term or obligation to be performed by it under any such
agreement, and no event has occurred which with notice or lapse of time or both
would constitute such a default, which default or event would have a Material
Adverse Effect. No default exists, and no event has occurred which with notice
or lapse of time or both would constitute a default, in the due performance and
observance of any term, covenant or condition, by the Company of any other
agreement or instrument to which the Company is a party or by which it or its
properties or business may be bound or affected, which default or event would
have a Material Adverse Effect.
(m) The Company is not in violation of any term or provision of its
charter, by-laws or operating agreement, as applicable. The Company is not in
violation of any franchise, license, permit, judgment, decree, order, statute,
rule or regulation, where the consequences of such violation would have a
Material Adverse Effect.
(n) Neither the execution, delivery and performance of this Agreement
by the Company nor the consummation of any of the transactions contemplated
hereby (including, without limitation, the issuance and sale by the Company of
the Stock) will give rise to a right to terminate or accelerate the due date of
any payment due under, or conflict with or result in the breach of any term or
provision of, or constitute a default (or an event which with notice or lapse of
time or both would constitute a default) under, or require any consent or waiver
under, or result in the execution or imposition of any lien, charge,
encumbrance, claim, security interest, restriction or defect upon any properties
or assets of the Company pursuant to the terms of, any indenture, mortgage, deed
of trust or other agreement or instrument to which the Company is a party or by
which the Company is bound, or any of its properties or businesses are bound, or
any franchise, license, permit, judgment, decree, order, statute, rule or
regulation applicable to the Company or violate any provision of the charter or
by-laws of the Company, except for such consents or waivers which have already
been obtained and are in full force and effect.
(o) All of the outstanding shares of common stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable and
none of such shares were issued in violation of any preemptive or other similar
right. The Stock, when issued and sold pursuant to this Agreement, will be duly
authorized and validly issued, fully paid and nonassessable and will not be
issued in violation of any preemptive or other similar right. Except as
disclosed in the Registration Statement and the Prospectus, there is no
outstanding option, warrant or other right calling for the issuance of, and
there is no commitment, plan or arrangement to issue, any capital
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stock of the Company or any security convertible into or exercisable or
exchangeable for such capital stock, except for standard dividend reinvestment
plans. The Stock conforms in all material respects to all statements relating
thereto contained in the Registration Statement and the Prospectus.
(p) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as (x) described or
referred to therein, or (y) are not material (as to clauses (i) and (ii) only),
are consistent with past practice (as to clauses (i) and (ii) only), and are
publicly disclosed, the Company has not (i) issued any securities or incurred
any liability or obligation, direct or contingent, except such liabilities or
obligations incurred in the ordinary course of business including, without
limitation, debt financing to acquire and develop properties, (ii) entered into
any transaction not in the ordinary course of business or (iii) declared or paid
any dividend or made any distribution on any shares of its capital stock or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
otherwise acquire any shares of its capital stock.
(q) Except as disclosed in the Registration Statement and Prospectus,
no holder of any security of the Company has the right, which has not been
waived, to have any security owned by such holder included in the Registration
Statement.
(r) All necessary corporate action has been duly and validly taken by
the Company to authorize the execution, delivery and performance of this
Agreement and the issuance and sale of the Stock by the Company. This Agreement
has been duly and validly authorized, executed and delivered by the Company and
constitutes and will constitute the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. Except
for any "blue sky" filings or Stock Exchange listing applications to be filed
pursuant hereto, each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions contemplated
hereby and the issuance and sale of the Stock by the Company has been obtained
or made and is in full force and effect. The Company will use its best
reasonable efforts to cause the Stock to be listed for trading on the Trading
Market. For purposes of this Agreement, the "Trading Market" is (i) the New York
Stock Exchange, Inc., and (ii) each other securities exchange or market on which
the common stock of the Company trades or is admitted for trading.
(s) The Company has not incurred any liability for a fee, commission or
other compensation on account of the employment of a broker or finder in
connection with the transactions contemplated by this Agreement other than as
contemplated hereby or as described in the Registration Statement.
(t) The Company is conducting its business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, except where the failure to be so in compliance would not
have a Material Adverse Effect.
(u) No transaction has occurred between or among the Company and any of
its officers or directors or any affiliate or affiliates of any such officer or
director that is required to be described in and is not described in the
Registration Statement and the Prospectus.
(v) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in, or which has constituted or
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which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the common stock of the Company to facilitate the
sale or resale of any of the Stock.
(w) The Company has filed all federal, state, local and foreign tax
returns that are required to be filed through the date hereof (and will file all
such tax returns when and as required to be filed after the date hereof), or has
received extensions thereof, and has paid all taxes shown on such returns to be
due on or prior to the date hereof (and will pay all taxes shown on such returns
to be due after the date hereof) and all assessments received by it to the
extent that the same are material and have become due except where the failure
to file such a return or pay such amount would not have a Material Adverse
Effect.
(x) The Company has met the qualification requirements for a "real
estate investment trust" during its taxable years ending on or after December
31, 1999 and its proposed method of operations will enable it to continue to
meet the requirements for qualification and taxation as a "real estate
investment trust" under the Internal Revenue Code of 1986, as amended (the
"Code"), assuming no change in the applicable underlying law. The Company does
not know of any event that would cause or is likely to cause the Company to fail
to qualify as a "real estate investment trust" at any time.
(y) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(z) The Company's systems of internal accounting controls taken as a
whole are sufficient to meet the broad objectives of internal accounting control
insofar as those objectives pertain to the prevention or detection of errors or
irregularities in amounts that would be material in relation to the Company's
financial statements; and, to the best of the Company's knowledge, neither the
Company nor any employee or agent thereof has made any payment of funds of the
Company or received or retained any funds, and no funds of the Company have been
set aside to be used for any payment, in each case in violation of any law, rule
or regulation.
(aa) The Company is not involved in any labor dispute and, to the
knowledge of the Company, no such dispute has been threatened, except for such
disputes as would not have a Material Adverse Effect on the Company, or subject
the Company or its shareholders to any material liability or disability.
(bb) Except as disclosed in the Registration Statement or the
Prospectus, (i) there has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, hazardous
wastes or hazardous substances by the Company or any of its subsidiaries (or to
the knowledge of the Company, any of their predecessors in interest) at, upon or
from any of the property now or previously owned or leased by the Company or its
subsidiaries in violation of any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit or which would require remedial action under
any applicable law, ordinance, rule, regulation, order, judgment, decree or
permit, except for any violation or remedial action which would not have a
Material Adverse Effect; (ii) there has been no material spill, discharge, leak,
emission, injection, escape, dumping or release of any kind onto such property
or into the environment surrounding such property of any toxic wastes, solid
wastes, hazardous wastes or hazardous substances due to or caused by the Company
or any of its subsidiaries, except for any such spill, discharge, leak emission,
injection, escape, dumping or release which would not have a Material Adverse
Effect; and (iii) the terms "hazardous wastes,"
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"toxic wastes" and "hazardous substances" shall have the meanings specified in
any applicable local, state, federal and foreign laws or regulations with
respect to environmental protection.
ARTICLE II.
SALE AND DELIVERY OF SECURITIES
2.1 Sale and Delivery of Securities.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company agrees to issue and sell through the Sales Manager, as agent, and the
Sales Manager agrees to sell, as agent for the Company, on a best efforts basis,
up to the Maximum Amount of the Stock during the term of this Agreement on the
terms set forth herein. The Stock will be sold from time to time as described in
the Registration Statement and Prospectus, in amounts, and subject to price
limitations, as directed by the Company and as agreed to by the Sales Manager.
(b) The Company or the Sales Manager may, upon notice to the other
party hereto by telephone (confirmed promptly by telecopy), at any time and from
time to time suspend the offering of Stock; provided, however, that such
suspension shall not affect or impair the parties' respective obligations with
respect to the Stock sold hereunder prior to the giving of such notice.
(c) The compensation to the Sales Manager for sales of Stock shall be
at the following commission rates for the shares of Stock sold under this
Agreement: 3.0% of the gross sales price per share ("sales proceeds") for the
first $10 million of aggregate sales proceeds raised in each year (commencing
with the date hereof), including any sales proceeds raised through the
Recoupment Time specified in Section 3.1(h); 2.5% of sales proceeds for the
next $10 million of aggregate sales proceeds raised in such year and 2.0% of
sales proceeds for any additional aggregate sales proceeds raised in such year.
For purposes of this section 2.1(c), the first year shall end on August 31,
2005, and each subsequent year shall end on the next succeeding August 31st.
The remaining proceeds, after further deduction for any transaction fees
imposed by any governmental or self-regulatory organization in respect to such
sale shall constitute the net proceeds to the Company for such Stock (the "Net
Proceeds"). For purposes of the first sentence of this section 2.1(c), sales
proceeds include sales proceeds from sales of Stock by the Sales Manager for
the account of the Company, whether under this Agreement, or otherwise.
(d) The Company shall open and maintain a trading account (the "Trading
Account") at a clearing agent designated by the Sales Manager to facilitate the
transactions contemplated by this Agreement. The Company shall, with respect to
each sale of Stock, effect delivery of the applicable number of shares of Stock
to the Trading Account, on or before the third business day (or such other day
as is industry practice for regular-way trading) following each sale of the
Stock (each, a "Settlement Date"). The Net Proceeds from each sale of the Stock
shall be available in the Trading Account immediately following the settlement
of such sale on the related Settlement Date. The Sales Manager's compensation
shall be withheld from the sales proceeds on each Settlement Date and shall be
paid to the Sales Manager.
(e) At each Settlement Date, the Company shall be deemed to have
affirmed each representation, warranty, covenant and other agreement contained
in this Agreement. Any obligation of the Sales Manager under this Agreement
shall be subject to the continuing accuracy of the
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representations and warranties of the Company herein, to the performance by the
Company of its obligations hereunder and to the continuing satisfaction of the
additional conditions specified in Article IV below.
(f) If the Company shall default on its obligation to deliver Stock on
any Settlement Date, the Company shall (i) hold the Sales Manager harmless
against any loss, claim or damage arising from or as a result of such default by
the Company and (ii) pay the Sales Manager any commission to which it would
otherwise be entitled absent such default.
ARTICLE III.
COVENANTS OF THE COMPANY
3.1 The Company covenants and agrees with the Sales Manager that:
(a) As promptly as practicable after the date of this Agreement, the
Company will file the Registration Statement naming the Sales Manager as an
underwriter, to permit sales of the Stock under the Act. The Company will use
its best reasonable efforts to cause the Registration Statement to become
effective as promptly as possible thereafter.
(b) During the period in which a prospectus relating to the Stock is
required to be delivered under the Act, the Company will notify the Sales
Manager promptly of the time when any subsequent amendment to the Registration
Statement has become effective or any subsequent supplement to the Prospectus
has been filed and of any request by the Commission for any amendment or
supplement to the Registration Statement or the Prospectus or for additional
information; the Company will prepare and file with the Commission, promptly
upon the Sales Manager's reasonable request, any amendments or supplements to
the Registration Statement or Prospectus that, in the Sales Manager's reasonable
opinion, may be necessary or advisable in connection with the sale of the Stock
pursuant to this Agreement; the Company will not file any amendment or
supplement to the Registration Statement or Prospectus (other than a supplement
to the Prospectus that (i) relates solely to the issuance of securities other
than the Stock and (ii) does not materially change the information about the
Company or its business, operations, properties or financial condition disclosed
in the Registration Statement or Prospectus previously thereto (an "Excluded
Supplement")) unless a copy thereof has been submitted to the Sales Manager a
reasonable period of time before the filing and the Sales Manager has not
reasonably objected thereto; and it will notify the Sales Manager at the time of
filing thereof a copy of any document that upon filing is deemed to be
incorporated by reference in the Registration Statement or Prospectus, which
will then be available on the Company's website at www.ahtreit.com (and will
furnish to the Sales Manager any such document that is not available on the
Company's website). The Company will cause each amendment or supplement to the
Prospectus to be filed with the Commission as required pursuant to the
applicable paragraph of Rule 424(b) of the Rules and Regulations or, in the case
of any document to be incorporated therein by reference, to be filed with the
Commission as required pursuant to the Exchange Act, within the time period
prescribed.
(c) The Company will advise the Sales Manager, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement, of
the suspension of the qualification of the Stock for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceeding for any such
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purpose; and it will promptly use its best reasonable efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such a stop order
should be issued.
(d) Within the time during which a prospectus relating to the Stock is
required to be delivered under the Act, the Company will comply with all
requirements imposed upon it by the Act and by the Rules and Regulations, as
from time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Stock as contemplated by the provisions hereof and
the Prospectus. If during such period any event occurs as a result of which the
Prospectus, as then amended or supplemented, would include an untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances then existing, not
misleading, or if during such period it is necessary to amend or supplement the
Registration Statement or Prospectus to comply with the Act, the Company will
promptly notify the Sales Manager to suspend the offering of Stock during such
period and the Company will amend or supplement the Registration Statement or
Prospectus (at the expense of the Company) so as to correct such statement or
omission or effect such compliance and will use its best reasonable efforts to
have any amendment or supplement to the Registration Statement or Prospectus
declared effective as soon as possible, unless the Company has reasonable
business reasons to defer public disclosure of the relevant information.
(e) The Company will use its best reasonable efforts to qualify the
Stock for sale under the securities laws of such jurisdictions as the Sales
Manager designates and to continue such qualifications in effect so long as
required for the sale of the Stock, except that the Company shall not be
required in connection therewith to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction.
(f) The Company will furnish to the Sales Manager and its legal counsel
(at the expense of the Company) copies of the Registration Statement and the
Prospectus during the period in which a prospectus relating to the Stock is
required to be delivered under the Act, in each case as soon as available and in
such quantities as the Sales Manager may from time to time reasonably request
and, in the case when the Trading Market is a national securities exchange, the
Company will also furnish copies of the Prospectus to such exchange in
accordance with Rule 153 of the Rules and Regulations.
(g) The Company will make generally available to its security holders
as soon as practicable, but in any event not later than 15 months after the end
of the Company's current fiscal quarter, an earnings statement (which need not
be audited) covering a 12-month period that satisfies the provisions of Section
11(a) of the Act and Rule 158 of the Rules and Regulations.
(h) The Company, whether or not the transactions contemplated hereunder
are consummated or this Agreement is terminated, will pay all of its expenses
incident to the performance of its obligations hereunder (including, but not
limited to, any transaction fees imposed by any governmental or self-regulatory
organization with respect to transactions contemplated by this Agreement and any
blue sky fees) and will pay the expenses of printing all documents relating to
the offering. The Company will reimburse the Sales Manager for its reasonable
out-of-pocket costs and expenses incurred in connection with entering into this
Agreement, including, without limitation, reasonable travel, reproduction,
printing and similar expenses and reasonable fees and disbursements of its legal
counsel. In addition, without limiting the foregoing, the Company will pay, or
reimburse the Sales Manager for, any filing fees incurred by the Sales Manager
in connection with filings required to be made by the Sales Manager under NASD
Rule 2710, the Corporate Financing Rule. It is agreed that the 3.0% commission
rate set forth in Section 2.1(c) will be reduced to 2.0%, until such time
("Recoupment Time") as the amount of the commission savings to the Company as a
result of the 1.0% reduction in commission rate, equals the amount that the
Company paid or reimbursed pursuant to the preceding sentence. After the
Recoupment Time, the 3.0% commission rate shall be applicable to sales as set
forth in Section 2.1(c). Other than as set forth herein, there shall be no
reduction of the commission rates as set forth in Section 2.1(c).
(i) The Company shall use its best reasonable efforts to list, subject
to notice of issuance, the Stock on each applicable Trading Market.
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(j) The Company will apply the Net Proceeds from the sale of the Stock
as set forth in the Prospectus.
(k) The Company will not, directly or indirectly, offer or sell any
shares of common stock (other than the Stock) or securities convertible into or
exchangeable for, or any rights to purchase or acquire, common stock, during the
period from the date of this Agreement through the final Settlement Date for the
sale of Stock hereunder without (i) giving the Sales Manager at least one
business day prior written notice specifying the nature of the proposed sale and
the date of such proposed sale and (ii) suspending activity under this program
for such period of time as may reasonably be determined by agreement of the
Company and the Sales Manager; provided, however, that no such notice and
suspension shall be required in connection with the Company's issuance or sale
of (i) shares of common stock pursuant to any employee or director stock option
or benefits plan, stock ownership plan, dividend reinvestment plan, as such
plans may be amended from time to time, and (ii) common stock issuable upon
conversion of securities or the exercise of warrants, options or other rights in
effect or outstanding on the date hereof. Notwithstanding the foregoing, this
paragraph (k) shall not apply during periods that the Company is neither selling
Stock through the Sales Manager nor has requested the Sales Manager to sell
Stock.
(l) The Company will, at any time during the term of this Agreement, as
supplemented from time to time, advise the Sales Manager immediately after it
shall have received notice or obtain knowledge thereof, of any information or
fact that would alter or affect any opinion, certificate, letter and other
document provided to the Sales Manager pursuant to Article IV below.
(m) Each time that the Registration Statement or the Prospectus shall
be amended or supplemented (other than an Excluded Supplement), the Company
shall (unless the Company is not then selling Stock through the Sales Manager
and has not requested the Sales Manager to sell Stock) furnish or cause to be
furnished to the Sales Manager forthwith a certificate dated the date of filing
with the Commission of such amendment, supplement or other document, the date of
effectiveness of amendment, as the case may be, in form satisfactory to the
Sales Manager to the effect that the statements contained in the certificates
referred to in Section 4.1(f) below that were last furnished to the Sales
Manager are true and correct at the time of such amendment, supplement, filing,
as the case may be, as though made at and as of such time (except that such
statements shall be deemed to relate to the Registration Statement and the
Prospectus as amended and supplemented to such time) or, in lieu of such
certificates, certificates of the same tenor as the certificates referred to in
said Section 4.1(f) below, modified as necessary to relate to the Registration
Statement and the Prospectus as amended and supplemented to the time of delivery
of such certificate.
(n) Each time that (i) the Registration Statement or the Prospectus is
amended or supplemented (other than a pricing supplement filed pursuant to Rule
424(b)(2) of the Act with respect to the Registration Statement) or (ii) there
is filed with the Commission any document incorporated by reference into the
Prospectus (other than any Form 10-Q or Form 8-K, unless the Sales Manager shall
otherwise reasonably request), the Company shall (unless the Company is not then
selling Stock through the Sales Manager and has not requested the Sales Manager
to sell Stock) furnish or cause to be furnished forthwith to the Sales Manager
and to its legal counsel, a written opinion of Andrews Kurth LLP, counsel to the
Company ("Company Counsel"), or other counsel reasonably satisfactory to the
Sales Manager, dated the date of filing with the Commission of such amendment,
supplement or other document or the date of effectiveness of such amendment, as
the case may be, in form and substance satisfactory to the Sales Manager, of the
same tenor as the opinion referred to in Section 4.1(d) below, but modified as
necessary to relate to
10
the Registration Statement and the Prospectus as amended and supplemented to the
time of delivery of such opinion.
(o) Each time that the Registration Statement or the Prospectus shall
be amended or supplemented (other than an Excluded Supplement) to include
additional financial information or there is filed with the Commission any
document incorporated by reference into the Prospectus which contains additional
financial information (other than any Form 10-Q or Form 8-K, unless the Sales
Manager shall otherwise reasonably request), the Company shall (unless the
Company is not then selling Stock through the Sales Manager and has not
requested the Sales Manager to sell Stock) cause Ernst & Young LLP, or other
independent accountants then retained by the Company, forthwith to furnish to
the Sales Manager a letter, dated the date of effectiveness of such amendment,
or the date of filing of such supplement or other document with the Commission,
as the case may be, in form satisfactory to the Sales Manager, of the same tenor
as the letter referred to in Section 4.1(e) below but modified to relate to the
Registration Statement and the Prospectus, as amended and supplemented to the
date of such letter.
ARTICLE IV.
CONDITIONS OF THE SALES MANAGER'S OBLIGATIONS
4.1 The obligations of the Sales Manager to sell the Stock as provided
herein shall be subject to the accuracy, as of the date hereof, and as of each
Settlement Date contemplated under this Agreement, of the representations and
warranties of the Company herein, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(a) The Registration Statement contemplated by Section 3.1(a) above
shall have been declared effective. No stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceeding for that
purpose shall have been instituted or, to the knowledge of the Company or the
Sales Manager, threatened by the Commission, and any request of the Commission
for additional information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the Sales Manager's
reasonable satisfaction. The Stock shall have been listed for trading on the
Trading Market.
(b) The Sales Manager shall not have advised the Company that the
disclosures in the Registration Statement or the Prospectus are not reasonably
acceptable to the Sales Manager.
(c) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, there shall not have been any material adverse change in the
capital stock of the Company, or any material adverse change, or any development
that may reasonably be expected to cause a material adverse change, in the
condition (financial or other), business, net worth or results of operations of
the Company, or any adverse change in the rating assigned to any securities of
the Company.
(d) (1) The Sales Manager shall have received at the date of the first
sale of Stock hereunder (the "Commencement Date") and at every other date
specified in Section 3.1(n) above, opinions of Company Counsel, dated as of the
Commencement Date and dated as of such other date, in the form of Schedule A
hereto.
11
(2) The Sales Manager shall have received a letter from Company
Counsel authorizing the Sales Manager to rely on the opinion on tax matters
delivered by Company Counsel as Exhibit 8.1 to the Registration Statement.
(e) At the Commencement Date and at such other dates specified in
Section 3.1(o) above, the Sales Manager shall have received a "comfort letter"
from Ernst & Young LLP, independent public accountants for the Company, or other
independent accountants then retained by the Company, dated the date of delivery
thereof, in form and substance satisfactory to the Sales Manager.
(f) The Sales Manager shall have received from the Company a
certificate, or certificates, signed by the Chief Financial Officer and
President or Chief Executive Officer or any Vice President of the Company, dated
as of the Commencement Date and (unless the Company is not then selling Stock
through the Sales Manager and has not requested the Sales Manager to sell Stock)
dated as of the first business day of each calendar month thereafter (each, a
"Certificate Date"), to the effect that, to the best of their knowledge based
upon reasonable investigation:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made at and as of the
Commencement Date or the Certificate Date (as the case may be), and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Commencement Date and each such Certificate Date (as the case may be),
including all conditions in this Article IV;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceeding for that
purpose has been instituted or, to the knowledge of such officer after
due inquiry, is threatened, by the Commission;
(iii) Since the date of this Agreement there has occurred no
event required to be set forth in an amendment or supplement to the
Registration Statement or Prospectus that has not been so set forth and
there has been no document required to be filed under the Exchange Act
and the rules and regulations of the Commission thereunder that upon
such filing would be deemed to be incorporated by reference in the
Prospectus that has not been so filed; and
(iv) Since the date of this Agreement, there has not been any
material adverse change in the assets or properties, business, results
of operations, or condition (financial or otherwise) of the Company,
which has not been described in an amendment or supplement to the
Registration Statement or Prospectus (directly or by incorporation).
(g) At the Commencement Date and on each Settlement Date, the Company
shall have furnished to the Sales Manager such appropriate further information,
certificates and documents as the Sales Manager may reasonably request.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to the Sales Manager. The Company will furnish the Sales Manager with
such conformed copies of such opinions, certificates, letters and other
documents, as the Sales Manager shall reasonably request.
12
ARTICLE V.
INDEMNIFICATION AND CONTRIBUTION
5.1 (a) The Company agrees to indemnify and hold harmless the Sales
Manager and each person, if any, who controls the Sales Manager within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
representations in this Agreement or contained in the Registration
Statement (or any amendment thereto), or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out
of any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including, subject to Section 5.1(c) below, the reasonable fees and
disbursements of legal counsel chosen by the Sales Manager), reasonably
incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Sales Manager expressly for use in the Registration Statement (or any amendment
thereto) or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).
(b) The Sales Manager agrees to indemnify and hold harmless the Company
and its directors and each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in Section 5.1(a) above, as incurred, but only with respect to untrue statements
or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendments thereto) or any preliminary prospectus
or the Prospectus (or any amendment or supplement thereto) in reliance upon and
in conformity with written information furnished to the Company by the Sales
Manager expressly for use in the Registration Statement (or any amendment
13
thereto) or such preliminary prospectus or the Prospectus (or any amendment or
supplement thereto). The total liability of the Sales Manager under this Section
5.1(b) shall not exceed the total actual sales price of Stock sold by the Sales
Manager that is the subject of the dispute.
(c) Any indemnified party that proposes to assert the right to be
indemnified under this Article V will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Article V, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party
will not relieve the indemnifying party from any liability that it might have to
any indemnified party to the extent it is not materially prejudiced as a result
thereof. If any such action is brought against any indemnified party and it
notifies the indemnifying party of its commencement, the indemnifying party will
be entitled to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving notice of the
commencement of the action from the indemnified party, jointly with any other
indemnifying party similarly notified, to assume the defense of the action, with
legal counsel reasonably satisfactory to the indemnified party, and after notice
from the indemnifying party to the indemnified party of its election to assume
the defense, the indemnifying party will not be liable to the indemnified party
for any legal or other expenses except as provided below and except for the
reasonable costs of investigation subsequently incurred by the indemnified party
in connection with the defense. The indemnified party will have the right to
employ its own legal counsel in any such action, but the fees, expenses and
other charges of such legal counsel will be at the expense of such indemnified
party unless (1) the employment of legal counsel by the indemnified party has
been authorized in writing by the indemnifying party, (2) the indemnified party
has reasonably concluded (based on the written advice of legal counsel) that
there may be legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the indemnifying party,
(3) a conflict or potential conflict exists (based on the written advice of
legal counsel to the indemnified party) between the indemnified party and the
indemnifying party (in which case the indemnifying party will not have the right
to direct the defense of such action on behalf of the indemnified party) or (4)
the indemnifying party has not in fact employed legal counsel to assume the
defense of such action within a reasonable time after receiving notice of the
commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of legal counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified party or parties. All such
fees, disbursements and other charges will be reimbursed by the indemnifying
party promptly as they are incurred. An indemnifying party will not be liable
for any settlement of any action or claim effected without its written consent
(which consent will not be unreasonably withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Article V is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Sales Manager, the
Company and the Sales Manager will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company from persons other than the
Sales Manager, such as persons who control the Company within the meaning of the
Act, officers of the Company who signed the Registration Statement and directors
of the Company, who also may be liable for contribution) to which the Company
and the Sales Manager may be subject in such proportion as shall be appropriate
to reflect the relative benefits received by the Company on the one
14
hand and the Sales Manager on the other. The relative benefits received by the
Company on the one hand and the Sales Manager on the other hand shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total compensation
(before deducting expenses) received by the Sales Manager from the sale of Stock
on behalf of the Company. If, but only if, the allocation provided by the
foregoing sentence is not permitted by applicable law, the allocation of
contribution shall be made in such proportion as is appropriate to reflect not
only the relative benefits referred to in the foregoing sentence but also the
relative fault of the Company, on the one hand, and the Sales Manager, on the
other, with respect to the statements or omission which resulted in such loss,
claim, liability, expense or damage, or action in respect thereof, as well as
any other relevant equitable considerations with respect to such offering. Such
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the Sales
Manager, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Sales Manager agree that it would not be just and equitable
if contributions pursuant to this Section 5.1(d) were to be determined by pro
rata allocation or by any other method of allocation, which does not take into
account, the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, liability,
expense or damage, or action in respect thereof, referred to above in this
Section 5.1(d) shall be deemed to include, for the purpose of this Section
5.1(d), any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the foregoing provisions of this Section 5.1(d), the Sales
Manager shall not be required to contribute any amount in excess of the amount
by which the total actual sales price at which Stock sold by the Sales Manager
exceeds the amount of any damages that the Sales Manager has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission and no person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) will be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 5.1(d), any person who controls
a party to this Agreement within the meaning of the Act will have the same
rights to contribution as that party, and each officer and director of the
Company who signed the Registration Statement will have the same rights to
contribution as the Company, subject in each case to the provisions hereof. Any
party entitled to contribution, promptly after receipt of notice of commencement
of any action against such party in respect of which a claim for contribution
may be made under this Section 5.1(d), will notify any such party or parties
from whom contribution may be sought, but the omission so to notify will not
relieve that party or parties from whom contribution may be sought from any
other obligation it or they may have under this Section 5.1(d). No party will be
liable for contribution with respect to any action or claim settled without its
written consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution provided by this Article V shall not
relieve the Company and the Sales Manager from any liability the Company and the
Sales Manager may otherwise have (including, without limitation, any liability
the Sales Manager may have for a breach of its obligations under Article II
above).
15
ARTICLE VI.
REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY
6.1 All representations, warranties and agreements of the Company
herein or in certificates delivered pursuant hereto, and the agreements of the
Sales Manager contained in Article V above, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Sales Manager or any controlling persons, or the Company (or any of their
officers, directors or controlling persons), and shall survive delivery of and
payment for the Stock.
ARTICLE VII.
TERMINATION
7.1 The Company shall have the right, by giving notice as hereinafter
specified, to terminate this Agreement in its sole discretion at any time. Any
such termination shall be without liability of any party to any other party
except that the provisions of Section 3.1(h), Article V and Article VI above
shall remain in full force and effect notwithstanding such termination.
7.2 The Sales Manager shall have the right, by giving notice as
hereinafter specified, to terminate this Agreement in its sole discretion at any
time. Any such termination shall be without liability of any party to any other
party except that the provisions of Section 3.1(h), Article V and Article VI
above shall remain in full force and effect notwithstanding such termination.
7.3 This Agreement shall remain in full force and effect unless
terminated pursuant to Sections 7.1 or 7.2 above or otherwise by mutual
agreement of the parties; provided that any such termination by mutual agreement
shall in all cases be deemed to provide that Section 3.1(h), Article V and
Article VI above shall remain in full force and effect.
7.4 Any termination of this Agreement shall be effective on the date
specified in such notice of termination; provided that such termination shall
not be effective until the close of business on the date of receipt of such
notice by the Sales Manager or the Company, as the case may be. If such
termination shall occur during a period when sales of Stock are being made
pursuant to this Agreement, any sales of Stock made prior to the termination of
this Agreement shall settle in accordance with the provisions of this Agreement.
ARTICLE VIII.
NOTICES
8.1 All notices or communications hereunder shall be in writing and if
sent to the Sales Manager shall be mailed, delivered or telecopied and confirmed
to the Sales Manager at Brinson Patrick Securities Corporation, 330 Madison
Avenue, 9th Floor, New York, New York 10017, facsimile number (212) 453-5555,
Attention: Corporate Finance, or if sent to the Company, shall be mailed,
delivered or telecopied and confirmed to the Company at 14185 Dallas Parkway,
Suite 1100, Dallas, Texas 75254, Attention: David A. Brooks, Esq.; facsimile
number (972) 490-9605. Each party to this Agreement may change such address for
notices by sending to the parties to this Agreement written notice of a new
address for such purpose.
16
ARTICLE IX.
MISCELLANEOUS
9.1 This Agreement shall inure to the benefit of and be binding upon
the Company and the Sales Manager and their respective successors and the
controlling persons, officers and directors referred to in Article V above, and
no other person will have any right or obligation hereunder.
9.2 This Agreement constitutes the entire agreement and supersedes all
other prior and contemporaneous agreements and undertakings, both written and
oral, between the parties hereto with regard to the subject matter hereof.
9.3 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS.
9.4 This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The parties agree that this Agreement will be
considered signed when the signature of a party is delivered by facsimile
transmission. Such facsimile transmission shall be treated in all respects as
having the same effect as an original signature.
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date hereof.
ASHFORD HOSPITALITY TRUST, INC
By: /s/ David Kimichik
-----------------------------------
Name: David Kimichik
Title: Chief Financial Officer
BRINSON PATRICK SECURITIES CORPORATION
By: /s/ Todd Wyche
-----------------------------------
Name: Todd Wyche
Title: Managing Director
18
SCHEDULE 1.1(f)
LIST OF SIGNIFICANT SUBSIDIARIES
SCHEDULE A
FORM OF LEGAL OPINION
_________ ___, 2004
Brinson Patrick Securities Corporation
330 Madison Avenue, 9th Floor
New York, New York 10017
Gentlemen:
We have acted as legal counsel to Ashford Hospitality Trust, Inc, a
Maryland corporation (the "Company"), in connection with the negotiation of the
Sales Agreement dated as of [DATE OF EXECUTION] between the Company and you (the
"Agreement"). This letter is being furnished to you pursuant to Section 4.1(d)
of the Agreement. Capitalized terms used herein and not otherwise defined shall
have the meanings given them in the Agreement.
For purposes of rendering the opinions expressed below, we have
examined the executed original, or a copy certified or otherwise authenticated
to our satisfaction, of the Agreement. We have also examined originals or
copies, certified or otherwise authenticated to our satisfaction, of such other
documents and certificates of public officials and officers of the Company, as
we have deemed necessary or appropriate for purposes of this letter.
In rendering the opinions expressed herein, we have assumed without
independent verification the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity, completeness and accuracy of
all documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified, photostatic or facsimile copies
thereof and the authenticity, completeness and accuracy of the originals of such
certified, photostatic or facsimile copies. In making our examination of
documents executed by parties other than the Company, we have assumed that such
parties had the power to enter into and perform all obligations thereunder and
have also assumed the due authorization by all requisite action, and due
execution and delivery by such parties of such documents and the validity and
binding effect thereof. We have no knowledge of any fraud and have assumed that
no fraud exists regarding the documents referenced herein or the transactions
evidenced or contemplated thereby or otherwise regarding any matters relevant to
the opinions set forth herein. As to questions of fact material to such
opinions, we have also, when relevant facts were not independently established,
relied upon the documents, corporate records, agreements, instruments and
certificates referenced in the second paragraph of this letter.
With respect to the opinions set forth below, we have further assumed
that the Company will continue (as it does on the date hereof) to have a
sufficient number of shares of common stock (the "Stock"), $0.01 par value,
authorized for issuance under its charter from time to time to accommodate the
issuances contemplated by the Agreement.
Based upon the foregoing and subject to the assumptions and
qualifications set forth herein, and with due regard to such legal
considerations as we deem relevant, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, has full corporate power and authority to conduct its business as
described in the Registration Statement and Prospectus and is duly qualified as
a foreign corporation to transact business in good standing in the states of
[_________].
2. The Board of Directors of the Company has duly and validly
authorized the issuance of the Stock at market price at the time of the
transaction, and when issued and delivered to and paid for by the purchaser
thereof pursuant to the Agreement, the Stock will be fully paid and
nonassessable and will conform to the description thereof in the Prospectus. All
corporate action required to be taken for the authorization, issuance and sale
of the Stock pursuant to the Agreement has been validly and sufficiently taken.
The shareholders of the Company have no preemptive rights with respect to the
Stock. The Stock is the subject of an effective registration statement
permitting its sale in the manner contemplated by the Agreement.
3. The Registration Statement has become effective under the Act; (B)
to our knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been instituted
or threatened by the Commission; (C) if applicable, the filing of the Prospectus
supplements have been made in the manner and within the time period required by
the Rules and Regulations; and (D) the Stock has been approved for listing on
the New York Stock Exchange.
4. The Registration Statement, when it became effective, and the
Prospectus and any amendment or supplement thereto, on the date of filing
thereof with the Commission and at the date hereof (except for the financial
statements and notes and schedules and other financial information included
therein), complied as to form in all material respects with the requirements of
the Act and the Rules and Regulations; and the documents incorporated by
reference in the Registration Statement or Prospectus or any amendment or
supplement thereto, when filed with the Commission under the Exchange Act
(except for the financial statements and notes and schedules and other financial
information included therein), complied as to form in all material respects with
the requirements of the Act or the Exchange Act, as applicable, and the rules
and regulations of the Commission thereunder.
5. The description in the Registration Statement and Prospectus of
statutes, legal and governmental proceedings, contracts and other documents are
accurate in all material respects; and we do not know of any statutes or legal
or governmental proceedings required to be described in the Prospectus that are
not described as required, or of any contracts or documents of a character
required to be described in the Registration Statement or Prospectus (or
required to be filed under the Exchange Act if upon such filing they would be
incorporated by reference therein) or to be filed as exhibits to the
Registration Statement that are not described and filed as required.
6. The Agreement has been duly authorized, executed and delivered by
the Company.
7. The execution, delivery and performance of the Agreement by the
Company and the consummation of the transactions contemplated therein by the
Company do not and will not result in
2
a breach or violation of any of the terms and provisions of, or constitute a
default under, any agreement or instrument known to us to which the Company is a
party or by which the Company is bound or to which any of the property of the
Company is subject, except for such breaches or defaults that would not in the
aggregate have a Material Adverse Effect on the Company, nor will such action
result in the violation of the Company's charter or by-laws, or any statute or
any order, rule or regulation known to us of any court or governmental agency or
body having jurisdiction over the Company or any of its properties.
8. Except for permits and similar authorizations required under the
securities or "blue sky" laws of certain states (as to which we express no
opinion), no consent, waiver, approval, authorization or other order of any
regulatory body, administrative agency or other governmental body is legally
required for (i) the issuance or sale of the Stock by the Company, or (ii) the
sale of the Stock by the Sales Manager, each as contemplated by the Agreement
and the Prospectus.
9. We know of no actions, suits or proceedings pending or threatened
against or affecting the Company or the business, properties, business
prospects, condition (financial or otherwise) or results of operations of the
Company or any of its officers in their capacity as such, before or by any
federal or state or foreign court, commission, regulatory body, wherein an
unfavorable ruling, decision or finding might have a Material Adverse Effect on
the Company.
10. The Company is not, and upon issuance and sale of the Stock and the
application of the net proceeds from the sale thereof in the manner described in
the Prospectus will not be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
In rendering the foregoing opinions we express no opinion as to the
laws of any jurisdiction other than applicable federal law and the laws of the
States of Texas and (subject to the qualification expressed in the next
sentence) New York, and we assume no responsibility as to the applicability
thereto, or the effect thereon, of the laws of any other jurisdiction. We have
relied on the opinion of Hogan & Hartson L.L.P. of Baltimore, Maryland delivered
to you today with respect to all matters of Maryland law (and our opinion with
respect to Maryland law is subject to all qualifications, assumptions and
exceptions set forth in their opinion).
This letter and the matters addressed herein are as of the date hereof,
and we undertake no, and hereby disclaim any, obligation to advise you of any
change in any matter set forth herein occurring after the date hereof. This
letter is solely for your benefit, and no other persons shall be entitled to
rely upon the opinions herein expressed. This letter is limited to the matters
stated herein and no opinion is implied or may be inferred beyond the matters
expressly stated. Without our prior written consent, this letter may not be
quoted in whole or in part or otherwise referred to in any document and may not
be furnished to any other person or entity.
We have participated in conferences with directors, officers and other
representatives of the Company, representatives of the Sales Manager and
representatives of the Sales Manager's legal counsel, at which conferences the
contents of the Registration Statement and the Prospectus and related matters
were discussed, and, although we have not independently verified and are not
passing upon and assume no responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus (except to the extent specified in the foregoing opinions), no facts
have come to our attention that lead us to believe that the Registration
Statement, at the time it became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not
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misleading, or the Prospectus, on the date of filing thereof with the Commission
and at the date hereof, included an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; it
being understood that we express no opinion as to the financial statements and
related notes, the financial statement schedules or other financial and
statistical data included in any of the documents mentioned in this paragraph.
Very truly yours,
[LEGAL COUNSEL]
By:
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