Exhibit 1.1
91,125,541 Units (Common Shares
and Series A Preferred Shares)
APPLE REIT EIGHT,
INC.
Agency Agreement
, 2007
David Lerner Associates,
Inc.
477 Jericho Turnpike
Syosset, New York 11791
Dear Sirs:
Apple REIT Eight, Inc., a Virginia
corporation (the “Company”), is a corporation that will
elect to qualify as a real estate investment trust pursuant to
Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended (the “Code”). Subject to the terms and
conditions stated herein, the Company proposes to engage David
Lerner Associates, Inc. as its managing dealer (the
“Agent”) to solicit offers to buy and obtain purchasers
for Units, as offered by the Prospectus which is part of the Form
S-11 Registration Statement under the Securities Act of 1933 (File
No. 333-125546) as filed with the Securities and Exchange
Commission. Each Unit refers to one share of common stock, no par
value, and one Series A preferred share of the Company registered
pursuant to the Registration Statement referred to in the preceding
sentence. This will confirm our agreement respecting your
engagement as the exclusive agent to solicit offers to buy and
obtain purchasers for the Units on a “best efforts”
basis.
1. Representations and Warranties.
The Company represents and warrants to, and agrees with, the Agent
that:
(a) The Company has filed with the
Securities and Exchange Commission (the “Commission”) a
registration statement on Form S-11 (File No. 333-125546), and
as a part thereof a preliminary prospectus, both as amended by such
amendments thereto as may have been required to the date hereof,
with respect to the registration of the Units under the Securities
Act of 1933, as amended (the “Act”); any preliminary
prospectus included in such registration statement or filed with
the Commission pursuant to Rule 424 of the Commission under the Act
is hereinafter called a “Preliminary Prospectus”; the
registration statement, as amended at the time it becomes effective
under the Act, and the prospectus filed as a part thereof or mailed
for filing pursuant to Rule 424(b) of the Act are hereinafter
called the “Registration Statement” and
“Prospectus,” respectively; except that (A) if the
Company files a post-effective amendment to the registration
statement, then the term “Registration Statement” shall
refer to the registration statement as amended by such
post-effective amendment thereto and the term
“Prospectus” shall refer to the amended prospectus then
on file with the Commission, and (B) if the prospectus,
including any sticker supplement thereto not theretofore
consolidated into a post-effective amendment, filed by the Company
pursuant to either Rule 424(b) or (c) of the rules and
regulations of the Commission under the Act (the
“Regulations”), shall differ from the prospectus on
file at the time the Registration Statement or any post-effective
amendment thereto shall have become effective, the term
“Prospectus” shall refer to the prospectus, including
any such sticker supplement, filed pursuant to either Rule 424(b)
or (c), as the case may be, from and after the date on which it
shall have been filed. The Company will not at any time after the
Registration Statement initially becomes effective file any
amendment to the Registration Statement or any amendment or
supplement to the Prospectus to which you shall object in writing
or which shall be disapproved by your counsel;
(b) No order preventing or
suspending the use of any Preliminary Prospectus has been issued by
the Commission, and each Preliminary Prospectus, at the time of
filing thereof, conformed in all material respects to the
requirements of the Act and the Regulations, and did not contain
any untrue statement of a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished to the Company by you, and
relating to you, expressly for use therein;
(c) The Registration Statement and
the Prospectus, when effective or filed with the Commission, as the
case may be, conformed or will conform, in all material respects to
the requirements of the Act and the rules and regulations of the
Commission thereunder and did not and will not as of the applicable
effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto 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; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished to the
Company by you, and relating to you, expressly for use
therein;
(d) There are no contracts or other
documents that are required to be filed as exhibits to the
Registration Statement which have not been so filed;
(e) The Company and each of its
subsidiaries has been duly incorporated or organized, is validly
existing, and if a corporation is in good standing, under the laws
of Virginia, with power and authority (corporate or other) to own
its properties and conduct its business as described in the
Prospectus, and has been duly qualified as a foreign entity for the
transaction of business and is in good standing in each
jurisdiction in which such qualification is required, whether by
reason of the ownership of property or the conduct of business,
except such jurisdictions, if any, in which the failure to be so
qualified will not have a material adverse effect on the respective
company;
(f) The Company and each of its
subsidiaries possesses all material licenses, permits,
authorizations, consents and orders required for the contemplated
method of operation of its business as described in the
Prospectus;
(g) The Company has an authorized
capitalization as set forth in the Prospectus; all of the issued
capital stock of the Company has been duly and validly authorized
and issued, is fully paid and nonassessable and conforms to the
description of the capital stock of the Company contained in the
Prospectus; there are no preemptive or other rights to subscribe
for or to purchase any capital stock of the Company; except as
described in the Prospectus, there are no warrants or options to
purchase any capital stock of the Company; and neither the filing
of the Registration Statement nor the offering or sale of the Units
as contemplated by this Agreement gives rise to any rights for or
relating to the registration of any the capital stock of the
Company;
(h) The Units to be issued and sold
by the Company pursuant to this Agreement have been duly and
validly authorized and, when issued and delivered against payment
therefor as provided herein, will be duly and validly issued and
fully paid and nonassessable and will conform to the description of
the Units contained in the Prospectus;
(i) The Company has the corporate
power to enter into this Agreement, and the issue and sale of the
Units by the Company and the performance of such Agreement and the
consummation by the Company of the transactions herein contemplated
will not result in a breach or violation of any terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the
Company, is subject, nor will such action result in any violation
of the provisions of the Articles of Incorporation or Bylaws of the
Company, or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Company or any of its properties; and no consent, approval,
authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the issue
and sale of the Units or the consummation by the Company of the
transactions contemplated by this Agreement, except such consents,
approvals, authorizations, registrations or qualifications as may
be required under the Act and under state securities or Blue Sky
laws in connection with the distribution of the Units by the
Agent;
(j) This Agreement has been duly
authorized, executed and delivered by the Company, and constitutes
a valid and binding agreement of the Company, enforceable in
accordance with its terms, except to the extent that enforceability
may be limited by bankruptcy, insolvency or other laws affecting
the enforcement of creditors’ rights generally or by general
principles of equity, and except to the extent that the
enforceability of the indemnity and contribution provisions
contained in this Agreement may be limited under applicable
laws;
(k) The Advisory Agreement has been
duly authorized and when executed and delivered by the parties
thereto will constitute a valid and binding agreement of the
parties thereto enforceable in accordance with its terms, except to
the extent that enforceability may be limited by bankruptcy,
insolvency or other laws affecting the enforcement of
creditors’ rights generally or by general principles of
equity;
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(l) Ernst & Young LLP,
which has certified the financial statements of the Company,
constitutes an independent public accountant as required by the Act
and the rules and regulations of the Commission
thereunder;
(m) The financial statements of the
Company, together with related notes, as set forth in the
Registration Statement and the Prospectus, presently fairly the
financial position of the Company at the indicated date;
(n) Since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, neither the Company nor any of its subsidiaries has
experienced any material adverse change or any development
involving a prospective material adverse change in the general
affairs, management, financial position, properties or results of
operations of the Company, or any of its subsidiaries, otherwise
than as set forth in the Prospectus; and neither the Company nor
any of its subsidiaries have entered into any material transactions
other than as described in the Prospectus; and the capitalization,
indebtedness, properties, material liabilities and business of the
Company and its subsidiaries conform to the descriptions thereof
contained in the Prospectus;
(o) There are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or
any of its subsidiaries is the subject, other than as set forth or
contemplated in the Prospectus, which, individually or in the
aggregate, would have a material adverse effect on the financial
position, stockholders’ equity or results of operations of
the Company or any of its subsidiaries and, to the best of their
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened or contemplated by
others;
(p) The Company is not and will not
be an “investment company,” or under the control of an
investment company as defined in the Investment Company Act of
1940, as amended; and
(q) The Company is organized in
conformity with the requirements for qualification as a real estate
investment trust under Sections 856 through 860 of the Code and the
rules and regulations thereunder. The contemplated method of
operation of the Company’s business as described in the
Prospectus will allow the Company to satisfy the operational
requirements for qualification as a real estate investment trust
under such Sections and such rules and regulations.
2. Offering and Sale of Units
— Closing Dates.
(a) On the basis of the
representations, warranties and covenants herein contained, but
subject to the terms and conditions herein set forth, the Agent is
hereby appointed the selling agent of the Company during the term
herein specified (the “Offering Period”) for the
purpose of finding subscribers for the Units for the account and
risk of the Company through a public offering. Your agency
hereunder, which is subject to the conditions of Section 6
hereof, shall continue as long as Units are being offered through
the Commission filing
[ ]
and any amendments thereto. However, your agency may be terminated
by the Company if you cease to be a member in good standing of the
NASD or if you become subject to an order or other action of or by
the Securities and Exchange Commission or other securities
authority substantially restricting or impairing your ability to
offer and sell the Units under this Agreement, or if there is a
material default by you under this Agreement which is not promptly
cured. Subject to the performance by the Company of all of its
obligations to be performed hereunder, and to the completeness and
accuracy of all the representations and warranties contained
herein, the Agent hereby accepts such agency and agrees on the
terms and conditions herein set forth to use its best efforts
during the Offering Period to find subscribers for the Units at the
current public offering price (each subscriber being required to
invest at least $5,000, or $2,000 in the case of a Qualified Plan,
as defined in the Prospectus). The time for each issuance of and
payment for Units is herein referred to as a “Closing
Date.”
(b) If less than all the Units shall
have been subscribed and paid for at the initial Closing Date (the
“Initial Closing Date”), then, at periodic intervals to
be mutually agreed upon by you and the Company during the Offering
Period, there shall be subsequent closings for the payment to the
Company of the purchase price of additional Units sold by you
(“Subsequent Closing Date(s)”) as described in
Section 2(c).
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(c) Subsequent closing(s) will take
place at such time(s), date(s) and place(s) as determined by the
Company, with the concurrence of the Agent. Units will be issued to
subscribers and compensation will be paid to the Agent at each
Closing Date.
(d) As compensation for your
services under this Agreement, you will be paid, on each Closing
Date, a commission equal to 7.5% of the public offering price for
each Unit subscribed and paid for at each Closing Date which was
sold by you or a Selected Dealer engaged by you. In addition, you
will be paid, on each Closing Date, a non-accountable Marketing
Expense Allowance equal to 2.5% of the public offering price for
each Unit subscribed and paid for on the applicable Closing Date
which was sold by you or a Selected Dealer engaged by
you.
(e) Subscriptions for Units may be
solicited by certain dealers selected by you (the “Selected
Dealers”) and sales by Selected Dealers shall be made under a
Selected Dealer Agreement in substantially the form attached as
Exhibit A, which sets forth the terms and conditions, including
compensation, of the other dealers participating. Each such
Selected Dealer shall be a member in good standing of the National
Association of Securities Dealers, Inc. (“NASD”).
Subscribers’ checks are to be made payable to the Agent.
Selected Dealers must transmit all such checks directly to the
Agent by noon of the next business day after receipt.
(f) Neither you, the Company, the
Agent, nor any Selected Dealer participating in the offering of the
Units shall, directly or indirectly, pay or award any
finder’s fees, commissions or other compensation to any
person engaged by a potential investor for investment advice as an
inducement to such adviser to advise the purchase of Units;
provided, however, that normal sales commissions payable to a
registered broker-dealer or other properly licensed person for
selling Units shall not be prohibited hereby.
(g) If the offering is terminated
without any closing, the Agent shall not be reimbursed or paid any
amounts under this Agreement.
3. Covenants of the
Company.
The Company agrees that:
(a) The Company will use its best
efforts to cause the Registration Statement to become effective and
will notify you immediately and confirm in writing (i) when
the Registration Statement and any amendments thereto shall have
become effective, or any supplement to the Prospectus or any
amended Prospectus shall have been filed, (ii) of any request
by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional
information, (iii) of the happening of any event which makes
untrue any statement of a material fact made in the Registration
Statement or the Prospectus, or which requires the making of a
change in the Registration Statement or the Prospectus, in order to
make any material statement therein not misleading; and
(iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of
the initiation of any proceedings for that purpose, or of the
suspension of the qualification of the Units for offering or sale
in any jurisdiction, or of the institution of any proceedings for
such purpose; and the Company will make every reasonable effort to
prevent the issuance by the Commission or any governmental agency
pursuant to the securities laws of any jurisdiction of any stop
order and, if such stop order shall at any time be issued, to
obtain the lifting thereof at the earliest possible
moment;
(b) It will, promptly from time to
time take such actions as you may reasonably request to qualify the
Units for offering and sale under the securities laws of such
jurisdictions as you may request and to comply with such laws so as
to permit the continuance of sales of Units therein in such
jurisdictions for so long as may be necessary to complete the
distribution of the Units, provided that in connection therewith
neither the Company, the Advisor nor the Broker shall be required
to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) The Company will deliver to you,
as soon as available, a copy of the Registration Statement as
originally filed and each amendment thereto (including
exhibits);
(d) The Company will deliver
promptly to you, as soon as the Registration Statement becomes
effective and thereafter from time to time during the period when
the Prospectus is required to be delivered under the Act, such
number of copies of
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the Prospectus (as amended or
supplemented), as you may reasonably request; and the Company
consents to the use of the Prospectus and any amendments or
supplements thereto by you and by any Selected Dealers for the
purposes contemplated by the Act and this Agreement;
(e) During the period when the
Prospectus is required to be delivered under the Act, the Company
will comply, so far as it is able and at the Company’s
expense, with all requirements imposed upon it by the Act, as now
and as hereafter amended, so far as necessary to permit the
continuation of sales of the Units during such period in accordance
with the provisions of this Agreement and of the
Prospectus;
(f) If any event relating to or
affecting the Company shall occur as a result of which it is
necessary, in the opinion of your counsel, to amend or supplement
the Prospectus in order to make the Prospectus not misleading in
the light of the circumstances existing at the time it is delivered
to a subscriber, the Company will forthwith prepare and furnish to
you, without expense to you, a reasonable number of copies of an
amendment or amendments of, or a supplement or supplements to, the
Prospectus (in form and substance reasonably satisfactory to your
counsel) which will amend or supplement the Prospectus so that, as
amended or supplemented, it will not contain an untrue statement of
a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
existing at the time the Prospectus is delivered to a subscriber,
not misleading. For the purposes of this subsection, the Company
will furnish such information with respect to the Company and any
Company properties as you may from time to time reasonably
request;
(g) The Company will furnish to its
Shareholders as soon as practicable after the end of each fiscal
year an annual report (including a balance sheet and statements of
income and cash flows of the Company certified by independent
public accountants) and, as soon as practicable after the end of
each of the first three quarters of each fiscal year (beginning
with the fiscal quarter ending after the effective date of the
Registration Statement), summary financial information of the
Company for such quarter in reasonable detail;
(h) During a period of five years
from the effective date of the Registration Statement, the Company
will furnish to you copies of all reports or other communications
(financial or other) furnished to securityholders, and deliver to
you (i) as soon as they are available, copies of any reports
and financial statements furnished to or filed with the Commission
or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the
Company as you may from time to time reasonably request;
(i) The Company, will not, at any
time before or after the Registration Statement becomes effective,
file any amendment to the Registration Statement or any amendment
or supplement to the Prospectus to which you shall reasonably
object in writing or which shall be reasonably disapproved by your
counsel promptly after notice thereof; will deliver to you, from
time to time, all supplemental sales materials (whether designated
solely for broker-dealer use or otherwise) proposed to be used or
delivered by the Company in connection with the offering of Units,
prior to the use or delivery to third parties of such material, and
it will not use or deliver any such material to which you shall
object or which shall be disapproved by your counsel;
and
(j) Subsequent to the date of this
Agreement and through each Closing Date, except as described,
contemplated or permitted in the Registration Statement, the
Company will not take any action (or refrain from taking any
action) that will result in the Company incurring any material
liability or obligation, direct or contingent, or enter into any
material transaction not in the ordinary course of business, and
there will not be any material change in the capital stock,
long-term debt, notes payable or short-term borrowings of the
Company or any issuance of options, warrants or rights to purchase
capital stock of the Company, or any declaration or payment or
commitment to pay or anticipated payment of any dividend or other
distribution on the capital stock of the Company, except as
contemplated in the Prospectus, which has resulted in or reasonably
could be expected to result in a material adverse change in the
business or financial position of the Company, taken as a
whole.
4. Expenses. The Company covenants
and agrees with you that, except as otherwise agreed by you and the
Company, the Company will pay the following: (i) the fees,
disbursements and expenses of the Company’s counsel and
accountants in connection with the registration of the Units under
the Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement and the
Prospectus and amendments and supplements thereto and the mailing
and delivering of
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copies thereof to you and the Selected Dealers;
(ii) the cost of printing or producing this Agreement, any
Blue Sky Surveys, all sales material and any other documents in
connection with the offering, purchase, sale and delivery of the
Units; (iii) the cost of preparing stock certificates, if any;
(iv) the costs or expenses of any depositary, escrow agent,
transfer agent or registrar; (v)
