CONTRIBUTION AGREEMENT dated as of June 26, 2008 by and among AKSHAR LIMITED LIABILITY COMPANY, as Contributor, and HERSHA HOSPITALITY LIMITED PARTNERSHIP as OP, IN CONNECTION WITH THE CONTRIBUTION OF PROPERTY KNOWN AS THE HOLIDAY INN EXPRESS LOCATED AT
Exhibit
10.1
dated as
of June 26, 2008
by and
among
AKSHAR
LIMITED LIABILITY COMPANY,
as
Contributor,
and
HERSHA
HOSPITALITY LIMITED PARTNERSHIP
as
OP,
IN
CONNECTION WITH THE CONTRIBUTION OF
PROPERTY
KNOWN AS THE HOLIDAY INN EXPRESS LOCATED AT
0000
XXXXXXXX XXXXXXXXX, XXXX XXXXXXX, XXXXXXXX 00000
THIS CONTRIBUTION AGREEMENT,
dated as of June 26, 2008 (the "Agreement"), is made
by and between Akshar Limited Liability Company, a Maryland limited Liability
Company (the "Contributor"), Hersha
Camp Springs Associates, LLC, a Maryland limited liability company (the "Property
Partnership"), Hersha Hospitality Limited Partnership, a Virginia limited
partnership (the "OP") and Hersha
Hospitality Trust, a Maryland real estate investment trust (the "REIT"), and
provides:
WHEREAS, the Property
Partnership is a directly and indirectly wholly-owned subsidiary of the OP that
is a disregarded entity for federal tax purposes, and the Contributor intends to
contribute the Property to the capital of the OP in exchange for cash,
assumption or payoff of indebtedness and issuance of units of limited
partnership interest in the OP; and
WHEREAS, the Property
Partnership shall receive the Property pursuant to this Agreement at the
direction of the OP, and all actions of the Property Partnership shall be deemed
to be actions of the OP acting through the Property Partnership as a vehicle for
the holding title to the Property.
NOW, THEREFORE, for and in
consideration of the mutual promises contained herein, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE
I
1.1 Definitions. The
following terms shall have the indicated meanings:
"Act of Bankruptcy"
shall mean if a party hereto or any general partner thereof shall (a) apply for
or consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property, (b) admit in writing its inability to pay its debts as they become
due, (c) make a general assignment for the benefit of its creditors, (d) file a
voluntary petition or commence a voluntary case or proceeding under the Federal
Bankruptcy Code (as now or hereafter in effect), (e) be adjudicated a bankrupt
or insolvent, (f) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, (g) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
or proceeding under the Federal Bankruptcy Code (as now or hereafter in effect),
or (h) take any corporate or limited liability company action for the purpose of
effecting any of the foregoing; or if a proceeding or case shall be commenced,
without the application or consent of a party hereto or any general partner
thereof, in any court of competent jurisdiction seeking (1) the liquidation,
reorganization, dissolution or winding-up, or the composition or readjustment of
debts, of such party or general partner, (2) the appointment of a receiver,
custodian, trustee or liquidator or such party or general partner or all or any
substantial part of its assets, or (3) other similar relief under any law
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, and such proceeding or case shall continue undismissed; or
an order (including an order for relief entered in an involuntary case under the
Federal Bankruptcy Code, as now or hereafter in effect) judgment or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of sixty (60) consecutive
days.
"Apportionment Date"
shall mean the day immediately preceding the Closing Date.
"Articles of
Organization" shall mean the Articles of Organization of the Contributor
filed with the Secretary of State of the State of Maryland and attached hereto
as Exhibit
F.
"Assignment and
Assumption" shall mean the Assignment and Assumption of Contracts by and
between Contributor and OP, dated of even date herewith.
"Authorizations" shall
mean all licenses, permits and approvals required by any governmental or
quasi-governmental agency, body or officer for the ownership, operation and use
of the Property or any part thereof.
"Closing" shall mean
the Closing of the contribution and acquisition of the Property pursuant to this
Agreement.
"Closing Date" shall
mean the date on which the Closing occurs, which shall occur within thirty (30)
days after the expiration of the Study Period.
"Consideration" shall
mean the value of Thirteen Million Nine Hundred Seventy Thousand Dollars and
00/100 ($13,970,000.00), which amount includes the payoff of the Existing Loan,
payable in cash and LP Units to the Contributor at Closing in the manner
described in Section
2.3.
"Continuing
Liabilities" shall include liabilities arising under Operating Contracts,
Leases, equipment leases, loan agreements, or proration credits at Closing, but
shall exclude any liabilities arising from any other arrangement, agreement or
pending litigation.
"Contributor Operating
Agreement" shall mean the current operating agreement of the Contributor,
attached hereto as Exhibit
G.
"Escrow Agent" shall
mean Chesapeake Title Company, 000 Xxxx Xxxx, # 000, Xxxxxx,
XX 00000, Phone: (000) 000-0000.
"Existing Loan" shall
mean that certain loan secured by the Existing Mortgage and other loan documents
dated as of September 26, 2007, from Manufacturers and Traders Trust Company, a
New York banking corporation, to the Contributor, in the original principal
amount of Eight Million Two Hundred Fifty Thousand Dollars and No/100
($8,250,000.00).
"FIRPTA Certificate"
shall mean the affidavit of the Contributor under Section 1445 of the Internal
Revenue Code certifying that such Contributor is not a foreign corporation,
foreign partnership, foreign limited liability company, foreign trust, foreign
estate or foreign person (as those terms are defined in the Internal Revenue
Code and the Income Tax Regulations), in form and substance satisfactory to the
OP.
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"Governmental Body"
means any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign.
"Hotel" shall mean the
hotel and related amenities located on the Land.
"Improvements" shall
mean the Hotel and all other buildings, improvements, fixtures and other items
of real estate located on the Land.
"Insurance Policies"
shall mean those certain policies of insurance described on Exhibit B attached
hereto.
"Intangible Personal
Property" shall mean all intangible personal property owned or possessed
by the Contributor and used in connection with the ownership, operation,
leasing, occupancy or maintenance of the Property, including, without
limitation, the right to use any trade names and all variations thereof under
which the Hotel operates, the Authorizations, escrow accounts, insurance
policies, general intangibles, business records, plans and specifications,
surveys and title insurance policies pertaining to the real property and the
personal property, all licenses, permits and approvals with respect to the
construction, ownership, operation, leasing, occupancy or maintenance of the
Property, any unpaid award for taking by condemnation or any damage to the Land
by reason of a change of grade or location of or access to any street or
highway, and the share of the Tray Ledger as hereinafter defined, excluding (a)
any of the aforesaid rights the OP elects not to acquire, and
(b) accounts receivable except for the above described share of the
Tray Ledger.
"Inventory" shall mean
all inventory located at the Hotel, including without limitation, all
mattresses, pillows, bed linens, towels, paper goods, soaps, cleaning supplies
and other such supplies.
"Joinder" shall have
the meaning set forth in Section
2.3(d).
"Knowledge" shall mean
the actual knowledge of the Contributor that it would have had after making
reasonable investigation.
"Land" shall mean that
certain parcel of real estate lying and being in the County of Prince
Georges, State
of Maryland located at 0000 Xxxxxxxx Xxxxxxxxx, Xxxx Xxxxxxx, Xxxxxxxx 00000, as
more particularly described on Exhibit A attached
hereto, together with all easements, rights, privileges and appurtenances
thereunto belonging or in any way appertaining, and all of the leasehold,
interest, estate, right, title, interest, claim or demand whatsoever of the
Contributor therein, in the streets and ways adjacent thereto and in the beds
thereof, either at law or in equity, in possession or expectancy, now or
hereafter acquired.
"Leases" shall mean
those leases of real property listed on Exhibit C attached
hereto.
"LP Units" shall mean
limited partnership units of the OP.
"Manager" shall mean
Hersha Hospitality Management, LP, a Pennsylvania limited
partnership.
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"Members" shall mean
all of the members of the Contributor as of the date hereof and as listed in the
Contributor Operating Agreement (attached hereto as Exhibit
G).
"Operating Contracts"
shall mean the management agreements, service contracts, supply contracts,
leases (other than the Leases) and other agreements, if any, in effect with
respect to the construction, ownership, operation, occupancy or maintenance of
the Property.
"Owner's Title Policy"
shall mean an owner's policy of title insurance issued to the Property
Partnership by the Title Company, dated as of the Closing Date, pursuant to
which the Title Company insures the OP's and Property Partnership's ownership of
title to the fee interest in the Real Property (including the marketability
thereof) subject only to Permitted Title Exceptions. The Owner's
Title Policy shall insure the OP and Property Partnership in the amount of the
Consideration and shall be acceptable in form and substance to the
OP. The description of the Land in the Owner's Title Policy shall be
by courses and distances and shall be identical to the description shown on a
survey provided by the Contributor to the OP.
"Permitted Title
Exceptions" shall mean those exceptions to title to the Real Property
that are satisfactory to the OP as determined pursuant to Section
2.2.
"Property" shall mean
collectively the Land, Improvements, the Inventory, the Reservation System, the
Tangible Personal Property and the Intangible Personal Property, consisting of
all the property utilized for the operation of the Hotel.
"Real Property" shall
mean the Land and the Improvements.
"Reservation System"
shall mean the Contributor's reservation terminal and reservation system
equipment and software, if any.
"Securities Act" shall
mean the Securities Act of 1933, as amended.
"Study Period" shall
mean the period commencing as of the date of the Letter of Intent between the
parties, and continuing through June 23,
2008.
"Tangible Personal
Property" shall mean the items of tangible personal property consisting
of all furniture, fixtures and equipment situated on, attached to, or used in
the operation of the Hotel, and all furniture, furnishings, equipment,
machinery, and other personal property of every kind located on or used in the
operation of the Hotel and owned by the Contributor.
"Title Commitment"
shall mean the commitment by the Title Company to issue the Owner's Title
Policy.
"Title Company" shall
mean Chesapeake Title Company, 000 Xxxx Xxxx, # 000, Xxxxxx,
XX 00000, Phone: (000) 000-0000.
"Tray Ledger" shall
mean the final night's room revenue (revenue from rooms occupied as of 11:59:59
p.m. on the Apportionment Date, inclusive of food, beverage, telephone and
similar charges), net of any sales taxes, room taxes or other taxes
thereon.
4
"Utilities" shall mean
public sanitary and storm sewers, natural gas, telephone, public water
facilities, electrical facilities and all other utility facilities and services
necessary for the operation and occupancy of the Property as a
hotel.
1.2 Rules of
Construction. The following rules shall apply to the
construction and interpretation of this Agreement:
(a) Singular
words shall connote the plural number as well as the singular and vice versa,
and the masculine shall include the feminine and the neuter.
(b) All
references herein to particular articles, sections, subsections, clauses or
exhibits are references to articles, sections, subsections, clauses or exhibits
of this Agreement.
(c) Headings
contained herein are solely for convenience of reference and shall not
constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.
(d) Each
party hereto and its counsel have reviewed and revised (or requested revisions
of) this Agreement, and therefore any usual rules of construction requiring that
ambiguities are to be resolved against a particular party shall not be
applicable in the construction and interpretation of this Agreement or any
exhibits hereto.
ARTICLE II
2.1 Contribution and
Acquisition. The Contributor agrees to contribute, assign and
transfer the Property to the OP as a capital contribution to the OP and the OP
agrees to accept the Property in exchange for the Consideration and in
accordance with the other terms and conditions set forth herein.
2.2 Study
Period. (a) The OP shall have the right, until the
end of the Study Period, to enter upon the Real Property and to perform, at the
OP's expense, such economic, surveying, engineering, environmental, topographic
and marketing tests, studies and investigations as the OP may deem
appropriate. If such tests, studies and investigations warrant, in
the OP's sole, absolute and unreviewable discretion, the transfer of the
Property for the purposes contemplated by the OP, then the OP may elect to
proceed to Closing and shall so notify the Contributor prior to the expiration
of the Study Period. If for any reason the OP does not so notify the
Contributor of its determination to proceed to Closing prior to the expiration
of the Study Period, or if the OP notifies the Contributor, in writing, prior to
the expiration of the Study Period that it has determined not to proceed to
Closing, this Agreement automatically shall terminate, and the OP shall be
released from any further liability or obligation under this
Agreement.
(b) During
the Study Period, the Contributor shall make available to the OP, its agents,
auditors, engineers, attorneys and other designees, for inspection copies of all
existing architectural and engineering studies, surveys, title insurance
policies, zoning and site plan materials, correspondence, environmental audits
and other related materials or information if any, relating to the Property
which are in, or come into, the Contributor's possession or
control.
5
(c) The
OP hereby indemnifies and defends the Contributor against any loss, damage or
claim arising from entry upon the Real Property by the OP or any agents,
contractors or employees of the OP. The OP, at its own expense, shall
restore any damage to the Real Property caused by any of the tests or studies
made by the OP.
(d) During
the Study Period, the OP, at its expense, may cause an examination of title to
the Property to be made, and, prior to the expiration of the Study Period, may
notify the Contributor of any defects in title shown by such examination that
the OP is unwilling to accept. The Contributor shall notify the OP
whether the Contributor is willing to cure such defects and to proceed to
Closing. Contributor may cure, but shall not be obligated to cure
such defects. If such defects consist of deeds of trust, mechanics'
liens, tax liens or other liens or charges in a fixed sum or capable of
computation as a fixed sum, the Contributor, at its option, shall either pay and
discharge (in which event, the Escrow Agent is authorized to pay and discharge
at Closing) such defects at Closing. If the Contributor is unwilling
or unable to cure any such defects by Closing, the OP shall elect (1) to waive
such defects and proceed to Closing without any abatement in the Consideration
or (2) to terminate this Agreement. The Contributor shall not, after
the date of this Agreement, subject the Property to and shall take all
reasonable best efforts to prevent the Property from being subjected to any
liens, encumbrances, covenants, conditions, restrictions, easements or other
title matters or seek any zoning changes or take any other action which may
affect or modify the status of title without the OP's prior written
consent. All title matters revealed by the OP's title examination and
not objected to by the OP as provided above shall be deemed Permitted Title
Exceptions. If OP shall fail to examine title and notify the
Contributor of any such title objections by the end of the Study Period, all
such title exceptions (other than those rendering title unmarketable and those
that are to be paid at Closing as provided above) shall be deemed Permitted
Title Exceptions.
2.3 Payment of the
Consideration. In consideration of the payment of the Consideration
by the OP to the Contributor, the Contributor agrees to contribute, assign and
transfer the Property to the Property Partnership for the benefit of the OP in
accordance with the terms and conditions set forth in this Agreement as a
contribution to the capital of the OP pursuant to Section 721 of the Internal
Revenue Code of 1986, as amended and the OP shall pay the Consideration to the
Contributor in the following manner:
(a) The
total Consideration for the contribution by the Contributor of the Property,
which the OP and the Property Partnership agree to pay to the Contributor and
which the Contributor agrees to accept for the contribution of the
Property is Thirteen Million Nine Hundred Seventy Thousand Dollars and No/100
($13,970,000.00), which amount includes the payoff of the Existing Loan, payable
in cash and LP Units, with the price of such LP Units to be determined on the
Closing Date, subject to the prorations and adjustments described
herein. Contributor shall be restricted from converting or selling
any such LP Units for a period of one (1) year from the Closing
Date. Any adjustments and prorations to be made pursuant to the terms
of this Agreement shall be paid by wire transfer of immediately available funds
to an account specified by the party due to receive same. The
Consideration shall consist of the following:
6
(i)
On the Closing Date, the Contributor will receive a cash distribution (the
"Cash Amount")
from OP to reimburse Contributor for pre-formation expenditures in
accordance with Treasury Regulation Section 1.707-4(b) in the amount of
$866,000.00;
(ii) The
"Loan Amount"
which shall be the amount of the payoff for the Existing Loan, if not assumed by
the Property Partnership; and
(iii) The
LP Units which shall consist of units of limited partnership interest in the OP
with a value equal to Thirteen Million Nine Hundred Seventy Thousand Dollars and
No/100 ($13,970,000.00) less the Cash Amount, and
less the Loan Amount;
and which shall be subject to the payment schedule, the prorations and
adjustments described herein and payable as set forth herein, provided, however, that all
holdbacks, deductions, prorations and any other adjustments or costs affecting
the total Consideration shall be paid from or added to the Cash
Amount. For purposes hereof, the "Value" of the LP Units shall be
deemed to be equal to the Value, based upon a twenty (20)-day volume weighted
average price, of the REIT Shares (as defined in the OP's Limited Partnership
Agreement, hereinafter defined) into which the LP Units would be convertible if
converted at a one-to-one conversion ratio on the date of this
Agreement.
(b) Consideration
Contingency/Earn-Out. The OP, in its sole discretion, shall
determine the valuation of the Hotel on December 31, 2010. This
valuation of the Hotel shall be computed by applying a nine percent (9.0%)
capitalization rate to the audited trailing twelve (12) months net operating
income, adjusted for the revenue management fee, and a four percent (4.0%) of
revenue furniture, fixture and equipment reserve, property taxes and license
fees, and costs of property insurance (the "Valuation"). If
the then current Valuation of the Hotel exceeds the total Consideration (in the
amount of Thirteen Million Nine Hundred Seventy Thousand Dollars and No/100
($13,970,000.00)) as paid by the OP hereunder, the OP will pay in the lawful
money of the United States equal to the difference between the then current
Valuation and the Consideration paid hereunder (the "Earn-Out Payment"),
but in no event shall such Earn-Out Payment exceed One Million Nine Hundred and
Five Thousand Dollars and No/100 ($1,905,000.00) for the Hotel.
(c) Notwithstanding
the foregoing, no LP Units shall be issued by the OP, and following such
issuance no LP Units shall be transferred by Contributor to, any person or
entity that is not an accredited investor within the meaning of Regulation D
promulgated by the United States Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended (the "Securities Act"), and
to the extent any such non-accredited person or entity is entitled to receive
any portion of the Consideration, such portion shall be paid in cash rather than
LP Units and the number of LP Units issuable in payment of the Consideration
shall be reduced accordingly. The Contributor agrees to take such
actions as OP may reasonably request in order to assure that the issuance of any
LP Units pursuant to this Agreement complies with the requirements of the
Securities Act and Regulation D promulgated thereunder. Except as
otherwise expressly set forth in this Agreement, the Contributor acknowledges
and agrees that once the Closing occurs, the Contributor shall no longer hold
any right, title or interest in the Property (except through its ownership of
OP). Contributor hereby directs OP to pay, issue and distribute (as applicable)
the Consideration on the Closing Date to the Contributor in such amounts set
forth in this Agreement. The Contributor
acknowledges that any certificates evidencing the LP Units will bear appropriate
legends indicating (i) that the LP Units have not been registered under the
Securities Act, and (ii) that OP's Amended and Restated Limited Partnership
Agreement (the "OP's
Limited Partnership Agreement", attached hereto as Exhibit I) restricts
the transfer of the LP Units. The Contributor shall upon receipt of
the LP Units at Closing become a limited partner of OP by executing the form of
joinder (the "Joinder", attached
hereto as Exhibit
H) to the OP's Limited Partnership Agreement and deliver the executed
Joinder at closing pursuant to the terms of Section 6.2 hereof;
provided, however, that if the
Contributor is presently a limited partner of the OP, it shall not be required
to execute and deliver the Joinder. By executing and delivering the
Joinder in accordance with the terms hereof, the Contributor acknowledges that
it will be bound by the terms and provisions of the OP's Limited Partnership
Agreement.
7
ARTICLE III
To induce
the OP to enter into this Agreement and to accept the Property, Contributor
hereby makes the following representations, warranties and covenants, upon which
Contributor acknowledges and agrees that the OP is entitled to rely and has
relied:
3.1 Identity and
Power.
The
Contributor is a limited liability company duly formed, validly existing and in
good standing under the laws of the State of Maryland and has all requisite
powers necessary to carry on its business as now conducted, and to own and
operate the Property.
(a) Neither
the execution, delivery, or performance by the Contributor of this Agreement,
nor the consummation of the transactions contemplated hereby, nor compliance by
the Contributor with any of the provisions hereof, will:
(i) violate,
conflict with, result in a breach of any provision of, constitute a default (or
an event that, with notice or lapse of time or both, would constitute a default)
under, result in the termination of, accelerate the performance required by, or
result in a right of termination or acceleration, or the creation of any lien,
security interest, charge, or encumbrance upon any of the Property or other
assets of the Contributor, under any of the terms, conditions, or provisions of,
the Articles of Organization, the Contributor Operating Agreement or any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement, or other
instrument or obligation to which the Contributor is a party, or by which the
Contributor may be bound, or to which the Contributor or its properties or
assets may be subject; or
8
(ii)
violate any judgment, ruling, order, writ, injunction, decree, statute, rule, or
regulation applicable to the Contributor or any of the Contributor's properties
or assets.
(b) Except
under the Existing Loan, no party has any interest in the Property and no party
has any interest in the Contributor, or any portion thereof, or the right or
option to acquire any interest in the Contributor or the Property or any portion
thereof. The Contributor has no subsidiaries.
(c) The
Contributor has conducted no business other than the ownership and operation of
the Property.
3.3 Litigation with respect to
Contributor. Except as set forth on Exhibit E, there is no
action, suit, claim or proceeding pending or, to the Contributor's Knowledge,
threatened against or affecting the Contributor or its assets in any court,
before any arbitrator or before or by any governmental body or other regulatory
authority (i) that would materially adversely affect the Contributor or the
Property, (ii) that seeks restraint, prohibition, damages or other relief in
connection with this Agreement or the transactions contemplated hereby, or (iii)
would delay the consummation of any of the transactions contemplated
hereby. The Contributor is not subject to any judgment, decree,
injunction, rule or order of any court relating to the Contributor's
participation in the transactions contemplated by this Agreement.
3.4 Title to the
Property.
Except
for liens disclosed by Contributor to OP, the Property is, on the date hereof,
and will be on the Closing Date, free and clear of all liens and
encumbrances, has good, marketable title thereto and the right to
convey same. The Contributor is the fee owner of the Real Property
and the sole owner of the Property. As of the Closing Date, the
Property Partnership will own the Real Property in fee simple and the
Property.
Title to
the Real Property as delivered to the OP and the Property Partnership shall be
good and marketable legal and equitable title, free and clear of all liens,
restrictions, easements, encumbrances, leases (except the Leases), tenancies and
other title objections, except the Permitted Title Exceptions. Title
to the Inventory, the Reservation System, the Tangible Personal Property and the
Intangible Personal Property shall be good and marketable and free and clear of
all liens, security interests and other encumbrances.
3.5 Bankruptcy. No
Act of Bankruptcy has occurred with respect to the Contributor or the
Property.
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3.6 Brokerage
Commission. The Contributor has not engaged the services of,
nor is it or will it or OP become liable to, any real estate agent, broker,
finder or any other person or entity for any brokerage or finder's fee,
commission or other amount with respect to the transactions described herein on
account of any action by the Contributor.
3.7 Liabilities, Debts and
Obligations. Except for the Continuing Liabilities and any
other liabilities disclosed by Contributor to the OP, the Contributor has no
liabilities, debts or obligations.
3.8 Tax
Matters.
(a) Notwithstanding
anything to the contrary contained in this Agreement, including without
limitation the use of words and phrases such as "sell," "sale," purchase," and
"pay," the parties hereto acknowledge and agree that it is its intent that the
transaction contemplated hereby shall be treated for federal income tax purposes
pursuant to Section 721 of the Internal Revenue Code of 1986, as amended, as the
contribution of the Property by the Contributor to the OP in exchange for the
Consideration, and not as a transaction in which Contributor is acting other
than in the capacity as a prospective partner in the OP.
(b) The
Contributor represents and warrants that it has obtained from its own counsel
advice regarding the tax consequences of (i) the transfer of the Property to the
OP and the receipt of the Consideration therefor, (ii) the Contributor's
admission as a limited partner of the OP, and (iii) any other transaction
contemplated by this Agreement. The Contributor further represents
and warrants that it has not relied on the OP or the OP's representatives or
counsel for such tax advice.
(c) The
Contributor has filed within the time and in the manner prescribed by law all
federal, state, and local tax returns and reports, including but not limited to
income, gross receipts, intangible, real property, excise, withholding,
franchise, sales, use, employment, personal property, and other tax returns and
reports, required to be filed with respect to the Contributor and the Property
under the laws of the United States and of each state or other jurisdiction in
which the Contributor conducts business activities requiring the filing of tax
returns or reports. All tax returns and reports filed by the
Contributor are true and correct in all material respects. The
Contributor has paid in full all taxes of whatever kind or nature for the
periods covered by such returns. The Contributor has not been
delinquent in the payment of any tax, assessment, or governmental charge or
deposit and has no tax deficiency or claim outstanding, assessed, threatened, or
proposed against it. The charges, accruals, and reserves for unpaid
taxes on the books and records of the Contributor as of the Closing Date are
sufficient in all respects for the payment of all unpaid federal, state, and
local taxes of Contributor accrued for or applicable to all periods ended on or
before the Closing Date. There are no tax liens, whether imposed by
the United States, any state, local, or other taxing authority, outstanding
against the Contributor or any of its assets. The federal, state, and
local tax returns of the Contributor have not been audited, nor has the
Contributor received any notice of any federal, state, or local
audit. The Contributor has not obtained or received any extension of
time (beyond the Closing Date) for the assessment of deficiencies for any years
or waived or extended the statute of limitations for the determination or
collection of any tax. To the Contributor's Knowledge, no unassessed
tax deficiency is proposed or threatened against the Property.
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(d) All
taxes, including real property taxes and rental taxes or the equivalent, and all
interest and penalties due thereon, required to be paid or collected by the
Contributor in connection with the operation of the Property as of the Closing
Date will have been collected and/or paid to the appropriate governmental
authorities, as required or such amounts shall be pro-rated as of the Closing
Date. The Contributor shall file, all necessary returns and petitions
required to be filed through the Closing Date.
3.9 Contracts and
Agreements. With respect to the Property, there is no loan
agreement, guarantee, note, bond, indenture and other debt instrument, lease or
other contract to which the Contributor is a party or by which its assets are
bound other than the Permitted Title Exceptions, the Leases, and the Operating
Contracts.
3.10 No Special
Taxes. The Contributor has no Knowledge of, nor has it
received any written notice of, any special taxes or assessments relating to the
Property or any part thereof or any planned public improvements that may result
in a special tax or assessment against the Property.
3.11 Compliance with Existing
Laws. The Contributor possesses all Authorizations, each of
which is valid and in full force and effect, and, to Contributor's Knowledge, no
provision, condition or limitation of any of the Authorizations has been
breached or violated. The Contributor has not misrepresented or
failed to disclose any relevant fact in obtaining all Authorizations, and the
Contributor has no Knowledge of any change in the circumstances under which
those Authorizations were obtained that result in its termination, suspension,
modification or limitation. The Contributor has no Knowledge, nor has
it received written notice within the past three (3) years, of any existing
violation of any provision of any applicable building, zoning, subdivision,
environmental or other governmental ordinance, resolution, statute, rule, order
or regulation, including but not limited to those of environmental agencies or
insurance boards of underwriters, with respect to the ownership, operation, use,
maintenance or condition of the Property or any part thereof, or requiring any
repairs or alterations other than those that have been made prior to the date
hereof.
3.12 Operating
Contracts. The Contributor has performed all of the
obligations under each of the Operating Contracts and no fact or circumstance
has occurred which, by itself or with the passage of time or the giving of
notice or both, would constitute a material default under any of the Operating
Contracts. Without the prior written consent of the OP, which consent
will not be unreasonably withheld or delayed, the Contributor shall not enter
into any new management agreement, maintenance or repair contract, supply
contract, lease in which it is lessee or other agreements with respect to the
Property, nor shall the Contributor enter into any agreements modifying the
Operating Contracts.
3.13 Warranties and
Guaranties. The Contributor shall not release or modify any
warranties or guarantees, if any, of manufacturers, suppliers and installers
relating to the Improvements and the Tangible Personal Property or any part
thereof, except with the prior written consent of the OP, which consent shall
not be unreasonably withheld or delayed. A complete list of all such
warranties and guaranties in effect as of the date of this Agreement is attached
hereto as Exhibit
D.
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3.14 Insurance. All
of the Contributor's Insurance Policies are valid and in full force and effect,
all premiums for such policies were paid when due and the Contributor shall pay
all future premiums for such policies (and any replacements thereof) on or
before the due date therefor. The Contributor shall pay all premiums
on, and shall not cancel or allow to expire, any of its Insurance Policies prior
to the Closing Date unless such policy is replaced, without any lapse of
coverage, by another policy or policies providing coverage at least as extensive
as the policy or policies being replaced.
3.15 Condemnation Proceedings;
Roadways. The Contributor has not received written notice of
any condemnation or eminent domain proceeding pending or threatened against the
Property or any part thereof. The Contributor has no Knowledge of any
change or proposed change in the route, grade or width of, or otherwise
affecting, any street or road adjacent to or serving the Real
Property.
3.16 Labor Disputes and
Agreements. There are not currently any labor disputes pending
or, threatened as to the operation or maintenance of the Property or any part
thereof. The Contributor is not a party to any union or other
collective bargaining agreement with employees employed in connection with the
ownership, operation or maintenance of the Property. The OP will not
be obligated to give or pay any amount to any employee of the Contributor and
the OP shall not have any liability under any pension or profit sharing plan
that the Contributor may have established with respect to the
Property or its employees.
3.17 Financial
Information. To the Contributor's Knowledge, except as
otherwise disclosed in writing to the OP prior to the end of the Study Period,
for each of the Contributor's accounting years, when a given year is taken as a
whole, all of the Contributor's financial information previously delivered or to
be delivered to the OP is and shall be correct and complete in all material
respects and presents accurately the financial condition of the Contributor and
results of the operations of the Property for the periods indicated, except that
such statements do not have footnotes or schedules that may otherwise be
required by GAAP. If requested by the OP, the Contributor shall
deliver promptly all four-week period ending financial information available to
the Contributor and the Hotel. The Contributor's financial
information is prepared based on books and records maintained by the Contributor
in accordance with the Contributor's accounting system. The
Contributor's financial information has been provided to the OP without any
changes or alteration thereto. To the best of Contributor's
Knowledge, since the date of the last financial statement included in the
Contributor's financial information, there has been no material adverse change
in the financial condition or in the operations of the Property.
3.18
Organizational
Documents. The Articles of Organization and the Contributor
Operating Agreement, are in full force and effect and have not been modified or
supplemented, and no fact or circumstance has occurred that, by itself or with
the giving of notice or the passage of time or both, would constitute a default
thereunder.
3.19 Operation of
Property. The Contributor covenants that between the date
hereof and the Closing Date, Contributor shall (a) operate the Property only in
the usual, regular and ordinary manner consistent with the Contributor's prior
practice, (b) maintain the books of account and records in the usual, regular
and ordinary manner, in accordance with sound accounting principles applied on a
basis consistent with the basis used in keeping its books in prior years, and
(c) use all reasonable efforts to preserve intact the present business
organization, keep available the services of the present officers and employees
and preserve its relationships with suppliers and others having business
dealings with it. The Contributor shall continue to make good faith
efforts to take guest room reservations and to book functions and meetings and
otherwise to promote the business of the Property in generally the same manner
as the Contributor did prior to the execution of this
Agreement. Except as otherwise permitted hereby, from the date hereof
until Closing, the Contributor shall use its good faith efforts not to take any
action or fail to take action the result of which (i) would have a material
adverse effect on the Property or the OP's ability to continue the operation
thereof after the Closing Date in substantially the same manner as presently
conducted, (ii) reduce or cause to be reduced any room rents or any other
charges over which Contributor has operational control, or (iii) would cause any
of the representations and warranties contained in this Article III to be
untrue as of Closing.
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3.20 Hazardous
Substances. Except for matters in the Contributor's or OP's
audits, Contributor has no Knowledge: (a) of the presence of any
Hazardous Substances (as defined below) on the Property, or any portion thereof,
or, (b) of any spills, releases, discharges, or disposal of Hazardous Substances
that have occurred or are presently occurring on or onto the Property, or any
portion thereof, or (c) of the presence of any PCB transformers serving, or
stored on, the Property, or any portion thereof, and Contributor has no
Knowledge of any failure to comply with any applicable local, state and federal
environmental laws, regulations, ordinances and administrative and judicial
orders relating to the generation, recycling, reuse, sale, storage, handling,
transport and disposal of any Hazardous Substances (as used herein, "Hazardous Substances"
shall mean any substance or material whose presence, nature, quantity or
intensity of existence, use, manufacture, disposal, transportation, spill,
release or effect, either by itself or in combination with other materials is
either: (1) potentially injurious to the public health, safety or
welfare, the environment or the Property, (2) regulated, monitored or defined as
a hazardous or toxic substance or waste by any Governmental Body, or (3) a basis
for liability of the owner of the Property to any Governmental Body or third
party, and Hazardous Substances shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil, or any products, by-products or
components thereof, and asbestos). Notwithstanding anything to the
contrary contained herein Contributor shall have no liability to OP for any
Hazardous Substances of which Contributor has no Knowledge.
3.21 Room
Furnishings. All public spaces, lobbies, meeting rooms, and
each room in the Hotel available for guest rental is furnished in accordance
with commercially reasonable standards for the Hotel and room type.
3.22 Independent
Audit. Contributor shall provide access by OP's
representatives, to all financial and other information relating to the Property
and the Contributor.
3.23 Bulk Sale
Compliance. Contributor shall indemnify OP against any claim,
loss or liability arising under the bulk sales law in connection with the
transaction contemplated herein.
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3.24 Sufficiency of Certain
Items. The Property contains not less than:
(a) a
sufficient amount of furniture, furnishings, color television sets, carpets,
drapes, rugs, floor coverings, mattresses, pillows, bedspreads and the like, to
furnish each guest room, so that each such guest room is, in fact, fully
furnished; and
(b) a
sufficient amount of towels, washcloths and bed linens, so that there are three
(3) sets of towels, washcloths and linens for each guest room (one on the beds,
one on the shelves, and one in the laundry), together with a sufficient supply
of paper goods, soaps, cleaning supplies and other such supplies and materials,
as are reasonably adequate for the current operation of the Hotel.
3.25 Leases. True,
complete copies of the Leases, are attached as Exhibit C
hereto. The Leases are, and will at Closing be, in full force and
effect and the Contributor is not in default and the Contributor shall make good
faith efforts for itself not to be in default with respect thereto (with or
without the giving of any notice and/or lapse of time).
3.26 Noncontravention. The
execution and delivery of, and the performance by the Contributor of its
obligations under this Agreement do not and will not contravene, or constitute a
default under, any provision of applicable law or regulation, or any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Contributor, or result in the creation of any lien or other encumbrance on any
asset of the Contributor. There are no outstanding agreements
(written or oral) pursuant to which the Contributor (or any predecessor to or
representative of the Contributor) has agreed to contribute or has granted an
option or right of first refusal to acquire the Property or any part
thereof.
3.27 Securities Law
Matters.
(a) The
Contributor and its Members are accredited investors as defined under the
securities laws. In acquiring the LP Units and engaging in this
transaction, the Contributor and its Members are not relying upon any
representations made to it by the OP or REIT, or any of the officers, employees,
or agents of the OP or REIT not contained herein. The Contributor and
its Members are relying upon their own independent analysis and assessment
(including with respect to taxes), and the advice of such Contributor's advisors
(including tax advisors), and not upon that of the OP or REIT or any of OP's or
REIT's advisors or affiliates, for purposes of evaluating, entering into, and
consummating the transactions contemplated by this Agreement. Each of the
Contributor and its Members individually represent and warrant that they have
reviewed and approved the form of the OP's Limited Partnership
Agreement.
(b) The
Contributor and its Members acknowledge that the LP Units offered hereby are
being offered without registration under the Securities Act or any state
securities acts and are instead being offered and sold in reliance on an
exemption from such registration requirements under Regulation D under the
Securities Act ("Regulation
D"). The Contributor and its Members further acknowledge
that, to satisfy the requirements of these exemptions, the OP must determine
whether a prospective holder of LP Units meets the definition of accredited
investor before selling securities to such prospective holder.
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(i)
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The
LP Units will be acquired for investment for Contributor's or its Members'
own accounts, not as a nominee or agent, and not with a view to the public
resale or distribution thereof within the meaning of the Securities Act,
and Contributor and its Members have no present intention of selling,
granting any participation in, or otherwise distributing the LP
Units.
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(ii)
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Contributor
and its Members each understand that the acquisition of the LP Units
involves substantial risk. Contributor and its Members each
individually has experience as an investor in partnerships similar to the
OP and acknowledges that they are able to represent themselves, can bear
the economic risk of the investment in the LP Units and has such knowledge
and experience in financial or business matters that renders them capable
of evaluating the merits and risks of the acquisition of the LP Units and
protecting their interests in connection with this
investment.
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(iii)
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Contributor
and its Members are an accredited investor within the meaning of
Regulation D promulgated under the Securities Act and has received copies
of the OP's Partnership Agreement, the REIT's Declaration of Trust and
Bylaws and the REIT SEC Documents and has read and understands the
respective contents thereof. Contributor and its Members have
had the opportunity to ask questions of the REIT and have received answers
to such questions. Contributor and its Members have each
carefully reviewed and evaluated the documents provided to them by the
REIT and understand the risks and other considerations related to the
investment.
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(iv)
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Contributor
and its Members understand that the LP Units are characterized as
"restricted securities" under the Securities Act inasmuch as they are
being acquired from the Partnership in a transaction not involving a
public offering and that under the Securities Act and applicable rules and
regulations thereunder such securities may be resold without registration
under the Securities Act only in certain limited
circumstances. Contributor understands that no public market
now exists for the Partnership Units and that it is uncertain whether such
a public market will ever exist.
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(v)
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The
Contributor and its Members were at no time presented with or solicited by
any form of general solicitation or general advertising, including, but
not limited to, any advertisement, article, notice or other communication
published in any newspaper, magazine, or similar media or broadcast over
television or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising in connection
with the acquisition of the LP Units contemplated
hereby.
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3.28 Patriot Act
Representations. The Contributor and, to the actual knowledge
of the Contributor and any direct owner of the Contributor is (i) not included
on any Government List (as defined below), (ii) not a person who has been
determined by competent authority to be subject to the prohibitions contained in
the Presidential Executive Order No. 13224 or any other similar prohibitions
contained in the rules and regulations of the OFAC or in any enabling
legislation or other Presidential Executive Orders in respect thereof, (iii) has
not been indicted or convicted of any Patriot Act Offenses, or (iv) not
currently under investigation by any governmental authority for alleged criminal
activity. For purposes of this Agreement, (i) "Government List"
means (A) the Specially Designated Nationals and Blocked Persons List maintained
by OFAC, (B) any other list of terrorists, terrorist organizations or narcotics
traffickers maintained pursuant to any of the Rules and Regulations of OFAC, or
(C) any similar list maintained by the United States Department of State, the
United States Department of Commerce or any other governmental authority or
pursuant to any Executive Order of the President of the United States of
America; (ii) "OFAC" means the
Office of Foreign Asset Control, U.S. Department of the Treasury, (iii) "Patriot Act" means
the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as the same may
be amended from time to time, and corresponding provisions of future laws, and
(iv) "Patriot Act
Offense" means any violation of the criminal laws of the United States of
America or of any of the several states, or that would be a criminal violation
if committed within the jurisdiction of the United States of America or any of
the several states, relating to terrorism or the laundering of monetary
instruments, including any offense under (A) the criminal laws against
terrorism, (B) the criminal laws against money laundering, (C) the Bank Secrecy
Act, as amended, (D) the Money Laundering Control Act of 1986, as amended, or
(E) the Patriot Act and also includes the crimes of conspiracy to commit, or
aiding and abetting another to commit, any of the foregoing.
Each of
the representations, warranties and covenants contained in this Article III and its
various subparagraphs are intended for the benefit of the OP and the Property
Partnership and may be waived in whole or in part, by the OP, but only by an
instrument in writing signed by the OP. Each of said representations,
warranties and covenants shall survive the closing of the transaction
contemplated hereby for twelve (12) months, and no investigation, audit,
inspection, review or the like conducted by or on behalf of the OP shall be
deemed to terminate the effect of any such representations, warranties and
covenants, it being understood that the OP and Property Partnership each has the
right to rely thereon and that each such representation, warranty and covenant
constitutes a material inducement to execute this Agreement and to close the
transaction contemplated hereby and to pay the Consideration to the
Contributor. The OP and Property Partnership each acknowledges and
agrees that, except for the representations and warranties expressly set forth
herein, the OP and Property Partnership are receiving the Property "AS-IS,
WHERE-IS" with no representations or warranties by or from the Contributor,
express or implied, or any nature whatsoever.
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ARTICLE IV
To induce
the Contributor to enter into this Agreement and to sell the Property, the OP
hereby makes the following representations, warranties and covenants upon each
of which the OP acknowledges and agrees that the Contributor is entitled to rely
and have relied:
(a)
The OP is a limited partnership duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia, and has all partnership
powers and all governmental licenses, authorizations, consents and approvals to
carry on its business as now conducted and to enter into and perform its
obligations under this Agreement and any document or instrument required to be
executed and delivered hereunder.
(b) The
Property Partnership is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Maryland, and has
all company powers and all governmental licenses, authorizations, consents and
approvals to carry on its business as now conducted and to enter into and
perform its obligations under this Agreement and any document or instrument
required to be executed and delivered hereunder. The Property Partnership
is a directly and indirectly wholly-owned subsidiary of the OP.
(c) The
REIT is a real estate investment trust duly organized, validly existing and in
good standing under the laws of the State of Maryland, and has all company
powers and all governmental licenses, authorizations, consents and approvals to
carry on its business as now conducted and to enter into and perform its
obligations under this Agreement and any document or instrument required to be
executed and delivered hereunder.
4.2 Noncontravention. The
execution and delivery of this Agreement and the performance by the OP of its
obligations hereunder do not and will not contravene, or constitute a default
under, any provisions of applicable law or regulation, the OP's organizational
documents, or any agreement, judgment, injunction, order, decree or other
instrument binding upon the OP or result in the creation of any lien or other
encumbrance on any asset of the OP.
4.3 Litigation. There
is no action, suit or proceeding, pending or known to be threatened, against or
affecting the OP in any court or before any arbitrator or before any
Governmental Body which (a) in any manner raises any question affecting the
validity or enforceability of this Agreement or any other agreement or
instrument to which the OP are a party or by which it is bound and that is to be
used in connection with, or is contemplated by, this Agreement, (b) could
materially and adversely affect the ability of the OP to perform its obligations
hereunder, or under any document to be delivered pursuant hereto.
4.4 The
OP shall use any convention permitted by law and selected by the general partner
of the OP to make the allocations contemplated in the OP Limited Partnership
Agreement in respect of the issuance of the LP Units to be made pursuant to this
Agreement, except that any income, gain, loss, deduction or credit arising from
a sale, exchange or other disposition of property of the OP giving rise to
capital gain, capital loss, section 1231 gain or section 1231 loss (as such
terms are defined in Code Section 1231) shall be allocated to the holders of the
LP Units in accordance with their interests on the date of the transaction
giving rise to such gain or loss.
4.4 Bankruptcy. No
Act of Bankruptcy has occurred with respect to the OP.
17
4.5 No
Brokers. The OP has not engaged the services of, nor is it or
will it become liable to, any real estate agent, broker, finder or any other
person or entity for any brokerage or finder's fee, commission or other amount
with respect to the transaction described herein.
ARTICLE
V
The OP's
obligations hereunder are subject to the satisfaction of the following
conditions precedent and the compliance by the Contributor with the following
covenants:
5.1 Contributor's
Deliveries. The Contributor shall have delivered to the Escrow
Agent or the OP, as the case may be, on or before the date of Closing, all of
the documents and other information required of Contributor pursuant to Section
6.2.
5.2 Representations, Warranties
and Covenants; Obligations of Contributor; Certificate. All of
the Contributor's representations and warranties made in this Agreement shall be
true and correct as of the date hereof and as of the Closing Date as if then
made, there shall have occurred no material adverse change in the financial
condition of the Property since the date hereof, the Contributor
shall have performed all of its material covenants and other obligations under
this Agreement and the Contributor shall have executed and delivered to the OP
at Closing a certificate to the foregoing effect.
5.3 Title
Insurance. Good and indefeasible title to the fee interest in
the Real Property shall be insurable as such by the Title Company at or below
its regularly scheduled rates subject only to Permitted Title Exceptions as
determined in accordance with Section
2.2.
5.4 Condition of
Improvements. The Improvements and the Tangible Personal
Property (including but not limited to the mechanical systems, plumbing,
electrical, wiring, appliances, fixtures, heating, air conditioning and
ventilating equipment, elevators, boilers, equipment, roofs, structural members
and furnaces) shall be in the same condition at Closing as it are as of the date
hereof, reasonable wear and tear excepted. Prior to Closing, the
Contributor shall not have diminished the quality or quantity of maintenance and
upkeep services heretofore provided to the Real Property and the Tangible
Personal Property and the Contributor shall not have diminished the
Inventory. The Contributor shall not have removed or caused or
permitted to be removed any part or portion of the Real Property or the Tangible
Personal Property unless the same is replaced, prior to Closing, with similar
items of at least equal quality and acceptable to the OP.
5.5 Utilities. All
of the Utilities shall be installed in and operating at the Property, and
service shall be available for the removal of garbage and other waste from the
Property.
5.6 Property. From
the date hereof to and including the Closing Date, Contributor shall not sell,
assign, pledge, hypothecate or otherwise transfer the Property or interests in
the Contributor, except as contemplated by this Agreement, nor shall the
Contributor issue any securities, partnership or membership interests, as the
case may be, to any person or to sell, pledge, transfer or otherwise dispose of
the Property or any interest therein.
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5.7 Environmental
Audits. The Contributor shall have delivered to the OP all
updates to the environmental audit and reports, which updates shall not have
disclosed any changes to the environmental condition of the Property since the
date of the original environmental audit and reports.
5.8 Zoning. Contributor
has received no written notice from any Government Body to the effect that the
Property is being used in violation of the zoning and subdivision laws or that
there are outstanding notices of uncorrected violations of the zoning, housing,
building, safety or fire ordinances.
5.9 Existing
Mortgage. The OP acknowledges that the Property and the
Contributor are subject to a mortgage pursuant to the Existing Loan, a loan in
the original principal amount of Eight Million Two Hundred Fifty Thousand
Dollars ($8,250,000.00) from Manufacturers and Traders Trust Company, a New York
banking corporation. The OP will pay off or the Property Partnership
will assume the Existing Loan in full at Closing, as a part of the total
Consideration. The Contributor shall bear all costs and expenses
associated with the satisfaction and/or termination of the Existing
Loan. The OP shall bear all costs and expenses associated with an
assumption of the Existing Loan.
5.10 Third Party
Consents. (a) In the event of an assumption or
modification of the Existing Mortgage as contemplated hereunder, then as a
condition to Closing, the Contributor shall receive approval from Manufacturers
and Traders Trust Company for (i) the loan assumption by the Property
Partnership; (ii) to the contribution of the Property to the OP; and (iii) to
the percentage lease structure whereby, on the Closing Date, the Property
Partnership shall lease the Property to a REIT subsidiary ("Lessee") pursuant to
a percentage lease, and Lessee shall ender into a new management agreement with
Manager.
5.11 Management Agreement. As
a condition to Closing, the Contributor shall, as contemplated hereunder, to
terminate any and all existing management agreement for the management and
operation of the hotel.
5.12 Franchise License
Contingency. The current franchise licensor for the Hotel
shall approve in writing the transfer of the franchise license or the granting
of a new franchise license for the Hotel to the OP or its designated affiliate
("Franchise
Approval"). The OP shall be responsible for obtaining and
shall use diligent efforts to obtain Franchise Approval, provided that the
Contributor shall use diligent efforts in assisting the OP in obtaining
Franchise Approval, and shall fully cooperate with Purchaser's application and
pursuit of the same with the franchise licensor. In the event that
the OP is unable to obtain Franchise Approval on or before the Closing Date,
then either (i) the parties hereto shall agree to extend the Closing date for up
to thirty (30) days in order to obtain Franchise Approval; or (ii) either the OP
or the Contributor, at such party's sole option, may elect to terminate this
Agreement.
5.13 As
a condition to Closing, the Contributor shall, as contemplated hereunder, to
terminate any existing leases with respect to the Property, other than those
permitted pursuant to Exhibit C.
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ARTICLE VI
6.1 Closing. Closing
shall be held at a location that is mutually acceptable to the
parties. The anticipated Closing Date is June ___, 2008, which
date may be modified by the mutual consent of the parties.
6.2 Contributor'
Deliveries. At Closing, the Contributor shall deliver to OP
all of the following instruments, each of which shall have been duly executed
and, where applicable, acknowledged on behalf of the Contributor and shall be
dated as of the date of Closing:
(a) A
good and sufficient Deed conveying to the Property Partner fee simple interest
in the Real Property with good and clear record and marketable title, free of
all encumbrances and dated as of the Closing Date.
(b) The
Xxxx of Sale conveying to the OP, or its assignee, the Inventory, the
Reservation System, the Tangible Personal Property and the Intangible Personal
Property free of all encumbrances.
(c)
The closing certificate required by Section
5.2.
(d)
The Assignment and Assumption.
(e) Any
and all service contracts, space leases, and agreements.
(f)
Such agreements, affidavits or other documents as may be required by the Title
Company to issue the Owner's Title Policy with affirmative coverage over
mechanics' and materialmen's liens.
(g)
The FIRPTA Certificate.
(h)
True, correct and complete copies of all warranties, if any, of manufacturers,
suppliers and installers possessed by the Contributor and relating to the
Improvements and the Personal Property, or any part thereof.
(i)
Copies of the Articles of Organization and the Contributor Operating
Agreement.
(j)
Appropriate consent of the Contributor, authorizing (A) the execution of any
documents to be executed and delivered by the Contributor prior to, at or
otherwise in connection with Closing and in connection with the transactions
contemplated by this Agreement, and (B) the performance by the Contributor of
its obligations hereunder and under such documents.
(k) Valid,
final and unconditional certificate(s) of occupancy for the Real Property and
Improvements, issued by the appropriate Governmental Body.
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(l) Such
proof, reasonably acceptable to the OP, evidencing the payment by Contributor of
all transfer taxes incurred in connection with the transactions contemplated by
this Agreement.
(m) A
written instrument executed by the Contributor, conveying and transferring to
the Property Partnership all of the Contributor's right, title and interest in
any telephone numbers and facsimile numbers relating to the Property, and, if
the Contributor maintains a post office box, conveying to the Property
Partnership all of its interest in and to such post office box and the number
associated therewith, so as to assure a continuity in operation and
communication.
(n) All
current real estate and personal property tax bills in the Contributor's
possession or under its control.
(o) A
complete set of all guest registration cards, guest transcripts, guest
histories, and all other available guest information.
(p) An
updated schedule of employees, showing salaries and duties with a statement of
the length of service of each such employee, brought current to a date not more
than 48 hours prior to the Closing.
(q) A
complete list of all advance room reservations, functions and the like, in
reasonable detail so as to enable the OP to honor the Contributor's commitments
in that regard.
(r) A
list of the Contributor's outstanding accounts receivable as of midnight on the
date prior to the Closing, specifying the name of each account and the amount
due the Contributor.
(s) Possession
of the Property and all keys for the Property.
(t) All
books, records, operating reports, appraisal reports, files and other materials
in the Contributor's possession or control which are necessary in the OP's
discretion to maintain continuity of operation of the Property.
(u) To
the extent permitted under applicable law, documents of transfer necessary to
transfer to the OP the Contributor's employment rating for workmens'
compensation and state unemployment tax purposes.
(v) As
assignment of all warranties and guarantees from all contractors and
subcontractors, manufacturers, and suppliers in effect with respect to the
Improvements.
(w) Complete
set of "as-built" drawings for the Improvements as available in Contributor's
possession.
(x) The
Joinder.
(y) The
existing environmental reports for the Real Property.
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(z) The
existing ALTA survey for the Real Property, which shall have certification that
the Land is not in a flood hazard area
(aa) The
franchise license, commitment or transfer documents, as applicable.
(bb) Any
other document or instrument reasonably requested by the OP or required
hereby.
6.3 OP's
Deliveries. At Closing, the OP shall pay or deliver to the
Contributor the following:
(a) The
Consideration described in Section
2.3.
(b) The
Joinder.
(c) Any
other document or instrument reasonably requested by the Contributor or required
hereby.
6.4 Closing
Costs. Each party shall pay its own legal fees and
expenses. All filing fees and all charges for title insurance
premiums shall be paid by the OP. Any other costs, expenses or taxes,
including transfer taxes, shall shared equally by Contributor and the
OP.
6.5 Income and Expense
Allocations. All income, except any Intangible Personal
Property, and expenses with respect to the Property, determined in accordance
with United States generally accepted accounting principles consistently
applied, shall be allocated between the Contributor and the OP. The
Contributor shall be entitled to all income (including all cash box receipts and
cash credits for unused expendables), and responsible for all expenses for the
period of time up to but not including 12:01 a.m. on the Closing Date, and the
OP shall be entitled to all income and responsible for all expenses for the
period of time from, after and including 12:01 a.m. on the Closing
Date. Only adjustments for ground rent, if applicable, and real
estate taxes shall be shown on the settlement statements (with such supporting
documentation as the parties hereto may require being attached as exhibits to
the settlement statements) and shall increase or decrease (as the case may be)
the amount payable by the OP. All other such adjustments shall be
made by separate agreement between the parties and shall be payable by check or
wire directly between the parties. Without limiting the generality of
the foregoing, the following items of income and expense shall be allocated as
of the Closing Date:
(a) Current
and prepaid rents, including, without limitation, prepaid room receipts,
function receipts and other reservation receipts.
(b) Real
estate and personal property taxes.
(c) Amounts
under the Operating Contracts.
(d) Utility
charges (including but not limited to charges for water, sewer and
electricity).
22
(e) Wages,
vacation pay, pension and welfare benefits and other fringe benefits of all
persons employed at the Property who the OP elects to employ.
(f)
Value of fuel stored on the Property at the price paid for such fuel by the
Contributor, including any taxes.
(g) All
prepaid reservations and contracts for rooms confirmed by Contributor prior to
the Closing Date for dates after the Closing Date, all of which OP shall
honor.
The Tray
Ledger shall be retained by the Contributor. The Contributor shall be
required to pay all sales taxes and similar impositions currently up to the
Closing Date.
OP shall
not be obligated to collect any accounts receivable or revenues accrued prior to
the Closing Date for Contributor, but if OP collects same, such amounts will be
promptly remitted to Contributor in the form received.
If
accurate allocations cannot be made at Closing because current bills are not
obtainable (as, for example, in the case of utility bills or tax bills), the
parties shall allocate such income or expenses at Closing on the best available
information, subject to adjustment upon receipt of the final xxxx or other
evidence of the applicable income or expense. Any income received or
expense incurred by the Contributor or the OP with respect to the Property after
the date of Closing shall be promptly allocated in the manner described herein
and the parties shall promptly pay or reimburse any amount due. The
Contributor shall pay at Closing all special assessments and taxes applicable to
the Property.
ARTICLE VII
7.1 Condemnation. In
the event of any actual or threatened taking, pursuant to the power of eminent
domain, of all or any portion of the Real Property, or any proposed sale in lieu
thereof, the Contributor shall give written notice thereof to the OP promptly
after the Contributor learns or receives notice thereof. If all or
any part of the Real Property is, or is to be, so condemned or sold, the OP
shall have the right to terminate this Agreement pursuant to Section
8.3. If the OP elects not to terminate this Agreement, all
proceeds, awards and other payments arising out of such condemnation or sale
(actual or threatened) shall be paid or assigned, as applicable, to the OP at
Closing.
7.2 Risk of
Loss. The risk of any loss or damage to the Property
prior to the recordation of the Deed shall remain upon
Contributor. If any such loss or damage to more than Ten Percent
(10%) of the value of the Improvements occurs prior to Closing or any such loss
or damage is uninsured or underinsured, the OP shall have the right to terminate
this Agreement pursuant to Section
8.3. If the OP elects not to terminate this Agreement, all
insurance proceeds and rights to proceeds arising out of such loss or damage
shall be paid or assigned, as applicable, to the OP at Closing.
23
ARTICLE VIII
8.1 Liability of
OP. Except for any obligation expressly assumed or agreed to
be assumed by the OP hereunder and in the Assignment and Assumption, the OP does
not assume any obligation of the Contributor or any liability for claims arising
out of any occurrence prior to Closing.
8.2 Indemnification by
Contributor. The Contributor hereby indemnifies and holds each
of the OP and Property Partnership harmless from and against any and all suits,
actions, claims, costs, penalties, damages, losses, liabilities and expenses,
subject to Section 9.11,
that may at any time be incurred by the OP or Property Partnership, whether
before or after Closing, (i) as a result of any breach by the Contributor of any
of its representations, warranties, covenants or obligations set forth herein or
in any other document delivered by the Contributor pursuant hereto, (ii)
relating to any suits, litigation or actions brought against Contributor prior
to the Closing Date, (iii) in connection with any and all liabilities and
obligations of the Contributor occurring, accruing or arising prior to the
Closing Date, and/or (iv) as a result of or in connection with the use or
operation of the Property prior to the Closing Date.
8.3 Termination by
OP. If any condition set forth herein cannot or will not be
satisfied prior to Closing, or upon the occurrence of any other event that would
entitle the OP to terminate this Agreement and its obligations hereunder, and
the Contributor fails to cure any such matter within five (5) days after notice
thereof from the OP, the OP, at its option and as its sole remedy, shall elect
either (a) to terminate this Agreement, and all other rights and obligations of
the Contributor and the OP hereunder shall terminate immediately, or (b) to
waive its right to terminate and, instead, to proceed to Closing.
8.4 Termination by
Contributor. If, prior to Closing, the OP defaults in
performing any of its obligations under this Agreement, and the OP fails to cure
any such default within five (5) business days after notice thereof from the
Contributor, then the Contributor's sole remedy for such default shall be to
terminate this Agreement.
ARTICLE IX
9.1 Completeness;
Modification. This Agreement constitutes the entire agreement
between the parties hereto with respect to the transactions contemplated hereby
and supersedes all prior discussions, understandings, agreements and
negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties
hereto.
9.2 Assignments. The
OP may assign its rights hereunder to any affiliate of OP without the consent of
the Contributor. No such assignment shall relieve the OP of any of
its obligations and liabilities hereunder.
24
9.3 Successors and
Assigns. The benefits and burdens of this Agreement shall
inure to the benefit of and bind the OP, the Property Partnership and the
Contributor and their respective successors and assigns.
9.4 Days. If
any action is required to be performed, or if any notice, consent or other
communication is given, on a day that is a Saturday or Sunday or a legal holiday
in the jurisdiction in which the action is required to be performed or in which
is located the intended recipient of such notice, consent or other
communication, such performance shall be deemed to be required, and such notice,
consent or other communication shall be deemed to be given, on the first
business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
9.5 Governing Law. This
Agreement and all documents referred to herein shall be governed by and
construed and interpreted in accordance with the laws of the State of
Maryland.
9.6 Counterparts. To
facilitate execution, this Agreement may be executed in as many counterparts as
may be required. It shall not be necessary that the signature on
behalf of both parties hereto appear on each counterpart hereof. All
counterparts hereof shall collectively constitute a single
agreement.
9.7 Severability. If
any term, covenant or condition of this Agreement, or the application thereof to
any person or circumstance, shall to any extent be invalid or unenforceable, the
remainder of this Agreement, or the application of such term, covenant or
condition to other persons or circumstances, shall not be affected thereby, and
each term, covenant or condition of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
9.8 Costs. Regardless
of whether Closing occurs hereunder, and except as otherwise expressly provided
herein, each party hereto shall be responsible for its own costs in connection
with this Agreement and the transactions contemplated hereby, including without
limitation fees of attorneys, engineers and accountants.
9.9 Notices. All
notices, requests, demands and other communications hereunder shall be in
writing and shall be delivered by hand, transmitted by facsimile transmission,
sent prepaid by Federal Express (or a comparable overnight delivery service) or
sent by the United States mail, certified, postage prepaid, return receipt
requested, at the addresses and with such copies as designated
below. Any notice, request, demand or other communication delivered
or sent in the manner aforesaid shall be deemed given or made (as the case may
be) when actually delivered to the intended recipient.
|
If to the
Contributor:
|
Attn: Xxxxxxxx Xxxxx
|
Akshar
Limited Liability Company
0000
Xxxxxxxx Xxxxxxxxx
Xxxx
Xxxxxxx, Xxxxxxxx 00000
25
|
|
With a copy
to:
|
Xxxxx Xxxxx,
Esquire
|
|
|
00
Xxxxxx Xxxxx
|
Xxxxxxxxxx,
XX 00000
Phone: (000)
000-0000
Fax: (000)
000-0000
|
|
If to the
OP:
|
Hersha
Hospitality Limited Partnership
|
|
|
00
Xxxxxx Xxxxx
|
|
|
Xxxxxxxxxx,
XX 00000
|
Phone: (000)
000-0000
Fax: (000)
000-0000
Attn:
Xxxxxx X. Xxxxxx
|
|
With a copy
to:
|
Thea
Parent, Esquire
|
|
|
Franklin Firm,
LLP
|
Penn Mutual Towers
000
Xxxxxx Xxxxxx, 0xx
xxxxx
Xxxxxxxxxxxx,
XX 00000
Phone: (000)
000-0000
Fax:
(000) 000-0000
Or to
such other address as the intended recipient may have specified in a notice to
the other party. Any party hereto may change its address or designate
different or other persons or entities to receive copies by notifying the other
party and the Escrow Agent in a manner described in this Section.
9.10 Incorporation by
Reference. All of the exhibits attached hereto are by this
reference incorporated herein and made a part hereof.
9.11 Survival. All of the representations, warranties, covenants and
agreements of the Contributor and the OP made in, or pursuant to, this Agreement
shall survive for a period of twelve (12) months following Closing and shall not
merge into the Deed or any other document or instrument executed and delivered
in connection herewith, except for the representations and warranties set forth
in Sections
3.4, 3.7, 3.8 and 3.9, which shall
survive for periods coterminous with applicable statutes of
limitations.
9.12 Further
Assurances. The Contributor and the OP each covenants and
agrees to sign, execute and deliver, or cause to be signed, executed and
delivered, and to do or make, or cause to be done or made, upon the written
request of the other party, any and all agreements, instruments, papers, deeds,
acts or things, supplemental, confirmatory or otherwise, as may be reasonably
required by either party hereto for the purpose of or in connection with
consummating the transactions described herein.
9.13 No
Partnership. This Agreement does not and shall not be
construed to create a partnership, joint venture or any other relationship
between the parties hereto except the relationship of Contributor and OP
specifically established hereby.
26
9.14 Time of
Essence. Time is of the essence with respect to every
provision hereof.
9.15 Confidentiality. Contributor
and its representatives, including any professionals representing Contributor,
shall keep the existence and terms of this Agreement strictly confidential,
except to the extent disclosure is compelled by law, and then only to the extent
of such compulsion.
[The
remainder of this page is left intentionally blank.]
27
IN WITNESS WHEREOF, the
parties hereto have caused this Contribution Agreement to be executed in its
names by their respective duly-authorized representatives.
|
CONTRIBUTOR:
|
|||||
|
AKSHAR LIMITED LIABILITY
COMPANY, a Maryland limited liability company
|
|||||
|
By:
|
|
||||
|
Name:
|
Xxxxxxxx
Xxxxx
|
||||
|
Title:
|
Member
|
||||
|
OP:
|
|||||
|
HERSHA HOSPITALITY LIMITED
PARTNERSHIP, a Virginia limited partnership
|
|||||
|
By:
|
Hersha
Hospitality Trust, a Maryland real estate investment trust, its sole
general partner
|
||||
| By: | |||||
| Name: | Xxxxxx X. Xxxxxx | ||||
| Title: | CFO | ||||
|
PROPERTY
PARTNERSHIP:
|
|||||
|
HERSHA CAMP SPRINGS ASSOCIATES,
LLC, a Maryland limited liability company
|
|||||
| By: | |||||
|
Name:
|
Xxxxxx X. Xxxxxx | ||||
| Title: | Manager | ||||
| REIT: | |||||
|
HERSHA HOSPITALITY
TRUST, a Maryland real estate investment trust
|
|||||
| By: | |||||
| Name: | Xxxxxx X. Xxxxxx | ||||
| Title: | CFO | ||||
28