Exhibit 10.8
CONTRIBUTION AGREEMENT
BY AND BETWEEN
PORTSMOUTH HOTEL DEVELOPERS, LLC,
a Georgia limited liability company,
as the Contributor
AND
HIGHLAND HOSPITALITY, L.P.,
a Delaware limited partnership,
as the Acquirer
TABLE OF CONTENTS
Page
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ARTICLE I The Contribution................................................... 1
1.1 Contribution of Contributed Assets................................... 1
1.2 Consideration........................................................ 1
1.3 Deposit.............................................................. 2
1.4 Redemption Rights for Units.......................................... 3
1.5 Tax Consequences to Contributor...................................... 3
ARTICLE II Representations and Covenants..................................... 3
2.1 Representations by Acquirer.......................................... 3
2.2 Representations by Contributor....................................... 5
2.3 Satisfaction of Conditions........................................... 8
2.4 Contributor's Indemnity.............................................. 8
2.5 Acquirer's Indemnity................................................. 8
2.6 Consent to Transfers................................................. 8
ARTICLE III Conditions Precedent to the Closing.............................. 9
3.1 Conditions to Acquirer's Obligations................................. 9
3.2 Conditions to Contributor's Obligations.............................. 9
ARTICLE IV Closing and Closing Documents.................................... 10
4.1 Closing............................................................. 10
4.2 Contributor's Deliveries............................................ 10
4.3 Acquirer's Deliveries............................................... 11
4.4 Fees and Expenses; Closing Costs.................................... 11
4.5 Default Remedies.................................................... 11
ARTICLE V Miscellaneous..................................................... 12
5.1 Notices............................................................. 12
5.2 Entire Agreement; Modifications and Waivers; Cumulative Remedies.... 13
5.3 Exhibits............................................................ 13
5.4 Successors and Assigns.............................................. 13
5.5 Article Headings.................................................... 13
5.6 Governing Law....................................................... 13
5.7 Counterparts........................................................ 13
5.8 Survival............................................................ 13
5.9 Further Acts........................................................ 14
5.10 Severability....................................................... 14
5.11 Attorneys' Fees.................................................... 14
5.12 Confidentiality.................................................... 14
EXHIBITS
A Assignment
B Partnership Agreement
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of the 6th day of
August, 2003 by and between PORTSMOUTH HOTEL DEVELOPERS, LLC, a Georgia
limited liability company (the "Contributor"); and HIGHLAND HOSPITALITY, L.P., a
Delaware limited partnership (the "Acquirer").
RECITALS
A. Portsmouth Hotel Associates, LLC, a Delaware limited liability company
(the "Company") is the owner of the leasehold interest in the 250-room hotel and
adjacent conference center known as the Renaissance Portsmouth Hotel and
Conference Center located in the City of Portsmouth, Virginia (the "Project").
B. The Contributor is the record and beneficial owner of 33.33% of the
membership interests in the Company (the "Contributed Assets"). CCC Chesapeake
LLC (the "Barcelo Crestline Member") is the owner of 66.67% of the membership
interests in the Company. The Contributor desires to contribute the Contributed
Assets to the Acquirer, and the Acquirer desires to acquire the Contributed
Assets from the Contributor, on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
THE CONTRIBUTION
1.1 Contribution of Contributed Assets. The Contributor agrees to
contribute and transfer the Contributed Assets to the Acquirer, and the Acquirer
agrees to accept transfer of the Contributed Assets pursuant to the terms and
conditions set forth in this Agreement. The Contributed Assets shall be
transferred to the Acquirer free and clear of all liens, encumbrances, security
interests, prior assignments or conveyances, conditions, restrictions, claims,
and other matters affecting title thereto.
1.2 Consideration. The total consideration (the "Consideration") for which
the Contributor agrees to contribute and assign the Contributed Assets to the
Acquirer, and which the Acquirer agrees to pay or deliver to the Contributor,
subject to the terms of this Agreement, shall be the issuance to the Contributor
of a number of units of limited partnership interests in the Acquirer ("Units")
equal to (a) the excess of (i) One Million Seven Hundred Fifty Thousand Dollars
($1,750,000), which amount includes thirty-three and thirty-three hundredths
percent (33.33%) of the "Purchased Working Capital" (as defined below), over
(ii) the "Initial Deposit" (as defined below), divided by (b) the price (net of
the underwriting discount) at which the
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common shares (the "Common Shares") of Highland Hospitality Corporation, a
Maryland corporation (the "REIT"), are offered to (X) the public in the
underwritten initial public offering of the Common Shares, or (Y) Qualified
Institutional Buyers in a private placement of the Common Shares under Rule 144A
of the Securities Act of 1933, as amended, either of which offering shall result
in gross offering proceeds of not less than Two Hundred Fifty Million Dollars
($250,000,000) (either of which offering shall hereinafter be referred to as the
"IPO") before any discounts or fees paid to underwriters or placement agents. On
the Closing Date (as defined below), the Units shall be distributed to the
Contributor. At such time, the Acquirer shall issue to the Contributor
certificates reflecting the Contributor's ownership of Units. In no event shall
the number of Units issued to the Contributor be less than 33.33% of the
aggregate of all Units issued to members of the Company. Any certificates
evidencing the Units will bear appropriate legends indicating (i) that the Units
have not been registered under the Securities Act of 1933, as amended
("Securities Act"), and (ii) that the Acquirer's amended and restated agreement
of limited partnership (the "Partnership Agreement") will restrict the transfer
of the Units. Upon receipt of the Units, the Contributor shall become a limited
partner of the Acquirer and shall execute the Acquirer's Partnership Agreement.
Notwithstanding the provisions of Section 8.04(c) of the Partnership Agreement,
the Acquirer agrees that the restriction set forth in Section 8.04(c) of the
Partnership Agreement shall not apply to the Contributor's redemption of its
Units and the Acquirer agrees that if a redemption of the Contributor's Units
would trigger any of the provisions of subparts (i)-(v) of Section 8.04(c) of
the Partnership Agreement, the Acquirer will acquire the Units for cash. The
Contributor acknowledges and agrees that once Closing occurs, the Contributor
shall no longer be a member of the Company, shall no longer be entitled to
receive any distributions from the Company, and shall have no further right,
title or interest in the Company. The term "Purchased Working Capital" shall
mean the agreed upon sum of Two Hundred Fifty Thousand Dollars ($250,000), which
amount represents the Company's good faith estimate of the Company's current
assets shown on the hotel balance sheet (exclusive of any FF&E Reserves) less
the Company's current liabilities shown on the hotel balance sheet at the close
of business on the Closing Date. The Contributor shall be permitted an
opportunity to review the books and records of the Company prior to the Closing
Date (and for sixty (60) days thereafter) to verify the calculation of Purchased
Working Capital and all other working capital as of the Closing Date. Within
such sixty (60) day period, the parties hereto agree to calculate actual working
capital as of the Closing Date (including any amounts in any escrow or reserve
accounts as of the Closing Date). In the event that actual working capital at
Closing is more or less than Two Hundred Fifty Thousand Dollars ($250,000), then
the Contributor shall pay to the Acquirer 33.33% of the amount by which actual
working capital as of the Closing Date is less than $250,000, and the Acquirer
will pay to the Contributor 33.33% of the amount by which actual working capital
as of the Closing Date exceeds $250,000. The Contributor and the Barcelo
Crestline Member (by its execution hereof) hereby acknowledge and agree any such
adjustments shall be paid in cash to the party entitled thereto, and such
adjustments shall be deemed final.
1.3 Deposit. Within five (5) business days after the full execution of this
Agreement, the Acquirer shall pay to the Contributor the sum of Twenty-Five
Thousand Dollars ($25,000) (the "Initial Deposit") as consideration for the
Contributor entering into this Agreement. In the event that the Closing has not
occurred prior to 5:00 p.m. on the last business day of December, 2003, January,
2004 or February, 2004 the Acquirer shall pay to the Contributor an additional
sum of Twenty-Five Thousand Dollars ($25,000) within ten (10) days after the
last day of each
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such month (each such payment is referred to herein as an "Extension Payment").
The Initial Deposit and each such Extension Payment shall be deemed earned and
non-refundable immediately upon payment of the Initial Deposit and immediately
upon the Extension Payment becoming payable to the Contributor (except if the
Contributor defaults hereunder, in which event the Initial Deposit and each
Extension Payment shall be promptly refunded to the Acquirer).
1.4 Redemption Rights for Units. Each Unit shall be redeemable at the
option of the holder, in accordance with, but subject to the restrictions
contained in, the Partnership Agreement; provided, however, that such redemption
option may not be exercised prior to the first anniversary of the Closing Date.
1.5 Tax Consequences to Contributor. 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 their 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 (the "Code"), as
the contribution of the Contributed Assets by the Contributor to the Acquirer,
in exchange for the Units, the Initial Deposit, any Extension Payments, and any
payments made by Acquirer pursuant to Section 1.2 or Section 4.4, and not as a
transaction in which the Contributor is acting other than in its capacity as a
prospective partner in the Acquirer. If the Acquirer sells the Project within
twelve (12) months following the Closing, the Acquirer shall pay to the
Contributor a tax indemnity amount equal to the difference between (a) the
federal income tax liability associated with any gain from the sale of the
Project that is allocated by the Acquirer to the Contributor or its owners under
Section 704(c) of the Code (the "Section 704(c) Gain") and (b) the present value
(calculated as of the April 15th immediately following the calendar year in
which the sale of the Project occurs and using a 15% discount rate) of the same
dollar amount of federal income tax liability assuming such liability were not
due until the April 15th immediately following the calendar year in which the
first anniversary of the Closing falls. For purposes of computing the federal
income tax liability associated with Section 704(c) Gain, it will be assumed
that any capital gain that is subject to federal income tax at a maximum rate of
either 15% or 25% is actually subject to federal income tax at such maximum
rate.
ARTICLE II
REPRESENTATIONS AND COVENANTS
2.1 Representations by Acquirer. The Acquirer hereby represents and
warrants unto the Contributor that the following statements are true, correct,
and complete as of the date of this Agreement and will be true, correct, and
complete as of the Closing Date:
(a) Organization and Power. The Acquirer is duly organized, validly
existing, and in good standing under the laws of the State of Delaware, and has
full right, power, and authority to enter into this Agreement and to assume and
perform all of its obligations under this Agreement; and, the execution and
delivery of this Agreement and the performance by the Acquirer of its
obligations hereunder have been duly authorized by all requisite action of the
Acquirer and require no further action or approval of the Acquirer's partners or
of any other
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individuals or entities in order to constitute this Agreement as a binding and
enforceable obligation of the Acquirer.
(b) Noncontravention. Neither the entry into nor the performance of,
or compliance with, this Agreement by the Acquirer has resulted, or will result,
in any violation of, or default under, or result in the acceleration of, any
obligation under any existing certificate of limited partnership, partnership
agreement, mortgage, indenture, lien agreement, note, contract, permit,
judgment, decree, order, restrictive covenant, statute, rule, or regulation
applicable to the Acquirer.
(c) Litigation. There is no action, suit, or proceeding, pending or
known to be threatened, against or affecting the Acquirer in any court or before
any arbitrator or before any federal, state, municipal, or other governmental
department, commission, board, bureau, agency or instrumentality which (i) in
any manner raises any question affecting the validity or enforceability of this
Agreement, (ii) could materially and adversely affect the business, financial
position, or results of operations of the Acquirer, (iii) could materially and
adversely affect the ability of the Acquirer to perform its obligations
hereunder, or under any document to be delivered pursuant hereto.
(d) Units Validly Issued. The Units, when issued, will have been duly
and validly authorized and issued, free of any preemptive or similar rights, and
will be fully paid and nonassessable, without any obligation to restore capital
except as required by the Delaware Revised Uniform Limited Partnership Act (the
"Limited Partnership Act"). The Contributor shall be admitted as a limited
partner of the Acquirer as of the Closing Date and shall be entitled to all of
the rights and protections of a limited partner under the Limited Partnership
Act and the provisions of the Partnership Agreement, with the same rights,
preferences, and privileges as all other limited partners on a pari passu basis.
For purposes of allocating items of income, gain, loss and deduction with
respect to the Project and/or the Contributed Assets in the manner required by
Section 704(c) of the Code, the Acquirer shall employ, and shall cause any
entity controlled by the Acquirer which holds title to the Project or the
Contributed Assets to employ, the "traditional method" (without curative
allocations) as set forth in Treasury Regulation section 1.704-3(b)(1).
(e) Consents. Except as may otherwise be set forth in Section 3.1(d)
hereof, each consent, approval, authorization, order, license, certificate,
permit, registration, designation, or filing by or with any governmental agency
or body necessary for the execution, delivery, and performance of this Agreement
or the transactions contemplated hereby by the Acquirer has been obtained or
will be obtained on or before the Closing Date.
(f) Brokerage Commission. The Acquirer has not engaged the services of
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 Acquirer. The
Acquirer hereby agrees to indemnify and hold the Contributor and its employees,
directors, members, partners, affiliates and agents harmless against any claims,
liabilities, damages or expenses arising out of a breach of the foregoing. This
indemnification shall survive Closing or any termination of this Agreement.
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2.2 Representations by Contributor. The Contributor hereby represents and
warrants unto the Acquirer that each and every one of the following statements
is true, correct, and complete as of the date of this Agreement and will be
true, correct, and complete as of the Closing Date:
(a) Organization and Power. The Contributor is duly organized, validly
existing, and in good standing as a limited liability company under the laws of
the State of Georgia. The Contributor has full right, power, and authority to
enter into this Agreement and to assume and perform all of its obligations under
this Agreement; and the execution and delivery of this Agreement and the
performance by the Contributor of its obligations hereunder have been duly
authorized by all requisite action of Contributor and require no further action
or approval of Contributor's members or managers or of any other individuals or
entities (other than the Barcelo Crestline Member pursuant to the Operating
Agreement defined below) in order to constitute this Agreement as a binding and
enforceable obligation of the Contributor.
(b) Noncontravention. Neither the entry into nor the performance of,
or compliance with, this Agreement by the Contributor has resulted, or will
result, in any violation of, or default under, or result in the acceleration of,
any obligation under any limited liability company agreement, regulations,
mortgage indenture, lien agreement, note, contract, permit, judgment, decree,
order, restrictive covenant, statute, rule, or regulation applicable to
Contributor or to the Contributed Assets.
(c) Litigation. There is no action, suit, or proceeding, pending or
known to be threatened, against or affecting the Contributor in any court or
before any arbitrator or before any federal, state, municipal, or other
governmental department, commission, board, bureau, agency or instrumentality
which (A) in any manner raises any question affecting the validity or
enforceability of this Agreement, (B) could materially and adversely affect the
business, financial position, or results of operations of the Contributor, (C)
could materially and adversely affect the ability of the Contributor to perform
its obligations hereunder, or under any document to be delivered pursuant
hereto, (D) could create a lien on the Contributed Assets, any part thereof, or
any interest therein, or (E) could adversely affect the Contributed Assets, any
part thereof, or any interest therein.
(d) Good Title. (A) The Contributor is the sole owner of the
Contributed Assets, (B) the Contributor has good title to the Contributed
Assets, (C) the Contributed Assets are free and clear of all liens,
encumbrances, pledges, and security interests whatsoever, and (D) the
Contributor has not granted any other person or entity an option to purchase or
a right of first refusal upon the Contributed Assets nor are there any
agreements or understandings between Contributor and any other person or entity
with respect to the disposition of the Contributed Assets.
(e) No Consents. Except as may otherwise be set forth in Section
3.1(d) hereof, each consent, approval, authorization, order, license,
certificate, permit, registration, designation, or filing by or with any
governmental agency or body necessary for the execution, delivery, and
performance of this Agreement or the transactions contemplated hereby by the
Contributor has been obtained or will be obtained on or before the Closing Date.
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(f) Operation of Contributed Assets. Between the date hereof and the
Closing Date, the Contributor will (A) operate its business only in the usual,
regular, and ordinary manner consistent with such entity's prior practice and
(B) maintain its 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. Except
as otherwise permitted hereby, from the date hereof until the Closing Date, the
Contributor shall not take any action or fail to take any action the result of
which would (1) have a material adverse effect on the Contributed Assets, the
Project, or the Acquirer's ability to continue the operation thereof after the
Closing Date in substantially the same manner as presently conducted or (2)
would cause any of the representations and warranties contained in this Section
2.2 to be untrue as of the Closing Date.
(h) Operating Agreement. The Limited Liability Company Agreement of
the Company, dated as of February 23, 1999 (the "Operating Agreement") is in
force and effect as of the date hereof, and has not been modified or amended.
The Contributor has performed all of its obligations under the Operating
Agreement.
(i) Securities Law Matters. (A) In acquiring the Units and engaging in
this transaction, neither the Contributor nor any member thereof is relying upon
any representations made to it by the Acquirer, or any of its partners,
officers, employees, or agents that are not contained herein. The Contributor is
aware of the risks involved in investing in the Units and in the Common Shares
issuable upon redemption of such Units. The Contributor has had an opportunity
to ask questions of, and to receive answers from, the Acquirer and the REIT or a
person or persons authorized to act on their behalf, concerning the terms and
conditions of this investment and the financial condition, affairs, and business
of the Acquirer and the REIT. The Contributor confirms that all documents,
records, and information pertaining to its investment in the Acquirer that have
been requested by it, including a complete copy of the form of the Partnership
Agreement, have been made available or delivered to it prior to the date hereof.
The Contributor represents and warrants that it has reviewed and approved the
form of the Partnership Agreement attached hereto as Exhibit B.
(B) The Contributor and each member thereof understands that
neither the Units nor the Common Shares issuable upon redemption of the Units
have been registered 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. The Units issuable to the Contributor are being
acquired solely for its own account, for investment, and are not being acquired
with a view to, or for resale in connection with, any distribution, subdivision,
or fractionalization thereof, in violation of such laws, and the Contributor
does not have any present intention to enter into any contract, undertaking,
agreement, or arrangement with respect to any such resale; provided, however,
that, at or following Closing, the Contributor may distribute the Units to its
members that (1) have represented and warranted to the Acquirer in writing that,
as of the time of such distribution, such member is an accredited investor as
that term is defined in Rule 501 of Regulation D under the Securities Act of
1933, as amended, and (2) have executed the Partnership Agreement as limited
partners. The Contributor understands that any certificates evidencing the Units
will contain appropriate legends reflecting the requirement that the Units not
be resold by the Contributor without registration under such laws or the
availability of an
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exemption from such registration and that the Partnership Agreement will
restrict transfer of the Units.
(j) Accredited Investors. The Contributor is an accredited investor as
that term is defined in Rule 501 of Regulation D under the Securities Act of
1933, as amended.
(k) Tax Matters. (A) 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 by the
Contributor 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 the 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.
(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 Contributed Assets to the Acquirer and the receipt of Units as
consideration therefor, (ii) its admission as a limited partner of the Acquirer,
and (iii) any other transaction contemplated by this Agreement. The Contributor
further represents and warrants that it has not relied on the Acquirer or the
Acquirer's representatives or counsel for such tax advice.
(l) Bankruptcy with respect to Contributor. No Act of Bankruptcy has
occurred with respect to the Contributor. As used herein, "Act of Bankruptcy"
shall mean if a party hereto or any member or manager 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
bankrupt or insolvent, (F) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, receivership,
dissolution, 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 entity action
for the purpose of effecting any of the foregoing.
(m) Brokerage Commission. The Contributor has not engaged the services
of, any real estate agent, broker, finder or any other person or entity for any
brokerage or finder's
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fee, commission or other amount with respect to the transactions described
herein on account of any action by the Contributor. The Contributor hereby
agrees to indemnify and hold the Acquirer and its employees, directors, members,
partners, affiliates and agents harmless against any claims, liabilities,
damages or expenses arising out of a breach of the foregoing. This
indemnification shall survive Closing or any termination of this Agreement.
(n) Contractor's Warranty. The Contributor represents and warrants on
behalf of itself and its parents and affiliates that all warranties and
guaranties pertaining to the Project, including without limitation the general
contractor's warranty for the construction of the Project which covers the
leaking swimming pool, have been assigned to the Company with the consent of all
parties necessary for such warranties and guaranties to remain effective in
favor of the Company.
2.3 Satisfaction of Conditions. The Acquirer hereby covenants that the
Acquirer shall: (I) use commercially reasonable efforts and diligence in order
to satisfy all of the conditions set forth in subsections 3.1(d), (e), and (f)
and Section 3.2 hereof, and (II) cooperate and assist in the Contributor's
efforts to satisfy the conditions set forth in subsection 3.1(c) hereof; and the
Contributor shall not have any obligation to consummate the Closing hereunder
unless and until all such conditions have been satisfied or waived by the
Contributor in writing. The Contributor hereby covenants that the Contributor
shall: (A) use commercially reasonable efforts and diligence in order to satisfy
all of the conditions set forth in subsections 3.1(a), (b) and (c) hereof, and
(B) cooperate and assist in the Acquirer's efforts to satisfy the conditions set
forth in subsections 3.1(d) and (f) and subsection 3.2(c) hereof; and the
Acquirer shall not have any obligation to consummate the Closing hereunder
unless and until such conditions have been satisfied or waived by the Acquirer
in writing.
2.4 Contributor's Indemnity. The Contributor agrees to indemnify and hold
the Acquirer, the REIT, and their respective employees, directors, members,
partners, affiliates and agents harmless of and from all liabilities, losses,
damages, costs, and expenses (including reasonable attorneys' fees) which the
Acquirer or the REIT may suffer or incur by reason of any breach of its
representations or warranties contained in this Agreement, and by reason of any
act or cause of action occurring or accruing prior to the Closing Date and
arising from the ownership of the Contributed Assets prior to the Closing Date.
2.5 Acquirer's Indemnity. The Acquirer agrees to indemnify and hold the
Contributor and its employees, directors, members, partners, affiliates and
agents harmless of and from all liabilities, losses, damages, costs, and
expenses (including reasonable attorneys' fees) which the Contributor may suffer
or incur by reason of any breach of its representations or warranties contained
in this Agreement, and by reason of any act or cause of action occurring or
accruing subsequent to the Closing Date and arising from the ownership or
operation of the Contributed Assets or the operation of the Project subsequent
to the Closing Date.
2.6 Consent to Transfers. Pursuant to Section 5.2 of the Operating
Agreement, the Contributor hereby consents to the "Transfer" (as defined in the
Operating Agreement) of the Barcelo Crestline Member's membership interest in
the Company to the Acquirer pursuant to a separate agreement. By its execution
hereof, the Barcelo Crestline Member hereby consents to the Transfer of the
Contributed Assets to the Acquirer.
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ARTICLE III
CONDITIONS PRECEDENT TO THE CLOSING
3.1 Conditions to Acquirer's Obligations. In addition to any other
conditions set forth in this Agreement, the Acquirer's obligation to consummate
the Closing is subject to the timely satisfaction of each and every one of the
conditions and requirements set forth in this Section 3.1, all of which shall be
conditions precedent to the Acquirer's obligations under this Agreement.
(a) Contributor's Obligations. The Contributor shall have performed
all obligations of the Contributor hereunder which are to be performed prior to
Closing, and shall have delivered or caused to be delivered to the Acquirer, all
of the documents and other information required of the Contributor pursuant to
Section 4.2.
(b) Contributor's Representations and Warranties. The Contributor's
representations and warranties set forth in Section 2.2 shall be true and
correct as if made again on the Closing Date.
(c) No Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or other order issued by a court
of competent jurisdiction restraining or prohibiting the consummation of the
transactions contemplated hereby.
(d) Third Party Consents. To the extent required by the "City
Documents" or the "Franchise Documents" (as those terms are defined in the
Company's Limited Liability Company Agreement dated as of February 23, 1999),
the Acquirer shall have obtained the consent of the Industrial Development
Authority of the City of Portsmouth and/or Marriott International, Inc. to (i)
the Acquirer's acquisition of the Contributed Assets, and (ii) the lease or
sublease of the Project from the Company to a wholly-controlled affiliate of the
Acquirer.
(e) Completion of IPO. The IPO shall have been completed.
(f) Loan Payoff. The loan to the Company secured by, among other
things, a deed of trust on the Project (the "Project Loan") shall be paid in
full concurrently with the Closing.
3.2 Conditions to Contributor's Obligations. In addition to any other
conditions set forth in this Agreement, the Contributor's obligations to
consummate the Closing is subject to the timely satisfaction of each and every
one of the conditions and requirements set forth in this Section 3.2, all of
which shall be conditions precedent to the Contributor's obligations under this
Agreement.
(a) Acquirer's Obligations. The Acquirer shall have performed all
obligations of the Acquirer hereunder which are to be performed prior to
Closing, and shall have delivered or caused to be delivered to the Contributor,
all of the documents and other information required of the Acquirer pursuant to
Section 4.3.
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(b) Acquirer's Representations and Warranties. The Acquirer's
representations and warranties set forth in Section 2.1 shall be true and
correct as if made again on the Closing Date.
(c) Loan Payoff. The Project Loan shall be paid in full concurrently
with the Closing.
(d) Release by Barcelo Crestline Member. The Barcelo Crestline Member
shall execute a release at Closing releasing the named obligated party(ies) from
all obligations and liabilities under that certain Completion, Performance and
Contingent Repayment Guaranty dated as of May 24, 1999 in favor of the Barcelo
Crestline Member.
(e) Completion of IPO. The IPO shall have been completed, including
the filing with the Securities and Exchange Commission of a tax opinion
customary for an IPO for a real estate investment trust, and Barcelo Crestline
Corporation and/or its affiliates shall have made an aggregate equity investment
in the Acquirer or the REIT of not less than Ten Million Dollars ($10,000,000).
ARTICLE IV
CLOSING AND CLOSING DOCUMENTS
4.1 Closing. The consummation and closing (the "Closing") of the
transactions contemplated under this Agreement shall take place at the offices
of the Acquirer in McLean, Virginia, or such other place as is mutually
agreeable to the parties, on the date of the closing of the IPO (the "Closing
Date"), or as otherwise set by agreement of the parties; provided, however, that
this Agreement shall terminate and the Contributor shall retain the Initial
Deposit and each Extension Payment (unless the Contributor is in default
hereunder), if Closing does not occur prior to March 31, 2004.
4.2 Contributor's Deliveries. At the Closing, the Contributor shall deliver
the following to the Acquirer in addition to all other items required to be
delivered to the Acquirer by the Contributor:
(a) Assignment of Contributed Assets. The Contributor shall have
executed and delivered an Assignment, in substantially the form of Exhibit A
attached hereto, granting and conveying to the Acquirer good and indefeasible
title to the Contributed Assets, free and clear of all liens, encumbrances,
security interests, prior assignments, conditions, restrictions, claims, and
other matters affecting title thereto.
(b) Execution of Partnership Agreement. Signature pages of the
Partnership Agreement (which Partnership Agreement shall be in substantially the
form attached hereto as Exhibit B) duly executed by the Contributor, as limited
partner.
(c) FIRPTA Certificate. An affidavit from the Contributor certifying
pursuant to Section 1445 of the Internal Revenue Code that the Contributor is
not a foreign corporation, foreign partnership, foreign trust, foreign estate or
foreign person (as those terms are defined in the Internal Revenue Code and the
Income Tax Regulations promulgated thereunder).
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(d) Other Documents. Any other document or instrument reasonably
requested by the Acquirer or required hereby. Without limiting the generality of
the foregoing, certain individuals associated with the Contributor have served
as directors and officers in the Portsmouth Conference Center Hotel Association,
and such individuals shall resign and withdraw from such positions at Closing.
The Contributor shall deliver the minute book, the articles of incorporation,
the bylaws, a good standing certificate and the other books and records for such
Association to the Acquirer at Closing.
4.3 Acquirer's Deliveries. At the Closing, the Acquirer shall deliver the
following to the Contributor:
(a) Certificates for Units. If certificates are issued, certificates
representing Units duly issued by the Acquirer in the name of the Contributor as
of the Closing Date representing the Units to which the Contributor is entitled
pursuant to Section 1.2 of this Agreement.
(b) Executed Partnership Agreement. The fully executed Partnership
Agreement, with the original duly executed signature of the REIT, as general
partner, and original or photostatic copies of the signatures of all limited
partners.
(c) Other Documents. Any other document or instrument reasonably
requested by the Contributor or required hereby, including without limitation
the release required pursuant to Section 3.2(d) hereof.
4.4 Fees and Expenses; Closing Costs. The Acquirer shall pay all fees,
expenses and closing costs relating to the transactions contemplated by this
Agreement; provided however, that the Contributor shall pay its own attorneys'
and consultants' fees and expenses. Notwithstanding the foregoing, the Acquirer
agrees to reimburse the Contributor for up to $20,000 of the Contributor's
reasonable legal fees and expenses incurred in connection with the negotiation
and closing of the transaction contemplated by this Agreement, and the Acquirer
shall reimburse the Contributor for such fees and expenses regardless of whether
the transaction actually closes unless the failure to close is due to a default
by the Contributor (in which event the Acquirer's obligation to reimburse the
Contributor for such fees and expenses shall terminate).
4.5 Default Remedies. If the Closing fails to occur due to a default by the
Acquirer, the Contributor shall retain the Initial Deposit and the applicable
Extension Payments as the Contributor's sole and exclusive remedy for such
default, and the Contributor hereby waives any right it may have to damages
(compensatory, consequential or otherwise) from the Acquirer as a result of such
default; provided, however, that if the closing of the IPO occurs and all of the
other conditions precedent set forth in Section 3.1 hereof have been satisfied,
but the Acquirer fails to consummate the Closing contemplated hereunder with the
Contributor, the Contributor shall have the right to seek specific performance
of this Agreement. If the Contributor defaults in performing any of the
Contributor's obligations under this Agreement, the Acquirer shall have all
rights and remedies available to it at law or in equity resulting from the
Contributor's default, including without limitation, the right to seek specific
performance of this Agreement and the Contributor's obligation to convey the
Contributed Assets to the Acquirer hereunder. The parties
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acknowledge and agree that the failure of a condition precedent to occur,
notwithstanding the good faith and commercially reasonable efforts of the
applicable party, shall not be a default hereunder.
ARTICLE V
MISCELLANEOUS
5.1 Notices. Any notice provided for by this Agreement and any other
notice, demand, or communication required hereunder shall be in writing and
either delivered in person (including by confirmed facsimile transmission) or
sent by hand delivered against receipt or sent by recognized overnight delivery
service or by certified or registered mail, postage prepaid, with return receipt
requested. All notices shall be addressed as follows:
Acquirer:
c/o Highland Hospitality Corporation
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
XxXxxx, XX 00000
Attention: General Counsel
Fax No.: (000) 000-0000
with a copy to:
c/o Highland Hospitality Corporation
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
XxXxxx, XX 00000
Attention: Chief Executive Officer
Fax No.: (000) 000-0000
Contributor:
Xxx Xxxxxxxxx, Xxxxx 000
0000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Xx.
Fax No.: (000) 000-0000
with a copy to:
King & Spalding LLP
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
Attention: G. Xxxxx Xxxxxx, Esq. or Xxxxx X. Xxxxxxxx, Esq.
Fax No.: (000) 000-0000
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Any address or name specified above may be changed by a notice given by the
addressee to the other party. Any notice, demand or other communication shall be
deemed given and effective as of the date of delivery in person or receipt set
forth on the return receipt. The inability to deliver because of changed address
of which no notice was given, or rejection or other refusal to accept any
notice, demand or other communication, shall be deemed to be receipt of the
notice, demand or other communication as of the date of such attempt to deliver
or rejection or refusal to accept.
5.2 Entire Agreement; Modifications and Waivers; Cumulative Remedies. This
Agreement supersedes any existing letter of intent between the parties,
constitutes the entire agreement among the parties hereto and may not be
modified or amended except by instrument in writing signed by the parties
hereto, and no provisions or conditions may be waived other than by a writing
signed by the party waiving such provisions or conditions. No delay or omission
in the exercise of any right or remedy accruing to the Contributor or the
Acquirer upon any breach under this Agreement shall impair such right or remedy
or be construed as a waiver of any such breach theretofore or thereafter
occurring. The waiver by the Contributor or the Acquirer of any breach of any
term, covenant, or condition herein stated shall not be deemed to be a waiver of
any other breach, or of a subsequent breach of the same or any other term,
covenant, or condition herein contained. All rights, powers, options, or
remedies afforded to Contributor or the Acquirer either hereunder or by law
shall be cumulative and not alternative, and the exercise of one right, power,
option, or remedy shall not bar other rights, powers, options, or remedies
allowed herein or by law, unless expressly provided to the contrary herein.
5.3 Exhibits. All exhibits referred to in this Agreement and attached
hereto are hereby incorporated in this Agreement by reference.
5.4 Successors and Assigns. Except as set forth in this Article, this
Agreement may not be assigned by the Acquirer or the Contributor without the
prior approval of the other party hereto. This Agreement shall be binding upon,
and inure to the benefit of, the Contributor, the Acquirer, and their respective
legal representatives, successors, and permitted assigns.
5.5 Article Headings. Article headings and article and Section numbers are
inserted herein only as a matter of convenience and in no way define, limit, or
prescribe the scope or intent of this Agreement or any part hereof and shall not
be considered in interpreting or construing this Agreement.
5.6 Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the Commonwealth of Virginia, without regard to
conflicts of laws principles.
5.7 Counterparts. This Agreement may be executed in any number of
counterparts and by any party hereto on a separate counterpart, each of which
when so executed and delivered shall be deemed an original and all of which
taken together shall constitute but one and the same instrument.
5.8 Survival. All representations and warranties contained in this
Agreement, and all covenants and agreements contained in the Agreement which
contemplate performance after the
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Closing Date (including, without limitation, those covenants and agreements
contained in Section 1.2 hereof) shall survive the Closing.
5.9 Further Acts. In addition to the acts, instruments and agreements
recited herein and contemplated to be performed, executed and delivered by the
Acquirer and the Contributor, the Acquirer and Contributor shall perform,
execute, and deliver or cause to be performed, executed, and delivered at the
Closing or after the Closing, any and all further acts, instruments, and
agreements and provide such further assurances as the other parties may
reasonably require to consummate the transaction contemplated hereunder.
5.10 Severability. In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal, or unenforceable provision had never been
contained herein.
5.11 Attorneys' Fees. Should a party employ an attorney or attorneys to
enforce any of the provisions hereof or to protect its interest in any manner
arising under this Agreement, or to recover damages for breach of this
Agreement, any non-prevailing party in any action pursued in a court of
competent jurisdiction (the finality of which is not legally contested) shall
pay to the prevailing party all reasonable costs, damages, and expenses,
including reasonable attorneys' fees, expended or incurred in connection
therewith.
5.12 Confidentiality. The Contributor acknowledges that the matters
relating to the REIT, the IPO, this Agreement, and the other documents, terms,
conditions and information related thereto (collectively, the "Information") are
confidential in nature. Therefore, the Contributor covenants and agrees to keep
the Information confidential and will not (except as required by applicable law,
regulation or legal process, and only after compliance with the provisions of
this Section 5.12), without the Acquirer's prior written consent, disclose any
Information in any manner whatsoever; provided, however, that the Information
may be revealed only to the Contributor's key employees, legal counsel and
financial advisors and to Fremont Investment and Loan, the City of Portsmouth
and the Industrial Development Authority of the City of Portsmouth, each of whom
shall be informed of the confidential nature of the Information and shall agree
to act in accordance with the terms of this Section 5.12. In the event that the
Contributor or its key employees, legal counsel or financial advisors or Fremont
Investment and Loan, the City of Portsmouth or the Industrial Development
Authority of the City of Portsmouth (collectively, the "Information Group") are
requested pursuant to, or required by, applicable law, regulation or legal
process to disclose any of the Information, the applicable member of the
Information Group will notify the Acquirer promptly so that it may seek a
protective order or other appropriate remedy or, in its sole discretion, waive
compliance with the terms of this Section 5.12. In the event that no such
protective order or other remedy is obtained, or that the Acquirer waives
compliance with the terms of this Section 5.12, the applicable member of the
Information Group may furnish only that portion of the Information which it is
advised by counsel is legally required and will exercise all reasonable efforts
to obtain reliable assurance that confidential treatment will be accorded the
Information. The Contributor acknowledges that remedies at law may be inadequate
to protect the Acquirer or the REIT against any actual or threatened breach of
this Section 5.12, and, without prejudice to any other rights and remedies
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otherwise available, the Contributor agrees to the granting of injunctive relief
in favor of the REIT and/or the Acquirer without proof of actual damages.
Notwithstanding any other express or implied agreement to the contrary, the
parties agree and acknowledge that each of them and each of their employees,
representatives, and other agents may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the transaction
and all materials of any kind (including opinions or other tax analyses) that
are provided to any of them relating to such tax treatment and tax structure,
except to the extent that confidentiality is reasonably necessary to comply with
U.S. federal or state securities laws. For purposes of this paragraph, the terms
"tax treatment" and "tax structure" have the meanings specified in Treasury
Regulation section 1.6011-4(c).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
[SIGNATURES APPEAR ON FOLLOWING PAGES.]
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IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the 6th day of August, 2003.
CONTRIBUTOR:
PORTSMOUTH HOTEL DEVELOPERS, LLC, a
Georgia limited liability company
By: /s/ Xxxxx X. Xxxxxxxx, Xx.
----------------------------------
Name: Xxxxx X. Xxxxxxxx, Xx.
Title: Authorized Member
ACQUIRER:
HIGHLAND HOSPITALITY, L.P., a Delaware
limited partnership
By: Highland Hospitality Corporation,
its General Partner
By: /s/ Xxxxx X. Xxxxxxx
------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President, CEO
and Treasurer
The Barcelo Crestline Member executes this Agreement solely for the purpose
of (a) consenting to the Contributor's Transfer of the Contributed Assets to the
Acquirer, (b) agreeing to execute the release described in Section 3.2(d)
hereof, and (c) acknowledging the agreements with respect to the working capital
contained in Section 1.2 hereof.
BARCELO CRESTLINE MEMBER:
CCC CHESAPEAKE LLC, a Delaware
limited liability company
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
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EXHIBIT A
Assignment
PORTSMOUTH HOTEL DEVELOPERS, LLC, a Georgia limited liability company
("Assignor"), for good and valuable consideration paid to the Assignor by
HIGHLAND HOSPITALITY, L.P., a Delaware limited partnership ("Assignee"),
pursuant to the Contribution Agreement dated as of , 2003, by and
---------------
between Assignor and Assignee (the "Agreement") and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, does
hereby sell, assign, transfer, convey and deliver to the Assignee, its
successors and assigns, good and indefeasible title to the Contributed Assets,
free and clear of all liens, encumbrances, security interests, prior
assignments, conditions, restrictions, claims, and other matters affecting title
thereto.
Capitalized terms used but not defined herein shall have the respective
meanings ascribed to them in the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be
signed by a duly authorized officer this day of , 200 .
--- ----- --
PORTSMOUTH HOTEL DEVELOPERS, LLC, a
Georgia limited liability company
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
EXHIBIT B
Partnership Agreement
