Exhibit 10.10
CONTRIBUTION AGREEMENT
BY AND BETWEEN
SUGAR LAND 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 Post-Closing Escrow................................................... 4
1.4 Escrow of Units....................................................... 4
1.5 Deposit............................................................... 4
1.6 Redemption Rights for Units........................................... 4
1.7 Tax Consequences to Contributor....................................... 4
ARTICLE II Representations and Covenants..................................... 4
2.1 Representations by Acquirer........................................... 4
2.2 Representations by Contributor........................................ 6
2.3 Satisfaction of Conditions............................................ 9
2.4 Contributor's Indemnity............................................... 9
2.5 Acquirer's Indemnity.................................................. 9
2.6 Consent of Transfers.................................................. 9
ARTICLE III Conditions Precedent to the Closing............................. 10
3.1 Conditions to Acquirer's Obligations................................. 10
3.2 Conditions to Contributor's Obligations.............................. 11
ARTICLE IV Closing and Closing Documents.................................... 12
4.1 Closing.............................................................. 12
4.2 Contributor's Deliveries............................................. 12
4.3 Acquirer's Deliveries................................................ 13
4.4 Fees and Expenses; Closing Costs..................................... 13
4.5 Default Remedies..................................................... 13
ARTICLE V Miscellaneous..................................................... 13
5.1 Notices.............................................................. 13
5.2 Entire Agreement; Modifications and Waivers; Cumulative Remedies..... 14
5.3 Exhibits............................................................. 15
5.4 Successors and Assigns............................................... 15
5.5 Article Headings..................................................... 15
5.6 Governing Law........................................................ 15
5.7 Counterparts......................................................... 15
5.8 Survival............................................................. 15
5.9 Further Acts......................................................... 15
5.10 Severability........................................................ 15
5.11 Attorneys' Fees..................................................... 16
5.12 Confidentiality..................................................... 16
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 SUGAR LAND HOTEL DEVELOPERS, LLC, a Georgia
limited liability company (the "Contributor"); and HIGHLAND HOSPITALITY, L.P., a
Delaware limited partnership (the "Acquirer").
RECITALS
A. Sugar Land Hotel Associates, L.P., a Delaware limited partnership (the
"Partnership") is the owner of a 300-room hotel and a leasehold interest in the
adjacent conference center and parking garage, known as the Marriott Sugar Land
Hotel and Conference Center located in the City of Sugar Land, Texas, all of
which is currently under construction (the "Project").
B. The Contributor is the record and beneficial owner of a 20% limited
partnership interest in the Partnership (the "Contributed Assets"). CCGP Sugar
Land Corporation (the "General Partner") is the general partner of the
Partnership and the owner of a 1% general partnership interest in the
Partnership. CCLP Sugar Land Corporation (the "Barcelo Crestline Limited
Partner") is the owner of a 79% limited partnership interest in the Partnership.
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. Although the Project is encumbered by a
deed of trust securing a loan to the Company (the "Project Loan"), 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
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Acquirer ("Units") equal to (a) the sum of (i) Nine Hundred Thousand Dollars
($900,000), plus (ii) except as provided in Section 1.3 below, twenty percent
(20%) of any "Cost Savings" as defined below), minus (iii) the "Deposit" (as
defined below), divided by (b) the price (net of the underwriting discount) at
which the 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. Subject to the provisions of Section 1.4 below, on the Closing
Date (as defined below), the Units not constituting Escrowed Units (as defined
below) shall be issued to the Contributor by the Acquirer issuing to the
Contributor certificates reflecting the Contributor's ownership of such Units.
In no event shall the number of Units issued to the Contributor (including the
Escrowed Units) be less than 20% of the aggregate of all Units issued to all
partners of the Partnership, after the deduction of the $300,000 "Additional
Development Cost Payment", as defined in the Partnership's limited partnership
agreement dated as of February 28, 2002, as amended by a First Amendment to
Limited Partnership Agreement dated as of July 1, 2003 (as amended, the "Sugar
Land Partnership Agreement"). 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
"Acquirer's 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 Acquirer's Partnership Agreement, the
Acquirer agrees that the restriction set forth in Section 8.04(c) of the
Acquirer's 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 Acquirer's Partnership Agreement, the Acquirer will acquire the Units for
cash. Except as otherwise expressly set forth in this Agreement, the Contributor
acknowledges and agrees that once Closing occurs, the Contributor shall no
longer be a partner in the Partnership, shall no longer be entitled to receive
any distributions from the Partnership, and shall have no further right, title
or interest in the Partnership. The term "Costs Savings" shall mean the
documented and approved (by the General Partner and the Barcelo Crestline
Limited Partner in their good faith reasonable judgment) amounts by which the
total actual "Development Expenses" incurred as of Closing in connection with
the Project is less than the total "Development Budget" for work completed as of
Closing (as those terms are defined in that certain Hotel Development Agreement
dated February 28, 2002, as amended by a First Amendment to Hotel Development
Agreement dated as of July 1, 2003 (the "Hotel Development Agreement"), between
Stormont Hospitality Group, LLC (the "Developer") and the Partnership).
Additionally, the Contributor, the General Partner and the Barcelo Crestline
Limited Partner (by their execution hereof) hereby acknowledge and agree that
within sixty (60) days after the Closing Date, the Partnership's working capital
as of the Closing Date, if any, including all amounts in any escrow or reserve
accounts as of the Closing Date, shall be paid to the Acquirer.
1.3 Post-Closing Escrow. In the event that the Acquirer elects to pay off
the Project Loan prior to Project Close-Out (as defined below), then the
Acquirer agrees to fund into an
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escrow account (the "Escrow") an amount equal to the difference between (a)
$27,750,000, and (b) the actual principal amount of the Project Loan which is
paid off at Closing. The Escrow shall be held by Acquirer until Project
Close-Out occurs. The Developer shall be entitled to request and receive from
the Escrow monthly disbursements of funds in accordance with the draw procedures
set forth in the Hotel Development Agreement to pay actual Development Expenses
incurred which are shown on the Development Budget but which were not paid or
payable prior to Closing. If the Escrow is established as provided above, then
the portion of the Cost Savings described in subparagraph 1.2(a)(ii) above shall
not be paid to the Contributor at Closing, but rather upon the occurrence of
Project Close-Out, if such Costs Savings exist, then any amounts remaining in
the Escrow shall be distributed 20% to the Contributor (which may, at the
Contributor's option, be paid in cash or in Units provided the Contributor
continues to be an accredited investor at such time) and 80% to the Acquirer
within five (5) business days after Project Close-Out. If the amount distributed
to the Contributor from the Escrow is insufficient to pay the Contributor 20% of
the Cost Savings, then the Acquirer shall pay such insufficient amount to the
Contributor (either in cash or, at the Contributor's option, in Units provided
the Contributor continues to be an accredited investor at such time) within five
(5) business days after Project Close-Out occurs.
1.4 Escrow of Units. At Closing, the Acquirer shall hold back and keep in
escrow twenty-five percent (25%) of the Units (the "Escrowed Units") that
otherwise would be delivered to the Contributor at Closing as part of the
Consideration. By separate contribution agreement, the Barcelo Crestline Limited
Partner and the General Partner collectively will also escrow twenty-five
percent (25%) of the limited partnership units of the Acquirer to which they
will be entitled under such separate contribution agreement. The Escrowed Units
shall be held by the Acquirer until such time as all of the following have
occurred (collectively, the "Project Close-Out"): (a) "Completion" has occurred
under the Hotel Development Agreement, (b) all "Punchlist Items" (as defined in
the Hotel Development Agreement) are fully completed, (c) any and all disputes
with the Developer, the contractor and any other parties relating to the
construction and development of the Project which are reasonably anticipated to
be settled for $25,000 or more have been settled and final payments have been
made to the Developer and the contractor (including any retainage amounts), and
(d) all other Development Expenses have been paid. Any distributions under the
Acquirer's Partnership Agreement which are paid by the Acquirer on the Escrowed
Units while they are in escrow shall be paid to the Contributor. On the date on
which all conditions for Project Close-Out have been satisfied except for the
payment of the costs and expenses which constitute a "Capped Overrun" (as
defined in the Hotel Development Agreement), if such Capped Overrun exists, the
Contributor shall pay its percentage portion of such Capped Overrun to the
Company pursuant to the provisions of the Sugar Land Partnership Agreement as if
the Contributor were still a partner thereof. If the Contributor fails to pay
such portion of the Capped Overrun within twenty (20) days after the date on
which Project Close-Out would have occurred but for the payment of the amount of
the Capped Overrun, then the Acquirer shall have the right to take out of escrow
and retain the number of Escrowed Units having a value (as of the date the
Escrowed Units are taken out of escrow) equal to the amount of the Capped
Overrun which the Contributor failed to pay, in which event the Acquirer will
pay to the party entitled thereto the amount of the Capped Overrun which the
Contributor failed to pay. The balance of the Escrowed Units shall be released
from escrow and delivered to the Contributor within five (5) business days
thereafter. If the Contributor pays such portion of the Capped Overrun within
such 20-day period, then the
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Acquirer shall release the Escrowed Units from Escrow and deliver them to the
Contributor within five (5) business days after the Acquirer's receipt of such
payment.
1.5 Deposit. Within five (5) business days after the full execution of this
Agreement, the Acquirer shall pay to the Contributor the sum of Ten Thousand
Dollars ($10,000) (the "Deposit") as consideration for the Contributor entering
into this Agreement. The Deposit shall be non-refundable immediately upon
payment to the Contributor (except if the Contributor defaults hereunder, in
which event the Deposit shall be promptly refunded to the Acquirer).
1.6 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 Acquirer's Partnership Agreement; provided, however, that such
redemption option may not be exercised prior to the first anniversary of the
Closing Date.
1.7 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 Deposit, any amounts received by the Contributor
pursuant to Section 1.3, and any payments made by Acquirer pursuant to 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
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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 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 Acquirer's 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
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
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claims, liabilities, damages or expenses arising out of a breach of the
foregoing. This indemnification shall survive Closing or any termination of this
Agreement.
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 General Partner and the Barcelo Crestline Limited
Partner pursuant to the Sugar Land Partnership Agreement) 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) other than the pledge of the Contributed Assets to Regent Sugar
Land, L.P. (the "Regent Pledge") as collateral for the Mezzanine Loan (as
hereinafter defined) and the pledge to Sugar Land Town Square Development
Authority (the "City Pledge") to secure Stormont Hospitality Group, LLC's
obligations under the Conference Center and Parking Garage Development Agreement
dated February 28, 2002, 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
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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
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.
(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) Sugar Land Partnership Agreement. The Sugar Land Partnership
Agreement is in force and effect as of the date hereof, and has not been further
modified or amended. The Contributor has performed all of its obligations under
the Sugar Land Partnership 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 Acquirer's
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 Acquirer's 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
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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 those of 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 Acquirer's 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 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
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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 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.
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 (h)
and subsections 3.2(a), (b), (c) and (d) hereof, and (II) cooperate and assist
in the Contributor's efforts to satisfy the conditions set forth in subsections
3.1(c), (f) and (g) and subsections 3.2(f) 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), (c), (f), (g) and (i) and subsections 3.2(e)
and (f) hereof, and (B) cooperate and assist in the Acquirer's efforts to
satisfy the conditions set forth in subsections 3.1(d) and (h) 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 Sugar Land
Partnership Agreement, the Contributor hereby consents to the "Transfer" (as
defined in the Sugar Land Partnership Agreement) of the General Partner's and
the Barcelo Crestline Limited Partner's
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partnership interest in the Partnership to the Acquirer and/or its affiliates
pursuant to a separate agreement. By their execution hereof, the General Partner
and the Barcelo Crestline Limited Partner hereby consent to the Transfer of the
Contributed Assets to the Acquirer.
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 Sugar
Land Partnership Agreement, the Acquirer shall have obtained the consent of the
City of Sugar Land, Texas, Xxxxxxxxx Properties Incorporated, the Sugar Land
Town Square Development Authority 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 Partnership to a wholly-controlled affiliate of the
Acquirer.
(e) Completion of IPO. The IPO shall have been completed.
(f) Completion and Certificate of Occupancy. "Completion" (as that
term is defined in the Hotel Development Agreement dated February 28, 2002)
shall have occurred, and a final certificate of occupancy (the "CO") shall have
been issued for the Project.
(g) Master Development Agreement. The Contributor shall have caused
the Master Development Agreement dated April 30, 2001, as amended by an
Amendment to Master Development Agreement dated as of January 31, 2003 (as
amended, the "Master Development Agreement") among the City of Sugar Land,
Texas, Xxxxxxxxx Properties Incorporated and Stormont Hospitality Group, LLC to
be amended in a form reasonably satisfactory to the Acquirer and the Contributor
in order to (A) delete and terminate the following provisions thereof, or (B)
acknowledge that such provisions are fully performed and satisfied or are
otherwise contained in the "Conference Center and Parking Lease" (as defined in
the Master
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Development Agreement) and the Hotel Development Agreement and therefore are no
longer binding obligations under the Master Development Agreement: Sections
2.2.5, 8.3, 11.1.6, 11.1.8, and Article 12.
(h) Mezzanine Loan Payoff. The $3,500,000 mezzanine loan from Regent
Sugar Land, L.P. to the Partnership (the "Mezzanine Loan") shall be paid in full
concurrently with the Closing, and the Regent Pledge shall have been terminated
and released, together with any associated financing statements.
(i) City Pledge Termination. The City Pledge shall have been
terminated and released, and any financing statements associated therewith shall
have been released.
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.
(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) Mezzanine Loan Payoff. The Mezzanine Loan shall be paid in fully
concurrently with the Closing and the Regent Pledge, together with any
associated financing statements, shall have been terminated and released.
(d) 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).
(e) City Pledge Termination. The City Pledge shall have been
terminated and released, and any financing statements associated therewith shall
have been released.
(f) Master Development Agreement. The termination of or amendment to
the Master Development Agreement described in Section 3.1(g) above shall have
been fully executed and delivered by all parties thereto.
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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 later to occur of the following unless
otherwise set by agreement of the parties (such date being referred to herein as
the "Closing Date"): (a) the date which is five (5) business days after the CO
is issued, or (b) the date of the closing of the IPO; provided, however, that
this Agreement shall terminate and the Contributor shall retain the Deposit
(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 Acquirer's Partnership Agreement. Signature pages of
the Acquirer's Partnership Agreement (which Acquirer's 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).
(d) Pledge Releases. A fully executed termination and release of the
Regent Pledge and the City Pledge, together with terminations and releases of
all financing statements associated therewith.
(e) Master Development Agreement. A fully executed termination or
amendment of the Master Development Agreement described in Section 3.1(g).
(f) Other Documents. Any other document or instrument reasonably
requested by the Acquirer or required hereby. Without limiting the generality of
the foregoing, the Contributor shall cause Xxxxx X. Xxxxxxxx, Xx. to resign from
the Board of Directors of the Sugar Land Hotel and Conference Center
Association, Inc. at Closing.
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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 Acquirer's Partnership Agreement. The fully executed
Acquirer's 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.
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 Deposit 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 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
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(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
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
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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 Closing Date (including, without limitation,
those covenants and agreements contained in Sections 1.2, 1.3 and 1.4 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
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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 the "Senior Lender," the "Mezzanine Lender," the
"City," the "Authority" and the "Franchisor" (as those terms are defined in the
Sugar Land Partnership Agreement), 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 the Senior Lender, the
Mezzanine Lender, the City, the Authority or the Franchisor (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
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:
SUGAR LAND 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 General Partner and the Barcelo Crestline Limited Partner execute this
Agreement solely for the purpose of (a) consenting to the Contributor's Transfer
of the Contributed Assets to the Acquirer, and (b) acknowledging the last
sentence of Section 1.2 hereof.
GENERAL PARTNER
CCGP SUGAR LAND CORPORATION, a Delaware
corporation
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
BARCELO CRESTLINE LIMITED PARTNER:
CCLP SUGAR LAND CORPORATION, a Delaware
corporation
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
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EXHIBIT A
Assignment
SUGAR LAND 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 .
-- ----- --
SUGAR LAND HOTEL DEVELOPERS, LLC, a
Georgia limited liability company
By:
-------------------------------------
Name:
Title:
EXHIBIT B
Acquirer's Partnership Agreement
