Exhibit 10.11
CONTRIBUTION AGREEMENT
BY AND AMONG
CCC CHESAPEAKE LLC,
a Delaware limited liability company,
as the Contributor,
BARCELO CRESTLINE CORPORATION,
a Maryland corporation
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 Redemption Rights for Units...........................................3
1.4 Tax Consequences to Contributor.......................................3
ARTICLE II Representations and Covenants......................................3
2.1 Representations by Acquirer...........................................3
2.2 Representations by Contributor and BCC................................4
2.3 Satisfaction of Conditions...........................................10
2.4 Contributor's and BCC's Indemnity....................................10
2.5 Acquirer's Indemnity.................................................11
ARTICLE III Conditions Precedent to the Closing..............................11
3.1 Conditions to Acquirer's Obligations.................................11
3.2 Conditions to Contributor's Obligations..............................12
ARTICLE IV Closing and Closing Documents.....................................13
4.1 Closing..............................................................13
4.2 Contributor's Deliveries.............................................13
4.3 Acquirer's Deliveries................................................13
4.4 Fees and Expenses; Closing Costs.....................................14
4.5 Default Remedies.....................................................14
ARTICLE V Miscellaneous......................................................14
5.1 Notices..............................................................14
5.2 Entire Agreement; Modifications and Waivers; Cumulative Remedies.....15
5.3 Exhibits.............................................................16
5.4 Successors and Assigns...............................................16
5.5 Article Headings.....................................................16
5.6 Governing Law........................................................16
5.7 Counterparts.........................................................16
5.8 Survival.............................................................16
5.9 Further Acts.........................................................16
5.10 Severability........................................................16
5.11 Attorneys' Fees.....................................................16
5.12 Confidentiality.....................................................17
EXHIBITS
A. Assignment
B. Partnership Agreement
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of the 4th day of
September, 2003 by and among CCC CHESAPEAKE LLC, a Delaware limited
liability company (the "Contributor"); BARCELO CRESTLINE CORPORATION, a Maryland
corporation ("BCC"); 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 66.67% of the
membership interests in the Company (the "Contributed Assets"). Portsmouth Hotel
Developers, LLC (the "Stormont Member") is the owner of 33.33% of the membership
interests in the Company. BCC is the sole member of the Contributor. 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 Acquirer shall have the right (at
its sole option) to designate and direct the Contributor to transfer all or a
portion of the Contributed Assets to an affiliate of the Acquirer. The
Contributed Assets shall be transferred to the Acquirer (and/or to its designees
or affiliates) 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 BCC (as the
Contributor's designee for such payment and delivery), subject to the terms of
this Agreement, shall be the issuance to BCC of a number of units of limited
partnership interests in the Acquirer ("Units") equal to (a) the excess of (i)
Sixteen Million Eight Hundred Sixty-Six Thousand One Hundred Thirty-Two Dollars
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($16,866,132), which amount includes sixty-six and sixty-seven hundredths
percent (66.67%) of the "Purchased Working Capital" (as defined below), over
(ii) the sum of (1) the actual principal amount of the "Project Loan" (as
defined below) which is paid off at Closing, plus (2) $1,750,000 (which is to be
paid to the Stormont Member at the closing under that certain Contribution
Agreement dated as of August 6, 2003 (the "Stormont Contribution Agreement")
between the Stormont Member and the Acquirer), plus (3) the amount (if any) of
the adjusted working capital paid to the Stormont Member after closing pursuant
to Section 1.2 of the Stormont Contribution Agreement, 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 Million Dollars ($200,000,000) (either of
which offering shall hereinafter be referred to as the "IPO") before any
discounts or fees paid to underwriters or placement agents. No fractional Units
will be issued as Consideration hereunder, but in lieu of issuing fractional
Units, the value thereof shall be paid in cash. The Contributor hereby directs
the Acquirer to issue and distribute the Units on the Closing Date (as defined
below) directly to BCC, which executes this Agreement for the purpose of
acknowledging and agreeing to such distribution of the Units to BCC and for the
other purposes set forth herein. The Contributor and BCC acknowledge that 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, BCC shall become a limited
partner of the Acquirer and shall execute the Acquirer's Partnership Agreement.
The Contributor and BCC acknowledge and agree 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 ("Total Working Capital"). Within such sixty (60) day period, the parties
hereto agree to calculate Total Working Capital as of the Closing Date
(including any amounts in any escrow or reserve accounts (including the FF&E
Reserves) 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 and BCC jointly and severally agree to pay to the Acquirer
66.67% of the amount by which actual working capital as of the Closing Date is
less than $250,000, and the Acquirer will pay to BCC 66.67% of the amount by
which actual working capital as of the Closing Date exceeds $250,000. The
Contributor and BCC hereby acknowledge and agree that any such adjustments shall
be deemed final. All such adjusted amounts shall be paid in cash (other than any
portion thereof that was held in any escrow or
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reserve accounts, which escrowed or reserved amounts shall be paid to BCC in the
form of Units rather than cash, provided BCC continues to be an accredited
investor at that time).
1.3 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.
1.4 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 and any payments made by Acquirer to or on behalf of
the Contributor or BCC 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.
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 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
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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"). BCC 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 BCC and their
respective 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.
2.2 Representations by Contributor and BCC. The Contributor and BCC hereby
make the following representations and warranties, each and every one of which
is true, correct, and complete as of the date of this Agreement (unless they
expressly provide for a future date), 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 Delaware. 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 Stormont Member pursuant to the Operating Agreement
defined below, which consent has
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been obtained in the Stormont Contribution 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 or BCC 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, BCC 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, the Company or the
Project 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, the Company or the Project, (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, the Company, the Project, any part thereof, or any
interest therein, or (E) could materially and adversely affect the Contributed
Assets, the Company, the Project, 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, conditions, restrictions, claims and security interests
and any other matters affecting title thereto, 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.
(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. 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, the Company, 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.
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(g) 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. No event of default or event that with notice or the passage of time,
or both, would constitute an event of default has occurred under the Operating
Agreement.
(h) Securities Law Matters. (A) In acquiring the Units and engaging in
this transaction, neither the Contributor nor BCC 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 and BCC are
aware of the risks involved in investing in the Units and in the Common Shares
issuable upon redemption of such Units. The Contributor and BCC have 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 and BCC
confirm 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 and BCC represent and
warrant that each has reviewed and approved the form of the Partnership
Agreement attached hereto as Exhibit B.
(B) The Contributor and BCC understand 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 BCC at the direction of 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
neither BCC nor the Contributor has any present intention to enter into any
contract, undertaking, agreement, or arrangement with respect to any such
resale. The Contributor and BCC understand that any certificates evidencing the
Units will contain appropriate legends reflecting the requirement that the Units
not be resold 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.
(i) Accredited Investors. BCC and the Contributor are each an
accredited investor as that term is defined in Rule 501 of Regulation D under
the Securities Act of 1933, as amended.
(j) Tax Matters. (A) The Contributor has filed within the time periods
(including any extensions of such time periods filed by the Contributor) 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 to be paid by the Contributor
for
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the periods covered by such returns (unless an extension of such periods has
been properly filed for such returns). The Contributor 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 and BCC represent and warrant that they have
obtained from their own counsel advice regarding the transactions contemplated
by this Agreement, including, without limitation, the tax consequences of (i)
the transfer of the Contributed Assets to the Acquirer and the receipt of Units
as consideration therefor and (ii) BCC's admission as a limited partner of the
Acquirer. The Contributor and BCC further represent and warrant that they have
not relied on the Acquirer or the Acquirer's representatives or counsel for such
tax advice.
(k) Bankruptcy with respect to Contributor. No Act of Bankruptcy has
occurred with respect to the Contributor or BCC. 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.
(l) 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.
(m) Project Representations and Warranties. To the best of the
Contributor's knowledge, each of the following statements with respect to the
Project is true, correct and complete as of the date of this Agreement (unless
they expressly provide for a future date), and will be true, correct and
complete as of the Closing Date:
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(A) Title to Project. The Company owns good and marketable
leasehold title of record to the Project, free and clear of any claim, lien,
charge, security interest, mortgage, deed of trust, encumbrance, purchase rights
or other rights of any nature whatsoever of any third party, other than the deed
of trust securing the Project Loan which Project Loan shall be paid in full and
released at Closing, the lien for real estate taxes and assessments not yet due
or payable, and such recorded easements and restrictions which do not materially
adversely affect the marketability of title to the Project or the use of the
Project for its intended use.
(B) No Agreements to Sell. The Company has made no agreement
with, and will not enter into any agreement with, and has no obligation
(absolute or contingent) to, any other person or firm to sell, transfer or in
any way encumber the Project or to not sell the Project, or to enter into any
agreement with respect to a sale, transfer or encumbrance of or put or call
right with respect to the Project.
(C) Leases. True, correct and complete copies of the Hotel Lease
Agreement dated as of May 24, 1999 (the "Hotel Lease") and the Conference Center
Lease Agreement dated as of May 24, 1999 (the "Conference Center Lease")
(collectively, the "Leases") have been delivered to the Acquirer and its agents
and underwriters. The Leases are valid, binding and enforceable and presently in
full force and effect. Neither the Company nor the lessor under the Leases is in
default thereunder, and no event has occurred which, but for the passage of time
or the giving of notice, or both, would constitute a default under any of the
Leases.
(D) Franchise Documents. True, correct and complete copies of the
"Franchise Documents" (as defined in the Operating Agreement) have been
delivered or made available to the Acquirer and its agents and underwriters. The
Franchise Documents are valid, binding and enforceable and presently in full
force and effect. Neither the Company nor the other parties to the Franchise
Documents is in default under the Franchise Documents, and no event has occurred
which, but for the passage of time or the giving of notice, or both, would
constitute a default under the Franchise Documents.
(E) Liabilities; Indebtedness. Except for the Project Loan, the
Company has not incurred any indebtedness related to the Project except in each
instance for trade payables and other customary and ordinary expenses in the
ordinary course of business that have been disclosed to the Acquirer.
(F) Insurance. The Company currently maintains or causes to be
maintained all of the public liability, casualty and other insurance coverage
with respect to the Project that is required under the terms of the "Senior Loan
Documents" and the "Management Agreement" (as those terms are defined in the
Operating Agreement). All such insurance coverage shall be maintained in full
force and effect through the Closing and all premiums due and payable thereunder
have been, and shall be, fully paid through Closing.
(G) Personal Property. All equipment, fixtures and personal
property located at or on the Project shall remain and not be removed prior to
the Closing, except for equipment that becomes obsolete or unusable, which may
be disposed of or replaced in the ordinary course of business.
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(H) Environmental Conditions. Except as set forth in the
environmental reports and materials previously delivered to the Acquirer
(collectively, "Environmental Reports"), neither the Contributor nor the Company
has received any written notice of the presence or release of any substance that
is regulated under any Environmental Laws as a pollutant, contaminant or toxic,
radioactive or otherwise hazardous substance, including petroleum, its
derivatives or by-products and other hydrocarbons (collectively and
individually, "Hazardous Substances") that would cause the Project or the
Company to be in violation of any applicable Environmental Laws and that remains
uncured, nor has the Contributor or the Company received written notice that the
Project is not in compliance with applicable Environmental Laws. Except as
otherwise disclosed in the Environmental Reports, (i) there are no Hazardous
Substances located at, on or under the Project and (ii) no Hazardous Substances
have leaked, escaped or been discharged, emitted or otherwise released from the
Project onto any adjoining properties. For the purposes of this Section,
"Environmental Laws" means any and all federal, state and local statutes, laws,
regulations and rules in effect on the date hereof relating to the protection of
the environment or to the use, transportation and disposal of Hazardous
Substances.
(I) Compliance With Laws. The Company possesses and/or on or
prior to Closing will possess such certificates, authorities or permits issued
by the appropriate state or federal agencies or bodies necessary to conduct the
business to be conducted by it, and the Company has not received any written
notice of proceedings that have been or may be commenced relating to the
revocation or modification or any such certificate, authority or permit which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling,
or finding, would materially and adversely affect the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Project. The Company has not received any written or other notice of any
violation of any applicable zoning, building or safety code, rule, regulation or
ordinance, or of any employment, environmental, wetlands or other regulatory
law, order, regulation or other requirement, including without limitation the
Americans With Disabilities Act ("ADA") or any restrictive covenants or other
easements, encumbrances or agreements, relating to the Project, which remains
uncured and would materially and adversely affect the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Project. The Project has been constructed in compliance with and its operations
materially comply with all applicable laws, ordinances, rules and regulations,
and all material approvals regarding zoning, land use, subdivision,
environmental and building and construction laws, ordinances, rules and
regulations have been obtained, and such approvals will not be invalidated by
the consummation of the transactions contemplated by this Agreement (other than
those licenses and permits, including without limitation, liquor licenses, for
which new licenses or permits must be obtained by law as a result of the change
in the ownership of the Contributed Assets contemplated by this Agreement).
(J) Condemnation and Moratoria. There are (i) no pending or
threatened condemnation or eminent domain proceedings, or negotiations for
purchase in lieu of condemnation, which affect or would affect any portion of
the Project; (ii) no pending or threatened moratoria on utility or public water
or sewer hook-ups or the issuance of permits, licenses or other inspections or
approvals necessary in connection with the construction or reconstruction of
improvements which affect or would affect any portion of the Project; and (iii)
no pending or threatened proceeding to change adversely the existing zoning
classification as to
-9-
any portion of the Project. No portion of the Project is a designated historic
property or located within a designated historic area or district, and there are
no graveyards or burial grounds located within any of the Project.
(K) Condition of Improvements. Other than the leak in the
swimming pool to be corrected by the contractor, there is no material defect in
the condition of the Project, including, without limitation, the improvements
thereon; the roof, foundation, load-bearing walls or other structural elements
thereof, or the mechanical, electrical, plumbing and, safety systems therein,
nor any material damage from casualty or other cause, nor any soil condition of
any nature that will not support all of the improvements thereon without the
need for unusual or new subsurface excavations, fill, footings, caissons or
other installations.
(L) Taxes. (i) All taxes (including real estate taxes due and
owing with respect to the Project) have been paid and all tax or information
returns required to be filed on or before the date hereof by or on behalf of the
Company have been filed and all such tax or information returns required to be
filed hereafter will be filed on or before the date due in accordance with all
applicable laws prior to the incurrence of any penalties or interest thereon and
all taxes shown to be due on any returns have been paid or will be paid when
due; and (ii) there is no action, suit or proceeding pending against or
threatened with respect to the Company or the Project in respect of any tax, nor
is any claim for additional tax asserted by any taxing authority. Neither the
Company nor any of its federal, state and local income or franchise tax returns
are the subject of any audit or examination by any taxing authority.
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), (f) and
(h) and Section 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 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), (f) 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 and BCC's Indemnity. The Contributor and BCC hereby agree
jointly and severally 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 (a) any breach of the representations or warranties
contained in Section 2.2 of this Agreement, (b) 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, and (c) the ownership or
operation of the Project and relating to the period prior to the Closing Date,
including, without limitation, actions or claims relating to damage to property
or injury to or death of any person occurring or arising during the period prior
to the Closing Date, or any claims for any debts or obligations occurring on or
about or in connection with the
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Project or any portion thereof or with respect to the Project's operations at
any time prior to the Closing Date (subject to the reconciliation of Total
Working Capital as set forth in Section 1.2).
2.5 Acquirer's Indemnity. The Acquirer agrees to indemnify and hold the
Contributor, BCC 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 Contributor
may suffer or incur by reason of (a) any breach of its representations or
warranties contained in Section 2.1 of this Agreement, (b) any act or cause of
action occurring or accruing on or after the Closing Date and arising from the
ownership of the Contributed Assets on or after the Closing Date, and (c) the
ownership or operation of the Project and relating to the period on or after the
Closing Date, including, without limitation, actions or claims relating to
damage to property or injury to or death of any person occurring or arising
during the period on or after the Closing Date, or any claims for any debts or
obligations occurring on or about or in connection with the Project or any
portion thereof or with respect to the Project's operations at any time on or
after the Closing Date.
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
and BCC'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 Operating Agreement), the Acquirer shall have obtained the consent of
the Industrial Development Authority of the City of Portsmouth and/or Marriott
International, Inc. (the "Franchisor") to (i) the Acquirer's acquisition of the
Contributed Assets, (ii) the lease or sublease of the Project from the Company
to a wholly-controlled affiliate of the Acquirer (the "TRS Affiliate"), and
(iii) either assigning the existing Franchise Documents to the TRS Affiliate or
entering into a new franchise
-11-
agreement for the Project between the Franchisor and the TRS Affiliate (the "New
Franchise Agreement").
(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.
(g) Stormont Contribution Agreement Closing. Each of the conditions
precedent to the Acquirer's obligations to close under the Stormont Contribution
Agreement shall have been satisfied or waived by the Acquirer, and the closing
under the Stormont Contribution Agreement shall have occurred or shall occur
simultaneously with the Closing hereunder.
(h) Franchise Documents. Either the existing Franchise Documents shall
have been assigned by the Company to the TRS Affiliate with all necessary
consents from the Franchisor, or the New Franchise Agreement shall have been
executed by the Franchisor and the TRS Affiliate.
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) Loan Payoff. The Project Loan shall be paid in full concurrently
with the Closing.
(d) Completion of IPO. The IPO shall have been completed.
(e) Stormont Contribution Agreement Closing. Each of the conditions
precedent to the Acquirer's obligations to close under the Stormont Contribution
Agreement shall have been satisfied or waived by the Acquirer, and the closing
under the Stormont Contribution Agreement shall have occurred or shall occur
simultaneously with the Closing hereunder.
-12-
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 if Closing does not occur prior to March 31,
2004.
4.2 Contributor's Deliveries. At the Closing, the Contributor and BCC, as
applicable, shall deliver the following to the Acquirer in addition to all other
items required to be delivered to the Acquirer by the Contributor or BCC:
(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 and/or its designee 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 BCC, 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) Release of Guaranty. The release required by the Stormont
Contribution Agreement 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
Contributor.
(e) Other Documents. Any other document or instrument reasonably
requested by the Acquirer or required hereby. Without limiting the generality of
the foregoing, to the extent that individuals associated with the Contributor or
BCC serve as officers or directors in the Portsmouth Conference Center Hotel
Association, the Contributor or BCC shall cause such individuals to resign and
withdraw from such positions at Closing. The Contributor or BCC shall deliver to
the Acquirer at Closing any minute books or other books and records of such
Association that are in the possession or control of the Contributor or BCC.
4.3 Acquirer's Deliveries. At the Closing, the Acquirer shall deliver the
following:
(a) Certificates for Units. If certificates are issued, certificates
representing Units duly issued by the Acquirer in the name of BCC as of the
Closing Date representing the Units to which the Contributor is entitled
pursuant to Section 1.2 of this Agreement.
-13-
(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, a
copy of the fully executed Management Agreement.
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 and BCC shall pay their own
attorneys' and consultants' fees and expenses.
4.5 Default Remedies. 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, as the Contributor's sole and
exclusive remedy for such default, 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 (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
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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 or BCC:
x/x Xxxxxxx Xxxxxxxxx Xxxxxxxxxxx
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
XxXxxx, XX 00000
Attention: General Counsel
Fax No.: (000) 000-0000
with a copy to:
x/x Xxxxxxx Xxxxxxxxx Corporation
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
XxXxxx, XX 00000
Attention: Chief Executive Officer
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 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.
-15-
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 Section 1.1 or elsewhere
in this Agreement, this Agreement may not be assigned by the Acquirer, BCC 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,
BCC, 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, 2.4 and 2.5 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, BCC and the Contributor, the Acquirer, BCC 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.
-16-
5.12 Confidentiality. The Contributor and BCC acknowledge 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 and BCC covenant and agree to
keep the Information confidential and will not (except as required by applicable
law, regulation or legal process, including applicable securities laws), 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 and BCC'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, BCC 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 (other than in
connection with the IPO), 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 and BCC
acknowledge 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 and BCC agree 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 4th day of September, 2003.
CONTRIBUTOR:
CCC CHESAPEAKE LLC, a Delaware
limited liability company
By: /s/ Xxxxxxxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxxxxxxx X. Xxxxxxxxx
Title: Vice President
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 and Chief Executive
Officer
BCC:
BARCELO CRESTLINE CORPORATION,
a Maryland corporation
By: /s/ Xxxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
-18-
EXHIBIT A
Assignment
CCC CHESAPEAKE LLC, a Delaware 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, Barcelo
---------------
Crestline Corporation 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 good and
indefeasible title to percent (___%) of the Contributed Assets to
-----
and percent (___%) of the Contributed Assets to the
---------------- ----
Assignee, its successors and assigns, in each case 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 .
-- ----- --
CCC CHESAPEAKE LLC, a Delaware
limited liability company
By:
----------------------------------------
Name: Xxxxxxxxx X. Xxxxxxxxx
Title: Vice President
EXHIBIT B
Partnership Agreement
