CONTRIBUTION AGREEMENT dated as of October 1, 2007 by and among as Contributor, and HERSHA HOSPITALITY LIMITED PARTNERSHIP as Acquirer, IN CONNECTION WITH THE PURCHASE AND SALE OF 20% OF THE PARTNERSHIP INTERESTS IN AFFORDABLE HOSPITALITY ASSOCIATES,...
Exhibit
99.1
dated
as
of October 1, 2007
by
and
among
3344
Associates
as
Contributor,
and
HERSHA
HOSPITALITY LIMITED PARTNERSHIP
as
Acquirer,
IN
CONNECTION WITH THE PURCHASE AND SALE OF 20% OF THE
PARTNERSHIP
INTERESTS IN AFFORDABLE HOSPITALITY ASSOCIATES, LP, OWNER OF THE HAMPTON
INN
PHILADELPHIA, LOCATED AT
0000
XXXX
XXXXXX, XXXXXXXXXXXX, XX
THIS
CONTRIBUTION AGREEMENT, dated as of October 1, 2007 (the “Agreement”), by 3344
Associates, a Pennsylvania limited partnership (the “Contributor”), Affordable
Hospitality Associates, L.P., a Pennsylvania limited liability company (the
“LP”), and Hersha Hospitality Limited Partnership, a Virginia limited
partnership (the “Acquirer”), provides:
ARTICLE
I
DEFINITIONS;
RULES OF CONSTRUCTION
1.1 Definitions. The
following terms shall have the indicated meanings:
“Act
of Bankruptcy” shall mean if a party hereto or any general partner thereof
shall (a) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of
all
or a substantial part of its property, (b) admit in writing its inability
to pay its debts as they become due, (c) make a general assignment for the
benefit of its creditors, (d) file a voluntary petition or commence a
voluntary case or proceeding under the Federal Bankruptcy Code (as now or
hereafter in effect), (e) be adjudicated a bankrupt or insolvent,
(f) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or adjustment
of debts, (g) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary case
or
proceeding under the Federal Bankruptcy Code (as now or hereafter in effect),
or
(h) take any corporate or limited liability company action for the purpose
of effecting any of the foregoing; or if a proceeding or case shall be
commenced, without the application or consent of a party hereto or any general
partner thereof, in any court of competent jurisdiction seeking (1) the
liquidation, reorganization, dissolution or winding-up, or the composition
or
readjustment of debts, of such party or general partner, (2) the
appointment of a receiver, custodian, trustee or liquidator or such party or
general partner or all or any substantial part of its assets, or (3) other
similar relief under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts, and such proceeding or case
shall continue undismissed; or an order (including an order for relief entered
in an involuntary case under the Federal Bankruptcy Code, as now or hereafter
in
effect) judgment or decree approving or ordering any of the foregoing shall
be
entered and continue unstayed and in effect, for a period of 60 consecutive
days.
“Apportionment
Date” shall mean the day immediately preceding the Closing
Date.
“Assignment
and Assumption Agreement” shall mean that certain Assignment and Assumption
Agreement with respect to the Interests (defined herein below), dated as of
the
Closing Date, by and between Contributor and
Acquirer.
“Authorizations”
shall mean all licenses, permits and approvals required by any governmental
or
quasi-governmental agency, body or officer for the ownership, operation and
use
of the Property or any part thereof.
“Certificate
of Limited Partnership” shall mean the Certificate of Limited Partnership of
the LP filed with the Secretary of State of the Commonwealth of Pennsylvania,
a
true and correct copy of which is attached hereto as
Exhibit F.
“Closing”
shall mean the Closing of the contribution and acquisition of the Interests
pursuant to this Agreement.
“Closing
Date” shall mean the date on which the Closing occurs.
“Consideration”
shall mean Forty One Million Seven Hundred Eighty Thousand Dollars
($41,780,000.00), less the Existing Mortgages times twenty percent (20%),
divided by the Weighted LP Unit Price, to be paid in the form of LP Units on
the
Closing Date.
“Contingent
Consideration” shall mean Sixty Six Thousand Dollars ($66,000.00) divided by
the Weighted LP Unit Price, to be paid in the form of LP Units if the Closing
Date is after September 30, 2007.
“Continuing
Liabilities” shall include liabilities arising under Operating Agreements,
Leases, equipment leases, loan agreements, or proration credits at Closing,
but
shall exclude any liabilities arising from any other arrangement, agreement
or
pending litigation.
“Deposit”
shall have the meaning set forth in Section 2.3.
“Employment
Agreements” shall mean any and all employment agreements, written or oral,
between the Contributor or its managing agent and the persons employed with
respect to the Property. A schedule indicating all pertinent
information with respect to each Employment Agreement in effect as of the date
hereof, name of employee, social security number, wage or salary, accrued
vacation benefits, other fringe benefits, etc., is attached hereto as
Exhibit B.
“Escrow
Agent” shall mean All American Abstract, 0000 Xxxxx Xxxx, Xxxxxxx, XX 00000;
Phone: 000-000-0000; Fax: 000-000-0000.
“Existing
Mortgages” shall mean the existing line of credit from Commerce Bank, N.A.
to the LP, dated February 15, 2006, in the original principal amount of Eighty
Five Million Dollars ($85,000,000.00), of which Twenty One Million Dollars
($21,000,000.00) currently encumbers the Property, and a capital lease
obligation of which Two Hundred Ninety Six Thousand Seven Hundred Twenty Dollars
($296,720.00) remains outstanding.
“FIRPTA
Certificate” shall mean the affidavit of the Contributor under
Section 1445 of the Internal Revenue Code certifying that such Contributor
is not a foreign corporation, foreign partnership, foreign limited liability
company, foreign trust, foreign estate or foreign person (as those terms are
defined in the Internal Revenue Code and the Income Tax Regulations), in form
and substance satisfactory to the Acquirer.
“Governmental
Body” means any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign.
2
“Hersha”
shall mean Hersha Hospitality Trust, a Maryland business trust.
“Hotel”
shall mean the hotel and related amenities located on the Land.
“Improvements”
shall mean the Hotel and all other buildings, improvements, fixtures and other
items of real estate located on the Land.
“Insurance
Policies” shall mean those certain policies of insurance described on
Exhibit C attached hereto.
“Intangible
Personal Property” shall mean all intangible personal property owned or
possessed by the Contributor or the LP and used in connection with the
ownership, operation, leasing, occupancy or maintenance of the Property,
including, without limitation, the Authorizations, escrow accounts, insurance
policies, general intangibles, business records, plans and specifications,
surveys and title insurance policies pertaining to the real property and the
personal property, all licenses, permits and approvals with respect to the
construction, ownership, operation, leasing, occupancy or maintenance of the
Property, any unpaid award for taking by condemnation or any damage to the
Land
by reason of a change of grade or location of or access to any street or
highway, and the share of the Tray Ledger as hereinafter defined, excluding
(a) any of the aforesaid rights the Acquirer elects not to acquire,
(b) the Contributor’s cash on hand, in bank accounts and invested with
financial institutions and (c) accounts receivable except for the above
described share of the Tray Ledger.
“Interests”
shall mean all right title and interest of 3344 Associates in the LP, consisting
of a 20% partnership interest in the LP.
“Inventory”
shall mean all inventory located at the Hotel, including without limitation,
all
mattresses, pillows, bed linens, towels, paper goods, soaps, cleaning supplies
and other such supplies.
“Joinder”
shall have the meaning set forth in Section 2.3(d).
"Knowledge"
shall mean the actual knowledge of the Contributor that he would have had after
making reasonable investigation.
“LP
Units” shall mean limited partnership units of the Acquirer.
“Land”
shall mean that certain parcel of real estate lying and being in the City and
County of Philadelphia, Pennsylvania at 0000 Xxxx Xxxxxx, Xxxxxxxxxxxx,
Xxxxxxxxxxxx, as more particularly described on Exhibit A attached
hereto, together with all easements, rights, privileges, remainders, reversions
and appurtenances thereunto belonging or in any way appertaining, and all of
the
estate, right, title, interest, claim or demand whatsoever of the Contributor
therein, in the streets and ways adjacent thereto and in the beds thereof,
either at law or in equity, in possession or expectancy, now or hereafter
acquired.
“Leases”
shall mean those leases of real property listed on Exhibit D attached
hereto.
3
“LP”
shall mean Affordable Hospitality Associates, L.P., a Pennsylvania limited
partnership that owns, as its only assets, the fee interest in the Land, and
the
Hotel and Improvements located on the Land.
“LP
Partnership Agreement” shall mean the current partnership agreement of the
LP, a true and correct copy of which is attached hereto as
Exhibit G.
“Manager”
shall mean Hersha Hospitality Management, LP, a Pennsylvania limited
partnership.
“Operating
Agreements” shall mean the management agreements, service contracts, supply
contracts, leases (other than the Leases) and other agreements, if any, in
effect with respect to the construction, ownership, operation, occupancy or
maintenance of the Property. All of the Operating Agreements in force
and effect as of the date hereof are listed on Exhibit E attached
hereto.
“Owner's
Title Policy” shall mean an owner's policy of title insurance issued to the
Acquirer by the Title Company, dated as of the Closing Date, pursuant to which
the Title Company insures the Acquirer's ownership of title to the fee interest
in the Real Property (including the marketability thereof) subject only to
Permitted Title Exceptions. The Owner's Title Policy shall insure the
Acquirer in the amount of the Consideration and shall be acceptable in form
and
substance to the Acquirer. The description of the Land in the Owner's
Title Policy shall be by courses and distances and shall be identical to the
description shown on a survey provided by the Contributor to the
Acquirer.
“Permitted
Title Exceptions” shall mean those exceptions to title to the Real Property
that are satisfactory to the Acquirer as determined pursuant to
Section 2.2.
“Property”
shall mean collectively the Land, Improvements, the Inventory, the Reservation
System, the Tangible Personal Property and the Intangible Personal
Property.
“Real
Property” shall mean the Land and the Improvements.
“Reservation
System” shall mean the Contributor’s Reservation Terminal and Reservation
System equipment and software, if any.
“Securities
Act” shall mean the Securities Act of 1933, as amended.
“Tangible
Personal Property” shall mean the items of tangible personal Property
consisting of all furniture, fixtures and equipment situated on, attached to,
or
used in the operation of the Hotel, and all furniture, furnishings, equipment,
machinery, and other personal property of every kind located on or used in
the
operation of the Hotel and owned by the Contributor or the LP.
“Title
Commitment” shall mean the commitment by the Title Company to issue the
Owner's Title Policy.
4
“Title
Company” shall mean All American Abstract, 0000 Xxxxx Xxxx, Xxxxxxx, XX
00000; Phone: 000-000-0000; Fax: 000-000-0000.
“Tray
Ledger” shall mean Contributor’s share of the final night's room revenue
(revenue from rooms occupied as of 11:59 P.M. on the Apportionment Date,
exclusive of food, beverage, telephone and similar charges which shall be
retained by the Contributor), including any sales taxes, room taxes or other
taxes thereon.
“Utilities”
shall mean public sanitary and storm sewers, natural gas, telephone, public
water facilities, electrical facilities and all other utility facilities and
services necessary for the operation and occupancy of the Property as a
hotel.
“Weighted
LP Unit Price” shall mean the average volume-weighted closing price per
share of Hersha Class A common shares over a twenty (20) trading day period
that
ends at the conclusion of the trading day that is prior to the Closing
Date.
1.2 Rules
of
Construction. The following rules shall apply to the construction
and interpretation of this Agreement:
(a) Singular
words shall connote the plural number as well as the singular and vice versa,
and the masculine shall include the feminine and the neuter.
(b) All
references herein to particular articles, sections, subsections, clauses or
exhibits are references to articles, sections, subsections, clauses or exhibits
of this Agreement.
(c) Headings
contained herein are solely for convenience of reference and shall not
constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.
(d) Each
party hereto and its counsel have reviewed and revised (or requested revisions
of) this Agreement, and therefore any usual rules of construction requiring
that
ambiguities are to be resolved against a particular party shall not be
applicable in the construction and interpretation of this Agreement or any
exhibits hereto.
ARTICLE
II
CONTRIBUTION
AND ACQUISITION; STUDY PERIOD;
PAYMENT
OF CONSIDERATION
2.1 Contribution
and
Acquisition. The Contributor agrees to contribute, assign and
transfer its Interests to the Acquirer and the Acquirer agrees to accept the
Interests in exchange for the Consideration and in accordance with the other
terms and conditions set forth herein.
2.2 Study
Period.
(a) Prior
to the date hereof, the Acquirer has conducted such investigations and
inspections as the Acquirer, in its sole discretion, has deemed necessary and
desirable in order to evaluate the desirability of its intended acquisition
of
the Interests and, notwithstanding anything contained in this Agreement to
the
contrary, the Contributor acknowledges that the Acquirer shall have the right
to
terminate this Agreement, extend the Closing Date or otherwise modify or deviate
from the terms of this Agreement based upon the results and/or the Acquirer’s
review of any investigations or inspections of the Property (including, without
limitation, review of any documents, reports and other materials provided to
the
Acquirer by the Contributor with regard to the Property), whether such
investigations or inspections were conducted prior to or after the date
hereof.
5
2.3 Payment
of the
Consideration. The Consideration shall be paid to the Contributor in the
following manner:
(a) Acquirer
shall pay to Contributor the Consideration in LP Units. If Closing occurs after
September 30, 2007, Acquirer shall additionally pay to Contributor the
Contingent Consideration, also in LP Units.
(b) Any
adjustments and prorations to be made pursuant to the terms of this Agreement
shall be paid by wire transfer of immediately available funds to an account
specified by the party due to receive same.
(c) Notwithstanding
the foregoing, no LP Units shall be issued by the Acquirer, and following such
issuance no LP Units shall be transferred by the Contributor to, any person
or
entity that is not an accredited investor within the meaning of Regulation
D
promulgated by the United States Securities and Exchange Commission
(“SEC”) under the Securities Act of 1933, as amended (the “Securities
Act”), and to the extent any such non-accredited person or entity is
entitled to receive any portion of the Consideration, such portion shall be
paid
in cash rather than LP Units and the number of LP Units issuable in payment
of
the Consideration shall be reduced accordingly. The Contributor agrees to take
such actions as Acquirer may reasonably request in order to assure that the
issuance of any LP Units pursuant to this Agreement complies with the
requirements of the Securities Act and Regulation D promulgated thereunder.
Except as otherwise expressly set forth in this Agreement, the Contributor
acknowledges and agrees that once the Closing occurs, the Contributor shall
no
longer hold any right, title or interest in the Property (except through its
ownership of Acquirer). Contributor hereby directs Acquirer to pay, issue and
distribute (as applicable) the Consideration on the Closing Date to the
Contributor in such amounts set forth in this
Agreement. The Contributor that acquires LP Units
acknowledges that any certificates evidencing the LP Units will bear appropriate
legends indicating (i) that the LP Units have not been registered under the
Securities Act, and (ii) that Acquirer’s Limited Partnership Agreement (the
“Acquirer’s Limited Partnership Agreement”) restricts the transfer of the
LP Units. The Contributor shall upon receipt of the LP Units at Closing become
a
limited partner of Acquirer by executing the form of joinder (the
“Joinder”) to the Acquirer’s Limited Partnership Agreement attached
hereto as Exhibit J and deliver the executed Joinder at closing pursuant
to the terms of Section 6.2 hereof; provided, however,
that if Contributor is presently a limited partner of the Acquirer, Contributor
shall not be required to execute and deliver the Joinder. By
executing and delivering the Joinder in accordance with the terms hereof the
Contributor acknowledges that it will be bound by the terms and provisions
of
the Acquirer’s Limited Partnership Agreement.
6
ARTICLE
III
CONTRIBUTOR’S
REPRESENTATIONS, WARRANTIES AND COVENANTS
To
induce
the Acquirer to enter into this Agreement and to purchase the Interests,
Contributor hereby makes the following representations, warranties and
covenants, upon each of which Contributor acknowledges and agrees that the
Acquirer is entitled to rely and has relied:
3.1 Identity
and
Power. The Contributor is a limited partnership duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania, and has all partnership powers and all governmental licenses,
authorizations, consents and approvals necessary to carry on its business as
now
conducted, to own, lease and operate its properties, to execute and deliver
this
Agreement and any document or instrument required to be executed and delivered
on behalf of the Contributor hereunder, to perform its obligations under this
Agreement and any such other documents or instruments and to consummate the
transactions contemplated hereby.
3.2 Authorization,
No Violations and Notices.
(a) The
execution, delivery and performance of this Agreement by the Contributor, and
the consummation of the transactions contemplated hereby have been duly
authorized, adopted and approved by the Contributor. No other
proceedings are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed by the
Contributor and is a valid and binding obligation enforceable against the
Contributor in accordance with its terms.
(b) Neither
the execution, delivery, or performance by the Contributor of this Agreement,
nor the consummation of the transactions contemplated hereby, nor compliance
by
the Contributor with any of the provisions hereof, will
7
(i) violate,
conflict with, result in a breach of any provision of, constitute a default
(or
an event that, which, with or lapse of time or both, would constitute a default)
under, result in the termination of, accelerate the performance required by,
or
result in a right of termination or acceleration, or the creation of any lien,
security interest, charge, or encumbrance upon any of the Property or assets
of
the LP, under any of the terms, conditions, or provisions of, the
Certificate of Limited Partnership, the LP Partnership Agreement, or any note,
bond, mortgage, indenture, deed of trust, lease, agreement, or other instrument,
or obligation to which the LP is a party, or by which the LP may be bound,
or to
which the LP or the Property or assets may be subject; or
(ii) violate
any
judgment, ruling, order, writ, injunction, decree, statute, rule, or regulation
applicable to the LP or its Property or assets that would not be violated by
the
execution, delivery or performance of this Agreement or the transactions
contemplated hereby by the Contributor or compliance by the Contributor with
any
of the provisions hereof.
3.3 Litigation
with
respect to Contributor. Except as set forth on Exhibit I,
there is no action, suit, claim or proceeding pending or, to the Contributor’s
Knowledge, threatened against or affecting the Contributor or his assets in
any
court, before any arbitrator or before or by any governmental body or other
regulatory authority (i) that would materially adversely affect the Contributor
or the Interests, (ii) that seeks restraint, prohibition, damages or other
relief in connection with this Agreement or the transactions contemplated
hereby, or (iii) would delay the consummation of any of the transactions
contemplated hereby. The Contributor is not subject to any judgment,
decree, injunction, rule or order of any court relating to the Contributor’s
participation in the transactions contemplated by this Agreement.
3.4 Interests
and
Property.
(a) The
Interests are, on the date hereof, and will be on the Closing Date, free and
clear of all liens and encumbrances and the Contributor has good, marketable
title thereto and the right to convey same in accordance with the terms of
this
Agreement. Upon delivery of the Contributor’s Assignment and
Assumption Agreement to the Acquirer at Closing, good valid and marketable
title
to the Contributor’s Interests, free and clear of all liens and encumbrances,
will pass to the Acquirer. The Interests constitute twenty percent
(20%) of the only outstanding partnership interests of the LP. Acquirer, as
of
the date of this Agreement, owns the remaining eighty percent (80%) of the
only
outstanding partnership interests of the LP.
(b) Except
for the lien created in connection with the Existing Mortgage, the Property
is,
on the date hereof, and will be on the Closing Date, free and clear of all
liens
and encumbrances, and the LP has good, marketable title thereto and the right
to
convey same. The LP is the fee simple owner of the Real Property and
the sole owner of the Property.
3.5 Bankruptcy.
No Act of Bankruptcy has occurred with respect to the LP.
3.6 Brokerage
Commission. The Contributor has not engaged the services of, nor
is it or will it or Acquirer become liable to, any real estate agent, broker,
finder or any other person or entity for any brokerage or finder’s fee,
commission or other amount with respect to the transactions described herein on
account of any action by the Contributor.
8
3.7 The
LP.
(a) The
LP is a limited partnership duly formed, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania and has all requisite powers
necessary to carry on its business as now conducted, to own, lease and operate
its properties.
(b) Neither
the execution, delivery, or performance by the Contributor of this Agreement,
nor the consummation of the transactions contemplated hereby, nor compliance
by
the Contributor or the LP with any of the provisions hereof, will:
(i) violate,
conflict with, result in a breach of any provision of, constitute a default
(or
an event that, with notice or lapse of time or both, would constitute a default)
under, result in the termination of, accelerate the performance required by,
or
result in a right of termination or acceleration, or the creation of any lien,
security interest, charge, or encumbrance upon any of the Property or other
assets of the LP, under any of the terms, conditions, or provisions of, the
Certificate of Limited Partnership or LP Partnership Agreement, or any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement, or other
instrument or obligation to which the LP is a party, or by which the LP may
be
bound, or to which the LP or its properties or assets may be subject;
or
(ii) violate
any
judgment, ruling, order, writ, injunction, decree, statute, rule, or regulation
applicable to the LP or any of the LP’s properties or assets.
(c) Except
for the Contributor and the Acquirer, no party has any interest in the LP or
the
Property or any portion thereof, or the right or option to acquire any interest
in the LP or the Property or any portion thereof. The LP has no
subsidiaries and does not directly or indirectly own any securities of or
interest in any other entity, including, without limitation, any LLC or joint
venture.
(d) The
LP has conducted no business other than the ownership and operation of the
Property.
3.8 Liabilities,
Debts and Obligations. Except for the Continuing Liabilities and
the Existing Mortgage, the LP has no liabilities, debts or
obligations.
3.9 Tax
Matters.
(a) Notwithstanding
anything to the contrary contained in this Agreement, including without
limitation the use of words and phrases such as “sell,” “sale,” purchase,” and
“pay,” the parties hereto acknowledge and agree that it is 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,
as the contribution of the Interests by the Contributor to the Acquirer in
exchange for the Consideration, and not as a transaction in which any
Contributor is acting other than in the capacity as a prospective partner in
the
Acquirer.
9
(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 Interests
to
the Acquirer and the receipt of the Consideration therefor, (ii) the
Contributor’s admission as a limited partner of the Acquirer, and (iii) any
other transaction contemplated by this Agreement. Each Contributor
further represents and warrants that it has not relied on the Acquirer or the
Acquirer’s representatives or counsel for such tax advice.
(c) The
LP 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 LP under the laws of the United States and of each
state or other jurisdiction in which the LP conducts business activities
requiring the filing of tax returns or reports. All tax returns and
reports filed by the LP are true and correct in all material
respects. The LP has paid in full all taxes of whatever kind or
nature for the periods covered by such returns. The LP 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 LP as of the Closing Date are sufficient
in all respects for the payment of all unpaid federal, state, and local taxes
of
the LP 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 LP or
any
of its assets. The federal, state, and local tax returns of the LP
have not been audited, nor have the LP or the Contributor received any notice
of
any federal, state, or local audit. The LP has not obtained or
received any extension of time (beyond the Closing Date) for the assessment
of
deficiencies for any years or waived or extended the statute of limitations
for
the determination or collection of any tax. To the Contributor’s
Knowledge, no unassessed tax deficiency is proposed or threatened against the
LP.
(d) All
taxes, including real property taxes and rental taxes or the equivalent, and
all
interest and penalties due thereon, required to be paid or collected by the
LP
in connection with the operation of the Property as of the Closing Date will
have been collected and/or paid to the appropriate governmental authorities
as
required or such amounts shall be pro-rated as of the Closing Date. The LP
shall
file all necessary returns and petitions required to be filed through the
Closing Date.
3.10 Contracts
and
Agreements. There is no loan agreement, guarantee, note, bond,
indenture and other debt instrument, lease and other contract to which the
LP is
a party or by which its assets are bound other than Existing Mortgage, Permitted
Title Exceptions, the Leases, and the Operating Agreements.
3.11 No
Special
Taxes. The Contributor has no Knowledge of, nor has he received
any written notice of, any special taxes or assessments relating to the LP
or
Property or any part thereof or any planned public improvements that may result
in a special tax or assessment against the Property.
10
3.12 Compliance
with
Existing Laws. The LP possesses all Authorizations, each of which
is valid and in full force and effect, and, to Contributor’s Knowledge, no
provision, condition or limitation of any of the Authorizations has been
breached or violated. The LP has not misrepresented or failed
to disclose any relevant fact in obtaining all Authorizations, and the
Contributor has no Knowledge of any change in the circumstances under which
those Authorizations were obtained that result in their termination, suspension,
modification or limitation. The Contributor has no Knowledge, nor has
it received written notice within the past three (3) years, of any existing
violation of any provision of any applicable building, zoning, subdivision,
environmental or other governmental ordinance, resolution, statute, rule, order
or regulation, including but not limited to those of environmental agencies
or
insurance boards of underwriters, with respect to the ownership, operation,
use,
maintenance or condition of the Property or any part thereof, or requiring
any
repairs or alterations other than those that have been made prior to the date
hereof.
3.13 Operating
Agreements. The LP has performed all of its obligations under
each of the Operating Agreements and no fact or circumstance has occurred which,
by itself or with the passage of time or the giving of notice or both, would
constitute a material default under any of the Operating
Agreements. Without the prior written consent of the Acquirer, which
consent will not be unreasonably withheld or delayed, the Contributor shall
cause the LP not to enter into any new management agreement, maintenance or
repair contract, supply contract, lease in which it is lessee or other
agreements with respect to the Property, nor shall the Contributor cause the
LP
to enter into any agreements modifying the Operating Agreements.
3.14 Warranties
and
Guaranties. The Contributor shall cause the LP not to release or
modify any warranties or guarantees, if any, of manufacturers, suppliers and
installers relating to the Improvements and the Tangible Personal Property
or
any part thereof, except with the prior written consent of the Acquirer, which
consent shall not be unreasonably withheld or delayed. A complete
list of all such warranties and guaranties in effect as of the date of this
Agreement is attached hereto as Exhibit H.
3.15 Insurance. All
of the LP’s Insurance Policies are valid and in full force and effect, all
premiums for such policies were paid when due and the LP shall pay all future
premiums for such policies (and any replacements thereof) on or before the
due
date therefor. The LP shall pay all premiums on, and the LP shall not
to cancel or allow to expire, any of the LP’s Insurance Policies prior to the
Closing Date unless such policy is replaced, without any lapse of coverage,
by
another policy or policies providing coverage at least as extensive as the
policy or policies being replaced.
3.16 Condemnation
Proceedings; Roadways. The LP has received no written notice of
any condemnation or eminent domain proceeding pending or threatened against
the
Property or any part thereof. The Contributor has no Knowledge of any
change or proposed change in the route, grade or width of, or otherwise
affecting, any street or road adjacent to or serving the Real
Property.
11
3.17 Litigation
with
Respect to LP. Except as set forth on Exhibit I, there is
no action, suit or proceeding pending or known to be threatened against or
affecting the LP or any part of or interest in the Property in any court, before
any arbitrator or before or by any governmental agency which (a) in any manner
raises any question affecting the validity or enforceability of this Agreement
or any other material agreement or instrument to which the LP is a party or
by
which it is bound and that is or is to be used in connection with, or is
contemplated by, this Agreement, (b) could materially and adversely affect
the
business, financial position or results of operations of the LP, (c) could
materially and adversely affect the ability of the LP to perform its obligations
hereunder, or under any document to be delivered pursuant hereto, (d) could
create a material lien on the Property, any part thereof or any interest
therein, or (e) could otherwise materially and adversely affect the Property,
any part thereof or any interest therein or the use, operation, condition or
occupancy thereof.
3.18 Labor
Disputes
and Agreements. There are not currently any labor disputes
pending or, threatened as to the operation or maintenance of the Property or
any
part thereof. The LP is party to a collective bargaining
agreement with employees employed in connection with the ownership, operation
or
maintenance of the Property. The Acquirer will not be obligated to
give or pay any amount to any employee of the LP, and the Acquirer shall not
have any liability under any pension or profit sharing plan that the LP may
have
established with respect to the Property or their or its employees.
3.19 Financial
Information. To the Contributor’s Knowledge, except as otherwise
disclosed in writing to the Acquirer, for each of the LP’s accounting years,
when a given year is taken as a whole, all of the LP’s financial information
previously delivered or to be delivered to the Acquirer is and shall be correct
and complete in all material respects and presents accurately the financial
condition of the LP and results of the operations of the Property for the
periods indicated, except that such statements do not have footnotes or
schedules that may otherwise be required by GAAP. If requested by the
Acquirer, the Contributor shall cause the LP to deliver promptly all four-week
period ending financial information available to the LP. The LP’s
financial information is prepared based on books and records maintained by
the
LP in accordance with the LP’s accounting system. The LP’s financial
information has been provided to the Acquirer without any changes or alteration
thereto. To the best of Contributor's Knowledge, since the date of
the last financial statement included in the LP’s financial information, there
has been no material adverse change in the financial condition or in the
operations of the Property.
3.20 Organizational
Documents. The LP’s Partnership Agreement and Certificate of
Limited Partnership (together, the “Organizational Documents”) are in
full force and effect and have not been modified or supplemented, and no fact
or
circumstance has occurred that, by itself or with the giving of notice or the
passage of time or both, would constitute a default thereunder.
3.21 Operation
of
Property. The Contributor covenants that between the date hereof
and the Closing Date, Contributor shall not prevent the LP from (a) operating
the Property only in the usual, regular and ordinary manner consistent with
the
LP’s prior practice, (b) maintaining the books of account and records in the
usual, regular and ordinary manner, in accordance with sound accounting
principles applied on a basis consistent with the basis used in keeping its
books in prior years, and (c) using all reasonable efforts to preserve intact
the present business organization, keep available the services of the present
officers and employees and preserve their relationships with suppliers and
others having business dealings with them. The LP shall continue to
make good faith efforts to take guest room reservations and to book functions
and meetings and otherwise to promote the business of the Property in generally
the same manner as the LP did prior to the execution of this
Agreement. Except as otherwise permitted hereby, from the date hereof
until Closing, the Contributor shall use its good faith efforts to ensure that
the LP shall not take any action or fail to take action the result of which
(i)
would have a material adverse effect on the Property or the Acquirer’s ability
to continue the operation thereof after the Closing Date in substantially the
same manner as presently conducted, (ii) reduce or cause to be reduced any
room
rents or any other charges over which Contributor has operational control,
or
(iii) would cause any of the representations and warranties contained in this
Article III to be untrue as of Closing.
12
3.22 Bankruptcy
with
respect to LP. No Act of Bankruptcy has occurred with respect to
the LP.
3.23 Hazardous
Substances. Except for matters in LP’s or Acquirer's audits,
Contributor has no Knowledge: (a) of the presence of any
“Hazardous Substances” (as defined below) on the Property, or any portion
thereof, or, (b) of any spills, releases, discharges, or disposal of
Hazardous Substances that have occurred or are presently occurring on or onto
the Property, or any portion thereof, or (c) of the presence of any PCB
transformers serving, or stored on, the Property, or any portion thereof, and
Contributor has no Knowledge of any failure to comply with any applicable local,
state and federal environmental laws, regulations, ordinances and administrative
and judicial orders relating to the generation, recycling, reuse, sale, storage,
handling, transport and disposal of any Hazardous Substances (as used herein,
“Hazardous Substances” shall mean any substance or material whose presence,
nature, quantity or intensity of existence, use, manufacture, disposal,
transportation, spill, release or effect, either by itself or in combination
with other materials is either: (1) potentially injurious to the
public health, safety or welfare, the environment or the Property,
(2) regulated, monitored or defined as a hazardous or toxic substance or
waste by any Governmental Body, or (3) a basis for liability of the owner
of the Property to any Governmental Body or third party, and Hazardous
Substances shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, crude oil, or any products, by-products or components thereof, and
asbestos). Notwithstanding anything to the contrary contained herein
Contributor shall have no liability to Acquirer for any Hazardous Substances
of
which Contributor has no Knowledge.
3.24 Room
Furnishings. All public spaces, lobbies, meeting rooms, and each
room in the Hotel available for guest rental is furnished in accordance with
commercially reasonable standards for the Hotel and room type.
3.25 Intentionally
Omitted.
3.26 Independent
Audit. Contributor shall provide access by Acquirer's
representatives, to all financial and other information relating to the Property
and the LP.
13
3.27 Bulk
Sale Compliance. Contributor shall indemnify
Acquirer against any claim, loss or liability arising under the bulk sales
law
in connection with the transaction contemplated herein.
3.28 Sufficiency
of
Certain Items. The Property contains not less than:
(a) a
sufficient amount of furniture, furnishings, color television sets, carpets,
drapes, rugs, floor coverings, mattresses, pillows, bedspreads and the like,
to
furnish each guest room, so that each such guest room is, in fact, fully
furnished; and
(b) a
sufficient amount of towels, washcloths and bed linens, so that there are three
sets of towels, washcloths and linens for each guest room (one on the beds,
one
on the shelves, and one in the laundry), together with a sufficient supply
of
paper goods, soaps, cleaning supplies and other such supplies and materials,
as
are reasonably adequate for the current operation of the Hotel.
3.29 Intentionally
Omitted.
3.30 Leases. True,
complete copies of the Leases are attached as Exhibit D
hereto. The Leases are, and will at Closing be, in full force and
effect and neither Contributor nor the LP, is in default and the Contributor
shall make good faith efforts for itself and the LP not to be in default with
respect thereto (with or without the giving of any notice and/or lapse of
time).
3.31 Noncontravention. The
execution and delivery of, and the performance by the Contributor of its
obligations under this Agreement do not and will not contravene, or constitute
a
default under, any provision of applicable law or regulation, or any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Contributor, or result in the creation of any lien or other encumbrance on
any
asset of the Contributor. There are no outstanding agreements
(written or oral) pursuant to which the Contributor (or any predecessor to
or
representative of the Contributor) has agreed to contribute or has granted
an
option or right of first refusal to acquire the Interests or the Property or
any
part thereof.
3.32 Securities
Law Matters.
(a) The
Contributor is knowledgeable, sophisticated and experienced in business and
financial matters; the Contributor has previously invested in securities similar
to the LP Units and fully understands the limitations on transfer imposed by
the
federal securities laws and as described in this Agreement. The Contributor
is
able to bear the economic risk of holding the LP Units for an indefinite period
and is able to afford the complete loss of its investment in the LP Units;
the
Contributor has received and reviewed all information and documents about or
pertaining to Acquirer and Hersha, the business and prospects of Acquirer and
Hersha and the issuance of the LP Units as the Contributor deems necessary
or
desirable; and the Contributor has had the opportunity to review public filings
made with the SEC pursuant to the Exchange Act related to Acquirer and Hersha;
and the Contributor has been given the opportunity to obtain any additional
information or documents and to ask questions and receive answers about such
information and documents, Acquirer, Hersha, the business and prospects of
Acquirer and Hersha and the LP Units which the Contributor deems necessary
or
desirable to evaluate the merits and risks related to its investment in the
LP
Units and to conduct its own independent valuation of the LP Units; and the
Contributor understands and has taken cognizance of all risk factors related
to
the purchase of the LP Units. The Contributor was at no time
presented with or solicited by any form of general solicitation or general
advertising, including, but not limited to, any advertisement, article, notice
or other communication published in any newspaper, magazine, or similar media
or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising in
connection with the acquisition of the LP Units contemplated
hereby. The Contributor is a sophisticated real estate investor. In
acquiring the LP Units and engaging in this transaction, the Contributor is
not
relying upon any representations made to it by Acquirer or Hersha, or any of
the
officers, employees, or agents of Acquirer or Hersha, not contained herein.
The
Contributor is relying upon its own independent analysis and assessment
(including with respect to taxes), and the advice of such Contributor's advisors
(including tax advisors), and not upon that of Acquirer or Hersha or any of
Acquirer’s or Hersha’s advisors or affiliates, for purposes of evaluating,
entering into, and consummating the transactions contemplated by this Agreement.
The Contributor represents and warrants that it has reviewed and approved the
form of the Acquirer's Limited Partnership Agreement attached hereto as
Exhibit K.
14
(b) The
Contributor understands that the LP Units have not 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 LP
Units issuable to the Contributor are being acquired solely for the
Contributor’s 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 has
no
present intention to enter into any contract, undertaking, agreement, or
arrangement with respect to any such resale. The Contributor understands that
any certificates evidencing the LP Units will contain appropriate legends as
required by the Acquirer’s Limited Partnership Agreement that reflect the
non-negotiability of the certificate and that the LP Units represented by the
certificate are governed by and are transferable only in accordance with the
provisions of the Acquirer’s Limited Partnership Agreement.
(c) The
Contributor is an "accredited investor" as that term is defined in Rule 501
of
Regulation D under the Securities Act. In order to be an “accredited
investor”, as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act, you must be one of the following:
(i) a
bank as defined in Section 3(a)(2) of the Securities Act, or a savings and
loan
association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act, whether acting in its individual or fiduciary
capacity;
(ii) a
broker or dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”);
(iii) an
insurance company as defined in Section 2(13) of the Securities
Act;
15
(iv) an
investment company registered under the Investment Company Act of 1940, as
amended;
(v) a
business development company as defined in Section 2(a)(48) of the Investment
Company Act of 1940, as amended;
(vi) a
Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment
Act
of 1958, as amended;
(vii) a
plan established and maintained by a state, its political subdivisions, or
any
agency or instrumentality of a state or its political subdivisions, for the
benefit of its employees, if such plan has total assets in excess
of Five Million Dollars ($5,000,000.00);
(viii) an
employee benefit
plan within the meaning of the Employee Retirement Income Security Act of 1974,
as amended, if the investment decision is made by a plan fiduciary, as defined
in Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company or registered investment adviser, or if the
employee benefit plan has total assets in excess of Five Million Dollars
($5,000,000.00) or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors;
(ix) a
private business development company as defined in Section 202(a)(22) of the
Investment Advisors Act of 1940, as amended;
(x) an
(a) organization described in Section 501(c)(3) of the Internal Revenue Code
of
1986, as amended, (b) corporation, (c) Massachusetts or similar business trust,
(d) partnership, or (e) limited liability company, in each case not formed
for
the specific purpose of acquiring LP Units of the Acquirer or shares of Hersha’s
common stock, with total assets in excess of Five Million Dollars
($5,000,000.00);
(xi) a
director or executive officer of Acquirer or Hersha;
(xii) a
natural person whose individual net worth, or joint net worth with his or her
spouse, at the time of his or her acquisition of the LP Units exceeds One
Million Dollars ($1,000,000.00);
(xiii) a
natural person
who has an individual income in excess of Two Hundred Thousand Dollars
($200,000.00) in each of the two most recent years or joint income with that
person’s spouse in excess of Three Hundred Thousand Dollars ($300,000.00) in
each of those years and has a reasonable expectation of reaching the same income
level in the current year;
(xiv) a
trust, with total
assets in excess of Five Million Dollars ($5,000,000.00), not formed for the
specific purpose of acquiring LP Units of the Acquirer or shares of Hersha’s
common stock whose acquisition of LP Units of the Acquirer or shares of Hersha’s
common stock is directed by a sophisticated person as described in Rule
506(b)(2)(ii) of Regulation D under the Securities Act; or
16
(xv) an
entity in which all of the equity owners are accredited investors.
3.33 Patriot
Act Representations. The Contributor and, to the actual knowledge
of such Contributor, any direct or indirect owner of the LP or such Contributor,
(i) are not included on any Government List (as defined below), (ii) are not
persons who have been determined by competent authority to be subject to the
prohibitions contained in the Presidential Executive Order No. 13224 or any
other similar prohibitions contained in the rules and regulations of the OFAC
or
in any enabling legislation or other Presidential Executive Orders in respect
thereof, (iii) have not been indicted or convicted of any Patriot Act Offenses,
or (iv) are not currently under investigation by any governmental authority
for
alleged criminal activity. For purposes of this Agreement, (i) “Government
List” means (A) the Specially Designated Nationals and Blocked Persons List
maintained by OFAC, (B) any other list of terrorists, terrorist organizations
or
narcotics traffickers maintained pursuant to any of the Rules and Regulations
of
OFAC, or (C) any similar list maintained by the United States Department of
State, the United States Department of Commerce or any other governmental
authority or pursuant to any Executive Order of the President of the United
States of America; (ii) “OFAC” means the Office of Foreign Asset Control,
U.S. Department of the Treasury, (iii) “Patriot Act” means the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept
and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as the same may be amended
from time to time, and corresponding provisions of future laws, and (iv)
“Patriot Act Offense” means any violation of the criminal laws of the
United States of America or of any of the several states, or that would be
a
criminal violation if committed within the jurisdiction of the United States
of
America or any of the several states, relating to terrorism or the laundering
of
monetary instruments, including any offense under (A) the criminal laws against
terrorism, (B) the criminal laws against money laundering, (C) the Bank Secrecy
Act, as amended, (D) the Money Laundering Control Act of 1986, as amended,
or
(E) the Patriot Act and also includes the crimes of conspiracy to commit, or
aiding and abetting another to commit, any of the foregoing.
Each
of
the representations, warranties and covenants contained in this Article
III and its various subparagraphs are intended for the benefit of the
Acquirer and may be waived in whole or in part, by the Acquirer, but only by
an
instrument in writing signed by the Acquirer. Each of said
representations, warranties and covenants shall survive the closing of the
transaction contemplated hereby for twelve (12) months, and no investigation,
audit, inspection, review or the like conducted by or on behalf of the Acquirer
shall be deemed to terminate the effect of any such representations, warranties
and covenants, it being understood that the Acquirer has the right to rely
thereon and that each such representation, warranty and covenant constitutes
a
material inducement to the Acquirer to execute this Agreement and to close
the
transaction contemplated hereby and to pay the Consideration to the
Contributor. Acquirer acknowledges and agrees that, except for the
representations and warranties expressly set forth herein, Acquirer is acquiring
the LP and Property “AS-IS, WHERE-IS” with no representations or warranties by
or from Contributor, express or implied, or any nature whatsoever.
17
ARTICLE
IV
ACQUIRER'S
REPRESENTATIONS, WARRANTIES AND COVENANTS
To
induce
the Contributor to enter into this Agreement and to sell the Interests, the
Acquirer hereby makes the following representations, warranties and covenants
upon each of which the Acquirer acknowledges and agrees that the Contributor
is
entitled to rely and has relied:
4.1 Organization
and
Power. The Acquirer is a limited partnership duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia, and has all partnership powers and all governmental licenses,
authorizations, consents and approvals to carry on its business as now conducted
and to enter into and perform its obligations under this Agreement and any
document or instrument required to be executed and delivered on behalf of the
Acquirer hereunder.
4.2 Noncontravention. The
execution and delivery of this Agreement and the performance by the Acquirer
of
its obligations hereunder do not and will not contravene, or constitute a
default under, any provisions of applicable law or regulation, the Acquirer's
partnership agreement or any agreement, judgment, injunction, order, decree
or
other instrument binding upon the Acquirer or result in the creation of any
lien
or other encumbrance on any asset of the Acquirer.
4.3 Litigation. There
is no material 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 Governmental Body which (a) in any manner raises any question
affecting the validity or enforceability of this Agreement or any other
agreement or instrument to which the Acquirer is a party or by which it is
bound
and that is to be used in connection with, or is contemplated by, this
Agreement, (b) could materially and adversely affect the ability of the
Acquirer to perform its obligations hereunder, or under any document to be
delivered pursuant hereto.
4.4 Bankruptcy. No
Act of Bankruptcy has occurred with respect to the Acquirer.
4.5 No
Brokers. The Acquirer has not engaged the services of, nor is it
or will it become liable to, any real estate agent, broker, finder or any other
person or entity for any brokerage or finder's fee, commission or other amount
with respect to the transaction described herein.
ARTICLE
V
CONDITIONS
AND ADDITIONAL COVENANTS
The
Acquirer's obligations hereunder are subject to the satisfaction of the
following conditions precedent and the compliance by the Contributor with the
following covenants:
18
5.1 Contributor’s
Deliveries. The Contributor shall have delivered to the Escrow
Agent or the Acquirer, as the case may be, on or before the date of Closing,
all
of the documents and other information required of Contributor pursuant to
Section 6.2.
5.2 Representations,
Warranties and Covenants; Obligations of Contributor;
Certificate. All of the Contributor’s representations and
warranties made in this Agreement shall be true and correct as of the date
hereof and as of the Closing Date as if then made, there shall have occurred
no
material adverse change in the financial condition of the Property or the LP
since the date hereof, the Contributor shall have performed all of its material
covenants and other obligations under this Agreement and the Contributor shall
have executed and delivered to the Acquirer at Closing a certificate to the
foregoing effect.
5.3 Title
Insurance. Good and indefeasible title to the fee interest in the
Real Property shall be insurable as such by the Title Company at or below its
regularly scheduled rates subject only to Permitted Title Exceptions as
determined in accordance with Section 2.2.
5.4 Condition
of
Improvements. The Improvements and the Tangible Personal Property
(including but not limited to the mechanical systems, plumbing, electrical,
wiring, appliances, fixtures, heating, air conditioning and ventilating
equipment, elevators, boilers, equipment, roofs, structural members and
furnaces) shall be in the same condition at Closing as they are as of the date
hereof, reasonable wear and tear excepted. Prior to Closing, the
Contributor shall not have diminished the quality or quantity of maintenance
and
upkeep services heretofore provided to the Real Property and the Tangible
Personal Property and the Contributor shall not have diminished the
Inventory. The Contributor shall not have removed or caused or
permitted to be removed any part or portion of the Real Property or the Tangible
Personal Property unless the same is replaced, prior to Closing, with similar
items of at least equal quality and acceptable to the Acquirer.
5.5 Utilities. All
of the Utilities shall be installed in and operating at the Property, and
service shall be available for the removal of garbage and other waste from
the
Property.
5.6 Intentionally
Omitted.
5. Interests. From
the date hereof to and including the Closing Date, Contributor shall not sell,
assign, pledge, hypothecate or otherwise transfer the Interests, except as
contemplated by this Agreement, nor shall the Contributor cause or permit the
LP
to issue any securities or membership interests to any person or to sell,
pledge, transfer or otherwise dispose of the Property or any interest
therein.
5.8 Existing
Mortgage. Acquirer acknowledges that the Property and the LP are
subject to the Existing Mortgage, a line of credit from Commerce Bank, N.A.
to
the LP in the original principal amount of Eighty Five Million Dollars
($85,000,000.00), of which Twenty One Million Three Hundred Ninety Dollars
($21,390,000.00) currently encumbers the Property.
5.9 Indemnification. The
Contributor hereby agrees to indemnify, defend and hold the Acquirer and the
Acquirer’s affiliates (and their respective agents, principals, shareholders,
partners, members, officers, directors and employees) (collectively, the
“Acquirer Indemnified Parties”) harmless from and against all liabilities,
losses, claims, damages, costs and expenses (including, but not limited to,
reasonable attorneys’ fees and expenses) that may be incurred by or asserted
against any such Acquirer Indemnified Parties by reason of, arising out of
or
otherwise connected with the litigation set forth on Exhibit I and/or any
actions or omissions of Contributor occurring at any time prior to Closing
or
any earlier termination of this Agreement. This Section 5.9shall survive
indefinitely following Closing or any earlier termination of this
Agreement.
19
ARTICLE
VI
CLOSING
6.1 Closing. Closing
shall be held at a location that is mutually acceptable to the parties, on
or
before October 1, 2007.
6.2 Contributor’
Deliveries. At Closing, the Contributor shall deliver to Acquirer
all of the following instruments, each of which shall have been duly executed
and, where applicable, acknowledged on behalf of the Contributor and shall
be
dated as of the date of Closing:
(a) Certificates
representing the Interests.
(b) The
certificate required by Section 5.2.
(c) The
Assignment and Assumption Agreement.
(d)
Any and all service contracts, space leases, and agreements.
(e) Such
agreements, affidavits or other documents as may be required by the Title
Company to issue the Owner's Title Policy with affirmative coverage over
mechanics' and materialmen's liens.
(f) The
FIRPTA Certificate.
(g) True,
correct and complete copies of all warranties, if any, of manufacturers,
suppliers and installers possessed by the Contributor and relating to the
Improvements and the Personal Property, or any part thereof.
(h) Copies
of the LP’s Organizational Documents.
(i) Appropriate
consent of the LP, authorizing (A) the execution of any documents to be
executed and delivered by the LP prior to, at or otherwise in connection with
Closing and in connection with the transactions contemplated by this Agreement,
and (B) the performance by the LP of its obligations hereunder and under
such documents.
(j) Valid,
final and unconditional certificate(s) of occupancy for the Real Property and
Improvements, issued by the appropriate Governmental Body.
20
(k) Such
proof as the Acquirer may reasonably require with respect to Contributor’s
compliance with the bulk sales laws or similar statutes.
(l) A
written instrument executed by the Contributor, conveying and transferring
to
the Acquirer all of the Contributor’s right, title and interest in any telephone
numbers and facsimile numbers relating to the Property, and, if the Contributor
maintains a post office box, conveying to the Acquirer all of its interest
in
and to such post office box and the number associated therewith, so as to assure
a continuity in operation and communication.
(m) All
current real
estate and personal property tax bills in the Contributor’s possession or under
its control.
(n) A
complete set of all guest registration cards, guest transcripts, guest
histories, and all other available guest information in the Contributor’s
possession or under its control..
(o) An
updated schedule of employees, showing salaries and duties with a statement
of
the length of service of each such employee, brought current to a date not
more
than 48 hours prior to the Closing.
(p) A
complete list of all advance room reservations, functions and the like, in
reasonable detail so as to enable the Acquirer to honor the Contributor’s
commitments in that regard.
(q) A
list of the Contributor’s outstanding accounts receivable as of midnight on the
date prior to the Closing, specifying the name of each account and the amount
due the Contributor.
(r) Possession
of the Property and all keys for the Property.
(s) All
books, records, operating reports, appraisal reports, files and other materials
in the Contributor’s possession or control which are necessary in the Acquirer’s
discretion to maintain continuity of operation of the Property.
(t) To
the extent permitted under applicable law, documents of transfer necessary
to
transfer to the Acquirer the Contributor’s employment rating for workmens'
compensation and state unemployment tax purposes.
(u) An
assignment of all warranties and guarantees from all contractors and
subcontractors, manufacturers, and suppliers in effect with respect to the
Improvements.
(v) Complete
set of “as-built” drawings for the Improvements as available in Contributor’s
possession.
(w) Such
proof,
reasonably acceptable to the Acquirer evidencing the payment by Contributor
of
all transfer taxes incurred in connection with the transactions contemplated
by
this Agreement.
21
(x) The
Joinder.
(y) Any
other document or instrument reasonably requested by the Acquirer or required
hereby.
6.3 Acquirer's
Deliveries. At Closing, the Acquirer shall pay or deliver to the
Contributor the following:
(a) The
Consideration described in Section 2.3.
(b) The
Assignment and Assumption Agreement.
(c) The
Joinder.
(d) Any
other document or instrument reasonably requested by the Contributor or required
hereby.
6.4 Closing
Costs. Each party shall pay its own legal fees and
expenses. All filing fees, and recording or other similar taxes, and
all charges for title insurance premiums shall be paid by
Acquirer. Any other costs or expenses shall be paid by
Acquirer.
6.5 Income
and
Expense Allocations. All income, except any Intangible Personal
Property, and expenses with respect to the Property, determined in accordance
with United States generally accepted accounting principles consistently
applied, shall be allocated between the Contributor and the
Acquirer. The Contributor shall be entitled to its share of all
income (including all cash box receipts and cash credits for unused
expendables), and responsible for its share of all expenses for the period
of
time up to but not including 11:59 P.M. on the Apportionment Date, and the
Acquirer shall be entitled to all income and responsible for all expenses for
the period of time from, after and including 11:59 P.M. on the Apportionment
Date. Only adjustments for ground rent, if applicable, and real
estate taxes shall be shown on the settlement statements (with such supporting
documentation as the parties hereto may require being attached as exhibits
to
the settlement statements) and shall increase or decrease (as the case may
be)
the amount payable by the Acquirer. All other such adjustments shall
be made by separate agreement between the parties and shall be payable by check
or wire directly between the parties. Without limiting the generality
of the foregoing, the following items of income and expense shall be allocated
as of the Closing Date:
(a) Current
and prepaid rents, including, without limitation, prepaid room receipts,
function receipts and other reservation receipts.
(b) Real
estate and personal property taxes.
(c) Amounts
under the Operating Agreements.
(d) Utility
charges (including but not limited to charges for water, sewer and
electricity).
22
(e) Wages,
vacation pay, pension and welfare benefits and other fringe benefits of all
persons employed at the Property who the Acquirer elects to employ.
(f) Value
of fuel stored on the Property at the price paid for such fuel by the
Contributor, including any taxes.
(g) All
prepaid reservations and contracts for rooms confirmed by Contributor prior
to
the Closing Date for dates after the Closing Date, all of which Acquirer shall
honor.
The
Tray
Ledger shall be retained by the Contributor. The Contributor shall be
required to pay its share of all sales taxes and similar impositions currently
up to the Closing Date.
Acquirer
shall not be obligated to collect any accounts receivable or revenues accrued
prior to the Closing Date for Contributor, but if Acquirer collects same, such
amounts will be promptly remitted to Contributor in the form
received.
If
accurate allocations cannot be made at Closing because current bills are not
obtainable (as, for example, in the case of utility bills or tax bills), the
parties shall allocate such income or expenses at Closing on the best available
information, subject to adjustment upon receipt of the final xxxx or other
evidence of the applicable income or expense. Any income received or
expense incurred by the Contributor or the Acquirer with respect to the Property
after the date of Closing shall be promptly allocated in the manner described
herein and the parties shall promptly pay or reimburse any amount
due. The Contributor shall pay at Closing all special assessments and
taxes applicable to the Property.
The
certificates evidencing the Contributor’s ownership of the Interests will be
dated as of the Closing Date.
ARTICLE
VII
CONDEMNATION;
RISK OF LOSS
7.1 Condemnation. In
the event of any actual or threatened taking, pursuant to the power of eminent
domain, of all or any portion of the Real Property, or any proposed sale in
lieu
thereof, the Contributor shall give written notice thereof to the Acquirer
promptly after the Contributor learns or receives notice thereof. If
all or any part of the Real Property is, or is to be, so condemned or sold,
the
Acquirer shall have the right to terminate this Agreement pursuant to
Section 8.3. If the Acquirer elects not to terminate this
Agreement, all proceeds, awards and other payments arising out of such
condemnation or sale (actual or threatened) shall be paid or assigned, as
applicable, to the Acquirer at Closing.
7.2 Risk
of
Loss. The risk of any loss or damage to the Property prior
to Closing shall remain upon Contributor. If any such loss or damage
to more than ten percent (10%) of the value of the Improvements occurs prior
to
Closing or any such loss or damage is uninsured or underinsured, the Acquirer
shall have the right to terminate this Agreement pursuant to
Section 8.3. If the Acquirer elects not to terminate this
Agreement, all insurance proceeds and rights to proceeds arising out of such
loss or damage shall be paid or assigned, as applicable, to the Acquirer at
Closing.
23
ARTICLE
VIII
LIABILITY
OF ACQUIRER; INDEMNIFICATION BY CONTRIBUTOR;
TERMINATION
RIGHTS
8.1 Liability
of
Acquirer. Except for any obligation expressly assumed or agreed
to be assumed by the Acquirer hereunder and in the Assignment and Assumption
Agreement, the Acquirer does not assume any obligation of the Contributor or
any
of Contributor’s liability for claims arising out of any occurrence prior to
Closing.
8.2 Indemnification
by Contributor. The Contributor hereby indemnifies and holds the
Acquirer harmless from and against any and all suits, actions, claims, costs,
penalties, damages, losses, liabilities and expenses, subject to
Section 9.11, that may at any time be incurred by the
Acquirer, whether before or after Closing, (i) as a result of any breach by
the
Contributor of any of his representations, warranties, covenants or obligations
set forth herein or in any other document delivered by the Contributor pursuant
hereto, (ii) relating to any suits, litigation or actions brought against any
Contributor prior to the Closing Date, (iii) in connection with Contributor’s
share of any and all liabilities and obligations of the LP occurring, accruing
or arising prior to the Closing Date, and/or (iv) as a result of or in
connection with Contributor’s use or operation of the Property prior to the
Closing Date.
8.3 Termination
by
Acquirer. If any condition set forth herein cannot or will not be
satisfied prior to Closing, or upon the occurrence of any other event that
would
entitle the Acquirer to terminate this Agreement and its obligations hereunder,
and the Contributor fails to cure any such matter within five (5) days after
notice thereof from the Acquirer, the Acquirer, at its option and as its sole
remedy, shall elect either (a) to terminate this Agreement, and all other
rights and obligations of the Contributor and the Acquirer hereunder shall
terminate immediately, or (b) to waive its right to terminate and, instead,
to proceed to Closing.
8.4 Termination
by
Contributor. If, prior to Closing, the Acquirer defaults in
performing any of its obligations under this Agreement, and the Acquirer fails
to cure any such default within five (5) business days after notice thereof
from
the Contributor, then the Contributor’s sole remedy for such default shall be to
terminate this Agreement.
ARTICLE
IX
MISCELLANEOUS
PROVISIONS
9.1 Completeness;
Modification. This Agreement constitutes the entire agreement
between the parties hereto with respect to the transactions contemplated hereby
and supersedes all prior discussions, understandings, agreements and
negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties
hereto.
24
9.2 Assignments. The
Acquirer may assign its rights hereunder to any affiliate of Acquirer without
the consent of the Contributor. No such assignment shall relieve the
Acquirer of any of its obligations and liabilities hereunder.
9.3 Successors
and
Assigns. The benefits and burdens of this Agreement shall inure
to the benefit of and bind the Acquirer and the Contributor and their respective
party hereto.
9.4 Days. If
any action is required to be performed, or if any notice, consent or other
communication is given, on a day that is a Saturday or Sunday or a legal holiday
in the jurisdiction in which the action is required to be performed or in which
is located the intended recipient of such notice, consent or other
communication, such performance shall be deemed to be required, and such notice,
consent or other communication shall be deemed to be given, on the first
business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a “day” or “days” shall
refer to calendar days and not business days.
9.5 Governing
Law. This Agreement and all documents referred to herein
shall be governed by and construed and interpreted in accordance with the laws
of the Commonwealth of Pennsylvania.
9.6 Counterparts. To
facilitate execution, this Agreement may be executed in as many counterparts
as
may be required. It shall not be necessary that the signature on
behalf of both parties hereto appear on each counterpart hereof. All
counterparts hereof shall collectively constitute a single
agreement.
9.7 Severability. If
any term, covenant or condition of this Agreement, or the application thereof
to
any person or circumstance, shall to any extent be invalid or unenforceable,
the
remainder of this Agreement, or the application of such term, covenant or
condition to other persons or circumstances, shall not be affected thereby,
and
each term, covenant or condition of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
9.8 Costs. Regardless
of whether Closing occurs hereunder, and except as otherwise expressly provided
herein, each party hereto shall be responsible for its own costs in connection
with this Agreement and the transactions contemplated hereby, including without
limitation fees of attorneys, engineers and accountants.
9.9 Notices. All
notices, requests, demands and other communications hereunder shall be in
writing and shall be delivered by hand, transmitted by facsimile transmission,
sent prepaid by Federal Express (or a comparable overnight delivery service)
or
sent by the United States mail, certified, postage prepaid, return receipt
requested, at the addresses and with such copies as designated
below. Any notice, request, demand or other communication delivered
or sent in the manner aforesaid shall be deemed given or made (as the case
may
be) when actually delivered to the intended recipient.
|
If
to the Contributor:
|
3344
Associates
|
|
|
00
Xxxxxx Xxxxx
|
Xxxxxxxxxx,
XX 00000
Phone:
(000) 000-0000
Fax:
(000) 000-0000
25
|
|
If
to the Acquirer:
|
Hersha
Hospitality Limited Partnership
|
|
|
00
Xxxxxx Xxxxx
|
|
|
Xxxxxxxxxx,
XX 00000
|
|
|
Phone:
(000) 000-0000
|
|
|
Fax:
(000) 000-0000
|
Attn:
Xxxxxx X. Xxxxxx
|
|
With
a copy to:
|
Franklin Firm,
LLP
|
Penn Mutual Towers
|
|
000
Xxxxxx Xxxxxx, 0xx
xxxxx
|
|
|
Xxxxxxxxxxxx,
XX 00000
|
|
|
Phone: (000)
000-0000
|
|
|
Fax: (000)
000-0000
|
Attn:
Lok Mohapatra, Esquire
Or
to
such other address as the intended recipient may have specified in a notice
to
the other party. Any party hereto may change its address or designate
different or other persons or entities to receive copies by notifying the other
party and the Escrow Agent in a manner described in this Section.
9.10 Incorporation
by
Reference. All of the exhibits attached hereto are by this
reference incorporated herein and made a part hereof.
9.11 Survival. All
of the representations, warranties, covenants and agreements of the Contributor
and the Acquirer made in, or pursuant to, this Agreement shall survive for
a
period of twelve (12) months following Closing and shall not merge into the
Deed
or any other document or instrument executed and delivered in connection
herewith, except for the representations and warranties set forth in Sections
3.4, 3.7 and 3.9, which shall survive for periods coterminous with
applicable statutes of limitations, and the indemnification set forth in
Section 5.9, which shall survive indefinitely following Closing or any
earlier termination of this Agreement.
9.12 Further
Assurances. The Contributor and the Acquirer each covenant and
agree to sign, execute and deliver, or cause to be signed, executed and
delivered, and to do or make, or cause to be done or made, upon the written
request of the other party, any and all agreements, instruments, papers, deeds,
acts or things, supplemental, confirmatory or otherwise, as may be reasonably
required by either party hereto for the purpose of or in connection with
consummating the transactions described herein.
9.13 No
Partnership. This Agreement does not and shall not be construed
to create a partnership, joint venture or any other relationship between the
parties hereto except the relationship of Contributor and Acquirer specifically
established hereby.
26
9.14 Time
of
Essence. Time is of the essence with respect to every provision
hereof.
9.15 Confidentiality. Contributor
and its representatives, including any professionals representing Contributor,
shall keep the existence and terms of this Agreement strictly confidential,
except to the extent disclosure is compelled by law, and then only to the extent
of such compulsion.
[SIGNATURE
PAGE FOLLOWS]
27
IN
WITNESS WHEREOF, the Contributor and the Acquirer have caused this
Contribution Agreement to be executed in their names by their respective
duly-authorized representatives.
|
CONTRIBUTOR:
|
||
|
3344
ASSOCIATES, a Pennsylvania limited partnership
|
||
|
By:
|
Xxxxxxxxxxx
Enterprises, Ltd., a Pennsylvania corporation, its sole general
partner
|
|
|
By:
|
||
|
Name:
Xxxx X. Xxxx
|
||
|
Title:
President
|
||
|
ACQUIRER:
|
||
|
HERSHA
HOSPITALITY LIMITED PARTNERSHIP, a Virginia limited
partnership
|
||
|
By:
|
Hersha
Hospitality Trust, a Maryland business trust, its sole general
partner
|
|
|
By:
|
||
|
Name:
Xxxxxx X. Xxxxxx
|
||
|
Title:
CFO
|
||
28
EXHIBIT
A
Legal
Description of Land
EXHIBIT
B
Employment
Agreements
EXHIBIT
C
Insurance
Policies
EXHIBIT
D
Leases
EXHIBIT
E
Operating
Agreements
EXHIBIT
F
Certificate
of Limited Partnership of LP
EXHIBIT
G
LP
Partnership Agreement
EXHIBIT
H
Warranties
and Guaranties
EXHIBIT
I
Litigation
Schedule
|
|
1.
|
Xxxxxxx
Xxxxxxxx, Xxxx X. Xxxxxxx and Xxxxx Xxxxxxx v. Affordable Hospitality
Associates, L.P., Affordable Hospitality, Inc. and Hersha Hospitality
Trust, District Court for the Southern District of New York, Case
No. 06
CV 3338 (SCR).
|
EXHIBIT
J
Form
of Joinder
JOINDER
AGREEMENT
THIS
JOINDER AGREEMENT (the “Agreement”), is dated as of October 1, 2007, by and
among 3344 Associates, a Pennsylvania limited partnership ( “Limited Partner”)
and Hersha Hospitality Limited Partnership, a Virginia limited partnership
(“HHLP”) and Hersha Hospitality Trust, a Maryland real estate investment trust
(“Hersha”). Capitalized terms used but not otherwise defined herein
shall have the meanings assigned to them in the Partnership Agreement (as
defined below).
WHEREAS,
the affairs of HHLP are governed by the terms of that certain Amended and
Restated Agreement of Limited Partnership of Hersha Hospitality Limited
Partnership, dated January 26, 1999, as amended, by and between Hersha and
the
limited partners set forth on Exhibit A attached thereto (the
“Partnership Agreement”); and
WHEREAS,
pursuant to that certain Contribution Agreement (the “Contribution Agreement”),
dated October 1, 2007, by and among Limited Partner and
HHLP, Limited Partner is acquiring units representing ownership of HHLP (the
“Units”) and wishes to be admitted as a limited partner of HHLP.
NOW
THEREFORE, in consideration of the foregoing and of the representations,
warranties and agreements set forth herein, the parties agree as
follows:
1. Limited
Partner by its signature below becomes a party under the Partnership Agreement
with the same force and effect as if originally named therein as a limited
partner, and Limited Partner hereby (a) agrees to be bound by all of the terms
and provisions of the Partnership Agreement applicable to it as a limited
partner of HHLP and (b) represents and warrants that the representations and
warranties made by a limited partner thereunder are true and correct with
respect to Limited Partner on as of the date hereof. Limited Partner agrees
to
execute any other documents or instruments as Hersha may require in order to
effect the admission of Limited Partner as a limited partner to
HHLP.
2. To
the extent required, Limited Partner agrees to sign an amended Certificate
evidencing the admission of Limited Partner as a limited partner and filed
for
record in accordance with the Act.
3. Limited
Partner agrees that it will not sell, assign or otherwise transfer the Units
or
any fraction thereof, whether voluntarily or by operation of law or at a
judicial sale or otherwise, to any Person who does not make the representations
and warranties to Hersha set forth in Section 9.01(a) in the Partnership
Agreement and similarly agrees not to sell, assign or transfer the Units to
any
Person who does not similarly represent, warrant and agree.
4. Limited
Partner hereby irrevocably appoints Hersha its true and lawful attorney-in-fact,
who may act for each limited partner of HHLP and in its name, place and stead,
and for its use and benefit, to sign, acknowledge, swear to, deliver, file
or
record, at the appropriate public offices, any and all documents, certificates
and instruments as may be deemed necessary or desirable by Hersha to carry
out
fully the provisions of the Partnership Agreement and the Virginia Revised
Uniform Limited Partnership Act in accordance with their terms, which power
of
attorney is coupled with an interest and shall survive the death, dissolution
or
legal incapacity of Limited Partner, or the transfer by Limited Partner of
any
part or all of its interest in HHLP.
5. At
the request of Hersha, Limited Partner agrees to pay all reasonable legal fees
and other expenses of HHLP and Hersha and filing and publication costs in
connection with Limited Partner’s admission as a limited Partner.
6. Hersha,
as general partner to HHLP, hereby consents to the admission of Limited Partner
as a limited partner of HHLP.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the parties have executed this Joinder Agreement as of the
date
first above written.
|
LIMITED
PARTNER:
|
||
|
3344
ASSOCIATES, a Pennsylvania limited partnership
|
||
|
By:
|
Xxxxxxxxxxx
Enterprises, Ltd., a Pennsylvania corporation, its sole general
partner
|
|
|
By:
|
|||
|
Name:
Xxxx X. Xxxx
|
|||
|
Title:
President
|
|||
|
HHLP:
|
||
|
HERSHA
HOSPITALITY LIMITED PARTNERSHIP, a Virginia limited
partnership
|
||
|
By:
|
Hersha
Hospitality Trust, a Maryland business
trust, its sole general partner
|
|
|
By:
|
|||
|
Name:
Xxxxxx X. Xxxxxx
|
|||
|
Title:
CFO
|
|||
|
HERSHA:
|
||
|
HERSHA
HOSPITALITY TRUST, a Maryland business trust
|
||
|
By:
|
||
|
Name:
Xxxxxx X. Xxxxxx
|
||
|
Title:
CFO
|
||
EXHIBIT
K
Acquirer's
Limited Partnership Agreement and any Amendments
thereto:
