Exhibit 10.19
Securities Purchase Agreement between
CNL Hospitality Properties, Inc. and
Five Arrows Realty Securities II L.L.C.,
dated February 24, 1999
SECURITIES PURCHASE AGREEMENT
Dated as of February 24, 1999
among
CNL HOSPITALITY PROPERTIES, INC.,
CNL HOTEL INVESTORS, INC.
and
FIVE ARROWS REALTY SECURITIES II L.L.C.
TABLE OF CONTENTS
Page
ARTICLE I................................................................... 2
1. PURCHASE OF CHP COMMON STOCK.................................. 2
1.1. Purchase of CHP Common Stock......................... 2
1.2. Timing of Purchases.................................. 2
1.3. Use of Proceeds...................................... 3
1.4. Purchase Price....................................... 3
1.5. Issuance of Note in lieu of CHP Common
Stock................................................ 3
1.6. Conversion of Note................................... 3
ARTICLE II.................................................................. 3
2. REPRESENTATIONS AND WARRANTIES OF CHP......................... 3
2.1. Corporate Power and Authority........................ 3
2.2. Consents and Approvals; Authorization
and Noncontravention................................. 4
2.3. Existence and Good Standing.......................... 4
2.4. Capital Stock........................................ 6
2.5. Valid Issuance of Shares; No Personal
Liability............................................ 6
2.6. Subsidiaries and Investments......................... 6
2.7. Financial Statements and No Material Changes......... 7
2.8. Title to Properties; Encumbrances.................... 8
2.9. Leases............................................... 8
2.10. Contracts............................................ 9
2.11. Restrictive Documents................................ 9
2.12. Litigation........................................... 9
2.13. ERISA................................................10
2.14. Environmental Matters................................11
2.15. Taxes................................................13
2.16. Compliance with Laws.................................14
2.17. No Changes Since Balance Sheet Date..................14
2.18. Disclosure...........................................14
2.19. Broker's or Finder's Fees............................15
2.20. Insurance............................................16
ARTICLE III.................................................................16
3. REPRESENTATIONS AND WARRANTIES OF FIVE ARROWS.................16
3.1. Power and Authority..................................16
3.2. Existence and Good Standing..........................16
3.3. Consents; Authorization..............................16
3.4. Accredited Investor..................................16
3.5. Investment...........................................16
3.6. Rule 144.............................................17
3.7. Brokers or Finders...................................17
3.8. Ownership Limits.....................................17
ARTICLE IV..................................................................17
4. COVENANTS.....................................................17
4.1. Use of Proceeds......................................17
4.2. Notice of Default....................................17
4.3. Stockholder Approval.................................17
4.4. Appointment of Five Arrows Director..................19
4.5. Further Assurances...................................19
4.6 Supplemental Disclosure..............................19
4.7 Prohibition on Issuance of Securities................19
ARTICLE V...................................................................19
5. CONDITIONS TO CHP'S OBLIGATIONS...............................19
5.1. Representations and Warranties.......................19
5.2. Approvals............................................20
5.3. Proceedings..........................................20
ARTICLE VI..................................................................20
6. CONDITIONS TO THE INITIAL PURCHASE............................20
6.1. Representations and Warranties.......................20
6.2. Performance of Agreements............................20
6.3. Approvals............................................20
6.4. Opinion of CHP's Counsel.............................21
6.5. Good Standing and Other Certificates.................21
6.6. No Material Adverse Change...........................21
6.7. Registration Rights Agreement........................21
6.8. Hotel Investors Subscription Agreement...............21
6.9. Valid Issuance.......................................21
6.10. Appointment of Five Arrows Director..................21
6.11. D&O Insurance........................................21
6.12. Investment in Advisor................................22
6.13. Proceedings..........................................22
6.14 Opinion of CHP's Tax Counsel.........................22
6.15 Approval of Financing and Other
Material Documents...................................22
ARTICLE VII.................................................................22
7. CONDITIONS TO SUBSEQUENT PURCHASES............................22
7.1. Representations and Warranties.......................22
7.2. Performance of Agreements............................22
7.3. Assurance of Performance.............................23
7.4. Performance of Hotel Investors
Subscription Agreement...............................23
7.5. No Material Adverse Change...........................23
7.6. Valid Issuance.......................................23
7.7. Five Arrows Director.................................23
7.8. D&O Insurance........................................23
ARTICLE VIII................................................................24
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNITY.....................................................24
8.1. Survival.............................................24
8.2. Indemnification......................................24
ARTICLE IX..................................................................26
9. MISCELLANEOUS.................................................26
9.1. Preservation of Confidential Information.............26
9.2. Governing Law........................................26
9.3. Prevailing Party.....................................26
9.4. Captions.............................................26
9.5. Publicity............................................26
9.6. Notices..............................................26
9.7. Successors and Assigns...............................28
9.8. Counterparts.........................................28
9.9. Entire Agreement.....................................28
9.10. Amendments...........................................29
9.11. Severability.........................................29
9.12. Termination of Agreement.............................29
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
February 24, 1999, among CNL Hospitality Properties, Inc., a Maryland
corporation ("CHP"), CNL Hotel Investors, Inc., a Maryland corporation ("Hotel
Investors"), and Five Arrows Realty Securities II L.L.C., a Delaware limited
liability company ("Five Arrows").
W I T N E S S E T H:
WHEREAS, Five Arrows, CHP and CNL Hospitality Partners, LP, a
Delaware limited partnership ("Hospitality Partners") 100% of the partnership
interests of which are owned by CHP through its wholly owned subsidiaries have
formed Hotel Investors to be operated as a real estate investment trust ("REIT")
within the meaning of Section 856 of the Internal Revenue Code of 1986, as
amended (the "Code"); and
WHEREAS, a purpose of Hotel Investors is to acquire from
various sellers affiliated with Western International ("WI") 100% of the
partnership interests in partnerships that own certain hotels identified on
Exhibit 1 hereto or, with the consent of Five Arrows, such other hotels as may
be substituted in lieu thereof of similar quality, characteristics and subject
to the same cross-default obligations as the hotels on Exhibit 1 (the "Hotels")
and to manage the Hotels (collectively, the "Business"); and
WHEREAS, the Hotels are expected to be subject to leases with
a new entity affiliated with WI; and
WHEREAS, in accordance with the Subscription and Stockholders'
Agreement, (the "Hotel Investors Subscription Agreement") dated as of February
24, 1999, among Five Arrows, CHP and Hospitality Partners, Five Arrows has
agreed to contribute to Hotel Investors up to a maximum amount of $50,886,508.86
(the "Five Arrows Commitment"), and Hospitality Partners has agreed to
contribute to Hotel Investors up to a maximum of $39,982,488.90 (the
"Hospitality Commitment"), for the acquisition of the Hotels; and
WHEREAS, pursuant to the Hotel Investors Subscription
Agreement upon making advances on the Five Arrows Commitment and in
consideration therefor, Five Arrows will purchase from Hotel Investors shares of
8% Class A Cumulative Preferred Stock of Hotel Investors (the "Class A Preferred
Stock") having an aggregate liquidation preference equal to the aggregate amount
of such advances; and
WHEREAS, the Class A Preferred Stock shall be exchangeable for
newly issued shares of CHP common stock, par value $.01 per share ("CHP Common
Stock"), upon the terms set forth in the Hotel Investors Subscription Agreement;
and
WHEREAS, to provide a portion of the funds necessary in order
for Hospitality Partners to satisfy the Hospitality Commitment therefor, CHP
desires to issue the CHP Common Stock required to be delivered to the holders of
the Class A Preferred Stock upon any such exchange; and
WHEREAS, Five Arrows desires to purchase and CHP desires to
sell up to an additional 1,578,947 shares of CHP Common Stock, at purchase price
of $9.50 per share, for a maximum aggregate investment of $14,999,996.50, each
upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
respective representations and warranties hereinafter set forth and the
respective covenants and agreements contained herein and intending to be legally
bound hereby, the parties hereto agree as follows:
ARTICLE I
1. PURCHASE OF CHP COMMON STOCK.
1.1. Purchase of CHP Common Stock. Upon the terms and
subject to the conditions herein stated, CHP agrees to issue and sell to Five
Arrows, and Five Arrows agrees to purchase from CHP, up to 1,578,947 shares of
CHP Common Stock (the "Shares") at a purchase price (the "Purchase Price") of
$9.50 per share, for a maximum aggregate investment of $14,999,996.50 (the "Five
Arrows Investment"). On any Closing Date (as defined in Section 1.2 hereof) on
which Five Arrows purchases Shares, CHP shall deliver to Five Arrows a
certificate registered in Five Arrows' name (or satisfactory evidence of such
issuance), representing the Shares to be issued to Five Arrows at the closing on
the applicable Closing Date (each a "Closing"). Five Arrows may elect to pay
that portion of the Purchase Price required to be paid by Five Arrows at each
Closing by wire transfer to either (i) an account designated by CHP within two
days before the applicable Closing Date or (ii) an account designated by
Hospitality Partners, for the benefit of Hotel Investors and on behalf of CHP,
within two days before the applicable Closing Date.
1.2. Timing of Purchases. At any time or from time to
time between the date hereof and December 31, 1999, Five Arrows shall be
required, subject to the conditions set forth below, to purchase Shares within
10 days of receipt of a notice from CHP (a "Notice of Purchase") which notice
shall (a) state that CHP has received notice from Hospitality Partners
requesting that Hospitality Partners fund all or any portion of the Hospitality
Commitment (each such amount to be funded to be referred to as an "Incremental
Funding") and (b) specify the portion of the Five Arrows Investment to be made
which shall not exceed the lesser of the balance of the Five Arrows Commitment
or 37.52% of the applicable Incremental Funding; provided, however, that such
portion shall be rounded down to the nearest whole share so as to avoid the
issuance of fractional shares of CHP Common Stock, and the date (each a "Closing
Date") such Shares are to be purchased (a "Purchase," and the first Purchase,
the "Initial Purchase").
1.3. Use of Proceeds. In no event shall Five Arrows
be required to purchase any Shares other than by reason of the funding of any
Hospitality Commitment.
1.4. Purchase Price. Five Arrows shall, on each
Closing Date, pay to CHP (or, in accordance with Section 1.1 hereof, to
Hospitality Partners) the Purchase Price for the number of Shares specified in
the applicable Notice of Purchase. Upon receipt of such Purchase Price, CHP
shall deliver to Five Arrows that number of Shares equal to the Purchase Price
divided by 9.5. For example, if the portion of the Hospitality Commitment
required by Hotel Investors on a particular Closing Date (i.e., the Incremental
Funding) is $22,000,000, then the Purchase Price shall be $8,254,400 for 868,884
Shares and the remaining Five Arrows Commitment shall be $6,745,596.
1.5. Issuance of Note in lieu of CHP Common Stock.
Notwithstanding the foregoing, in the event that Five Arrows would own more than
9.8% of the outstanding CHP Common Stock as a result any purchase of Shares
hereunder and the ownership limitations set forth in the Articles of
Incorporation of CHP (the "Ownership Limits") have not theretofore been amended
or waived to permit Five Arrows to hold in excess of such limitations, Five
Arrows shall (i) purchase in the aggregate that number of whole Shares that
would cause Five Arrows to own up to but not in excess of 9.8% of the
outstanding CHP Common Stock and (ii) loan to CHP the balance of any Incremental
Funding in exchange for the promissory note of CHP and Hotel Investors
substantially in the form of Exhibit 1.5 attached hereto (the "Note").
1.6. Conversion of Note. The principal amount of the
Note shall be converted automatically into shares of CHP Common Stock, at one
time or from time to time as the holder of the Note is permitted under the
amended or waived Ownership Limits to own additional shares of CHP Common Stock.
The per share conversion price shall be equal to the principal amount converted
divided by 9.5 and upon any such conversion, the accrued and unpaid interest on
the converted portion of the Note shall be paid immediately by CHP. All shares
of CHP Common Stock issued upon such conversion shall be fully paid and
nonassessable, and the Holder (as defined below) thereof shall be entitled to
the same rights with respect to such shares (including, without limitation,
registration rights) as if such shares were purchased pursuant to Section 1.4
hereof.
ARTICLE II
2. REPRESENTATIONS AND WARRANTIES OF CHP. CHP, with respect to
itself and each of its Subsidiaries (as such term is defined in Section 2.6
hereof), represents and warrants, as of the date hereof (except as otherwise
specified herein), and as may be updated pursuant to Section 4.6 hereof as of
each Closing Date as if made on such Closing Date, as follows:
2.1. Corporate Power and Authority. CHP has the full
legal right, power and authority to enter into this Agreement, the Note, the
Registration Rights Agreement, dated February 24, 1999 by and between CHP and
Five Arrows (the "CHP Registration Rights Agreement"), the Hotel Investors
Subscription Agreement and any other agreements executed in connection herewith
or therewith (collectively with this Agreement, the "Transaction Documents"),
and to issue and sell the Shares to be issued pursuant to this Agreement and to
consummate the other transactions contemplated hereby and thereby.
2.2. Consents and Approvals; Authorization and
Noncontravention. Except as set forth in Schedule 2.2 attached hereto, there is
no requirement applicable to CHP or any of its Subsidiaries to make any filing
with, or obtain any permit, authorization, consent or approval of, any
governmental authority or any other person as a condition to the lawful
consummation by CHP and any of its Subsidiaries of the transactions contemplated
by this Agreement and the Transaction Documents. This Agreement and each other
Transaction Document has been duly and validly authorized, executed and
delivered by CHP and any of its Subsidiaries party thereto and constitute the
valid and legally binding agreements of CHP and each Subsidiary who is a party
thereto, enforceable against them in accordance with their terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles. The execution and delivery by CHP and such subsidiaries of this
Agreement, and the other agreements and instruments to be executed and delivered
by CHP in connection herewith and therewith, do not and the consummation of the
transactions contemplated hereby and thereby will not, in any manner which would
have a material adverse effect on CHP: (i) violate any provision of the Articles
of Incorporation or By-Laws of CHP or of any of CHP's Subsidiaries; (ii) except
as set forth on Schedule 2.2, violate any provision of, or result in the
termination or acceleration of, or default under, or entitle any party to
accelerate (whether after the filing of notice or lapse of time or both) any
obligation under, or result in the creation or imposition of any lien, charge,
pledge, security interest or other encumbrance upon any of the assets of CHP or
of any of CHP's Subsidiaries pursuant to any provision of any mortgage, lien,
lease, agreement, license, or instrument, or violate any law, regulation, order,
arbitration award, judgment or decree to which CHP or any of CHP's Subsidiaries
is a party or by which CHP or any of CHP's Subsidiaries or any of their
respective properties is bound, or (iii) violate or conflict with, or create a
default under, any other material contract, including, without limitation, those
contracts listed on Schedule 2.10 attached hereto, or restriction of any kind or
character to which CHP or any of its Subsidiaries is bound or subject.
2.3. Existence and Good Standing.
(a) CHP and each of CHP's Subsidiaries is a
corporation or partnership, duly formed or organized, validly existing and in
good standing under the laws of its organization, as the case may be. CHP and
each of CHP's Subsidiaries has the requisite power, corporate or otherwise, to
own its property and to carry on its business as it is now being conducted. CHP
is duly qualified to do business and is in good standing in the jurisdictions
listed on Schedule 2.3 attached hereto, which are the only jurisdictions in
which the character or location of the properties owned or leased by CHP or the
nature of the business conducted by CHP makes such qualification necessary,
except where the failure to so qualify would not have a material adverse effect
on CHP.
(b) CHP has qualified as a REIT under the Code and
has taken no action or omitted to take any action, the effect of which
reasonably could be expected to disqualify CHP as a REIT under the Code.
2.4. Capital Stock.
(a) The authorized capital stock of CHP consists of:
(i) 60,000,000 shares of Common Stock; (ii) 3,000,000 shares of preferred stock,
par value $.01 per share (the "Preferred Stock"); and (iii) 63,000,000 shares of
excess stock, par value $.01 per share (the "Excess Stock"). As of November 20,
1998, (i) 3,290,417.022 shares of Common Stock were validly issued and
outstanding, fully paid and nonassessable, and no shares of Preferred Stock or
Excess Stock have been issued or are outstanding; and (ii) no shares of Common
Stock and no shares of Preferred Stock were reserved for issuance. All of such
shares of capital stock of CHP have been duly authorized, validly issued, are
fully paid and nonassessable and were issued in compliance with all applicable
federal and state securities laws. Except as set forth on Schedule 2.4, (i) no
shares of capital stock of CHP or any of CHP's Subsidiaries are subject to
preemptive rights or any other similar rights; (ii) no securities, directly or
indirectly, are convertible into or exchangeable for any of the capital stock of
CHP or any of CHP's Subsidiaries; and (iii) no options, warrants, rights, calls
or commitments relating to such shares or other such securities, are
outstanding.
(b) Except as set forth on Schedule 2.4, neither CHP
nor any of its Subsidiaries are subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock nor are there any outstanding rights to repurchase capital stock
of CHP or any of its Subsidiaries, except as set forth in or contemplated by
this Agreement. Except as set forth on Schedule 2.4, there are no agreements
between CHP's shareholders with respect to the voting, transfer or registration
of CHP's capital stock.
2.5. Valid Issuance of Shares; No Personal Liability.
(a) When issued, sold and delivered in accordance
with the terms hereof for the consideration expressed herein, the Shares will be
duly and validly issued, fully paid and non-assessable. The Shares are not
subject to preemptive rights or any other similar rights and will be issued in
compliance with all applicable federal and state securities laws. Five Arrows,
upon purchase of the Shares, will not be subject to personal liability by reason
of being a holder of Shares.
(b) The shares of CHP Common Stock when issued and
delivered upon exchange for shares of Class A Preferred Stock in accordance with
the terms hereof will be duly and validly issued, fully paid and non-assessable
and will not be subject to preemptive rights or any other similar rights. Such
shares of CHP Common Stock will be issued in compliance with all applicable
federal and state securities laws. Five Arrows, upon issuance of such shares of
CHP Common Stock, will not be subject to personal liability by reason of being a
holder of such shares.
2.6. Subsidiaries and Investments. CHP's only direct
or indirect Subsidiaries are listed in Schedule 2.6 attached hereto. The
outstanding shares of capital stock, partnership or other equity interests of
each Subsidiary have been duly authorized and validly issued and are fully paid
and non-assessable, as applicable, and are owned by CHP, directly or through one
or more Subsidiaries, free and clear of any lien, charge, encumbrance or other
security interests except as set forth in Schedule 2.6. For purposes of this
Agreement, "Subsidiary" shall mean a Person (as defined in Section 2.10) in
which CHP has the ability, whether by the direct or indirect ownership of shares
or other equity interests, by contract or otherwise, to elect a majority of the
directors of a corporation or the trustees of a real estate investment trust, to
select the managing partner of a partnership, or otherwise to select, or have
the power to remove and then select, a majority of those persons exercising
governing authority over such Person. In the case of a limited partnership, the
sole general partner, all of the general partners to the extent each has equal
management control and authority, or the managing general partner or managing
general partners thereof shall be deemed to have control of such partnership
and, in the case of a trust other than a real estate investment trust, any
trustee thereof or any Person having the right to select any such trustee shall
be deemed to have control of such trust.
2.7. Financial Statements and No Material Changes.
(a) CHP has heretofore furnished Five Arrows with
true and correct copies of (i) the audited consolidated balance sheet and the
related statements of income and cash flows, including the footnotes thereto, of
CHP and CHP's Subsidiaries as of the end of their latest fiscal year ended
December 31, 1997 ("Fiscal 1997"), all of which were audited by Coopers &
Xxxxxxx L.L.P., and (ii) the unaudited consolidated balance sheet of CHP and
CHP's Subsidiaries and the related statements of income and cash flows as of
September 30, 1998 prepared by CHP. (The balance sheet of CHP and CHP's
Subsidiaries at December 31, 1997 is hereinafter referred to as the "Balance
Sheet" and such date is hereinafter referred to as the "Balance Sheet Date").
Such financial statements including the footnotes thereto, except as indicated
therein, have been prepared in accordance with generally accepted accounting
principles ("GAAP"), consistently applied throughout the periods presented. The
Balance Sheet fairly presents the financial condition of CHP and CHP's
Subsidiaries at the date thereof and, except as indicated therein, reflects all
known or asserted material claims against and all material debts and liabilities
of CHP and CHP's Subsidiaries, fixed or contingent, as at the date thereof, and
the related statements of income and retained earnings fairly present the
results of the operations of CHP and CHP's Subsidiaries and the changes in its
financial position for the period indicated each in accordance with GAAP, except
as specified therein.
(b) CHP has filed all forms, reports and documents
(the "SEC Reports") required to be filed by it pursuant to the Securities Act of
1933, as amended (the "Securities Act"), and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), with the Securities and Exchange
Commission (the "SEC") since September 30, 1998. As of their respective dates,
the SEC Reports complied in all material respects with the requirements of the
Exchange Act and the Securities Act and the applicable rules and regulations
promulgated by the SEC thereunder. None of the SEC Reports, as of their
respective dates, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements made, in light of the circumstances under which they were
made, not misleading. CHP has heretofore furnished or offered to furnish Five
Arrows with true and correct copies of all SEC Reports and Exhibits and
Schedules thereto required to be filed by CHP with SEC.
(c) Since the respective dates of the material SEC
Reports, except as otherwise listed on Schedule 2.7(c) attached hereto, there
has been no material adverse change in the assets or liabilities, or in the
business affairs or business prospects of CHP or any of its Subsidiaries
(present or anticipated) or condition, financial or otherwise, or in the results
of operations of CHP or any of CHP's Subsidiaries; and to the best knowledge,
information and belief of CHP, no fact or condition (not of general knowledge)
exists or is contemplated or threatened which might reasonably be expected to
cause such a change in the future.
2.8. Title to Properties; Encumbrances. Except as set
forth on Schedule 2.8 attached hereto and except for properties and assets
reflected in the Balance Sheet or acquired since the Balance Sheet Date which
have been sold or otherwise disposed of in the ordinary course of business, CHP
and each of CHP's Subsidiaries has, and on each Closing Date, will have, good,
valid and marketable title to (a) all of its material properties and assets
(real and personal, tangible and intangible), including, without limitation, all
of the properties and assets reflected in the Balance Sheet, except as indicated
in the notes thereto or in a Schedule to this Agreement, and (b) all of the
material properties and assets purchased by CHP or any of CHP's Subsidiaries
since the Balance Sheet Date, in each case subject to no material encumbrance,
lien, charge or other restriction of any kind or character, except for (i) liens
reflected in the Balance Sheet or in a Schedule to this Agreement, (ii) liens
consisting of zoning or planning restrictions, easements, permits and other
restrictions or limitations on the use of real property or irregularities in
title thereto which do not detract from the value of, or impair the use of, such
property by CHP or any of CHP's Subsidiaries in the operation of their
respective businesses, and (iii) liens for current taxes, assessments or
governmental charges or levies on property not yet due and delinquent and liens
of carriers, warehousemen, vendors and material men incurred in the ordinary
course of business securing sums not yet due and payable (liens of the type
described in clauses (i), (ii) and (iii) above are hereinafter sometimes
referred to as "Permitted Liens").
2.9. Leases. Except as set forth on Schedule 2.9,
each lease of material real or personal property to which CHP and each of its
Subsidiaries is a party is in full force and effect, and there exists no event
of default or event, occurrence, condition or act (including the purchase of the
Shares or any of the conditions precedent hereunder) which, with the giving of
notice, the lapse of time or the happening of any further event or condition,
would become a default under such lease to real or personal property. CHP and
each of its Subsidiaries is not currently in default of any of the terms or
conditions under any such lease to real or personal property and, to the best
knowledge, information and belief of CHP, all of the material covenants to be
performed by any other party under any such lease to real or personal property
have been fully performed. The real or personal property leased by CHP and each
of its Subsidiaries is in a state of good maintenance and repair in all material
respects.
2.10. Contracts. Except as set forth on Schedule 2.10
attached hereto, neither CHP nor any of CHP's Subsidiaries is bound by (a) any
material contract or other agreements relating to the acquisition or disposition
by CHP or any of CHP's Subsidiaries of any operating business or the capital
stock or assets of any person, (b) any material agreement, contract or
commitment relating to the employment of any person by CHP or any of CHP's
Subsidiaries, or any bonus, deferred compensation, pension, profit sharing,
stock option, employee stock purchase, retirement or other employee benefit
plan, (c) any material agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other distribution in
respect of its capital stock, (d) any material agreement, contract or commitment
relating to capital expenditures not yet made, (e) any material loan or advance
to, or material investment in, any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization,
government or other entity (each a "Person") or any material agreement, contract
or commitment relating to the making of any such loan, advance or investment,
(f) any material guarantee or other contingent liability in respect of any
indebtedness or obligation of any Person (other than the endorsement of
negotiable instruments for collection in the ordinary course of business), (g)
any material management service, consulting or any other similar type of
contract, unless entered into or incurred in the ordinary course of business,
(h) any material agreement, contract or commitment limiting the freedom of CHP
or any of CHP's Subsidiaries to engage in any line of business or to compete
with any Person, (i) any material bank debt, loan, credit or other financing
arrangement, and (j) except as otherwise disclosed in this Agreement or a
Schedule or Exhibit annexed hereto, any material agreement, contract or
commitment not entered into in the ordinary course of business. Each contract or
agreement set forth on Schedule 2.10 (or required to be set forth on Schedule
2.10) is in full force and effect and except as set forth on Schedule 2.10,
there exists no default or event of default or event, occurrence, condition or
act (including the purchase of the Shares, or any of the conditions precedent
hereunder) which, with the giving of notice, the lapse of time or the happening
of any further event or condition, would become a default or event of default
thereunder.
2.11. Restrictive Documents. Except as set forth on
Schedule 2.11 attached hereto, neither CHP nor any of CHP's Subsidiaries is
subject to, or a party to, any charter, by-law, mortgage, lien, lease, license,
permit, agreement, contract, instrument, law, rule, ordinance, regulation,
order, judgment or decree, or any other restriction of any kind or character, in
any such case which is material to CHP, which would prevent consummation of the
transactions contemplated by this Agreement, compliance by CHP with the terms,
conditions and provisions hereof or the continued operation of CHP's or any of
CHP's Subsidiaries' business after the date hereof or each Closing Date on
substantially the same basis as heretofore operated or which would restrict the
ability of CHP or any of CHP's Subsidiaries to acquire any property or conduct
business in any area.
2.12. Litigation. Except as set forth on Schedule
2.12 attached hereto, there is no material action, suit, proceeding at law or in
equity, arbitration or administrative or other proceeding by or before or any
investigation by any governmental or other instrumentality or agency, pending,
or, to the best knowledge, information and belief of CHP threatened, against or
affecting CHP or any of CHP's Subsidiaries, or any of their respective
properties or rights, and CHP does not know of any valid basis for any action,
proceeding or investigation. Except as set forth on Schedule 2.12, neither CHP
nor any of CHP's Subsidiaries is subject to any judgment, order or decree
entered in any lawsuit or proceeding which is reasonably likely to have a
material adverse effect on its operations, business practices, present or
anticipated, or ability to acquire any property or conduct business.
2.13. ERISA. (i) Each employee benefit plan defined
in Section 3(3) of ERISA in respect of which CHP or any ERISA Affiliate is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA of CHP (each a "Plan") is in substantial compliance with
the applicable provisions of the Employee Retirement Income Security Act of
1974, as amended, ("ERISA") and the Code, (ii) no Termination Event has occurred
nor is reasonably expected to occur with respect to any Benefit Plan, (iii) the
most recent annual report (Form 5500 Series) with respect to each Plan,
including Schedule B (Actuarial Information) thereto, copies of which have been
filed with the Internal Revenue Service, is complete and correct in all material
respects and fairly presents the funding status of such Benefit Plan, and since
the date of such report there has been no material adverse change in such
funding status, (iv) no Benefit Plan had an accumulated (whether or not waived)
funding deficiency or permitted decreases which would create a deficiency in its
funding standard account within the meaning of Section 412 of the Code at any
time during the previous 60 months, and (v) no lien imposed under the Code or
ERISA exists or is likely to arise on account of any Benefit Plan within the
meaning of Section 412 of the Code. Neither CHP nor any of its ERISA Affiliates
has incurred any withdrawal liability under ERISA with respect to any
Multiemployer Plan, and CHP is not aware of any facts indicating that CHP or any
of its ERISA Affiliates may in the future incur any such withdrawal liability.
Except as required by Section 4980B of the Code, CHP does not maintain a welfare
plan (as defined in Section 3(1) of ERISA) which provides benefits or coverage
after a participant's termination of employment. Neither CHP nor any of its
ERISA Affiliates have incurred any liability under the Worker Adjustment and
Retraining Notification Act. All Plans in existence on the initial Closing Date
are set forth on Schedule 2.13 attached hereto. For purposes of this Agreement,
(i) "Termination Event" means (a) a Reportable Event with respect to any Benefit
Plan (with respect to which the 30 day notice requirement has not been waived);
(b) the withdrawal of CHP or any ERISA Affiliate from a Benefit Plan during a
plan year in which CHP or any ERISA Affiliate was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA; (c) providing a written notice of intent
to terminate a Benefit Plan to affected parties of a distress termination
described in Section 4041(c) of ERISA; or (d) the institution by the Pension
Benefit Guarantee Corporation of proceedings to terminate a Benefit Plan, (ii)
"Benefit Plan" means a defined benefit plan as defined in Section 3(35) of ERISA
that is subject to Title IV of ERISA (other than a Multiemployer Plan) and in
respect of which CHP or any ERISA Affiliate is or within the immediately
preceding six (6) years was an "employer" as defined in Section 3(5) of ERISA,
(iii) "Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA and subject to Title IV of ERISA which is, or within the
immediately preceding six (6) years was, contributed to by CHP or any ERISA
Affiliate, (iv) "ERISA Affiliate" means any (a) corporation which is a member of
the same controlled group of corporations (within the meaning of Section 414(b)
of the Code) as CHP, (b) partnership or other trade or business (whether or not
incorporated) under common control (within the meaning of Section 414(c) of the
Code) with CHP, or (c) member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as CHP, any corporation described in
clause (a) above or any partnership or trade or business described in clause (b)
above and (v) "Reportable Event" means any of the events described in Section
4043(b) of ERISA (other than events for which the notice requirements have been
waived).
2.14. Environmental Matters. Except as set forth in
Schedule 2.14 attached hereto, to the best knowledge of the Company and its
Subsidiaries:
(a) The operations and properties of CHP and
its Subsidiaries are in material compliance with Environmental Laws;
(b) CHP and its Subsidiaries have obtained
and is in compliance with all necessary permits or authorizations that are
required under Environmental Laws to operate the facilities, assets and business
of CHP and its Subsidiaries;
(c) There has been no Release (i) at any
assets, properties or businesses owned or operated by CHP, any of its
Subsidiaries or any predecessor in interest; (ii) from adjoining properties or
businesses; or (iii) from or onto any facilities which received Hazardous
Materials generated by CHP, any of its Subsidiaries or any predecessor in
interest that would result in any Environmental Liabilities except to the extent
that any such Release is not reasonably likely to have a material adverse effect
on the business (present or anticipated) or condition (financial or otherwise),
properties, results of operations or prospects of CHP or its Subsidiaries;
(d) No Environmental Claims have been
asserted against CHP, any of its Subsidiaries or any predecessor in interest nor
does CHP or any of its Subsidiaries have knowledge or notice of any threatened
or pending Environmental Claims against CHP or any of its Subsidiaries which is
reasonably likely to result in Environmental Liabilities except to the extent
that any such Environmental Claims are not reasonably likely to have a material
adverse effect on the business (present or anticipated) or condition (financial
or otherwise), properties, results of operations or prospects of CHP or its
Subsidiaries;
(e) No Environmental Claims have been
asserted against any facilities that may have received Hazardous Materials
generated by CHP, any of its Subsidiaries or any predecessor in interest which
is reasonably likely to result in Environmental Liabilities except to the extent
that any such Environmental Claims are not reasonably likely to have a material
adverse effect on the business (present or anticipated) or condition (financial
or otherwise), properties, results of operations or prospects of CHP or its
Subsidiaries;
(f) CHP has delivered to Five Arrows true
and complete copies of all Phase I environmental assessments, environmental
reports, studies, material correspondence or investigations in their possession
regarding any Environmental Liabilities, or any environmental conditions, at the
assets, properties or businesses of CHP or any of its Subsidiaries; and
(g) To the extent that any of the assets,
properties or businesses owned or operated by CHP or any of its Subsidiaries are
located in "wetlands" regulated under Environmental Laws, CHP and its
Subsidiaries are in compliance with Environmental Laws regulating those
"wetlands" except to the extent that any such failure to comply is not
reasonably expected to have a material adverse effect on the business (present
or anticipated) or condition of CHP or its Subsidiaries or any predecessor in
interest.
(h) Schedule 2.14(h) is a true, complete and
accurate list of each instance where the operations of CHP and its Subsidiaries
or the environmental conditions of the real estate presently or formerly owned
or operated by CHP or its Subsidiaries or its predecessors in interest are not
in material compliance with an Environmental Law or give rise to Environmental
Liabilities. None of the items listed on Schedule 2.14 individually or in the
aggregate would have a material adverse effect on CHP and its Subsidiaries.
For purposes of this Agreement, (i)
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq., as amended;
the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. 6901 et seq., as
amended; the Clean Air Act ("CAA"), 42 U.S.C. 7401 et seq., as amended; the
Clean Water Act ("CWA"), 33 U.S.C. 1251 et seq., as amended; the Occupational
Safety and Health Act ("OSHA"), 29 U.S.C. 655 et seq.; and any other federal,
state, local or municipal laws, statutes, regulations, rules or ordinances
imposing liability or establishing standards of conduct for protection of the
environment, (ii) "Environmental Liabilities" means any monetary obligations,
losses, liabilities (including strict liability), damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable out-of-pocket fees, disbursements and expenses of counsel,
out-of-pocket expert and consulting fees and out-of-pocket costs for
environmental site assessments, remedial investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any
Environmental Claim filed by any governmental authority or any third party
against CHP or its Subsidiaries or any predecessors in interest which relate to
any violations of Environmental Laws, Remedial Actions, Releases or threatened
Releases of Hazardous Materials from or onto (a) any assets, properties or
businesses presently or formerly owned by CHP, its Subsidiaries or a predecessor
in interest, or (b) any facility which received Hazardous Materials generated by
the Company, its Subsidiaries or a predecessor in interest, (iii) "Environmental
Claim" means any complaint, summons, citation, notice, directive, order, claim,
litigation, investigation, judicial or administrative proceeding, judgment,
letter or other communication from any governmental agency, department, bureau,
office or other authority, or any third party alleging violations of
Environmental Laws or Releases of Hazardous Materials (a) from any assets,
properties or businesses of CHP and its Subsidiaries or any predecessor in
interest, (b) from adjoining properties or businesses, or (c) from or onto any
facility, which received hazardous materials generated by CHP and its
Subsidiaries or any predecessor in interest, (iv) "Hazardous Materials" include
(a) any element, compound, or chemical that is defined, listed or otherwise
classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous
substances, extremely hazardous substance or chemical, hazardous waste, medical
waste, biohazardous or infectious waste, special waste, or solid waste under
Environmental Laws; (b) petroleum, petroleum-based or petroleum-derived
products; (c) polychlorinated biphenyls; (d) any substance exhibiting a
hazardous waste characteristic including but not limited to corrosivity,
ignitibility toxicity or reactivity as well as any radioactive or explosive
materials; and (e) any raw materials, building components exhibiting a Hazardous
Material characteristic, including but not limited to asbestos-containing
materials, (v) "Release" means any spilling, leaking, pumping, emitting,
emptying, discharging, injecting, escaping, leaching, migrating, dumping, or
disposing of Hazardous Materials (including the abandonment or discarding of
barrels, containers or other closed receptacles containing Hazardous Materials)
into the environment, (vi) "Remedial Action" means all actions taken to (a)
clean up, remove, remediate, contain, treat, monitor, assess, evaluate or in any
other way address Hazardous Materials in the indoor or outdoor environment; (b)
prevent or minimize a Release or threatened Release of Hazardous Materials so
they do not migrate to cause substantial danger to public health or welfare or
the indoor or outdoor environment; (c) perform pre-remedial studies and
investigations and post-remedial operation and maintenance activities; or (d)
any other actions authorized by 42 U.S.C. 9601.
2.15. Taxes. Except as set forth on Schedule 2.15
attached hereto:
(a) All taxes and assessments, including,
without limitation, income, property, sales, use, franchise, value added,
employees' income withholding and social security taxes and import duties,
including interest and penalties thereon, imposed by the United States or by any
foreign country or by any state, municipality, subdivision or instrumentality of
the United States or of any foreign country, or by any other taxing authority,
for which CHP or any of CHP's Subsidiaries may be liable in respect of all
periods prior to each Closing Date (including taxes in respect of tax periods
ending on each Closing Date and taxes in respect of tax periods ending after
each Closing Date to the extent attributable to the portion of that period which
ends on each Closing Date), either have been paid when due or will be paid when
due. All tax returns required to be filed through the date hereof taking into
account all lawful extensions of due dates (and each Closing Date), including,
without limitation, information returns, have been (or will be) duly and timely
filed taking into account all lawful extensions of due dates and are (or will
be) true, complete and correct in all material respects and all deposits and
payments required by law to be made by CHP or any of CHP's Subsidiaries,
including with respect to employees' withholding taxes, have been duly made in
accordance with all applicable laws, except to the extent that such failure to
make such payment would not reasonably be expected to have a material adverse
effect on CHP or any of its Subsidiaries. As of the date hereof, no such returns
have been the subject of an audit or examination by any taxing authority. There
is not now in force any waiver or agreement by CHP or any of CHP's Subsidiaries
for the extension of time for the assessment of any tax.
(b) There are no tax sharing agreements or
arrangements or tax indemnity agreements between CHP or any of CHP's
Subsidiaries and any other person, including any agreements or undertakings
provided by CHP or any of CHP's Subsidiaries to any Person requiring CHP or such
Subsidiary to take any action, or refrain from taking any action, to reduce or
defer the tax liability of such other Person.
(c) Neither CHP nor any of CHP's
Subsidiaries has ever been an includable corporation in any affiliated group of
corporations within the meaning of Section 1504 of the Code of 1986 (or any
similar provision of state or other tax law).
(d) Neither CHP nor any of CHP's
Subsidiaries has filed a consent pursuant to the collapsible corporation
provisions of section 341(f) of the Code (or any similar provision of state or
other tax law) or agreed to have section 341(f)(2) of the Code or any similar
provision of state or other tax law) apply to any disposition of any asset owned
by CHP or any of CHP's Subsidiaries.
2.16. Compliance with Laws. Except as set forth on
Schedule 2.16 attached hereto, CHP and each of CHP's Subsidiaries is in
compliance in all material respects with all applicable laws, regulations,
orders, judgments and decrees. Neither CHP nor any of CHP's Subsidiaries, any
employee of CHP nor any of CHP's Subsidiaries nor any of CHP's affiliates acting
upon CHP's request has at any time made any payments for unlawful political
contributions or made any bribes, kickback payments or other illegal payments.
2.17. No Changes Since Balance Sheet Date. Since the
Balance Sheet Date, except as expressly contemplated hereby or as disclosed in a
Schedule or Exhibit hereto (including, without limitation, Schedule 2.17) or any
SEC Report, neither CHP nor any of CHP's Subsidiaries has (a) incurred any
material liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise), except in the ordinary course of business (and neither
CHP nor any of CHP's Subsidiaries is in default in respect of the terms or
conditions of any indebtedness), (b) permitted any of its assets to be subjected
to any material mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind (other than Permitted Liens), (c) sold,
transferred or otherwise disposed of any material assets except in the ordinary
course of business, (d) made any material capital expenditure or commitment
therefor, except in the ordinary course of business, (e) declared or paid any
dividend or made any distribution on any shares of its capital stock, or
redeemed, purchased or otherwise acquired any shares of its capital stock or any
option, warrant or other right to purchase or acquire any such shares, other
than regularly scheduled cash dividends, (f) made any material bonus or profit
sharing distribution or payment of any kind, (g) materially increased its
indebtedness for borrowed money or made any material loan to any Person, (h)
written off as uncollectible any notes or accounts receivable, except write-offs
in the ordinary course of business charged to applicable reserves, (i) granted
any increase in the rate of wages, salaries, bonuses or other remuneration of
any executive employee or other employees, except in the ordinary course of
business, (j) canceled or waived any claims or rights of substantial value, (k)
made any material change in any method of accounting or audit practice, (l)
otherwise conducted its business or entered into any transaction, except in the
ordinary course of business, or (m) agreed, whether or not in writing, to do any
of the foregoing.
2.18. Disclosure. None of this Agreement, the
financial statements referred to in Section 2.7 hereof (including the footnotes
thereto), any Schedule, Exhibit or certificate attached hereto or delivered in
accordance with the terms hereof or any document or statement in writing which
has been supplied by CHP or by any of its directors or officers in connection
with the transactions contemplated by this Agreement contains any untrue
statement of material fact, or omits any statement of material fact necessary in
order to make the statements contained herein or therein not misleading in light
of the circumstances under which made.
2.19. Broker's or Finder's Fees. Except for a fee
payable by CHP to CNL Hospitality Advisors, Inc. in the amount of $600,000, CHP
has not incurred, and will not incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any other Transaction Document or any of the
transactions contemplated hereby.
2.20. Insurance. CHP and each of its Subsidiaries
maintains insurance policies, including but not limited to fire and casualty and
worker's compensation policies, which provide with reputable third party
insurers coverage customary for companies similarly situated and otherwise
adequate for its businesses.
ARTICLE III
3. REPRESENTATIONS AND WARRANTIES OF FIVE ARROWS. Five Arrows
hereby represents, warrants and agrees, as of the date hereof and as of each
Closing Date, as if made on such Closing Date, as follows:
3.1. Power and Authority. Five Arrows has the full
legal right, power and authority to enter into this Agreement and the
Transaction Documents, and to consummate the other transactions contemplated
hereby and thereby.
3.2. Existence and Good Standing. Five Arrows is a
limited liability company, duly formed or organized, validly existing and in
good standing under the laws of its organization.
3.3. Consents; Authorization. There is no requirement
applicable to Five Arrows to make any filing with, or obtain any permit,
authorization, consent or approval of, any governmental authority or any other
person as a condition to the lawful consummation by Five Arrows of the
transactions contemplated by this Agreement and the Transaction Documents. This
Agreement, when executed and delivered by Five Arrows, will constitute a valid
and legally binding obligation of Five Arrows, enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditor's rights generally and of general principles of equity (regardless of
whether considered in a proceeding at law or in equity).
3.4. Accredited Investor. Five Arrows is an
accredited investor as defined in Rule 501 under the Securities Act.
3.5. Investment. Five Arrows is acquiring the Shares
for investment for its own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof. Five Arrows
understands that the Shares have not been, and will not be, registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, and cannot be transferred by it unless
subsequently registered under the Securities Act or if an exemption from the
registration requirements exists.
3.6. Rule 144. Five Arrows acknowledges that the
Shares must be held indefinitely unless subsequently registered under the
Securities Act, or unless an exemption from such registration is available. Five
Arrows is aware of the provisions of Rule 144 promulgated under the Securities
Act which permit limited resale of securities purchased in a private placement
subject to the satisfaction of certain conditions, which presently include,
among other things, in most circumstances (i) the existence of a public market
for the Shares, (ii) the availability of certain current public information
about CHP, (iii) the resale occurring not less than one year after a party has
purchased and fully paid for the securities to be sold from CHP or affiliate of
CHP, (iv) the sale being effected through a "broker's transaction" or in
transactions directly with a "market maker" (as provided by Rule 144(f)), and
(v) the number of shares being sold during any three-month period not exceeding
specified limitations.
3.7. Brokers or Finders. Five Arrows has not
incurred, and will not incur, directly or indirectly, as a result of any action
taken by Five Arrows, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
3.8. Ownership Limits. The issuance of shares of CHP
Common Stock to Five Arrows pursuant to this Agreement will not cause Five
Arrows or any member of Five Arrows to Beneficially or Constructively Own (as
such terms are defined in the Articles of Incorporation of CHP) shares in excess
of the Ownership Limits that are applicable to Five Arrows and its members
pursuant to Section 7.6 and 7.7 of the Articles of Incorporation of CHP as such
Articles are in effect at the time of any issuance, taking into account the
waiver of certain Ownership Limits referred to in Section 4.3(a) hereof.
ARTICLE IV
4. COVENANTS.
4.1. Use of Proceeds. Any portion of the Five Arrows
Investment received by CHP on account of Five Arrows' purchase of Shares
pursuant to this Agreement shall immediately be contributed by CHP to
Hospitality Partners to immediately fund its corresponding capital commitment to
Hotel Investors.
4.2. Notice of Default. As soon as practicable and in
any event within 5 business days of the occurrence of a default or failure by
CHP or Hospitality Partners to perform or observe any covenant, agreement, or
obligation contained in this Agreement, the Registration Rights Agreement, the
Hotel Investors Subscription Agreement or any Transaction Document contemplated
hereby or thereby, CHP shall notify Five Arrows of such default or failure.
4.3. Stockholder Approval.
(a) CHP covenants that it will call a meeting of
stockholders of CHP to be held no later than June 30, 1999 (the "Stockholder
Meeting Deadline"), for purposes of securing stockholder approval for the waiver
of the Ownership Limits set forth in Section 7.6(ii)(a) and (b) of the Articles
of Incorporation of CHP. Notwithstanding anything to the contrary contained
herein, any waiver of the Ownership Limits shall neither waive nor purport to
waive the limitations contained in Sections 7.6(ii)(c), (d) or (e) of CHP's
Articles of Incorporation. CHP will promptly prepare and file and will provide
to each of its stockholders entitled to vote at such meeting in advance of such
meeting, a proxy statement complying with Section 14 of the Exchange Act
soliciting each such stockholder's affirmative vote at such stockholder meeting
in favor of the amendment of CHP's Articles of Incorporation to permit the Board
of Directors of CHP to waive the Ownership Limits with respect to issuance of
the shares of CHP Common Stock and upon the exchange of Class A Preferred Stock
pursuant to the Hotel Investors Subscription Agreement. Such proxy statement
shall reflect that the Board of Directors has approved the waiver of such
ownership limitation with respect to Five Arrows, subject to stockholder
approval. CHP and its Board of Directors shall recommend to the stockholders
that they approve such proposal and shall use its best efforts to solicit its
stockholders' approval of such amendment. Such proxy statement shall not seek
approval of any matters other than the approval described in the preceding
sentence and the election of directors, which shall include a nominee designated
by Five Arrows, which may be the director designated pursuant to Section 4.4
hereof. CHP shall file such proxy statement with the SEC on a timely basis so as
to permit the stockholders' meeting to be held by the Stockholder Meeting
Deadline. Five Arrows shall have the opportunity to review and comment on each
version of the Proxy Statement submitted to or filed with the SEC.
(b) Upon approval by CHP's stockholders of the
amendment of CHP's Articles of Incorporation to permit the Board of Directors of
CHP to waive the Ownership Limits with respect to the issuance of shares and the
exchange of shares of Class A Preferred Stock for shares of CHP Common Stock
pursuant to the Hotel Investors Subscription Agreement, (i) CHP shall deliver to
Five Arrows (A) a certificate of the Secretary of CHP certifying that the
stockholders of the Company have approved such amendment and (B) a certified
copy of the amended Articles of Incorporation of CHP as filed with the State of
Maryland and (ii) the balance of the outstanding principal amount of the Note
shall be converted into shares of CHP Common Stock as provided in Section 1.6
hereof and any accrued and unpaid interest thereon shall be paid to the holder
of the Note as set forth in Section 1.6 hereof.
(c) Notwithstanding anything to the contrary
contained herein, any waiver of the Ownership Limits shall (i) neither waive nor
purport to waive the limitations contained in Sections 7.6(ii)(c), (d) or (e) of
CHP's Articles of Incorporation and (ii) be subject to the condition that Five
Arrows make representations at the time of such waiver that the issuance of
shares of CHP Common Stock in excess of the Ownership Limits to Five Arrows
pursuant to this Agreement or the exchange of shares of Class A Preferred Stock
for shares of CHP Common Stock in excess of the Ownership Limits pursuant to the
Hotel Investors Subscription Agreement will neither (a) cause any individual
within the meaning of Section 542(a)(2) of the Code, as modified by Section
856(h) of the Code, to own more than 9.9% of the stock of CHP, directly or
indirectly through the application of Section 544 of the Code, as modified by
Section 856(h) of the Code nor (b) cause the Company to own (directly or
Constructively (as defined in Section 7.6(i) of CHP's Articles of
Incorporation)) an interest in an tenant that is described in Section
856(d)(2)(B) of the Code.
4.4. Appointment of Five Arrows Director. CHP shall
use it best efforts to qualify, nominate and recommend to the stockholders that
they elect to the Board of Directors the nominee designated by Five Arrows from
time to time (the "Five Arrows Director") at each meeting of stockholders at
which directors are generally elected.
4.5. Further Assurances. CHP and Five Arrows shall
take any and all actions, in a manner satisfactory to the other, to meet each
condition to closing set forth herein, keep all its respective representations
and warranties hereunder true, complete and correct and effect all applicable
actions contemplated by this Agreement required to be effected on or prior to
each Closing Date.
4.6 Supplemental Disclosure. CHP shall have the
continuing obligation up to and until the entire amount of the Five Arrows
Investment has been invested in CHP to supplement promptly or amend the
Schedules with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or listed in the Schedules; provided, however, that for the purpose of
the rights and obligations of Five Arrows hereunder, (a) any such supplemental
disclosure that may be reasonably considered by Five Arrows to be material and
adverse to Five Arrows, CHP or any of its Subsidiaries shall not be deemed to
have been disclosed as of the date of this Agreement unless so agreed to in
writing by Five Arrows and (b) such supplemental disclosure other than as
described in clause (a) shall be deemed to have been disclosed as of the date of
this Agreement.
4.7 Prohibition on Issuance of Securities. For so
long as any shares of Class A Preferred Stock are outstanding, other than in
accordance with and pursuant to employee benefit plans approved by the Board of
Directors of CHP, CHP shall not issue any shares of CHP Common Stock (or rights,
warrants or other securities convertible into or exchangeable for CHP Common
Stock) after the date hereof at a purchase price per share (or having a
conversion, exchange or exercise price per share of CHP Common Stock) (excluding
the value of services and other intangible assets) of less than $9.50.
ARTICLE V
5. CONDITIONS TO CHP'S OBLIGATIONS. The obligation of CHP to
consummate the transactions contemplated by this Agreement on each Closing Date
is conditioned upon satisfaction, on or prior to such date, of the following
conditions:
5.1. Representations and Warranties. The
representations and warranties of Five Arrows contained in this Agreement shall
be true, complete and correct in all material respects (except that
representations and warranties qualified by materiality, material adverse effect
or knowledge shall, as so qualified, be true and correct in all respects) on and
as of the applicable Closing Date with the same effect as though such
representations and warranties had been made on and as of such date.
5.2. Approvals. All governmental and other consents
and approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received (including but not
limited to the waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, having expired, if applicable).
5.3. Proceedings. All proceedings to be taken in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to CHP and its counsel, and CHP shall have received copies of all such
documents and other evidences as it or its counsel may reasonably request in
order to establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
ARTICLE VI
6. CONDITIONS TO THE INITIAL PURCHASE. The obligation of Five
Arrows to purchase Shares pursuant to the Notice of Purchase for the Initial
Purchase on such Closing Date is conditioned upon satisfaction, on or prior to
such date, of the following conditions:
6.1. Representations and Warranties. The
representations and warranties of CHP contained in this Agreement or in any
Exhibit or Schedule attached hereto shall be true, complete and correct in all
material respects (except that representations and warranties qualified by
materiality, material adverse effect or knowledge shall, as so qualified, be
true and correct in all respects) on and as of such Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and CHP shall have delivered to Five Arrows a certificate, dated such
Closing Date, to such effect.
6.2. Performance of Agreements. All of the covenants
and agreements of CHP to be performed on or before such Closing Date pursuant to
the terms hereof or the terms of any Exhibit hereto, shall have been duly
performed in all material respects, and CHP shall have delivered to Five Arrows
a certificate, dated such Closing Date, to such effect.
6.3. Approvals. All material governmental and other
material consents, filings and approvals necessary to permit the consummation of
the transactions contemplated by this Agreement shall have been received and be
in full force and effect (including but not limited to the waiting period under
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, having
expired, if applicable).
6.4. Opinion of CHP's Counsel. CHP shall have
furnished Five Arrows with a favorable opinions, dated such Closing Date, of
both of Xxxx Xxxxxxx Xxxxx & Xxxxxxxxxx, special counsel to CHP, and Lowndes
Drosdick Xxxxxx & Xxxx, P.A., Florida counsel to CHP, each in form and substance
satisfactory to Five Arrows and its counsel, to the effect set forth on Exhibit
6.4 attached hereto.
6.5. Good Standing and Other Certificates. CHP shall
have delivered to Five Arrows a certificate from the Secretary of State or other
appropriate official of the State of Maryland, and such other states as
applicable to the effect that CHP and each of CHP's Subsidiaries are in good
standing or subsisting in each such State and listing all charter documents of
CHP and each of CHP's Subsidiaries on file with each such State.
6.6. No Material Adverse Change. Since the Balance
Sheet Date and prior to such Closing Date, there shall be no material adverse
change in the assets or liabilities, the business (present or anticipated), or
condition, financial or otherwise, the results of operations, of CHP and each of
CHP's Subsidiaries and CHP shall have delivered to Five Arrows a certificate,
dated such Closing Date, to such effect.
6.7. Registration Rights Agreement. On such Closing
Date, CHP shall have properly and validly executed the Registration Rights
Agreement in the form of Exhibit 6.7 annexed hereto.
6.8. Hotel Investors Subscription Agreement. On such
Closing Date, Hotel Investors, CHP and Hospitality Partners shall have properly
and validly executed the Hotel Investors Subscription Agreement and taken all
actions required to be taken by it hereunder.
6.9. Valid Issuance. The Shares to be issued and sold
by CHP and to be acquired by Five Arrows shall be duly authorized and validly
issued to Five Arrows, free and clear of all liens, encumbrances, restrictions
and claims of every kind. Five Arrows shall have received properly completed
stock certificates representing the number of Shares being purchased by Five
Arrows on such Closing Date.
6.10. Appointment of Five Arrows Director. Prior to
or concurrent with the Initial Purchase, the Five Arrows Director shall have
been elected and qualified to become a member of the Board of Directors of CHP.
6.11. D&O Insurance. CHP shall have purchased
officers' and directors' liability insurance with respect to the Five Arrows
Director and on such terms and with such carrier as are reasonably acceptable to
Five Arrows.
6.12. Investment in Advisor. Prior to or concurrent
with the Initial Closing, the investment by Five Arrows in CNL Hospitality
Advisors, Inc. shall be occurring substantially with the Initial Purchase.
6.13. Proceedings. All proceedings to be taken in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be satisfactory in form and substance to Five
Arrows and its counsel, and Five Arrows shall have received copies of all such
documents and other evidences as it or its counsel may request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
6.14 Opinion of CHP's Tax Counsel. CHP shall have
furnished Five Arrows with a reasoned opinion satisfactory to Five Arrows and
its counsel, dated the Closing Date, of PriceWaterhouseCoopers LLP, or other tax
counsel satisfactory to Five Arrows and its counsel, that Five Arrows should not
recognize "unrelated business taxable income" within the meaning of Section 512
of the Code as a result of Five Arrows' investment in CNL Hotel Investors, Inc.
6.15 Approval of Financing and Other Material
Documents. CHP shall have furnished Five Arrows with all documents related to
the financing of the Hotels by Hotel Investors and all other material documents
required to be delivered by Hotel Investors thereunder or in connection with the
transactions contemplated hereunder and thereunder, and all such documents
including any material changes, amendments, modifications or waivers thereto
shall have been approved by Five Arrows and its counsel, in their sole
discretion.
ARTICLE VII
7. CONDITIONS TO SUBSEQUENT PURCHASES. The obligation of Five
Arrows to purchase Shares pursuant to any Notice of Purchase after the Initial
Purchase on such Closing Date is conditioned upon satisfaction, on or prior to
such date, of the following conditions:
7.1. Representations and Warranties. Subject to
Section 4.6 hereof, the representations and warranties of CHP contained in this
Agreement or in any Exhibit or Schedule attached hereto shall be true, complete
and correct in all material respects (except that representations and warranties
qualified by materiality, material adverse effect or knowledge shall, as so
qualified, be true and correct in all respects) on and as of such Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date.
7.2. Performance of Agreements. All of the covenants
and agreements of Hotel Investors, CHP and Hospitality Partners to be performed
on or before such Closing Date pursuant to the terms hereof, the Note or the
terms of any other agreement contemplated hereby and thereby, shall have been
duly performed in all material respects.
7.3. Assurance of Performance. CHP shall have
delivered to Five Arrows evidence that the Purchase Price to be paid at any
Closing hereunder shall immediately be contributed by CHP to Hospitality
Partners who in turn will use such proceeds to fund its capital commitment to
Hotel Investors.
7.4. Performance of Hotel Investors Subscription
Agreement. All of the agreements to be performed or observed by Hotel Investors,
CHP and Hospitality Partners pursuant to the terms of the Hotel Investors
Subscription Agreement or the terms of the Articles Supplementary shall have
been duly performed or observed.
7.5. No Material Adverse Change. Prior to such
Closing Date, there shall be no material adverse change in the assets or
liabilities, the business (present or anticipated), or condition, financial or
otherwise, the results of operations, of CHP and each of CHP's Subsidiaries.
7.6. Valid Issuance. The Shares to be issued and sold
by CHP and to be acquired by Five Arrows on such Closing Date shall be duly
authorized and validly issued to Five Arrows, free and clear of all liens,
encumbrances, restrictions and claims of every kind. Five Arrows shall have
received properly completed stock certificates representing the number of Shares
being purchased by Five Arrows on such Closing Date.
7.7. Five Arrows Director. The Five Arrows Director
shall be serving as a member of the Board of Directors of CHP.
7.8. D&O Insurance. CHP shall have maintained
officers' and directors' liability insurance with respect to the Five Arrows
Director and on such terms and with such carrier as are reasonably acceptable to
Five Arrows.
ARTICLE VIII
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNITY.
8.1. Survival . The respective representations and
warranties and covenants and agreements of CHP and Five Arrows contained in this
Agreement or in any Schedule or Exhibit attached hereto shall survive the
Closing and shall terminate on January 1, 2002, except that the representations
and warranties and covenants and agreements contained in Sections 2.13, 2.14 and
2.15 (and any applicable Schedule) shall terminate upon the expiration of the
applicable statute of limitations giving effect to any extensions thereof.
8.2. Indemnification.
(a) Each of CHP and Five Arrows, as the case may be
(each, an "Indemnifying Party"), agrees to indemnify and hold the other and such
other's respective stockholders, partners, officers, directors, members,
employees, counsel, accountants and agents (each, an "Indemnified Party")
harmless from any damages, liabilities, losses, costs or expenses (including,
without limitation, reasonable counsel fees and expenses) suffered or paid,
directly or indirectly, as a result of or arising out of (without regard to any
materiality, material adverse effect or knowledge qualifier) (i) the breach or
non-compliance with any covenant, agreement or obligation contained herein by an
Indemnifying Party, (ii) the breach of or the failure of any respective
representation or warranty contained herein made by an Indemnifying Party, (iii)
any breach of any covenant, agreement or obligation contained in the
Registration Rights Agreement, or any other Transaction Document by an
Indemnifying Party, (iv) all Taxes resulting from CHP being severally liable for
any Taxes pursuant to Section 1.1502-6 of the Treasury Regulations or any
analogous state or local provision or (v) any Environmental Liabilities arising
out of any (A) any Releases or threatened Releases of Hazardous Materials at or
from the properties of CHP or its Subsidiaries; (B) any violations of
Environmental Laws; (C) any Environmental Claim related to the conditions
existing prior to each applicable Closing Date; and (D) any personal injury
(including wrongful death) or property damage (real or personal) arising out of
exposure to Hazardous Material used, handled, generated, transported or disposed
by CHP, any of its Subsidiaries or any predecessor in interest at the properties
of CHP or its Subsidiaries. However, the Indemnifying Party shall be obligated
to indemnify the Indemnified Party only when the aggregate of all damages,
liabilities, losses, costs or expenses suffered or paid by the Indemnified Party
as to which a right of indemnification is provided under this Article VIII
exceeds $200,000 (the "Threshold Amount"). After the aggregate amount of all
damages, liabilities, losses, costs or expenses suffered or paid by the
Indemnified Party exceeds the Threshold Amount, the Indemnifying Party shall be
obligated to indemnify the Indemnified Party for all such damages, liabilities,
losses, costs or expenses suffered or paid. Notwithstanding anything in this
Agreement to the contrary, the liability of CHP hereunder shall in no event
exceed the Five Arrows Investment received by CHP pursuant to this Agreement
(except for CHP's liability under clause (iv) of this paragraph (a).
(b) If any action, suit, proceeding or investigation
is commenced, as to which an Indemnified Party proposes to demand
indemnification, it shall notify the Indemnifying Party with reasonable
promptness and the Indemnifying Party shall have the right to assume the defense
thereof; provided, however, that any failure by an Indemnified Party to notify
the Indemnifying Party shall not relieve the Indemnifying Party from its
obligations hereunder, except to the extent that the Indemnifying Party shall
have been materially prejudiced in its ability to defend the action, suit,
proceedings or investigation for which such indemnification is sought by reason
of such failure. An Indemnified Party shall have the right to retain counsel of
its own choice in its sole discretion, and the Indemnifying Party shall pay the
reasonable fees, reasonable expenses and reasonable disbursements of such
counsel only if the Indemnifying Party has declined or failed to assume the
defense thereof or if the Indemnifying Party's counsel would be unable to defend
such claim on behalf of the Indemnified Party by virtue of a conflict of
interest; and such counsel shall to the extent consistent with its professional
responsibilities cooperate with the Indemnifying Party and any counsel
designated by the Indemnifying Party. The Indemnifying Party shall be liable for
any settlement of any claim against an Indemnified Party made with the
Indemnifying Party's written consent, which consent shall not be unreasonably
withheld. The Indemnifying Party shall not, without prior written consent of an
Indemnified Party, settle or compromise any claim, or permit a default or
consent to the entry of any judgment in respect thereof, unless such settlement,
compromise or consent includes, as an unconditional term thereof, the giving by
the claimant to an Indemnified Party of an unconditional release from all
liability in respect to such claim.
(c) In order to provide for just and equitable
contribution, if a claim for indemnification pursuant to these indemnification
provisions is made but it is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) that such indemnification may not
be enforced in such case, even though the express provisions hereof provide for
indemnification in such case, then the Indemnifying Party, on the one hand, and
an Indemnified Party, on the other, shall contribute to the losses, claims,
damages, obligations, penalties, judgments, awards, liabilities, costs and
expenses to which the indemnified persons may be subject in accordance with the
relative benefits received by the Indemnifying Party, on the one hand, and an
Indemnified Party, on the other hand, in connection with the statements, acts or
omissions which resulted in expenses and the relevant equitable considerations
shall also be considered. No person found liable for a fraudulent
misrepresentation shall be entitled to contribution on account thereof from any
person who is not also found liable for such fraudulent misrepresentation.
(d) The obligations to indemnify and hold harmless
pursuant to this Section 8.2 shall survive each Closing Date and shall terminate
with respect to any unasserted claim based on a breach of or the non-compliance
with any covenant, agreement or obligation or a breach of or a failure of any
representation or warranty contained in (i) this Agreement (other than Sections
2.13, 2.14 and 2.15) on January 1, 2002 and (ii) Sections 2.13, 2.14 and 2.15
and the obligation set forth in Section 8.2(a)(iv) hereof upon expiration of the
applicable statute of limitations giving effect to any extensions thereof.
ARTICLE IX
9. MISCELLANEOUS.
9.1. Preservation of Confidential Information. Five
Arrows shall keep confidential any and all non-public information obtained from
CHP concerning CHP's properties, operations and business (unless readily
ascertainable from public or published information or trade sources) until the
same ceases to be non-public (or becomes so ascertainable).
9.2. Governing Law. The interpretation and
construction of this Agreement, and all matters relating hereto, shall be
governed by the laws of the State of New York applicable to agreements executed
and to be performed solely within such State.
9.3. Prevailing Party. The prevailing party or
parties in any litigation shall be entitled to receive from the losing party or
parties all costs and expenses, including reasonable counsel fees, incurred by
the prevailing party or parties.
9.4. Captions. The Article and Section captions used
herein are for reference purposes only, and shall not in any way affect the
meaning or interpretation of this Agreement.
9.5. Publicity. Except as otherwise required by law,
none of the parties hereto shall issue any press release or take any other
public statement, in each case relating to, connected with or arising out of
this Agreement or the matters contained herein. Any statement so issued or made
shall require the reasonable prior approval of the other parties hereto as to
the contents and the manner of presentation and publication thereof.
9.6. Notices. All notices, statements, instructions
or other documents required to be given hereunder, shall be in writing and shall
be given either by hand delivery, by overnight delivery service, by facsimile
transmission or by mailing the same in a sealed envelope, first-class mail,
postage prepaid and either certified or registered, return receipt requested,
addressed as follows:
if to Five Arrows, to:
Five Arrows Realty Securities II L.L.C.
c/o Rothschild Realty, Inc.
1251 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No. (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
with a copy to its counsel:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile No. (000) 000-0000
Attention: Xxxxx Xxxxx
if to CHP or Hotel Investors, to:
CNL Hospitality Properties, Inc.
or CNL Hotel Investors, Inc. (as the case may be)
c/o CNL Hospitality Group
000 X. Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile No. (000) 000-0000
Attention: C. Xxxxx Xxxxxxxxxx
with a copy to its counsel:
Xxxx Xxxxxxx Xxxxx & Xxxxxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Facsimile No. (000) 000-0000
Attention: Xxxxxx X. XxXxxxxxx
and to any other parties at their addresses reflected in the stock records of
CHP. Five Arrows, by written notice given to CHP in accordance with this Section
9.6, and CHP by written notice to Five Arrows, may change the address to which
notices, statements, instruction or other documents are to be sent to such
party. All notices, statements, instructions and other documents delivered
hereunder shall be deemed effective upon receipt.
9.7. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
9.8. Counterparts. This Agreement may be executed in
two or more counterparts, all of which taken together shall constitute one
instrument.
9.9. Entire Agreement. This Agreement, including the
other documents referred to herein or annexed as Exhibits or Schedules hereto
which form a part hereof, contains the entire understanding of the parties
hereto with respect to the subject matter contained herein and therein and
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
9.10. Amendments. This Agreement may not be changed
orally, but only by an agreement in writing signed by the parties hereto.
9.11. Severability. In case any provision in this
Agreement shall be held invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions hereof will not in any
way be affected or impaired thereby.
9.12. Termination of Agreement. The Agreement may be
terminated upon mutual written agreement of the parties.
[The remainder of this page has been intentionally left blank.]
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first above written.
CNL HOSPITALITY PROPERTIES, INC.
By: /s/ Xxxxx X. Xxxxxx, Xx.
-----------------------------
Name:Xxxxx X. Xxxxxx, Xx.
Title:Chairman and Chief Executive
Officer
FIVE ARROWS REALTY SECURITIES II L.L.C.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------
Name:Xxxxxxx X. Xxxxxx
Title:Manager
CNL HOTEL INVESTORS, INC.
By: /s/ Xxxxx X. Xxxxxx, Xx.
-----------------------------
Name:Xxxxx X. Xxxxxx, Xx.
Title:Chairman and Chief Executive
Officer
EXHIBIT 1
Hotels
Project Owner
--------------------------------------------------------------------------------
Courtyard:
Addison, TX Acourt Property, Ltd.
Plano, TX PLC Hotel Property, Ltd.
Scottsdale, AZ XXXX Property, L.P.
Seattle, WA Westlake Hotel Property, L.P.
Residence Inn:
Las Vegas, NV LVHC Hotel Property,
Limited Partnership
Phoenix, AZ PARI Hotel Property, L.P.
Plano, TX PLRI Hotel Property, Ltd.
Marriott Suites:
Dallas, TX Marcen Property, Ltd.
EXHIBIT 1.5
Form of Promissory Note
Exhibits and Schedules
Schedule 2.1 - Liens, Encumbrances, Restrictions and Claims
Schedule 2.2 - Contravention
Schedule 2.3 - Jurisdictions Where CHP is Qualified to Do Business
Schedule 2.4 - Capitalization
Schedule 2.6 - Subsidiaries and Investments
Schedule 2.7(b) - Material Adverse Changes
Schedule 2.8 - Title to Properties Encumbrances
Schedule 2.9 - Leases
Schedule 2.10 - Material Contracts
Schedule 2.11 - Restrictive Documents
Schedule 2.12 - Litigation
Schedule 2.13 - ERISA Plans
Schedule 2.14 - Environmental Matters
Schedule 2.15 - Taxes
Schedule 2.16 - Non-Compliance
Exhibit 1 - Hotels
Exhibit 1.2 - Promissory Note
Exhibit 6.4 - Opinion of CHP's Counsel
Exhibit 6.7 - Registration Rights Agreement
