SECURITIES PURCHASE AGREEMENT
AMONG
CNL HOSPITALITY PARTNERS, X.X.
XXXXXX HOSPITALITY TRUST
AND
HERSHA HOSPITALITY LIMITED PARTNERSHIP
DATED AS OF APRIL 21, 2003
TABLE OF CONTENTS
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Page
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ARTICLE 1 PURCHASE AND SALE OF PREFERRED UNITS . . . . . . . . . . . . . . 1
1.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Payment at First Closing, Second Closing or Subsequent
Closings. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 3
2.1 Representations and Warranties of HT and HLP. . . . . . . . . 3
2.2 Representations and Warranties of CHP . . . . . . . . . . . . 26
ARTICLE 3 COVENANTS OF HT AND HLP. . . . . . . . . . . . . . . . . . . . . 28
3.1 Covenants Relating to the Business of HT and HLP. . . . . . . 28
3.2 Access and Information. . . . . . . . . . . . . . . . . . . . 31
3.3 Notification of Certain Matters . . . . . . . . . . . . . . . 31
3.4 Third Party Consents. . . . . . . . . . . . . . . . . . . . . 32
3.5 Appointment of Observer to the HT Board of Trustees . . . . . 32
3.6 Waiver of Anti-Takeover Statute . . . . . . . . . . . . . . . 32
3.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.8 Use of Purchase Price; Use of Proceeds. . . . . . . . . . . . 33
3.9 Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . . 33
3.10 Execution and Delivery of Excepted Holder Agreement . . . . . 33
3.11 Registration Rights Agreement . . . . . . . . . . . . . . . . 33
3.12 Existing Registration Rights. . . . . . . . . . . . . . . . . 33
3.13 HLP Partnership Agreement . . . . . . . . . . . . . . . . . . 33
3.14 Joint Venture Agreement . . . . . . . . . . . . . . . . . . . 33
3.15 Filing of Articles Supplementary and Capital Stock Matters. . 34
3.16 Stock Exchange Listing. . . . . . . . . . . . . . . . . . . . 34
3.17 Certain Other Actions . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 3A COVENANT OF CHP . . . . . . . . . . . . . . . . . . . . . . . . 35
3A.1 Fairness Opinion. . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 4 MUTUAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 36
4.1 Additional Agreements . . . . . . . . . . . . . . . . . . . . 36
4.2 Advice of Changes; SEC Filings. . . . . . . . . . . . . . . . 36
ARTICLE 5 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 37
5.1 Conditions to Each Party's Obligation . . . . . . . . . . . . 37
5.2 Conditions to Obligations of CHP at the First Closing . . . . 37
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5.3 Conditions to Obligations of HT and HLP at the First Closing. 39
5.4 Conditions to Obligations of CHP at the Second Closing
and each Subsequent Closing . . . . . . . . . . . . . . . . . 40
5.4A Condition to Obligations of CHP at each Subsequent Closing. . 41
5.5 Conditions to Obligations of HT and HLP at the Second
Closing and Each Subsequent Closing . . . . . . . . . . . . . 41
ARTICLE 6 CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.2 Actions to Occur at the First Closing . . . . . . . . . . . . 43
6.3 Actions to Occur at the Second Closing and Each
Subsequent Closing. . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . 45
7.1 Termination Prior to First Closing. . . . . . . . . . . . . . 45
7.2 Termination Subsequent to First Closing . . . . . . . . . . . 46
7.3 Effect of Termination Prior to First Closing. . . . . . . . . 47
ARTICLE 8 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 47
8.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 47
8.2 Limitations on Indemnification for Breaches of
Representations and Warranties. . . . . . . . . . . . . . . . 48
8.3 Indemnification Procedures. . . . . . . . . . . . . . . . . . 49
8.4 Tax Related Adjustments . . . . . . . . . . . . . . . . . . . 50
ARTICLE 9 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 50
9.1 Survival of Representations, Warranties, and Covenants. . . . 50
9.2 Amendment and Modification. . . . . . . . . . . . . . . . . . 51
9.3 Waiver of Compliance. . . . . . . . . . . . . . . . . . . . . 51
9.4 Specific Performance. . . . . . . . . . . . . . . . . . . . . 51
9.5 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 51
9.6 Expenses and Obligations. . . . . . . . . . . . . . . . . . . 52
9.7 Parties in Interest . . . . . . . . . . . . . . . . . . . . . 52
9.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 53
9.10 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 53
9.11 Governing Law; Choice of Forum. . . . . . . . . . . . . . . . 53
9.12 Public Announcements. . . . . . . . . . . . . . . . . . . . . 54
9.13 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.14 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.15 Articles, Sections. . . . . . . . . . . . . . . . . . . . . . 54
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EXHIBITS:
Exhibit A -- Form of Legal Opinion of HT's Counsel
Exhibit B -- Form of Legal Tax Opinion of HT's Tax Counsel
Exhibit C -- Form of BSA Legal Opinion
Exhibit D -- Form of Excepted Holder Agreement
Exhibit E -- Form of Registration Rights Agreement
Exhibit F -- Form of Registration Rights Acknowledgement
Exhibit G -- Form of Second Amendment to HLP Limited Partnership
Agreement
Exhibit H -- Form of Joint Venture Agreement
Exhibit I -- Form of Articles Supplementary
Exhibit J List of CHP's Officers, Directors and Employees
DISCLOSURE SCHEDULES:
Schedule 2.1(a) -- HT Subsidiaries and Non-Subsidiary Investments
Schedule 2.1(b) -- Options and Certain Restrictions
Schedule 2.1(c) -- Conflicts, Violations or Defaults and Consents of
Governmental Entities
Schedule 2.1(f) -- Certain Changes or Events
Schedule 2.1(g) -- Undisclosed Liabilities
Schedule 2.1(h) -- Defaults and Violations
Schedule 2.1(i) -- Officers with Knowledge
Schedule 2.1(j) -- HT Litigation
Schedule 2.1(k) -- Taxes
Schedule 2.1(l) -- ERISA Matters
Schedule 2.1(m) -- Labor and Employment Matters
Schedule 2.1(o) -- Environmental Matters
Schedule 2.1(p) -- Properties
Schedule 2.1(q) -- Insurance
Schedule 2.1(r) -- Brokers
Schedule 2.1(t) -- Material Contracts
Schedule 2.1(u) -- Information Systems
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INDEX OF DEFINED TERMS
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Term Defined in Section:
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Affiliate 2.1(d)
Agreement Preamble
Amended and Restated HLP Partnership 3.13
Agreement
Amex 3.16
Articles Supplementary 2.1(a)(i)
Balance Sheet Date 2.1(f)
Basket 8.2(a)
BSA Opinion 3.9
Business Day 6.1(b)
CERCLA 2.1(o)(viii)
CHP Preamble
CHP Indemnified Parties 8.1(a)
CHP Litigation 2.2(c)
CHP Order 2.2(c)
CHP's Cap 8.2(a)
Claim 8.3(a)(i)
Class A Shares 2.1(b)(i)
Class B Shares 2.1(b)(i)
Closings 6.1(a)
Closing Date 6.1(a)
Closing Dates 6.1(a)
Contributed Leases 3.18(b)
Control 2.1(d)
Cure Period 7.1(b)(i)
Delivery Date 2.1(a)(i)
Discretionary Capital 3.8
Encumbrances 2.1(b)(ii)
Environmental Laws 2.1(o)
EPA 2.1(o)(viii)
ERISA 2.1(l)(i)
Excepted Holder Agreement 3.10
Exchange Act 2.1(c)(iii)
Expenses 8.1(a)(iii)
Expense Reimbursement 7.3(b)
First Closing 1.1(a)
First Closing Units 1.1(a)
Fully Diluted Interest in HT 8.1(a)(iv)
GAAP 2.1(d)
Governmental Entity 2.1(c)(iii)
Ground Lease 2.1(p)(ii)
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Ground Leases 2.1(p)(ii)
Ground Lessee 2.1(p)(ii)
Ground Lessees 2.1(p)(ii)
Hazardous Materials 2.1(o)
HHMLP 3.18(a)
HLP Preamble
HLP Certificate of Limited Partnership 2.1(a)(i)
HLP Partnership Agreement 2.1(a)(i)
HLP Ordinary Units 2.1(b)(i)
HT Preamble
HT's Cap 8.2(a)
HT Common Stock 2.1(b)(i)
HT Common Stock Equivalents 2.1(b)(i)
HT Declaration of Trust 2.1(a)(i)
HT Disclosure Schedule 2.1(a)(i)
HT Employee Benefit Plans 2.1(l)(iii)
HT ERISA Affiliate 2.1(l)(i)
HT Fee Property 2.1(p)(i)
HT Fee Properties 2.1 (p)(i)
HT Franchise Agreements 2.1(t)(vi)
HT Indemnified Parties 8.1(b)
HT Intangible Property 2.1(n)
HT Leasehold Property 2.1(p)(i)
HT Leasehold Properties 2.1(p)(i)
HT Litigation 2.1(j)
HT Option Plan 2.1(b)(i)
HT Order 2.1(j)
HT Pension Plans 2.1(l)(i)
HT Property 2.1(p)(i)
HT Properties 2.1(p)(i)
HT Permits 2.1(h)(i)
HT Preferred Stock 2.1(b)(i)
HT SEC Documents 2.1(d)
HT TRS 3.18(a)
HT Trustees Plan 2.1(b)(i)
HSR Act 2.1(c)(iii)
HW Opinion 3.9
HW Tax Opinion 3.9
Information Systems 2.1(u)
Joint Venture Agreement 3.14
Knowledge 2.1(h)(i)
Losses 8.1(a)(i)
Material Adverse Effect 2.1(a)(ii)
Material Contracts 2.1(t)(xvi)
MGCL 3.6
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Observer Resolution 5.2(d)
Person 2.1(d)
Preferred Units Recitals
Projections 2.1(v)
Property Restrictions 2.1(p)(iii)
Purchase Price 1.2
REIT 2.1(k)(ii)
REIT Training 3.19
Registration Rights Acknowledgement 3.12
Registration Rights Agreement 3.11
Release 2.1(o)
Remedial Action 2.1(o)
SDAT 3.15(a)
SEC 2.1(c)(iii)
Second Closing 1.1(b)
Second Closing Date 1.3
Second Closing Units 1.1(b)
Securities Act 2.1(c)(iii)
Series A Preferred Shares 2.1(b)(i)
Space Lease 2.1(p)(vii)
Space Leases 2.1(p)(vii)
Subsequent Closing 1.1(c)
Subsequent Closing Date 1.3
Subsequent Closing Units 1.1(c)
Subsidiary 2.1(a)(iii)
Tax Protection Agreements 2.1(k)(viii)
Transaction Documents 2.1(b)(ii)
Voting Debt 2.1(b)(i)
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of April 21,
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2003, is among CNL Hospitality Partners, L.P., a limited partnership formed
under the laws of the State of Delaware ("CHP"), Hersha Hospitality Trust, a
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Maryland real estate investment trust ("HT"), and Hersha Hospitality Limited
--
Partnership, a limited partnership formed under the laws of the Commonwealth of
Virginia ("HLP"), the general partner of which is HT.
---
WHEREAS, upon the terms and subject to the conditions of this Agreement,
CHP desires to purchase and HLP desires to issue and sell preferred limited
partnership interests in the form of HLP's Preferred Units (as defined in
Section 1.1) having the rights, privileges and preferences as agreed to by the
parties hereto;
WHEREAS, HT, the general partner of HLP, has approved the issuance and sale
of the Preferred Units and the general partner of CHP has approved the purchase
of the Preferred Units pursuant to the terms of this Agreement and the other
transactions contemplated hereby;
WHEREAS, simultaneously herewith, HLP and CHP are entering into a Joint
Venture Agreement (as defined herein), pursuant to which HLP and CHP will
acquire and operate real estate projects;
WHEREAS, HT, HLP and CHP desire to make certain representations,
warranties, agreements and covenants in respect of the purchase and sale of the
Preferred Units (as defined herein) and also to prescribe various conditions
thereto, all as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual premises, representations,
warranties, agreements and covenants contained in this Agreement, the parties
hereto, intending to be legally bound, agree as follows:
ARTICLE 1
PURCHASE AND SALE OF PREFERRED UNITS
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1.1 Purchase and Sale. Upon the terms and subject to the
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conditions set forth in this Agreement, HLP shall issue and sell to CHP, and CHP
shall purchase from HLP, at the times indicated below, a number of Preferred
Units as follows:
(a) at the first closing (the "First Closing") 100,000 Preferred
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Units (the "First Closing Units");
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(b) at the second closing, which shall occur within 30 days after
the First Closing (the "Second Closing") provided such date is a Business Day
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and if such date is not a Business Day, the next following Business Day, 50,000
Preferred Units (the "Second Closing Units"); and
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(c) subject to the provisions contained immediately below, at one
or more subsequent closings, which shall occur within 15 Business Days (as
hereinafter defined) after the date on which HLP provides written notice to CHP
in accordance with Section 9.8 hereof (each, a "Subsequent Closing"), a number
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of Preferred Units not to exceed 100,000 Preferred Units in the aggregate for
all such closings (all such units, the "Subsequent Closing Units" and, together
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with the First Closing Units and the Second Closing Units, are collectively
referred to as the "Preferred Units" and individually referred to as a
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"Preferred Unit"), provided, however, that HLP shall not be obligated to sell
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and CHP shall not be required to purchase in excess of 250,000 Preferred Units
in the aggregate (pursuant to this Section 1.1), and provided further however
that CHP shall not be obligated to purchase any Subsequent Closing Units until
such time as HLP is or has been obligated to make an Additional Capital
Contribution to the Joint Venture in connection with an Approved Acquisition in
accordance with Section 4.3 of the Joint Venture Agreement. Upon satisfaction
of the condition set forth in the ultimate proviso of the preceding sentence, at
any Subsequent Closing, CHP shall only be obligated to purchase such number of
Subsequent Closing Units (not to exceed 100,000 in the aggregate) which results
in a Purchase Price equal to the total amount HLP is or has been required to
contribute to the Joint Venture in connection with one or more Approved
Acquisitions pursuant to Section 4.3 of the Joint Venture Agreement, less the
Purchase Price for the number of Subsequent Closing Units acquired by CHP
pursuant to such previous Subsequent Closings, if any. As used in this Section,
the terms "Additional Capital Contribution" and "Approved Acquisition" shall
have the meanings ascribed to such terms in the Joint Venture Agreement.
All references to the number of Preferred Units which CHP is obligated to
purchase hereunder and HLP is obligated to issue and sell hereunder, and all
references to the Purchase Price (as defined herein) shall, in all instances, be
subject to equitable adjustment from time to time for subdivisions and
combinations of HT's Class A Shares (as defined herein) and for transactions of
similar effect. For example, in the event of a subdivision of Class A Shares,
the Purchase Price shall proportionately be decreased and the remaining number
of Preferred Units that CHP is obligated to purchase shall proportionately be
increased, and in the event of a combination of Class A Shares, the Purchase
Price shall proportionately be increased and the remaining number of Preferred
Units that CHP is obligated to purchase shall proportionately be decreased.
1.2 Purchase Price. The purchase price payable by CHP to HLP in
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consideration for the sale of the Preferred Units shall be an amount equal to
$100.00 per Preferred Unit (the "Purchase Price") and the aggregate purchase
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price payable hereunder, in the event all 250,000 Preferred Units are purchased
and sold hereunder, shall be $25.0 million, provided, however, that at the First
Closing, the Purchase Price shall be credited, dollar-for-dollar, for the full
amount of CHP's invoiced out-of-pocket legal, financial and other business
advisory expenses incurred by CHP in connection with the due diligence,
preparation and negotiation of this Agreement and the Transaction Documents (as
defined herein) and any other out-of-pocket expenses incurred by CHP in
connection with the transactions contemplated by this Agreement and the
Transaction Documents, and letter of intent dated November 18, 2002 and
predecessor letter of intent dated August 19, 2002 which shall include, without
limitation, the fees and disbursements of Xxxxxxxxx Xxxxxxx, LLP,
PricewaterhouseCoopers, LLP and Lowndes, Drosdick, Doster, Xxxxxx & Xxxx.
1.3 Payment at First Closing, Second Closing or Subsequent Closings.
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Payment of the Purchase Price for the Preferred Units to be purchased at the
First Closing, Second Closing or any Subsequent Closing, as the case may be,
2
shall be made by or on behalf of CHP by wire transfer of immediately available
funds to an account designated by HLP (the number for which account shall have
been furnished to CHP at least five Business Days prior to the "First Closing
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Date", the "Second Closing Date" or any "Subsequent Closing Date" (in each
---- --------------------- -----------------------
instance, as hereinafter defined)).
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
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2.1 Representations and Warranties of HT and HLP. HT and HLP jointly
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and severally represent and warrant to CHP, as of the date hereof, the First
Closing Date, the Second Closing Date and each Subsequent Closing Date, as
follows:
(a) Organization, Standing and Power.
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(i) HT is a real estate investment trust duly organized,
validly existing and in good standing under the laws of the State of Maryland.
HLP is a limited partnership duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia. Each Subsidiary (as
defined below) is a corporation, limited liability company or partnership duly
incorporated, organized or formed (as the case may be), validly existing and,
where applicable, in good standing under the laws of its state of incorporation,
organization or formation. Each of HT, HLP and each Subsidiary has all
requisite power and authority to own, lease and operate its assets, and to carry
on its business as now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the business it is
conducting, or the ownership of its assets, makes such qualification necessary,
other than in such jurisdictions where the failure to so qualify would not have
a Material Adverse Effect (as defined below). On or before the date hereof, HT
shall deliver to CHP complete and correct copies, as in effect on the date
hereof, of HT's Declaration of Trust (the "HT Declaration of Trust"), HT's
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Articles Supplementary to the HT Declaration of Trust (the "Articles
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Supplementary"), HLP's certificate of limited partnership (the "HLP Certificate
------------ ---------------
of Limited Partnership"), HLP's Amended and Restated Agreement of Limited
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Partnership (the "HLP Partnership Agreement"), HT's bylaws, and charters and
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bylaws and other organizational documents of each Subsidiary. Each Subsidiary
and each respective jurisdiction of incorporation or organization are identified
on Schedule 2.1(a)) of the disclosure schedule delivered by HT to CHP on the
date that is at least five Business Days prior to the date hereof (the "Delivery
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Date"), and made a part hereof by reference (the "HT Disclosure Schedule").
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Schedule 2.1(a) of the HT Disclosure Schedule sets forth (a) each Subsidiary and
its owners and their respective ownership interests in such Subsidiary; (b) a
list of each jurisdiction in which HT, HLP or a Subsidiary is qualified or
licensed to do business and each assumed name under which any of them conducts
business in any jurisdiction and (c) any other corporation or other entity of
which HT or HLP, directly or indirectly, owns or holds the right to acquire any
capital stock or other ownership interest.
(ii) As used in this Agreement, "Material Adverse Effect"
-----------------------
means, when used in connection with HT, HLP or any Subsidiary, any change, event
or effect, whether or not foreseeable or known as of the date hereof, that,
individually or in the aggregate with any such other change, event or effect,
is, or could reasonably be expected to have a materially
3
adverse effect on the (A) business, (B) assets, (C) liabilities, (D) financial
condition, or (E) results of operations (including, but not limited to,
operating income and cash flow) of HT, HLP and all Subsidiaries taken as a
whole.
(iii) As used in this Agreement, the word "Subsidiary" means,
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with respect to HT, HLP or any subsidiary of HT or HLP, any corporation,
partnership, trust, limited liability company or other legal entity, whether
incorporated or unincorporated, of which: (A) HT, HLP or any other subsidiary
of HT or HLP is a general partner; (B) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the Board of Directors, Board of Trustees or other similar governing body,
directly or indirectly, are owned or controlled by HT or HLP or by any
subsidiary of HT or HLP; or (C) at least 25% of the equity interests are
beneficially owned, directly or indirectly, by HT or HLP and/or any subsidiary
of HT or HLP (but excluding the limited partnership formed pursuant to the Joint
Venture Agreement and its Subsidiaries).
(b) Capital Structure.
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(i) As of the date hereof, the authorized capital shares of
HT consisted of (A) 100,000,000 common shares of beneficial interest, par value
$.01 per share, of which 50,000,000 shares are designated Priority Class A
Common Shares ("Class A Shares") and of which 50,000,000 shares are designated
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Class B Common Shares ("Class B Shares", and together with Class A Shares, the
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"HT Common Stock"), and (B) 10,000,000 preferred shares of beneficial interest,
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par value $.01 per share the ("HT Preferred Stock"), of which 350,000 shares
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have been designated as Series A Preferred Shares, par value $.01 per share (the
"Series A Preferred Shares"). As of the date hereof, (1) no Series A Preferred
--------------------------
Shares are issued and outstanding and no other shares of HT Preferred Stock are
issued and outstanding; (2) 2,576,101 Class A Shares are issued and outstanding;
(3) no Class B Shares are issued and outstanding; (4) 650,000 Class B Shares are
subject to issuance pursuant to HT's Option Plan (the "HT Option Plan"), of
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which options to purchase 534,000 Class B shares have been issued pursuant to
which no Class B Shares were issued; (5) 200,000 Class B Shares are subject to
issuance pursuant to HT's Board of Trustees' Plan to provide incentives to
attract and retain independent trustees (the "HT Trustees Plan"), pursuant to
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which no Class B Shares are issued; (6) 5,099,722 Class B Shares are subject to
issuance, and are also reserved for issuance, upon the exchange of limited
partner interests in HLP (the "HLP Ordinary Units"); (7) no Voting Debt (as
------------------
defined below) is issued and outstanding by HT, HLP or any Subsidiary and (8)
12,000,000 shares of HT Common Stock are reserved for issuance upon conversion
of the Series A Preferred Shares and the Preferred Units. HT is the sole
general partner of HLP and holds 36.1% of the partnership interests in HLP. As
of the date hereof, (x) 5,099,722 HLP Ordinary Units, constituting an interest
of 100%, are validly issued and outstanding, and not subject to preemptive
rights, (y) no Preferred Units are issued and outstanding and (z) no other HT
Common Stock or securities convertible into or granting its holder rights to
acquire HT Common Stock (the "HT Common Stock Equivalents") are issued and
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outstanding. Subject to the limitations contained in the HLP Partnership
Agreement and the HT Declaration of Trust, each HLP Ordinary Unit is immediately
exchangeable for cash or one Class A Share or one Class B Share, as the case may
be, pursuant to the terms of the HLP Partnership Agreement. Schedule 2.1(b) of
the HT Disclosure Schedule sets forth the name and number of HLP Ordinary Units
and the percentage interest of each partner in HLP. The term "Voting Debt"
-----------
means bonds, debentures, notes or other indebtedness
4
having the right to vote (or convertible into securities having the right to
vote) on any matters on which holders of equity interests in HT, HLP or any
Subsidiary, as applicable, may vote.
(ii) All outstanding shares of HT Common Stock and the
outstanding HLP Ordinary Units are validly issued, fully paid and non-assessable
and are not subject to preemptive rights. Except as set forth on Schedule
2.1(b) of the HT Disclosure Schedule, all outstanding equity interests of HT,
HLP and each Subsidiary that are owned by HT, HLP or any Subsidiary are free and
clear of all liens, pledges, charges, claims, mortgages, deeds of trust,
security interests, restrictions, rights of first refusal, defects in title, or
other burdens, options or encumbrances of any kind ("Encumbrances"), other than
------------
restrictions on transfer under Federal and state securities laws and statutory
liens for taxes not yet due. Set forth on Schedule 2.1(b) of the HT Disclosure
Schedule is a true and complete list of the following: (A) each outstanding
qualified or non-qualified option to purchase HT Common Stock or HLP Ordinary
Units granted under the HT Option Plan, the HT Trustees Plan or otherwise, the
name of each holder of each such option and the exercise price and the number of
shares or HLP Ordinary Units subject to each such option; (B) each grant of HT
Common Stock or HLP Ordinary Units to employees which is subject to any risk of
forfeiture, the name of each holder of such restricted stock or HLP Ordinary
Units and the number of shares or HLP Ordinary Units of such restricted stock or
HLP Ordinary Units held by each holder; (C) any obligations of HT to issue HT
Common Stock except pursuant to this Agreement, and any obligations of HLP to
issue HLP Ordinary Units, in each case as a result of the transactions
contemplated hereby and the total thereof; and (D) each loan made by HT or HLP
with respect to the purchase of HT Common Stock or HLP Ordinary Units, as the
case may be, and the recipient, amount and principal terms thereof. Except as
set forth in this Section 2.1(b) or on Schedule 2.1(b) of the HT Disclosure
Schedule, there are issued and outstanding or reserved for issuance: (x) no
shares of stock, limited partnership interests, Voting Debt or other voting
securities of HT, HLP or any Subsidiary; (y) no securities of HT, HLP or any
Subsidiary or securities or assets of any other entity convertible into or
exchangeable for shares of stock, limited partnership interests, Voting Debt or
other voting securities of HT, HLP or any Subsidiary; and (z) no options,
warrants, calls, rights (including preemptive rights), commitments or agreements
to which HT, HLP or any Subsidiary is a party or by which it is bound in any
case obligating HT, HLP or any Subsidiary to issue, deliver, sell, purchase,
redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed
or acquired, additional shares of stock, limited partnership interests or any
Voting Debt or other voting securities of HT, HLP or any Subsidiary, or
obligating HT, HLP or any Subsidiary to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement. Except as set forth on
Schedule 2.1(b) of the HT Disclosure Schedule, there are not as of the date
hereof, except as contemplated herein or in any other documents to be executed
by HT, HLP or any applicable Subsidiary and CHP in connection with the
consummation of the transactions contemplated in this Agreement (collectively,
"Transaction Documents"), and there will not be on any of the Closing Dates (as
----------------------
defined herein), any stockholder agreements, voting trusts or other agreements
or understandings to which HT, HLP or any Subsidiary is a party or by which it
is bound (i) granting to any person, preemptive rights on any shares of HT
Preferred Stock, HT Common Stock or HLP Ordinary Units, or (ii) relating to the
voting of any equity securities of HT, HLP or any Subsidiary that limits in any
way the solicitation of proxies or consents from, or the casting of votes by,
the shareholders, partners or equity owners of HT, HLP or any Subsidiary.
Except as set forth on Schedule 2.1(b) of
5
the HT Disclosure Schedule, there are no restrictions on HT's or HLP's ability
to vote the equity interests of any Subsidiary. Except as set forth on Schedule
2.1(b) of the HT Disclosure Schedule, all dividends or distributions on
securities of HT or HLP that have been declared or authorized prior to the date
hereof have been paid in full. Except as set forth on Schedule 2.1(b) of the HT
Disclosure Schedule or in the HT SEC Documents, there is no restriction on the
ability of HLP or any Subsidiary to distribute cash to their respective parent
companies.
(c) Authority; No Violations; Consents and Approvals.
-----------------------------------------------------
(i) Each of HT, HLP and each Subsidiary has all requisite
power and authority to enter into this Agreement and the Transaction Documents
to which it is a party, and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Transaction
Documents to which HT, HLP and each Subsidiary is a party, if any, and the
consummation of the transactions contemplated hereby or thereby have been duly
authorized by all necessary action on the part of the governing bodies of HT,
HLP and such Subsidiary, as applicable. This Agreement and the Transaction
Documents to which HT, HLP or any Subsidiary is a party have been duly executed
and delivered by HT, HLP or such Subsidiary and, assuming this Agreement and the
Transaction Documents to which CHP is a party constitute the valid and binding
obligations of CHP, constitute valid and binding obligations of HT, HLP and such
Subsidiary, are enforceable in accordance with their terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization, moratorium and other
laws of general applicability relating to or affecting creditors' rights and to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(ii) Except as set forth on Schedule 2.1(c) of the HT
Disclosure Schedule, the execution and delivery of this Agreement and the
Transaction Documents by HT, HLP and any Subsidiary, if applicable, do not, and
the consummation of the transactions contemplated hereby or thereby, and
compliance with the provisions hereof or thereof, will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both), under, or give rise to a right of termination, cancellation or
acceleration of any material obligation or to the loss of a material benefit
under, or give rise to a right of purchase under, or result in the creation of
any Encumbrance upon any of the properties or assets of HT, HLP or any
Subsidiary or require the consent or approval of any third party, or otherwise
result in a material detriment to HT, HLP or any Subsidiary, under any provision
of (A) the HT Declaration of Trust, HT's bylaws, the HLP Partnership Agreement,
the HLP Certificate of Limited Partnership or any provision of the comparable
charter or organizational documents of any Subsidiary, (B) any loan or credit
agreement, note, bond, mortgage or indenture (or guarantee of same) entered into
by HT, HLP or any Subsidiary and secured by a lien on any hotel owned by HT, HLP
or any such Subsidiary, (C) any other loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to HT, HLP or any Subsidiary or their respective
properties or assets, or any guarantee by HT, HLP or any Subsidiary of any of
the foregoing, (D) any joint venture or other ownership arrangement or (E)
assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 2.1(c)(iii) are duly and timely obtained or
made, any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to HT, HLP or any Subsidiary or any of their respective properties or
assets, other than, in the case of clauses (C), (D) and (E), any such conflicts,
violations, defaults, rights, Encumbrances or detriments that, individually or
in
6
the aggregate, (1) have not had, and could not reasonably be expected to have, a
Material Adverse Effect, or (2) would not, or could not reasonably be expected
to, materially impair the ability of HT, HLP or any Subsidiary to perform its
obligations hereunder or under any Transaction Document or prevent the
consummation of any of the transactions contemplated hereby or thereby.
(iii) Except as set forth on Schedule 2.1(c) of the HT
Disclosure Schedule, no consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any court,
governmental, regulatory or administrative agency or commission or other
governmental authority or instrumentality, domestic (federal, state or
municipal) or foreign (a "Governmental Entity"), is required by or with respect
-------------------
to HT, HLP or any Subsidiary in connection with the execution and delivery of
this Agreement or any of the Transaction Documents to which HT, HLP or any
Subsidiary is a party, if any, by HT, HLP or such Subsidiary, or the
consummation by HT, HLP or any Subsidiary of the transactions contemplated
hereby or thereby, except for: (A) the filing with the Securities and Exchange
Commission (the "SEC") of such reports under Section 13(a) or Section 16 of the
---
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such other
------------
compliance with the Exchange Act or Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations thereunder, as may be required
---------------
in connection with this Agreement or any of the Transaction Documents and the
transactions contemplated hereby or thereby; (B) any filings required under
state securities laws; (C) such filings and approvals as may be required by any
applicable state takeover laws, or environmental laws; (D) the filing, if
applicable, of a pre-merger notification and report by HT or HLP under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
---
Act"), and the expiration or termination of the applicable waiting period
---
thereunder; and (E) approval of the listing application for the Class A Shares
into which the Series A Preferred Shares and the Preferred Units are convertible
and the Series A Preferred Shares into which the Preferred Units are
exchangeable to be issued hereunder, by the American Stock Exchange.
(d) SEC Documents. HT has made available to CHP a true and
--------------
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by HT with the SEC since January 1, 1999 and prior to or
on the date hereof (the "HT SEC Documents"), which are all the documents (other
----------------
than preliminary material) that HT was required to file with the SEC between
January 1, 1999 and the date hereof. As of their respective dates, the HT SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such HT SEC
Documents, and none of the HT SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. HT has no outstanding and unresolved
comments from the SEC with respect to any of the HT SEC Documents. The
consolidated financial statements of HT included in the HT SEC Documents
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
----
during the periods involved and fairly presented in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited statements, to
normal, recurring adjustments, none of which are material) the consolidated
financial position of HT,
7
HLP and their consolidated Subsidiaries as of their respective dates and the
consolidated statements of income and the consolidated cash flows of HT and
their consolidated Subsidiaries for the periods presented therein. Except as
disclosed in the HT SEC Documents, there are no agreements, arrangements or
understandings between HT, HLP or any Subsidiary and any party who is at the
date hereof or was at any time prior to the date hereof (but after January 1,
1999) an Affiliate (as hereinafter defined) of HT, HLP or any Subsidiary that
are required to be disclosed in the HT SEC Documents. The books of account and
other financial records of HT are true, complete and correct in all material
respects and are accurately reflected in all material respects in the financial
statements included in the HT SEC Documents. As used in this Agreement,
"Affiliate", and all derivations thereof shall have the meaning set
---------
forth in Rule 12b-2 of the Exchange Act and shall include, without limitation,
for the avoidance of doubt, (a) the trustees and senior executive officers of
HT, HLP and any Subsidiary, his or her spouse, parent, sibling, mother-in-law,
father in-law, brother-in-law, sister-in-law, aunt, uncle, or first cousin, (b)
any Person directly or indirectly owning, controlling or holding the power to
vote 5% or more of the outstanding voting securities of HT, HLP or any
Subsidiary, and (c) any Person 5% or more of whose outstanding voting securities
are directly or indirectly owned, controlled or held with power to vote by HT,
HLP or any Subsidiary.
For purposes of this definition and this Agreement, the term "control" (and
-------
correlative terms) means the possession, directly or indirectly, of the power,
whether by contract, equity ownership or otherwise, to direct or cause the
direction of the policies or management of a Person. As used in this Agreement,
"Person" means an individual, corporation, partnership, limited liability
------
company, association, trust, unincorporated organization or other entity.
(e) FCPA; Questionable Payments. Neither HT, HLP, any Subsidiary,
---------------------------
nor any of their respective current or former shareholders, partners, directors,
trustees, officers, employees, agents or other persons acting on behalf of HT,
HLP or any Subsidiary, has on behalf of HT, HLP or any Subsidiary or in
connection with HT's, HLP's or any Subsidiary's respective businesses: (a) used
any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (b) made any direct or
indirect unlawful payments to any foreign or domestic governmental officials or
employees from corporate funds, (c) established or maintained any unlawful or
unrecorded fund of corporate monies or other assets, (d) made any false or
fictitious entries on the books and records of HT, HLP or any Subsidiary, (e)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment of any nature, or (f) to the Knowledge of HT, HLP or any
Subsidiary, violated any provision of the Foreign Corrupt Practices Act of 1977,
as amended.
(f) Absence of Certain Changes or Events. Except as disclosed on
-------------------------------------
Schedule 2.1(f) of the HT Disclosure Schedule or as disclosed in or reflected in
the HT SEC Documents, and except as contemplated by this Agreement, HT, HLP and
each Subsidiary has conducted their respective businesses since December 31,
2002, the date of the most recent audited financial statements included in the
HT SEC Documents (the "Balance Sheet Date"), in the ordinary course, consistent
------------------
with past practices. Without limiting the generality of the foregoing, since
the Balance Sheet Date, except as disclosed on Schedule 2.1(f) of the HT
Disclosure Schedule or in the HT SEC Documents, there has not been:
8
(i) any event, occurrence, development or state of
circumstances or facts which, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect, other than those
occurring as a result of general economic or financial conditions;
(ii) any (i) authorization, declaration, payment or setting
aside of any dividend or other distribution in respect of any of its equity
interests, capital stock, partnership interests or other securities of HT, HLP
or any Subsidiary thereof, (ii) split, combination, division, distribution, or
reclassification any of HT, HLP or any Subsidiary's equity securities, or (iii)
redemption, purchase, or other acquisition any of their respective equity
securities.
(iii) any (a) incurrence of indebtedness for borrowed money
(except (A) to finance any transactions or other expenditures permitted by this
Agreement and regular borrowings under credit facilities made in the ordinary
course of HT's cash management practices, and (B) refinancings of existing debt
or guarantees of any such indebtedness, or issuance or sale of any debt
securities or warrants or rights to acquire any debt securities of HT, HLP or
any Subsidiary or guarantees of any debt securities of others, (b) creation of
any mortgages, liens, security interests or similar other Encumbrances on the
property of HT, HLP or any Subsidiary in connection with any indebtedness
thereof; (c) assumption, guarantee, endorsement, or other consent to assumption
of liability or responsibility (whether directly, contingently, or otherwise)
for the obligations of any other Person; or (d) making of loans, advances, or
capital contributions to, or investments in, any Person other than a Subsidiary;
(iv) any mortgage, pledge, or Encumbrance of any assets of
HT, HLP or any Subsidiary having a fair market value, individually or in the
aggregate, in excess of $250,000;
(v) any acquisition, disposition or similar transaction by
HT, HLP or any Subsidiary involving any material assets, properties or
liabilities having a fair market value, individually or in the aggregate, in
excess of $250,000, whether by merger, purchase or sale of stock, purchase or
sale of assets or otherwise;
(vi) any damage, destruction or other casualty loss (whether
or not covered by insurance) resulting in any Material Adverse Effect;
(vii) any (i) making or rescission of any material express or
deemed election relating to Taxes (as defined herein) (except as required by law
or necessary to preserve HT's status as a REIT or the status of any of HLP or
any Subsidiary as a partnership or a disregarded entity for federal income Tax
purposes or as a qualified REIT subsidiary under Section 856(i) of the Code or
as a taxable REIT subsidiary under Section 856(l) of the Code), (ii) settlement
or compromise of any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, except any
settlements or compromises relating to contests or protests relating to property
Tax valuations undertaken by HT, HLP or any Subsidiary in the ordinary course of
business, or (iii) change in any material respect any of its methods of
reporting income or deductions for Federal income Tax purposes from those
employed in the preparation of its federal income Tax returns that have been
filed for prior
9
taxable years, except as may be required by applicable law or except for changes
that will not materially and adversely affect HT, HLP or any Subsidiary;
(viii) any (i) grant of any increase in the compensation of,
or payment of any bonus (other than regularly scheduled bonuses as set forth on
Schedule 2.1(f) of the HT Disclosure Schedule) or noncompetition payments to,
any of its directors, trustees, officers or employees; (ii) payment or agreement
to pay to any director, trustee, officer or employee, whether past or present,
any pension, retirement or other employee benefit; (iii) new, or amendment of
any existing, employment or severance or termination agreement with any
director, trustee, officer or employee, either individually or as part of a
class of similarly situated Persons; (iv) establishment, adoption or any
amendment of any existing, (A) "employee benefit plan," as such term is defined
in section 3(3) of ERISA (including, but not limited to, employee benefit plans,
such as foreign plans, which are not subject to the provisions of ERISA), (B)
personnel policy, stock option plan, stock purchase plan, stock appreciation
rights, phantom stock plan, collective bargaining agreement, bonus plan or
arrangement, incentive award plan or arrangement, vacation policy, severance pay
plan, policy or agreement, deferred compensation agreement or arrangement,
executive compensation or supplemental income arrangement, consulting agreement,
employment agreement or other employee benefit plan, agreement, arrangement,
program, practice or understanding or (C) collective bargaining agreement; or
(v) any resignation, termination or removal of any executive officers or
employees listed on Schedule 2.1(f) of the HT Disclosure Schedule, or loss of
significant personnel of HT, HLP or any Subsidiary or material change in the
terms and conditions of the employment of any such executive officer or
employee;
(ix) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of HT, HLP or any Subsidiary, which employees
were not subject to a collective bargaining agreement at the Balance Sheet Date,
or any lockouts, strikes, slowdowns, work stoppages or threats thereof by or
with respect to any employees of HT, HLP or any Subsidiary; or
(x) any other transaction or commitment made, or any contract
or agreement entered into, by HT, HLP or any Subsidiary or any relinquishment by
HT, HLP or any Subsidiary of any contract or other right, in either case,
material to HT, HLP or any Subsidiary, other than transactions and commitments
in the ordinary course of business consistent with past practices and those
contemplated by this Agreement or the Transaction Documents.
(g) No Undisclosed Liabilities. Except as set forth on Schedule
----------------------------
2.1(g) of the HT Disclosure Schedule or in the HT SEC Documents, there are no
liabilities of HT, HLP or any Subsidiary of any kind whatsoever, whether
accrued, contingent, absolute, determined or otherwise, other than: (i)
liabilities adequately provided for on the balance sheet of HT dated as of
December 31, 2002 (including the notes thereto) contained in HT's Annual Report
on Form 10-K for the fiscal year ended December 31, 2002; (ii) liabilities
incurred in the ordinary course of business subsequent to December 31, 2002
which have not had and could not reasonably be expected to have a Material
Adverse Effect; and (iii) liabilities incurred under this Agreement. Except for
leases for personal or real property entered into in the ordinary course of
business, and except for instruments, arrangements or agreements referred to in
this Agreement or disclosed in the HT Disclosure Schedules, neither HT, HLP nor
any Subsidiary has issued any
10
instruments, entered into any agreements, commitments or arrangements or
incurred any obligations that could reasonably be expected to have the effect of
providing HT with "off balance sheet" financing, including, without limitation,
any sale-leaseback arrangements, "synthetic leases", shared trust arrangements
and "off balance sheet debt".
(h) No Default. Except as set forth on Schedule 2.1(h) of the HT
-----------
Disclosure Schedule, neither HT, HLP nor any Subsidiary is in default or
violation (and no event has occurred which, with notice or the lapse of time or
both, would constitute a default or violation) of any term, condition or
provision of (i) the HT Declaration of Trust or HT's bylaws, the HLP Certificate
of Limited Partnership or the HLP Partnership Agreement, or the comparable
charter or organizational documents of any Subsidiary, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license to which HT, HLP or any
Subsidiary is now a party or by which HT, HLP or any Subsidiary or any of their
respective properties or assets is bound or (iii) any order, writ, injunction,
decree, statute, rule or regulation applicable to HT, HLP or any Subsidiary,
except in the case of (ii) and (iii) for defaults or violations which in the
aggregate have not had and could not reasonably be expected to have a Material
Adverse Effect.
(i) Compliance with Applicable Laws. HT, HLP and each
----------------------------------
Subsidiary holds all permits, licenses, authorizations, memberships, consents,
certificates, registrations, qualifications, variances, exemptions, orders,
franchises, approvals or other rights and privileges of all Governmental
Entities necessary for the lawful conduct of each of their respective businesses
(the "HT Permits"), except where the failure so to hold has not had, and could
-----------
not reasonably be expected to have, a Material Adverse Effect. HT, HLP and each
Subsidiary is in compliance in all material respects with the terms of the HT
Permits. Except as disclosed in the HT Disclosure Schedule or in the HT SEC
Documents, the businesses of HT, HLP and each Subsidiary are not being conducted
in violation of any law, ordinance or regulation of any Governmental Entity. No
investigation or review by any Governmental Entity with respect to HT, HLP and
each Subsidiary is pending or, to the Knowledge (as hereinafter defined) of HT,
is threatened. As used in this Agreement, "Knowledge" means, with respect to a
---------
specified party hereto, the actual knowledge of such party (including, but not
limited to, (i) with respect to HT, HLP and each Subsidiary, the actual
knowledge of the officers, trustees and employees set forth on Schedule 2.1(i)
of the HT Disclosure Schedule and the knowledge that they would have had after
due inquiry and investigation and (ii) with respect to CHP, the actual knowledge
of the officers and employees listed on CHP's "List of CHP's Officers and
--------------------------
Employees," attached hereto as Exhibit J and the knowledge that such persons
---------
would have after due inquiry and investigation.
(j) HT Litigation. As of the date hereof, except as disclosed in the
--------------
HT SEC Documents or on Schedule 2.1(j) of the HT Disclosure Schedule, there is
no suit, action or proceeding pending, or, to the Knowledge of HT, HLP or any
Subsidiary, threatened against HT, HLP or any Subsidiary seeking damages in
excess of $50,000 ("HT Litigation"), and neither HT, HLP nor any Subsidiary has
-------------
any Knowledge of any facts that are likely to give rise to any HT Litigation,
nor is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against HT, HLP or any Subsidiary (an "HT
--
Order"). Schedule 2.1(j) of the HT Disclosure Schedule contains an accurate and
-----
complete list of all HT Litigation pending or, to the Knowledge of HT, HLP or
any Subsidiary, threatened against HT, HLP or any
11
Subsidiary. Except as set forth on Schedule 2.1(j) of the HT Disclosure
Schedule, there is no action, suit, proceeding or investigation that HT, HLP or
any Subsidiary currently intends to initiate by filing a complaint with a
Governmental Entity. Except as set forth on Schedule 2.1(j) of the HT Disclosure
Schedule, there are no actions, charges, indictments or investigations of the
trustees, officers, employees or agents of HT, HLP or any Subsidiary, whether
pending or, to the Knowledge of HT, HLP or any Subsidiary, threatened, which
involves allegations of criminal violation of any Federal, state or local
statute, law or ordinance, in each case acting on behalf of HT, HLP or any
Subsidiary.
(k) Taxes. Except as set forth on Schedule 2.1(k) of the HT Disclosure
-----
Schedule or in the HT SEC Documents:
(i) Each of HT, HLP and each Subsidiary (A) has filed all Tax
returns and reports required to be filed by it (after giving effect to any
filing extension properly granted by a Governmental Entity having authority to
do so), and all such returns and reports are accurate and complete in all
material respects, and (B) has paid (or HT has paid on its behalf) all Taxes
shown on such returns and reports as required to be paid by it. The most recent
financial statements contained in the HT SEC Documents reflect an adequate
reserve for all material Taxes payable by HT, HLP and each Subsidiary for all
taxable periods and portions thereof through the date of such financial
statements. HT, HLP and each Subsidiary has established (and until the First
Closing Date shall continue to establish and maintain) on its books and records
reserves that are adequate for the payment of all Taxes not yet due and payable,
all as required by GAAP. Since January 1999, HT has incurred no liability for
Taxes under Sections 857(b), 860(c) or 4981 of the Code, including without
limitation any Tax arising from a prohibited transaction described in Section
857(b)(6) of the Code, and neither HT, HLP nor any Subsidiary has incurred any
material liability for Taxes other than in the ordinary course of business. No
material deficiencies for any Taxes have been proposed, asserted or assessed
against HT, HLP or any Subsidiary, including claims by any taxing authority in a
jurisdiction where HT, HLP or any Subsidiary does not file Tax returns but in
which any of them is or may be subject to taxation, and no requests for waivers
of the time to assess any such Tax are pending. As used in this Agreement,
"Taxes" or "Tax" includes all federal, state, local and foreign income,
----- ---
property, sales, use, franchise, employment, payroll, excise, environmental and
other taxes, assessments, tariffs or governmental charges of any nature
whatsoever, together with penalties, interest or additions to Tax with respect
thereto.
(ii) HT (A) for all taxable years commencing with the year
ended December 31, 1999 through the date hereof has been subject to taxation as
a real estate investment trust within the meaning of Section 856 of the Code (a
"REIT") and has satisfied all requirements to qualify as a domestically
----
controlled (as defined in Section 897(h)(4)(B) of the Code) REIT for such years,
(B) was as of the date hereof and will be as of the First Closing Date, the
Second Closing Date and each Subsequent Closing Date (taking into account the
Preferred Units to be issued hereunder) domestically organized and operated in
conformity with the requirements for qualification and taxation as a
domestically controlled REIT and (C) no challenge to HT's status as a
domestically controlled REIT is pending or, to HT's, HLP's or any Subsidiary's
Knowledge, threatened. Each Subsidiary which is a partnership, joint venture or
limited liability company has, since its formation been treated and continues to
be treated for
12
Federal income Tax purposes as (i) a partnership and not as a corporation or
(ii) a disregarded entity.
(iii) All Taxes which HT, HLP, or any Subsidiary are required
by law to withhold or collect, including Taxes required to have been withheld in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party and sales, gross receipts and use
Taxes, have been duly withheld or collected and, to the extent required, have
been paid over to the proper Governmental Entities or are held in separate bank
accounts for such purpose. There are no Encumbrances for Taxes upon the assets
of HT, HLP or any Subsidiary except for statutory liens for Taxes not yet due.
(iv) The Tax returns of HT, HLP, and each Subsidiary are not
being and have not been examined or audited by any taxing authority for any past
year or period.
(v) Neither HT, HLP, nor any Subsidiary (A) has filed a
consent under Section 341(f) of the Code concerning collapsible corporations, or
(B) is a party to any Tax allocation or sharing agreement.
(vi) Neither HT, HLP, nor any Subsidiary has any liability
for the Taxes of any Person other than for themselves (A) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), (B) as a transferee or successor, (C) by contract, or (D) otherwise.
(vii) Neither HT, HLP, nor any Subsidiary had made any
payments, is obligated to make any payments, or is a party to an agreement that
could obligate any of them to make any payments that will not be deductible
under Section 280G of the Code.
(viii) Neither HT, HLP, nor any Subsidiary has entered into
or is subject, directly or indirectly, to any "Tax Protection Agreements,"
-------------------------
except as disclosed in Schedule 2.1(k) of the HT Disclosure Schedule, true and
correct copies of which have been made available to CHP. As used herein, a "Tax
---
Protection Agreement" is an agreement, oral or written, (A) that has as one of
---------------------
its purposes to permit a Person or entity to take the position that such Person
or entity could defer federal taxable income that otherwise might have been
recognized upon a transfer of property to any Subsidiary that is treated as a
partnership for Federal income Tax purposes, and (B) that (i) prohibits or
restricts in any manner the disposition of any assets of HT, HLP and each
Subsidiary (including, without limitation, requiring HT, HLP and each Subsidiary
to indemnify any Person for any Tax liabilities resulting from any such
disposition), (ii) requires that HT, HLP or any Subsidiary maintain, or put in
place, or replace, indebtedness, whether or not secured by one or more of HT
Properties (as hereinafter defined), or (iii) requires that HT, HLP or any
Subsidiary offer to any Person or entity at any time the opportunity to
guarantee or otherwise assume, directly or indirectly, the risk of loss for
Federal income Tax purposes for indebtedness or other liabilities of HT, HLP and
each Subsidiary.
(l) Pension and Benefit Plans; ERISA.
------------------------------------
Except as set forth on Schedule 2.1(l) of the HT Disclosure Schedule or in
the HT SEC Documents:
13
(i) All "employee pension benefit plans," as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), maintained by HT, HLP or any Subsidiary or any trade or business
-----
(whether or not incorporated) which is under common control, or which is treated
as a single employer, with HT under Section 414(b), (c), (m) or (o) of the Code
("HT ERISA Affiliate") or to which HT, HLP or any Subsidiary or any HT ERISA
--------------------
Affiliate contributed or is obligated to contribute thereunder within six years
prior to the date hereof (the "HT Pension Plans") intended to qualify under
----------------
Section 401 of the Code so qualify both in form and operation, and have been
determined by the IRS to be qualified under Section 401 of the Code and, to the
Knowledge of HT nothing has occurred with respect to the operation of HT Pension
Plans that could reasonably be expected to cause the loss of such qualification
or the imposition of any material liability, penalty or Tax under ERISA or the
Code.
(ii) No HT Pension Plan is subject to Title IV of ERISA.
(iii) There is no material violation of ERISA with respect to
(A) the filing of applicable reports, documents, and notices with the Secretary
of Labor and the Secretary of the Treasury regarding all "employee benefit
plans," as defined in Section 3(3) of ERISA, HT Pension Plans and all other
material employee compensation and benefit arrangements or payroll practices,
including, without limitation, severance pay, sick leave, vacation pay, salary
continuation for disability, consulting or other compensation agreements,
retirement, deferred compensation, bonus (including, without limitation, any
retention bonus plan), long-term incentive, stock option, stock purchase,
hospitalization, medical insurance, life insurance and scholarship programs
maintained by HT, HLP or any Subsidiary or with respect to which HT, HLP or any
Subsidiary has any liability (all such plans, other than HT Pension Plans, being
hereinafter referred to as the "HT Employee Benefit Plans") or (B) the
----------------------------
furnishing of such documents to the participants or beneficiaries of HT Employee
Benefit Plans or HT Pension Plans.
(iv) Each HT Employee Benefit Plan and HT Pension Plan,
related trust (or other funding or financing arrangement) and all amendments
thereto are listed on Schedule 2.1(l) of the HT Disclosure Schedule, true and
complete copies of which have been made available to CHP, as have the most
recent summary plan descriptions, administrative service agreements, Form 5500s
and, with respect to any HT Pension Plan intended to be qualified pursuant to
Section 401 of the Code, a current determination letter.
(v) HT Employee Benefit Plans and HT Pension Plans have been
administered and maintained, in all material respects, in accordance with their
terms and with all provisions of ERISA and the qualification requirements of
Section 401(a) of the Code (including rules and regulations thereunder) and
other applicable Federal and state law. There is no liability for breaches of
fiduciary duty in connection with HT Employee Benefit Plans and HT Pension
Plans, and neither HT nor any Subsidiary or any "party in interest" or
"disqualified person" with respect to HT Employee Benefit Plans and HT Pension
Plans has engaged in a "prohibited transaction" within the meaning of Section
4975 of the Code or Section 406 of ERISA.
(vi) There are no actions, suits or claims pending (other
than routine claims for benefits) or, to the Knowledge of HT, HLP or any
Subsidiary, threatened against, or
14
with respect to, HT Employee Benefit Plans or HT Pension Plans or their assets
that would have a Material Adverse Effect.
(vii) Except as described on Schedule 2.1(l) of the HT
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (A) result in any
payment (including any retention bonuses or noncompetition payments) becoming
due to any employee or group of employees of HT, HLP or any Subsidiary; (B)
increase any benefits otherwise payable under any HT Employee Benefit Plan or HT
Pension Plan; or (C) result in the acceleration of the time of payment or
vesting of any such benefits. Except as described on Schedule 2.1(l) of the HT
Disclosure Schedule, there are no severance agreements, noncompetition
agreements or employment agreements between HT, HLP or any Subsidiary and any
employee of HT, HLP or any Subsidiary. True and complete copies of all
severance agreements and employment agreements described on Schedule 2.1(l) of
the HT Disclosure Schedule have been provided to CHP.
(viii) Neither HT, HLP nor any Subsidiary has any consulting
agreement or arrangement with any Person involving compensation in excess of
$200,000 except as are terminable upon one month's notice or less.
(ix) Neither HT, HLP nor any Subsidiary nor any HT ERISA
Affiliate contributes to, or has an obligation to contribute to, and has not
within six years prior to the Effective Time contributed to, or had an
obligation to contribute to, a multiemployer plan within the meaning of Section
3(37) of ERISA.
(x) No stock or other security issued by HT, HLP or any
Subsidiary forms or has formed a material part of the assets of any HT Employee
Benefit Plan or HT Pension Plan.
(xi) HT, HLP, each Subsidiary and each ERISA Affiliate has
complied with the requirements of Section 4980B of the Code and Parts 6 and 7 of
Subtitle B of Title I of ERISA regarding health care coverage under HT Employee
Benefit Plans.
(xii) No amount has been paid by HT, HLP, any Subsidiary or
any of its ERISA Affiliates, and no amount is expected to be paid by HT, HLP or
any of its ERISA Affiliates, which would be subject to the provisions of 162(m)
of the Code such that all or a part of such payments would not be deductible by
the payor.
(xiii) As to any HT Pension Plan intended to be qualified
pursuant to Section 401(a) of the Code there has been no termination or partial
termination of the plan within the meaning of Section 411(d)(3) of the Code.
(xiv) No act, omission or transaction has occurred which
would result in the imposition on HT, HLP or any Subsidiary of breach of
fiduciary duty liability damages pursuant to Section 409 of ERISA, a civil
penalty pursuant to Section 502 of ERISA or a Tax imposed pursuant to Chapter 43
of Subtitle D of the Code.
15
(xv) To the Knowledge of HT, HLP, and each Subsidiary there
is no matter pending with respect to any HT Pension Plan or HT Employee Benefit
Plan before the Internal Revenue Service, the Department of Labor or the Pension
Benefit Guaranty Corporation.
(xvi) Each HT Employee Benefit Plan may be unilaterally
amended or terminated in its entirety by HT, HLP, or each Subsidiary, as the
case may be, without liability except as to benefits accrued thereunder prior to
amendment or termination.
(xvii) No Employee Benefit Plan provides retiree medical or
retiree life insurance benefits to any Person and neither HT, HLP nor any
Subsidiary is contractually or otherwise obligated (whether or not in writing)
to provide any Person with life insurance or medical benefits upon retirement or
termination of employment, other than as referenced by the provisions of Section
601 through 608 of ERISA and Section 4980B of the Code.
(xviii) In connection with the consummation of the
transaction contemplated by this Agreement, no payments have or will be made
which, in the aggregate, would result in the imposition of the sanctions imposed
under Sections 280G and 4999 of the Code.
(m) Labor and Employment Matters. Except as set forth on Schedule
-----------------------------
2.1(m) of the HT Disclosure Schedule or in the HT SEC Documents:
(i) Neither HT, HLP nor any Subsidiary is a party to any
collective bargaining agreement or other current labor agreement with any labor
union or organization, and there is no current union representation question
involving employees of HT, HLP or any Subsidiary, nor does HT, HLP or any
Subsidiary have any Knowledge of any activity or proceeding of any labor
organization (or representative thereof) or employee group (or representative
thereof) to organize any such employees.
(ii) There is no unfair labor practice charge or grievance
arising out of a collective bargaining agreement or other grievance procedure
pending, or, to the Knowledge of HT, HLP or any Subsidiary, threatened against
HT, HLP or any Subsidiary.
(iii) There is no complaint, lawsuit or proceeding in any
forum by or on behalf of any present or former employee, any applicant for
employment or any classes of the foregoing alleging breach of any express or
implied contract of employment, any law or regulation governing employment or
the termination thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship pending, or, to the Knowledge of HT,
HLP or any Subsidiary, threatened against HT, HLP or any Subsidiary.
(iv) There is no strike, slowdown, work stoppage or lockout
pending, or, to the Knowledge of HT, HLP or any Subsidiary, threatened, against
or involving HT, HLP or any Subsidiary.
(v) Each of HT, HLP and each Subsidiary has complied with all
legal obligations with respect to the employment authorization of its workforce,
including without limitation, the timely and accurate completion of the Form
I-9, Employment Eligibility Verification Form, for each of its United States
employees as well as the maintenance of
16
appropriate public access file documents for each employee classified as an H-1B
specialty occupation worker. Neither HT, HLP or any Subsidiary has any Knowledge
that any of its employees may not lawfully be employed by it.
(vi) HT, HLP and each Subsidiary is in material compliance
with all applicable laws respecting employment and employment practices, terms
and conditions of employment, wages, hours of work and occupational safety and
health.
(vii) There is no proceeding, claim, suit, action or
governmental investigation pending or, to the Knowledge of HT, HLP or any
Subsidiary, threatened, with respect to which any current or former trustee,
officer, employee or agent of HT, HLP or any Subsidiary is or may be entitled to
claim indemnification from HT, HLP or any Subsidiary pursuant to the HT
Declaration of Trust, HT's bylaws, HLP Partnership Agreement, or any provision
of a comparable charter or organizational document of any Subsidiary, or any
indemnification agreement to which HT, HLP or any Subsidiary is a party or under
applicable law.
(n) Intangible Property. HT, HLP and each Subsidiary owns or holds a
--------------------
license to all rights necessary to use all trademarks, service marks, trade
names, patents, copyrights, computer programs, source code, object code,
databases, industrial designs, processes, formulae, know-how, and trade secrets
necessary for the operation of the businesses of each of HT, HLP or any
Subsidiary (collectively, the "HT Intangible Property"), except where the
------------------------
failure to possess or have adequate rights to use such properties has not had,
and could not reasonably be expected to have, a Material Adverse Effect. All of
the HT Intangible Property is owned or licensed by HT, HLP or any Subsidiary
free and clear of any and all Encumbrances, except those that have not had, and
could not reasonably be expected to have, a Material Adverse Effect, and neither
HT, HLP nor any Subsidiary has forfeited or otherwise relinquished any HT
Intangible Property which forfeiture has resulted, or could reasonably be
expected to result, in a Material Adverse Effect. To the Knowledge of HT, HLP
or any Subsidiary, the use of HT Intangible Property by HT, HLP or any
Subsidiary does not conflict with, infringe upon, violate or interfere with or
constitute an appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right, copyright,
trademark, service xxxx, trade name, patent or any pending application for any
of the foregoing, any computer program, source code, object code, database,
industrial design, process, formula, know-how, or trade secret of any other
Person, and there have been no claims made, and neither HT, HLP nor any
Subsidiary has received any notice of any claim, and none of the HT Intangible
Property is invalid or unenforceable or conflicts with the asserted rights of
any other Person or has not been used or enforced or has failed to have been
used or enforced in a manner that would result in the abandonment, cancellation
or unenforceability of any of HT Intangible Property, except for any such
conflict, infringement, violation, interference, claim, invalidity, abandonment,
cancellation or unenforceability that has not had and could not reasonably be
expected to have a Material Adverse Effect.
(o) Environmental Matters. For purposes of this Agreement:
----------------------
"Environmental Laws" means all federal, state and local laws
-------------------
(including the common law), rules, regulations, ordinances, orders (whether
by consent or otherwise),
17
decrees, or other legal requirements, in effect at the time of the First
Closing, relating to or concerning human health, worker safety, or the
environment (including, without limitation, ambient indoor and outdoor air,
surface water, wetlands, groundwater, surface and subsurface soil, natural
resources, and wildlife). For example, "Environmental Laws" include all
------------------
laws, regulations, ordinances, orders, decrees or legal requirements
relating to the Release (as defined herein) or threatened Release of
Hazardous Materials (as defined herein), to the manufacture, procession,
distribution, use, treatment, storage, disposal, transport or handling of
solid waste, hazardous waste, pollutants, or Hazardous Materials, to the
use, maintenance and closure of underground or aboveground storage tanks,
to the use, maintenance and closure of septic or sewage treatment systems,
to the presence of any potentially harmful indoor air contaminants such as
radon, toxic mold, human pathogens, and other disease causing agents, and
any similar laws, rules, regulations, ordinances, orders and decrees
wherever the applicable party hereto owns or operates assets or conducts
business;
"Hazardous Materials" means (i) any petroleum or petroleum products,
--------------------
radioactive materials (including radon and other naturally occurring
radioactive substances), asbestos, urea formaldehyde foam insulation, lead
paint, polychlorinated biphenyls, and transformers, light ballasts, and/or
any other equipment that might contain polychlorinated biphenyls, (ii) any
chemicals, materials or substances which may be defined as or included in
the definition of "solid waste," "hazardous substances," "hazardous waste,"
"hazardous materials," "extremely hazardous substances," "restricted
hazardous wastes," "pollutants," "toxic substances" or "toxic pollutants"
under any Environmental Law and (iii) any other chemical, material,
substance or waste, human or environmental exposure to which is now
prohibited, limited or regulated under any Environmental Law in any
jurisdiction in which HT, HLP or each Subsidiary operates;
"Release" means any spill, effluent, emission, leaking, pumping,
-------
pouring, emptying, escaping, dumping, injection, deposit, disposal,
discharge, dispersal, leaching, exposure, or migration into the
environment, or into or out of any property owned, operated or leased by
HT, HLP and each Subsidiary; and
"Remedial Action" means any action to (i) clean up, remove, remediate,
---------------
encapsulate or treat Hazardous Material, toxic mold, human pathogens, and
other disease causing agents, (ii) prevent the Release or threatened
Release of any Hazardous Material; (iii) assess Environmental Law
compliance, remove or replace underground or aboveground storage tanks,
undertake assessments or pre-remedial studies and investigations and/or
post-remedial monitoring, or (iv) bring the applicable party into
compliance with an Environmental Law.
Except as disclosed on Schedule 2.1(o) of the HT Disclosure Schedule or the
HT SEC Documents:
(i) HT, HLP and each Subsidiary now comply, and shall until
the First Closing Date, the Second Closing Date and all Subsequent Closing
Dates, continue to comply, with all Environmental Laws;
18
(ii) HT, HLP and each Subsidiary has and, until the First
Closing Date, the Second Closing Date and all Subsequent Closing Dates, shall
maintain, all permits, licenses and registrations required by the Environmental
Laws, and has made and, as of each Closing Date, will have provided or made all
applicable training, filings, postings, reports or notices required thereby;
(iii) HT, HLP and each Subsidiary have not received any
communication, whether written or otherwise, from any person (A) regarding HT's,
HLP's, or any Subsidiary's alleged noncompliance with or liability under any
Environmental Law, (B) recommending or directing HT, HLP, or each Subsidiary to
undertake Remedial Action (as defined herein), (C) regarding any Release or
threatened Release of a Hazardous Material, or (D) regarding the presence of
toxic mold, human pathogens, or other disease causing agents on the HT Property
(as defined herein);
(iv) HT, HLP and each Subsidiary (A) do not have any
outstanding contracts with any other Person respecting compliance with the
Environmental Laws, Remedial Action, a Release or threatened Release of a
Hazardous Material or for the assessment or removal and remediation of toxic
mold, human pathogens, and other disease causing agents, and (B) have not
assumed responsibility for the environmental liabilities of any another Person;
(v) To their Knowledge, HT, HLP and each Subsidiary do not
have any contingent liability in connection with alleged violations of worker
safety laws, the Release of Hazardous Material (whether on-site or off-site) or
employee or third party exposure to Hazardous Materials, toxic mold, human
pathogens, or other disease causing agents;
(vi) HT's, HLP's and each Subsidiary's operations involving
the generation, transportation, treatment, storage or disposal of hazardous or
solid waste, as defined and regulated under 40 C.F.R. Parts 260-270 (in effect
as of the date hereof) or any applicable state equivalent, comply with all
applicable Environmental Laws in all material respects;
(vii) To the Knowledge of HT, HLP, and each Subsidiary, the
HT Property (as defined herein), as well as all property formerly owned or
operated by HT, HLP or each Subsidiary, do not contain underground storage
tanks, surface impoundments, or aboveground storage tanks, or Hazardous
Materials;
(viii) To the Knowledge of HT, HLP, and each Subsidiary, no
HT Property (A) is included or proposed for inclusion on the National Priorities
List of the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA"), by the United States Environmental Protection
------
Agency (the "EPA"), (B) appears on the Comprehensive Environmental Response,
---
Compensation, and Liability Information System database maintained by the EPA,
(C) has otherwise been identified in a published writing by the EPA as a
potential CERCLA removal, remedial or response site, or (D) is proposed for
inclusion on any similar list of potentially contaminated sites pursuant to any
other Environmental Law;
(ix) To the Knowledge of HT, HLP and each Subsidiary, the HT
Properties do not contain toxic mold that might pose a risk to human health; and
19
(x) HT, HLP, and each Subsidiary has provided CHP with true
and complete copies of final reports, letters, claims, demands, assessments, and
documents in their possession or control that refer or relate to the
Environmental Laws, Remedial Action, or any other matter material to the
environmental condition of any HT Property.
(p) Properties.
----------
(i) Good and Marketable Title. Each of HT, HLP and each
----------------------------
Subsidiary owns good and marketable: (A) fee simple title to each of the real
properties identified on Schedule 2.1(p) of the HT Disclosure Schedule as a
(collectively, the "HT Fee Properties" and each an "HT Fee Property"); and (B)
----------------- ---------------
ground leasehold interest to each of the real properties identified on Schedule
2.1(p) of the HT Disclosure Schedule as a "Leasehold Property" (collectively,
------------------
the "HT Leasehold Properties" and each a "HT Leasehold Property"). The HT Fee
------------------------ ---------------------
Properties and the HT Leasehold Properties are hereinafter referred to
collectively as the "HT Properties", and each individually as an "HT Property".
------------- -----------
The HT Properties are all of the real estate properties owned in fee simple or
ground leased by HT, HLP and each Subsidiary, in each case (except as provided
below) free and clear of all Encumbrances.
(ii) Ground Leases. True, correct and complete copies of all
-------------
ground leases for all HT Leasehold Properties (collectively, the "Ground
------
Leases", and each a "Ground Lease") (including all modifications or amendments)
------ ------------
have been delivered to CHP. Except as set forth on Schedule 2.1(p) of the HT
Disclosure Schedule or in the HT SEC Documents, as of the date hereof, (i) HT,
HLP or such Subsidiary holding the lessee's interest under any Ground Lease
(collectively, the "Ground Lessees", and each a "Ground Lessee") have not
--------------- -------------
pledged, encumbered or otherwise hypothecated (except for secured financings
identified on Schedule 2.1(p) of the HT Disclosure Schedule) any of its interest
therein, and, each Ground Lessee is the sole owner of the lessee's interest in
and to its respective Ground Leases (ii) the Ground Leases have not been
assigned or sublet (except pursuant to the Leases) by Ground Lessees in any
respect, (iii) to the Knowledge of HT, HLP or any Subsidiary, Ground Lessees
have performed all obligations in all material respects on the part of the
lessee to be performed under the Ground Leases, (iv) there are no agreements
made by Ground Lessees with any ground lessors under the Ground Leases for the
performance of any work or other obligations which have not been performed,
except as set forth in the Ground Leases, (v) no notice of default has been
given or received by Ground Lessees under any Ground Leases, and to the
Knowledge of HT, HLP or any Subsidiary, neither the lessor nor any Ground Lessee
is in default in any material respect under any Ground Lease, and no claim,
judicial suit or proceeding or other adversarial action has been instituted or
threatened by any Ground Lessee against any ground lessor, or by any ground
lessor against any Ground Lessee; and (vi) Ground Lessees, as ground lessee,
under the Ground Leases have not paid rent for more than six months in advance
with respect to any of the Ground Leases.
(iii) Encumbrances and Property Restrictions. The HT
-----------------------------------------
Properties are not subject to any rights of way, written agreements, easements,
conditions, covenants, restrictions, laws, ordinances and regulations affecting
building, land or air right use, occupancy, or development (collectively,
"Property Restrictions"), except for: (A) Property Restrictions imposed or
----------------------
promulgated by law or any Governmental Entity with respect to real property,
including zoning regulations, provided that they do not materially and/or
adversely affect the current or intended use or operation of, or impede access
to, any HT Property, (B) Encumbrances
20
and Property Restrictions disclosed on existing title reports or existing
surveys (in either case, true, complete and correct copies of which title
reports or surveys have been made available to CHP), and (C) mechanics',
carriers', workers', repairmen's or materialmen's liens or other Encumbrances,
Property Restrictions or other limitations of any kind, if any, which,
individually or in the aggregate, do not materially detract from the value of or
materially interfere with the present use or operation of, or access to, any of
HT Property subject thereto or affected thereby, and does not have a Material
Adverse Effect. Neither HT, HLP nor any Subsidiary has received notice of any
default or breach by HT, HLP or any Subsidiary under any of the Encumbrances or
Property Restrictions affecting the HT Properties.
(iv) Title Insurance. Except as set forth on Schedule 2.1(p)
---------------
of the HT Disclosure Schedule, at the time of acquisition of each HT Property,
valid policies of title insurance were obtained, insuring HT, HLP or the
applicable Subsidiary's fee simple title or ground leasehold interest, as the
case may be, in and to each HT Property in amounts at least equal to the value
of such HT Property at the time of acquisition and the issuance of such title
policy, subject only to the matters disclosed above and on Schedule 2.1(p) of
the HT Disclosure Schedule, and such policies are in full force and effect and
no material claim has been made, filed or otherwise threatened (orally or in
writing) against any such title policy. Except as set forth on Schedule 2.1(p)
to the HT Disclosure Schedule, to the Knowledge of HT, HLP or any Subsidiary, an
on-the-ground survey of each HT Property made prior to the First Closing Date
and prepared in accordance with ALTA/ACSM standards would not disclose any
Encumbrance, Property Restriction or other matter affecting title which is not
currently shown on an existing survey of such HT Property and which does or
could materially and/or adversely affect the value or operation of such HT
Property or the ability to obtain mortgage financing on such HT Property.
(v) Compliance, Flood Zone and Access. Each HT Property:
-------------------------------------
(A) complies with the Property Restrictions, except where the failure to so
comply does not have a Material Adverse Effect, (B) and each improvement on each
HT Property lies outside of any flood plain or, if any such improvement lies
within a flood plain, adequate flood insurance therefor is in full force and
effect, and (C) each HT Property has access to and from a dedicated public
right-of-way either directly or through an insured easement, true, complete and
correct copies of which have been made available to CHP.
(vi) Development and Construction. All HT Properties
------------------------------
currently under development or construction by HT, HLP or any Subsidiary and all
HT Properties currently proposed for acquisition, development or commencement of
construction prior to the First Closing Date by HT, HLP or any Subsidiary are
listed as such on Schedule 2.1(p) to the HT Disclosure Schedule. All material
executory agreements (which shall include, without limitation, all executory
agreements involving aggregate payments for goods or services in excess of
$250,000) entered into by HT, HLP or any Subsidiary relating to the development
or construction of hotels or other real estate properties are listed on Schedule
2.1(t) of the HT Disclosure Schedule. True, complete and correct copies of such
agreements have previously been delivered or made available to CHP.
(vii) Space Leases. Schedule 2.1(p) of the HT Disclosure
-------------
Schedule sets forth a true, correct and complete list of all space leases where
HT, HLP or any Subsidiary is the
21
landlord (including all modifications or amendments thereto) in effect as of the
date hereof ("Space Leases" or individually a "Space Lease"), together with the
------------ -----------
most recent rent roll for each HT Property, showing, inter alia, a full,
complete and accurate list of tenants, current rents, security deposits, prepaid
rents and rent delinquencies, unperformed or outstanding tenant improvement
costs and unpaid leasing commissions. To the Knowledge of HT, HLP and each
Subsidiary, true, correct and complete copies of all Space Leases (including all
modifications or amendments) have been delivered to CHP. Except as set forth on
Schedule 2.1(p) of the HT Disclosure Schedule, (i) HT, HLP or a Subsidiary is
the sole owner of the lessor's interest in all Space Leases and HT, HLP or such
Subsidiary, as the case may be, has not pledged, assigned or hypothecated
(except for secured financings identified on Schedule 2.1(p) of the HT
Disclosure Schedule) any of its interest in any of the Space Leases, (ii) no
Space Lease has been modified, or to the Knowledge of HT, HLP and each
Subsidiary, assigned or sublet by the tenant thereunder, in any respect except
as shown on Schedule 2.1(p) of the HT Disclosure Schedule, (iii) to the
Knowledge of HT, HLP and each Subsidiary, HT, HLP or such Subsidiary, as the
case may be, has fully performed all obligations on the part of the landlord
(including tenant work or payments on account thereof) to be performed under
each Space Lease, and there are no agreements with any tenant for the
performance of any work or otherwise with respect to any matter except as set
forth in the Space Leases, all of which has been fully performed and paid for by
HT, HLP or such Subsidiary; (iv) no tenant has any right of first offer or
refusal with respect to, or other option to purchase, any HT Property or any
interest therein, or, except as set forth in the Space Leases, to lease
additional space in any HT Property, to extend the term of such tenant's Space
Lease, to put back to the landlord any space currently subject to such tenant's
Space Lease, or to terminate such tenant's Space Lease; (v) no notice of default
has been given or received by HT, HLP or any Subsidiary with respect to any
Space Lease, and, to the Knowledge of HT, HLP or any Subsidiary, no tenant
otherwise is in monetary or material default under its Space Lease, or with the
giving of notice, the lapse of time or the happening of any further event or
condition, would become in default under such Space Lease; (vi) no tenant has
asserted any claim against the landlord under its Space Lease or instituted, or
to the Knowledge of HT, HLP or any Subsidiary threatened, any judicial suit or
proceeding or other adversarial action, (vii) to the Knowledge of HT, HLP or any
Subsidiary, no tenant is the subject of voluntary or involuntary bankruptcy or
other insolvency proceedings, (viii) to the Knowledge of HT, HLP or any
Subsidiary, there are no pending disputes with any tenant under any Space
Leases, and (ix) no tenant has paid rent for more than one month in advance.
(viii) Personal Property. Other than as set forth on
------------------
Schedule 2.1(p) of the HT Disclosure Schedule, all personal property owned by
HT, HLP and each Subsidiary is owned free and clear of all liens, encumbrances,
claims, chattel mortgages, conditional bills of sale, security interests and
demands, other than statutory liens for taxes not yet due.
(q) Insurance. Schedule 2.1(q) of the HT Disclosure Schedule sets
---------
forth an insurance schedule of each of HT's, HLP's and each Subsidiary's
directors' and officers' liability insurance, property and casualty insurance,
errors and omissions insurance, title insurance, umbrella policies and any other
form of insurance maintained by HT, HLP, and each Subsidiary. HT, HLP and each
Subsidiary maintains insurance with financially responsible insurers in such
amounts and covering such risks as are in accordance with normal industry
practice for companies engaged in businesses similar to those of HT, HLP and
each Subsidiary. Except as set forth on Schedule 2.1(q) of the HT Disclosure
Schedule, neither HT, HLP nor any
22
Subsidiary has received any notice of cancellation or termination with respect
to any existing material insurance policy of HT, HLP or any Subsidiary.
(r) Brokers. Except as set forth on Schedule 2.1(r) of the HT
-------
Disclosure Schedule, no agent, broker, investment banker or other person is or
will be entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement and the
Transaction Documents based upon arrangements made by or on behalf of HT, HLP or
any Subsidiary.
(s) Investment Company Act of 1940. Neither HT, HLP nor any
------------------------------
Subsidiary is, or at the time of each Closing, will be, required to be
registered as an investment company under the Investment Company Act of 1940, as
amended.
(t) Contracts.
---------
(i) Except as disclosed in the HT SEC Documents or on
Schedule 2.1(t) to the HT Disclosure Schedule, there is no contract or agreement
that purports to limit in any material respect the freedom of HT, HLP or any
Subsidiary to engage in any line of business or to compete with any Person or
purports to limit the names or the geographic location in which HT, HLP or any
Subsidiary may conduct its business.
(ii) Except as set forth on Schedule 2.1(t) of the HT
Disclosure Schedule or the HT SEC Documents, neither HT, HLP nor any Subsidiary
is party to any agreement which would restrict any of them from prepaying any of
their indebtedness without penalty or premium at any time or which requires any
of them to maintain any amount of indebtedness with respect to any HT
Properties.
(iii) Except as disclosed on Schedule 2.1(t) of the HT
Disclosure Schedule or the HT SEC Documents, neither HT, HLP nor any Subsidiary
is a party to any agreement relating to the management of any of the HT
Properties which is not terminable by HT, HLP or such Subsidiary, as the case
may be, without penalty on less than 30 days notice.
(iv) Schedule 2.1(t) of the HT Disclosure Schedule lists all
agreements entered into by HT, HLP or any Subsidiary providing for the
development or construction of hotels or other real estate properties or for the
sale of, or option to sell, any HT Properties or the purchase of, or option to
purchase, any real estate.
(v) Except as set forth on Schedule 2.1(t) of the HT
Disclosure Schedule, neither HT, HLP nor any Subsidiary has any continuing
contractual liability (A) for indemnification or otherwise under any agreement
relating to the sale of real estate previously owned (other than non-material
indemnification obligations relating to brokerage commissions, ordinary and
customary title warranties, post-closing adjustments and customary contractual
indemnification for pre-closing events upon sales of properties by HT, HLP or
any Subsidiary), (B) to pay any additional purchase price for any of HT
Properties, or (C) to make any prorations or adjustments to prorations (other
than real estate Taxes) that may previously have been made with respect to any
property currently or formerly owned by HT, HLP or any Subsidiary.
23
(vi) Schedule 2.1(t) of the HT Disclosure Schedule sets forth
each franchise license agreement relating to the HT Properties ("HT Franchise
------------
Agreements").
----------
(vii) Except as set forth on Schedule 2.1(t) of the HT
Disclosure Schedule or in the HT SEC Documents, there are no material
outstanding contractual obligations of HT, HLP or any Subsidiary to provide any
funds to, or make any investment (in the form of an advance, loan, extension of
credit, capital contribution or otherwise) in any Person or which provide for
the direct or indirect guarantee by HT, HLP or any Subsidiary (including by
means of a take-or-pay or keepwell agreement) of the indebtedness, liabilities,
obligations or financial condition of HT, HLP or any Subsidiary or any other
Person.
(viii) Except as set forth on Schedule 2.1(t) of the HT
Disclosure Schedule or in the HT SEC Documents, there are no indemnification
agreements or guarantee agreements entered into by and between HT, HLP or any
Subsidiary and any trustee, director, officer or limited partner.
(ix) Except as set forth on Schedule 2.1(t) of the HT
Disclosure Schedule, there are no contracts, agreements, commitments or
arrangements that grant registration rights other than the Registration Rights
Agreement and the HLP Partnership Agreement.
(x) Except as set forth on Schedule 2.1(t) of the HT
Disclosure Schedule, there are no contracts, agreements, commitments or
arrangements that grant any preemptive rights to any holder of equity securities
of HT, HLP or any Subsidiary or any other shareholder's agreements regarding HT,
HLP or any Subsidiary's equity securities.
(xi) Except as set forth on Schedule 2.1(t) of the HT
Disclosure Schedule or in the HT SEC Documents, there are no contracts,
agreements, commitments or arrangements between HT, HLP or any Subsidiary or
Hersha Hospitality Management, L.P., a Pennsylvania limited partnership, on the
one hand and any Affiliate, on the other hand. All such transactions required
to be disclosed on Schedule 2.1(t) of the HT Disclosure Schedule have been duly
authorized, approved and ratified by HT in accordance with all applicable
provisions of Maryland law, including but not limited to Section 2-419 of the
Corporations and Associations Article of the Maryland Code.
(xii) Except as set forth on Schedule 2.1(t) of the HT
Disclosure Schedule, there are no material contracts or other agreements
relating to the acquisition by HT, HLP or any Subsidiary of any operating
business or the capital stock or assets of any Person.
(xiii) Except as set forth on Schedule 2.1(t) of the HT
Disclosure Schedule or in the HT SEC Documents, there are no material
agreements, contracts or commitments relating to the employment of any person by
HT, HLP or any Subsidiary, or any bonus, deferred compensation, pension, profit
sharing, stock option, employee stock purchase, retirement or other employee
benefit plan.
(xiv) Except as set forth on Schedule 2.1(t) of the HT
Disclosure Schedule or in the HT SEC Documents, there are no material
agreements, indentures or other
24
instruments which contain restrictions with respect to payment of dividends or
any other distribution of the equity securities of HT, HLP or any Subsidiary.
(xv) Except as set forth on Schedule 2.1(t) of the HT
Disclosure Schedule or in the HT SEC Documents, there are no material
agreements, contracts or commitments relating to capital expenditures not yet
made by HT, HLP or any Subsidiary.
(xvi) Except as set forth on Schedule 2.1(t) of the HT
Disclosure Schedule or in the HT SEC Documents, there are no contracts,
agreements, commitments or arrangements that (A) create a material partnership,
joint venture or similar arrangement, (B) require payments to be made in excess
of $250,000 per year for goods and services by HT, HLP or any Subsidiary, (C)
grant any Encumbrance upon any asset of HT, HLP or any Subsidiary or (D) were
not made in the ordinary course of business and are material to HT, HLP or any
Subsidiary, in each of the cases set forth in clauses (A), (B), (C) and (D)
which are not subject to termination within 30 days after the date of the
execution and delivery thereof without penalty or payment by HT, HLP or any
Subsidiary (all such contracts, arrangements or agreements listed on Schedule
2.1(t) of the HT Disclosure Schedule pursuant to clauses (i) through (xvi), the
"Material Contracts").
-------------------
(u) Information Systems. Schedule 2.1(u) of the HT Disclosure
-------------------
Schedule identifies information systems of HT, HLP and each Subsidiary that are
material to the operations of HT, HLP or any Subsidiary (the "Information
-----------
Systems") and identifies any Information Systems that to the Knowledge of HT,
-------
HLP or any Subsidiary do not accurately process data.
(v) Projections. All financial projections concerning HT,
-----------
HLP and each Subsidiary and the transactions contemplated by this Agreement and
the Transaction Documents (the "Projections") that have been prepared by or on
-----------
behalf of HT, HLP or any Subsidiary (other than the limited partnership formed
pursuant to the Joint Venture Agreement and its Subsidiaries) and that have been
or will be made available to CHP or any of its authorized representatives in
connection with the transactions contemplated hereby and thereby have been, and
at the time made available will be, reasonably prepared on a basis reflecting
(i) best estimates, (ii) assumptions and (iii) judgments as to the future
financial performance of HT, HLP or any Subsidiary.
(w) Offering of the Securities. None of HT, HLP or any
--------------------------
Subsidiary, nor any Person authorized or employed by any of them as agent,
broker, dealer or otherwise in connection with the offering or sale of the
Preferred Units or any security of any of them similar to the Preferred Units
has offered the Preferred Units or any such similar security for sale to, or
solicited any offer to buy the Preferred Units or any such similar security
from, or otherwise approached or negotiated with respect thereto with, any
Person or Persons except in compliance with the Securities Act. None of HT, HLP
or any Subsidiary, nor any Person acting on its behalf has taken or will take
any action (including, without limitation, any offer, issuance or sale of any
security of HT, HLP or any Subsidiary under circumstances that might require the
integration of such security with the Preferred Units under the Securities Act
or the rules and regulations thereunder), in either case so as to subject the
offering, issuance or sale of Preferred Units to the registration provisions of
the Securities Act.
25
(x) Xxxx-Xxxxx-Xxxxxx Act. HLP represents that its assets
----------------------
consist of hotels or motels and improvements and assets incidental to their
ownership and operation, that it does not own any gambling casino or ski
facility, that it does not own 50% or more of the stock, partnership interest,
or other interest in any property management company, and that it does not hold
assets valued in excess of $50 million that are not hotels, motels, or
improvements and assets incidental to their ownership and operation.
2.2 Representations and Warranties of CHP. CHP represents and warrants
-------------------------------------
to HT and HLP as of the date hereof, the First Closing Date, the Second Closing
Date and each Subsequent Closing Date as follows:
(a) Organization, Standing and Power. CHP is a limited
-----------------------------------
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware.
(b) Authority; No Violations, Consents and Approvals.
-----------------------------------------------------
(i) CHP has all requisite power and authority to enter into
this Agreement and the Transaction Documents to which it is a party, and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Transaction Documents to which CHP is a party
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action on the part of its general partner.
This Agreement and the Transaction Documents to which CHP is a party have been
duly executed and delivered by CHP, and assuming this Agreement and the
Transaction Documents to which any of HT, HLP or any Subsidiary is a party
constitute the valid and binding obligation of HT, HLP or any Subsidiary, as the
case may be, constitute a valid and binding obligation of CHP enforceable in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding at
law/or in equity ).
(ii) The execution and delivery of this Agreement and the
Transaction Documents to which CHP is a party do not, and the consummation of
the transactions contemplated hereby and thereby, and compliance with the
provisions hereof and thereof, will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under any provision of (A) CHP's Certificate of Limited Partnership or that
certain Agreement of Limited Partnership by and between CHP and its partners,
dated June 15, 1998, or (B) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in Section 2.2(b)(iii) are duly
and timely obtained or made, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to CHP or any of its respective
properties or assets, other than, in the case of clause (B), any such conflicts,
violations or defaults, that, individually or in the aggregate, would not, or
could not reasonably be expected to, impair the ability of CHP to perform its
obligations hereunder or thereunder or prevent the consummation of any of the
transactions contemplated hereby or thereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any Governmental Entity
is required by or with respect to CHP in connection with the execution and
delivery by CHP of this Agreement and any
26
Transaction Document to which it is a party or the consummation by CHP of the
transactions contemplated hereby or thereby, except for: (A) the filing with the
SEC of such reports under Section 13(a) or Section 16 of the Exchange Act and
such other compliance with the Securities Act and the Exchange Act and the rules
and regulations thereunder as may be required in connection with this Agreement
and the transactions contemplated hereby; (B) any filings required under state
securities laws; (C) such filings and approvals as may be required by any
applicable state takeover laws or environmental laws; and (D) filings under the
HSR Act, if applicable.
(c) Litigation. As of the date hereof, there is no suit, action
----------
or proceeding pending, or, to the Knowledge of CHP, threatened against CHP that
could reasonably be expected to affect the ability of CHP to consummate the
transactions contemplated hereby ("CHP Litigation"), and CHP has no Knowledge of
--------------
any facts that are likely to give rise to any CHP Litigation, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against CHP that could reasonably be expected to affect
the ability of CHP to consummate the transactions contemplated hereby ("CHP
---
Order").
-----
(d) Acquisition of Preferred Units. CHP is acquiring the
---------------------------------
Preferred Units for its own account and without a view to the distribution
thereof within the meaning of the Securities Act or with any present intention
of distributing or selling any of the Preferred Units except in compliance with
the Securities Act, provided that the disposition by CHP of its property shall
at all times be within its control.
(e) No Registration. CHP understands that each of the Preferred
----------------
Units, the Series A Preferred Shares into which the Preferred Units are
exchangeable and the Class A Shares into which the Preferred Units and the
Series A Preferred Shares are exchangeable or convertible into, as the case may
be, (A) have not been registered under the Securities Act or any state
securities laws or the securities laws of any other domestic or foreign
jurisdiction, (B) will be issued in reliance upon an exemption from the
registration and prospectus delivery requirements of the Securities Act pursuant
to Section 4(2) thereof and/or Regulation D promulgated thereunder and (C) will
be issued in reliance upon exemptions from the registration and prospectus
delivery requirements of state securities laws which relate to private
offerings.
(f) Status as Accredited Investor. CHP is an "Accredited
--------------------------------
Investor" within the meaning of Rule 501 of Regulation D, as promulgated by the
SEC pursuant to the Securities Act.
(g) Brokers. No agent, broker, investment banker or other Person
-------
is or will be entitled to any broker's, finder's or other similar fee or
commission in connection with this Agreement or any of the transactions
contemplated by the Transaction Documents based upon arrangements made by or on
behalf of CHP.
(h) Funding. CHP has cash on hand or committed financing sources
-------
adequate to fund the purchase price of all of the Preferred Units.
27
ARTICLE 3
COVENANTS OF HT AND HLP
-----------------------
3.1 Covenants Relating to the Business of HT and HLP. Except as
-------------------------------------------------------
otherwise contemplated by this Agreement or to the extent that CHP shall
otherwise consent in writing, from the date hereof until the First Closing Date,
HT and HLP covenant and agree with CHP that, as to themselves and any
Subsidiary, neither HT, HLP nor any Subsidiary shall:
(a) fail to conduct its or their business(es) in any manner except
in the ordinary course consistent with past practice;
(b) amend, terminate, or fail to use all of its or their
commercially reasonable efforts to renew any agreement or contract (provided
however that neither HT, HLP nor any Subsidiary shall be required to renew any
agreement or contract on terms that are materially less favorable to any of
them), or default in any respect (or take or omit to take any action that, with
or without giving of notice or the passage of time, would constitute a material
default) under any agreement or contract or enter into any agreement or contract
under which any party thereto becomes obligated to provide goods or services
having a value of, or to make payments aggregating, $250,000 or more per year;
(c) fail to maintain all applicable HT Permits and authorities to
do business;
(d) fail to use its and their commercially reasonable efforts to
preserve intact its and their business organizations and relationships with
third parties;
(e) other than a merger of a wholly-owned Subsidiary with or into
HT or HLP or other Subsidiaries, merge or consolidate with or into any other
Person, or otherwise dissolve, or liquidate;
(f) (i) hire or promote any individual to serve as an officer of
HT, HLP or any Subsidiary or hire any employee or consultant if the aggregate
annual compensation of such officer, employee or consultant exceeds $75,000;
(ii) grant any increase in the compensation of, or pay any bonus (other than
regularly scheduled bonuses as previously disclosed in the HT SEC Documents) or
noncompetition payments to, any of its directors, trustees, officers or
employees; (iii) pay or agree to pay to any director, trustee, officer or
employee, whether past or present, any pension, retirement or other employee
benefit; (iv) enter into any new, or amend any existing, employment or severance
or termination agreement with any director, officer or employee, either
individually or as part of a class of similarly situated Persons; or (v)
establish, adopt or enter into any new, or amend any existing, (A) "employee
benefit plan," as such term is defined in section 3(3) of ERISA (including, but
not limited to, employee benefit plans, such as foreign plans, which are not
subject to the provisions of ERISA), (B) personnel policy, stock option plan,
stock purchase plan, stock appreciation rights, phantom stock plan, collective
bargaining agreement, bonus plan or arrangement, incentive award plan or
arrangement, vacation policy, severance pay plan, policy or agreement, deferred
compensation agreement or arrangement, executive compensation or supplemental
income arrangement, consulting agreement, employment
28
agreement or other employee benefit plan, agreement, arrangement, program,
practice or understanding or (C) collective bargaining agreement;
(g) acquire (including, without limitation, by merger,
consolidation, or the acquisition of any equity interest or assets) any assets
having a fair market value, individually or in the aggregate, in excess of
$250,000;
(h) sell (whether by merger, consolidation or sale of any equity
interests or assets, except for transactions permitted under Section 3.1(e)) or
otherwise dispose of any real HT Property;
(i) except as set forth on Schedule 2.1(t) of the HT
Disclosure Schedule, mortgage, pledge, or subject to any material Encumbrance,
any assets of HT, HLP or any Subsidiary having a fair market value, individually
or in the aggregate, in excess of $250,000;
(j) fail to pay or otherwise satisfy (except if being contested
in good faith) any material accounts payable, liabilities, or obligations when
due and payable other than on a basis, and within the time, consistent with past
practice;
(k) (i) authorize, declare, pay or set aside for payment any
dividends on or make other distributions in respect of, any of its equity
interests, capital stock or partnership interests or other securities of HT, HLP
or any Subsidiary thereof, (ii) split, combine, divide, distribute, or
reclassify any of its equity securities, or (iii) directly or indirectly,
redeem, purchase, or otherwise acquire any of its equity securities, except in
the case of clause (i) above, customary (no more than $0.18 per share or such
other amount as may be necessary to allow HT to maintain its status as a REIT)
quarterly cash dividends declared and paid in respect of HT Common Stock so long
as HT is not in default of its obligations to pay quarterly dividends on the
Series A Preferred Shares or quarterly distributions on the Preferred Units;
(l) sell, issue, pledge, dispose of, encumber, or deliver
(whether through the issuance or granting of any options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any equity or other ownership
interests or income/loss participations or shares of any class or series of
stock of HT, HLP or any Subsidiary or any securities convertible into or
exercisable or exchangeable for any of the above (other than the issuance of
certificates in replacement of lost certificates), any Voting Debt or other
voting securities or any securities convertible into, or any rights, warrants or
options to acquire, any equity or other ownership interests or income/loss
participations or shares of Voting Debt or other voting securities or
convertible securities, other than the issuance of (i) HT Common Stock upon the
exercise of stock options that were outstanding on the date hereof; (ii) HT
Common Stock upon the conversion of HT Common Stock Equivalents that were
outstanding on the date hereof; or (iii) HT Common Stock upon the conversion of
HLP Ordinary Units that were outstanding on the date hereof;
(m) change or amend the HT Declaration of Trust, HT's bylaws,
the HLP Certificate of Limited Partnership, the HLP Partnership Agreement or any
other organizational document of HT, HLP, or any Subsidiary;
29
(n) (i) incur any indebtedness for borrowed money (except
(A) to finance any transactions or other expenditures permitted by this
Agreement (including those referred to in Section 3.1(g)) and regular borrowings
under credit facilities made in the ordinary course of HT's cash management
practices, and (B) refinancings of existing debt or guarantees of any such
indebtedness, or issue or sell any debt securities or warrants or rights to
acquire any debt securities of HT, HLP or any Subsidiary or guarantee any debt
securities of others, (ii) create any mortgages, liens, security interests or
similar other Encumbrances on the property of HT, HLP or any Subsidiary in
connection with any indebtedness thereof; (iii) assume, guarantee, endorse, or
otherwise become liable or responsible (whether directly, contingently, or
otherwise) for the obligations of any other Person; or (iv) make any loans,
advances, or capital contributions to, or investments in, any Person;
(o) (i) make or rescind any material express or deemed
election relating to Taxes (except as required by law or necessary to preserve
HT's status as a REIT or the status of any of HLP or any Subsidiary as a
partnership or a disregarded entity for Federal income Tax purposes or as a
qualified REIT subsidiary under Section 856(i) of the Code or as a taxable REIT
subsidiary under Section 856(l) of the Code) unless it is reasonably expected
that such action will not materially and adversely affect HT, HLP or any
Subsidiary, including elections for any and all joint ventures, partnerships,
limited liability companies or other investments where HT has the capacity to
make such binding election, (ii) settle or compromise any material claim,
action, suit, litigation, proceeding, arbitration, investigation, audit or
controversy relating to Taxes, except where such settlement or compromise will
not materially and adversely affect HT, HLP or any Subsidiary and except any
settlement or compromise relating to contests or protests relating to property
Tax valuations undertaken by HT, HLP or any Subsidiary in the ordinary course of
business, or (iii) change in any material respect any of its methods of
reporting income or deductions for Federal income Tax purposes from those
employed in the preparation of its Federal income Tax returns that have been
filed for prior taxable years, except as may be required by applicable law or
except for changes that will not materially and adversely affect HT, HLP or any
Subsidiary;
(p) engage in any transactions with any of its Affiliates other
than transactions approved by CHP in writing or expressly contemplated hereby or
by the Transaction Documents;
(q) terminate the services of its or their current officers and
employees or terminate or in any way materially damage or impair its
relationship with its or their customers, suppliers and others having business
dealings with it;
(r) authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of HT, HLP or any
Subsidiary, provided that dispositions in accordance with Section 3.1(h) hereof
shall not be deemed a partial liquidation;
(s) make any changes in its or their accounting methods which
would be required to be disclosed under GAAP or the rules and regulations of the
SEC, except as required by law, rule, regulation or GAAP;
(t) materially amend or terminate, or waive compliance with the
terms of or breaches under, any Material Contract, or enter into a new contract,
agreement or arrangement
30
not listed on Schedule 2.1(t) of the HT Disclosure Schedule that, if entered
into prior to the date hereof, would have been required to be listed on such
schedule;
(u) take any action to increase the size of HT's Board of
Trustees, remove any trustee or, except as expressly contemplated hereby, fill
any vacancies created by the death, resignation or removal of any Trustee;
(v) take any action, the result of which is the withdrawal,
resignation or removal of HT as the general partner of HLP; or
(w) agree, or make any commitment, orally or in writing, to take
any action prohibited by this Agreement or which it is reasonably foreseeable
could cause a breach of any of the representations or warranties or conditions
or covenants contained herein.
3.2 Access and Information.
------------------------
(a) Until the First Closing, HT shall, upon reasonable notice and
in such manner as shall not unreasonably interfere with the conduct of the
business of HT and HLP, afford CHP and its representatives (including CHP's
accountants, business advisors and legal counsel) full access during normal
business hours, to all properties, books, records, Phase I, Phase II and other
environmental reports and Tax returns of HT, HLP and each Subsidiary and all
other information with respect to its and their business(es), together with the
opportunity to make copies of such books, records, Phase I, Phase II and other
environmental reports and other documents and to discuss the business(es) of HT,
HLP and each of their Subsidiaries with such officers, trustees, and employees
of, and accountants and counsel for, HT, HLP and any Subsidiary as CHP deems
reasonably necessary or appropriate for the purposes of familiarizing itself
with HT, HLP and each Subsidiary. In furtherance of the foregoing, HT shall
authorize and instruct its accountants to meet with CHP and its representatives,
including CHP's independent public accountants, to discuss the business and
accounts of HT, HLP and each Subsidiary and to make available to (with the
opportunity to make copies by) CHP and its representatives, including its
independent public accountants, all the work papers of its accountants related
to their audit and review of the financial statements and Tax returns of HT, HLP
and each Subsidiary.
(b) Until such time as CHP ceases to hold Class A Common Shares,
Preferred Units and/or Series A Preferred Shares or any other class or series of
shares of HT, HLP or Subsidiary equity, which on an as converted/exchanged
basis, represents less than 5% of the HT Common Shares then issued and
outstanding, on a fully diluted basis (which shall assume the conversion and/or
exchange of all HT and HLP securities convertible into or exchangeable for HT
Common Shares), within 30 days after the end of each calendar month, HT shall
deliver to CHP the monthly operating statements for HT, HLP and each Subsidiary
(in a form reasonably acceptable to CHP) prepared in accordance with GAAP
consistent with past practices.
3.3 Notification of Certain Matters. HT shall give prompt written
----------------------------------
notice to CHP of (a) the occurrence or failure to occur, of any event of which
it, HLP or any Subsidiary has Knowledge that has caused or that would likely
cause any representation or warranty of HT, HLP or any Subsidiary contained in
this Agreement or any Transaction Document to be untrue
31
or inaccurate in any material respect at any time after the date hereof or (b)
the failure of HT, HLP, or any Subsidiary or any officer, director, employee or
agent of HT, HLP, or any Subsidiary to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it hereunder or under any Transaction Document. No such notification shall
affect the representations or warranties of the parties or the conditions to
their respective obligations hereunder. This covenant shall terminate at such
time as each representation and warranty of HT, HLP and each Subsidiary set
forth in Section 2.1 terminates pursuant to Section 9.1 hereof.
3.4 Third Party Consents. After the date hereof and prior to the First
--------------------
Closing, HT, HLP and each Subsidiary shall use all commercially reasonable
efforts, including making any commercially reasonable required payments, to
obtain the written consent, waiver or approval required (i) with respect to any
of the items required by the items set forth on Schedule 2.1(c) of the HT
Disclosure Schedule and (ii) from any other party to any contract or agreement
that is required to permit the consummation of the transactions contemplated
hereby or under any Transaction Document.
3.5 Appointment of Observer to the HT Board of Trustees. Effective
-------------------------------------------------------
simultaneously with the First Closing, HT shall have irrevocably appointed or
shall have caused the irrevocable appointment of at least one individual
designated by CHP as an observer to HT's Board of Trustees and to each committee
of HT's Board of Trustees and shall have delivered to CHP a copy of the
resolution(s) of the Board of Trustees reflecting these actions.
3.6 Waiver of Anti-Takeover Statute. HT and HLP shall, and shall cause
-------------------------------
each Subsidiary to, duly exempt from, or waive on an irrevocable basis any
applicable State law restrictions on, CHP's ownership of Preferred Units, Series
A Preferred Shares into which the Preferred Units are exchangeable and Class A
Shares into which Preferred Units and Series A Preferred Shares are exchangeable
or convertible, or any other class or series of HT, HLP or Subsidiary equity, as
the case may be, including, without limitation, exemption from the "control
share" provisions (Title 3, Subtitle 7 of the Maryland General Corporation Law
(the "MGCL") (or any successor statute)) and "business combination" provisions
(Title 3, Subtitle 6) of the MGCL, as amended from time to time, and shall
deliver to CHP resolutions of HT's Board of Trustees reflecting these actions.
3.7 Insurance. HT and HLP shall, and shall cause each Subsidiary to,
---------
use all commercially reasonable efforts to maintain with financially responsible
insurance companies insurance in such amount and against such risks and losses
as are customary for companies engaged in their respective businesses (provided
that the types and amounts with the insurers shown on Schedule 2.1(q) shall be
deemed sufficient by the parties) to and at such time as CHP shall have the
right to nominate and elect a member to HT's Board of Trustees, HT shall have
purchased directors' and officers' liability insurance with respect to all
members of HT's Board of Trustees and on such terms and with such financially
responsible insurance companies as are reasonably customary for companies
engaged in its business.
3.8 Use of Purchase Price; Use of Proceeds. Except as set forth in the
--------------------------------------
next sentence, HLP shall use all of the Purchase Price for purposes of acquiring
joint venture investments and assets pursuant to the terms of the Joint Venture
Agreement. HLP may use (i) up to $5.0 million
32
of the aggregate Purchase Price to increase HLP's existing development line of
credit for purposes of making loans to Affiliates to fund development projects,
pursuant to the terms of the Joint Venture Agreement and (ii) up to an
additional $10.0 million of the aggregate Purchase Price for discretionary
purposes unrelated to transactions contemplated by the Joint Venture Agreement
(which, for purposes of the Joint Venture Agreement, is referred to as the
"Discretionary Capital").
----------------------
3.9 Legal Opinions. HT and HLP shall obtain and deliver to CHP (i) an
---------------
opinion from Hunton & Xxxxxxxx LLP, counsel to HT, dated as of the First Closing
Date, in substantially the form attached hereto as Exhibit A (the "HW Opinion"),
----------
(ii) a tax opinion from Hunton & Xxxxxxxx LLP, tax counsel to HT, dated as of
each Closing Date, in substantially the form attached hereto as Exhibit B (the
"HW Tax Opinion") and (iii) an opinion from Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx,
------------------
LLP, Maryland counsel to HT, dated as of the First Closing Date, in
substantially the form attached hereto as Exhibit C (the "BSA Opinion").
-----------
3.10 Execution and Delivery of Excepted Holder Agreement. HT shall
-------------------------------------------------------
execute and deliver to CHP an excepted holder agreement in the form attached
hereto as Exhibit D (the "Excepted Holder Agreement").
---------------------------
3.11 Registration Rights Agreement. HT shall execute and deliver to
-------------------------------
CHP the Registration Rights Agreement in the form attached hereto as Exhibit E
(the "Registration Rights Agreement").
-------------------------------
3.12 Existing Registration Rights. HT shall cause its existing
------------------------------
registration rights agreements, to be amended by an acknowledgement that holders
of such rights' existing registration rights are subordinated to CHP's
registration rights (the "Registration Rights Acknowledgement") in the form
-------------------------------------
attached hereto as Exhibit F and shall have delivered to CHP duly executed
copies of same.
3.13 HLP Partnership Agreement. HT and HLP shall cause the HLP
---------------------------
Partnership Agreement to be amended in the form attached hereto as Exhibit G
(the "Second Amendment to the HLP Partnership Agreement") and shall have
-------------------------------------------------------
delivered to CHP a duly executed copy of the same.
3.14 Joint Venture Agreement. HLP shall execute and deliver to CHP the
-----------------------
joint venture agreement in the form attached hereto as Exhibit H (the "Joint
-----
Venture Agreement").
------------------
3.15 Filing of Articles Supplementary andCapital Stock Matters.
---------------------------------------------------------------
(a) HT shall file the Articles Supplementary in the form attached
hereto as Exhibit I on or prior to the First Closing Date with the State
Department of Assessments and Taxation of Maryland (the "SDAT") in accordance
----
with Maryland law and take any and all actions necessary to cause such Articles
Supplementary to be accepted for filing.
(b) HT shall reserve and shall keep available for issuance (i) at
all times when any Series A Preferred Shares or Preferred Units are outstanding,
solely for the purpose of effecting the conversion of the Series A Preferred
Shares, the total number of shares of Class A Shares issuable upon conversion of
the outstanding Series A Preferred Shares; (ii) at all times
33
when Preferred Units are outstanding, solely for the purpose of effecting the
exchange of the Preferred Units, the total number of shares of Series A
Preferred Shares and Class A Shares issuable upon exchange of the outstanding
Preferred Units; (iii) at all times when Preferred Units are outstanding, the
total number of shares of Class A Shares issuable upon the exchange of the
outstanding Preferred Units; and (iv) shall take such action, if any, as is
necessary or appropriate to cause the HT Declaration of Trust to be amended to
provide for a sufficient number of authorized but unissued Series A Preferred
Shares and Class A Shares to enable the foregoing issuances.
3.16 Stock Exchange Listing. HT shall cause the underlying Class A
------------------------
Shares into which all such Preferred Units and Series A Preferred Shares are
exchangeable or convertible to be authorized for listing on the American Stock
Exchange, ("AMEX") subject to official notice of issuance.
----
3.17 Certain Other Actions.
-----------------------
(a) HT shall, and shall cause HLP and each Subsidiary to, duly and
timely file all reports, Tax returns and other documents required to be filed
with Federal, state, local and other authorities, subject to extensions
permitted by applicable law; provided that, such extensions do not adversely
-------- ----
affect the status of any such entity to qualify as a REIT under the Code.
(b) HT and HLP shall, and shall cause each Subsidiary to, take (or
refrain from taking, as applicable) such action(s) as are necessary to maintain
the status of HT as a REIT for Federal income Tax purposes, through each Closing
Date including making or rescinding any express or deemed election relative to
Taxes (unless, in the case of HT, it is required by law or necessary to preserve
the status of HT as a REIT for Federal income Tax purposes).
(c) In connection with any acquisition, disposition or other
extraordinary corporate transaction involving HT, HLP or any Subsidiary, HT
shall deliver to CHP, within a reasonable period of time prior to consummation
of such transaction, a summary of the material terms and an analysis of the
Federal and state Tax implications of such transaction.
(d) HT and HLP shall take, and shall cause each Subsidiary to take
(or refrain from taking, as applicable) such action(s) as are necessary to
maintain such disclosure controls and procedures to ensure that information
required to be disclosed in HT's reports filed or submitted under the Exchange
Act, is accumulated and communicated to HT's management, including HT's Chief
Executive Officer and Chief Financial Officer to allow timely decisions
regarding required disclosure.
3.18 HT TRS Restructuring.
----------------------
(a) By June 30, 2003, HT shall (i) form a corporation in the
State of Delaware which shall qualify as a "taxable REIT subsidiary" of HT
(within the meaning of Section 856(l) of the Code, hereinafter, an "HT TRS") and
------
(ii) cause the HT TRS to issue common stock such that 99% of its outstanding
common stock is held by Hersha Hospitality Management, L.P.
34
("HHMLP") or wholly-owned subsidiaries of HHMLP and 1% of its outstanding common
-----
stock is held by HT.
(b) HHMLP shall contribute to the HT TRS all of its hotel
operating leases with HLP and/or subsidiaries of HLP (the "Contributed Leases").
------------------
(c) HT shall contribute to the HT TRS cash in an amount equal
to 1.01% of fair market value of the Contributed Leases in exchange for its 1%
interest in the outstanding common stock of the HT TRS.
(d) HT shall cause the HT TRS to enter into one or more
management agreements with HHMLP for the operation of the hotels covered by the
Contributed Leases.
3.19 REIT Training. Not later than thirty days following the
--------------
date of this Agreement, HT shall cause in-house legal counsel to receive
educational guidance on REIT qualification considerations pursuant to Section
856 of the Code from outside national tax counsel with REIT tax expertise in an
amount sufficient to reasonably ensure the continued status of HT as a real
estate investment trust (the "REIT Training"), and during the period CHP is a
-------------
Partner of HLP, a Partner in the Joint Venture or owns beneficially or
otherwise, equity shares in HT, shall perform and provide copies of its
quarterly income/asset testing to outside national tax counsel with REIT tax
expertise and CHP's in-house tax counsel not later than ten (10) days following
the close of each calendar quarter. In addition to the foregoing, all of HLP's
direct and indirect investments with a net fair market value in excess of
$5,000,000, and all third-party agreements which contemplate the payment or
receipt of funds in any twelve month period of time in excess of $500,000 or
projected to provide HLP, directly or indirectly, with annual gross income in
excess of $500,000 shall be reviewed by outside national tax counsel with REIT
tax expertise prior to being executed, and CHP shall be given notice of the
intended acquisition of any such asset or execution of any such third party
agreement within five (5) days of the date such review is concluded.
ARTICLE 3A
COVENANT OF CHP
---------------
3A.1 Fairness Opinion. At any time when CHP beneficially owns
-----------------
more than fifty percent (50%) of the issued and outstanding HT Common Stock, CHP
and its "affiliates" or "associates", as such terms are defined in Section 3-601
of the MGCL, shall not initiate or consummate (i) any merger, consolidation or
share exchange with HT, HLP or any of their Subsidiaries, or (ii) any sale,
lease, transfer or other acquisition, other than in the ordinary course of
business, in one transaction or a series of related transactions within a
12-month period, of all or substantially all of the assets of HT or HLP, unless
the Board of Trustees of HT has received a written opinion of a nationally
recognized financial advisor to the effect that as of the date of such opinion,
the consideration to be received by the holders of HT Common Stock in such
transaction is fair, from a financial point of view.
35
ARTICLE 4
MUTUAL COVENANTS
----------------
4.1 Additional Agreements. Subject to the terms and conditions herein
----------------------
provided, HT, HLP and each Subsidiary, on the one hand, and CHP on the other
hand, shall take, or cause to be taken, all actions and shall do, or cause to be
done, all things necessary, appropriate or desirable under any applicable law or
regulation or under any applicable governing agreement to consummate and make
effective the transactions contemplated by this Agreement and the Transaction
Documents including using all reasonable efforts to obtain all necessary
waivers, consents and approvals related to it and take all actions necessary to
effect all necessary registrations and filings. HT, HLP and each Subsidiary on
the one hand, and CHP on the other hand, shall take, or cause to be taken, all
action or shall do, or cause to be done, all things necessary, appropriate or
desirable to cause its covenants and conditions it is obligated to satisfy
applicable to the transactions contemplated hereby to be performed or satisfied
as soon as practicable. In addition, if any Governmental Entity shall have
issued an order, decree, ruling or injunction, or taken any other action related
to HT, HLP or any Subsidiary, on the one hand or CHP, on the other hand that
would have the effect of restraining, enjoining or otherwise prohibiting or
preventing the consummation of the transactions contemplated by this Agreement
and the Transaction Documents, such party that is the subject of the order,
decree, ruling, etc. shall use its reasonable best efforts to have such order,
decree, ruling or injunction or other action declared ineffective as soon as
practicable. If at any time after each Closing Date, any further action is
necessary to be taken so as to comply with this Agreement, the applicable
part(ies) to this Agreement or their duly authorized representatives shall take
all such action.
4.2 Advice of Changes; SEC Filings. The parties hereto shall confer
---------------------------------
with each other on a regular basis, report on HT's, HLP's and each Subsidiary's
operational matters and promptly advise each other orally and in writing of any
change or event which has caused, or could reasonably be expected to have caused
or to cause, a breach of a representation, warranty or covenant contained in
this Agreement or in any of the Transaction Documents. The parties hereto shall
promptly provide each other (or their respective counsel) copies of all filings
made by such party or its subsidiaries, as applicable, with the SEC or any other
state or federal Governmental Entity in connection with this Agreement, the
Transaction Documents and the transactions contemplated hereby or thereby.
ARTICLE 5
CONDITIONS PRECEDENT
--------------------
5.1 Conditions to Each Party's Obligation. The respective obligations
--------------------------------------
of CHP, HT and HLP to effect the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions on or prior to each
Closing Date:
(a) Consents and Approvals. All authorizations, consents, orders,
----------------------
or approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity necessary for the consummation of
the transactions contemplated by this Agreement shall have been filed, occurred,
run or been obtained.
36
(b) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction, or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect.
(c) No Action. No action shall have been taken nor any statute,
----------
rule, regulation or order shall have been enacted or issued by any Governmental
Entity that makes the consummation of the transactions contemplated hereby
illegal.
5.2 Conditions to Obligations of CHP at the First Closing. The
-------------------------------------------------------------
obligation of CHP to effect the transactions contemplated hereby at the First
Closing is subject to the satisfaction of the following conditions unless, to
the extent permitted by applicable law, waived, in whole or in part, by CHP:
(a) Representations and Warranties. The representations and
--------------------------------
warranties of HT and HLP set forth in this Agreement shall be true and correct
in all material respects (provided that any representation or warranty of HT or
HLP contained herein that is qualified by a materiality qualifier or a Material
Adverse Effect qualification, or words of similar meaning, shall not be further
qualified hereby) as of the date hereof and as of the First Closing Date, as
though made on or as of the First Closing Date (other than such representations
and warranties which address matters only as of a certain date, which shall be
true and correct as of such date), and CHP shall have received a certificate to
the foregoing effect signed by the chief executive officers and chief financial
officers of HT and HLP.
(b) Performance of Obligations. HT and HLP shall have performed
----------------------------
and shall have caused each Subsidiary to have performed in all material respects
(provided that any covenant or agreement that is qualified by a materiality
qualifier or Material Adverse Effect qualification or words of similar meaning
shall not be further qualified hereby) all obligations required to be performed
by them under this Agreement prior to the First Closing Date, and CHP shall have
received a certificate to such effect signed by the chief executive officers and
chief financial officers of HT and HLP.
(c) Third Party Consents. CHP shall have been furnished with any
---------------------
such written consent, approval or waiver contemplated by Section 3.4 hereof.
(d) Appointment of Board of Trustee Observer. HT's Board of
---------------------------------------------
Trustees shall have appointed one individual designated by CHP as an observer to
HT's Board of Trustees and to each committee of HT's Board of Trustees, and CHP
shall have received a copy of the resolutions of HT's Board of Trustees
reflecting these actions. Such resolution shall be irrevocable and shall only
terminate upon the first to occur of (i) such time as CHP, pursuant to the
Articles Supplementary, shall nominate and elect a Trustee to the HT Board of
Trustees (the "Observer Resolution") or (ii) such time as CHP ceases to hold
--------------------
Class A Common Shares, Preferred Units and/or Series A Preferred Shares or any
other class or series of HT, HLP or Subsidiary equity, which on an as
converted/exchanged basis, represents in the aggregate less than 5% of the HT
Common Shares then issued and outstanding, on a fully diluted basis (which shall
assume the conversion and/or exchange of all HT and HLP securities convertible
into or exchangeable for HT Common Shares).
37
(e) Legal Opinion. CHP shall have received the HW Opinion.
--------------
(f) Tax Opinion. CHP shall have received the HW Tax Opinion.
------------
(g) BSA Opinion. CHP shall have received the BSA Opinion.
------------
(h) Excepted Holder Agreement. HT shall have executed and
---------------------------
delivered to CHP the Excepted Holder Agreement and CHP shall have received a
copy of the resolutions of HT's Board of Trustees reflecting these actions.
(i) Registration Rights Agreement. HT shall have executed and
-------------------------------
delivered to CHP the Registration Rights Agreement.
(j) Registration Rights Acknowledgement. HT shall have caused its
-----------------------------------
existing registration rights agreement to be amended by the Registration Rights
Acknowledgement in the form attached hereto as Exhibit F and shall have
delivered to CHP duly executed copies of same.
(k) Second Amendment to the HLP Partnership Agreement. HT and HLP
-------------------------------------------------
shall have caused the Second Amendment to the HLP Partnership Agreement to be
executed and delivered to CHP.
(l) Joint Venture Agreement. HT shall have executed and delivered
-----------------------
to CHP the Joint Venture Agreement.
(m) Filing of Articles Supplementary; Good Standing Certificates.
-------------------------------------------------------------
HT shall have filed the Articles Supplementary with the SDAT in accordance with
Maryland law and the same shall have been accepted and filed. The SDAT shall
have issued a Short Form Good Standing Certificate regarding HT and the Virginia
State Corporation Commission shall have issued a Short Form Good Standing
Certificate regarding HLP, in each case as of a date no earlier than five (5)
days prior to the First Closing Date.
(n) Stock Exchange Listing. All of the underlying Class A Shares
-----------------------
into or for which all such Series A Preferred Shares and Preferred Units are
convertible or exchangeable, as the case may be, together with such additional
number of shares of Class A Shares as may be necessary as a reasonable reserve
for purposes of effecting the anti-dilution rights set forth in the Articles
Supplementary and the HLP Partnership Agreement, shall have been authorized for
listing on the AMEX, subject to official notice of issuance.
(o) No Litigation. No litigation or administrative proceeding or
--------------
investigation (whether formal or informal) shall be pending or, to HT's
Knowledge, threatened which challenges the transactions contemplated hereby or
by any Transaction Document.
(p) No Material Adverse Effect. There shall not have occurred any
--------------------------
event, circumstance, condition, fact, effect, or other matter which has had or
could reasonably be expected to have a Material Adverse Effect or materially
affect the ability of any of HT, HLP or any Subsidiary to perform on a timely
basis any obligation under this Agreement or any of the Transaction Documents to
which such Person is a party or to consummate the transactions contemplated
hereby or thereby.
38
(q) Transaction Approval. HT shall have obtained the affirmative
---------------------
consent of its Board of Trustees, approving the transactions contemplated by
this Agreement and the Transaction Documents.
(r) Anti-Takeover Resolution. HT's Board of Trustees shall have
-------------------------
irrevocably exempted the transactions contemplated by this Agreement, the
Transaction Documents, and CHP from application of the "control share"
provisions (Title 3, Subtitle 7 of the MGCL (or any successor statute)) and
"business combination" provisions (Title 3, Subtitle 6) of the MGCL, as amended
from time to time, and shall deliver to CHP resolutions of HT's Board of
Trustees reflecting these actions.
(s) Intentionally Omitted.
-----------------------
(t) Closing Deliveries. All documents, instruments, certificates
-------------------
or other items required to be delivered by HT and HLP pursuant to Section 6.2(b)
shall have been delivered.
5.3 Conditions to Obligations of HT and HLP at the First Closing. The
-------------------------------------------------------------
obligation of HT and HLP to effect the transactions contemplated hereby at the
First Closing is subject to the satisfaction of the following conditions unless
waived, in whole or in part, by HT.
(a) Representations and Warranties. The representations and
--------------------------------
warranties of CHP set forth in this Agreement shall be true and correct in all
material respects (provided that any representation or warranty of CHP contained
herein that is qualified by a materiality qualifier or words of similar meaning
shall not be further qualified hereby) as of the date hereof and as of the First
Closing Date, as though made on or as of the First Closing Date (other than such
representations and warranties which address matters only as of a certain date,
which shall be true and correct as of such date), and HT shall have received a
certificate to the foregoing effect signed on behalf of CHP by an authorized
executive officer of CHP.
(b) Performance of Obligations. CHP shall have performed in all
----------------------------
material respects (provided that any covenant or agreement that is qualified by
a materiality qualifier or words of similar meaning shall not be further
qualified hereby) the obligations required to be performed by it under this
Agreement prior to the First Closing Date, and HT shall have received a
certificate to such effect signed on behalf of CHP by an authorized executive
officer of CHP.
(c) Excepted Holder Agreement. CHP shall have executed and
---------------------------
delivered to HT a counterpart copy of the Excepted Holder Agreement.
(d) Registration Rights Agreement. CHP shall have executed and
-------------------------------
delivered to HT a counterpart copy of the Registration Rights Agreement.
(e) Second Amendment to the HLP Partnership Agreement. CHP shall
--------------------------------------------------
have executed and delivered to HT a counterpart copy of the Second Amendment to
the HLP Partnership Agreement.
(f) Joint Venture Agreement. CHP shall have executed and
-------------------------
delivered to HT a counterpart copy of the Joint Venture Agreement.
39
(g) Standstill Agreement. CHP shall have executed and delivered
---------------------
to HT a counterpart copy of the Standstill Agreement.
(h) Transaction Approval. CHP shall have obtained the affirmative
--------------------
consent of its General Partner, approving the transactions contemplated by this
Agreement and the Transaction Documents.
(i) Closing Deliveries. All documents, instruments, certificates
-------------------
or other items required to be delivered by CHP pursuant to Section 6.2(a) shall
have been delivered.
5.4 Conditions to Obligations of CHP at the Second Closing and each
-------------------------------------------------------------------
Subsequent Closing. The obligation of CHP to effect the transactions
-------------------
contemplated hereby at the Second Closing and at each Subsequent Closing is
subject to the satisfaction of the following conditions unless waived, in whole
or in part, by CHP:
(a) Representations and Warranties. The representations and
--------------------------------
warranties of HT and HLP set forth in this Agreement shall have been true and
correct in all material respects (provided that any representation or warranty
of HT or HLP contained herein that is qualified by a materiality qualifier or a
Material Adverse Effect qualification or words of similar meaning shall not be
further qualified hereby) as of the Second Closing Date and each Subsequent
Closing Date, as though made on or as of the Second Closing Date and each
Subsequent Closing Date (other than such representations and warranties which
address matters only as of a certain date, which shall be true and correct as of
such date), and CHP shall have received a certificate to the foregoing effect
signed by the chief executive officers and chief financial officers of HT and
HLP.
(b) Performance of Obligations. HT and HLP shall have performed
----------------------------
in all material respects (provided that any covenant or agreement that is
qualified by a materiality qualifier or Material Adverse Effect qualification or
words of similar meaning shall not be further qualified hereby) all obligations
required to be performed by it under this Agreement and the Transaction
Documents prior to the Second Closing Date and each Subsequent Closing Date,
including, without limitation, performance of the covenants set forth in
Sections 3.18 and 3.19 hereof, and CHP shall have received a certificate to such
effect signed by the chief executive officers and chief financial officers of HT
and HLP.
(c) Closing Deliveries. All documents, instruments, certificates
-------------------
or other items required to be delivered by HT pursuant to Section 6.3(b) shall
have been delivered.
(d) First Closing. The First Closing shall have occurred.
--------------
(e) No Litigation. No litigation or administrative proceeding or
--------------
investigation (whether formal or informal) shall be pending or, to CHP's
Knowledge, threatened which challenges the transactions contemplated hereby.
(f) No Material Adverse Effect. There shall not have occurred any
--------------------------
event, circumstance, condition, fact, effect, or other matter which has had or
could reasonably be expected to have a Material Adverse Effect or materially
affect the ability of any of HT, HLP or any Subsidiary to perform on a timely
basis any obligation under this Agreement or any of the
40
Transaction Documents to which such Person is a party or to consummate the
transactions contemplated hereby or thereby.
5.4A Condition to Obligations of CHP at each Subsequent Closing.
------------------------------------------------------------
CHP shall not be required to purchase in excess of 250,000 Preferred Units in
the aggregate (pursuant to this Section 5.4A), and provided further however that
CHP shall not be obligated to purchase any Subsequent Closing Units until such
time as HLP is or has been obligated to make an Additional Capital Contribution
to the Joint Venture in connection with an Approved Acquisition in accordance
with Section 4.3 of the Joint Venture Agreement. Upon satisfaction of the
condition set forth in the preceding sentence, at any Subsequent Closing, CHP
shall only be obligated to purchase such number of Subsequent Closing Units (not
to exceed 100,000 in the aggregate) which results in a Purchase Price equal to
the total amount HLP is or has been required to contribute to the Joint Venture
in connection with one or more Approved Acquisitions pursuant to Section 4.3 of
the Joint Venture Agreement, less the Purchase Price for the number of
Subsequent Closing Units acquired by CHP pursuant to such previous Subsequent
Closings, if any. As used in this Section, the terms "Additional Capital
Contribution" and "Approved Acquisition" shall have the meanings ascribed to
such terms in the Joint Venture Agreement.
5.5 Conditions to Obligations of HT and HLP at the Second Closing and
-------------------------------------------------------------------
Each Subsequent Closing. The obligation of HT and HLP to effect the
-------------------------
transactions contemplated hereby at the Second Closing and at each Subsequent
Closing is subject to the satisfaction of the following conditions unless
waived, in whole or in part, by HT and HLP.
(a) Representations and Warranties. The representations and
--------------------------------
warranties of CHP set forth in this Agreement shall be true and correct in all
material respects (provided that any representation or warranty of CHP contained
herein that is qualified by a materiality qualifier or words of similar meaning
shall not be further qualified hereby) as of the date hereof and as of the
Second Closing Date and each Subsequent Closing Date, as though made on or as of
the Second Closing Date and each such Subsequent Closing Date (other than such
representations and warranties which address matters only as of a certain date,
which shall be true and correct as of such date), and HT shall have received a
certificate to the foregoing effect signed on behalf of CHP by an authorized
officer of CHP.
(b) Performance of Obligations. CHP shall have performed in all
----------------------------
material respects (provided that any covenant or agreement that is qualified by
a materiality qualifier or words of similar meaning shall not be further
qualified hereby) the obligations required to be performed by it under this
Agreement and the Transaction Documents prior to the Second Closing Date and
each such Subsequent Closing Date, and HT shall have received a certificate to
such effect signed on behalf of CHP by an authorized officer of CHP.
(c) Closing Deliveries. All documents, instruments, certificates
-------------------
or other items required to be delivered by CHP pursuant to Section 6.3(a) shall
have been delivered.
(d) First Closing. The First Closing shall have occurred.
--------------
41
ARTICLE 6
CLOSING
-------
6.1 Closing.
-------
(a) The purchase and sale of the Preferred Units shall take place
at two or more closings (the "Closings"). The First Closing shall take place
--------
five business days after satisfaction or waiver of each of the conditions set
forth in Sections 5.1, 5.2 and 5.3 at 10:30 a.m., Eastern time (the "First
-----
Closing Date"). The Second Closing shall take place, subject to the earlier
-------------
satisfaction or waiver of each of the conditions set forth in Sections 5.4 and
5.5 at 10:30 a.m. Eastern time on the date that is 30 days after the First
Closing Date and in the event such date is not a Business Day, on the next
following Business Day (the "Second Closing Date"). All Closings shall take
-------------------
place at the offices of Xxxxxxxxx Xxxxxxx, LLP, 000 Xxxxx Xxxxxx Xxxxxx, Xxxxx
000, Xxxxxxx, Xxxxxxx 00000, unless another date or place is agreed to in
writing by the parties. Each Subsequent Closing shall occur on the dates
provided herein (each, a "Subsequent Closing Date" and, together with the First
-----------------------
Closing Date and Second Closing Date, collectively, the "Closing Dates" and
-------------
individually, a "Closing Date") on which HT provides written notice to CHP in
-------------
accordance with Section 9.8 hereof, requiring a Subsequent Closing to occur at
the offices of Xxxxxxxxx Traurig, LLP, as described above, unless another date
or place is agreed to in writing by the parties.
(b) As used in this Agreement, "Business Day" means any day other
------------
than (i) a Saturday or Sunday or (ii) a day on which commercial banks in New
York City, New York are authorized or required to be closed.
6.2 Actions to Occur at the First Closing.
-------------------------------------------
(a) At the First Closing, CHP shall deliver to HT and HLP the
following:
(i) Purchase Price. An amount equal to the aggregate
---------------
Purchase Price, as reduced in accordance with Section 1.2 hereof, for the First
Closing Units, by wire transfer of immediately available funds to an account
designated by HLP;
(ii) Certificates. The certificates referred to in Sections
------------
5.3(a) and 5.3(b);
(iii) Excepted Holder Agreement. A counterpart copy of the
---------------------------
Excepted Holder Agreement executed by CHP;
(iv) Registration Rights Agreement. A counterpart copy of
-------------------------------
the Registration Rights Agreement executed by CHP;
(v) Second Amendment to the HLP Partnership Agreement. A
-----------------------------------------------------
counterpart copy of the Second Amendment to the HLP Partnership Agreement
executed by CHP;
42
(vi) Joint Venture Agreement. A counterpart copy of the
-------------------------
Joint Venture Agreement executed by CHP;
(vii) Standstill Agreement. A counterpart copy of the
---------------------
Standstill Agreement executed by CHP; and
(viii) Transaction Approvals. Written consents or other
----------------------
reasonably acceptable written evidence reflecting the approvals referred to in
Section 5.3(h).
(b) At the First Closing, HT shall deliver to CHP the following:
(i) Preferred Units Certificates. Certificates representing
-----------------------------
the First Closing Units;
(ii) Certificates. The certificates described in Sections
------------
5.2(a) and 5.2(b);
(iii) Third Party Consents. The original of each Consent, if
--------------------
any, pursuant to Section 5.2(c);
(iv) The Observer Resolution. A copy of a fully executed
-------------------------
Observer Resolution in the form of a unanimous written consent of HT's Board of
Trustees or a Secretary's Certificate certifying that such Observer Resolution
was duly approved and adopted by HT's Board of Trustees at a meeting duly
noticed and convened;
(v) Legal Opinions. The HW Opinion, the HW Tax Opinion and
---------------
the BSA Opinion;
(vi) Excepted Holder Agreement. A counterpart of the
---------------------------
Excepted Holder Agreement executed by HT;
(vii) Registration Rights Agreement. A counterpart of the
-------------------------------
Registration Rights Agreement executed by HLP;
(viii) Registration Rights Acknowledgement. A copy of each
-------------------------------------
fully executed Registration Rights Acknowledgement;
(ix) Second Amendment to the HLP Partnership Agreement. A
----------------------------------------------------
copy of the fully executed Second Amendment to the HLP Partnership Agreement;
(x) Joint Venture Agreement. A counterpart of the Joint
-------------------------
Venture Agreement executed by HT;
(xi) Articles Supplementary. A certified copy of the
-----------------------
Articles Supplementary, as filed with the SDAT;
43
(xii) Good Standing Certificate. A Short Form Good Standing
--------------------------
Certificate regarding HT issued by the SDAT and a Short Form Good Standing
Certificate regarding HLP issued by the Virginia State Corporation Commission;
(xiii) AMEX Notice of Listing. Official notice of issuance
-------------------------
on the AMEX of all of the underlying Class A Shares into or for which all such
Series A Preferred Shares and Preferred Units are convertible or exchangeable,
together with such additional number of shares of Class A Shares as may be
necessary as a reasonable reserve for purposes of effecting the anti-dilution
rights set forth in the Articles Supplementary;
(xiv) Transaction Approvals. Written consents or other
----------------------
reasonably acceptable written evidence reflecting the approvals referred to in
Section 5.2(q); and
(xv) The Anti-Takeover Resolution. A copy of a fully
------------------------------
executed Anti-Takeover Resolution in the form of a unanimous written consent of
HT's Board of Trustees or a Secretary's Certificate certifying that such
Anti-Takeover Resolution was duly approved and adopted by HT's Board of Trustees
at a meeting duly noticed and convened.
6.3 Actions to Occur at the Second Closing and Each Subsequent Closing.
------------------------------------------------------------------
(a) At the Second Closing and each Subsequent Closing, CHP shall
deliver to HT and HLP the following:
(i) Purchase Price. An amount equal to the Purchase Price
---------------
for the Second Closing Units, or the Subsequent Closing Units, as the case may
be, to be purchased at such Second Closing or Subsequent Closing, by wire
transfer of immediately available funds to an account designated by HLP; and
(ii) Certificates. The certificates referred to in Sections
------------
5.5(a) and 5.5(b).
(b) At the Second Closing and each Subsequent Closing, HT shall
deliver to CHP the following:
(i) Preferred Units Certificates. Certificates representing
-----------------------------
the Second Closing Units or Subsequent Closing Units, as the case may be, to be
purchased at such Second Closing or Subsequent Closing, as the case may be; and
(ii) Certificates. The certificates described in Sections
------------
5.4(a) and 5.4(b).
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
7.1 Termination Prior to First Closing This Agreement may be terminated
----------------------------------
at any time prior to the First Closing:
44
(a) by mutual consent of CHP and HT;
(b) by either CHP or HT:
(i) in the event of a breach by the other party of any
representation, warranty, covenant or agreement contained in this Agreement
which cannot be or has not been cured within 40 days (the "Cure Period")
-----------
following receipt by the breaching party of written notice of such breach, or
failure of the breaching party to promptly use reasonable efforts to cure such
breach after receipt of such written notice of such breach;
(ii) if a court of competent jurisdiction or other
Governmental Entity shall have issued an order, decree, or ruling or taken any
other action (with respect to which order, decree, or ruling CHP, HLP and HT
shall use their best efforts to cause to be set aside), in each case permanently
restraining, enjoining, or otherwise prohibiting the transactions contemplated
by this Agreement or the Transaction Documents, and such order, decree, ruling,
or other action shall have become final and nonappealable; or
(iii) if the First Closing shall not have occurred by 5:00
p.m., Eastern time on the date immediately following 120 days after the date
hereof; provided, however, that the right to terminate this Agreement under this
clause (iii) shall not be available to any party whose breach of this Agreement
has been the cause of, or resulted in, the failure of the First Closing to occur
on or before such date;
(c) by CHP: upon the occurrence of an event described in Section
5.2(p) (No Material Adverse Effect);
The right of any party hereto to terminate this Agreement pursuant to this
Section 7.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any Person
controlling any such party, or any of their respective officers, directors,
trustees, employees, accountants, consultants, legal counsel, agents, or other
representatives whether prior to or after the execution of this Agreement.
Notwithstanding anything in the foregoing to the contrary, a party that is in
material breach of this Agreement shall not be entitled to terminate this
Agreement except, in the case of a default by HT or HLP, with the consent of
CHP, or in the case of a default by CHP, with the consent of HT.
7.2 Termination Subsequent to First Closing. This Agreement may be
-------------------------------------------
terminated subsequent to the First Closing:
(a) by mutual consent of CHP and HT;
(b) by HT or HLP, in the event of a material breach by CHP of any
representation, warranty, covenant or agreement contained in this Agreement or
the Transaction Documents, which cannot be or has not been cured within the Cure
Period following receipt by CHP of written notice of such breach;
(c) by CHP, in the event that any representation or warranty of
HT, HLP or any Subsidiary contained in this Agreement or in the Transaction
Documents was not materially
45
true and correct subsequent to the First Closing Date, and which cannot be or
has not been cured within the Cure Period following receipt by HT or HLP of
written notice of such breach;
(d) by CHP, in the event of a material breach by HT or HLP of any
covenant or agreement contained in this Agreement, or in the Transaction
Documents subsequent to the First Closing Date, which cannot be or has not been
cured within the Cure Period following receipt by HT or HLP of written notice of
such breach;
(e) by CHP upon the failure of HT to require Subsequent Closings
for the issuance and sale hereunder of all Subsequent Closing Units pursuant to
Section 1.1(c) hereof, within one year after the First Closing Date; and
(f) by HT or HLP at any time after such date which is one year and
six months immediately following the First Closing Date, if (a) following such
date, HT and HLP shall have offered to CHP by written notice in accordance with
Section 9.8 hereof, an irrevocable offer to purchase, upon the terms and
conditions set forth herein, and CHP shall have received such written offer to
purchase, any Preferred Units not purchased hereunder and (b) CHP shall have
failed to indicate its acceptance of such offer (by written notice to HT and/or
HLP in accordance with Section 9.8 hereof) within thirty (30) days of its
receipt of such notice.
7.3 Effect of Termination Prior to First Closing.
--------------------------------------------------
(a) In the event of a termination of this Agreement pursuant to
Section 7.1 hereof by either HT, HLP or CHP, this Agreement shall terminate and
have no further force or effect, without any liability or obligation on the part
of any of HT, HLP or CHP, other than the provisions of Article 9 and this
Article 7, which shall survive termination of this Agreement; provided, however,
that nothing herein shall relieve any party from any liability for any breach by
such party of any of its representations, warranties, covenants or agreements
set forth in this Agreement.
(b) If this Agreement is terminated by CHP pursuant to Section
7.1(b)(i), 7.1(b)(iii) or 7.1(c), HT shall pay CHP, by wire transfer of
immediately available funds, up to $250,000 in the aggregate of all invoiced
out-of-pocket expenses incurred by CHP to pay the reasonable fees and
disbursements of Xxxxxxxxx Xxxxxxx LLP, PricewaterhouseCoopers LLP and Lowndes,
Drosdick, Doster, Xxxxxx & Xxxx in connection with the due diligence and
preparation and negotiation of this Agreement, the Transaction Documents and the
transactions contemplated hereby and thereby, and the related letter of intent
and term sheet dated November 18, 2002 and predecessor letter of intent and term
sheet dated August 19, 2002, and any other reasonable out-of-pocket expenses
incurred by CHP in connection with such matters (the "Expense Reimbursement")
---------------------
within ten Business Days after receipt of the written demand for same by CHP.
ARTICLE 8
INDEMNIFICATION
---------------
8.1 Indemnification.
---------------
46
(a) HT and HLP each hereby agrees to jointly and severally
indemnify, defend, and hold harmless CHP and its directors, officers, employees,
Affiliates, agents, successors and assigns (collectively, the "CHP Indemnified
---------------
Parties") from and against:
-------
(i) subject to Section 8.2 hereof, any and all losses,
liabilities, obligations, damages, costs and expenses (collectively, "Losses")
------
based upon, attributable to, or resulting from, the Breach of any representation
or warranty of HT, HLP or any Subsidiary set forth in Article 2.1 hereof, or any
representation or warranty contained in any certificate delivered by or on
behalf of HT, HLP or any Subsidiary pursuant to this Agreement except to the
extent CHP had actual knowledge (other than in the case of Section 2.1(c)(ii)(B)
hereof) of such Breach and, notwithstanding such actual knowledge, subsequently
consummated a Closing contemplated by this Agreement;
(ii) any and all Losses, attributable to, or resulting from,
the Breach of any covenant or other agreement on the part of HT, HLP or any
Subsidiary under this Agreement except to the extent CHP had actual knowledge of
such Breach and, notwithstanding such actual knowledge, subsequently consummated
a Closing contemplated by this Agreement;
(iii) any and all notices, actions, suits, proceedings,
claims, demands, assessments, judgments, costs, penalties and expenses,
including reasonable attorneys' and other professionals' fees and disbursements
(collectively, "Expenses") as a consequence of and incident to any and all
--------
Losses with respect to which indemnification is provided hereunder; and
(iv) For purposes of Section 8.1(a)(ii), any and all Losses,
attributable to, or resulting from, the Breach of any representation or warranty
of HT, HLP or any Subsidiary set forth in Section 2.1(c)(ii)(B) hereof, or any
certificate with respect to such representations and warranties set forth in
Section 2.1(c)(ii)(B) hereof relating to any loan or credit agreement, note,
bond, mortgage or indenture (or guarantee of same) entered into by HT, HLP or
any Subsidiary and secured by a lien on any hotel owned by HT, HLP or any such
Subsidiary, the amount of such Loss which HT or HLP shall be obligated to
indemnify CHP for, shall be "grossed up" to reflect the diminution in the value
of CHP's interest in HT and HLP resulting from payment of such indemnity and
shall be calculated as (x) the actual Loss suffered by CHP divided by (y) one
minus CHP's "Fully Diluted Interest In HT." For purposes of this provision,
CHP's Fully Diluted Interest in HT shall equal the percentage arrived at by
dividing (i) the total number of shares of HT Common Shares into which CHP's
equity securities in HT and HLP are convertible plus the number of HT Common
Shares CHP then holds, by (ii) the total number of HT Common Shares into which
any outstanding equity securities of HT and HLP are convertible plus the total
number of HT Common Shares then issued and outstanding.
(b) CHP hereby agrees to indemnify defend and hold harmless HT and
HLP and their respective trustees, directors, officers, employees, Affiliates,
agents, successors and assigns (collectively, the "HT Indemnified Parties") from
----------------------
and against:
(i) subject to Section 8.2 hereof, any and all Losses based
upon, attributable to or resulting from the failure of any representation or
warranty of CHP set forth in Article 2.2 hereof, or any representation or
warranty contained in any certificate delivered by or on behalf of CHP pursuant
to this Agreement except to the extent HT or HLP had actual
47
knowledge of such Breach and, notwithstanding such actual knowledge,
subsequently consummated a Closing contemplated by this Agreement;
(ii) any and all Losses based upon, attributable to or
resulting from the Breach of any covenant or other agreement on the part of CHP
under this Agreement except to the extent HT or HLP had actual knowledge of such
Breach and, notwithstanding such actual knowledge, subsequently consummated a
Closing contemplated by this Agreement; and
(iii) any and all Expenses as a consequence of and incident
to the foregoing.
8.2 Limitations on Indemnification for Breaches of Representations and
-------------------------------------------------------------------
Warranties.
----------
(a) An indemnifying party shall not be required to make any
payment with respect to any claim for indemnification under Section 8.1(a)(i) or
Section 8.1(b)(i) hereof, as the case may be, unless the aggregate amount of
claims for indemnification asserted (which for purposes of this Agreement shall
mean the indemnified party's giving of notice of such claim to the indemnifying
party) by the CHP Indemnified Parties or the HT Indemnified Parties (as the case
may be) equals or exceeds U.S. $250,000 (the "Basket"); it being hereby
------
acknowledged and agreed that if the aggregate amount of such claim(s) meets or
exceeds the Basket and indemnification is due without regard to such Basket, the
indemnifying party shall be required to pay the entire amount of all Losses and
Expenses with respect to which indemnification is provided hereunder; provided,
--------
further, however, that if any claim for indemnification is based upon,
------- -------
attributable to or results from the Breach of the representations and warranties
-------
set forth in Sections 2.1(b), 2.1(c)(ii)(B) or 2.1(r) hereof, such Basket shall
not be applicable and that if any claim for indemnification is based upon,
attributable to, or results from the Breach of the representations and
warranties set forth in Section 2.1(c)(ii)(B) hereof, HT's Cap (as defined
below) shall not be applicable. Notwithstanding anything to the contrary
contained in this Agreement, other than a breach of a representation or warranty
set forth in Section 2.1(c)(ii)(B) hereof, which, as set forth in the preceding
sentence shall not be subject to HT's Cap and shall not be counted toward or
added into the calculation of whether HT's Cap has been reached, the
indemnification obligations of HT and HLP under Section 8.1(a) hereof shall not
exceed the aggregate Purchase Price paid to HLP hereunder (hereinafter, "HT's
----
Cap").
---
Notwithstanding anything to the contrary contained in this Agreement, the
indemnification obligations of CHP under Section 8.1(b) hereof shall not exceed
$2.5 million ("CHP's Cap").
----------
8.3 Indemnification Procedures.
---------------------------
(a) Claims by Third Parties.
(i) If any legal proceedings shall be instituted or any claim
or demand ("Claim") shall be asserted by any Person in respect of which
-----
indemnification may be sought under Section 8.1 hereof (without giving effect to
the Basket), the indemnified party shall promptly cause written notice of the
assertion of any Claim of which it has knowledge which is covered by this
indemnity to be forwarded to the indemnifying party. The indemnifying party
shall have the right, at its sole option and expense, to be represented by
counsel of its choice,
48
which counsel must be reasonably satisfactory to the indemnified party, and to
defend against, negotiate, settle or otherwise manage any Claim which relates to
any Losses for which indemnification is sought hereunder. If the indemnifying
party elects to defend against, negotiate, settle or otherwise manage any Claim
which relates to any Losses for which indemnification is sought hereunder, it
shall promptly notify the indemnified party of its intent to do so. If the
indemnifying party elects not to defend against, negotiate, settle or otherwise
manage any Claim which relates to any Losses for which indemnification is sought
hereunder or fails to notify the indemnified party of its election as herein
provided or contests its obligation to indemnify the indemnified party for such
Losses under this Agreement, then the indemnified party may defend against,
negotiate, settle or otherwise manage such Claim. If the indemnified party
defends any Claim, then the indemnifying party shall reimburse the indemnified
party for the reasonable Expenses of defending such Claim upon submission of
periodic bills. If the indemnifying party shall assume the defense of any Claim,
the indemnified party may participate, at its own expense, in the defense of
such Claim; provided, however, that such indemnified party shall be entitled to
-------- -------
participate in any such defense with separate counsel at the expense of the
indemnifying party if (i) so requested by the indemnifying party to participate
or (ii) in the reasonable opinion of counsel to the indemnified party, a
conflict or potential conflict of interest exists between the indemnified party
and the indemnifying party that would make such separate representation
advisable; and provided, further, that the indemnifying party shall not be
-------- -------
required to pay for more than one such counsel for all indemnified parties in
connection with any Claim. The parties hereto agree to cooperate fully with each
other in connection with the defense, negotiation or settlement of any such
Claim.
(ii) After any final judgment or award shall have been
rendered by a court of competent jurisdiction and the expiration of the time in
which to appeal therefrom, or a settlement shall have been consummated, or the
indemnified party and the indemnifying party shall have arrived at a mutually
binding agreement with respect to a Claim hereunder, the indemnified party shall
forward to the indemnifying party notice of any sums due and owing by the
indemnifying party pursuant to this Agreement with respect to such matter.
(iii) The failure of the indemnified party to give reasonably
prompt notice of any Claim shall not release, waive or otherwise affect the
indemnifying party's obligations with respect thereto except to the extent that
the indemnifying party can demonstrate actual material loss and prejudice as a
result of such failure.
8.4 Tax Related Adjustments. HT and CHP agree that any payment of
-------------------------
Losses or Expenses made hereunder will be treated by the parties on their Tax
returns as an adjustment to the Purchase Price. If, notwithstanding such
treatment by the parties, any payment of Losses or Expenses is determined to be
taxable income rather than adjustment to the Purchase Price by any taxing
authority, then the indemnifying party shall indemnify the indemnified party for
any Taxes payable by the indemnified party or any subsidiary by reason of the
receipt of such payment (including any payments under this Section 8.4),
determined at an assumed marginal tax rate equal to the highest marginal tax
rate then in effect for corporate taxpayers in the relevant jurisdiction.
49
ARTICLE 9
GENERAL PROVISIONS
------------------
9.1 Survival of Representations, Warranties, and Covenants. Except as
-------------------------------------------------------
set forth in the proviso below, each of the representations and warranties made
in this Agreement or any Transaction Document shall survive each of the Closings
as provided below, regardless of any investigation at any time made by or on
behalf of any party hereto or of any information any party may have in respect
thereof. The representations and warranties set forth in this Agreement (other
than representations and warranties contained in Section 2.1(b) (relating to the
capital structure of HT, HLP and each Subsidiary), Section 2.1(c) (relating to
the authority of HT, HLP and each Subsidiary), Section 2.1(k) (relating to
Taxes), Section 2.1(l) (relating to pension and benefits plans) and Section
2.1(o) (relating to environmental matters), which representations and warranties
shall survive until the expiration of the applicable statute of limitations) or
any Transaction Document shall terminate on the date that is one year and six
months from the date of the last Subsequent Closing Date. Following the date of
termination of a representation or warranty, no claim can be brought with
respect to a breach of such representation or warranty, but no such termination
shall affect any claim for a breach of a representation or warranty that was
asserted in writing pursuant to Article 8 hereof before the date of termination.
To the extent that a covenant or agreement is performable after the First
Closing, the Second Closing or any Subsequent Closing, as applicable, each such
covenant or agreement shall survive such Closing indefinitely. Notwithstanding
the general survival provisions contained in this Section 9.1, (i) HT and HLP
shall be deemed to have waived any and all rights and remedies as to any breach
by CHP of any representation, warranty, covenant or agreement of CHP contained
herein (other than the obligation to acquire all Subsequent Closing Units) or in
any Transaction Document, if HT or HLP shall have knowledge of such breach, and
notwithstanding such knowledge, HT and HLP shall have subsequently consummated a
Closing contemplated by this Agreement; and (ii) CHP shall be deemed to have
waived any and all rights and remedies as to any breach by HT or HLP of any
representation, warranty, covenant or agreement of HT or HLP contained herein
(other than the obligation to issue the Subsequent Closing Units) or in any
Transaction Document occurring prior to such Closing, if CHP shall have
knowledge of such breach and, notwithstanding such knowledge, CHP shall have
subsequently consummated a Closing contemplated by this Agreement.
9.2 Amendment and Modification. This Agreement may not be amended or
----------------------------
modified except by an instrument in writing signed by all of the parties hereto.
9.3 Waiver of Compliance. Any failure of CHP on the one hand, or HT
----------------------
and/or HLP, on the other hand, to comply with any obligation, covenant,
agreement, or condition contained herein may be waived only if set forth in an
instrument in writing signed by the party or parties to be bound by such waiver,
but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement, or condition shall not operate as a waiver of,
or estoppel with respect to, any other failure.
9.4 Specific Performance. The parties recognize that in the event HT
---------------------
or HLP should refuse to perform under the provisions of this Agreement, monetary
damages alone will not be adequate. Accordingly, CHP shall be entitled, in
addition to any other remedies which may be
50
available, including money damages, to obtain specific performance of the terms
of this Agreement. In the event of any action to enforce this Agreement
specifically, HT and HLP hereby waive the defense that there is an adequate
remedy at law. In no event shall HT or HLP be entitled to seek specific
performance with respect to any of CHP's obligations arising under this
Agreement.
9.5 Severability. If any term or other provision of this Agreement is
------------
determined by a court of competent jurisdiction to be invalid, illegal, or
incapable of being enforced under any rule of applicable law, or public policy,
all other conditions and provisions of this Agreement shall nevertheless remain
in full force and effect. Upon such determination that any term or other
provision is invalid, illegal, or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the fullest extent possible.
9.6 Expenses and Obligations. Except as expressly set forth in this
--------------------------
Agreement or any Transaction Document, HT and CHP will each pay its own costs
and expenses in connection with the Transaction Documents and the transactions
contemplated hereby or thereby. In addition, HT and HLP each agrees to pay any
and all stamp, transfer and other similar Taxes payable or determined to be
payable in connection with the execution and delivery of this Agreement and the
issuance of the Preferred Units, the Series A Preferred Shares and all Class A
Shares issuable upon exchange of the Preferred Units, and conversion of the
Series A Preferred Shares.
9.7 Parties in Interest. This Agreement shall be binding upon and,
---------------------
except as provided below, inure solely to the benefit of each party hereto and
their successors, assigns and transferees, and nothing in this Agreement,
express or implied, is intended to confer upon any other Person (other than the
indemnified parties as provided in Article 8) any rights or remedies of any
nature whatsoever under or by reason of this Agreement.
9.8 Notices.
-------
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied, or mailed by
registered or certified mail (return receipt requested), or sent by Federal
Express or other recognized overnight courier, to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to CHP, to:
CNL Hospitality Partners, L.P.
CNL Center at City Commons
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Facsimile: 000-000-0000
Attn: Xxxxx Xxxxxxxxxx
with a copy (which shall not constitute notice hereunder) to:
51
Xxxxxxxxx Traurig, LLP
The MetLife Building
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 212-801-6400
Attn: Xxxxxx Xxxxx, Esq.
Xxxx X. Xxxxxx, Esq.
(b) If to HT or HLP, to:
Hersha Hospitality Trust
000 Xxxxxxxx Xxxxx
Xxx X
Xxx Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile: 000-000-0000
Attn: Xxxx X. Xxxx
with a copy (which shall not constitute notice) to:
Hunton & Xxxxxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Facsimile: 804-788-8218
Attn: Xxxxxxx X. Xxxxx, Esq.
Xxxxxxx Xxxxx, Esq.
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, on the date of receipt, if telecopied, three Business Days
after the date of mailing, if mailed by registered or certified mail, return
receipt requested, and one Business Day after the date of sending, if sent by
Federal Express or other recognized overnight courier.
9.9 Counterparts. This Agreement may be executed and delivered
------------
(including by facsimile transmission) in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
9.10 Entire Agreement. This Agreement (which term, for purposes of
-----------------
this Section, shall be deemed to include the exhibits and schedules hereto and
the other certificates, documents and instruments delivered hereunder)
constitutes the entire agreement of the parties hereto and supersedes all prior
agreements, letters of intent and understandings, both written and oral, among
the parties with respect to the subject matter hereof. There are no
representations or warranties, agreements, or covenants other than those
expressly set forth in this Agreement with respect to the subject matter hereof.
52
9.11 Governing Law; Choice of Forum. This Agreement shall be construed
------------------------------
in accordance with and governed by the internal laws of the State of Maryland
(without giving effect to such State's conflicts of laws principles). Each of
the parties hereto hereby irrevocably consents, to the maximum extent permitted
by law, that any action or proceeding relating to this Agreement or the
transactions contemplated hereby shall be brought, at the option of the party
instituting the action or proceeding, in any court of general jurisdiction in
New York County, New York, in the United States District Court for the Southern
District of New York or in any state or federal court sitting in the area
currently comprising the Southern District of New York. Each of the parties
hereto waives any objection that it may have to the conduct of any action or
proceeding in any such court based on improper venue or forum non conveniens,
waives personal service of any and all process upon it, and consents that all
service of process may be made by mail or courier service directed to it at the
address set forth herein and that service so made shall be deemed to be
completed upon the earlier of actual receipt or ten days after the same shall
have been posted or delivered to a nationally recognized courier service.
Nothing contained in this Section 9.11 shall affect the right of any party
hereto to serve legal process in any other manner permitted by law.
9.12 Public Announcements. HT and HLP, on the one hand, and CHP, on
---------------------
the other hand, shall consult with each other before issuing any press release
or otherwise making any public statements with respect to this Agreement or the
transactions contemplated hereby, except for statements required by law or by
any listing agreements with any national securities exchange or the National
Association of Securities Dealers, Inc., or made in disclosures filed pursuant
to the Securities Act or the Exchange Act.
9.13 Assignment. Neither this Agreement nor any of the rights,
----------
interests, or obligations hereunder shall be assigned by any of the parties
hereto, whether by operation of law or otherwise.
9.14 Headings. The headings of this Agreement are for convenience of
--------
reference only and are not part of the substance of this Agreement.
9.15 Articles, Sections. Unless the context indicates otherwise,
-------------------
references to Articles, Sections and paragraph, shall refer to the corresponding
article, section and paragraph in this Agreement.
[SIGNATURE PAGE FOLLOWS]
53
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed, all as of the date first written above.
CNL HOSPITALITY PARTNERS, L.P.
By: CNL Hospitality GP Corp.,
its general partner
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
HERSHA HOSPITALITY LIMITED
PARTNERSHIP
By: Hersha Hospitability Trust,
its general partner
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
HERSHA HOSPITALITY TRUST
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
Hersha Hospitality Management, L.P. joins in this Agreement for the sole purpose
of acknowledging its obligations with respect to Section 3.18 hereof.
HERSHA HOSPITALITY MANAGEMENT, L.P.
By: Hersha Hospitality Management, Co.,
its general partner
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Controller
(SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT)
54
HT DISCLOSURE SCHEDULE
55
Exhibit A
Form of HW Opinion
------------------
Exhibit B
Form of HW Tax Opinion
----------------------
Exhibit C
Form of BSA Legal Opinion
-------------------------
Exhibit D
Form of Excepted Holder Agreement
---------------------------------
Exhibit E
Form of Registration Rights Agreement
-------------------------------------
Exhibit F
Form of Registration Rights Acknowledgment
------------------------------------------
Exhibit G
Form of Second Amendment to HLP Limited Partnership Agreement
-------------------------------------------------------------
Exhibit H
Form of Joint Venture Agreement
-------------------------------
Exhibit I
Form of Articles Supplementary
------------------------------
Exhibit J
List of CHP's Officers and Employees
------------------------------------
Xxxxx Xxxxxxxxxx, Executive Vice President of Finance and Administration
Xxxxxx Xxxxxxx, Senior Vice President
