CONTRIBUTION AGREEMENT dated as of August 1, 2008 by and among HERSHA NORTHEAST ASSOCIATES, LLC, KIRIT PATEL, K&D INVESTMENT ASSOCIATES, L.L.C., and ASHWIN SHAH as Contributors, and HERSHA HOSPITALITY LIMITED PARTNERSHIP and HERSHA SMITHFIELD MANAGING...
Exhibit
10.1
dated as
of August 1, 2008
by and
among
HERSHA
NORTHEAST ASSOCIATES, LLC,
XXXXX
XXXXX,
K&D
INVESTMENT ASSOCIATES, L.L.C.,
and
XXXXXX
XXXX
as
Contributors,
and
HERSHA
HOSPITALITY LIMITED PARTNERSHIP
and
HERSHA
SMITHFIELD MANAGING MEMBER, LLC
as
Acquirer,
IN
CONNECTION WITH THE ACQUISITION OF MEMBERSHIP INTERESTS IN
44 HERSHA SMITHFIELD,
LLC
OWNER OF
THE HAMPTON INN AND SUITES LOCATED AT 000 XXXXXXX XXXX, XXXXX #0 AND INTERSTATE
295, SMITHFIELD, RHODE ISLAND
THIS
CONTRIBUTION AGREEMENT, dated as of August 1, 2008 (the "Agreement"), Hersha
Northeast Associates, LLC, a Delaware limited liability company (the "Northeast
Contributor"), Xxxxx Xxxxx, an individual (the "Xxxxx Contributor"),
K&D Investment Associates, L.L.C., a Michigan limited liability company (the
"K&D
Contributor") and Xxxxxx Xxxx, an individual (the "Shah Contributor",
and collectively, all together the "Contributors"), 44
Hersha Smithfield, LLC, a Rhode Island limited liability company (the "Subject Company"),
Hersha Smithfield Managing Member, LLC, a Delaware limited liability company
(the "Manager
Acquirer"), and Hersha Hospitality Limited Partnership, a Virginia
limited partnership (the "Partnership
Acquirer", and together with the Manager Acquirer, the "Acquirer")
provides:
ARTICLE I
1.1 Definitions. The
following terms shall have the indicated meanings:
"Act of Bankruptcy"
shall mean if a party hereto or any general partner thereof shall (a) apply for
or consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property, (b) admit in writing its inability to pay its debts as they become
due, (c) make a general assignment for the benefit of its creditors, (d) file a
voluntary petition or commence a voluntary case or proceeding under the Federal
Bankruptcy Code (as now or hereafter in effect), (e) be adjudicated a bankrupt
or insolvent, (f) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, (g) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
or proceeding under the Federal Bankruptcy Code (as now or hereafter in effect),
or (h) take any corporate or limited liability company action for the purpose of
effecting any of the foregoing; or if a proceeding or case shall be commenced,
without the application or consent of a party hereto or any general partner
thereof, in any court of competent jurisdiction seeking (1) the liquidation,
reorganization, dissolution or winding-up, or the composition or readjustment of
debts, of such party or general partner, (2) the appointment of a receiver,
custodian, trustee or liquidator or such party or general partner or all or any
substantial part of its assets, or (3) other similar relief under any law
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, and such proceeding or case shall continue undismissed; or
an order (including an order for relief entered in an involuntary case under the
Federal Bankruptcy Code, as now or hereafter in effect) judgment or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of sixty (60) consecutive
days.
"Apportionment Date"
shall mean the day immediately preceding the Closing Date.
"Articles of
Organization" shall mean the Articles of Organization of the Subject
Company and the Property Owner filed with the Secretary of State of the State of
Rhode Island, attached hereto as Exhibit
F.
"Assignment and Assumption
Agreement" shall mean those certain Assignment and Assumption Agreements
with respect to the Interests (defined herein below), dated as of the Closing
Date, by and between Contributors and Acquirer.
"Authorizations" shall
mean all licenses, permits and approvals required by any governmental or
quasi-governmental agency, body or officer for the ownership, operation and use
of the Property or any part thereof.
"Closing" shall mean
the Closing of the contribution and acquisition of the Interests pursuant to
this Agreement.
"Closing Date" shall
mean the date on which the Closing occurs, which shall occur within thirty (30)
days after the expiration of the Study Period.
"Consideration" shall
mean the value of Twelve Million Six Hundred Twenty Five Thousand Dollars and
00/100 ($12,625,000.00) less the principal balance of the existing loan from
Berkshire Bank to the Property Owner, dated December 12, 2006, in the original
principal amount of Seven Million Dollars ($7,000,000.00), payable in cash or LP
Units to the Contributors at Closing in the manner described in Section
2.3.
"Continuing
Liabilities" shall include liabilities arising under Operating Contracts,
Leases, equipment leases, loan agreements, or proration credits at Closing, but
shall exclude any liabilities arising from any other arrangement, agreement or
pending litigation.
"Escrow Agent" shall
mean Fidelity National Title Insurance CompanyβNational Title Services, 0000
Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxxxx, XX 00000; Phone 000-000-0000; Fax
000-000-0000.
"Existing Mortgage"
shall mean that certain Mortgage and Security Agreement dated as of December 12,
2006 and securing a loan from Berkshire Bank, to the Property Owner, in the
original principal amount of Seven Million Dollars ($7,000,000.00).
"FIRPTA Certificate"
shall mean the affidavit of the Contributors under Section 1445 of the Internal
Revenue Code certifying that such Contributors are not a foreign corporation,
foreign partnership, foreign limited liability company, foreign trust, foreign
estate or foreign person (as those terms are defined in the Internal Revenue
Code and the Income Tax Regulations), in form and substance satisfactory to the
Acquirer.
"Governmental Body"
means any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign.
"Hotel" shall mean the
hotel and related amenities located on the Land.
"HT" shall mean Hersha
Hospitality Trust, a Maryland real estate investment trust.
"Improvements" shall
mean the Hotel and all other buildings, improvements, fixtures and other items
of real estate located on the Land.
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"Insurance Policies"
shall mean those certain policies of insurance described on Exhibit B attached
hereto.
"Intangible Personal
Property" shall mean all intangible personal property owned or possessed
by the Contributors, the Subject Company or the Property Owner and used in
connection with the ownership, operation, leasing, occupancy or maintenance of
the Property, including, without limitation, the right to use the trade name
"Hampton Inn Smithfield" and all variations thereof, the Authorizations, escrow
accounts, insurance policies, general intangibles, business records, plans and
specifications, surveys and title insurance policies pertaining to the real
property and the personal property, all licenses, permits and approvals with
respect to the construction, ownership, operation, leasing, occupancy or
maintenance of the Property, any unpaid award for taking by condemnation or any
damage to the Land by reason of a change of grade or location of or access to
any street or highway, and the share of the Tray Ledger as hereinafter defined,
excluding (a) any of the aforesaid rights the Acquirer elects not to acquire,
(b) the Contributors' cash on hand, in bank accounts and invested with financial
institutions and (c) accounts receivable except for the above described share of
the Tray Ledger.
"Interests" shall mean
the Northeast Interests, the Xxxxx Interests, the K&D Interests and the Shah
Interests, consisting of One Hundred Percent (100%) of the interests in the
Subject Company.
"Inventory" shall mean
all inventory located at the Hotel, including without limitation, all
mattresses, pillows, bed linens, towels, paper goods, soaps, cleaning supplies
and other such supplies.
"Joinder" shall have
the meaning set forth in Section
2.3(c).
"K&D Interests"
shall mean all right, title and interest of K&D Contributor in the Subject
Company, consisting of a Ten Percent (10%) membership interest in the Subject
Company.
"Knowledge" shall mean
the knowledge of the Contributors that they would have had after making
reasonable investigation.
"Land" shall mean that
certain land condominium unit lying and being in the County of Providence and
State of Rhode Island located at 000 Xxxxxxx Xxxx, Xxxxx #0 and Interstate 295,
Smithfield, Rhode Island, as more particularly described on Exhibit A attached
hereto, together with all easements, rights, privileges and appurtenances
thereunto belonging or in any way appertaining, and all of the leasehold,
interest, estate, right, title, interest, claim or demand whatsoever of the
Property Owner therein, in the streets and ways adjacent thereto and in the beds
thereof, either at law or in equity, in possession or expectancy, now or
hereafter acquired.
"Leases" shall mean
those leases of real property listed on Exhibit C attached
hereto.
"LP Units" shall mean
limited partnership units of Partnership Acquirer.
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"Manager" shall mean
Hersha Hospitality Management, LP, a Pennsylvania limited
partnership.
"Northeast Interests"
shall mean all right, title and interest of Northeast Contributor in the Subject
Company, consisting of a Sixty Percent (60%) membership interest in the Subject
Company.
"Operating Contracts"
shall mean the management agreements, service contracts, supply contracts,
leases (other than the Leases) and other agreements, if any, in effect with
respect to the construction, ownership, operation, occupancy or maintenance of
the Property.
"Owner's Title Policy"
shall mean an owner's policy of title insurance issued to the Acquirer by the
Title Company, dated as of the Closing Date, pursuant to which the Title Company
insures the Property Owner's ownership of title to the fee interest in the Real
Property (including the marketability thereof) subject only to Permitted Title
Exceptions. The Owner's Title Policy shall insure the Property Owner
in the amount of the Consideration and shall be acceptable in form and substance
to the Acquirer. The description of the Land in the Owner's Title
Policy shall be by courses and distances and shall be identical to the
description shown on a survey provided by the Contributors to the
Acquirer.
"Xxxxx Interests"
shall mean all right, title and interest of Xxxxx Contributor in the Subject
Company, consisting of a Twenty Percent (20%) membership interest in the Subject
Company.
"Permitted Title
Exceptions" shall mean those exceptions to title to the Real Property
that are satisfactory to the Acquirer as determined pursuant to Section
2.2.
"Property" shall mean
collectively the Land, Improvements, the Inventory, the Reservation System, the
Tangible Personal Property and the Intangible Personal Property.
"Property Owner" shall
mean the Subject Company which owns, as its only assets, the fee interest in the
Land, the Hotel and Improvements located on the Land.
"Property Owner Operating
Agreement" shall mean the current operating agreement of the Property
Owner, attached hereto as Exhibit
G.
"Real Property" shall
mean the Land and the Improvements.
"Reservation System"
shall mean the Property Owner's reservation terminal and reservation system
equipment and software, if any.
"Securities Act" shall
mean the Securities Act of 1933, as amended.
"Shah Interests" shall
mean all right, title and interest of Shah Contributor in the Subject Company,
consisting of a Ten Percent (10%) membership interest in the Subject
Company.
"Study Period" shall
mean the period commencing as of the date of the Letter of Intent between the
parties, and continuing through June 15,
2008.
4
"Subject Company"
shall mean 44 Hersha Smithfield, LLC, a Rhode Island limited liability company,
which is also the Property Owner.
"Subject Company Operating
Agreement" shall mean the current operating agreement of the Subject
Company, attached hereto as Exhibit
G.
"Tangible Personal
Property" shall mean the items of tangible personal property consisting
of all furniture, fixtures and equipment situated on, attached to, or used in
the operation of the Hotel, and all furniture, furnishings, equipment,
machinery, and other personal property of every kind located on or used in the
operation of the Hotel and owned by the Contributors, the Subject Company or the
Property Owner.
"Title Commitment"
shall mean the commitment by the Title Company to issue the Owner's Title
Policy.
"Title Company" shall
mean Fidelity National Title Insurance Company-National Title Services, 0000
Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxxxx, XX 00000; Phone 000-000-0000; Fax
000-000-0000.
"Tray Ledger" shall
mean the final night's room revenue (revenue from rooms occupied as of 11:59:59
p.m. on the Apportionment Date, inclusive of food, beverage, telephone and
similar charges), net of any sales taxes, room taxes or other taxes
thereon.
"Utilities" shall mean
public sanitary and storm sewers, natural gas, telephone, public water
facilities, electrical facilities and all other utility facilities and services
necessary for the operation and occupancy of the Property as a
hotel.
1.2 Rules of
Construction. The following rules shall apply to the
construction and interpretation of this Agreement:
(a) Singular
words shall connote the plural number as well as the singular and vice versa,
and the masculine shall include the feminine and the neuter.
(b) All
references herein to particular articles, sections, subsections, clauses or
exhibits are references to articles, sections, subsections, clauses or exhibits
of this Agreement.
(c) Headings
contained herein are solely for convenience of reference and shall not
constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.
(d) Each
party hereto and its counsel have reviewed and revised (or requested revisions
of) this Agreement, and therefore any usual rules of construction requiring that
ambiguities are to be resolved against a particular party shall not be
applicable in the construction and interpretation of this Agreement or any
exhibits hereto.
5
ARTICLE II
2.1 Contribution and
Acquisition. The Contributors agree to contribute, assign and
transfer their Interests to the Acquirer and the Acquirer agrees to accept the
Interests in exchange for the Consideration and in accordance with the other
terms and conditions set forth herein.
2.2 Study
Period. (a) The Acquirer shall have the right,
until the end of the Study Period, to enter upon the Real Property and to
perform, at the Acquirer's expense, such economic, surveying, engineering,
environmental, topographic and marketing tests, studies and investigations as
the Acquirer may deem appropriate. If such tests, studies and
investigations warrant, in the Acquirer's sole, absolute and unreviewable
discretion, the acquisition of the Interests for the purposes contemplated by
the Acquirer, then the Acquirer may elect to proceed to Closing and shall so
notify the Contributors prior to the expiration of the Study
Period. If for any reason the Acquirer does not so notify the
Contributors of its determination to proceed to Closing prior to the expiration
of the Study Period, or if the Acquirer notifies the Contributors, in writing,
prior to the expiration of the Study Period that it has determined not to
proceed to Closing, this Agreement automatically shall terminate, and the
Acquirer shall be released from any further liability or obligation under this
Agreement.
(b) During
the Study Period, the Contributors shall make available to the Acquirer, its
agents, auditors, engineers, attorneys and other designees, for inspection
copies of all existing architectural and engineering studies, surveys, title
insurance policies, zoning and site plan materials, correspondence,
environmental audits and other related materials or information if any, relating
to the Property which are in, or come into, the Contributors' possession or
control.
(c) The
Acquirer hereby indemnifies and defends the Contributors against any loss,
damage or claim arising from entry upon the Real Property by the Acquirer or any
agents, contractors or employees of the Acquirer. The Acquirer, at
its own expense, shall restore any damage to the Real Property caused by any of
the tests or studies made by the Acquirer.
(d) During
the Study Period, the Acquirer, at its expense, may cause an examination of
title to the Property to be made, and, prior to the expiration of the Study
Period, may notify the Contributors of any defects in title shown by such
examination that the Acquirer is unwilling to accept. The
Contributors shall notify the Acquirer whether the Contributors are willing to
cure such defects and to proceed to Closing. Contributors may cure,
but shall not be obligated to cure such defects. If such defects
consist of deeds of trust, mechanics' liens, tax liens or other liens or charges
in a fixed sum or capable of computation as a fixed sum, the Contributors, at
their option, shall either pay and discharge (in which event, the Escrow Agent
is authorized to pay and discharge at Closing) such defects at
Closing. If the Contributors are unwilling or unable to cure any such
defects by Closing, the Acquirer shall elect (1) to waive such defects and
proceed to Closing without any abatement in the Consideration or (2) to
terminate this Agreement. The Contributors shall not, after the date
of this Agreement, subject the Property to and shall take all reasonable best
efforts to prevent the Property from being subjected to any liens, encumbrances,
covenants, conditions, restrictions, easements or other title matters or seek
any zoning changes or take any other action which may affect or modify the
status of title without the Acquirer's prior written consent, which consent
shall not be unreasonably withheld or delayed. All title matters
revealed by the Acquirer's title examination and not objected to by the Acquirer
as provided above shall be deemed Permitted Title Exceptions. If
Acquirer shall fail to examine title and notify the Contributors of any such
title objections by the end of the Study Period, all such title exceptions
(other than those rendering title unmarketable and those that are to be paid at
Closing as provided above) shall be deemed Permitted Title
Exceptions.
6
2.3 Payment of the
Consideration. Acquirer shall pay the Consideration to the Contributors
in the following manner:
(a) Acquirer
shall pay to Contributors Twelve Million Six Hundred Twenty Five Thousand
Dollars and 00/100 ($12,625,000.00), which amount includes the pay off,
assumption or modification of the existing loan from Berkshire Bank to the
Property Owner, dated December 12, 2006, in the original principal amount of
Seven Million Dollars ($7,000,000.00), payable in cash. All
mechanics' liens shall be paid in full on or before closing, or Escrow Agent
shall hold back an amount equal to one-hundred and twenty-five percent (125%) of
the amount of any unpaid liens.
(b) At
Closing, the Existing Mortgage shall be paid off, assumed or modified by
Acquirer, and, if assumed or modified, the Property Owner shall remain the
borrower. Any adjustments and prorations to be made pursuant to the
terms of this Agreement shall be paid by wire transfer of immediately available
funds to an account specified by the party due to receive same.
(c) Consideration Contingency -
Earn-Out. The Partnership Acquirer, in its sole discretion,
shall determine the valuation of the Hotel on December 31, 2010. The
valuation of the Hotel shall be computed by applying a nine percent (9.0%)
capitalization rate to the audited trailing twelve (12) months net operating
income, adjusted for the revenue management fee, and a four percent (4.0%) of
revenue furniture, fixture and equipment reserve, property taxes and license
fees, and costs of property insurance (the "Valuation").
If the
then-current Valuation of the Hotel exceeds the amount of Twelve Million and Six
Hundred Twenty-Five Thousand Dollars ($12,625,000.00) ("Acquirer
Consideration") as paid by Acquirer hereunder, the Partnership Acquirer
will pay the lawful money of the United States equal to the difference between
the then-current value and the Acquirer Consideration paid hereunder, but in no
event shall such earn-out payment exceed One Million Five Hundred and Fifteen
Thousand Dollars ($1,515,000.00) for the Hampton Inn
Smithfield.
7
ARTICLE III
To induce
the Acquirer to enter into this Agreement and to acquire the Interests,
Contributors hereby make the following representations, warranties and
covenants, upon each of which Contributors acknowledge and agree that the
Acquirer is entitled to rely and has relied:
3.1 Identity and
Power.
(a) The
Contributors have all requisite powers and all governmental licenses,
authorizations, consents and approvals necessary to carry on their business as
now conducted, to own, lease and operate their respective properties, to execute
and deliver this Agreement and any document or instrument required to be
executed and delivered on behalf of each such Contributor hereunder, to perform
their respective obligations under this Agreement and any such other documents
or instruments and to consummate the transactions contemplated
hereby.
(a) The
execution, delivery and performance of this Agreement by the Contributors, and
the consummation of the transactions contemplated hereby have been duly
authorized, adopted and approved by the Contributors. No other
proceedings are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed by the
Contributors and is a valid and binding obligation enforceable against them in
accordance with its terms.
(b) Neither
the execution, delivery, or performance by the Contributors of this Agreement,
nor the consummation of the transactions contemplated hereby, nor compliance by
the Contributors with any of the provisions hereof, will:
(i)
violate, conflict with, result in a breach of any provision of, constitute a
default (or an event that, which, with or lapse of time or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in a right of termination or acceleration, or
the creation of any lien, security interest, charge, or encumbrance upon any of
the Property, the assets of the Subject Company or assets of the Property Owner,
under any of the terms, conditions, or provisions of, the Articles of
Organization, the Subject Company Operating Agreement, the Property Owner
Operating Agreement or any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement, or other instrument, or obligation to which the
Subject Company or the Property Owner is a party, or by which the Subject
Company or the Property Owner may be bound, or to which the Subject Company or
the Property Owner or their respective properties or assets, or the Property may
be subject; or
(ii) violate
any judgment, ruling, order, writ, injunction, decree, statute, rule, or
regulation applicable to the Subject Company or the Property Owner, their
respective properties or assets, or the Property that would not be violated by
the execution, delivery or performance of this Agreement or the transactions
contemplated hereby by the Contributors or compliance by the Contributors with
any of the provisions hereof.
8
3.3 Litigation with respect to
Contributors. Except as set forth on Exhibit E, there is no
action, suit, claim or proceeding pending or, to the Contributors' Knowledge,
threatened against or affecting the Contributors or their assets in any court,
before any arbitrator or before or by any governmental body or other regulatory
authority (i) that would materially adversely affect the Contributors or the
Interests, (ii) that seeks restraint, prohibition, damages or other relief in
connection with this Agreement or the transactions contemplated hereby, or (iii)
would delay the consummation of any of the transactions contemplated
hereby. The Contributors are not subject to any judgment, decree,
injunction, rule or order of any court relating to the Contributors'
participation in the transactions contemplated by this Agreement.
(a) The
Interests are, on the date hereof, and will be on the Closing Date, free and
clear of all liens and encumbrances and the Contributors have good, marketable
title thereto and the right to convey same in accordance with the terms of this
Agreement. Upon delivery of the Contributors' Assignment and
Assumption Agreement to the Acquirer at Closing, good valid and marketable title
to the Contributors' Interests, free and clear of all liens and encumbrances,
will pass to the Acquirer. The Interests constitute the only
outstanding interests of the Subject Company.
(b) Except
for liens disclosed by Contributors to Acquirer, the Interests are, on the date
hereof, and will be on the Closing Date, free and clear of all liens and
encumbrances, and the Contributors have good, marketable title thereto and the
right to convey same. The Property Owner is the fee owner of the Real
Property and the sole owner of the Property. The Contributors own One
Hundred Percent (100%) of the only outstanding securities and membership
interests of the Subject Company. As of the Closing Date, Acquirer
will own One Hundred Percent (100%) of the only outstanding securities and
membership interests of the Subject Company.
3.5 Bankruptcy. No
Act of Bankruptcy has occurred with respect to any of the
Contributors.
3.6 Brokerage
Commission. The Contributors have not engaged the services of,
nor is it or will it or Acquirer become liable to, any real estate agent,
broker, finder or any other person or entity for any brokerage or finder's fee,
commission or other amount with respect to the transactions described herein on
account of any action by the Contributors.
(a) The
Subject Company is a limited liability company duly formed, validly existing and
in good standing under the laws of the State of Rhode Island and has all
requisite powers necessary to carry on its business as now conducted, to own,
lease and operate its properties.
9
(b) The
Property Owner is a limited liability company duly formed, validly existing and
in good standing under the laws of the State of Rhode Island and has all
requisite powers necessary to carry on its business as now conducted, to own,
lease and operate its properties.
(c) Neither
the execution, delivery, or performance by the Contributors of this Agreement,
nor the consummation of the transactions contemplated hereby, nor compliance by
the Contributors, the Subject Company or the Property Owner with any of the
provisions hereof, will:
(i)
violate, conflict with, result in a breach of any provision of, constitute a
default (or an event that, with notice or lapse of time or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in a right of termination or acceleration, or
the creation of any lien, security interest, charge, or encumbrance upon any of
the Property or other assets of the Subject Company or the Property Owner, under
any of the terms, conditions, or provisions of, the Articles of Organization,
the Subject Company Operating Agreement, the Property Owner Operating Agreement
or any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement, or other instrument or obligation to which the Subject Company or the
Property Owner is a party, or by which the Subject Company or the Property
Owner may be bound, or to which the Subject Company or the Property
Owner or their respective properties or assets may be subject;
or
(ii) violate
any judgment, ruling, order, writ, injunction, decree, statute, rule, or
regulation applicable to the Subject Company or the Property Owner or any of the
Subject Company's properties or assets or the Property Owner's properties or
assets, as applicable.
(d) Except
for the Contributors, no party has any interest in the Subject Company and no
party has any interest in the Property Owner, or any portion thereof, or the
right or option to acquire any interest in the Subject Company, the Property
Owner or the Property or any portion thereof. The Subject Company and
the Property Owner have no subsidiaries and do not directly or indirectly own
any securities of or interest in any entity, including, without limitation, any
limited liability company or joint venture.
(e) The
Subject Company and the Property Owner have conducted no business other than the
ownership and operation of the Property.
3.8 Liabilities, Debts and
Obligations. Except for the Continuing Liabilities and any
other liabilities disclosed by Contributors to Acquirer, the Subject Company and
the Property Owner have no liabilities, debts or obligations.
3.9 Tax
Matters.
(a) Notwithstanding
anything to the contrary contained in this Agreement, including without
limitation the use of words and phrases such as "sell," "sale," purchase," and
"pay," the parties hereto acknowledge and agree that it is their intent that the
transaction contemplated hereby shall be treated for federal income tax purposes
pursuant to Section 721 of the Internal Revenue Code of 1986, as amended, as the
contribution of the Interests by the Contributors to the Acquirer in exchange
for the Consideration, and not as a transaction in which any Contributors are
acting other than in the capacity as a prospective partner in the Partnership
Acquirer.
10
(b) The
Contributors represent and warrant that they have obtained from their own
counsel advice regarding the tax consequences of (i) the transfer of the
Interests to the Acquirer and the receipt of the Consideration therefor, (ii)
the Contributors' admission as a limited partner of the Partnership Acquirer,
and (iii) any other transaction contemplated by this Agreement. Each
Contributor further represents and warrants that it has not relied on the
Acquirer or the Acquirer's representatives or counsel for such tax
advice.
(c) The
Contributors have caused the Subject Company and the Property Owner to file
within the time and in the manner prescribed by law all federal, state, and
local tax returns and reports, including but not limited to income, gross
receipts, intangible, real property, excise, withholding, franchise, sales, use,
employment, personal property, and other tax returns and reports, required to be
filed by the Subject Company and the Property Owner under the laws of the
United States and of each state or other jurisdiction in which the Subject
Company and the Property Owner conduct business activities requiring the
filing of tax returns or reports. All tax returns and reports filed
by the Subject Company and the Property Owner are true and correct in all
material respects. The Subject Company and the Property Owner
have paid in full all taxes of whatever kind or nature for the periods covered
by such returns. The Subject Company and the Property Owner have
not been delinquent in the payment of any tax, assessment, or governmental
charge or deposit and have no tax deficiency or claim outstanding, assessed,
threatened, or proposed against it. The charges, accruals, and
reserves for unpaid taxes on the books and records of the Subject
Company and the Property Owner as of the Closing Date are sufficient in all
respects for the payment of all unpaid federal, state, and local taxes of the
Subject Company and the Property Owner accrued for or applicable to all
periods ended on or before the Closing Date. There are no tax liens,
whether imposed by the United States, any state, local, or other taxing
authority, outstanding against the Subject Company and the Property Owner
or any of their respective assets. The federal, state, and local tax
returns of the Subject Company and the Property Owner have not been
audited, nor have the Subject Company, the Property Owner or the Contributors
received any notice of any federal, state, or local audit. The
Subject Company and the Property Owner have not obtained or received any
extension of time (beyond the Closing Date) for the assessment of deficiencies
for any years or waived or extended the statute of limitations for the
determination or collection of any tax. To the Contributors'
Knowledge, no unassessed tax deficiency is proposed or threatened against the
Subject Company or the Property Owner.
(d) All
taxes, including real property taxes and rental taxes or the equivalent, and all
interest and penalties due thereon, required to be paid or collected by the
Subject Company or the Property Owner in connection with the operation of the
Property as of the Closing Date will have been collected and/or paid to the
appropriate governmental authorities, as required or such amounts shall be
pro-rated as of the Closing Date. The Contributors shall cause the Subject
Company and the Property Owner to file, all necessary returns and petitions
required to be filed through the Closing Date. The Contributors shall
cause the Subject Company and the Property Owner to prepare and file all federal
and state income tax returns for the tax period ending on the Closing Date,
which shall reflect the termination for tax purposes of the Subject Company and
the Property Owner.
11
3.10 Contracts and
Agreements. There is no loan agreement, guarantee, note, bond,
indenture and other debt instrument, lease and other contract to which the
Subject Company or the Property Owner is a party or by which their assets are
bound other than the Permitted Title Exceptions, the Leases, and the Operating
Contracts.
3.11 No Special
Taxes. The Contributors have no Knowledge of, nor have they
received any written notice of, any special taxes or assessments relating to the
Subject Company, the Property Owner or the Property or any part thereof or any
planned public improvements that may result in a special tax or assessment
against the Property.
3.12 Compliance with Existing
Laws. The Subject Company and the Property Owner possess all
Authorizations, each of which is valid and in full force and effect, and, to
Contributors' Knowledge, no provision, condition or limitation of any of the
Authorizations has been breached or violated. Neither the
Subject Company nor the Property Owner has misrepresented or failed to disclose
any relevant fact in obtaining all Authorizations, and the Contributors have no
Knowledge of any change in the circumstances under which those Authorizations
were obtained that result in their termination, suspension, modification or
limitation. The Contributors have no Knowledge, nor have they
received written notice within the past three (3) years, of any existing
violation of any provision of any applicable building, zoning, subdivision,
environmental or other governmental ordinance, resolution, statute, rule, order
or regulation, including but not limited to those of environmental agencies or
insurance boards of underwriters, with respect to the ownership, operation, use,
maintenance or condition of the Property or any part thereof, or requiring any
repairs or alterations other than those that have been made prior to the date
hereof.
3.13 Operating
Contracts. The Subject Company and the Property Owner have
performed all of their respective obligations under each of the Operating
Contracts and no fact or circumstance has occurred which, by itself or with the
passage of time or the giving of notice or both, would constitute a material
default under any of the Operating Contracts. Without the prior
written consent of the Acquirer, which consent will not be unreasonably withheld
or delayed, the Contributors shall cause the Subject Company and the Property
Owner not to enter into any new management agreement, maintenance or repair
contract, supply contract, lease in which it is lessee or other agreements with
respect to the Property, nor shall the Contributors cause the Subject Company or
the Property Owner to enter into any agreements modifying the Operating
Contracts.
3.14 Warranties and
Guaranties. The Contributors shall cause the Subject Company
and the Property Owner not to release or modify any warranties or guarantees, if
any, of manufacturers, suppliers and installers relating to the Improvements and
the Tangible Personal Property or any part thereof, except with the prior
written consent of the Acquirer. A complete list of all such
warranties and guaranties in effect as of the date of this Agreement is attached
hereto as Exhibit
D.
12
3.15 Insurance. All
of the Subject Company's and the Property Owner's Insurance Policies are valid
and in full force and effect, all premiums for such policies were paid when due
and the Contributors shall cause the Subject Company and the Property Owner to
pay all future premiums for such policies (and any replacements thereof) on or
before the due date therefor. The Contributors shall cause the
Subject Company and the Property Owner to pay all premiums on, and shall cause
the Subject Company and the Property Owner not to cancel or allow to expire, any
of their respective Insurance Policies prior to the Closing Date unless such
policy is replaced, without any lapse of coverage, by another policy or policies
providing coverage at least as extensive as the policy or policies being
replaced. The Contributors shall cause the Subject Company and the
Property Owner to name the Acquirer as additional insureds on each of the
Insurance Policies.
3.16 Condemnation Proceedings;
Roadways. Neither the Subject Company nor the Property Owner
have received written notice of any condemnation or eminent domain proceeding
pending or threatened against the Property or any part thereof. The
Contributors have no Knowledge of any change or proposed change in the route,
grade or width of, or otherwise affecting, any street or road adjacent to or
serving the Real Property.
3.17 (a)
Litigation with
Respect to the Subject Company. Except as set forth on Exhibit E there is no
action, suit or proceeding pending or known to be threatened against or
affecting the Subject Company or any part of or interest in the Property in any
court, before any arbitrator or before or by any governmental agency which (a)
in any manner raises any question affecting the validity or enforceability of
this Agreement or any other material agreement or instrument to which the
Subject Company is a party or by which it is bound and that is or is to be used
in connection with, or is contemplated by, this Agreement, (b) could materially
and adversely affect the business, financial position or results of operations
of the Subject Company, (c) could materially and adversely affect the ability of
the Subject Company to perform its obligations hereunder, or under any document
to be delivered pursuant hereto, (d) could create a material lien on the
Property, any part thereof or any interest therein, or (e) could otherwise
materially and adversely affect the Property, any part thereof or any interest
therein or the use, operation, condition or occupancy thereof.
(b) Litigation with Respect to
the Property Owner. Except as set forth on Exhibit E there is no
action, suit or proceeding pending or known to be threatened against or
affecting the Property Owner or any part of or interest in the Property in any
court, before any arbitrator or before or by any governmental agency which (a)
in any manner raises any question affecting the validity or enforceability of
this Agreement or any other material agreement or instrument to which the
Property Owner is a party or by which it is bound and that is or is to be used
in connection with, or is contemplated by, this Agreement, (b) could materially
and adversely affect the business, financial position or results of operations
of the Property Owner, (c) could materially and adversely affect the ability of
the Property Owner to perform its obligations hereunder, or under any document
to be delivered pursuant hereto, (d) could create a material lien on the
Property, any part thereof or any interest therein, or (e) could otherwise
materially and adversely affect the Property, any part thereof or any interest
therein or the use, operation, condition or occupancy thereof.
13
3.18 Labor Disputes and
Agreements. There are not currently any labor disputes pending
or, threatened as to the operation or maintenance of the Property or any part
thereof. Neither the Subject Company nor the Property Owner is
a party to any union or other collective bargaining agreement with employees
employed in connection with the ownership, operation or maintenance of the
Property. The Acquirer will not be obligated to give or pay any
amount to any employee of the Subject Company or the Property Owner, and the
Acquirer shall not have any liability under any pension or profit sharing plan
that the Subject Company or the Property Owner may have established with respect
to the Property or their or its employees.
3.19 Financial
Information.
(a) To
the Contributors' Knowledge, except as otherwise disclosed in writing to the
Acquirer prior to the end of the Study Period, for each of the Subject Company's
accounting years, when a given year is taken as a whole, all of the Subject
Company's financial information previously delivered or to be delivered to the
Acquirer is and shall be correct and complete in all material respects and
presents accurately the financial condition of the Subject Company and results
of the operations of the Property for the periods indicated, except that such
statements do not have footnotes or schedules that may otherwise be required by
GAAP. If requested by the Acquirer, the Contributors shall cause the
Subject Company to deliver promptly all four-week period ending financial
information available to the Subject Company. The Subject Company's
financial information is prepared based on books and records maintained by the
Subject Company in accordance with the Subject Company's accounting
system. The Subject Company's financial information has been provided
to the Acquirer without any changes or alteration thereto. To the
best of Contributors' Knowledge, since the date of the last financial statement
included in the Subject Company's financial information, there has been no
material adverse change in the financial condition or in the operations of the
Property.
(b) To
the Contributors' Knowledge, except as otherwise disclosed in writing to the
Acquirer prior to the end of the Study Period, for each of the Property Owner's
accounting years, when a given year is taken as a whole, all of the Property
Owner's financial information previously delivered or to be delivered to the
Acquirer is and shall be correct and complete in all material respects and
presents accurately the financial condition of the Property Owner and results of
the operations of the Property for the periods indicated, except that such
statements do not have footnotes or schedules that may otherwise be required by
GAAP. If requested by the Acquirer, the Contributors shall cause the
Property Owner to deliver promptly all four-week period ending financial
information available to the Property Owner. The Property Owner's
financial information is prepared based on books and records maintained by the
Property Owner in accordance with the Property Owner's accounting
system. The Property Owner's financial information has been provided
to the Acquirer without any changes or alteration thereto. To the
best of Contributors' Knowledge, since the date of the last financial statement
included in the Property Owner's financial information, there has been no
material adverse change in the financial condition or in the operations of the
Property.
3.20 Organizational
Documents. The Articles of Organization, the Subject Company
Operating Agreement and the Property Owner Operating Agreement, are in full
force and effect and have not been modified or supplemented, and no fact or
circumstance has occurred that, by itself or with the giving of notice or the
passage of time or both, would constitute a default thereunder.
14
3.21 Operation of
Property. The Contributors covenant that between the date
hereof and the Closing Date, Contributors shall cause the Subject Company and
the Property Owner to (a) operate the Property only in the usual, regular and
ordinary manner consistent with the Subject Company's and the Property Owner's
prior practice, (b) maintain the books of account and records in the usual,
regular and ordinary manner, in accordance with sound accounting principles
applied on a basis consistent with the basis used in keeping its books in prior
years, and (c) use all reasonable efforts to preserve intact the present
business organization, keep available the services of the present officers and
employees and preserve their relationships with suppliers and others having
business dealings with them. The Contributors shall cause the Subject
Company and the Property Owner to continue to make good faith efforts to take
guest room reservations and to book functions and meetings and otherwise to
promote the business of the Property in generally the same manner as the Subject
Company and the Property Owner did prior to the execution of this
Agreement. Except as otherwise permitted hereby, from the date hereof
until Closing, the Contributors shall use their good faith efforts to ensure
that the Subject Company and the Property Owner shall not take any action or
fail to take action the result of which (i) would have a material adverse effect
on the Property or the Acquirer's ability to continue the operation thereof
after the Closing Date in substantially the same manner as presently conducted,
(ii) reduce or cause to be reduced any room rents or any other charges over
which Contributors have operational control, or (iii) would cause any of the
representations and warranties contained in this Article III to be
untrue as of Closing.
3.22 Bankruptcy with respect to
the Subject Company and the Property Owner. No Act of
Bankruptcy has occurred with respect to the Subject Company or the Property
Owner.
3.23 Hazardous
Substances. Except for matters in the Subject Company's, the
Property Owner's or Acquirer's audits, Contributors have no
Knowledge: (a) of the presence of any Hazardous Substances (as
defined below) on the Property, or any portion thereof, or, (b) of any spills,
releases, discharges, or disposal of Hazardous Substances that have occurred or
are presently occurring on or onto the Property, or any portion thereof, or (c)
of the presence of any PCB transformers serving, or stored on, the Property, or
any portion thereof, and Contributors have no Knowledge of any failure to comply
with any applicable local, state and federal environmental laws, regulations,
ordinances and administrative and judicial orders relating to the generation,
recycling, reuse, sale, storage, handling, transport and disposal of any
Hazardous Substances (as used herein, "Hazardous Substances"
shall mean any substance or material whose presence, nature, quantity or
intensity of existence, use, manufacture, disposal, transportation, spill,
release or effect, either by itself or in combination with other materials is
either: (1) potentially injurious to the public health, safety or
welfare, the environment or the Property, (2) regulated, monitored or defined as
a hazardous or toxic substance or waste by any Governmental Body, or (3) a basis
for liability of the owner of the Property to any Governmental Body or third
party, and Hazardous Substances shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil, or any products, by-products or
components thereof, and asbestos). Notwithstanding anything to the
contrary contained herein Contributors shall have no liability to Acquirer for
any Hazardous Substances of which Contributors have no
Knowledge.
15
3.24 Room
Furnishings. All public spaces, lobbies, meeting rooms, and
each room in the Hotel available for guest rental is furnished in accordance
with commercially reasonable standards for the Hotel and room type.
3.25 Independent
Audit. Contributors shall provide access by Acquirer's
representatives, to all financial and other information relating to the
Property, the Subject Company and the Property Owner.
3.26 Bulk Sale
Compliance. Contributors shall indemnify Acquirer against any
claim, loss or liability arising under the bulk sales law in connection with the
transaction contemplated herein.
3.27 Sufficiency of Certain
Items. The Property contains not less than:
(a) a
sufficient amount of furniture, furnishings, color television sets, carpets,
drapes, rugs, floor coverings, mattresses, pillows, bedspreads and the like, to
furnish each guest room, so that each such guest room is, in fact, fully
furnished; and
(b) a
sufficient amount of towels, washcloths and bed linens, so that there are three
(3) sets of towels, washcloths and linens for each guest room (one on the beds,
one on the shelves, and one in the laundry), together with a sufficient supply
of paper goods, soaps, cleaning supplies and other such supplies and materials,
as are reasonably adequate for the current operation of the Hotel.
3.28 Leases. True,
complete copies of the Leases, are attached as Exhibit C
hereto. The Leases are, and will at Closing be, in full force and
effect and neither Contributors, the Subject Company nor the Property Owner, are
in default and the Contributors shall make good faith efforts for themselves,
the Subject Company and the Property Owner not to be in default with respect
thereto (with or without the giving of any notice and/or lapse of
time).
3.29 Noncontravention. The
execution and delivery of, and the performance by the Contributors of, their
obligations under this Agreement do not and will not contravene, or constitute a
default under, any provision of applicable law or regulation, or any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Contributors, or result in the creation of any lien or other encumbrance on any
asset of the Contributors. There are no outstanding agreements
(written or oral) pursuant to which the Contributors (or any predecessor to or
representative of the Contributors) have agreed to contribute or has granted an
option or right of first refusal to acquire the Interests or the Property or any
part thereof.
3.30 Securities Law
Matters.
(a) The
Contributors are knowledgeable, sophisticated and experienced in business and
financial matters; the Contributors have previously invested in securities
similar to the LP Units and fully understand the limitations on transfer imposed
by the federal securities laws and as described in this Agreement. The
Contributors are able to bear the economic risk of holding the LP Units for an
indefinite period and are able to afford the complete loss of its investment in
the LP Units; the Contributors have received and reviewed all information and
documents about or pertaining to Partnership Acquirer and HT, the business and
prospects of Partnership Acquirer and HT and the issuance of the LP
Units as the Contributors deem necessary or desirable; and the Contributors have
had the opportunity to review public filings made with the SEC pursuant to the
Exchange Act related to Partnership Acquirer and HT; and the Contributors have
been given the opportunity to obtain any additional information or documents and
to ask questions and receive answers about such information and documents,
Partnership Acquirer, HT, the business and prospects of Partnership Acquirer and
HT and the LP Units which the Contributors deem necessary or desirable to
evaluate the merits and risks related to their investment in the LP Units and to
conduct their own independent valuation of the LP Units; and the Contributors
understand and have taken cognizance of all risk factors related to the
acquisition of the LP Units. The Contributors were at no time
presented with or solicited by any form of general solicitation or general
advertising, including, but not limited to, any advertisement, article, notice
or other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising in
connection with the acquisition of the LP Units contemplated
hereby. The Contributors are sophisticated real estate
investors. In acquiring the LP Units and engaging in this
transaction, the Contributors are not relying upon any representations made to
it by Acquirer or HT, or any of the officers, employees, or agents of Acquirer
or HT not contained herein. The Contributors are relying upon their own
independent analysis and assessment (including with respect to taxes), and the
advice of such Contributors' advisors (including tax advisors), and not upon
that of Acquirer or HT or any of Acquirer's or HT's advisors or affiliates, for
purposes of evaluating, entering into, and consummating the transactions
contemplated by this Agreement. The Contributors represent and warrant that they
has reviewed and approved the form of the Partnership Acquirer's Limited
Partnership Agreement.
16
(b) The
Contributors understand that the LP Units have not been registered under the
Securities Act or any state securities acts and are instead being offered and
sold in reliance on an exemption from such registration requirements. The LP
Units issuable to the Contributors are being acquired solely for the
Contributors' own accounts, for investment, and are not being acquired with a
view to, or for resale in connection with, any distribution, subdivision, or
fractionalization thereof, in violation of such laws, and the Contributors have
no present intention to enter into any contract, undertaking, agreement, or
arrangement with respect to any such resale. The Contributors understand that
any certificates evidencing the LP Units will contain appropriate legends as
required by the Partnership Acquirer's Limited Partnership Agreement that
reflect the non-negotiability of the certificate and that the LP Units
represented by the certificate are governed by and are transferable only in
accordance with the provisions of the Partnership Acquirer's Limited Partnership
Agreement.
(c) Each
Contributor is an "accredited investor" as that term is defined in Rule 501 of
Regulation D under the Securities Act. In order to be an "accredited
investor", as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act, you must be one of the following:
(i)
a bank as defined in Section 3(a)(2) of the Securities
Act, or a savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or
fiduciary capacity;
17
(ii) a
broker or dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934, as amended (the "Exchange
Act");
(iii) an
insurance company as defined in Section 2(13) of the Securities
Act;
(iv) an
investment company registered under the Investment Company Act of 1940, as
amended;
(v) a
business development company as defined in Section 2(a)(48) of the Investment
Company Act of 1940, as amended;
(vi) a
Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958, as amended;
(vii) a
plan established and maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political subdivisions, for the
benefit of its employees, if such plan has total assets in excess
of Five Million Dollars ($5,000,000.00);
(viii) an
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974, as amended if the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company or registered investment
adviser, or if the employee benefit plan has total assets in excess of Five
Million Dollars ($5,000,000.00) or, if a self-directed plan, with investment
decisions made sole by persons that are accredited investors;
(ix)
a private business development company as defined in Section 202(a)(22) of the
Investment Advisors Act of 1940, as amended;
(x)
an (a) organization described in Section 501(c)(3) of the Internal Revenue Code
of 1986, as amended, (b) corporation, (c) Massachusetts or similar business
trust, (d) partnership, or (e) limited liability company, in each case not
formed for the specific purpose of acquiring LP Units of the Partnership
Acquirer or shares of HT's common stock, with total assets in excess of Five
Million Dollars ($5,000,000.00);
(xi)
a director or executive officer of Partnership Acquirer or HT;
(xii)
a natural person whose individual net worth, or joint net worth with his or her
spouse, at the time of his or her acquisition of the LP Units exceeds One
Million Dollars ($1,000,000.00);
(xiii)
a natural person who has an individual income in excess of Two Hundred Thousand
Dollars ($200,000.00) in each of the two most recent years or joint income with
that person's spouse in excess of Three Hundred Thousand Dollars ($300,000.00)
in each of those years and has a reasonable expectation of reaching the same
income level in the current year;
18
(xiv) a
trust, with total assets in excess of Five Million Dollars ($5,000,000.00), not
formed for the specific purpose of acquiring LP Units of the Partnership
Acquirer or shares of HT's common stock whose acquisition of LP Units of the
Partnership Acquirer or shares of HT's common stock is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D under
the Securities Act; or
(xv) an
entity in which all of the equity owners are accredited investors.
3.31 Patriot Act
Representations. Each Contributor and, to the actual knowledge
of each such Contributor, any direct owner of the Subject Company, the Property
Owner or such Contributor, (i) are not included on any Government List (as
defined below), (ii) are not persons who have been determined by competent
authority to be subject to the prohibitions contained in the Presidential
Executive Order No. 13224 or any other similar prohibitions contained in the
rules and regulations of the OFAC or in any enabling legislation or other
Presidential Executive Orders in respect thereof, (iii) have not been indicted
or convicted of any Patriot Act Offenses, or (iv) are not currently under
investigation by any governmental authority for alleged criminal
activity. For purposes of this Agreement, (i) "Government List"
means (A) the Specially Designated Nationals and Blocked Persons List maintained
by OFAC, (B) any other list of terrorists, terrorist organizations or narcotics
traffickers maintained pursuant to any of the Rules and Regulations of OFAC, or
(C) any similar list maintained by the United States Department of State, the
United States Department of Commerce or any other governmental authority or
pursuant to any Executive Order of the President of the United States of
America; (ii) "OFAC" means the
Office of Foreign Asset Control, U.S. Department of the Treasury, (iii) "Patriot Act" means
the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as the same may
be amended from time to time, and corresponding provisions of future laws, and
(iv) "Patriot Act
Offense" means any violation of the criminal laws of the United States of
America or of any of the several states, or that would be a criminal violation
if committed within the jurisdiction of the United States of America or any of
the several states, relating to terrorism or the laundering of monetary
instruments, including any offense under (A) the criminal laws against
terrorism, (B) the criminal laws against money laundering, (C) the Bank Secrecy
Act, as amended, (D) the Money Laundering Control Act of 1986, as amended, or
(E) the Patriot Act and also includes the crimes of conspiracy to commit, or
aiding and abetting another to commit, any of the foregoing.
Each of
the representations, warranties and covenants contained in this Article III and its
various subparagraphs are intended for the benefit of the Acquirer and may be
waived in whole or in part, by the Acquirer, but only by an instrument in
writing signed by the Acquirer. Each of said representations,
warranties and covenants shall survive the closing of the transaction
contemplated hereby for twelve (12) months, and no investigation, audit,
inspection, review or the like conducted by or on behalf of the Acquirer shall
be deemed to terminate the effect of any such representations, warranties and
covenants, it being understood that the Acquirer has the right to rely thereon
and that each such representation, warranty and covenant constitutes a material
inducement to the Acquirer to execute this Agreement and to close the
transaction contemplated hereby and to pay the Consideration to the
Contributors. Acquirer acknowledges and agrees that, except for the
representations and warranties expressly set forth herein, Acquirer is acquiring
the Subject Company, the Property Owner and the Property "AS-IS, WHERE-IS" with
no representations or warranties by or from Contributors, express or implied, or
any nature whatsoever.
19
ARTICLE IV
To induce
the Contributors to enter into this Agreement and to sell the Interests, the
Acquirer hereby makes the following representations, warranties and covenants
upon each of which the Acquirer acknowledges and agrees that the Contributors
are entitled to rely and have relied:
(a) The
Partnership Acquirer is a limited partnership duly organized, validly existing
and in good standing under the laws of the Commonwealth of Virginia, and has all
partnership powers and all governmental licenses, authorizations, consents and
approvals to carry on its business as now conducted and to enter into and
perform its obligations under this Agreement and any document or instrument
required to be executed and delivered on behalf of the Partnership Acquirer
hereunder.
(b) The
Manager Acquirer is a Delaware limited liability company and has all requisite
powers and all governmental licenses, authorizations, consents and approvals
necessary to carry on its business as now conducted, to own, lease and operate
its properties, to execute and deliver this Agreement and any document or
instrument required to be executed and delivered on behalf of the Manager
Acquirer hereunder.
4.2 Noncontravention. The
execution and delivery of this Agreement and the performance by the Acquirer of
its obligations hereunder do not and will not contravene, or constitute a
default under, any provisions of applicable law or regulation, the Partnership
Acquirer's partnership agreement, the Manager Acquirer's operating agreement, or
any agreement, judgment, injunction, order, decree or other instrument binding
upon the Acquirer or result in the creation of any lien or other encumbrance on
any asset of the Acquirer.
4.3 Litigation. There
is no action, suit or proceeding, pending or known to be threatened, against or
affecting the Acquirer in any court or before any arbitrator or before any
Governmental Body which (a) in any manner raises any question affecting the
validity or enforceability of this Agreement or any other agreement or
instrument to which the Acquirer are a party or by which it is bound and that is
to be used in connection with, or is contemplated by, this Agreement, (b) could
materially and adversely affect the ability of the Acquirer to perform its
obligations hereunder, or under any document to be delivered pursuant
hereto.
4.4 Bankruptcy. No
Act of Bankruptcy has occurred with respect to the Acquirer.
20
4.5 No
Brokers. The Acquirer has not engaged the services of, nor is
it or will it become liable to, any real estate agent, broker, finder or any
other person or entity for any brokerage or finder's fee, commission or other
amount with respect to the transaction described herein.
ARTICLE V
The
Acquirer's obligations hereunder are subject to the satisfaction of the
following conditions precedent and the compliance by the Contributors with the
following covenants:
5.1 Contributors'
Deliveries. The Contributors shall have delivered to the
Escrow Agent or the Acquirer, as the case may be, on or before the date of
Closing, all of the documents and other information required of Contributors
pursuant to Section
6.2.
5.2 Representations, Warranties
and Covenants; Obligations of Contributors; Certificate. All
of the Contributors' representations and warranties made in this Agreement shall
be true and correct as of the date hereof and as of the Closing Date as if then
made, there shall have occurred no material adverse change in the financial
condition of the Property, the Subject Company or the Property Owner since the
date hereof, the Contributors shall have performed all of their material
covenants and other obligations under this Agreement and the Contributors shall
have executed and delivered to the Acquirer at Closing a certificate to the
foregoing effect.
5.3 Title
Insurance. Good and indefeasible title to the fee interest in
the Real Property shall be insurable as such by the Title Company at or below
its regularly scheduled rates subject only to Permitted Title Exceptions as
determined in accordance with Section
2.2.
5.4 Condition of
Improvements. The Improvements and the Tangible Personal
Property (including but not limited to the mechanical systems, plumbing,
electrical, wiring, appliances, fixtures, heating, air conditioning and
ventilating equipment, elevators, boilers, equipment, roofs, structural members
and furnaces) shall be in the same condition at Closing as they are as of the
date hereof, reasonable wear and tear excepted. Prior to Closing, the
Contributors shall not have diminished the quality or quantity of maintenance
and upkeep services heretofore provided to the Real Property and the Tangible
Personal Property and the Contributors shall not have diminished the
Inventory. The Contributors shall not have removed or caused or
permitted to be removed any part or portion of the Real Property or the Tangible
Personal Property unless the same is replaced, prior to Closing, with similar
items of at least equal quality and acceptable to the Acquirer.
5.5 Utilities. All
of the Utilities shall be installed in and operating at the Property, and
service shall be available for the removal of garbage and other waste from the
Property.
5.6 Interests. From
the date hereof to and including the Closing Date, Contributors shall not sell,
assign, pledge, hypothecate or otherwise transfer the Interests, except as
contemplated by this Agreement, nor shall the Contributors cause or permit the
Subject Company or the Property Owner to issue any securities, partnership or
membership interests, as the case may be, to any person or to sell, pledge,
transfer or otherwise dispose of the Property or any interest
therein.
21
5.7 Existing
Mortgage. Acquirer acknowledges that the Property and the
Property Owner are subject to the Existing Mortgage, a loan in the original
principal amount of Seven Million Dollars ($7,000,000.00) from Berkshire
Bank. As part of the Consideration, Acquirer will assume, modify or
pay off the Existing Mortgage.
5.8 Third Party
Consents. In the event of an assumption or modification of the
Existing Mortgage as contemplated in Sections 2.3(b) and
5.7, then as a condition to Closing, the Contributors shall cause the
Property Owner to receive approval from Berkshire Bank. (i) to the contribution
of the Interests to Acquirer as contemplated hereunder and (ii) to the
percentage lease structure whereby, on the Closing Date, the Property Owner
shall lease the Property to a REIT subsidiary ("Lessee") pursuant to
a percentage lease, and Lessee shall enter into a new management agreement with
Manager.
ARTICLE VI
6.1 Closing. Closing
shall be held at a location that is mutually acceptable to the
parties. The anticipated Closing Date is August 1, 2008, which date
may be modified by the mutual consent of the parties.
6.2 Contributor'
Deliveries. At Closing, the Contributors shall deliver to
Acquirer all of the following instruments, each of which shall have been duly
executed and, where applicable, acknowledged on behalf of the Contributors and
shall be dated as of the date of Closing:
(a) Certificates
representing the Interests.
(b) The
closing certificate required by Section
5.2.
(c) The
Assignment and Assumption Agreement.
(d) Any
and all service contracts, space leases, and agreements.
(e) Such
agreements, affidavits or other documents as may be required by the Title
Company to issue the Owner's Title Policy with affirmative coverage over
mechanics' and materialmen's liens.
(f)
The FIRPTA Certificate.
(g) True,
correct and complete copies of all warranties, if any, of manufacturers,
suppliers and installers possessed by the Contributors, the Subject Company or
the Property Owner and relating to the Improvements and the Personal Property,
or any part thereof.
22
(h) Copies
of the Articles of Organization, the Subject Company Operating Agreement and the
Property Owner Operating Agreement.
(i)
Appropriate consent of the Subject Company, authorizing (A) the execution of any
documents to be executed and delivered by the Subject Company prior to, at or
otherwise in connection with Closing and in connection with the transactions
contemplated by this Agreement, and (B) the performance by the Subject Company
of its obligations hereunder and under such documents.
(j)
Appropriate consent of the Property Owner, authorizing (A) the execution
of any documents to be executed and delivered by the Property Owner prior to, at
or otherwise in connection with Closing and in connection with the transactions
contemplated by this Agreement, and (B) the performance by the Property Owner of
its obligations hereunder and under such documents.
(k) Valid,
final and unconditional certificate(s) of occupancy for the Real Property and
Improvements, issued by the appropriate Governmental Body.
(l)
Such proof, reasonably acceptable to the Acquirer, evidencing the payment
by Contributors of all transfer taxes incurred in connection with the
transactions contemplated by this Agreement.
(m) A
written instrument executed by the Contributors, conveying and transferring to
the Acquirer all of the Contributors' right, title and interest in any telephone
numbers and facsimile numbers relating to the Property, and, if the Contributors
maintain a post office box, conveying to the Acquirer all of their interest in
and to such post office box and the number associated therewith, so as to assure
a continuity in operation and communication.
(n)
All current real estate and personal property tax bills in the Contributors'
possession or under their control.
(o) A
complete set of all guest registration cards, guest transcripts, guest
histories, and all other available guest information.
(p) An
updated schedule of employees, showing salaries and duties with a statement of
the length of service of each such employee, brought current to a date not more
than 48 hours prior to the Closing.
(q) A
complete list of all advance room reservations, functions and the like, in
reasonable detail so as to enable the Acquirer to honor the Contributors'
commitments in that regard.
(r)
A list of the Contributors' outstanding accounts receivable as of midnight on
the date prior to the Closing, specifying the name of each account and the
amount due the Contributors.
23
(s) Possession
of the Property and all keys for the Property.
(t) All
books, records, operating reports, appraisal reports, files and other materials
in the Contributors', the Subject Company's or the Property Owner's possession
or control which are necessary in the Acquirer's discretion to maintain
continuity of operation of the Property.
(u) To
the extent permitted under applicable law, documents of transfer necessary to
transfer to the Acquirer the Contributors' employment rating for workmens'
compensation and state unemployment tax purposes.
(v) As
assignment of all warranties and guarantees from all contractors and
subcontractors, manufacturers, and suppliers in effect with respect to the
Improvements.
(w) Complete
set of "as-built" drawings for the Improvements as available in Contributors',
the Subject Company's or the Property Owner's possession.
(x) Any
other document or instrument reasonably requested by the Acquirer or required
hereby.
6.3 Acquirer's
Deliveries. At Closing, the Acquirer shall pay or deliver to
the Contributor the following:
(a) The
Consideration described in Section
2.3.
(b) The
Assignment and Assumption Agreement.
(c) Any
other document or instrument reasonably requested by the Contributors or
required hereby.
6.4 Closing
Costs. Each party shall pay its own legal fees and
expenses. All filing fees and all charges for title insurance
premiums shall be paid by Acquirer. Any other costs, expenses or
taxes shall be paid by Contributor.
6.5 Income and Expense
Allocations. All income, except any Intangible Personal
Property, and expenses with respect to the Property, determined in accordance
with United States generally accepted accounting principles consistently
applied, shall be allocated between the Contributors and the
Acquirer. The Contributors shall be entitled to all income (including
all cash box receipts and cash credits for unused expendables), and responsible
for all expenses for the period of time up to but not including 12:01 a.m. on
the Closing Date, and the Acquirer shall be entitled to all income and
responsible for all expenses for the period of time from, after and including
12:01 a.m. on the Closing Date. Only adjustments for ground rent, if
applicable, and real estate taxes shall be shown on the settlement statements
(with such supporting documentation as the parties hereto may require being
attached as exhibits to the settlement statements) and shall increase or
decrease (as the case may be) the amount payable by the Acquirer. All
other such adjustments shall be made by separate agreement between the parties
and shall be payable by check or wire directly between the
parties. Without limiting the generality of the foregoing, the
following items of income and expense shall be allocated as of the Closing
Date:
24
(a) Current
and prepaid rents, including, without limitation, prepaid room receipts,
function receipts and other reservation receipts.
(b) Real
estate and personal property taxes.
(c) Amounts
under the Operating Contracts.
(d) Utility
charges (including but not limited to charges for water, sewer and
electricity).
(e)
Wages, vacation pay, pension and welfare benefits and other fringe benefits of
all persons employed at the Property who the Acquirer elects to
employ.
(f)
Value of fuel stored on the Property at the price paid for such fuel by the
Contributors, including any taxes.
(g) All
prepaid reservations and contracts for rooms confirmed by Contributors prior to
the Closing Date for dates after the Closing Date, all of which Acquirer shall
honor.
The Tray
Ledger shall be retained by the Contributors. The Contributors shall
be required to pay all sales taxes and similar impositions currently up to the
Closing Date.
Acquirer
shall not be obligated to collect any accounts receivable or revenues accrued
prior to the Closing Date for Contributors, but if Acquirer collects same, such
amounts will be promptly remitted to Contributor in the form
received.
If
accurate allocations cannot be made at Closing because current bills are not
obtainable (as, for example, in the case of utility bills or tax bills), the
parties shall allocate such income or expenses at Closing on the best available
information, subject to adjustment upon receipt of the final xxxx or other
evidence of the applicable income or expense. Any income received or
expense incurred by the Contributors or the Acquirer with respect to the
Property after the date of Closing shall be promptly allocated in the manner
described herein and the parties shall promptly pay or reimburse any amount
due. The Contributors shall pay at Closing all special assessments
and taxes applicable to the Property.
The
certificates evidencing the Contributors' ownership of the Interests will be
dated as of the Closing Date
25
ARTICLE VII
7.1 Condemnation. In
the event of any actual or threatened taking, pursuant to the power of eminent
domain, of all or any portion of the Real Property, or any proposed sale in lieu
thereof, the Contributors shall give written notice thereof to the Acquirer
promptly after the Contributors learn or receive notice thereof. If
all or any part of the Real Property is, or is to be, so condemned or sold, the
Acquirer shall have the right to terminate this Agreement pursuant to Section
8.3. If the Acquirer elects not to terminate this Agreement,
all proceeds, awards and other payments arising out of such condemnation or sale
(actual or threatened) shall be paid or assigned, as applicable, to the Acquirer
at Closing.
7.2 Risk of
Loss. The risk of any loss or damage to the Property
prior to the recordation of the Deed shall remain upon
Contributors. If any such loss or damage to more than Ten Percent
(10%) of the value of the Improvements occurs prior to Closing or any such loss
or damage is uninsured or underinsured, the Acquirer shall have the right to
terminate this Agreement pursuant to Section
8.3. If the Acquirer elects not to terminate this Agreement,
all insurance proceeds and rights to proceeds arising out of such loss or damage
shall be paid or assigned, as applicable, to the Acquirer at
Closing.
ARTICLE VIII
8.1 Liability of
Acquirer. Except for any obligation expressly assumed or
agreed to be assumed by the Acquirer hereunder and in the Assignment and
Assumption Agreement, the Acquirer does not assume any obligation of the
Contributors or any liability for claims arising out of any occurrence prior to
Closing.
8.2 Indemnification by
Contributors. The Contributors hereby indemnify and hold the
Acquirer harmless from and against any and all suits, actions, claims, costs,
penalties, damages, losses, liabilities and expenses, subject to Section 9.11,
that may at any time be incurred by the Acquirer, whether before or after
Closing, (i) as a result of any breach by the Contributors of any of their
representations, warranties, covenants or obligations set forth herein or in any
other document delivered by the Contributors pursuant hereto, (ii) relating to
any suits, litigation or actions brought against any Contributors, the Subject
Company or the Property Owner prior to the Closing Date, (iii) in connection
with any and all liabilities and obligations of the Subject Company or the
Property Owner occurring, accruing or arising prior to the Closing Date, and/or
(iv) as a result of or in connection with the use or operation of the Property
prior to the Closing Date.
8.3 Termination by
Acquirer. If any condition set forth herein cannot or will not
be satisfied prior to Closing, or upon the occurrence of any other event that
would entitle the Acquirer to terminate this Agreement and its obligations
hereunder, and the Contributors fail to cure any such matter within five (5)
days after notice thereof from the Acquirer, the Acquirer, at its option and as
its sole remedy, shall elect either (a) to terminate this Agreement, and all
other rights and obligations of the Contributors and the Acquirer hereunder
shall terminate immediately, or (b) to waive its right to terminate and,
instead, to proceed to Closing.
26
8.4 Termination by
Contributors. If, prior to Closing, the Acquirer defaults in
performing any of its obligations under this Agreement, and the Acquirer fails
to cure any such default within five (5) business days after notice thereof from
the Contributors, then the Contributors' sole remedy for such default shall be
to terminate this Agreement.
ARTICLE IX
9.1 Completeness;
Modification. This Agreement constitutes the entire agreement
between the parties hereto with respect to the transactions contemplated hereby
and supersedes all prior discussions, understandings, agreements and
negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties
hereto.
9.2 Assignments. The
Acquirer may assign its rights hereunder to any affiliate of Acquirer without
the consent of the Contributors. No such assignment shall relieve the
Acquirer of any of its obligations and liabilities hereunder.
9.3 Successors and
Assigns. The benefits and burdens of this Agreement shall
inure to the benefit of and bind the Acquirer and the Contributors and their
respective successors and assigns.
9.4 Days. If
any action is required to be performed, or if any notice, consent or other
communication is given, on a day that is a Saturday or Sunday or a legal holiday
in the jurisdiction in which the action is required to be performed or in which
is located the intended recipient of such notice, consent or other
communication, such performance shall be deemed to be required, and such notice,
consent or other communication shall be deemed to be given, on the first
business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
9.5 Governing Law. This
Agreement and all documents referred to herein shall be governed by and
construed and interpreted in accordance with the laws of the Commonwealth of
Pennsylvania.
9.6 Counterparts. To
facilitate execution, this Agreement may be executed in as many counterparts as
may be required. It shall not be necessary that the signature on
behalf of both parties hereto appear on each counterpart hereof. All
counterparts hereof shall collectively constitute a single
agreement.
27
9.7 Severability. If
any term, covenant or condition of this Agreement, or the application thereof to
any person or circumstance, shall to any extent be invalid or unenforceable, the
remainder of this Agreement, or the application of such term, covenant or
condition to other persons or circumstances, shall not be affected thereby, and
each term, covenant or condition of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
9.8 Costs. Regardless
of whether Closing occurs hereunder, and except as otherwise expressly provided
herein, each party hereto shall be responsible for its own costs in connection
with this Agreement and the transactions contemplated hereby, including without
limitation fees of attorneys, engineers and accountants.
9.9 Notices. All
notices, requests, demands and other communications hereunder shall be in
writing and shall be delivered by hand, transmitted by facsimile transmission,
sent prepaid by Federal Express (or a comparable overnight delivery service) or
sent by the United States mail, certified, postage prepaid, return receipt
requested, at the addresses and with such copies as designated
below. Any notice, request, demand or other communication delivered
or sent in the manner aforesaid shall be deemed given or made (as the case may
be) when actually delivered to the intended recipient.
|
If to
the Contributors:
|
Hersha
Northeast Associates, LLC
|
00 Xxxxxx
Xxxxx
Xxxxxxxxxx,
XX 00000
Phone: (000)
000-0000
Fax:
(000) 000-0000
Xxxxx Xxxxx
000
Xxxxxxx Xxxxx Xxxx
Xxxxxxx,
XX 00000
K&D
Investment Associates, L.L.C.
000
Xxxxxxx Xxxx
Xxxxxx,
XX 00000
Xxxxxx
Xxxx
000
Xxxxxxx Xxxx
Xxxxxx,
XX 00000
|
|
With a copy
to:
|
Xxxx X. Xxxxxx,
Esquire
|
Doherty,
Wallace, Pillsbury and Xxxxxx, P.C.
Xxx
Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
Phone: (000)
000-0000
Fax:
(000) 000-0000
|
|
If to the
Acquirer:
|
Hersha
Hospitality Limited Partnership
|
00 Xxxxxx
Xxxxx
Xxxxxxxxxx,
XX 00000
Phone:
(000) 000-0000
Fax:
(000) 000-0000
Attn:
Xxxxxx X. Xxxxxx
28
|
|
With a copy
to:
|
Lok Mohapatra,
Esquire
|
Franklin Firm,
LLP
Penn Mutual Towers
000
Xxxxxx Xxxxxx, 0xx
xxxxx
Xxxxxxxxxxxx,
XX 00000
Phone:
(000) 000-0000
Fax:
(000) 000-0000
Or to
such other address as the intended recipient may have specified in a notice to
the other party. Any party hereto may change its address or designate
different or other persons or entities to receive copies by notifying the other
party and the Escrow Agent in a manner described in this Section.
9.10 Incorporation by
Reference. All of the exhibits attached hereto are by this
reference incorporated herein and made a part hereof.
9.11 Survival. All of the representations, warranties, covenants and
agreements of the Contributors and the Acquirer made in, or pursuant to, this
Agreement shall survive for a period of twelve (12) months following Closing and
shall not merge into the Assignment and Assumption Agreement or any other
document or instrument executed and delivered in connection herewith, except for
the representations and warranties set forth in Sections 3.4, 3.7 and 3.9, which shall
survive for periods coterminous with applicable statutes of
limitations.
9.12 Further
Assurances. The Contributors and the Acquirer each covenant
and agree to sign, execute and deliver, or cause to be signed, executed and
delivered, and to do or make, or cause to be done or made, upon the written
request of the other party, any and all agreements, instruments, papers, deeds,
acts or things, supplemental, confirmatory or otherwise, as may be reasonably
required by either party hereto for the purpose of or in connection with
consummating the transactions described herein.
9.13 No
Partnership. This Agreement does not and shall not be
construed to create a partnership, joint venture or any other relationship
between the parties hereto except the relationship of Contributors and Acquirer
specifically established hereby.
9.14 Time of
Essence. Time is of the essence with respect to every
provision of this Agreement.
9.15 Confidentiality. Contributors
and their representatives, including any professionals representing
Contributors, shall keep the existence and terms of this Agreement strictly
confidential, except to the extent disclosure is compelled by law, and then only
to the extent of such compulsion.
[The
remainder of this page is left intentionally blank.]
29
IN WITNESS WHEREOF, the
Contributors and the Acquirer have caused this Contribution Agreement to be
executed in their names by their respective duly-authorized
representatives.
|
CONTRIBUTORS:
|
|||
|
HERSHA NORTHEAST ASSOCIATES,
LLC, a Delaware limited liability company
|
|||
|
By:
|
|
||
|
Name:
|
Xxxxxx
X. Xxxxx
|
||
|
Title:
|
Manager
|
||
|
XXXXX
XXXXX
|
|||
|
|
|||
|
Xxxxx
Xxxxx, an individual
|
|||
|
K&D INVESTMENT ASSOCIATES,
L.L.C., a Michigan limited liability company
|
|||
|
By:
|
|
||
|
Name:
|
Xxxxx
X. Xxxx
|
||
|
Title:
|
Manager
|
||
|
XXXXXX
XXXX
|
|||
|
|
|||
|
Xxxxxx
Xxxx, an individual
|
|||
30
|
ACQUIRER:
|
||||
|
HERSHA HOSPITALITY LIMITED
PARTNERSHIP, a Virginia limited partnership
|
||||
|
By:
|
Hersha
Hospitality Trust, a Maryland real estate investment trust, its sole
general partner
|
|||
|
By:
|
|
|||
|
Name:
|
Xxxxxx
X. Xxxxxx
|
|||
|
Title:
|
CFO
|
|||
|
HERSHA SMITHFIELD MANAGING MEMBER, LLC, a
Delaware limited liability company
|
||||
| By: |
|
|||
| Name: | Xxxxxx X. Xxxxxx | |||
| Title: | Manager | |||
31