CONTRIBUTION AGREEMENT
dated as of June 3, 1998
between
Shree Associates, Devi Associates, Shreeji Associates,
Madhusudan Patni and Shreenathji Enterprises, Ltd.
as Contributors,
and
Hersha Hospitality Limited Partnership,
a Virginia limited partnership,
as Acquiror
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION..................................... 1
1.1 Definitions............................................................ 1
1.2 Rules of Construction.................................................. 6
ARTICLE II
PURCHASE AND SALE; DEPOSIT;
PAYMENT OF CONSIDERATION AND CONTINGENT CONSIDERATION............ 6
2.1 Contribution and Acquisition........................................... 6
2.2 Study Period........................................................... 6
2.3 Payment of Consideration............................................... 8
2.4 Determination of Number of Partnership Units........................... 8
2.5 Contributors' Distribution of Partnership Units........................ 8
2.6 Intentionally Omitted.................................................. 9
2.7 Intentionally Omitted
2.8 Redemption............................................................. 9
2.9 Registration of Common Shares.......................................... 9
2.10 Payment of Contingent Consideration.................................... 9
ARTICLE III
CONTRIBUTORS' REPRESENTATIONS, WARRANTIES AND COVENANTS............. 9
3.1 Organization and Power.................................................10
3.2 Authorization, No Violations and Notices ..............................10
3.3 Litigation with respect to Contributors ...............................11
3.4 Interest...............................................................11
3.5 Bankruptcy with respect to Contributors................................11
3.6 Brokerage Commission...................................................11
3.7 The Partnership........................................................11
3.8 Liabilities, Debts and Obligations.....................................12
3.9 Tax Matters with respect to Partnership................................12
3.10 Contracts and Agreements...............................................13
3.11 No Special Taxes.......................................................13
3.12 Compliance with Existing Laws..........................................13
3.13 Operating Agreements...................................................13
3.14 Warranties and Guaranties..............................................13
3.15 Insurance..............................................................14
3.16 Condemnation Proceedings; Roadways.....................................14
3.17 Litigation with respect to Partnership.................................14
3.18 Labor Disputes and Agreements..........................................14
3.19 Financial Information..................................................14
3.20 Organizational Documents...............................................15
3.21 Operation of Property..................................................15
3.22 Intentionally Omitted..................................................15
3.23 Bankruptcy with respect to Partnership.................................15
3.24 Hazardous Substances...................................................15
3.25 Room Furnishings.......................................................16
3.26 License................................................................16
3.27 Independent Audit......................................................16
3.28 Bulk Sale Compliance...................................................16
3.29 Liquor License.........................................................16
3.30 Sufficiency of Certain Items...........................................17
3.31 Noncompetition.........................................................17
3.32 Leases.................................................................17
3.33 Securities Law Matters.................................................17
3.34 Tax Matters with respect to Contributors...............................17
3.35 Noncontravention.......................................................17
ARTICLE IV
ACQUIROR'S REPRESENTATIONS, WARRANTIES AND COVENANTS................18
4.1 Organization and Power.................................................18
4.2 Noncontravention.......................................................18
4.3 Litigation.............................................................18
4.4 Bankruptcy.............................................................19
4.5 No Brokers.............................................................19
ARTICLE V
CONDITIONS AND ADDITIONAL COVENANTS................19
5.1 Contributors' Deliveries...............................................19
5.2 Representations, Warranties and Covenants; Obligations of Contributors;
Certificate............................................................19
5.3 Title Insurance........................................................19
5.4 Intentionally Omitted..................................................19
5.5 Condition of Improvements..............................................19
5.6 Utilities..............................................................20
5.7 Intentionally Omitted..................................................20
5.8 License................................................................20
5.9 Intentionally Omitted..................................................20
ARTICLE VI
CLOSING.................................20
6.1 Closing................................................................20
6.2 Contributors' Deliveries...............................................20
6.3 Acquiror's Deliveries..................................................22
6.4 Closing Costs..........................................................22
6.5 Income and Expense Allocations.........................................23
ARTICLE VII
CONDEMNATION; RISK OF LOSS........................24
7.1 Condemnation...........................................................24
7.2 Risk of Loss...........................................................24
ARTICLE VIII
LIABILITY OF ACQUIROR; INDEMNIFICATION BY CONTRIBUTORS;
TERMINATION RIGHTS........................25
8.1 Liability of Acquiror..................................................25
8.2 Indemnification by Contributors........................................25
8.3 Termination by Acquiror................................................25
8.4 Termination by Contributors............................................25
ARTICLE IX
MISCELLANEOUS PROVISIONS........................25
9.1 Completeness; Modification.............................................25
9.2 Assignments............................................................25
9.3 Successors and Assigns.................................................26
9.4 Days...................................................................26
9.5 Governing Law..........................................................26
9.6 Counterparts...........................................................26
9.7 Severability...........................................................26
9.8 Costs..................................................................26
9.9 Notices................................................................26
9.10 Incorporation by Reference.............................................27
9.11 Survival...............................................................27
9.12 Further Assurances.....................................................28
9.13 No Partnership.........................................................28
9.14 Time of Essence........................................................28
9.15 Confidentiality........................................................29
LIST OF EXHIBITS
Exhibit A - Land
Exhibit B - Employment Agreements
Exhibit C - Insurance Policies
Exhibit D - Leases
Exhibit E - Operating Agreements
Exhibit F - Contributors' Partnership Agreement
Exhibit G - Contributors' Certificate of Limited Partnership
Exhibit H - Contributors' Warranties and Guaranties
Exhibit I - Litigation Schedule
Exhibit J - Allocation of Consideration
Exhibit K - Schedule of Transferees
Exhibit L - Investor Questionnaire and Agreement
Exhibit M - Hersha Hospitality Limited Partnership Agreement
Exhibit N - Contingent Consideration Calculation
Exhibit O - Shreenathji Enterprises, Ltd. Articles of
Incorporation
Exhibit P - Shreenathji Enterprises, Ltd. Bylaws
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT, dated as of the 3rd day of June, 1998,
between Shree Associates, a Pennsylvania limited partnership ("Shree"), Devi
Associates, a Pennsylvania limited partnership ("Devi"), Shreeji Associates, a
Pennsylvania limited partnership ("Shreeji"), Madhusudan Patni ("Patni") and
Shreenathji Enterprises, Ltd., a Pennsylvania corporation ("SEL") (collectively,
the "Contributors"), and Hersha Hospitality Limited Partnership, a Virginia
limited partnership (the "Acquiror"), provides:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
1.1 Definitions. The following terms shall have the indicated meanings:
"Act of Bankruptcy" shall mean if a party hereto or any
general partner thereof shall (a) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (b) admit in writing its
inability to pay its debts as they become due, (c) make a general assignment for
the benefit of its creditors, (d) file a voluntary petition or commence a
voluntary case or proceeding under the Federal Bankruptcy Code (as now or
hereafter in effect), (e) be adjudicated a bankrupt or insolvent, (f) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
(g) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case or proceeding
under the Federal Bankruptcy Code (as now or hereafter in effect), or (h) take
any corporate or partnership action for the purpose of effecting any of the
foregoing; or if a proceeding or case shall be commenced, without the
application or consent of a party hereto or any general partner thereof, in any
court of competent jurisdiction seeking (1) the liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of debts, of such
party or general partner, (2) the appointment of a receiver, custodian, trustee
or liquidator or such party or general partner or all or any substantial part of
its assets, or (3) other similar relief under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
and such proceeding or case shall continue undismissed; or an order (including
an order for relief entered in an involuntary case under the Federal Bankruptcy
Code, as now or hereafter in effect) judgment or decree approving or ordering
any of the foregoing shall be entered and continue unstayed and in effect, for a
period of 60 consecutive days.
"Shree Assignment and Assumption Agreement" shall mean that
certain assignment and assumption agreement whereby Shree assigns and the
Acquiror assumes the Shree Interest.
"Devi Assignment and Assumption Agreement" shall mean that
certain assignment and assumption agreement whereby Devi assigns and the
Acquiror assumes the Devi Interest.
"Shreeji Assignment and Assumption Agreement" shall mean that
certain assignment and assumption agreement whereby Shreeji assigns and the
Acquiror assumes the Shreeji Interest.
"Patni Assignment and Assumption Agreement" shall mean that
certain assignment and assumption agreement whereby Patni assigns and the
Acquiror assumes the Patni Interest.
"SEL Assignment and Assumption Agreement" shall mean that
certain assignment and assumption agreement whereby SEL assigns and the Acquiror
assumes the SEL Interest.
"Assignment and Assumption Agreements" shall mean the Shree
Assignment and Assumption Agreement, the Devi Assignment and Assumption
Agreement, the Shreeji Assignment and Assumption Agreement, the Patni Assignment
and Assumption Agreement, the Gandhi Assignment and Assumption Agreement and the
SEL Assignment and Assumption Agreement.
"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.
"Consideration" shall mean $3,300,000 payable to the
Contributors at Closing in the manner described in Section 2.3.
"Continuing Liabilities" shall include liabilities arising
under operating agreements, equipment leases, loan agreements, or proration
credits at Closing, but shall exclude any liabilities arising from any other
arrangement, agreement or pending litigation.
"Employment Agreements" shall mean any and all employment
agreements, written or oral, between the Contributors or its managing agent and
the persons employed with respect to the Property. A schedule indicating all
pertinent information with respect to each Employment Agreement in effect as of
the date hereof, name of employee, social security number, wage or salary,
accrued vacation benefits, other fringe benefits, etc.)
is attached hereto as Exhibit B.
"Escrow Agent" shall mean Sentinel Agency, 2146 North Second
Street, Harrisburg, Pennsylvania, 17110, Telephone: (717) 234-2666, Fax: (717)
234-8198.
"FIRPTA Certificates" shall mean the affidavit of each of the
Contributors under Section 1445 of the Internal Revenue Code certifying that
such Contributor is not a foreign corporation, foreign partnership, foreign
trust, foreign estate or foreign person (as those terms are defined in the
Internal Revenue Code and the Income Tax Regulations), in form and substance
satisfactory to the Acquiror.
"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.
"Improvements" shall mean the Hotel and all other
buildings,improvements, fixtures and other items of real estate located on the
Land.
"Shree Interest" shall mean all right, title and interest of
Shree in the Partnership, consisting of a 24.16% limited partnership interest in
the Partnership.
"Devi Interest" shall mean all right, title and interest of
Devi in the Partnership, consisting of a 24.16% limited partnership interest in
the Partnership.
"Shreeji Interest" shall mean all right, title and interest of
Shreeji in the Partnership, consisting of a 29.68% limited partnership interest
in the Partnership.
"Patni Interest" shall mean all right, title and interest of
Patni in the Partnership, consisting of a 21% limited partnership interest in
the Partnership.
"SEL Interest" shall mean all right, title and interest of SEL
in the Partnership, consisting of a 1% general partnership interest in the
Partnership.
"Insurance Policies" shall mean those certain policies of
insurance described on Exhibit C attached hereto.
"Intangible Personal Property" shall mean all intangible
personal property owned or possessed by the Contributors 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
"Holiday Inn" 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 Acquiror 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 Shree Interest, the Devi Interest,
the Shreeji Interest, the Patni Interest and the SEL Interest.
"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.
"Land" shall mean that certain parcel of real estate lying and
being in Milesburg, Centre County, Pennsylvania, as more particularly described
on Exhibit A attached hereto, together with all easements, rights, privileges,
remainders, reversions and appurtenances thereunto belonging or in any way
appertaining, and all of the estate, right, title, interest, claim or demand
whatsoever of the Contributors 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 attached as
Exhibit D attached hereto.
"Manager" shall mean Hersha Hospitality Management L.P.
"Operating Agreements" shall mean the management agreements,
service contracts, supply contracts, leases (other than the Leases) and other
agreements, if any, in effect with respect to the construction, ownership,
operation, occupancy or maintenance of the Property. All of the Operating
Agreements in force and effect as of the date hereof are listed on Exhibit E
attached hereto.
"Organizational Documents" shall mean the current partnership
agreement and certificate of limited partnership of each of the limited
partnership Contributors, true and correct copies of which are attached hereto
as Exhibits F and G and Articles of Incorporation and Bylaws of SEL, true and
correct copies of which are attached hereto as Exhibits O and P.
"Owner's Title Policy" shall mean an owner's policy of title
insurance issued to the Acquiror by the Title Company, pursuant to which the
Title Company insures the Acquiror's ownership of fee simple title to the Real
Property (including the marketability thereof) subject only to Permitted Title
Exceptions. The Owner's Title Policy shall insure the Acquiror in the amount of
the Consideration and shall be acceptable in form and substance to the Acquiror.
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 the Survey.
"Partnership" shall mean MEPS Associates, a Pennsylvania
limited partnership that owns as its sole assets hotel improvements situate in
Milesburg, Centre County, Pennsylvania.
"Permitted Title Exceptions" shall mean those exceptions to
title to the Real Property that are satisfactory to the Acquiror as determined
pursuant to Section 2.2.
"Property" shall mean collectively the Real Property, the
Inventory, the Reservation System, the Tangible Personal Property and the
Intangible Personal Property.
"Real Property" shall mean the Land and the Improvements.
"Reservation System" shall mean the Contributors' Reservation
Terminal and Reservation System equipment and software, if any.
"Shree's Organizational Documents" shall mean the current
partnership agreement and certificate of limited partnership of Shree, true and
correct copies of which are attached hereto as Exhibits F and G.
"Devi's Organizational Documents" shall mean the current
partnership agreement and certificate of limited partnership of Devi, true and
correct copies of which are attached hereto as Exhibits F and G.
"Shreeji's Organizational Documents" shall mean the current
partnership agreement and certificate of limited partnership of Shreeji, true
and correct copies of which are attached hereto as Exhibits F and G.
"SEL's Organizational Documents" shall mean the current
Articles of Incorporation and Bylaws of SEL, true and correct copies of which
are attached hereto as Exhibits O and P.
"Study Period" shall mean the period commencing at 9:00 a.m.
on the date hereof, and continuing through 5:00 p.m. on the Closing Date.
"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;
provided, however, that the Acquiror agrees that, all Inventory shall be
conveyed to the Acquiror's property manager.
"Title Commitment" shall mean the commitment by the Title
Company to issue the Owner's Title Policy.
"Title Company" shall mean Sentinel Agency, 2146 North Second
Street, Harrisburg, Pennsylvania, 17110, Telephone: (717) 234-2666, Fax: (717)
234-8198.
"Tray Ledger" shall mean the final night's room revenue
(revenue from rooms occupied as of 12:01 a.m. on the Effective Date, exclusive
of food, beverage, telephone and similar charges which shall be retained by the
Contributors), including any sales taxes, room taxes or other taxes thereon.
"Utilities" shall mean public sanitary and storm sewers,
natural gas, telephone, public water facilities, electrical facilities and all
other utility facilities and services necessary for the operation and occupancy
of the Property as a hotel.
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) The table of contents and headings contained herein are
solely for convenience of reference and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
(d) Each party hereto and its counsel have reviewed and
revised (or requested revisions of) this Agreement, and therefore any usual
rules of construction requiring that ambiguities are to be resolved against a
particular party shall not be applicable in the construction and interpretation
of this Agreement or any exhibits hereto.
ARTICLE II
CONTRIBUTION AND ACQUISITION; STUDY PERIOD; PAYMENT OF CONSIDERATION
AND CONTINGENT CONSIDERATION
2.1 Contribution and Acquisition. Each of the Contributors agrees to
contribute, assign and transfer its Interest to the Acquiror and the Acquiror
agrees to accept each Contributor's Interest in exchange for the Consideration
and the Contingent Consideration and in accordance with the other terms and
conditions set forth herein.
2.2 Study Period. (a) The Acquiror shall have the right, until 5:00
p.m. on the last day of the Study Period, and thereafter if the Acquiror
notifies the Contributors that the Acquiror has elected to proceed to Closing in
the manner described below, to enter upon the Real Property and to perform, at
the Acquiror's expense, such economic, surveying, engineering, environmental,
topographic and marketing tests, studies and investigations as the Acquiror may
deem appropriate. If such tests, studies and investigations warrant, in the
Acquiror's sole, absolute and unreviewable discretion, the purchase of the
Interests for the purposes contemplated by the Acquiror, then the Acquiror 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 Acquiror does not so
notify the Contributors of its determination to proceed to Closing prior to the
expiration of the Study Period, or if the Acquiror 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
Acquiror shall be released from any further liability or obligation under this
Agreement.
(b) During the Study Period, the Contributors shall make
available to the Acquiror, 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 Acquiror hereby indemnifies and defends the
Contributors against any loss, damage or claim arising from entry upon the Real
Property by the Acquiror or any agents, contractors or employees of the
Acquiror. The Acquiror, at its own expense, shall restore any damage to the Real
Property caused by any of the tests or studies made by the Acquiror.
(d) During the Study Period, the Acquiror, at its expense,
shall cause an examination of title to the Property to be made, and, prior to
the expiration of the Study Period, shall notify the Contributors of any defects
in title shown by such examination that the Acquiror is unwilling to accept. At
or prior to Closing, the Contributors shall notify the Acquiror whether the
Contributors are willing to cure such defects. 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 its option, shall
either pay and discharge (in which event, the Escrow Agent is authorized to pay
and discharge at Closing) such defects at Closing, or provide bonds or
indemnities in favor of the Title Company in order to remove such items from the
Title Policy at Closing. If the Contributors are unwilling or unable to cure any
other such defects by Closing, the Acquiror 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 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 Acquiror's prior written consent, which consent shall not be
unreasonably withheld or delayed. All title matters revealed by the Acquiror's
title examination and not objected to by the Acquiror as provided above shall be
deemed Permitted Title Exceptions. If Acquiror 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.
2.3 Payment of the Consideration. The Consideration shall be paid to
the Contributor in the following manner:
(a) The Acquiror shall receive a credit against the Consideration in an
amount equal to the Contributor's closing costs assumed and paid for by the
Acquiror pursuant to Section 6.4 hereof.
(b) The Acquiror shall receive a credit against the Consideration in an
amount equal to the outstanding balance (principal, interest, fees and the
like), as of the date of Closing, of the existing mortgage loan encumbering the
Property as such balance is evidenced by a letter from the lender, which loan
the Acquiror shall take subject to or, if requested, assume.
(c) The Acquiror shall receive a credit against the Consideration in an
amount equal to the outstanding balance (principal, interest, fees and the
like), as of the date of Closing, of the Contributor's loan to Shreenathji
Enterprises, Ltd., as such balance is evidenced by a letter from the lender,
which loan the Acquiror shall assume.
(d) The Acquiror shall pay the balance of the Consideration, as
adjusted by the prorations pursuant to Section 6.5 hereof, in the form of units
of limited partnership interest in the Acquiror (the "LP Units").
The parties agree that the transfer of the assets to the Acquiror
pursuant to this Agreement shall be treated for federal income tax purposes as a
contribution of such assets solely in exchange for a partnership interest in
Acquiror that qualifies as a tax-free contribution under Section 721 of the
Internal Revenue Code of 1986, as amended.
2.4. Determination of Number of Partnership Units. For purposes of
determining the number of Partnership Units to be delivered by the Acquiror at
the Closing, each Partnership Unit shall be deemed to have a value equal to
$6.00. No fractional Partnership Units will be issued at Closing; in lieu of any
such fraction, the value shall be rounded up to a whole share value.
2.5 Contributors' Distribution of Partnership Units . On the Closing
Date, the Partnership Units shall be distributed among the Contributors , as set
forth on Exhibit K attached hereto , in the amount specified on Exhibit K. On
the date hereof, Contributors shall deliver or cause to be delivered to Acquiror
an Investor Questionnaire and Agreement in the form attached hereto as Exhibit F
(a "Questionnaire"), completed and executed by each of the Contributors . On the
Closing Date, Acquiror shall issue certificates reflecting each of the
Contributors ownership of the Partnership Units. The certificates evidencing the
Partnership Units will bear appropriate legends indicating (i) that the
Partnership Units have not been registered under the Securities Act of 1933, as
amended ("Securities Act"), and (ii) that the Acquiror's Partnership Agreement
restricts the transfer of Partnership Units. The Acquiror shall assume no
responsibility for any allocation of the consideration, including Partnership
Units, to any of the Contributors' partners. Contributors agree to hold Acquiror
and its affiliates harmless and to indemnify Acquiror and its affiliates for all
costs, claims, damages and expenses, including reasonable attorney's fees,
incurred by Acquiror in connection with such allocations. Upon receipt of
Partnership Units, the Acquiror's Partnership Agreement shall be executed by or
on behalf of each of the Contributors and the Contributors shall become limited
partners of Acquiror and agree to be bound by the Partnership Agreement.
2.6 Intentionally Omitted.
2.7 Intentionally Omitted.
2.8 Redemption. The Partnership Units may be redeemed upon delivery of
a notice ("Redemption Notice") from the Contributors , for common shares
("Common Shares") of beneficial interest in Hersha Hospitality Trust (the
"REIT") or for cash, in accordance with the Hersha Hospitality Limited
Partnership Agreement, attached hereto as Exhibit M, and incorporated herein.
2.9 Registration of Common Shares.
The Contributors acknowledge that the issuance of the Common
Shares issuable upon redemption of the Partnership Units shall not have been
registered under the applicable provisions of the Securities Act, as of the
Closing Date. The REIT shall have the Common Shares issuable upon redemption
registered in accordance with the Hersha Hospitality Limited Partnership
Agreement attached hereto as Exhibit M and incorporated herein.
2.10 Consideration Contingency.
The Contributors shall value the Hotel on December 31, 1999. The value
of the Hotel shall be computed by applying a 12% capitalization rate to the
audited trailing 12 months net operating income, adjusted for a 4% of revenue
management fee and a 6% of revenue furniture, fixture and equipment reserve.
If the then current value of the Hotel exceeds the consideration paid
by Acquiror hereunder, the Acquiror will issue additional Partnership Units at
the Offering Price equal to the difference between the then current value and
the consideration paid hereunder and all distributions paid on those units since
Closing Date.
If the then current value of the Hotel is less than the Consideration
paid by the Acquiror hereunder, the Contributors will return to the Acquirer
Partnership Units at the Offering Price equal to the difference between the then
current value of the Hotel and the Consideration paid hereunder and all
distributions paid on those units since the Closing Date.
ARTICLE III
CONTRIBUTORS' REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the Acquiror to enter into this Agreement and to purchase the
Interests, the Contributors hereby make the following representations,
warranties and covenants on a joint and several basis , upon each of which the
Contributors acknowledge and agree that the Acquiror is entitled to rely and has
relied:
3.1 Organization and Power. The Contributors are limited partnerships
duly formed, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, a corporation duly formed, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania or individuals,
and have 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 Contributors hereunder, to perform their obligations under this Agreement
and any such other documents or instruments and to consummate the transactions
contemplated hereby.
3.2 Authorization, No Violations and Notices.
(a) The execution, delivery and performance of this Agreement by
the Contributors, and the consummation of the transactions
contemplated hereby have been duly authorized, adopted and
approved by the partners of the Contributors for those
Contributors that are partnerships to the extent required by
its organizational documents and applicable law. No other
proceedings are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly
executed by Shree, Devi, Shreeji, Patni, and SEL 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
properties or assets of the Partnership, under any of
the terms, conditions, or provisions of, its
Partnership, or any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement, or other
instrument, or obligation to which the Partnership is
a party, or by which the Partnership may be bound, or
to which the Partnership or its properties or assets
may be subject; or
(iii) violate any judgment, ruling, order, writ,
injunction, decree, statute, rule, or regulation
applicable to the Partnership or its property or
assets that would not be violated by the execution,
delivery or performance of this Agreement or the
transactions contemplated hereby by the Contributors
or compliance by the Contributors with any of the
provisions hereof.
3.3 Litigation with respect to Contributors. 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 adversely affect 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
Contribtuors' participation in the transactions contemplated by this Agreement.
3.4 Interests. The Interests will be free and clear of all liens and
encumbrances on the Closing Date and the Contributors have good, merchantable
title thereto and the right to convey same in accordance with the terms of this
Agreement. Upon delivery of the Assignment and Assumption Agreements to the
Acquiror at Closing, good valid and merchantable title to the Interests, free
and clear of all liens and encumbrances, will pass to the Acquiror.
3.5 Bankruptcy with Respect to Contributors. No Act of Bankruptcy has
occurred with respect to the Contributors.
3.6 Brokerage Commission. The Contributors have not engaged the
services of, nor is it or will it or Acquiror 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.
3.7 The Partnership.
(a) The Partnership is a limited partnership duly formed, validly
existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has all requisite powers
necessary to carry on its business as now conducted, to own,
lease and operate its properties.
(b) Neither the execution, delivery, or performance by the
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,
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
properties or assets of the Partnership, under any of
the terms, conditions, or provisions of, their
articles of incorporation or bylaws, or any note,
bond, mortgage, indenture, deed of trust, license,
lease, agreement, or other instrument or obligation
to which the Partnership is a party, or by which the
Partnership may be bound, or to which the Partnership
or its properties or assets may be subject; or
(ii) violate any judgment, ruling, order, writ,
injunction, decree, statute, rule, or regulation
applicable to the Partnership or any of the
Partnership's properties or assets.
(c) Except for the Contributors, no party has any interest in the
Partnership or the right or option to acquire any interest in
the Partnership or the property or any portion thereof. The
Partnership has no subsidiaries and does not directly or
indirectly own any securities of or interest in any other
entity, including, without limitation, any partnership or
joint venture.
3.8 Liabilities, Debts and Obligations. Except for the Continuing
Liabilities, the Partnership has no liability, debt or obligation.
3.9 Tax Matters with respect to Partnership.
(a) The Partnership has filed all income tax information returns on IRS
Form 1065 (including K-1s for each partner) and applicable state and
local income tax forms required to be filed with the United States
Government and with all states and political subdivisions thereof where
any such returns are required to be filed and where the failure to file
such return or report would subject the Partnership or its partners to
any material liability or penalty. All taxes (other than sale taxes,
rental taxes or the equivalent and real property taxes) imposed by the
United States, or by any foreign country, or by any state,
municipality, subdivision, or instrumentality of the United States or
of any foreign country or by any other taxing authority, which are due
and payable by the Partnership have been paid in full or adequately
provided for by reserves shown in their records and books of account
and in the Partnership's financial information. The Partnership has
not obtained or received any extension of time (beyond the Closing
Date) for the assessment of deficiencies for any years or waived or
extended the statute of limitations for the determination or collection
of any tax. To the Contributors' knowledge no unassessed tax
deficiency is proposed or threatened against the Partnership.
(b) All taxes, rental taxes or the equivalent, and all interest and
penalties due thereon, required to be paid or collected by the
Partnership 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 Partnership shall file, all
necessary returns and petitions required to be filed through the
Closing Date. The Partnership shall 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
Partnership. If requested by the Acquiror, the Contributors shall
cause the Partnership to make an election under Section 754 of the Code
for the period ending on the Closing Date.
3.10 Contracts and Agreements. There is no loan agreement, guarantee,
note, bond, indenture and other debt instrument, lease and other contract to
which the Partnership is a party or by which its assets are bound other than
Permitted Title Encumbrances, the Leases, and the Operating Agreements.
3.11 No Special Taxes. The Contributors have no actual knowledge of,
nor have they received any written notice of, any special taxes or assessments
relating to the Partnership or 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 Partnership possesses all
Authorizations, each of which is valid and in full force and effect, and, to
Contributors' actual knowledge, no provision, condition or limitation of any of
the Authorizations has been breached or violated. The Partnership has not
misrepresented or failed to disclose any relevant fact in obtaining all
Authorizations, and the Contributors have no actual 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 actual knowledge, nor have they received written notice within the past three
years, of any existing violation of any provision of any applicable building,
zoning, subdivision, environmental or other governmental ordinance, resolution,
statute, rule, order or regulation, including but not limited to those of
environmental agencies or insurance boards of underwriters, with respect to the
ownership, operation, use, maintenance or condition of the Property or any part
thereof, or requiring any repairs or alterations other than those that have been
made prior to the date hereof.
3.13 Operating Agreements. The Partnership has performed all of its
obligations under each of the Operating Agreements and no fact or circumstance
has occurred which, by itself or with the passage of time or the giving of
notice or both, would constitute a material default under any of the Operating
Agreements. The Partnership shall not 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 Partnership enter
into any agreements modifying the Operating Agreements, unless (a) any such
agreement or modification will not bind the Acquiror or the Property after the
date of Closing or (b) the Contributors have obtained the Acquiror's prior
written consent to such agreement or modification, which consent shall not be
unreasonably withheld or delayed.
3.14 Warranties and Guaranties. The Partnership shall not before
Closing, release or modify any warranties or guarantees, if any, of
manufacturers, suppliers and installers relating to the Improvements and the
Personal Property or any part thereof, except with the prior written consent of
the Acquiror, which consent shall not be unreasonably withheld or delayed. A
complete list of all such warranties and guaranties in effect as of this date is
attached hereto as Exhibit H.
3.15 Insurance. All of the Partnership's Insurance Policies are valid
and in full force and effect, all premiums for such policies were paid when due
and all future premiums for such policies (and any replacements thereof) shall
be paid by the Partnership on or before the due date therefor. The Partnership
shall pay all premiums on, and shall not cancel or voluntarily allow to expire,
any of the Partnership's Insurance Policies prior to the Closing Date unless
such policy is replaced, without any lapse of coverage, by another policy or
policies providing coverage at least as extensive as the policy or policies
being replaced. The Partnership shall name the Acquiror as an additional insured
on each of the Partnership's Insurance Policies.
3.16 Condemnation Proceedings; Roadways. The Partnership has received
no written notice of any condemnation or eminent domain proceeding pending or
threatened against the Property or any part thereof. The Contributors have no
actual 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 Litigation with respect to Partnership. Except as set forth on
Exhibit I there is no action, suit or proceeding pending or known to be
threatened against or affecting the Partnership or its 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 Partnership
are a party or by which they are 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 Partnership, (c) could materially and adversely affect the ability of the
Partnership perform its obligations hereunder, or under any document to be
delivered pursuant hereto, (d) could create a lien on the Property, any part
thereof or any interest therein, or (e) could otherwise materially adversely
affect the Property, any part thereof or any interest therein or the use,
operation, condition or occupancy thereof.
3.18 Labor Disputes and Agreements. The Partnership currently has no
labor disputes pending or, threatened as to the operation or maintenance of the
Property or any part thereof. The Partnership is not 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 Acquiror will not
be obligated to give or pay any amount to any employee of the Partnership, and
the Acquiror shall not have any liability under any pension or profit sharing
plan that the Partnership may have established with respect to the Property or
their or its employees.
3.19 Financial Information. To the best of the Contributors' knowledge
except as otherwise disclosed in writing to the Acquiror prior to the end of the
Study Period, for each of the Partnership's accounting years, when a given year
is taken as a whole, all of the Partnership's financial information previously
delivered or to be delivered to the Acquiror is and shall be correct and
complete in all material respects and presents accurately the results of the
operations of the Property for the periods indicated, except such statements do
not have footnotes or schedules that may otherwise be required by GAAP. If
requested by the Acquiror, Contributors will forward promptly all four-week
period ending financial information it receives from the Partnership.
Contributors' financial information is prepared based on information provided by
the Partnership based on books and records maintained by the Partnership in
accordance with the Partnership's accounting system. Partnership financial
information provided by the Acquiror has been provided to the Acquiror without
any changes or alteration thereto. To the best of Contributors' knowledge, since
the date of the last financial statement included in the Partnership'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 Partnership's Organizational
Documents are in full force and effect and have not been modified or
supplemented, and no fact or circumstance has occurred that, by itself or with
the giving of notice or the passage of time or both, would constitute a default
thereunder.
3.21 Operation of Property. The Contributors covenant that between the
date hereof and the date of Closing they will make good faith efforts to cause
the Partnership to (a) operate the Property only in the usual, regular and
ordinary manner consistent with the Partnership's prior practice, (b) maintain
their 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 their present business organization, keep available
the services of their present officers and employees and preserve their
relationships with suppliers and others having business dealings with them. The
Contributor shall make good faith efforts to encourage the Partnership to
continue to make good 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 Partnership did prior to the execution of this
Agreement. Except as otherwise permitted hereby, from the date hereof until
Closing, the Contributors shall use its good faith efforts to ensure that the
Partnership 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 Acquiror's
ability to continue the operation thereof after the date of Closing 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 Intentionally Omitted.
3.23 Bankruptcy with respect to Partnership. No Act of Bankruptcy has
occurred with respect to the Partnership.
3.24 Hazardous Substances. Except for matters in Partnership's or
Acquiror'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 actual 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 Environmental
Authority, or (3) a basis for liability of the owner of the Property to any
Environmental Authority 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 Acquiror for any Hazardous Substances of which Contributors have no actual
knowledge.
3.25 Room Furnishings. All public spaces, lobbies, meeting rooms, and
each room in the Hotel available for guest rental is furnished in accordance
with Licensor's standards for the Hotel and room type.
3.26 License. The license from Holiday Hospitality, Inc. (the
"Licensor") with respect to the Hotel (the "License") is, and at Closing will
be, valid and in full force and effect, and Contributors will make good faith
efforts not to be in default with respect thereto (with or without the giving of
any required notice and/or lapse of time).
3.27 Independent Audit. Contributors shall provide access by Acquiror's
representatives, to all financial and other information relating to the Property
which would be sufficient to enable them to prepare audited financial statements
in conformity with Regulation S-X of the Securities and Exchange Commission (the
"Commission") and to enable them to prepare a registration statement, report or
disclosure statement for filing with the Commission. Contributors shall also
provide to Acquiror's representatives a signed representative letter and a hold
harmless letter which would be sufficient to enable an independent public
accountant to render an opinion on the financial statements related to the
Property.
3.28 Bulk Sale Compliance. Contributors shall indemnify Acquiror
against any claim, loss or liability arising under the bulk sales law in
connection with the transaction contemplated herein.
3.29 Liquor License. The liquor license for the restaurant located
within the Hotel (the "Liquor License") is in full force and effect and validly
licensed to the person(s) required to be licensed under Pennsylvania law.
3.30 Sufficiency of Certain Items. The Property contains not less
than:
(a) a sufficient amount of furniture, furnishings, color
television sets, carpets, drapes, rugs, floor coverings, mattresses, pillows,
bedspreads and the like, to furnish each guest room, so that each such guest
room is, in fact, fully furnished; and
(b) a sufficient amount of towels, washcloths and bed linens,
so that there are three sets of towels, washcloths and linens for each guest
room (one on the beds, one on the shelves, and one in the laundry), together
with a sufficient supply of paper goods, soaps, cleaning supplies and other such
supplies and materials, as are reasonably adequate for the current operation of
the Hotel.
3.31 Noncompetition. If Contributors develop or acquire other lodging
facilities, not owned at the time of the execution of this Agreement, within 15
miles of any facility owned or to be owned by the Acquiror, the Contributors
shall give the Acquiror the option to purchase the facility for a period of two
years following the opening or acquisition of such facility.
3.32 Leases. True, complete copies of the Leases, if any, are attached
as Exhibit D hereto. The Leases are, and will at Closing be, in full force and
effect and Contributors, is not in default and will make good faith efforts not
to be in default with respect thereto (with or without the giving of any notice
and/or lapse of time). The Leases are, or will be at Closing, freely assignable
by Contributors and Contributors will have obtained consents all necessary
consents of any third party.
3.33 Securities Law Matters. Contributors further represent and warrant
that they have (i) received, reviewed, been given the opportunity to ask
questions of representatives of the Operating Partnership and the REIT
regarding, and understand the Acquiror's Partnership Agreement, as amended, and
each filing of the REIT under the Securities Act, and (ii) Contributors and the
Transferees are "accredited investors" as defined under Regulation D promulgated
under the Securities Act.
3.34 Tax Matters with Respect to Contributors. The Contributors
represent and warrant that they (and each of its partners) have obtained from
its own counsel advice regarding the tax consequences of (i) the transfer of the
Partnership Interest to the Acquiror and the receipt of Partnership Units as
consideration therefor, (ii) the Contributors' admission as partners of the
Acquiror, and (iii) any other transaction contemplated by this Agreement. The
Contributors further represent and warrant that they have not relied on the
Acquiror or the Acquiror's representatives or counsel for such advice.
3.35 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, the Contributors' Organizational Documents 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 Contributor. 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 have granted an
option or right of first refusal to acquire the Property or any part thereof.
Each of the representations, warranties and covenants contained in this Article
III and its various subparagraphs are intended for the benefit of the Acquiror
and may be waived in whole or in part, by the Acquiror, but only by an
instrument in writing signed by the Acquiror. Each of said representations,
warranties and covenants shall survive the closing of the transaction
contemplated hereby for twenty-four (24) months, and no investigation, audit,
inspection, review or the like conducted by or on behalf of the Acquiror shall
be deemed to terminate the effect of any such representations, warranties and
covenants, it being understood that the Acquiror has the right to rely thereon
and that each such representation, warranty and covenant constitutes a material
inducement to the Acquiror to execute this Agreement and to close the
transaction contemplated hereby and to pay the Consideration to the
Contributors. Acquiror acknowledges and agrees that, except for the
representations and warranties expressly set forth herein, Acquiror is acquiring
the Interests "AS-IS, WHERE-IS" with no representations or warranties by or from
Contributors or any of its affiliates, express or implied, or any nature
whatsoever.
ARTICLE IV
ACQUIROR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the Contributors to enter into this Agreement and to sell the
Interests, the Acquiror hereby makes the following representations, warranties
and covenants with respect to the Property, upon each of which the Acquiror
acknowledges and agrees that the Contributors are entitled to rely and have
relied:
4.1 Organization and Power. The Acquiror 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 Acquiror hereunder.
4.2 Noncontravention. The execution and delivery of this Agreement and
the performance by the Acquiror of its obligations hereunder do not and will not
contravene, or constitute a default under, any provisions of applicable law or
regulation, the Acquiror's partnership agreement or any agreement, judgment,
injunction, order, decree or other instrument binding upon the Acquiror or
result in the creation of any lien or other encumbrance on any asset of the
Acquiror.
4.3 Litigation. There is no action, suit or proceeding, pending or
known to be threatened, against or affecting the Acquiror 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 Acquiror is a party or by which it is
bound and that is to be used in connection with, or is contemplated by, this
Agreement, (b) could materially and adversely affect the business, financial
position or results of operations of the Acquiror, (c) could materially and
adversely affect the ability of the Contributors to perform its obligations
hereunder, or under any document to be delivered pursuant hereto, (d) could
create a lien on the Property, any part thereof or any interest therein or (e)
could adversely affect the Property, any part thereof or any interest therein or
the use, operation, condition or occupancy thereof.
4.4 Bankruptcy. No Act of Bankruptcy has occurred with respect to the
Acquiror.
4.5 No Brokers. The Acquiror has not engaged the services of, nor is it
or will it become liable to, any real estate agent, broker, finder or any other
person or entity for any brokerage or finder's fee, commission or other amount
with respect to the transaction described herein.
ARTICLE V
CONDITIONS AND ADDITIONAL COVENANTS
The Acquiror'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 Acquiror, 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 date of Closing as if then made, there shall have occurred
no material adverse change in the financial condition of the Property since the
date hereof, the Contributors shall have performed all of its material covenants
and other obligations under this Agreement and the Contributors shall have
executed and delivered to the Acquiror at Closing a certificate to the foregoing
effect.
5.3 Title Insurance. Good and indefeasible fee simple title to 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 Intentionally Omitted.
5.5 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 Acquiror.
5.6 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.
5.7 Intentionally Omitted.
5.8 License. From the date hereof to and including the Closing Date,
Contributors shall comply with and perform all of the duties and obligations of
licensee under the License.
5.9 Intentionally Omitted.
ARTICLE VI
CLOSING
6.1 Closing. Closing shall be held at a location that is mutually
acceptable to the parties, on or before December 31, 1998.
6.2 Contributors' Deliveries. At Closing, the Contributors shall
deliver to Acquiror 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) The certificate required by Section 5.2.
(b) The Assignment and Assumption Agreements.
(c) Certificate(s)/Registration of Title for any
vehicle owned by the Contributors and used in connection with the Property.
(d) 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.
(e) The FIRPTA Certificates.
(f) True, correct and complete copies of all
warranties, if any, of manufacturers, suppliers and installers possessed by
the Contributors and relating to the Improvements and the Personal Property,
or any part thereof.
(g) Certified copies of the Contributors' and
the Partnership's Organizational Documents.
(h) Appropriate resolutions of the partners of
the Contributors, together with all other necessary approvals and consents of
the Contributors, authorizing (A) the execution on behalf of the Contributors
of this Agreement and the documents to be executed and delivered by the
Contributors prior to, at or otherwise in connection with Closing, and (B)
the performance by the Contributors of its obligations hereunder and under
such documents.
(i) Valid, final and unconditional
certificate(s) of occupancy for the Real Property and Improvements, issued by
the appropriate governmental authority.
(j) The written consent of the Licensor to the
transfer of the license, if applicable, and if so required.
(k) Such proof as the Acquiror may reasonably
require with respect to Contributors' compliance with the bulk sales laws or
similar statutes.
(l) A written instrument executed by the
Contributors, conveying and transferring to the Acquiror all of the
Contributors' right, title and interest in any telephone numbers and
facsimile numbers relating to the Property, and, if the Contributors maintains
a post office box, conveying to the Acquiror all of its interest in and to such
post office box and the number associated therewith, so as to assure a
continuity in operation and communication.
(m) All current real estate and personal
property tax bills in the Contributors' possession or under its control.
(n) A complete set of all guest registration
cards, guest transcripts, guest histories, and all other available guest
information.
(o) An updated schedule of employees, showing
salaries and duties with a statement of the length of service of each such
employee, brought current to a date not more than 48 hours prior to the
Closing.
(p) A complete list of all advance room
reservations, functions and the like, in reasonable detail so as to enable the
Acquiror to honor the Contributors' commitments in that regard.
(q) 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.
(r) Intentionally Omitted
(s) All keys for the Property.
(t) All books, records, operating reports, appraisal
reports, files and other materials in the Contributors' possession or control
which are necessary in the Acquirors 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 Acquiror the Contributors'
employment rating for workmens' compensation and state unemployment tax
purposes.
(v) An 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.
(x) Such agreements, affidavits or other
documents as may be required by the Title Company in order to issue affirmative
mechanics lien coverage in the Owner's Title Policy for the Property.
(y) a completed version of the Questionnaire
from the Contributors and each Transferee.
(z) Any other document or instrument reasonably
requested by the Acquiror or required hereby.
6.3 Acquiror's Deliveries. At Closing, the Acquiror shall pay or
deliver to the Contributors the following:
(a) The Consideration described in Section 2.3.
(b) The Assignment and Assumption Agreements.
(c) The certificates described in Section 2.5 evidencing the
Transferees ownership of the Partnership Units and the admission of the
Transferees as limited partners in the Acquiror.
(d) Any other document or instrument reasonably requested
by the Contributors or required hereby.
6.4 Closing Costs. The Acquiror shall pay all legal fees and expenses.
Any filing fees for the Deed and the real estate transfer, recording or other
similar taxes due with respect to the transfer of title and all charges for
title insurance premiums shall be paid by the Acquiror. The Acquiror shall pay
reasonable fees for the preparation of the documents to be delivered by the
Contributor hereunder. Acquiror shall assume and pay for the releases of the any
deeds of trust, mortgages and other financing encumbering the Property and for
any costs associated with any corrective instruments, and the Acquiror shall
receive a credit against the Consideration for such costs pursuant to Section
2.3(a) hereof.. The Acquiror shall pay all other costs, including all franchise
license transfer fees, in carrying out the transactions contemplated hereunder.
6.5 Income and Expense Allocations. All income, except any Intangible
Personal Property, and expenses with respect to the Property, and applicable to
the period of time before and after Closing, determined in accordance with sound
accounting principles consistently applied, shall be allocated between the
Contributors and the Acquiror. 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 Acquiror shall be entitled to all income
and responsible for all expenses for the period of time from, after and
including the Closing Date. All adjustments 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 Acquiror pursuant to
Section 2.3(d). Without limiting the generality of the foregoing, the following
items of income and expense shall be allocated as of the Closing Date:
(a) Current and prepaid rents, including, without limitation,
prepaid room receipts, function receipts and other reservation receipts.
(b) Real estate and personal property taxes.
(c) Amounts under the Operating Agreements.
(d) Utility charges (including but not limited to charges for
water, sewer and electricity).
(e) Wages, vacation pay, pension and welfare benefits and
other fringe benefits of all persons employed at the Property who the Acquiror
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 Acquiror 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.
Acquiror shall not be obligated to collect any accounts receivable or
revenues accrued prior to the Closing Date for Contributors, but if Acquiror
collects same, such amounts will be promptly remitted to Contributors 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 bill or
other evidence of the applicable income or expense. Any income received or
expense incurred by the Contributors or the Acquiror 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
Partnership Units will be dated as of the Closing Date, and the Contributors
will be entitled to any dividends accruing thereon on and after the Closing
Date.
ARTICLE VII
CONDEMNATION; RISK OF LOSS
7.1 Condemnation. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, of all or any portion of the Real
Property, or any proposed sale in lieu thereof, the Contributors shall give
written notice thereof to the Acquiror promptly after the Contributors learns or
receives notice thereof. If all or any part of the Real Property is, or is to
be, so condemned or sold, the Acquiror shall have the right to terminate this
Agreement pursuant to Section 8.3. If the Acquiror 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 Acquiror 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 the Contributors. If any such
loss or damage to more than twenty five percent (25%) of the value of the
improvements occurs prior to Closing, the Acquiror shall have the right to
terminate this Agreement pursuant to Section 8.3. If the Acquiror 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
Acquiror at Closing.
ARTICLE VIII
LIABILITY OF ACQUIROR; INDEMNIFICATION BY CONTRIBUTORS;
TERMINATION RIGHTS
8.1 Liability of Acquiror. Except for any obligation expressly assumed
or agreed to be assumed by the Acquiror hereunder and in the Assignment and
Assumption Agreement, the Acquiror 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
indemnifies and holds the Acquiror harmless from and against any and all claims,
costs, penalties, damages, losses, liabilities and expenses (including
reasonable attorneys' fees), subject to Section 9.11 that may at any time be
incurred by the Acquiror, whether before or after Closing, as a result of any
breach by the Contributors of any of its representations, warranties, covenants
or obligations set forth herein or in any other document delivered by the
Contributors pursuant hereto.
8.3 Termination by Acquiror. 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 Acquiror to terminate this Agreement and its
obligations hereunder, and the Contributors fails to cure any such matter within
ten business days after notice thereof from the Acquiror, the Acquiror, 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
Acquiror hereunder shall terminate immediately, or (b) to waive its right to
terminate and, instead, to proceed to Closing.
8.4 Termination by Contributors. If, prior to Closing, the Acquiror
defaults in performing any of its obligations under this Agreement (including
its obligation to purchase the Property), and the Acquiror fails to cure any
such default within ten business days after notice thereof from the
Contributors, then the Contributors' sole remedy for such default shall be to
terminate this Agreement.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Completeness; Modification. This Agreement constitutes the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior discussions, understandings,
agreements and negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties hereto.
9.2 Assignments. Neither the Acquiror nor the Contributor shall have
the right to assign its interest in this Agreement; provided, however, the
Acquiror may designate one of its subsidiaries to take title to part or all of
the assets transferred to the Acquiror pursuant to this Agreement, which
designation shall not alter the Acquiror's rights or obligations under this
Agreement.
9.3 Successors and Assigns. The benefits and burdens of this Agreement
shall inure to the benefit of and bind the Acquiror and the Contributors and
their respective party hereto.
9.4 Days. If any action is required to be performed, or if any notice,
consent or other communication is given, on a day that is a Saturday or Sunday
or a legal holiday in the jurisdiction in which the action is required to be
performed or in which is located the intended recipient of such notice, consent
or other communication, such performance shall be deemed to be required, and
such notice, consent or other communication shall be deemed to be given, on the
first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
9.5 Governing Law. This Agreement and all documents referred to herein
shall be governed by and construed and interpreted in accordance with the laws
of the Commonwealth of Pennsylvania.
9.6 Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear on each counterpart
hereof. All counterparts hereof shall collectively constitute a single
agreement.
9.7 Severability. If any term, covenant or condition of this Agreement,
or the application thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term, covenant or condition to other persons or circumstances, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
9.8 Costs. Regardless of whether Closing occurs hereunder, and except
as otherwise expressly provided herein, each party hereto shall be responsible
for its own costs in connection with this Agreement and the transactions
contemplated hereby, including without limitation fees of attorneys, engineers
and accountants.
9.9 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand, transmitted by
facsimile transmission, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by the United States mail, certified,
postage prepaid, return receipt requested, at the addresses and with such copies
as designated below. Any notice, request, demand or other communication
delivered or sent in the manner aforesaid shall be deemed given or made (as the
case may be) when actually delivered to the intended recipient.
If to the Contributors: Jay H. Shah, Esquire
- ----------------------- Hersha Enterprises, Ltd.
The Lafayette Building
437 Chestnut Street, Suite 615
Philadelphia. PA 19106
Phone:(215) 238-1045
Fax:(215) 238-0157
With a copy to: Kiran P. Patel
- --------------- Hersha Enterprises, Ltd.
148 Sheraton Drive, Box A
New Cumberland, PA 17070
Phone:(717) 770-2405
Fax:(717) 774-7383
If to the Acquiror:
Jay H. Shah, Esquire
Hersha Enterprises, Ltd.
The Lafayette Building
437 Chestnut Street, Suite 615
Philadelphia, PA 19106
Phone: (215) 238-1045
Fax: (215) 238-0157
With a copy to: Cameron Cosby, Esquire
- --------------- Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, VA 23219-4074
Phone: (804) 788-8604
Fax: (804) 788-8218
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 Acquiror made in, or pursuant to, this
Agreement shall survive for a period of twenty-four (24) months following
Closing and shall not merge into the Deed or any other document or instrument
executed and delivered in connection herewith.
9.12 Further Assurances. The Contributors and the Acquiror 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 Acquiror specifically
established hereby.
9.14 Time of Essence. Time is of the essence with respect to every
provision hereof.
9.15 Confidentiality. Contributors and its 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.
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the Contributors and the Acquiror have caused this
Agreement to be executed in their names by their respective duly-authorized
representatives.
CONTRIBUTORS:
Shree Associates, a Pennsylvania limited partnership
By: /s/ Hasu P. Shah
------------------------------------------------
Hasu P. Shah, General Partner
Devi Associates, a Pennsylvania limited partnership
By: /s/ Bharat C. Mehta
------------------------------------------------
Bharat C. Mehta, General Partner
Shreeji Associates, a Pennsylvania limited partnership
By: /s/ Rajendra Gandhi
------------------------------------------------
Rajendra Gandhi, General Partner
Shreenathji Enterprises, Ltd., a Pennsylvania corporation
By: /s/ Hasu P. Shah
------------------------------------------------
Hasu P. Shah, President
/s/ Madhusudan Patni
--------------------------
Madhusudan Patni
ACQUIROR:
Hersha Hospitality Limited Partnership,
a Virginia partnership
By: Hersha Hospitality Trust, a Maryland Business
Trust, its sole general partner
By: /s/ Hasu P. Shah
------------------------------------------------
Hasu P. Shah, President