CONTRIBUTION AGREEMENT
dated as of June 3, 1998
between
144 ASSOCIATES, 344 ASSOCIATES,
544 ASSOCIATES AND 644 ASSOCIATES,
JOINT TENANTS DOING BUSINESS AS
2544 ASSOCIATES
as Contributor,
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......................................................................... 5
ARTICLE II
CONTRIBUTION AND ACQUISITION; DEPOSIT;
PAYMENT OF ACQUIRE PRICE AND CONTINGENT ACQUIRE PRICE........................... 5
2.1 Contribution and Acquisition.................................................................. 5
2.2 Intentionally Omitted......................................................................... 5
2.3 Study Period.................................................................................. 5
2.4 Payment of Consideration...................................................................... 6
2.5 Allocation of Consideration................................................................... 7
2.6 Determination of Number of LP Units........................................................... 7
2.7 Contributor's Transfer of LP Units to Contributor's Partner................................... 7
2.8 Redemption.................................................................................... 7
2.9 Registration of Common Shares................................................................. 7
2.10 Payment of Contingent Consideration............................................................ 8
ARTICLE III
CONTRIBUTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS........................... 8
3.1 Organization and Power......................................................................... 8
3.2 Authorization and Execution.................................................................... 9
3.3 Noncontravention............................................................................... 9
3.4 No Special Taxes............................................................................... 9
3.5 Compliance with Existing Laws.................................................................. 9
3.6 Operating Agreements........................................................................... 9
3.7 Warranties and Guaranties..................................................................... 10
3.8 Insurance..................................................................................... 10
3.9 Condemnation Proceedings; Roadways............................................................ 10
3.10 Litigation.................................................................................... 10
3.11 Labor Disputes and Agreements................................................................. 10
3.12 Financial Information......................................................................... 11
3.13 Organizational Documents...................................................................... 11
3.14 Operation of Property......................................................................... 11
3.15 Personal Property............................................................................. 11
3.16 Bankruptcy.................................................................................... 12
3.17 Intentionally Omitted......................................................................... 12
3.18 Hazardous Substances.......................................................................... 12
3.19 Room Furnishings.............................................................................. 12
3.20 License....................................................................................... 12
3.21 Independent Audit............................................................................. 12
3.22 Bulk Sale Compliance.......................................................................... 13
3.23 Intentionally Omitted......................................................................... 13
3.24 Sufficiency of Certain Items.................................................................. 13
3.25 Noncompetition................................................................................ 13
3.26 Leases........................................................................................ 13
3.27 Securities Law Matters........................................................................ 13
3.28 Tax Matters................................................................................... 14
ARTICLE IV
ACQUIROR'S REPRESENTATIONS, WARRANTIES AND COVENANTS............................ 14
4.1 Organization and Power........................................................................ 14
4.2 Noncontravention.............................................................................. 14
4.3 Litigation.................................................................................... 15
4.4 Bankruptcy.................................................................................... 15
4.5 No Brokers.................................................................................... 15
ARTICLE V
CONDITIONS AND ADDITIONAL COVENANTS.................................... 15
5.1 Contributor's Deliveries...................................................................... 15
5.2 Representations, Warranties and Covenants; Obligations of Contributor; Certificate............ 15
5.3 Title Insurance............................................................................... 15
5.4 Intentionally Omitted......................................................................... 15
5.5 Condition of Improvements..................................................................... 16
5.6 Utilities..................................................................................... 16
5.7 Intentionally Omitted......................................................................... 16
5.8 License....................................................................................... 16
5.9 Intentionally Omitted......................................................................... 16
ARTICLE VI
CLOSING................................................................................. 16
6.1 Closing....................................................................................... 16
6.2 Contributor's Deliveries...................................................................... 16
6.3 Acquiror's Deliveries......................................................................... 18
6.4 Closing Costs................................................................................. 19
6.5 Income and Expense Allocations................................................................ 19
ARTICLE VII
CONDEMNATION; RISK OF LOSS......................................... 20
7.1 Condemnation.................................................................................. 20
7.2 Risk of Loss.................................................................................. 21
ARTICLE VIII
LIABILITY OF ACQUIROR; INDEMNIFICATION BY CONTRIBUTOR;
TERMINATION RIGHTS............................................. 21
8.1 Liability of Acquiror......................................................................... 21
8.2 Indemnification by Contributor................................................................ 21
8.3 Termination by Acquiror....................................................................... 21
8.4 Termination by Contributor.................................................................... 21
ARTICLE IX
MISCELLANEOUS PROVISIONS.......................................... 22
9.1 Completeness; Modification.................................................................... 22
9.2 Assignments................................................................................... 22
9.3 Successors and Assigns........................................................................ 22
9.4 Days.......................................................................................... 22
9.5 Governing Law................................................................................. 22
9.6 Counterparts.................................................................................. 22
9.7 Severability.................................................................................. 22
9.8 Costs......................................................................................... 22
9.9 Notices....................................................................................... 22
9.10 Incorporation by Reference.................................................................... 23
9.11 Survival...................................................................................... 23
9.12 Further Assurances............................................................................ 24
9.13 No Partnership................................................................................ 24
9.14 Time of Essence............................................................................... 24
9.15 Confidentiality............................................................................... 24
LIST OF EXHIBITS
Exhibit A - Legal Description
Exhibit B - Employment Agreements
Exhibit C - Insurance Policies
Exhibit D - Leases
Exhibit E - Operating Agreements
Exhibit H - Contributor's 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
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT, dated as of the 3rd day of June 1998,
between 144 Associates, 344 Associates, 544 Associates and 644 Associates, joint
tenants doing business as 2455 Associates (individually and collectively the
"Contributor"), 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.
"Assignment and Assumption Agreement" shall mean that certain
assignment and assumption agreement whereby the Contributor (a) assigns and the
Acquiror assumes the Leases, (b) assigns and the Acquiror assumes the Operating
Agreements that have not been canceled at Acquiror's request and (c) assigns all
of the Contributor's right, title and interest in and to the Intangible Personal
Property, to the extent assignable.
"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.
"Bill of Sale [Inventory]" shall mean that certain bill of
sale conveying title to the Inventory to the Acquiror's property manager, lessee
or designee.
"Bill of Sale [Personal Property]" shall mean that certain
bill of sale conveying title to the Tangible Personal Property, Intangible
Personal Property and the Reservation System from the Contributor to the
Acquiror.
"Closing" shall mean the Closing of the contribution and
acquisition of the Property pursuant to this Agreement.
"Closing Date" shall mean the date on which the Closing
occurs.
"Consideration" shall mean $3,380,000, payable to the
Contributor at Closing in the manner described in Section 2.4.
"Deed" shall mean that certain deed conveying title to the
Improvements with special warranty from the Contributor to the Acquiror, subject
only to Permitted Title Exceptions. The description of the Land in the Deed
shall be by courses and distances and, if there is a discrepancy between the
description of the Land attached hereto as Exhibit A and the description of the
Land as shown on the Survey, the description of the Land in the Deed shall be
identical to the description shown on the Survey.
"Employment Agreements" shall mean any and all employment
agreements, written or oral, between the Contributor or its managing agent and
the persons employed with respect to the Property. A schedule indicating all
pertinent information with respect to each Employment Agreement in effect as of
the date hereof, name of employee, social security number, wage or salary,
accrued vacation benefits, other fringe benefits, etc.)
is attached hereto as Exhibit B.
"Escrow Agent" shall mean the Sentinel Agency, 2146 North
Second Street, Harrisburg, Pennsylvania 17110, Telephone: 717/234-2666, Fax:
717/234-8198.
"FIRPTA Certificate" shall mean the affidavit of the
Contributor under Section 1445 of the Internal Revenue Code certifying that the
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.
"Insurance Policies" shall mean those certain policies of
insurance described on Exhibit C attached hereto.
"Intangible Personal Property" shall mean all intangible
personal property owned or possessed by the Contributor 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 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 determined under Section 6.5, excluding (a) any of the aforesaid
rights the Acquiror elects not to acquire, (b) the Contributor's cash on hand,
in bank accounts and invested with financial institutions and (c) accounts
receivable except for the above described share of the Tray Ledger.
"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 New Columbia, Union 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 Contributor therein, in the streets and ways adjacent
thereto and in the beds thereof, either at law or in equity, in possession or
expectancy, now or hereafter acquired.
"Leases" shall mean those leases of real property attached as
Exhibit D attached hereto.
"Manager" shall mean Hersha Hospitality Mangement, 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.
"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
Improvements (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.
"Permitted Title Exceptions" shall mean those exceptions to
title to the Real Property that are satisfactory to the Acquiror as determined
pursuant to Section 2.3.
"Property" shall mean collectively the Improvements, the
Inventory, the Reservation System, the Tangible Personal Property and the
Intangible Personal Property.
"Real Property" shall mean the Land and the Improvements.
"Reservation System" shall mean the Contributor's Reservation
Terminal and Reservation System equipment and software, if any.
"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 Contributor;
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 the 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 Closing Date, exclusive of
food, beverage, telephone and similar charges which shall be retained by the
Contributor), including any sales taxes, room taxes or other taxes thereon.
"Utilities" shall mean public sanitary and storm sewers,
natural gas, telephone, public water facilities, electrical facilities and all
other utility facilities and services necessary for the operation and occupancy
of the Property as a hotel.
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
ACQUISITION AND CONTRIBUTION;
PAYMENT OF CONSIDERATION AND CONTINGENT CONSIDERATION
2.1 Contribution and Acquisition. The Contributor agrees to contribute
and the Acquiror agrees to acquire the Property for the Consideration and the
Contingent Consideration and in accordance with the other terms and conditions
set forth herein.
2.2 Intentionally Omitted
2.3 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 Contributor 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 acquisition of the
Property for the purposes contemplated by the Acquiror, then the Acquiror may
elect to proceed to Closing and shall so notify the Contributor prior to the
expiration of the Study Period. If for any reason the Acquiror does not so
notify the Contributor of its determination to proceed to Closing prior to the
expiration of the Study Period, or if the Acquiror notifies the Contributor, in
writing, prior to the expiration of the Study Period that it has determined not
to proceed to Closing, this Agreement automatically shall terminate, the
Acquiror shall be released from any further liability or obligation under this
Agreement.
(b) During the Study Period, the Contributor 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 Contributor's
possession or control.
(c) The Acquiror hereby indemnifies and defends the
Contributor 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 Contributor of any defects
in title shown by such examination that the Acquiror is unwilling to accept. At
or prior to Closing, the Contributor shall notify the Acquiror whether the
Contributor is willing to cure such defects. Contributor 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 Contributor, 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 Contributor is 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 Contributor 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 Contributor 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.
2.4 Payment of 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.
2.5 Allocation of Consideration. The parties agree that the
Consideration shall be allocated among the various components of the Property in
the manner indicated on Exhibit J attached hereto.
2.6 Determination of Number of LP Units. For purposes of determining
the number of LP Units to be delivered by the Acquiror at the Closing, each LP
Unit shall be deemed to have a value equal to Six Dollars ($6.00). The
Contributor shall be entitled to receive at the Closing for distribution to the
Transferees pursuant to Section 2.7 hereof the number of LP Units calculated by
dividing the Consideration by the Unit Price.
2.7 Contributor's Transfer of LP Units to Contributor's Partners. On
the Closing Date, Contributor shall distribute all of the LP Units to its
partners, as set forth on Exhibit K attached hereto (the "Transferees"), in the
amount specified on Exhibit K. On the date hereof, Contributor 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
the Contributor and each of the Transferees. On the Closing Date, Acquiror shall
issue certificates reflecting each of the Transferees' ownership of the LP Units
distributed by Contributor. The certificates evidencing the LP Units will bear
appropriate legends indicating (i) that the LP 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 LP Units. The
Acquiror shall assume no responsibility for any allocation of the consideration,
including LP Units, to the Transferees or any of Contributor's partners.
Contributor agrees 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 LP Units, the Acquiror's Partnership Agreement
shall be executed by or on behalf of each of the Transferees and the Transferees
shall become limited partners of Acquiror and agree to be bound by the
Partnership Agreement.
2.8 Redemption. The LP Units may be redeemed upon delivery of a notice
("Redemption Notice") from the Transferees, 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 commons shares issuable upon redemption
registered in accordance with the Hersha Hospitality Limited Partnership
Agreement attached hereto as Exhibit M, and incorporated herein.
2.10 Payment of Contingent Consideration.
The Contributors shall value the Hotel on December 31, 2000. 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 4% 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 Acquiror
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
CONTRIBUTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the Acquiror to enter into this Agreement and to acquire the
Property, the Contributor hereby makes the following representations, warranties
and covenants with respect to the Property, upon each of which the Contributor
acknowledges and agrees that the Acquiror is entitled to rely and has relied:
3.1 Organization and Power. The Contributor 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 and all governmental
licenses, authorizations, consents and approvals to carry on its business as now
conducted and to enter into and perform its obligations hereunder and under any
document or instrument required to be executed and delivered on behalf of the
Contributor hereunder.
3.2 Authorization and Execution. This Agreement has been duly
authorized by all necessary action on the part of the Contributor, has been duly
executed and delivered by the Contributor, constitutes the valid and binding
agreement of the Contributor and is enforceable in accordance with its terms.
There is no other person or entity who has an ownership interest in the Property
or whose consent is required in connection with the Contributor's performance of
its obligations hereunder.
3.3 Noncontravention. The execution and delivery of, and the
performance by the Contributor of its obligations under, this Agreement do not
and will not contravene, or constitute a default under, any provision of
applicable law or regulation, the Contributor's Organizational Documents or any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Contributor, or result in the creation of any lien or other encumbrance on
any asset of the Contributor. There are no outstanding agreements (written or
oral) pursuant to which the Contributor (or any predecessor to or representative
of the Contributor) has agreed to contribute or has granted an option or right
of first refusal to acquire the Property or any part thereof.
3.4 No Special Taxes. The Contributor has no actual knowledge of, nor
has it received any written notice of, any special taxes or assessments relating
to the Property or any part thereof or any planned public improvements that may
result in a special tax or assessment against the Property.
3.5 Compliance with Existing Laws. The Contributor possesses all
Authorizations, each of which is valid and in full force and effect, and, to
Contributor's actual knowledge, no provision, condition or limitation of any of
the Authorizations has been breached or violated. The Contributor has not
misrepresented or failed to disclose any relevant fact in obtaining all
Authorizations, and the Contributor has 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 Contributor has
no actual knowledge, nor has it 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.
3.6 Operating Agreements. The Contributor 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 Contributor 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 Contributor 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 Contributor has obtained the Acquiror's prior written
consent to such agreement or modification, which consent shall not be
unreasonably withheld or delayed.
3.7 Warranties and Guaranties. The Contributor shall not before or
after 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.
3.8 Insurance. All of the Contributor'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 Contributor on or before the due date therefor. The Contributor
shall pay all premiums on, and shall not cancel or voluntarily allow to expire,
any of the Contributor'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 Contributor shall name the Acquiror as an additional insured
on each of the Contributor's Insurance Policies. The Contributor shall transfer
all such policies to the Acquiror as of the date of closing.
3.9 Condemnation Proceedings; Roadways. The Contributor has received no
written notice of any condemnation or eminent domain proceeding pending or
threatened against the Property or any part thereof. The Contributor has no
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.
3.10 Litigation. Except as set forth on Exhibit I there is no action,
suit or proceeding pending or known to be threatened against or affecting the
Contributor 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 Contributor 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 Contributor, (c) could materially and adversely affect the
ability of the Contributor 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 otherwise
materially adversely affect the Property, any part thereof or any interest
therein or the use, operation, condition or occupancy thereof.
3.11 Labor Disputes and Agreements. Contributor has no labor disputes
pending or, threatened as to the operation or maintenance of the Property or any
part thereof. Contributor 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 Contributor unless the Acquiror
elects to hire that employee, and the Acquiror shall not have any liability
under any pension or profit sharing plan with respect to the Property or its
employees.
3.12 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.
3.13 Organizational Documents. The Contributor'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.
3.14 Operation of Property. The Contributor covenants that between the
date hereof and the date of Closing it will make good faith efforts to (a)
operate the Property only in the usual, regular and ordinary manner consistent
with the Contributor's prior practice, (b) maintain its 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 its present business organization, keep available the services of its
present officers and employees and preserve its relationships with suppliers and
others having business dealings with it. The Contributor shall make good faith
efforts 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 Contributor did prior to the
execution of this Agreement. Except as otherwise permitted hereby, from the date
hereof until Closing, the Contributor shall ensure that it 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 the Contributor has operational control, or (iii) would
cause any of the representations and warranties contained in this Article III to
be untrue as of Closing.
3.15 Personal Property. All of the Tangible Personal Property,
Intangible Personal Property and Inventory being conveyed by the Contributor to
the Acquiror or to the Acquiror's managing agent, lessee or designee, will be
free and clear of all liens, leases (other than the Leases) and other
encumbrances on the date of Closing and the Contributor has good, merchantable
title thereto and the right to convey same in accordance with the terms of the
Agreement.
3.16 Bankruptcy. No Act of Bankruptcy has occurred with respect to the
Contributor or any of the partners of the Contributor.
3.17 Intentionally Omitted.
3.18 Hazardous Substances. Except for matters in Contributor's or
Acquiror's audits, Contributor has no knowledge: (a) of the presence of any
"Hazardous Substances" (as defined below) on the Property, or any portion
thereof, or, (b) of any spills, releases, discharges, or disposal of Hazardous
Substances that have occurred or are presently occurring on or onto the
Property, or any portion thereof, or (c) of the presence of any PCB transformers
serving, or stored on, the Property, or any portion thereof, and Contributor has
no 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 Contributor shall have no liability to
Acquiror for any Hazardous Substances of which Contributor has no actual
knowledge.
3.19 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.
3.20 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 Contributor 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).
3.21 Independent Audit. Contributor 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 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. Contributor 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.
3.22 Bulk Sale Compliance. Contributor shall indemnify Acquiror against
any claim, loss or liability arising under the bulk sales law in connection with
the transaction contemplated herein.
3.23 Intentionally Omitted.
3.24 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.
3.25 Noncompetition. If Contributor develops or acquires other lodging
facilities, not owned at the time of execution of this agreement, within 15
miles of any facility owned or to be owned by Acquiror, the Contributors shall
give the Acquiror the option to purchase the facility at fair market value for a
period of two years following the opening or acquisition of such facility.
3.26 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 Contributor, 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 Contributor and Contributor will have obtained consents all necessary
consents of any third party.
3.27 Securities Law Matters. Contributor further represents and
warrants that it and the Transferees have (i) received, reviewed, been given the
opportunity to ask questions of representatives of the Partnership and the REIT
regarding, and understands the Acquiror's Partnership Agreement, as amended, and
each filing of the REIT under the Securities Act, and (ii) Contributor and the
Transferees are "accredited investors" as defined under Regulation D promulgated
under the Securities Act.
3.28 Tax Matters. The Contributor represents and warrants that it (and
each of its partners) has obtained from its own counsel advice regarding the tax
consequences of (i) the transfer of the Property to the Acquiror and the receipt
of cash and LP Units as consideration therefor, (ii) the Transferees' admission
as partners of the Acquiror, and (iii) any other transaction contemplated by
this Agreement. The Contributor further represents and warrants that it (and
each of its partners) has not relied on the Acquiror or the Acquiror's
representatives or counsel for such advice.
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 Contributor.
Acquiror acknowledges and agrees that, except for the representations and
warranties expressly set forth herein, Acquiror is acquiring the Property
"AS-IS, WHERE-IS" with no representations or warranties by or from Contributor
or any of its affiliates, express or implied, or any nature whatsoever.
ARTICLE IV
ACQUIROR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the Contributor to enter into this Agreement and to
contribute the Property, 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 Contributor is
entitled to rely and has 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 Contributor 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 Contributor with
the following covenants:
5.1 Contributor's Deliveries. The Contributor 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 Contributor
pursuant to Section 6.2.
5.2 Representations, Warranties and Covenants; Obligations of
Contributor; Certificate. All of the Contributor's representations and
warranties made in this Agreement shall be true and correct as of the date
hereof and as of the 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 Contributor shall have performed all of its material covenants
and other obligations under this Agreement and the Contributor shall have
executed and delivered to the 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 2.3.
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
Contributor shall not have diminished the quality or quantity of maintenance and
upkeep services heretofore provided to the Real Property and the Tangible
Personal Property and the Contributor shall not have diminished the Inventory.
The Contributor shall not have removed or caused or permitted to be removed any
part or portion of the Real Property or the Tangible Personal Property unless
the same is replaced, prior to Closing, with similar items of at least equal
quality and acceptable to the 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,
Contributor 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. Possession of the
Property shall be delivered to the Acquiror at Closing, subject only to
Permitted Title Exceptions and rights of guests of the Hotel.
6.2 Contributor's Deliveries. At Closing, the Contributor 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 Contributor and
shall be dated as of the date of Closing:
(a) The certificate required by Section 5.2.
(b) The Deed.
(c) The Bill of Sale [Inventory].
(d) The Bill of Sale [Personal Property].
(e) The Assignment and Assumption Agreement.
(f) Certificate(s)/Registration of Title for any vehicle
owned by the Contributor and used in connection with the Property.
(g) 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.
(h) The FIRPTA Certificate.
(i) True, correct and complete copies of all warranties,
if any, of manufacturers, suppliers and installers possessed by the Contributor
and relating to the Improvements and the Personal Property, or any part thereof.
(j) Certified copies of the Contributor's Organizational
Documents.
(k) Appropriate resolutions of the partners of the
Contributor, together with all other necessary approvals and consents of the
Contributor, authorizing (A) the execution on behalf of the Contributor of this
Agreement and the documents to be executed and delivered by the Contributor
prior to, at or otherwise in connection with Closing, and (B) the performance by
the Contributor of its obligations hereunder and under such documents.
(l) Valid, final and unconditional certificate(s) of
occupancy for the Real Property and Improvements, issued by the appropriate
governmental authority.
(m) The written consent of the Licensor to the transfer
of the license, if applicable, and if so required.
(n) If the Acquiror is assuming the Contributor's
obligations under any or all of the Operating Agreements, the originals of such
agreements, duly assigned to the Acquiror and with such assignment acknowledged
and approved by the other parties to such Operating Agreements.
(o) Such proof as the Acquiror may reasonably require
with respect to Contributor's compliance with the bulk sales laws or similar
statutes.
(p) A written instrument executed by the Contributor,
conveying and transferring to the Acquiror all of the Contributor's right, title
and interest in any telephone numbers and facsimile numbers relating to the
Property, and, if the Contributor maintains a post office box, conveying to the
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.
(q) All current real estate and personal property tax
bills in the Contributor's possession or under its control.
(r) A complete set of all guest registration cards, guest
transcripts, guest histories, and all other available guest information.
(s) 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.
(t) A complete list of all advance room reservations,
functions and the like, in reasonable detail so as to enable the Acquiror to
honor the Contributor's commitments in that regard.
(u) A list of the Contributor's outstanding accounts
receivable as of midnight on the date prior to the Closing, specifying the name
of each account and the amount due the Contributor.
(v) Written notice executed by Contributor notifying all
interested parties, including all tenants under any leases of the Property, that
the Property has been conveyed to the Acquiror and directing that all payments,
inquiries and the like be forwarded to the Acquiror at the address to be
provided by the Acquiror.
(w) All keys for the Property.
(x) All books, records, operating reports, appraisal
reports, files and other materials in the Contributor's possession or control
which are necessary in the Acquirors discretion to maintain continuity of
operation of the Property.
(y) To the extent permitted under applicable law,
documents of transfer necessary to transfer to the Acquiror the Contributor's
employment rating for workmens' compensation and state unemployment tax
purposes.
(z) An assignment of all warranties and guarantees from
all contractors and subcontractors, manufacturers, and suppliers in effect with
respect to the Improvements.
(aa) Complete set of "as-built" drawings for the
Improvements.
(bb) 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.
(cc) a completed version of the Questionnaire from the
Contributor and each Transferee.
(dd) 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 Contributor the following:
(a) The portion of the Consideration described in Section
2.4.
(b) The Assignment and Assumption Agreement.
(c) The certificates described in Section 2.7 evidencing
the Transferees ownership of the LP Units and the admission of the Transferrees
as limited partners in the Acquiror.
(d) Any other document or instrument reasonably requested
by the Contributor or required hereby.
6.4 Closing Costs. The Acquiror shall pay all legal fees and expenses.
All 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 also 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
2.4(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
Contributor and the Acquiror. The Contributor 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 date of Closing (the "Effective 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 date of Closing. 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 2.4(d). Without limiting the
generality of the foregoing, the following items of income and expense shall be
allocated as of the date of Closing:
(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 to be assigned to
and assumed by the Acquiror.
(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 Contributor, including any taxes.
(g) All prepaid reservations and contracts for rooms confirmed
by Contributor prior to the Effective Date for dates after the date of Closing,
all of which Acquiror shall honor.
(h) Current insurance premiums.
The Tray Ledger shall be retained by the Contributor. The Contributor
shall be required to pay all sales taxes and similar impositions currently up to
the date of Closing.
Acquiror shall not be obligated to collect any accounts receivable or
revenues accrued prior to the date of Closing for Contributor, but if Acquiror
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 bill or
other evidence of the applicable income or expense. Any income received or
expense incurred by the Contributor 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
Contributor shall pay at Closing all special assessments and taxes applicable to
the Property.
The certificates evidencing the Transferees' ownership of the LP Units
will be dated as of date of Closing, and the Transferees will be entitled to any
dividends accruing thereon on and after the date of Closing.
ARTICLE VII
CONDEMNATION; RISK OF LOSS
7.1 Condemnation. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, of all or any portion of the Real
Property, or any proposed sale in lieu thereof, the Contributor shall give
written notice thereof to the Acquiror promptly after the Contributor learns or
receives notice thereof. If all or any part of the Real Property is, or is to
be, so condemned or sold, the 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 Contributor. If any such
loss or damage to more than twenty five percent (25%) of the Property 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 CONTRIBUTOR;
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
Contributor or any liability for claims arising out of any occurrence prior to
Closing.
8.2 Indemnification by Contributor. The Contributor 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
Contributor of any of its representations, warranties, covenants or obligations
set forth herein or in any other document delivered by the Contributor 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 Contributor 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, in which event all other rights and obligations of the Contributor
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 Contributor. If, prior to Closing, the Acquiror
defaults in performing any of its obligations under this Agreement (including
its obligation to acquire the Property), and the Acquiror fails to cure any such
default within ten business days after notice thereof from the Contributor, then
the Contributor's sole remedy for such default shall be to terminate this
Agreement.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Completeness; Modification. This Agreement constitutes the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior discussions, understandings,
agreements and negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties hereto.
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 Contributor and
their respective party hereto.
9.4 Days. If any action is required to be performed, or if any notice,
consent or other communication is given, on a day that is a Saturday or Sunday
or a legal holiday in the jurisdiction in which the action is required to be
performed or in which is located the intended recipient of such notice, consent
or other communication, such performance shall be deemed to be required, and
such notice, consent or other communication shall be deemed to be given, on the
first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
9.5 Governing Law. This Agreement and all documents referred to herein
shall be governed by and construed and interpreted in accordance with the laws
of the Commonwealth of Pennsylvania.
9.6 Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear on each counterpart
hereof. All counterparts hereof shall collectively constitute a single
agreement.
9.7 Severability. If any term, covenant or condition of this Agreement,
or the application thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term, covenant or condition to other persons or circumstances, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
9.8 Costs. Regardless of whether Closing occurs hereunder, and except
as otherwise expressly provided herein, each party hereto shall be responsible
for its own costs in connection with this Agreement and the transactions
contemplated hereby, including without limitation fees of attorneys, engineers
and accountants.
9.9 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand, transmitted by
facsimile transmission, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by the United States mail, certified,
postage prepaid, return receipt requested, at the addresses and with such copies
as designated below. Any notice, request, demand or other communication
delivered or sent in the manner aforesaid shall be deemed given or made (as the
case may be) when actually delivered to the intended recipient.
If to the Contributor: Jay H. Shah, Esquire
Hersha Enterprises, Ltd.
437 Chestnut Street, Suite 614
Philadelphia, PA 19106
Telephone: (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
Fax: (717) 774-7383
If to the Acquiror: Jay H. Shah, Esquire
Hersha Enterprises, Ltd.
437 Chestnut Street, Suite 615
Philadelphia, PA 19106
Telephone: (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
Or to such other address as the intended recipient may have specified in a
notice to the other party. Any party hereto may change its address or designate
different or other persons or entities to receive copies by notifying the other
party and the Escrow Agent in a manner described in this Section.
9.10 Incorporation by Reference. All of the exhibits attached hereto
are by this reference incorporated herein and made a part hereof.
9.11 Survival. All of the representations, warranties, covenants and
agreements of the Contributor and the 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 Contributor 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 Contributor and Acquiror specifically
established hereby.
9.14 Time of Essence. Time is of the essence with respect to every
provision hereof.
9.15 Confidentiality. Contributor and its representatives, including
any brokers or other professionals representing Contributor, shall keep the
existence and terms of this Agreement strictly confidential, except to the
extent disclosure is compelled by law, and then only to the extent of such
compulsion.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the Contributor and the Acquiror have caused this
Agreement to be executed in their names by their respective duly-authorized
representatives.
CONTRIBUTORS:
144 Associates, a Pennsylvania limited partnership
By: Shreenathji Enterprises, Ltd., a Pennsylvania corporation,
its sole general partner
By: /s/ Hasu P. Shah
------------------------
Hasu P. Shah, President
344 Associates, a Pennsylvania limited partnership
By: Shreenathji Enterprises, Ltd., a Pennsylvania corporation,
its sole general partner
By: /s/ Hasu P. Shah
--------------------------
Hasu P. Shah, President
544 Associates, a Pennsylvania limited partnership
By: Shreenathji Enterprises, Ltd., a Pennsylvania corporation,
its sole general partner
By: /s/ Hasu P. Shah
---------------------
Hasu P. Shah, President
644 Associates, a Pennsylvania limited partnership
By: Shreenathji Enterprises, Ltd., a Pennsylvania corporation,
its sole general partner
By: /s/ Hasu P. Shah
----------------------
Hasu P. Shah, President
ACQUIROR:
Hersha Hospitality Limited Partnership, a Virginia limited
partnership
By: Hersha Hospitality Trust, a Maryland business
trust, its sole general partner
By: /s/ Hasu P. Shah
----------------------
Hasu P. Shah
President