PURCHASE AND SALE
AGREEMENT
dated as of December 18,
2006
between
BRIDGEWATER HOTELWORKS
ASSOCIATES, L.P., CHARLOTTE HOTELWORKS ASSOCIATES, L.P.,
GAITHERSBURG HOTELWORKS ASSOCIATES, L.P., PLEASANT HILL LODGING
PARTNERS, L.P., PLEASANTON HOTELWORKS ASSOCIATES, L.P., SCOTTSDALE
HOTELWORKS ASSOCIATES, L.P. and HARRISON HOTELWORKS ASSOCIATES,
L.P.
collectively, as Sellers,
and
Hersha Hospitality Limited
Partnership
as Purchaser
Table of Contents
Page
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ARTICLE 1
DEFINITIONS; RULES OF CONSTRUCTION
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1
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1
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1.2 Rules
of Construction
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11
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ARTICLE 2
PURCHASE AND SALE; STUDY PERIOD; PAYMENT OF
CONSIDERATION
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12
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12
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13
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ARTICLE 3
SELLERS’ REPRESENTATIONS, WARRANTIES AND COVENANTS
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15
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15
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3.2
Authorization, No Violations and Notices.
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16
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3.3
Litigation With Respect to Sellers
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17
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17
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3.5
Bankruptcy with Respect to Sellers
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17
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18
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3.7
Contracts and Agreements
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18
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18
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3.9
Compliance with Existing Laws.
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18
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3.10
Operating Agreements
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19
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3.11
Warranties and Guaranties
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19
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19
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3.13
Condemnation Proceedings; Roadways
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20
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3.14
Labor Disputes and Agreements
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20
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3.15
Financial Information
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20
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3.16
Organizational Documents
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20
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3.17
Hazardous Substances
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21
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21
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21
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3.20
Sufficiency of Certain Items
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21
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3.21
FF&E; Fixed Asset Supplies and Inventories
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22
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3.22
Disclosure Schedules
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22
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ARTICLE 4
PURCHASER’S REPRESENTATIONS, WARRANTIES AND
COVENANTS
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22
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22
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4.2
Authorization, No Violations and Notices.
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23
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24
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24
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24
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24
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ARTICLE 5
PURCHASER’S CONDITIONS AND SELLERS’ ADDITIONAL
COVENANTS
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24
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24
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5.2
Representations, Warranties and Covenants; Obligations of Sellers;
Certificate
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24
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25
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5.4
Condition of Improvements
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25
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25
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5.6
Management Agreements.
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25
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Table of Contents
(continued)
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26
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26
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5.9
Property Material Adverse Effect
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26
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27
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ARTICLE 6
CLOSING
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27
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27
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27
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6.3
Purchaser’s Deliveries
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29
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30
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6.5
Apportionments and Other Economic Adjustments.
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30
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35
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6.7
Pre-Closing Interim Operation
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36
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ARTICLE 7
CONDEMNATION; RISK OF LOSS
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38
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38
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39
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ARTICLE 8
LIABILITY OF PURCHASER; INDEMNIFICATION BY SELLERS; TERMINATION
RIGHTS
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39
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8.1
Liability of Purchaser
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39
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8.2
Indemnification by Sellers
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40
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8.3
Termination by Purchaser.
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40
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8.4
Termination by Sellers.
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41
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8.5
Limitation on Indemnity Obligations
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42
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8.6
Survival of Article 8
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42
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ARTICLE 9
SELLERS’ CONDITIONS AND PURCHASER’S ADDITIONAL
COVENANTS
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42
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42
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9.2
Representations, Warranties and Covenants; Obligations of
Sellers; Certificate
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42
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42
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43
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ARTICLE
10 ESCROW TERMS
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43
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10.1 The
Escrow Agent shall hold the Deposit in escrow on the following
terms and conditions:
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43
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ARTICLE
11 MISCELLANEOUS PROVISIONS
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44
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11.1
Completeness; Modification
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44
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45
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11.3
Successors and Assigns
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45
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45
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45
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45
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45
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45
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46
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11.10
Incorporation by Reference
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47
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47
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Table of Contents
(continued)
Page
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47
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48
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48
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48
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48
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48
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48
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11.19
Sellers’ Representatives
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49
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49
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PURCHASE AND SALE
AGREEMENT
This PURCHASE AND SALE AGREEMENT, dated as of
the 18th day of December, 2006, (this “Agreement”)
between BRIDGEWATER HOTELWORKS ASSOCIATES, L.P., CHARLOTTE
HOTELWORKS ASSOCIATES, L.P., GAITHERSBURG
HOTELWORKS ASSOCIATES, L.P., PLEASANT HILL
LODGING PARTNERS, L.P., PLEASANTON HOTELWORKS ASSOCIATES, L.P.,
SCOTTSDALE HOTELWORKS ASSOCIATES, L.P. ,
and HARRISON HOTELWORKS ASSOCIATES,
L.P. , each a Kansas limited
partnership (each, a “ Seller ” and
collectively, “ Sellers ”), and HERSHA
HOSPITALITY LIMITED PARTNERSHIP , a Virginia limited
partnership, (“ Purchaser ”),
provides:
ARTICLE
1
DEFINITIONS; RULES OF
CONSTRUCTION
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1.1
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Definitions . The following terms shall have the indicated
meanings:
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“ Act of
Bankruptcy ” shall mean if a party hereto or any
member, general partner or shareholder 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 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 member, general partner or shareholder 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, member or
shareholder, (2) the appointment of a receiver, custodian, trustee
or liquidator for such party or general partner, member or
shareholder 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.
“ Agreement Date
” shall mean the date first written above in the preamble of
this Agreement.
“ Allocated Purchase
Price ” shall mean, for each Property, the
Allocated Purchase Price for such Property as set forth in
Exhibit A .
“ Amended and Restated Space
Lease ” shall mean the
Amended and Restated Space Lease substantially in the form annexed
hereto as Exhibit F-2 .
“ Apportionment
Date ” shall mean December 31, 2006.
“ Assignment and Assumption
Agreement ” shall mean one or more Assignment
and Assumption Agreements, dated as of the Closing Date by and
between Sellers and Purchaser or its designees, whereby Sellers
assign and Purchaser or its designees assume all of Sellers’
right, title and interest in, to and under all licenses, contracts,
leases, permits and agreements affecting the Portfolio that
Purchaser has expressly agreed to assume in writing on or before
the Closing Date.
“ Authorizations
” shall mean all licenses (including, without limitation, the
liquor licenses for the Hotels, if any), permits and approvals
required by any governmental or quasi-governmental agency, body or
officer for the ownership, operation and use of any Property or any
part thereof.
“ Brand ”
shall mean Summerfield Suites by Hyatt.
“ Chicago
HotelWorks ” shall mean Chicago HotelWorks
Hospitality Corporation, a Kansas corporation.
“ Closing ”
shall mean the closing of the sale and acquisition of the Portfolio
pursuant to this Agreement.
“ Closing Date
” shall mean the date on which the Closing occurs.
“ Code ”
shall mean the Internal Revenue Code of 1986, as
amended.
“ Consideration
” shall mean the excess of (a) One Hundred Sixty Nine Million
Dollars ($169,000,000.00) over (b) the sum of (i) the Allocated
Purchase Prices for the Excluded Properties and (ii) Sellers’
CapX Amount.
“ Deposit ”
shall mean the amount of Eleven Million Dollars ($11,000,000) (or,
at Purchaser’s election, an irrevocable letter of credit in
like amount in the form annexed hereto as Exhibit
C , together with
interest accrued thereon, which shall be fully refundable in
accordance with the provisions of this Agreement.
“ Earn-Out
Agreement ” shall mean the Earn-Out Agreement to
be entered into by Hersha Hospitality Limited Partnership and
Sellers on the Closing Date, which Earn-Out Agreement shall be in
the form annexed hereto as Exhibit K
.
“ Employees
” shall mean the personnel employed to operate the
Hotels.
“ Employment
Agreements ” shall mean any and all employment
agreements, written or oral, between any Seller or its managing
agent and any Employee.
“ Environmental Laws
” shall mean
any federal, state or local environmental laws, ordinances, rules,
regulations, administrative or judicial orders, or any other
environmental requirements.
“ Escrow Agent
” shall mean All American Abstract Company, Inc., having an
address at 2854 Egypt Road, Audubon, Pennsylvania 19403.
“ Excluded Assets
” shall mean:
(a) all cash (other than House Banks to
the extent Purchaser elects to purchase the same), bank accounts
and money invested with financial institutions and other liquid
assets of Sellers;
(b) any interest in and to any refund of
Property Taxes (hereinafter defined) relating to the Portfolio or
its operations for the period on or before the Apportionment
Date;
(c) all credits, claims for refund,
prepaid expenses, deferred charges, escrow accounts, advance
payments, security or other deposits, including recoverable
deposits, and prepaid items (and, in each case, security interests
relating thereto) arising from or in connection with, or related
to, the Portfolio, its contracts or assets;
(d) all claims or rights of Sellers
against anyone arising on or before the Apportionment
Date;
(e) all insurance policies owned by any
Seller and all rights, claims, proceeds and causes of action of any
Seller under insurance policies and all rights in the nature of
insurance, indemnification or contribution relating to such Seller
or its Property, except as otherwise provided in this
Agreement;
(f) all of Sellers’ rights under
this Agreement and any other agreement to sell assets of Sellers
now existing or in the future and all cash and non-cash
consideration payable or deliverable to Sellers pursuant to the
terms and provisions hereof and thereof;
(g) Sellers’ interest in any Land
Lease or Operating Agreement that is not assumable by
Purchaser;
(h) all items listed on Exhibit
B ;
(i) Sellers’ interest in, and
obligations under, any Employment Agreements;
(j) all books and records of Sellers that
do not relate primarily to the Hotels, financial statements, and
accounting ledgers, records, and work-papers;
(k) Sellers’ interest in, to and
under the Disposition and Development Agreement dated May 31, 2001
between the Pleasant Hill Redevelopment Agency and Pleasant Hill
Lodging Partners, L.P., as amended; and
(l) the Excluded Properties.
“ Excluded
Properties ” is a collective reference to the
Properties which have been excluded from the within purchase and
sale pursuant to the express provisions hereof.
“ Existing Franchise
Licenses ” shall mean the existing Franchise
Licenses, pursuant to which Sellers operate the Properties under
the Brand.
“ FF&E ”
shall mean all tangible property and fixtures (which are not part
of the Real Property) of any kind attached to or located upon, and
used in connection with the ownership, maintenance, use or
operation of, the Hotels as of the date hereof (or acquired by any
Seller and so employed prior to Closing) including, but not limited
to, all furniture, fixtures, equipment, signs; all heating,
lighting, plumbing, drainage, electrical, air conditioning, and
other mechanical fixtures and equipment and systems; all copy
machines, computers, software, facsimile machines and other office
equipment; all elevators, escalators, and related motors and
electrical equipment and systems; all hot water heaters, furnaces,
heating controls, motors and boiler pressure systems and equipment;
all shelving and partitions; all ventilating equipment, and all
incinerating and disposal equipment; all tennis, pool and health
club and fitness equipment and furnishings; all vans, automobiles
and other motor vehicles; all carpets, drapes, beds, furniture,
furnishings, televisions, telephones and similar property; all
stoves, ovens, freezers, refrigerators, dishwashers, disposals,
kitchen equipment and utensils, tables, chairs, plates and other
dishes, glasses, silverware, serving pieces and other restaurant
and bar equipment, apparatus and utensils; all audiovisual
equipment, banquet equipment and laundry equipment; exclusive of
(a) any personal property leased under the Operating Agreements,
(b) items belonging to guests and tenants under the rooms
agreements, and (c) the items, if any, listed on Exhibit
G .
“ FF&E Reserve
” shall mean the balance of funds reserved for the future
replacement of furniture fixtures and equipment and/or for other
capital projects that are required under the Existing Franchise
Licenses to be on deposit on the Closing Date, taking into account
permitted withdrawals.
“ FIRPTA
Certificate ” shall mean the affidavit of a
Seller under Section 1445 of the Internal Revenue Code certifying
that such Seller is not a foreign corporation, foreign seller,
foreign limited liability company, foreign trust, foreign estate or
foreign person (as those terms are defined in the Internal Revenue
Code and the Income Tax Regulations), in form and substance
satisfactory to Purchaser.
“ Fixed Asset
Supplies ” shall mean all items included within
the category “Property and Equipment” under the Uniform
System of Accounts including, but not limited to linens, china,
glassware, tableware, uniforms and similar items whether used in
connection with public spaces or guest rooms.
“ Franchise
License ” shall mean, for each Hotel, the
license granted by the Franchisor enabling such Hotel to operate
under the Brand.
“ Franchisor
” shall mean Summerfield Hotel Company, L.L.C.
“ Governmental
Body ” means any federal, state, municipal or
other governmental department, commission, board, bureau, agency,
court or instrumentality, domestic or foreign.
“ 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: (1) potentially injurious to the public health,
safety or welfare, the environment or any Property, (2) regulated,
monitored or defined as a hazardous or toxic substance or waste by
any Governmental Body, or (3) a basis for liability of the owner of
any Property to any Governmental Body or third party. Hazardous
Substances shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil, or any products, by-products or
components thereof, and asbestos and mold.
“ Hotel ”
shall mean any of the hotels (together with its related amenities)
listed on Exhibit A .
“ House Banks
” shall mean petty cash funds and cashiers’
banks.
“ Immediate CapX
” shall mean the PIP (hereinafter defined) required by
Franchisor in connection with the New Franchise Licenses and any
Lender Required CapX.
“ Immediate CapX
Amount ” shall mean the cost of the Immediate
CapX.
“ Improvements
” shall mean all 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 D
attached hereto.
“ Intangible Personal
Property ” shall mean all intangible personal
property owned or possessed by any Seller and used in connection
with the ownership, operation, leasing, occupancy or maintenance of
the Hotels (other than the Excluded Assets and the Existing
Franchise Licenses) including, without limitation, the
Authorizations, Sellers’ interest in any Land Leases,
Sellers’ interest in any Operating Agreements that Purchaser
or its designees have agreed to assume, Sellers’ interest in
any construction, equipment, service or other types of guarantees
and warranties, general intangibles, business records, plans and
specifications, surveys, all other licenses which are transferable,
permits and approvals with respect to the construction, ownership,
operation, leasing, occupancy or maintenance of the Properties, and
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, excluding (a) the Excluded Assets which shall be
maintained and/or distributed to Sellers prior to the Closing Date
and (b) any of the aforesaid rights Purchaser elects not to
acquire.
“ Inventory
” or “ Inventories ”
shall mean all inventories of supplies of any kind owned by any
Seller and used in the operation of the Hotels (irrespective of
whether such are located on the premises or stored off premises)
including without limitation, all mattresses, pillows, bed linens,
towels, paper goods, soaps, cleaning supplies, foodstuff, beverage
inventories, utensils, and other such supplies.
“ Knowledge
” shall mean, with respect to Sellers, the actual knowledge
of B. Anthony Isaac, Donald Marvin, John Cantele, Greg Epp, Roy
Baker, Michael Daood, Stuart Shannon and Alan Mass; and, with
respect to Purchaser, the actual knowledge of Robert Hazard, Neil
H. Shah and Ashish R. Parikh.
“ Land ”
shall mean the parcels of real estate more particularly described
on Exhibit E 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 any Seller 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.
“ Land Leases
” shall mean any lease of real property or other occupancy
agreement relating to any Property pursuant to which any Seller or
its affiliate is the lessee.
“ Lender ”
is a collective reference to any mortgage lenders providing
financing to Purchaser to pay any part of the
Consideration.
“ Lender Required
CapX ” shall mean any repairs and replacements
proposed by Purchaser’s third-party property condition
inspector(s) (other than the PIP) for which Lender requires that
funds at Closing be escrowed.
“ Manager ”
shall mean LodgeWorks, L.P.
“ Management
Agreement ” shall mean with respect to each
Property in the Portfolio, a Management Agreement for such Property
between Manager and an affiliate of Purchaser, which Management
Agreement shall be substantially in the form annexed hereto as
Exhibit G .
“ Material
Authorizations ” is a collective reference to
all Authorizations other than those which if not obtained and kept
in full force and effect, individually or in the aggregate, could
not have a Property Material Adverse Effect.
“ New Franchise
Licenses ” shall mean the Franchise Licenses
that Purchaser or its affiliate(s) shall enter into with Franchisor
as a condition to Closing.
“ Operating
Agreements ” shall mean the service contracts,
supply contracts, Space Leases, leases (other than the Land Leases)
and other agreements, if any, in effect with respect to the
construction, ownership, operation, occupancy or maintenance of the
Properties.
“ Outside Closing
Date ” shall mean January 3, 2007;
provided , however , if any of the events referred to
in Sections 7.1 or 7.2 shall occur
within thirty (30) days prior to the Outside Closing Date, at
Purchaser’s election, the Outside Closing Date shall be
extended to the day that is thirty (30) days after such
occurrence.
“ Permitted Title
Exceptions ” shall mean those exceptions to
title to the Real Property that are satisfactory to Purchaser as
determined pursuant to Section 2.2
.
“ Pooling
Agreement ” shall mean the Pooling Agreement to
be entered into on the Closing Date by Purchaser or its designees
and Manager, which Pooling Agreement shall be in the form annexed
hereto as Exhibit H .
“ Portfolio
” is a collective reference to the Properties excluding the
Excluded Properties.
“ Portfolio Material Adverse
Effect ” shall mean any circumstance or event
which individually or in the aggregate could have a material
adverse effect on the Portfolio or the use thereof contemplated by
Purchaser excluding any change in general economic, business or
political conditions affecting the lodging industry.
“ Property ”
shall mean with respect to each Hotel, the Land, Improvements, the
Inventory, Systems, FF&E Reserve, the Tangible Personal
Property and the Intangible Personal Property associated with such
Hotel.
“ Property Material Adverse
Effect ” shall mean any circumstance or event
which individually or in the aggregate could have a material
adverse effect on any Property or the use of such Property
contemplated by Purchaser excluding any change in general economic,
business or political conditions affecting the lodging
industry.
“ Purchaser’s CapX
Amount ” shall mean $2,500,000; provided,
however, (a) if the Property in Charlotte, NC shall be excluded
from the within sale pursuant to the terms hereof,
Purchaser’s CapX Amount shall be reduced by $1,500,000 and
(b) if any other Property shall be excluded from the within sale
pursuant to the terms hereof, Purchaser’s CapX Amount shall
be reduced by an amount equal to $1,161 multiplied by the number of
guest rooms in such Property.
“ Real Property
” shall mean the Land and the Improvements.
“ Sellers’ CapX
Amount ” shall mean the excess of the Immediate
CapX Amount over the Purchaser’s CapX Amount.
“ Sellers’
Representative ” shall mean LodgeWorks,
L.P.
“ Space Lease
” shall mean a lease or other occupancy agreement with a term
in excess of thirty (30) days between any Seller, as lessor, and a
third party, as lessee, for any portion of the
Properties.
“ Study Period
” shall mean a period terminating on the date of execution of
this Agreement.
“ Systems ”
shall mean, without limitation, the equipment, supplies, licenses
and software required to operate the Franchisor’s reservation
system, the property management system, point-of-sales system,
telephone system, wireless or cabled internet service system, back
office system, fire-life safety system, surveillance system, time
clock system and other systems used in the marketing or operations
of the Hotels, all of which include requisite cabling, user
manuals, warranty certificates, software and any written and any
electronic books and records produced by the Systems. Systems shall
not include any Seller’s interest in any Operating Agreements
applicable to a particular system that is not assumable or that
Purchaser or its designees have not agreed to assume.
“ Tangible Personal
Property ” shall mean all tangible items of
personal property, other than the Excluded Assets, used in or
requisite to the operations of the Hotels including, but not
limited to all FF&E situated on, attached to, or used in the
operation of the Hotels.
“ Target Closing
Date ” shall mean December 27, 2006.
“ Title Company
” shall mean All American Abstract Company, Inc.
“ Title Policy
” shall mean one or more policies of title insurance with
appropriate endorsements issued to Purchaser or its designees by
the Title Company, dated as of the Closing Date, pursuant to which
the Title Company insures Purchaser’s or its designees’
ownership of fee simple title to the Real Property forming part of
the Portfolio (including the marketability thereof) subject only to
Permitted Title Exceptions. The aggregate amount of the Title
Policies shall equal the Consideration, and each Title Policy shall
be acceptable in all respects in form and substance to
Purchaser.
“ 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 Properties as a hotel.
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1.2
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Rules of Construction
. The following rules shall apply to
the construction and interpretation of this Agreement:
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(a)
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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.
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(b)
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All references
herein to particular articles, sections, subsections, clauses or
exhibits are references to articles, sections, subsections, clauses
or exhibits of this Agreement.
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(c)
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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.
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(d)
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Each party
hereto and its counsel have reviewed and revised (or requested
revisions of) this Agreement, and, therefor, 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.
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(e)
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Any reference
to a “business day” shall mean Monday through Friday,
United States federal and bank holidays excepted.
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(f)
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Wherever the
word “including” is used in this Agreement, it shall be
deemed to be followed by the words “without
limitation”.
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ARTICLE
2
PURCHASE AND SALE; STUDY
PERIOD;
PAYMENT OF
CONSIDERATION
|
2.1
|
Purchase and Sale
. In consideration of the payment of
the Consideration by Purchaser to Sellers, other good and valuable
consideration received by each of the parties hereto, and intending
to be legally bound hereby, Sellers agree to sell, assign and
transfer the Portfolio to Purchaser or one or more of its
designees, and Purchaser agrees to, or to cause one or more of its
designees to, purchase the Portfolio, in accordance with the terms
and conditions set forth herein.
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(a)
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The
Consideration shall be paid as follows:
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(i)
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On or prior to
the date hereof, Purchaser shall have deposited the Deposit with
Escrow Agent;
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(ii)
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Upon Closing,
at Purchaser’s election, the Deposit shall be credited to the
Consideration or, provided the Consideration is simultaneously paid
in full to Escrow Agent, returned to Purchaser;
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(iii)
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The balance of
the Consideration shall be paid by Purchaser by wire transfer to
the Escrow Agent at the Closing in cash. The Escrow Agent shall
provide Purchaser at least two (2) days prior to the Closing with
Escrow Agent’s wiring instructions for the payment of the
Consideration.
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(b)
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The
Consideration shall be held by the Escrow Agent to be released to
Sellers’ Representative in accordance with the provisions of
this Agreement. Sellers’ Representative shall provide Escrow
Agent at least two (2) days prior to the Closing with
Sellers’ Representative’s wiring instructions for the
payment of the Consideration.
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(c)
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If all or any
part of the Deposit is in the form of a letter of credit and
Purchaser is entitled to the return of the Deposit, Seller shall
promptly deliver to Purchaser a letter authorizing the cancellation
and termination thereof. The terms of this Section 2.1(c)
shall survive the Closing and termination of this
Agreement.
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(d)
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Upon its
receipt of payments on account of the Consideration, Sellers’
Representative will remit to each of the Sellers so much thereof as
each such other party may be entitled. Purchaser shall have no
responsibility with respect to the allocation or distribution of
the Consideration among Sellers except for the payment thereof to
Sellers’ Representative.
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(a)
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Purchaser has
been granted the right to enter upon the Real Property and to
perform, at Purchaser’s expense, such economic, surveying,
engineering, topographic and marketing tests, studies and
investigations, including a Phase I environmental study, as
Purchaser may have deemed appropriate. Sellers have provided to
Purchaser all Phase I environmental studies that Sellers have with
respect to the Properties. Purchaser shall indemnify Sellers for
any loss, damage or liabilities to the extent caused by
Purchaser’s acts or omissions at the Properties in connection
with exercising its rights under this Section 2.2(a)
.
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(b)
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Sellers have
provided Purchaser access to all records and information concerning
the Properties in Sellers’ possession or control, and have
made available to Purchaser, its agents, auditors, engineers,
attorneys and other designees, for inspection copies of all such
records and information including existing architectural and
engineering studies, ALTA surveys, existing title insurance
policies, zoning and site plan materials, correspondence relating
to environmental or title issues, environmental audits,
environmental reports, zoning compliance letters, tax returns,
accounts, financial reports from the date of commencement of hotel
operations, existing franchise agreements, current property
improvement plans, the current deed, historical reports on capital
expenditures, forward-looking capital budgets, permits, licenses,
operating and services contracts, Sellers’ organizational and
governing documents, and all other materials or information
relating to the Properties requested by Purchaser and in
Sellers’ possession or control.
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(c)
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Purchaser has
caused an examination of title to the Properties to be made and has
notified Sellers of any defects in title shown by such examination
that Purchaser is unwilling to accept. Sellers have notified
Purchaser whether Sellers are willing to cure such defects and to
proceed to Closing. Sellers may cure, but shall not be obligated to
cure such defects; provided , however , if such
defects consist of mortgages, deeds of trust, mechanics’
liens, tax liens or other liens or charges in a fixed sum or
capable of computation as a fixed sum or results from anything done
by any Seller after the Agreement Date, Sellers shall pay and
discharge (in which event, the Escrow Agent is authorized to pay
and discharge at Closing) all such obligations at or prior to
Closing such that all such defects are removed. If Sellers are
unwilling or unable to cure any defects by Closing (other than
those which it is obligated to cure), Purchaser shall elect (1) to
waive such defects and proceed to Closing or (2) to terminate this
Agreement and immediately receive a return of the Deposit. Sellers
shall take all commercially reasonable efforts to prevent the
Properties from being subjected to any liens, encumbrances,
covenants, conditions, restrictions, easements or other title
matters or seek any zoning changes or take any other action which
may affect or modify the status of title without Purchaser’s
prior written consent, which consent shall not be unreasonably
withheld or delayed. All title exceptions other than those that are
to be paid or cured as provided above, those first disclosed by the
Title Company after the date of Purchaser’s title examination
for a Property and those objected to by Purchaser prior to the end
of the Study Period shall be deemed Permitted Title Exceptions.
Further, any title exception which is waived by Purchaser shall be
a Permitted Title Exception.
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(d)
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[INTENTIONALLY
OMITTED]
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(e)
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Sellers have
contacted Franchisor and (i) formally notified Franchisor of the
transaction contemplated in this Agreement, (ii) scheduled an
inspection of the Hotels for the purpose of issuing New Franchise
Licenses and (iii) taken such other actions as may be required
under the Existing Franchise Licenses to facilitate
Purchaser’s ability to secure New Franchise Licenses. Sellers
shall copy Purchaser on all correspondence between Sellers and
Franchisor in this regard.
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(f)
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Purchaser has
initiated the application process for New Franchise
Licenses.
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ARTICLE
3
SELLERS’
REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Purchaser to enter into this Agreement
and to purchase the Portfolio, subject to the matters disclosed in
Schedule 3.1 through
Schedule 3.22
(collectively, the " Disclosure Schedules
"), each Seller hereby makes the representations, warranties and
covenants set forth in this Article 3 ,
each of which are true and correct, and shall be true and correct
as of the Closing, and upon each of which the Sellers acknowledge
and agree that Purchaser is entitled to rely and has relied upon.
Any information set forth in one section of the Disclosure
Schedules will be deemed to apply to each other Section or
subsection of this Agreement. If Sellers first discover after the
date hereof that they failed to include any matter which should
have been included in the Disclosure Schedules, Sellers shall be
entitled to update the Disclosure Schedules to include such matter
by written notice given to Purchaser on or before the expiration of
the Study Period. To the extent that prior to the expiration of the
Study Period Purchaser has Knowledge that any of the
representations or warranties contained in this Article
3 have been breached and Purchaser elects to
proceed with Closing, Purchaser shall be deemed to have waived such
breach.
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(a)
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Each Seller has
all requisite powers and all governmental licenses, authorizations,
consents and approvals necessary to carry on its business as now
conducted, to execute and deliver this Agreement and any document
or instrument required to be executed and delivered on behalf of it
hereunder, to perform its obligations under this Agreement and any
such other documents or instruments and to consummate the
transactions contemplated hereby; and
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(b)
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Each Seller is
a limited partnership duly organized, validly existing under the
laws of the State of Kansas, and has all requisite power and
authority under the laws of such State and under its charter
documents to conduct its business and enter into and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby. Each Seller has duly qualified and is in good
standing as a limited partnership in the State in which any
Property owned by it is located.
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3.2
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Authorization, No Violations and
Notices .
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(a)
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The execution,
delivery and performance of this Agreement by Sellers, and the
consummation of the transactions contemplated hereby, have been
duly authorized, adopted and approved by Sellers as necessary. No
other proceedings are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly
executed by Sellers and is a valid and binding obligation
enforceable against Sellers in accordance with its
terms.
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(b)
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Neither the
execution, delivery, or performance by any Seller of this
Agreement, nor the consummation of the transactions contemplated
hereby, nor compliance by such Seller with any of the provisions
hereof, will,
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(i)
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violate,
conflict with, result in a breach of any provision of, constitute a
default (or an event, which, with the passage of time, the giving
of notice, 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 any Sellers, under any of the terms,
conditions, or provisions of its Certificate of Limited
Partnership, Articles of Organization, Articles of Incorporation,
the Limited Partnership Agreement, Operating Agreement or Bylaws,
as applicable, licenses, leases, agreements, or other instruments,
or obligation to which Seller is a party, or by which Seller may be
bound, or to which any Seller, any Property or any of its other
assets may be subject other than the Existing Franchise Licenses
and the documents executed in connection with Sellers’
existing mortgage financings which will be fully discharged on the
Closing Date;
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(ii)
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violate any
judgment, ruling, order, writ, injunction or decree applicable to
any Seller, or the Properties or any of Sellers’ other
assets; or
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(iii)
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to
Sellers’ Knowledge, violate any statute, rule, or regulation
applicable to any Seller, or the Properties or any of
Sellers’ other assets.
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(c)
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Sellers have
conducted no business other than the ownership of the
Properties.
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3.3
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Litigation With Respect to
Sellers. There
is no action, suit, claim or proceeding pending or, to
Sellers’ Knowledge, threatened against or affecting any
Seller, any of its assets, or any part of or interest in any
Property before any Governmental Body 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 any Seller 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 Sellers or the
Properties, (c) could materially and adversely affect the ability
of any Seller to perform its obligations hereunder, or under any
document to be delivered pursuant hereto, or (d) could create a
lien on any Property.
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3.4
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Property . As of the date of this Agreement, Sellers have
no Knowledge of any material title defects to the Properties not
reflected in their existing title insurance policies or any zoning
or other land use restrictions affecting the Real Property that
could have a Property Material Adverse Effect. On the Closing Date,
the Portfolio will be free and clear of all liens and encumbrances,
except for the Permitted Title Exceptions. Sellers have good,
marketable title to the Properties and the right to convey same.
Sellers are the fee simple owners of the Real Property and the sole
owners of the Properties. To Sellers’ Knowledge and except as
set forth on Schedule 3.4, the Properties are in good order and
condition, and Sellers have no Knowledge of any material,
structural or mechanical problems or conditions affecting the
Improvements.
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3.5
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Bankruptcy with Respect to
Sellers . No Act
of Bankruptcy has occurred or is contemplated with respect to any
Seller.
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3.6
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Brokerage Commission
. Sellers are wholly liable for any
claims brought by 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 other than such fees, commissions or other amounts
owed to any one engaged by Purchaser.
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3.7
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Contracts and Agreements
. There is no loan agreement,
guarantee, note, bond, indenture and other debt instrument, lease
and other contract to which any Seller is a party and which
encumber any Property or by which any Seller’s assets are
bound other than the Permitted Title Exceptions, the Leases, the
Operating Agreements, the Existing Franchise Licenses and the
existing loan documents respecting Sellers’ existing
financing which shall be paid off in full by Sellers prior to or at
Closing at no cost or expense to Purchaser.
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3.8
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No
Special Taxes .
Sellers have no Knowledge of, nor has any Seller received any
written notice of, any special taxes or assessments relating to any
Seller or any Property or any part thereof or any planned public
improvements that may result in a special tax or assessment against
any Property.
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3.9
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Compliance with Existing
Laws .
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(a)
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Sellers possess
all Material Authorizations, each of which is valid and in full
force and effect, and, to Sellers’ Knowledge, no provision,
condition or limitation of any of such Material Authorization has
been breached or violated. Sellers have not misrepresented or
failed to disclose any relevant fact in obtaining any Material
Authorization, and Sellers have no Knowledge of any change in the
circumstances under which any Material Authorization were obtained
that could result in their termination, suspension, modification or
limitation.
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(b)
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Sellers have no
Knowledge, nor has any Seller received written notice within the
past three (3) years, of any existing violation of any provision of
any applicable building, zoning, subdivision, environmental or
other governmental ordinance, resolution, statute, rule, order or
regulation including but not limited to those of environmental
agencies or insurance boards of underwriters, with respect to the
ownership, operation, use, maintenance or condition of the
Properties or any part thereof, or requiring any repairs or
alterations other than those that have been made prior to the date
hereof.
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(c)
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Sellers or
Chicago HotelWorks own any liquor license used in connection with
the operations of the Hotels.
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3.10
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Operating Agreements
. All of the written Operating
Agreements in force and effect as of the date hereof are listed on
Exhibit J attached hereto. To each
Seller’s Knowledge, 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. Without the prior written consent of
Purchaser, which consent will not be unreasonably withheld or
delayed, no Seller shall enter into any new Operating Agreement or
Land Lease that will be binding on Purchaser or any Property
following the Closing unless the same can be cancelled without
penalty on not more than thirty (30) days’ notice, nor shall
any Seller enter into any agreements modifying the Operating
Agreements or Land Leases that will be binding on Purchaser or any
Property following the Closing unless the same can be cancelled
without penalty on not more than thirty (30) days’
notice.
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3.11
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Warranties and Guaranties
. Sellers shall not release or
modify any warranties or guarantees, if any, of manufacturers,
suppliers and installers relating to the Improvements and the
Tangible Personal Property or any part thereof, except with the
prior written consent of Purchaser, which consent shall not be
unreasonably withheld or delayed. Sellers have no Knowledge of any
such warranties or guaranties and make no representation in that
respect to the transferability of any such warranties or
guaranties.
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3.12
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Insurance . All of Sellers’ Insurance Policies are
valid and in full force and effect, and Sellers shall pay all
future premiums for such policies up to the Closing Date (and any
replacements thereof) on or before the due date therefor. Sellers
shall pay all premiums on, and shall not cancel or allow to expire
any of, the In
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