Exhibit
10.1
CONTRIBUTION
AGREEMENT
dated as of January 10,
2007
between
SHREE ASSOCIATES, KUNJ ASSOCIATES,
SHANTI III ASSOCIATES, TRUST FBO NEIL H. SHAH UNDER THE HASU AND
HERSHA SHAH 2004 TRUST, TRUST FBO JAY H. SHAH UNDER THE HASU AND
HERSHA SHAH 2004 TRUST, DEVI ASSOCIATES, DAVID L. DESFOR, AND
SHREENATHJI ENTERPRISES, LTD.
as Contributors,
and
HERSHA HOSPITALITY LIMITED
PARTNERSHIP AND HERSHA HOSPITALITY, LLC
as Acquirors
IN CONNECTION WITH THE CONTRIBUTION
AND ACQUISITION
OF PARTNERSHIP INTERESTS IN 44
CARLISLE ASSOCIATES, LP,
OWNER OF RESIDENCE INN, CARLISLE,
PENNSYLVANIA
CONTRIBUTION
AGREEMENT
THIS CONTRIBUTION AGREEMENT (the
“Agreement”), dated this 10th day of January, 2007,
between SHREE ASSOCIATES ("Shree"), KUNJ ASSOCIATES ("Kunj"),
SHANTI III ASSOCIATES ("Shanti III"), DEVI ASSOCIATES
(“Devi”), all Pennsylvania limited partnerships (the
“Partnership Contributors”), TRUST FBO NEIL H. SHAH
UNDER THE HASU AND HERSHA SHAH 2004 TRUST (“NHS
Trust”), TRUST FBO JAY H. SHAH UNDER THE HASU AND HERSHA SHAH
2004 TRUST (“JHS Trust”) (the “Trust
Contributors”), and Shreenathji Enterprises, Ltd.
(“SEL”), a Pennsylvania corporation, (the
“Corporate Contributor”), (collectively, the
“Contributors”), DAVID L. DESFOR (“Desfor”)
(the “Individual Contributor”), AND HERSHA HOSPITALITY
LIMITED PARTNERSHIP, a Virginia limited partnership (the
“Partnership Acquiror” or “HHLP”) and
HERSHA HOSPITALITY, LLC, a Virginia limited liability company (the
“LLC Acquiror” or “HHLLC”) (collectively,
the “Acquirors”) and 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.
" HHLP- JHS
Trust Assignment and Assumption Agreement" shall mean that
certain assignment and assumption agreement whereby JHS Trust
assigns and HHLP assumes the HHLP- JHS Trust Interest.
“
HHLP-NHS Trust Assignment and Assumption Agreement ”
shall mean that certain assignment and assumption agreement whereby
NHS Trust assigns and HHLP assumes the HHLP - NHS Trust
Interest.
“
HHLP-Shree Assignment and Assumption Agreement ” shall
mean that certain assignment and assumption agreement whereby Shree
assigns and HHLP assumes the HHLP-Shree Interest.
“
HHLP-Kunj Assignment and Assumption Agreement ” shall
mean that certain assignment and assumption agreement whereby Kunj
assigns and HHLP assumes the HHLP-Kunj Interest.
“
HHLP-Shanti III Assignment and Assumption Agreement ”
shall mean that certain assignment and assumption agreement whereby
Shanti III assigns and HHLP assumes the HHLP-Shanti III
Interest.
“
HHLP-Devi Assignment and Assumption Agreement ” shall
mean that certain assignment and assumption agreement whereby Devi
assigns and HHLP assumes the HHLP-Devi Interest.
“
HHLP-Desfor Assignment and Assumption Agreement ”
shall mean that certain assignment and assumption agreement whereby
Desfor assigns and HHLP assumes the HHLP-Desfor
Interest.
“
HHLLC-SEL Assignment and Assumption Agreement ” shall
mean that certain assignment and assumption agreement whereby SEL
assigns and HHLLC assumes the HHLLC-SEL Interest.
“
Assignment and Assumption Agreements ” shall mean the
HHLP-Shree Assignment and Assumption Agreement, the HHLP-Kunj
Assignment and Assumption Agreement, the HHLP-Shanti III Assignment
and Assumption Agreement, the HHLP-JHS Trust Assignment and
Assumption Agreement, the HHLP- NHS Trust Assignment and Assumption
Agreement, the HHLP-Devi Assignment and Assumption Agreement, the
HHLP-Desfor Assignment and Assumption Agreement, and the HHLLC-SEL
Assignment and Assumption Agreement.
"Authorizations" shall mean all licenses, permits and approvals
required by any governmental or quasi-governmental agency, body or
officer for the ownership, operation and use of the Property or any
part thereof.
"Closing" shall mean the closing of the contribution and
acquisition of the Interests pursuant to this Agreement.
"Closing
Date" shall mean the date
on which the Closing occurs.
“Consideration”
shall mean $8,615,000 payable to the
Contributors at Closing in the manner described in Section
2.3 .
“
Continuing Liabilities ” shall include liabilities
arising under operating agreements, equipment leases, loan
agreements, or proration credits at Closing, but shall exclude any
liabilities arising from any other arrangement, agreement or
pending litigation.
"Escrow
Agent" shall mean All
American Abstract Co., Inc., 2854 Egypt Road, Audubon, PA
19403.
"FIRPTA
Certificates" shall mean
the affidavit of each of the Contributors under Section 1445
of the Internal Revenue Code certifying that such Contributor is
not a foreign corporation, foreign partnership, foreign trust,
foreign estate or foreign person (as those terms are defined in the
Internal Revenue Code and the Income Tax Regulations), in form and
substance satisfactory to the Acquirors.
"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.
“
HHLP-JHS Trust Interest ” shall mean all right, title
and interest of JHS Trust in the Partnership, consisting of a 20%
limited partnership interest in the Partnership.
“
HHLP-NHS Trust Interest ” shall mean all right, title
and interest of NHS Trust in the Partnership, consisting of a 20%
limited partnership interest in the Partnership.
“
HHLP-Shree Interest ” shall mean all right, title and
interest of Shree in the Partnership, consisting of a 14% limited
partnership interest in the Partnership.
“
HHLP-Kunj Interest ” shall mean all right, title and
interest of Kunj in the Partnership, consisting of a 15% limited
partnership interest in the Partnership.
“
HHLP-Shanti III Interest ” shall mean all right, title
and interest of Shanti III in the Partnership, consisting of a 14%
limited partnership interest in the Partnership.
“
HHLP-Devi Interest ” shall mean all right, title and
interest of Devi in the Partnership, consisting of a 14% limited
partnership interest in the Partnership.
“
HHLP-Desfor Interest ” shall mean all right, title and
interest of Desfor in the Partnership, consisting of a 2% limited
partnership interest in the Partnership.
“HHLLC-SEL Interest”
shall mean all right, title and
interest of SEL in the Partnership, consisting of a 1% general
partnership interest in the Partnership.
"Insurance
Policies" shall mean
those certain policies of insurance described on
Exhibit C attached hereto.
"Intangible
Personal Property" shall
mean all intangible personal property owned or possessed by the
Contributors and used in connection with the ownership, operation,
leasing, occupancy or maintenance of the Property, including,
without limitation, the right to use the trade name "Residence Inn"
and all variations thereof, the Authorizations, escrow accounts,
insurance policies, general intangibles, business records, plans
and specifications, surveys and title insurance policies pertaining
to the Real Property and the Personal Property, all licenses,
permits and approvals with respect to the construction, ownership,
operation, leasing, occupancy or maintenance of the Property, any
unpaid award for taking by condemnation or any damage to the Land
by reason of a change of grade or location of or access to any
street or highway, and the share of the Tray Ledger as hereinafter
defined, excluding (a) any of the aforesaid rights the
Acquirors elect not to acquire, (b) the Contributors’
cash on hand, in bank accounts and invested with financial
institutions and (c) accounts receivable except for the above
described share of the Tray Ledger.
“
Interests ” shall mean the HHLP-Shree Interest, the
HHLP-Kunj Interest, the HHLP-Shanti III Interest, the HHLP- JHS
Trust Interest, the HHLP-NHS Trust Interest, the HHLP-Devi
Interest, the HHLP-Desfor Interest, and the HHLLC-SEL
Interest.
"Inventory" shall mean all "inventories of merchandise" and
"inventories of supplies", as such terms are defined in the Uniform
System of Accounts for Hotels [9 th Revised Edition] as
published by the Hotel Association of New York City, Inc., as
revised, and similar consumable supplies.
"Land" shall mean that certain parcel of real estate
lying and being at, more commonly known as the, as more
particularly described on Exhibit A attached hereto,
together with all easements, rights, privileges, remainders,
reversions and appurtenances thereunto belonging or in any way
appertaining, and all of the estate, right, title, interest, claim
or demand whatsoever of the Contributors therein, in the streets
and ways adjacent thereto and in the beds thereof, either at law or
in equity, in possession or expectancy, now or hereafter
acquired.
"Leases" shall mean those leases of real property
attached hereto as Exhibit D .
“
Lessee ” shall mean 44 New England Management
Company.
"Manager" shall mean Hersha Hospitality Management,
L.P.
"Operating
Agreements" shall mean
the management agreements, service contracts, supply contracts,
leases (other than the Leases) and other agreements, if any, in
effect with respect to the construction, ownership, operation,
occupancy or maintenance of the Property. All of the Operating
Agreements in force and effect as of the date hereof are listed on
Exhibit E attached hereto.
“Organizational
Documents” shall
mean the current partnership agreements and certificates of limited
partnership of the Partnership Contributors, true and correct
copies of which are attached hereto as Exhibit F and
Exhibit G , respectively.
"Owner's
Title Policy" shall mean
an owner's policy of title insurance issued to the Acquirors by the
Title Company, pursuant to which the Title Company insures the
Acquirors' ownership of fee simple title to the Real Property
(including the marketability thereof) subject only to Permitted
Title Exceptions. The Owner's Title Policy shall insure the
Acquirors in the amount of the Consideration and shall be
acceptable in form and substance to the Acquirors. The description
of the Land in the Owner's Title Policy shall be by courses and
distances and shall be identical to the description shown on the
Survey.
“Partnership”
shall mean 44 Carlisle Associates,
LP, a Pennsylvania limited partnership that owns as its sole assets
hotel improvements situated at 1 Hampton Court, Carlisle, PA
17013.
"Permitted
Title Exceptions" shall
mean those exceptions to title to the Real Property that are
satisfactory to the Acquirors.
"Property" shall mean collectively the Real Property, the
Inventory, the Reservation System, the Tangible Personal Property
and the Intangible Personal Property.
"Real
Property" shall mean the
Land and the Improvements.
"Reservation
System" shall mean the
Contributors’ Reservation Terminal and Reservation System
equipment and software, if any.
"Tangible
Personal Property" shall
mean the items of tangible personal Property consisting of all
furniture, fixtures and equipment situated on, attached to, or used
in the operation of the Hotel, and all furniture, furnishings,
equipment, machinery, and other personal property of every kind
located on or used in the operation of the Hotel and owned by the
Contributors; provided, however, that the Acquirors agree that, all
Inventory shall be conveyed to the Acquirors' property
manager.
"Title
Commitment" shall mean
the commitment by the Title Company to issue the Owner's Title
Policy.
"Title
Company" shall mean All
American Abstract Co., Inc., 2854 Egypt Road, Audubon, PA
19403.
"Tray
Ledger" shall mean the
final night's room revenue (revenue from rooms occupied as of 12:01
a.m. on the Effective Date, exclusive of food, beverage, telephone
and similar charges which shall be retained by the Contributors),
including any sales taxes, room taxes or other taxes
thereon.
"Utilities" shall mean public sanitary and storm sewers,
natural gas, telephone, public water facilities, electrical
facilities and all other utility facilities and services necessary
for the operation and occupancy of the Property as a
hotel.
1.2
Rules of Construction. The following rules shall apply to
the construction and interpretation of this Agreement:
(a)
Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the
feminine and the neuter.
(b)
All
references herein to particular articles, sections, subsections,
clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Agreement.
(c) The headings
contained herein are solely for convenience of reference and
shall not constitute a part of this Agreement nor shall they affect
its meaning, construction or effect.
(d)
Each
party hereto and its counsel have reviewed and revised (or
requested revisions of) this Agreement, and therefore any usual
rules of construction requiring that ambiguities are to be resolved
against a particular party shall not be applicable in the
construction and interpretation of this Agreement or any exhibits
hereto.
ARTICLE II
CONTRIBUTION AND ACQUISITION;
PAYMENT OF CONSIDERATION AND CONTINGENT
CONSIDERATION
2.1
Contribution and Acquisition. Each of the Contributors
agrees to contribute, assign and transfer its respective Interest
to the Acquirors and the Acquirors agree to accept each
Contributor’s Interest in exchange for the Consideration and
in accordance with the other terms and conditions set forth
herein.
2.2 Intentionally
Omitted .
2.3
Payment of the Consideration. The consideration shall be
paid to the Contributor in the following manner:
(a) The
Acquirors shall receive a credit against the Consideration in an
amount equal to the Contributors’ closing costs assumed and
paid for by the Acquirors pursuant to Section 6.4
hereof.
(b) The
Acquirors 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 (approximately $7million),
of the existing mortgage loan encumbering the property as such
balance is evidenced by a letter from the lender, which loan the
Acquirors shall take subject to or, if requested,
assume.
(c) The
Acquirors shall issue units of Hersha Hospitality Limited
Partnership for the amount of $1,330,000.00.
(d) The
Acquirors shall pay in the lawful money of the United States for
the balance of the Consideration.
The parties
agree that the transfer of the assets to the Acquirors pursuant to
this Agreement shall be treated for federal income tax purposes as
a contribution of such assets solely in exchange for partnership
interests in the Partnership Contributor that qualifies as a
tax-free contribution under Section 721 of the Internal revenue
Code of 1986, as amended.
ARTICLE III
CONTRIBUTORS’
REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the
Acquirors to enter into this Agreement and to acquire the
Interests, the Contributors hereby make the following
representations, warranties and covenants on a joint and several
basis, upon each of which the Contributors acknowledge and agree
that the Acquirors is entitled to rely and has relied:
3.1
Organization and Power. The Partnership Contributors are
each limited partnerships duly formed, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania, and
the Corporate Contributor is a corporation duly formed, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania and have all requisite powers and all governmental
licenses, authorizations, consents and approvals necessary to carry
on its business as now conducted, to own, lease and operate its
properties, to execute and deliver this Agreement and any document
or instrument required to be executed and delivered on behalf of
the Contributors hereunder, to perform their obligations under this
Agreement and any such other documents or instruments and to
consummate the transactions contemplated hereby.
3.2
Authorization, No Violations and Notices.
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(a)
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The execution, delivery and
performance of this Agreement by the Contributors, and the
consummation of the transactions contemplated hereby have been duly
authorized, adopted and approved by the Contributors, and the
partners of the Contributors for those Contributors that are
partnerships, and the shareholders of the Corporate Contributor, to
the extent required by their organizational documents and
applicable law. No other proceedings are necessary to authorize
this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed by Shree, Kunj, Shanti III, Devi,
JHS Trust, NHS Trust, Desfor, and SEL, and is a valid and binding
obligation enforceable against them in accordance with its
terms.
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(b)
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Neither the execution, delivery, or
performance by the Contributors of this Agreement, nor the
consummation of the transactions contemplated hereby, nor
compliance by the Contributors with any of the provisions hereof,
will:
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(i)
violate, conflict with, result in a breach of any provision of,
constitute a default (or an event that, which, with or lapse
of time or both, would constitute a default) under, result in the
termination of, accelerate the performance required by, or result
in a right of termination or acceleration, or the creation of any
lien, security interest, charge, or encumbrance upon any of the
properties or assets of the Partnership, under any of the terms,
conditions, or provisions of, its Partnership, or any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement, or
other instrument, or obligation to which the Partnership is a
party, or by which the Partnership may be bound, or to which the
Partnership or its properties or assets may be subject;
or
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(ii)
violate any judgment, ruling, order, writ, injunction, decree,
statute, rule, or regulation applicable to the Partnership or
its property or assets that would not be violated by the execution,
delivery or performance of this Agreement or the transactions
contemplated hereby by the Contributors or compliance by the
Contributors with any of the provisions hereof.
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3.3
Litigation with respect to Contributors. There is no action,
suit, claim or proceeding pending or, to the Contributors’
knowledge, threatened against or affecting the Contributors or
their assets in any court, before any arbitrator or before or by
any governmental body or other regulatory authority (i) that would
adversely affect the Interests, (ii) that seeks restraint,
prohibition, damages or other relief in connection with this
Agreement or the transactions contemplated hereby, or (iii) would
delay the consummation of any of the transactions contemplated
hereby. The Contributors are not subject to any judgment, decree,
injunction, rule or order of any court relating to the
Contributors’ participation in the transactions contemplated
by this Agreement.
3.4
Interests. The Interests will be free and clear of all liens
and encumbrances on the Closing Date and the Contributors have
good, merchantable title thereto and the right to convey same in
accordance with the terms of this Agreement. Upon delivery of the
Assignment and Assumption Agreements to the Acquirors at Closing,
good valid and merchantable title to the Interests, free and clear
of all liens and encumbrances, will pass to the
Acquirors.
3.5
Bankruptcy with Respect to Contributors. No Act of
Bankruptcy has occurred with respect to the
Contributors.
3.6
Brokerage Commission. The Contributors have not engaged the
services of, nor are they or will they or Acquirors become liable
to, any real estate agent, broker, finder or any other person or
entity for any brokerage or finder’s fee, commission or other
amount with respect to the transactions described herein on account
of any action by the Contributors.
3.7
The Partnership.
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(a)
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The Partnership is a limited
partnership duly formed, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania and has all
requisite powers necessary to carry on its business as now
conducted, to own, lease and operate its properties.
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(b)
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Neither the execution, delivery, or
performance by the Contributors of this Agreement, nor the
consummation of the transactions contemplated hereby, nor
compliance by the Contributors with any of the provisions hereof,
will:
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(i)
violate, conflict with, result in a breach of any provision of,
constitute a default (or an event that, with notice or lapse of
time or both, would constitute a default) under, result in the
termination of, accelerate the performance required by, or result
in a right of termination or acceleration, or the creation of any
lien, security interest, charge, or encumbrance upon any of the
properties or assets of the Partnership, under any of the terms,
conditions, or provisions of, their articles of incorporation or
bylaws, or any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement, or other instrument or obligation to
which the Partnership is a party, or by which the Partnership may
be bound, or to which the Partnership or its properties or assets
may be subject; or
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(ii)
violate any judgment, ruling, order, writ, injunction, decree,
statute, rule, or regulation applicable to the Partnership or
any of the Partnership’s properties or assets.
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(c)
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Except for the Contributors, no
party has any interest in the Partnership or the right or option to
acquire any interest in the Partnership or the property or any
portion thereof. The Partnership has no subsidiaries and does not
directly or indirectly own any securities of or interest in any
other entity, including, without limitation, any partnership or
joint venture.
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3.8
Liabilities, Debts and Obligations. Except for the
Continuing Liabilities, the Partnership has no liability, debt or
obligation.
3.9
Tax Matters with respect to Partnership.
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(a)
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The Partnership
has filed all income tax information returns on IRS Form 1065
(including K-1s for each partner) and applicable state and local
income tax forms required to be filed with the United States
Government and with all states and political subdivisions thereof
where any such returns are required to be filed and where the
failure to file such return or report would subject the Partnership
or its partners to any material liability or penalty. All taxes
(other than sale taxes, rental taxes or the equivalent and real
property taxes) imposed by the United States, or by any foreign
country, or by any state, municipality, subdivision, or
instrumentality of the United States or of any foreign country or
by any other taxing authority, which are due and payable by the
Partnership have been paid in full or adequately provided for by
reserves shown in their records and books of account and in the
Partnership’s financial information. The Partnership has not
obtained or received any extension of time (beyond the Closing
Date) for the assessment of deficiencies for any years or waived or
extended the statute of limitations for the determination or
collection of any tax. To the Contributors’ knowledge no
unassessed tax deficiency is proposed or threatened against the
Partnership.
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(b)
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All taxes,
rental taxes or the equivalent, and all interest and penalties due
thereon, required to be paid or collected by the Partnership in
connection with the operation of the Property as of the Closing
Date will have been collected and/or paid to the appropriate
governmental authorities, as required or such amounts shall be
pro-rated as of the Closing Date. The Partnership shall file, all
necessary returns and petitions required to be filed through the
Closing Date. The Partnership shall prepare and file all federal
and state income tax returns for the tax period ending on the
Closing Date, which shall reflect the termination for tax purposes
of the Partnership. If requested by the Acquirors, the Contributors
shall cause the Partnership to make an election under Section 754
of the Code for the period ending on the Closing Date.
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3.10
Contracts and Agreements. There is no loan agreement,
guarantee, note, bond, indenture and other debt instrument, lease
and other contract to which the Partnership is a party or by which
its assets are bound other than Permitted Title Encumbrances, the
Leases, and the Operating Agreements.
3.11
No
Special Taxes. The Contributors have no actual knowledge of,
nor have they received any written notice of, any special taxes or
assessments relating to the Partnership or Property or any part
thereof or any planned public improvements that may result in a
special tax or assessment against the Property.
3.12
Compliance with Existing Laws. The Partnership possesses all
Authorizations, each of which is valid and in full force and
effect, and, to Contributors’ actual knowledge, no provision,
condition or limitation of any of the Authorizations has been
breached or violated. The Partnership has not misrepresented or
failed to disclose any relevant fact in obtaining all
Authorizations, and the Contributors have no actual knowledge of
any change in the circumstances under which those Authorizations
were obtained that result in their termination, suspension,
modification or limitation. The Contributors have no actual
knowledge, nor have they received written notice within the past
three years, of any existing violation of any provision of any
applicable building, zoning, subdivision, environmental or other
go
