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Exhibti
10.1
CONTRIBUTION AGREEMENT
dated
as of June 13, 2008
by
and among
SHREE ASSOCIATES,
KUNJ ASSOCIATES,
DEVI ASSOCIATES,
SHANTI III ASSOCIATES,
TRUST FBO JAY H SHAH UNDER THE HASU AND
HERSHA SHAH 2004 TRUST DATED AUGUST 18, 2004,
TRUST FBO NEIL H SHAH UNDER THE HASU AND
HERSHA SHAH 2004 TRUST DATED AUGUST 18, 2004,
PLM ASSOCIATES LLC,
DAVID L. DESFOR AND
ASHISH R. PARIKH
as
Contributors,
and
HERSHA HOSPITALITY LIMITED PARTNERSHIP
as
Acquirer,
IN
CONNECTION WITH THE PURCHASE AND SALE OF
MEMBERSHIP
INTERESTS IN HERSHA CONDUIT ASSOCIATES, LLC, MEMBER OF
RISINGSAM HOSPITALITY LLC, OWNER OF THE JFK SHERATON LOCATED
AT
132-26
S. CONDUIT BOULEVARD, JAMAICA, NY
THIS
CONTRIBUTION AGREEMENT, dated as of June 13, 2008 (the “
Agreement
”), by Shree Associates, a Pennsylvania limited
partnership (the “ Shree Contributor
”), Kunj Associates, a Pennsylvania limited partnership
(the “ Kunj Contributor
”), Devi Associates, a Pennsylvania limited partnership
(the “ Devi Contributor
”), Shanti III Associates, a Pennsylvania limited
partnership (the “ Shanti III
Contributor ”), Trust FBO Jay H. Shah under the
Hasu and Hersha Shah 2004 Trust dated August 18, 2004 (the
“ Trust
FBO Jay H. Shah Contributor ”), Trust FBO Neil H.
Shah under the Hasu and Hersha Shah 2004 Trust dated August
18, 2004 (the “ Trust FBO Neil H. Shah
Contributor ”), PLM Associates LLC, a
Pennsylvania limited liability company (the “
PLM
Contributor ”), David L. Desfor, an individual
(the “ Desfor Contributor
”) and Ashish R. Parikh, an individual (the “
Parikh
Contributor ”, and collectively, all together the
“ Contributors
”), Hersha Conduit Associates, LLC, a New York limited
Liability Company (the “ LLC ”) and
Hersha Hospitality Limited Partnership, a Virginia limited
partnership (the “ Acquirer ”)
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 limited liability
company action for the purpose of effecting any of the
foregoing; or if a proceeding or case shall be commenced,
without the application or consent of a party hereto or any
general partner thereof, in any court of competent
jurisdiction seeking (1) the liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment
of debts, of such party or general partner, (2) the
appointment of a receiver, custodian, trustee or liquidator or
such party or general partner or all or any substantial part
of its assets, or (3) other similar relief under any law
relating to bankruptcy, insolvency, reorganization, winding-up
or composition or adjustment of debts, and such proceeding or
case shall continue undismissed; or an order (including an
order for relief entered in an involuntary case under the
Federal Bankruptcy Code, as now or hereafter in effect)
judgment or decree approving or ordering any of the foregoing
shall be entered and continue unstayed and in effect, for a
period of sixty (60) consecutive days.
“
Apportionment
Date ” shall mean the day immediately preceding
the Closing Date.
“
Articles of
Organization ” shall mean the Articles of
Organization of the LLC and the Property Owner filed with the
Secretary of State of the State of New York, attached hereto
as Exhibit F
.
“
Assignment and
Assumption Agreement ” shall mean those certain
Assignment and Assumption Agreements with respect to the
Interests (defined herein below), dated as of the Closing
Date, by and between Contributors and Acquirer .
“
Authorizations
” shall mean all licenses, permits and approvals
required by any governmental or quasi-governmental agency,
body or officer for the ownership, operation and use of the
Property or any part thereof.
“
Closing
” shall mean the Closing of the contribution and
acquisition of the Interests pursuant to this
Agreement.
“
Closing
Date ” shall mean the date on which the Closing
occurs.
“
Consideration
” shall mean the value of Five Hundred Seventy Four
Thousand Three Hundred and Six (574,306) LP Units, payable to
the Contributors at Closing in the manner described in
Section
2.3 and Fifty Percent (50%) of the modification by
Acquirer of the existing loan from Commerce Bank, N.A. to the
Property Owner, dated April 28, 2008, in the original
principal amount of Twenty Four Million Eight Hundred Thousand
Dollars ($24,800,000.00), for which loan the Property Owner
shall remain the borrower.
“
Continuing
Liabilities ” shall include liabilities arising
under Operating Agreements, Leases, equipment leases, loan
agreements, or proration credits at Closing, but shall exclude
any liabilities arising from any other arrangement, agreement
or pending litigation.
“
Escrow
Agent ” shall mean Summit Associates, 100
Lafayette Street, 3 rd
Floor, New York, NY 10013; Phone 212-608-5866; Fax
212-227-8745.
“
Existing
Mortgage ” shall mean that certain Leasehold
Mortgage and Security Agreement dated as of April 28, 2008,
and securing a loan from Commerce Bank, N.A. to the Property
Owner, in the original principal amount of Twenty Four Million
Eight Hundred Thousand Dollars ($24,800,000.00).
“
FIRPTA
Certificate ” shall mean the affidavit of the
Contributors under Section 1445 of the Internal Revenue
Code certifying that such Contributors are not a foreign
corporation, foreign partnership, foreign limited liability
company, foreign trust, foreign estate or foreign person (as
those terms are defined in the Internal Revenue Code and the
Income Tax Regulations), in form and substance satisfactory to
the Acquirer.
“
Governmental
Body ” means any federal, state, municipal or
other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign.
“
Ground
Lease ” shall mean that certain Ground Lease
dated June 19, 2003, as amended, by and between MLT Canyon
LLC, a New York limited liability company, as
“Landlord” and the Property Owner as
“Tenant”.
“
Hersha
” shall mean Hersha Hospitality Trust, a Maryland
business trust.
“
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 B
attached hereto.
“
Intangible
Personal Property ” shall mean all intangible
personal property owned or possessed by the Contributors, the
LLC or the Property Owner and used in connection with the
ownership, operation, leasing, occupancy or maintenance of the
Property, including, without limitation, the right to use the
trade name “JFK Sheraton” and all variations
thereof, the Authorizations, escrow accounts, insurance
policies, general intangibles, business records, plans and
specifications, surveys and title insurance policies
pertaining to the real property and the personal property, all
licenses, permits and approvals with respect to the
construction, ownership, operation, leasing, occupancy or
maintenance of the Property, any unpaid award for taking by
condemnation or any damage to the Land by reason of a change
of grade or location of or access to any street or highway,
and the share of the Tray Ledger as hereinafter defined,
excluding (a) any of the aforesaid rights the Acquirer
elects not to acquire, (b) the Contributors’ cash
on hand, in bank accounts and invested with financial
institutions and (c) accounts receivable except for the above
described share of the Tray Ledger.
“
Interests
” shall mean the Shree Interests, the Kunj Interests,
the Devi Interests, the Shanti III Interests, the Trust FBO
Jay H. Shah Interests, the Trust FBO Neil H. Shah Interests,
the PLM Interests, the Desfor Interests and the Parikh
Interests, consisting of One Hundred Percent (100%) of the
interests in the LLC.
“
Shree
Interests ” shall mean all right, title and
interest of Shree Contributor in the LLC, consisting of a
Three Percent (3%) membership interest in the
LLC.
“
Kunj
Interests ” shall mean all right, title and
interest of Kunj Contributor in the LLC, consisting of a
Fourteen Percent (14%) membership interest in the
LLC.
“
Devi
Interests ” shall mean all right, title and
interest of Devi Contributor in the LLC, consisting of a
Twelve Percent (12%) membership interest in the
LLC.
“
Shanti III
Interests ” shall mean all right, title and
interest of Shanti III Contributor in the LLC, consisting of a
Ten Percent (10%) membership interest in the LLC.
“
Trust FBO Jay H.
Shah Interests ” shall mean all right, title and
interest of Trust FBO Jay H. Shah Contributor in the LLC,
consisting of a Twenty-Five Percent (25%) membership interest
in the LLC.
“
Trust FBO Neil
H. Shah Interests ” shall mean all right, title
and interest of Trust FBO Neil H. Shah Contributor in the LLC,
consisting of a Twenty-Nine Percent (29%) membership interest
in the LLC.
“
PLM
Interests ” shall mean all right, title and
interest of PLM Contributor in the LLC, consisting of a Two
Percent (2%) membership interest in the LLC.
“
Desfor
Interests ” shall mean all right, title and
interest of Desfor Contributor in the LLC, consisting of a
Three Percent (3%) membership interest in the
LLC.
“
Parikh
Interests ” shall mean all right, title and
interest of Parikh Contributor in the LLC, consisting of a Two
Percent (2%) membership interest in the LLC.
“
Inventory
” shall mean all inventory located at the Hotel,
including without limitation, all mattresses, pillows, bed
linens, towels, paper goods, soaps, cleaning supplies and
other such supplies.
“
Joinder
” shall have the meaning set forth in Section
2.3(c) .
“
Knowledge”
shall mean the actual knowledge of the Contributors that they
would have had after making reasonable
investigation.
“
Land
” shall mean the ground lease to that certain parcel of
real estate lying and being in the County of Queens and State
of New York at 132-26 S. Conduit Boulevard, Jamaica, New York,
as more particularly described on Exhibit A
attached hereto, together with all easements, rights,
privileges and appurtenances thereunto belonging or in any way
appertaining, and all of the leasehold estate, right, title,
interest, claim or demand whatsoever of the Property Owner
therein, in the streets and ways adjacent thereto and in the
beds thereof, either at law or in equity, in possession or
expectancy, now or hereafter acquired.
“
Leases
” shall mean those leases of real property listed on
Exhibit C
attached hereto.
“
LLC
” shall mean Hersha Conduit Associates, LLC, a New York
limited liability company that owns, as its only assets,
interests in the Property Owner.
“
LLC
Operating Agreement ” shall mean the current
operating agreement of the LLC, attached hereto as Exhibit G
.
“
LP
Units ” shall mean limited partnership units of
Acquirer.
“
Manager
” shall mean Hersha Hospitality Management, LP, a
Pennsylvania limited partnership.
“
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.
“
Owner’s
Title Policy ” shall mean an owner’s policy
of title insurance issued to the Acquirer by the Title
Company, dated as of the Closing Date, pursuant to which the
Title Company insures the Property Owner’s ownership of
title to the leasehold interest in the Real Property
(including the marketability thereof) subject only to
Permitted Title Exceptions. The Owner’s Title
Policy shall insure the Property Owner in the amount of the
Consideration and shall be acceptable in form and substance to
the Acquirer. The description of the Land in the
Owner’s Title Policy shall be by courses and distances
and shall be identical to the description shown on a survey
provided by the Contributors to the Acquirer.
“
Permitted Title
Exceptions ” shall mean those exceptions to title
to the Real Property that are satisfactory to the Acquirer as
determined pursuant to Section 2.2
.
“
Property
” shall mean collectively the Land, Improvements, the
Inventory, the Reservation System, the Tangible Personal
Property and the Intangible Personal Property.
“
Property
Owner ” shall mean Risingsam Hospitality LLC, a
New York limited liability company that owns, as its only
assets, the leasehold interest in the Land, the Hotel and
Improvements located on the Land, in accordance with the
Ground Lease.
“
Property Owner
Operating Agreement ” shall mean the current
operating agreement of the Property Owner, attached hereto as
Exhibit H
.
“
Real
Property ” shall mean the Land and the
Improvements.
“
Reservation
System ” shall mean the Property Owner’s
Reservation Terminal and Reservation System equipment and
software, if any.
“
Securities
Act ” shall mean the Securities Act of 1933, as
amended.
“
Study
Period ” shall mean the period commencing as of
the date hereof, and continuing through the time of
Closing.
“
Tangible
Personal Property ” shall mean the items of
tangible personal property consisting of all furniture,
fixtures and equipment situated on, attached to, or used in
the operation of the Hotel, and all furniture, furnishings,
equipment, machinery, and other personal property of every
kind located on or used in the operation of the Hotel and
owned by the Contributors, the LLC or the Property
Owner.
“
Title
Commitment ” shall mean the commitment by the
Title Company to issue the Owner’s Title
Policy.
“
Title
Company ” shall mean Summit Associates, 100
Lafayette Street, 3 rd
Floor, New York, NY 10013; Phone 212-608-5866; Fax
212-227-8745.
“
Tray
Ledger ” shall mean the final night’s room
revenue (revenue from rooms occupied as of 11:59:59 p.m. on
the Apportionment Date, inclusive of food, beverage, telephone
and similar charges), net of any sales taxes, room taxes or
other taxes thereon.
“
Utilities
” shall mean public sanitary and storm sewers, natural
gas, telephone, public water facilities, electrical facilities
and all other utility facilities and services necessary for
the operation and occupancy of the Property as a
hotel.
1.2
Rules of
Construction. The following rules shall
apply to the construction and interpretation of this
Agreement:
(a) Singular
words shall connote the plural number as well as the singular
and vice versa, and the masculine shall include the feminine
and the neuter.
(b) All
references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles,
sections, subsections, clauses or exhibits of this
Agreement.
(c) Headings
contained herein are solely for convenience of reference and
shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
(d) Each
party hereto and its counsel have reviewed and revised (or
requested revisions of) this Agreement, and therefore any
usual rules of construction requiring that ambiguities are to
be resolved against a particular party shall not be applicable
in the construction and interpretation of this Agreement or
any exhibits hereto.
ARTICLE II
CONTRIBUTION AND
ACQUISITION; STUDY
PERIOD;
PAYMENT OF CONSIDERATION
2.1
Contribution and
Acquisition . The Contributors agree to
contribute, assign and transfer their Interests to the
Acquirer and the Acquirer agrees to accept the Interests in
exchange for the Consideration and in accordance with the
other terms and conditions set forth herein.
2.2
Study
Period. (a) The Acquirer shall
have the right, until the end of the Study Period, to enter
upon the Real Property and to perform, at the Acquirer’s
expense, such economic, surveying, engineering, environmental,
topographic and marketing tests, studies and investigations as
the Acquirer may deem appropriate. If such tests,
studies and investigations warrant, in the Acquirer’s
sole, absolute and unreviewable discretion, the purchase of
the Interests for the purposes contemplated by the Acquirer,
then the Acquirer may elect to proceed to Closing and shall so
notify the Contributors prior to the expiration of the Study
Period. If for any reason the Acquirer does not so
notify the Contributors of its determination to proceed to
Closing prior to the expiration of the Study Period, or if the
Acquirer notifies the Contributors, in writing, prior to the
expiration of the Study Period that it has determined not to
proceed to Closing, this Agreement automatically shall
terminate, and the Acquirer shall be released from any further
liability or obligation under this Agreement.
(b) During
the Study Period, the Contributors shall make available to the
Acquirer, its agents, auditors, engineers, attorneys and other
designees, for inspection copies of all existing architectural
and engineering studies, surveys, title insurance policies,
zoning and site plan materials, correspondence, environmental
audits and other related materials or information if any,
relating to the Property which are in, or come into, the
Contributors’ possession or control.
(c) The
Acquirer hereby indemnifies and defends the Contributors
against any loss, damage or claim arising from entry upon the
Real Property by the Acquirer or any agents, contractors or
employees of the Acquirer. The Acquirer, at its own
expense, shall restore any damage to the Real Property caused
by any of the tests or studies made by the
Acquirer.
(d) During
the Study Period, the Acquirer, at its expense, may cause an
examination of title to the Property to be made, and, prior to
the expiration of the Study Period, may notify the
Contributors of any defects in title shown by such examination
that the Acquirer is unwilling to accept. The
Contributors shall notify the Acquirer whether the
Contributors are willing to cure such defects and to proceed
to Closing. Contributors may cure, but shall not be
obligated to cure such defects. If such defects
consist of deeds of trust, mechanics’ liens, tax liens
or other liens or charges in a fixed sum or capable of
computation as a fixed sum, the Contributors, at their option,
shall either pay and discharge (in which event, the Escrow
Agent is authorized to pay and discharge at Closing) such
defects at Closing. If the Contributors are
unwilling or unable to cure any such defects by Closing, the
Acquirer shall elect (1) to waive such defects and
proceed to Closing without any abatement in the Consideration
or (2) to terminate this Agreement. The
Contributors shall not, after the date of this Agreement,
subject the Property to and shall take all reasonable best
efforts to prevent the Property from being subjected to any
liens, encumbrances, covenants, conditions, restrictions,
easements or other title matters or seek any zoning changes or
take any other action which may affect or modify the status of
title without the Acquirer’s prior written consent,
which consent shall not be unreasonably withheld or
delayed. All title matters revealed by the
Acquirer’s title examination and not objected to by the
Acquirer as provided above shall be deemed Permitted Title
Exceptions. If Acquirer shall fail to examine title
and notify the Contributors of any such title objections by
the end of the Study Period, all such title exceptions (other
than those rendering title unmarketable and those that are to
be paid at Closing as provided above) shall be deemed
Permitted Title Exceptions.
2.3
Payment of the
Consideration. Acquirer shall pay the Consideration to
the Contributors in the following manner:
(a) Acquirer
shall pay to Contributors Five Hundred Seventy Four Thousand
Three Hundred and Six (574,306) LP Units, the price of such LP
Units to be determined on the Closing Date. Contributors shall
be restricted from converting or selling such LP Units for a
period of one (1) year from the Closing Date.
(b) At
Closing, the Existing Mortgage shall be assumed or modified by
Acquirer, and the Property Owner shall remain the
borrower. Any adjustments and prorations to be made
pursuant to the terms of this Agreement shall be paid by wire
transfer of immediately available funds to an account
specified by the party due to receive same.
(c) Notwithstanding
the foregoing, no LP Units shall be issued by the Acquirer,
and following such issuance no LP Units shall be transferred
by any Contributor to, any person or entity that is not an
accredited investor within the meaning of Regulation D
promulgated by the United States Securities and Exchange
Commission (“SEC”) under the Securities Act of
1933, as amended (the “ Securities
Act ”), and to the extent any such non-accredited
person or entity is entitled to receive any portion of the
Consideration, such portion shall be paid in cash rather than
LP Units and the number of LP Units issuable in payment of the
Consideration shall be reduced accordingly. Each Contributor
agrees to take such actions as Acquirer may reasonably request
in order to assure that the issuance of any LP Units pursuant
to this Agreement complies with the requirements of the
Securities Act and Regulation D promulgated thereunder. Except
as otherwise expressly set forth in this Agreement, the
Contributors acknowledge and agree that once the Closing
occurs, the Contributors shall no longer hold any right, title
or interest in the Property Owner (except through its
ownership of Acquirer). Contributors hereby direct Acquirer to
pay, issue and distribute (as applicable) the Consideration on
the Closing Date to the Contributors in such amounts set forth
in this Agreement. The
Contributors that acquire LP Units acknowledge that any
certificates evidencing the LP Units will bear appropriate
legends indicating (i) that the LP Units have not been
registered under the Securities Act, and (ii) that
Acquirer’s Limited Partnership Agreement (the “
Acquirer’s
Limited Partnership Agreement ”, attached hereto
as Exhibit K
) restricts the transfer of the LP Units. Each Contributor
shall upon receipt of the LP Units at Closing become a limited
partner of Acquirer by executing the form of joinder (the
“ Joinder
”, attached hereto as Exhibit J
) to the Acquirer’s Limited Partnership Agreement and
deliver the executed Joinder at closing pursuant to the terms
of Section
6.2 hereof; provided ,
however , that if
any Contributor is presently a limited partner of the
Acquirer, such Contributor shall not be required to execute
and deliver the Joinder. By executing and
delivering the Joinder in accordance with the terms hereof,
each Contributor acknowledges that it will be bound by the
terms and provisions of the Acquirer’s Limited
Partnership Agreement.
ARTICLE III
CONTRIBUTORS’ REPRESENTATIONS, WARRANTIES AND
COVENANTS
To
induce the Acquirer to enter into this Agreement and to
purchase the Property, Contributors hereby make the following
representations, warranties and covenants, upon each of which
Contributors acknowledge and agree that the Acquirer is
entitled to rely and has relied:
3.1
Identity and
Power .
(a) The
Contributors have all requisite powers and all governmental
licenses, authorizations, consents and approvals necessary to
carry on their business as now conducted, to own, lease and
operate their respective properties, to execute and deliver
this Agreement and any document or instrument required to be
executed and delivered on behalf of each such Contributor
hereunder, to perform their respective obligations under this
Agreement and any such other documents or instruments and to
consummate the transactions contemplated hereby.
3.2
Authorization,
No Violations and Notices .
(a) The
execution, delivery and performance of this Agreement by the
Contributors, and the consummation of the transactions
contemplated hereby have been duly authorized, adopted and
approved by the Contributors. No other proceedings
are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly
executed by the Contributors and is a valid and binding
obligation enforceable against them in accordance with its
terms.
(b) Neither
the execution, delivery, or performance by the Contributors of
this Agreement, nor the consummation of the transactions
contemplated hereby, nor compliance by the Contributors with
any of the provisions hereof, will
(i) violate,
conflict with, result in a breach of any provision of,
constitute a default (or an event that, which, with or lapse
of time or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or
result in a right of termination or acceleration, or the
creation of any lien, security interest, charge, or
encumbrance upon any of the Property, the assets of the LLC or
assets of the Property Owner, under any of the
terms, conditions, or provisions of, the Articles of
Organization, the LLC Operating Agreement, the Property Owner
Operating Agreement or any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement, or other instrument,
or obligation to which the LLC or the Property Owner is a
party, or by which the LLC or the Property Owner may be bound,
or to which the LLC or the Property Owner or their respective
properties or assets, or the Property may be subject;
or
(ii) violate
any judgment, ruling, order, writ, injunction, decree,
statute, rule, or regulation applicable to the LLC or the
Property Owner, their respective properties or assets, or the
Property that would not be violated by the execution, delivery
or performance of this Agreement or the transactions
contemplated hereby by the Contributors or compliance by the
Contributors with any of the provisions hereof.
3.3
Litigation with
respect to Contributors . Except as set
forth on Exhibit
E , there
is no action, suit, claim or proceeding pending or, to the
Contributors’ Knowledge, threatened against or affecting
the Contributors or their assets in any court, before any
arbitrator or before or by any governmental body or other
regulatory authority (i) that would materially adversely
affect the Contributors or the Interests, (ii) that seeks
restraint, prohibition, damages or other relief in connection
with this Agreement or the transactions contemplated hereby,
or (iii) would delay the consummation of any of the
transactions contemplated hereby. The Contributors
are not subject to any judgment, decree, injunction, rule or
order of any court relating to the Contributors’
participation in the transactions contemplated by this
Agreement.
3.4
Interests and
Property .
(a) The
Interests are, on the date hereof, and will be on the Closing
Date, free and clear of all liens and encumbrances and the
Contributors have good, marketable title thereto and the right
to convey same in accordance with the terms of this
Agreement. Upon delivery of the Contributors’
Assignment and Assumption Agreement to the Acquirer at
Closing, good valid and marketable title to the
Contributors’ Interests, free and clear of all liens and
encumbrances, will pass to the Acquirer. The
Interests constitute the only outstanding interests of the
LLC.
(b) Except
for liens disclosed by Contributors to Acquirer, the Interests
are, on the date hereof, and will be on the Closing Date, free
and clear of all liens and encumbrances, and the Contributors
have good, marketable title thereto and the right to convey
same. The Property Owner is the leasehold owner of
the Real Property and the sole owner of the
Property. The LLC owns Fifty Percent (50%) of the
only outstanding securities and membership interests of the
Property Owner. As of the Closing Date, Acquirer
will own the remaining Fifty Percent (50%) of the only
outstanding securities and membership interests of the
Property Owner.
3.5
Bankruptcy
. No Act of Bankruptcy has occurred with respect to
the LLC or the Property Owner.
3.6
Brokerage
Commission . The Contributors have not
engaged the services of, nor is it or will it or Acquirer
become liable to, any real estate agent, broker, finder or any
other person or entity for any brokerage or finder’s
fee, commission or other amount with respect to the
transactions described herein on account of any action by the
Contributors.
3.7
The
LLC and the Property Owner .
(a) The
LLC is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of
New York and has all requisite powers necessary to carry on
its business as now conducted, to own and operate its interest
in the LLC.
(b) The
Property Owner is a limited liability company duly formed,
validly existing and in good standing under the laws of the
State of New York and has all requisite powers necessary to
carry on its business as now conducted, to own, lease and
operate its properties.
(c) Neither
the execution, delivery, or performance by the Contributors of
this Agreement, nor the consummation of the transactions
contemplated hereby, nor compliance by the Contributors, the
LLC or the Property Owner with any of the provisions hereof,
will:
(i) violate,
conflict with, result in a breach of any provision of,
constitute a default (or an event that, with notice or lapse
of time or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or
result in a right of termination or acceleration, or the
creation of any lien, security interest, charge, or
encumbrance upon any of the Property or other assets of the
LLC or the Property Owner, under any of the terms, conditions,
or provisions of, the Articles of Organization, the LLC
Operating Agreement, the Property Owner Operating Agreement or
any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement, or other instrument or obligation to which
the LLC or the Property Owner is a party, or by which the LLC
or the Property Owner may be bound, or to which the LLC
or the Property Owner or their respective properties or
assets may be subject; or
(ii) violate
any judgment, ruling, order, writ, injunction, decree,
statute, rule, or regulation applicable to the LLC or the
Property Owner or any of the LLC’s properties or assets
or the Property Owner’s properties or assets, as
applicable.
(d) Except
for the Contributors, no party has any interest in the LLC,
and except for Sam Chang, an individual, no party has any
interest in the Property Owner, or any portion thereof, or the
right or option to acquire any interest in the LLC, the
Property Owner or the Property or any portion
thereof. The LLC has no subsidiaries and does not
directly or indirectly own any securities of or interest in
any entity except for its interest in the Property Owner. The
Property Owner has no subsidiaries and does not directly or
indirectly own any securities of or interest in any other
entity, including, without limitation, any limited liability
company or joint venture.
(e) The
LLC has conducted no business other than the ownership and
operation of its interests in the Property Owner. The Property
Owner has conducted no business other than the ownership and
operation of the Property.
3.8
Liabilities,
Debts and Obligations . Except for the
Continuing Liabilities and any other liabilities disclosed by
Contributors to Acquirer, the LLC and the Property Owner have
no liabilities, debts or obligations.
3.9
Tax
Matters .
(a) Notwithstanding
anything to the contrary contained in this Agreement,
including without limitation the use of words and phrases such
as “sell,” “sale,” purchase,”
and “pay,” the parties hereto acknowledge and
agree that it is their intent that the transaction
contemplated hereby shall be treated for federal income tax
purposes pursuant to Section 721 of the Internal Revenue
Code of 1986, as amended, as the contribution of the Interests
by the Contributors to the Acquirer in exchange for the
Consideration, and not as a transaction in which any
Contributors are acting other than in the capacity as a
prospective partner in the Acquirer.
(b)
The Contributors represent and warrant that they has obtained
from their own counsel advice regarding the tax consequences
of (i) the transfer of the Interests to the Acquirer and the
receipt of the Consideration therefor, (ii) the
Contributors’ admission as a limited partner of the
Acquirer, and (iii) any other transaction contemplated by this
Agreement. Each Contributor further represents and
warrants that it has not relied on the Acquirer or the
Acquirer’s representatives or counsel for such tax
advice.
(c) The
Contributors have caused the LLC and the Property Owner to
file within the time and in the manner prescribed by law all
federal, state, and local tax returns and reports, including
but not limited to income, gross receipts, intangible, real
property, excise, withholding, franchise, sales, use,
employment, personal property, and other tax returns and
reports, required to be filed by the LLC and the Property
Owner under the laws of the United States and of each state or
other jurisdiction in which the LLC and the Property Owner
conduct business activities requiring the filing of tax
returns or reports. All tax returns and reports
filed by the LLC and the Property Owner are true and correct
in all material respects. The LLC and the Property
Owner have paid in full all taxes of whatever kind or nature
for the periods covered by such returns. The LLC
and the Property Owner have not been delinquent in the payment
of any tax, assessment, or governmental charge or deposit and
has no tax deficiency or claim outstanding, assessed,
threatened, or proposed against it. The charges,
accruals, and reserves for unpaid taxes on the books and
records of the LLC and the Property Owner as of the Closing
Date are sufficient in all respects for the payment of all
unpaid federal, state, and local taxes of the LLC and the
Property Owner accrued for or applicable to all periods ended
on or before the Closing Date. There are no tax
liens, whether imposed by the United States, any state, local,
or other taxing authority, outstanding against the LLC and the
Property Owner or any of their respective
assets. The federal, state, and local tax returns
of the LLC and the Property Owner have not been audited, nor
have the LLC, the Property Owner or the Contributors received
any notice of any federal, state, or local
audit. The LLC and the Property Owner have not
obtained or received any extension of time (beyond the Closing
Date) for the
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