Hotel: Houston/Nassau Bay CY
Larry G. Blumberg
Watson & Downs Investments, LLC
Blumberg Family – E&M, LLC
Blumberg Futures, LLC
Hollis & Spann Futures, LLC
SUNBELT – CNB, LLC
APPLE SUITES REALTY GROUP, INC.
Dated: July 7, 2011
TABLE OF CONTENTS
This PURCHASE CONTRACT (this '' Contract '') is made and entered into as of the date set forth in Item 1 of Schedule 1 by and between the persons and entities set forth in Item 2(a) of Schedule 1 (each, an '' Interest Owner '' and, collectively, the '' Interest Owners ''), with an address c/o Larry Blumberg & Associates, Inc., 2733 Ross Clark Circle, P.O. Box 5566, Dothan, Alabama 36302; the entity set forth in Item 2(b) of Schedule 1 (the '' Company ''), with its principal office c/o Larry Blumberg & Associates, Inc., 2733 Ross Clark Circle, P.O. Box 5566, Dothan, Alabama 36302; and APPLE SUITES REALTY GROUP, INC., a Virginia corporation, with its principal office at 814 East Main Street, Richmond, Virginia 23219, or its affiliates or assigns ('' Buyer '').
A. The Company is the fee simple or leasehold owner of the land identified in Exhibit A attached hereto and incorporated herein by this reference. The Company is constructing on such land the hotel identified in Item 3 of Schedule 1 attached hereto and incorporated herein by reference.
B. The Interest Owners are the sole owners of one hundred percent (100%) of the limited liability company interests or stock, as applicable, in the Company.
C. Buyer desires to purchase from the Interest Owners, and the Interest Owners desire to sell to Buyer, all of Interest Owner’s interests in the Company for the purchase price and upon terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1.1 Definitions . The following capitalized terms when used in this Agreement shall have the meanings set forth below unless the context otherwise requires:
“ Additional Deposit ” shall mean $2,500.
'' Affiliate '' shall mean, with respect to the Company, any Interest Owner or Buyer, any other person or entity directly or indirectly controlling (including but not limited to all directors and officers), controlled by or under direct or indirect common control with the Company, any Interest Owner or Buyer, as applicable. For purposes of the foregoing, a person or entity shall be deemed to control another person or entity if it possesses, directly or indirectly, the power to direct or cause direction of the management and policies of such other person or entity, whether through the ownership of voting securities, by contract or otherwise.
'' Agreement '' means any agreement, contract, obligation, promise or undertaking (whether written or oral and whether express or implied) that is or purports to be legally binding.
'' Appurtenances '' shall mean all rights, titles, and interests of the Company appurtenant to the Land and Improvements, including, but not limited to, (i) all easements, rights of way, rights of ingress and egress, tenements, hereditaments, privileges, and appurtenances in any way belonging to the Land or Improvements, (ii) any land lying in the bed of any alley, highway, street, road or avenue, open or proposed, in front of or abutting or adjoining the Land, (iii) any strips or gores of real estate adjacent to the Land, and (iv) the use of all alleys, easements and rights-of-way, if any, abutting, adjacent, contiguous to or adjoining the Land.
'' Brand '' shall mean the hotel brand or franchise identified in Item 4 of Schedule 1 and under which the Hotel operates.
'' Business Day '' shall mean any day other than a Saturday, Sunday or legal holiday in the Commonwealth of Virginia, the State of Alabama or the state in which the Hotel is located.
'' Closing '' shall mean the closing of the purchase and sale of the Interests pursuant to this Contract.
'' Closing Date '' shall have the meaning set forth in Section 10.1 .
“ Construction Warranty ” shall have the meaning set forth in Section 8.16 .
“ Contractor ” shall mean the contractor for the Hotel identified in Item 12 of Schedule 1 .
'' Code '' means the Internal Revenue Code of 1986, as amended.
“ Company Intellectual Property ” shall have the meaning set forth in Section 7.1(l) .
'' Contemplated Transactions '' shall mean all of the transactions contemplated by this Contract and the Exhibits hereto.
'' Contract '' shall mean this Purchase Contract, as amended from time to time pursuant to the terms hereof.
'' Contracts, Plans and Specs '' shall mean the Plans and Specifications and all other contracts, plans, drawings, specifications, surveys, soil reports, engineering reports, inspection reports, and other technical descriptions and reports.
'' Deposits '' shall mean, to the extent assignable, all prepaid rents and deposits (including, without limitation, any reserves for capital repairs and/or improvements), including, but not limited to, refundable security deposits and rental deposits and all other deposits for advance reservations, banquets or future services, made in connection with the use or occupancy of the Improvements, all reserves for replacement of FF&E, reserves for real property taxes and insurance and utility deposits, credit for which shall be given to the Interest Owners to the extent hereinafter provided.
'' Due Diligence Examination '' shall have the meaning set forth in Section 3.2 .
'' Earnest Money Deposit '' shall mean both the Initial Deposit defined below and described in Section 2.5(a) hereof and the Additional Deposit defined above and described in Section 2.5(a) hereof.
“ Effective Date ” shall mean the date this Contract is fully executed by all of the parties hereto, and an original of the executed document (which may be in the form of counterparts, in which case the last counterpart) is deposited with the Title Company.
“ Effective Time ” shall have the meaning set forth in Section 10.1 .
'' Environment '' means soil, land surface or subsurface strata, surface waters (including navigable waters and ocean waters), groundwaters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life and any other environmental medium or natural resource.
'' Environmental Requirements '' shall have the meaning set forth in Section 7.1(t)(iii) .
'' Escrow Agent '' shall mean Chicago Title Company, the Person serving as escrow agent for purposes of the Closing and the Earnest Money Deposit.
'' Exception Documents '' shall have the meaning set forth in Section 4.2 .
'' Existing Franchise Agreement '' shall mean the franchise agreement identified in Item 6 of Schedule 1 .
“ Existing Management Agreement ” shall mean the management agreement identified in Item 5 of Schedule 1 .
'' FF&E '' shall mean all tangible personal property and fixtures of any kind (other than personal property (i) owned by guests of the Hotel, or (ii) leased by the Company pursuant to an FF&E Lease), including, but not limited to, all furniture, fixtures, equipment, signs and related personal property; all heating, lighting, plumbing, drainage, electrical, air conditioning, and other mechanical fixtures and equipment and systems; all elevators, and related motors and electrical equipment and systems; all hot water heaters, furnaces, heating controls, motors and equipment, all shelving and partitions, all ventilating equipment, and all disposal equipment; all spa, health club and fitness equipment; all equipment used in connection with the use and/or maintenance of the guestrooms, restaurants, lounges, business centers, meeting rooms, swimming pools, indoor and/or outdoor sports facilities and other common areas and recreational areas; all carpet, drapes, beds, furniture, televisions and other furnishings; 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.
'' FF&E Leases '' shall mean all leases of any FF&E and other contracts permitting the use of any FF&E at the Improvements.
“ Force Majeure ” shall mean (i) strikes, lockouts or labor disputes, (ii) the inability through no fault of the Company to obtain labor or materials or reasonable substitutes therefor, (iii) acts of God and adverse weather conditions, (iv) enemy or hostile governmental action or acts of terrorism, (v) governmental restrictions such as embargoes, (vi) civil commotion, (vii) fire or other casualty or (viii) other conditions similar to those enumerated above that are beyond the reasonable control of the Company, but in each case excluding any such events or conditions that merely result in increased costs to the Company.
'' Franchisor '' shall mean the franchisor identified in Item 6 of Schedule 1 .
'' Governmental Body '' means any (i) nation, state, county, city, town, borough, village, district or other jurisdiction; (ii) federal, state, local, municipal, foreign or other government; (iii) governmental or quasi–governmental authority of any nature (including any agency, branch, department, board, commission, court, tribunal or other entity exercising governmental or quasi–governmental powers); (iv) multinational organization or body; (v) body exercising, or entitled or purporting to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; or (vi) any official of any of the foregoing.
'' Hazardous Material '' shall have the meaning set forth in Section 7.1(t)(iii) .
'' Hotel '' shall mean the hotel being constructed on the Land, including all Improvements and Personal Property associated therewith, known generally by the name and/or identification set forth in Item 3(a) of Schedule 1 .
'' Improvements '' shall mean all buildings, structures, fixtures, parking areas and other improvements now existing or to be constructed on the Land, including, without limitation, all improvements and amenities described in Item 3 of Schedule 1 and all related facilities.
'' Indemnified Party '' shall have the meaning set forth in Section 8.7(c)(i) .
'' Indemnifying Party '' shall have the meaning set forth in Section 8.7(c)(i) .
'' Initial Deposit '' shall mean the sum of $2,500 as set forth in Section 2.5(a) hereof
“ Interest ” shall mean the limited liability company interest or corporate stock, as applicable, owned by each Interest Owner in the Company, and “ Interests ” shall mean all of such limited liability company interests or corporate stock.
“ Interest Lien ” shall mean any claim, lien, pledge, charge, security interest, equitable interest, option, warrant, right of first refusal, restriction on use, voting, transfer, receipt of income or other attribute of ownership, or other encumbrance of any kind, affecting any Interest.
'' Land '' shall mean the real property described in Exhibit A , which is attached hereto and incorporated herein by reference, together with all rights (including without limitation all air rights and development rights), alleys, streets, strips, gores, waters, privileges, appurtenances, advantages and easements belonging thereto or in any way appertaining thereto, and all other Appurtenances.
“ Leased Premises ” shall have the meaning set forth in Section 7.1(k) .
'' Leases '' shall mean all leases, occupancy agreements, ''trade-out'' agreements, advance bookings, convention reservations, or other agreements demising space in, providing for the use or occupancy of, or otherwise similarly affecting or relating to the use or occupancy of, the Improvements or Land, together with all amendments, modifications, renewals and extensions thereof, and all guaranties by third parties of the obligations of the tenants, licensees, franchisees, concessionaires or other entities thereunder.
'' Legal Action '' shall have the meaning set forth in Section 8.8(c)(ii) .
'' Legal Requirement '' means any federal, state, local, municipal, foreign, international, multinational or other constitution, law, ordinance, principle of common law, code, regulation, rule, order, injunction, judgment, decree, ruling, assessment or arbitration award of any Governmental Body or arbitrator.
'' Licenses '' shall mean all permits, licenses, franchises, utility reservations, certificates of occupancy, and other documents issued by any federal, state, or municipal authority or by any private party related to the development, construction, use, occupancy, operation or maintenance of the Hotel, including, without limitation, all licenses, approvals and rights (including any and all existing waivers of any brand standard) necessary or appropriate for the operation of the Hotel under the Brand.
“ Manager ” shall mean LBAM-Investors Group, L.L.C., an Alabama limited liability company and an Affiliate of the Company as of the date of this Contract.
“ New Franchise Agreement ” shall mean the franchise agreement to be entered into by the Company and the Franchisor at the Closing.
“ New Management Agreement ” shall mean the management agreement to be entered into by the Company and the Manager at the Closing, in the form of the agreement attached hereto as Exhibit B .
'' Organizational Documents '' means (a) the articles or certificate of incorporation and the bylaws of a corporation; (b) the partnership agreement and the certificate of partnership of a partnership; (c) the articles of organization or certificate of formation and any operating or limited liability company agreement of a limited liability company; (d) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person, and (e) any amendment to any of the foregoing.
'' Pending Claims '' shall have the meaning set forth in Section 7.1(t)(ii) .
'' Permitted Exceptions '' shall have the meaning set forth in Section 4.3 .
'' Person '' means an individual or any entity, including a corporation, partnership, joint venture, limited liability company, trust, estate or other unincorporated association, whether or not a legal entity.
'' Personal Property '' shall mean, collectively, all of the Property other than the Real Property.
“ Plans and Specifications ” shall have the meaning set forth in Section 7.1(t)(viii) , as the same may be revised during construction with the approval of the Franchisor (to the extent such approval is required), provided that any material revisions also shall be subject to the approval of Buyer, which approval shall not be unreasonably withheld or delayed.
“ Pre-Closing Tax Period ” shall have the meaning set forth in Section 10.4(a) .
“ Pre-Opening Costs ” shall have the meaning set forth in Section 8.15 .
“ Pre-Opening Program ” shall have the meaning set forth in Section 8.15 .
'' Property '' shall mean, collectively, (i) all of the following with respect to the Hotel: the Land, Improvements, Appurtenances, FF&E, Supplies, Leases, Deposits, Records, Service Contracts, Warranties, Licenses, FF&E Leases, Contracts, Plans and Specs, Tradenames, Utility Reservations, as well as all other real, personal or intangible property of the Company related to any of the foregoing and (ii) any and all of the following that relate to or affect in any way the design, construction, ownership, use, occupancy, leasing, maintenance, service or operation of the Real Property, FF&E, Supplies, Leases, Deposits or Records: Service Contracts, Warranties currently in effect, Licenses, Tradenames, Contracts, Plans and Specs and FF&E Leases.
''Property Lien'' means any deed of trust or mortgage, lien, security interest, easement, right of way, encroachment, lease, purchase contract, option to purchase, right of first refusal, servitude, restrictive covenant, limitation on use or other encumbrance or title defect of any kind.
“ Punch List Items ” shall mean such items (i) as are reasonably necessary or appropriate to fully complete the construction, equipping and furnishing of the Hotel in accordance with this Contract and (ii) that, unless otherwise agreed by Buyer in its sole discretion, (a) individually and in the aggregate do not and will not prohibit, cause a delay in or otherwise adversely affect, under applicable Legal Requirements, the Management Agreement, the Franchise Agreement or otherwise, the opening of the Hotel for business to the public or the continued occupancy and operation of the Hotel as contemplated under the Brand and (b) may be corrected or completed, subject to delays caused by Force Majeure, within not more than sixty (60) days.
'' Purchase Price '' shall have the meaning set forth in Section 2.2 .
'' Real Property '' shall mean, collectively, all Land and Improvements with respect to the Hotel.
'' Records '' shall mean all books, records, promotional material, tenant data, guest history information (other than any such information owned exclusively by the Franchisor), marketing and leasing material and forms (including but not limited to any such records, data, information, material and forms in the form of computerized files located at the Hotel), market studies prepared in connection with the Company's current annual plan and other materials, information, data, legal or other documents or records (including, without limitation, all documentation relating to any litigation or other proceedings, all zoning and/or land use notices, relating to or affecting the Property, all business plans and projections and all studies, plans, budgets and contracts related to the development, construction and/or operation of the Hotel, and all Tax Returns and work papers and filings related to Taxes for the current tax year and the previous three (3) tax years) owned by the Company and/or in the Company's possession or control, or to which the Company has access or may obtain from the Franchisor, that are used in or relating to the Property and/or the operation of the Hotel, including the Land, the Improvements or the FF&E, and the Company shall furnish to Buyer (and the term ''Records'' shall include) a list of the general contractors, architects and engineers providing goods and/or services in connection with the construction of the Hotel, all construction warranties and guaranties currently in effect and copies of the final plans and specifications for the Hotel, it being understood that the Company may not have in its possession all change orders and other modifications to the original plans and specifications.
'' Release '' shall have the meaning set forth in Section 7.1(t)(iii) .
'' Review Period '' shall have the meaning set forth in Section 3.1 .
'' SEC '' shall have the meaning set forth in Section 8.5 .
'' Securities Act '' means the Securities Act of 1933, as amended.
'' Seller Liens '' shall have the meaning set forth in Section 4.3 .
'' Service Contracts '' shall mean contracts or agreements, such as maintenance, supply, service or utility contracts.
“ Straddle Period ” shall have the meaning set forth in Section 10.4(b) .
“ Substantial Completion ” including variations thereof such as “Substantially Complete” and “Substantially Completed” shall mean: (i) the Company and the Contractor have issued a certificate of substantial completion in form and substance satisfactory to Buyer certifying that the Hotel has been constructed substantially in accordance with the Plans and Specifications and the Legal Requirements, (ii) a certificate of occupancy authorizing the opening of the Hotel for business to the public and for operation under the Brand has been issued by the local governing authority and is in full force and effect, (iii) all other final and unconditional consents, approvals, licenses and operating permits necessary or appropriate for the Hotel to open for business to the public and to operate under the Brand have been issued by and obtained from all applicable governmental and regulatory authorities, subject to Punch List Items; (iv) the Hotel is fully furnished, fitted and equipped and ready to open for business to the public and operate under the Brand, subject to Punch List Items; (iii) all contractors, subcontractors, suppliers, mechanics, materialmen and other persons or entities providing labor or materials for the construction and development of the Hotel shall have been paid (or adequate provision for payment of such persons or entities, which is not required to be an actual escrow of funds, has been made to Buyer’s reasonable satisfaction), subject to Punch List Items and (iv) the Franchisor has approved the completion, furnishing and equipping of the Hotel and is prepared to commence (or authorize the commencement of) operation of the Hotel, and all of the other conditions set forth in the Management Agreement and the Franchise Agreement have been satisfied, subject to Punch List Items.
'' Supplemental Provisions '' shall have the meaning set forth in Article XVII .
'' Supplies '' shall mean all merchandise, supplies, inventory and other items used for the operation and maintenance of guest rooms, restaurants, lounges, swimming pools, health clubs, spas, business centers, meeting rooms and other common areas and recreational areas located within or relating to the Improvements, including, without limitation, all food and beverage (alcoholic and non-alcoholic) inventory, office supplies and stationery, advertising and promotional materials, china, glasses, silver/flatware, towels, linen and bedding (all of which shall be 2-par level for all suites or rooms in the Hotel), guest cleaning, paper and other supplies, upholstery material, carpets, rugs, furniture, engineers' supplies, paint and painters' supplies, employee uniforms, and all cleaning and maintenance supplies, including those used in connection with the swimming pools, indoor and/or outdoor sports facilities, health clubs, spas, fitness centers, restaurants, business centers, meeting rooms and other common areas and recreational areas.
'' Survey '' shall have the meaning set forth in Section 4.1 .
'' Tax '' or '' Taxes '' means any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental, windfall profit, customs, vehicle, airplane, boat, vessel or other title or registration, capital stock, franchise, employees' income withholding, foreign or domestic withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, value added, alternative, add-on minimum and other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any interest, penalty, addition or additional amount thereon imposed, assessed or collected by or under the authority of any Governmental Body or payable under any tax-sharing agreement or any other Contract, including any interest, penalty, or addition thereto, whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other Person.
'' Tax Return '' means any return (including any information return), report, statement, schedule, notice, form, declaration, claim for refund or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.
'' Third Party Consents '' shall have the meaning set forth in Section 8.3 .
'' Title Commitment '' shall have the meaning set forth in Section 4.2 .
'' Title Company '' shall have the meaning set forth in Section 4.2 .
'' Title Policy '' shall have the meaning set forth in Section 4.2 .
'' Title Review Period '' shall have the meaning set forth in Section 4.3 .
'' Tradenames '' shall mean all telephone exchanges and numbers, trade names, trade styles, trade marks, and other identifying material, and all variations thereof, together with all related goodwill (it being understood and agreed that all franchise, license, management and other agreements granting a right to use the name of such hotel chain or any other trademark or trade name and all waivers of any brand standard shall remain in full force and effect after the acquisition of the Interests by Buyer).
'' Utility Reservations '' shall mean the Company's interest in the right to receive and continuously consume (including, without limitation, from and after Closing) water service, sanitary and storm sewer service, electrical service, gas service and telephone service on and for the Land and Improvements in capacities that are adequate continuously to use and operate the Improvements for the purposes for which they were intended, including, but not limited to (i) any right to the present and future use of wastewater, drainage, water and other utility facilities to the extent such use benefits the Real Property, (ii) any reservations of or commitments covering any such use in the future, and (iii) any wastewater capacity reservations relating to the Real Property.
'' Warranties '' shall mean all warranties, guaranties, indemnities and claims, currently in effect, for the benefit of the Company with respect to the Hotel, the Property or any portion thereof, including, without limitation, all warranties and guaranties of the development, construction, completion, installation, equipping and furnishing of the Hotel, and all indemnities, bonds and claims of the Company related thereto.
PURCHASE AND SALE; PURCHASE PRICE; PAYMENT;
EARNEST MONEY DEPOSIT
2.1 Purchase and Sale . Each Interest Owner agrees to sell and convey to Buyer or its Affiliates and/or assigns, and Buyer or its assigns agrees to purchase from the Interest Owners, all of the Interests, in consideration of the Purchase Price, subject to and upon the terms and conditions hereof. All of the Interests shall be conveyed, assigned, and transferred to Buyer at Closing, free and clear of all Interest Liens.
2.2 Purchase Price . Buyer agrees to pay, and the Interest Owners agree to accept, as consideration for the conveyance of all of the Interests, subject to the adjustments provided for in this Contract, the amount set forth in Item 7 of Schedule 1 ; provided, however, that if the actual cost of construction of the Hotel is less than the amount set forth in Item 14 of Schedule 1 , the purchase price shall be reduced by an amount equal to twenty percent (20%) of the difference between such actual construction costs and the amount set forth in Item 14 of Schedule 1 (the '' Purchase Price '').
2.3 Allocation . The Purchase Price shall be allocated among the Interest Owners in accordance with their percentage interest in the Company as set forth in Item 2(a) of Schedule 1 .
2.4 Payment . The Purchase Price, plus any positive adjustments under Section 12.1 , less (i) the Earnest Money Deposit and interest earned thereon, if any, which Buyer elects to have applied against the Purchase Price (as provided below), (ii) any reserves, if any, provided in this Purchase Agreement and any applicable reserve for Punch List Items as provided in Section 8.14 hereof and (iii) any negative adjustments under Section 12.1, shall be paid to the Interest Owners in cash, certified funds or wire transfer, at the Closing of the purchase and sale of the Interests. At the Closing, the Earnest Money Deposit, together with interest earned thereon, if any, shall, at Buyer's election, be returned to Buyer or shall be paid over to the Interest Owners by Escrow Agent to be applied to the Purchase Price on behalf of Buyer.
2.5 Earnest Money Deposit .
(a) Upon the full execution and delivery of this Contract, Buyer shall deposit the sum of Two Thousand Five Hundred and No/100 Dollars ($2,500.00) in cash, certified bank check or by wire transfer of immediately available funds (the “ Initial Deposit ”) with the Title Company, as escrow agent (“ Escrow Agent ”), which sum shall be held by Escrow Agent as earnest money. If, pursuant to the provisions of Section 3.1 of this Contract, Buyer elects to terminate this Contract at any time prior to the expiration of the Review Period, then the Escrow Agent shall return the Earnest Money Deposit to Buyer promptly upon written notice to that effect from Buyer. If Buyer does not elect to terminate this Contract on or before the expiration of the Review Period, Buyer shall, within three (3) Business Days after the expiration of the Review Period deposit the Additional Deposit with the Escrow Agent. The Initial Deposit and the Additional Deposit, and all interest accrued thereon, shall hereinafter be referred to as the “ Earnest Money Deposit .”
(b) The Earnest Money Deposit shall be held by Escrow Agent subject to the terms and conditions of an Escrow Agreement dated as of the date of this Contract entered into by Seller, Buyer and Escrow Agent (the “ Escrow Agreement ”). The Earnest Money Deposit shall be held in an interest-bearing account in a federally insured bank or savings institution reasonably acceptable to Seller and Buyer, with all interest to accrue to the benefit of the party entitled to receive it and to be reportable by such party for income tax purposes.
3.1 Review Period . Buyer shall have a period through 6:00 p.m. Eastern Time on the date that is thirty (30) days after the Effective Date, unless a longer period of time is otherwise provided for in this Contract and except as otherwise agreed to by the parties hereto (the '' Review Period ''), to evaluate the legal, title, survey, construction, engineering, physical condition, structural, mechanical, environmental, zoning, economic, permit status, franchise status, marketing and economic data, financial statements and information, property statements, franchise agreements, loan documents and other documents and information related to the Property and the business of the Hotel. Within two (2) Business Days following the Effective Date, the Company, at the sole cost and expense of the Interest Owners, will deliver to Buyer for Buyer's review, to the extent not previously delivered to Buyer, true, correct and complete copies of the following, together with all amendments, modifications, renewals or extensions thereof:
(a) All Warranties currently in effect and Licenses relating to the Hotel, the Real Property or any part thereof;
(b) All real estate and personal property tax statements with respect to the Real Property and notices of appraised value for the Real Property for the current year (if available) and for the lesser of the time period the Real Property was owned or leased by the Company or each of the three (3) calendar years prior to the current year;
(c) Engineering, mechanical, architectural and construction plans, drawings, specifications and contracts, payment and performance bonds, title policies, reports and commitments, zoning information and marketing and economic data relating to the Real Property or the Hotel and the construction, development, installation and equipping thereof, as well as copies of all environmental reports and information, topographical, boundary or ''as built'' surveys, engineering reports, subsurface studies and other Contracts, Plans and Specs relating to or affecting the Hotel, which the Company has in its possession or control. Buyer acknowledges that the Contracts, Plans and Specs in the Company’s possession may not include all change orders and other modifications made during the course of construction of the Hotel, but in such case the Company will cause the general contractor for the Hotel to furnish copies of such change orders and other modifications upon Buyer’s request at any time during the Review Period;
(d) All agreements for real estate commissions, brokerage fees, finder's fees or other compensation payable by the Company in connection therewith; and
(e) All notices received from governmental authorities in connection with the Real Property for the current year and for the lesser of the time period the Real Property was owned or leased by the Company or each of the three (3) calendar years prior to the current year and all other notices received from governmental authorities received at any time that relate to any noncompliance or violation of law that has not been corrected.
The Company shall, upon request of Buyer, make available to Buyer and Buyer's representatives and agents, for inspection and copying during normal business hours, Records located at the Company's corporate offices, and the Company agrees to provide Buyer copies of all other reasonably requested information that is relevant to the management, operation, use, occupancy or leasing of or title to the Real Property and the plans and specifications for development of the Hotel. At any time during the Review Period, Buyer may, in its sole and absolute discretion, elect not to proceed with the purchase of the Property for any reason whatsoever by giving written notice thereof to the Company, in which event: (i) the Initial Earnest Money Deposit shall be promptly returned by Escrow Agent to Buyer together with all accrued interest, if any, (ii) this Contract shall be terminated automatically, (ii) all materials supplied by the Company to Buyer shall be returned promptly to the Company, and (iii) the parties will be relieved of all other rights, obligations and liabilities hereunder, except for the parties' obligations pursuant to Sections 3.3 and 16.6 below. Upon expiration of the Review Period, Buyer may not terminate this Contract and receive a refund of the Earnest Money Deposit for any reason except the failure of any of the conditions set forth in Section 9.1 .
Buyer acknowledges and agrees that certain of the items requested to be delivered to Buyer in this Section 3.1 have been delivered to and received by Buyer. The Company agrees to cooperate with Buyer and to provide any documents or instruments described herein which have not been delivered by the Company for Buyer’s due diligence and review.
3.2 Due Diligence Examination . At any time during the Review Period, and thereafter through Closing of the Property, Buyer and/or its representatives and agents shall have the right to enter upon the Property at all reasonable times for the purposes of reviewing all Records and other data, documents and/or information relating to the Property and conducting such surveys, appraisals, engineering tests, soil tests (including, without limitation, Phase I environmental site assessments), inspections of construction and other inspections and other studies as Buyer deems reasonable and necessary or appropriate to evaluate the Property, subject to providing advance (not less than 24 hours) notice to the Company unless otherwise agreed to by Buyer and the Company (the '' Due Diligence Examination ''). The Company shall have the right to have its representative present during Buyer's physical inspections of the Property, provided that failure of the Company to do so shall not prevent Buyer from exercising its due diligence, review and inspection rights hereunder. Buyer agrees to exercise reasonable care when visiting the Property, in a manner which shall not materially adversely affect the completion or operation of the Property. Buyer may not conduct a Phase II environmental site assessment or any other invasive environmental procedure without the prior written consent of the Company.
3.3 Restoration and Indemnity . Buyer covenants and agrees not to damage or destroy any portion of the Property in conducting its examinations and studies of the Property during the Due Diligence Examination and, if closing does not occur, shall repair any portion of the Property damaged by the conduct of Buyer, its agents or employees, to substantially the condition such portion(s) of the Property were in immediately prior to such examinations or studies. Buyer further hereby indemnifies and holds the Company and the Interest Owners harmless from and against any damage, personal injury or death caused by or arising from any action or omission by Buyer, its agents or employees in the examination and study of the Property.
SURVEY AND TITLE APPROVAL
4.1 Survey . The Company and the Interest Owners, at the Interest Owners’ sole cost and expense, prior to the execution hereof have delivered to Buyer, true, correct and complete copies of the most recent survey of the Real Property. In the event that an update of the survey or a new survey (such updated or new survey being referred to as the '' Survey '') are desired by Buyer, then Buyer shall be responsible for all costs related thereto.
4.2 Title . The Company, at the Interest Owners’ sole cost and expense, prior to the execution hereof have delivered to Buyer, within two (2) Business Days after the execution in full of this Contract, the Company's existing title insurance policy, including copies of all documents referred to therein, for the Real Property. Buyer's obligations under this Contract are conditioned upon Buyer being able to obtain (i) a Commitment for Title Insurance (the '' Title Commitment '') issued by Chicago Title Company, 5501 LBJ Freeway, Ste. 200, Dallas, Texas 75240, Attention: Debby Moore (the '' Title Company ''), for the most recent standard form of owner's policy of title insurance in the state in which the Real Property is located, covering the Real Property, setting forth the current status of the title to the Real Property, showing all Property Liens and pursuant to which the Title Company agrees to issue at Closing an Owner's Policy of Title Insurance on the most recent form of ALTA (where available) owner's policy available in the state in which the Land is located, with extended coverage and, to the extent applicable and available in such state, comprehensive, access, single tax parcel, contiguity, Fairway and such other endorsements as may be required by Buyer (collectively, the '' Title Policy ''); and (ii) true, complete, legible and, where applicable, recorded copies of all documents and instruments (the '' Exception Documents '') referred to or identified in the Title Commitment, including, but not limited to, all deeds, plats, surveys and Property Liens affecting the Real Property. Buyer shall promptly provide the Company with a copy of the Title Commitment issued by the Title Company.
4.3 Survey or Title Objections . If Buyer discovers any title or survey matter which is objectionable to Buyer, Buyer may provide the Company and the Interest Owners with written notice of its objection to same within fifteen (15) Business Days after Buyer's receipt of both the Survey and the Title Commitment, together with copies of all exceptions noted therein (the '' Title Review Period ''). If Buyer fails to so object in writing to any such matter set forth in the Survey or Title Commitment, it shall be conclusively assumed that Buyer has approved same, except as otherwise provided in Section 9.1(g) . If Buyer disapproves any condition of title, survey or other matters by written objection to the Company and the Interest Owners on or before the expiration of the Title Review Period, the Company and the Interest Owners shall elect either to attempt to cure, at the Interest Owners’ sole cost and expense, or not cure any such item by written notice sent to Buyer within five (5) days after receipt by the Company and the Interest Owners of notice from Buyer, and if the Company and the Interest Owners commit in writing to attempt to cure any such item, the Company and the Interest Owners shall be given until the Closing Date to cure any such defect. In the event the Company and the Interest Owners shall fail to cure a defect which they have committed in writing to cure prior to Closing, or if a new title defect arises after the date of Buyer's Title Commitment or Survey, as applicable, but prior to Closing, then Buyer may elect, in Buyer's sole and absolute discretion: (i) to waive such objection and proceed to Closing, or (ii) to terminate this Contract, if the Interest Owners are unable to cure said defect prior to Closing and receive a return of the Earnest Money Deposit, and any interest thereon. The items shown on the Survey or the Title Commitment or which are apparent by physical inspection of the Property and which are not objected to by Buyer as set forth above (other than (x) exceptions and title defects arising after the Title Review Period, (y) those standard exceptions which are ordinarily and customarily omitted in the state in which the Hotel is located, so long as the Company and/or the Interest Owners, as the case may be, provide, at the Interest Owners’ sole cost and expense, the appropriate owner's affidavit, gap indemnity or other documentation reasonably required by the Title Company for such omission, and (z) as provided in Section 9.1(h) ) are hereinafter referred to as the '' Permitted Exceptions .'' In no event shall Permitted Exceptions include mortgages or other documents evidencing or securing indebtedness or any mechanics' or materialmen's lens or any claims or potential claims therefor covering the Property or any portion thereof ('' Seller Liens ''), each of which shall be paid in full by the Interest Owners, at the Interest Owners’ sole cost and expense, and released at Closing.
MANAGEMENT AGREEMENT AND FRANCHISE AGREEMENT
The Company has entered into the Existing Management Agreement and the Existing Franchise Agreement for the operation and management of the Hotel. At the Closing, subject to the approval of the Franchisor, (i) the Company and the Existing Manager shall terminate the Existing Management Agreement, (ii) the Company and the Franchisor shall terminate the Existing Franchise Agreement, (iii) the Company and the Manager shall enter into the New Management Agreement and (iv) the Company and the Franchisor shall enter into the New Franchise Agreement. The Interest Owners shall be solely responsible for all claims and liabilities arising under the Existing Management Agreement and the Existing Franchise Agreement, whether accruing before or after the Closing. The Company and the Interest Owners shall obtain the Existing Manager's consent to the termination of the Existing Management Agreement, and the Company and the Interest Owners shall cause the Manager to enter into the New Management Agreement. Before the Closing, the Company and Buyer shall request the Franchisor to approve the transfer of the Interests to Buyer, the termination of the Existing Management Agreement, the execution of the New Management Agreement and the execution of the New Franchise Agreement. The Company and the Interest Owners shall use their best efforts to promptly provide all information required by the Franchisor in connection with the foregoing request for approval, and the Company, the Interest Owners and Buyer shall diligently pursue obtaining the Franchisor’s approval. The Interest Owners understand that Buyer expects the New Franchise Agreement to be upon financial terms and conditions no less favorable to the Company than the Existing Franchise Agreement.
Each Interest Owner, the Company and Buyer represents and warrants to the other that it has not engaged any broker, finder or other party in connection with the transaction contemplated by this Contract. Each Interest Owner agrees to save and hold harmless Buyer from any and all losses, damages, liabilities, costs and expenses (including, without limitation, attorneys' fees) involving claims made by any agent, broker, or other person by or through the acts of any Interest Owner or the Company, as the case may be, in connection with the Contemplated Transactions. Buyer agrees to save and hold harmless each Interest Owner and the Company from any and all losses, damages, liabilities, costs and expenses (including, without limitation, attorneys' fees) involving claims made by any agent, broker, or other person by or through the acts of Buyer in connection with the Contemplated Transactions.
REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 Representations, Warranties and Covenants of Interest Owners . Each Interest Owner represents, warrants and covenants to Buyer as follows:
(a) Organization and Existence of the Company . The Company is a limited liability company or corporation duly organized or incorporated and validly existing under the laws of the state indicated in Item 2(b) of Schedule 1 , and the Company has the full power and authority to own all of its property and assets and to carry on its business as presently conducted. The Company is not required to qualify to transact business in any jurisdiction other than the state is which it is organized or incorporated. The copies of the Company’s Organizational Documents that the Company has delivered to Buyer or delivers to Buyer during the Review Period are or will be true, correct and complete copies of the Organizational Documents of the Company as in effect as of the date hereof and have not been amended or supplemented further. The Company is not a general or limited partner of, or a party to any joint venture with, any other entity and does not, directly or indirectly, own any interest in any other Person.
(b) Authorization and Validity . Each Interest Owner and the Company have the power and authority to execute and deliver this Contract and the other agreements contemplated hereby and to consummate the Contemplated Transactions. This Contract has been duly executed and delivered by and constitutes a valid and binding agreement of the Company, each Interest Owner, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws. The execution and delivery hereof by the Company and each Interest Owner and the consummation by the Company and each Interest Owner of such transactions have been fully authorized by the Company and each Interest Owner.
(c) Ownership of Interests . The Interest Owners are the owners of all of the Interests, each owning the percentage set forth in Item 2(a) of Schedule 1 , and have good and valid title thereto, with no restrictions on, or any agreements with respect to, voting rights or any other incidents of ownership thereof, except as set forth in the Company’s Organizational Documents. The Interests represent one hundred percent (100%) of the record and beneficial interests in the Company and all other right, title and interest in and to the equity of the Company. The Interest Owners have the absolute right to sell and transfer all of the Interests to Buyer free and clear of all Interest Liens. Each Interest Owner acquired its Interest in compliance with all applicable laws. On consummation of the Contemplated Transactions, in accordance with the terms hereof, Buyer will acquire good and marketable title to the Interests free and clear of all Interest Liens.
(d) Related Party Transactions . No Interest Owner has any direct or indirect interest in any property used by, or relating to, the Company, except through the ownership of its Interest.
(e) Non-Contravention . The execution and delivery by each Interest Owner and the Company of this Contract and the other agreements contemplated hereby do not, and the consummation by each Interest Owner and the Company of the transactions contemplated hereby or thereby will not (i) violate any provision of the any Organizational Documents of any Interest Owner or the Company, (ii) violate, or result with the passage of time in a violation of, any provision of, or result in the acceleration of or entitle any party to accelerate any obligation under, or result in the creation or imposition of any Property Lien upon, any of the property of any Interest Owner or the Company pursuant to any provision of any mortgage, deed of trust, lease, agreement, license or instrument to which any Interest Owner or the Company is a party or to which any of them is subject (collectively, the “ Restrictive Documents ”) except to the extent consents, waivers, satisfactions or terminations therefor will be delivered on or before Closing, (iii) constitute an event permitting termination of any mortgage, deed of trust, lease, agreement, license or instrument to which any Interest Owner or the Company is a party, except for those Restrictive Documents which represent obligations to be satisfied or for which consents to assignment or waivers of termination will be delivered on or before Closing or (iv) violate any judgment, order, writ, injunction, decree, regulation or rule of any court or governmental authority applicable to any Interest Owner or the Company or the assets of any of them.
(f) Consents and Approvals . No consent, approval, notification, authorization or order of, or declaration, filing or registration with, any governmental agency, is required to be obtained or made by the Company or any Interest Owner in connection with the consummation by the Company and each Interest Owner of the Contemplated Transactions.
(g) No Undisclosed Liabilities . The Company does not have, as of the date of this Contract, any debts, liabilities or obligations, whether accrued, absolute, contingent or otherwise, that are material to the financial condition, assets, liabilities, income or prospects of the business of the Company except as disclosed in this Contract or otherwise disclosed in writing to Buyer on or before the date of this Contract.
(h) Litigation . There are no actions, suits, claims, investigations or proceedings (legal, administrative or arbitrative) pending or, to the knowledge of any of the Interest Owners or the Company, threatened against any of the Interest Owners or the Company, whether at law or in equity and whether civil or criminal in nature, before or by any federal, state, municipal or other court, arbitrator, governmental department, commission, agency or instrumentality, domestic or foreign. There are no judgments, decrees or orders of any such court, arbitrator, governmental department, commission, agency or instrumentality outstanding against any of the Interest Owners or the Company, (i) which relate to the Company or any Interest Owner and which have or could reasonably be expected to have an adverse effect on the financial condition, assets, liabilities, income or prospects of the business of the Company, or (ii) which seek specifically to prohibit, restrict or delay consummation of the transactions contemplated hereby or fulfillment of any of the conditions of this Contract.
(i) Title to Properties . The Company has good and marketable title to all of the Property (whether real, fee or leasehold, personal or mixed, tangible or intangible) and enjoys quiet possession of all such properties and interests, free and clear of all mortgages and other encumbrances (except for Seller Liens to be paid off at Closing, Permitted Exceptions and current taxes and liens which arise by operation of law with respect to obligations not yet due and payable). The Property includes all real estate, intangible assets and physical assets of the Company and all of the property reasonably required to own and operate the Hotel as it is contemplated to be operated and in accordance with the Existing Franchise Agreement.
(j) Condemnation and Special Assessments . There are no pending or, to the knowledge of the Company or any Interest Owner, threatened proceedings for condemnation or the exercise of the right of eminent domain as to any part of the Real Property or for limiting or denying any right of access thereto. None of the Interest Owners or the Company has any knowledge of any special taxes or assessments relating to any part of the Real Property or any planned public improvements that may result in a special assessment against any part of the Real Property.
(k) Lease of Real and Personal Property . Schedule 7.1(k) sets forth a list of (a) all leases pursuant to which the Company leases, as lessee, real property (the " Leased Premises "), (b) all leases pursuant to which the Company leases, as lessor, real property, (c) all leases pursuant to which the Company leases, as lessee, personal property and (d) all prepaid expenses, rents and security deposits paid by or to the Company with respect to any of the foregoing leases. The Company has performed all material obligations required to be performed by it to date under all leases set forth in Schedule 7.1(k) and is not in default nor, to the best knowledge of the Company and any Interest Owner, alleged to be in default in any material respect under any thereof. To the best knowledge of [the Company and any Interest Owner, there exists no default, or any event which upon the giving of notice or passage of time would give rise to any default, in the performance of any obligation to be performed by any other party to any of such leases. Immediately after the Closing, Buyer will possess