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Exhibit 10.2

CONTRIBUTION AGREEMENT

dated as of November 4, 2009

by and among

HERSHA NORTHEAST ASSOCIATES, LLC

And

KIRIT PATEL,

as Contributors,

and

HERSHA HOSPITALITY LIMITED PARTNERSHIP

as Acquirer,

IN CONNECTION WITH THE ACQUISITION OF MEMBERSHIP INTERESTS IN
44 WEST HAVEN HOSPITALITY, LLC
OWNER OF THE HAMPTON INN AND SUITES LOCATED AT
510-544 SAW MILL ROAD, WEST HAVEN, CONNECTICUT

 
 

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CONTRIBUTION AGREEMENT
 
THIS CONTRIBUTION AGREEMENT, dated as of November 4, 2009 (the “Agreement”),
Hersha Northeast Associates, LLC, a Delaware limited liability company (the
“Northeast Contributor”) and Kirit Patel, an individual (the “Patel
Contributor”, and collectively, all together the “Contributors”), 44 West Haven
Hospitality, LLC, a Connecticut limited liability company (the “Subject
Company”), 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
Subject Company and the Property Owner filed with the Secretary of State of the
State of Connecticut, attached hereto as Exhibit F.
 
 
 

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“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 Thirteen Million Dollars and 00/100
($13,000,000.00) including the principal balance of the existing loan from M&T
Bank to the Property Owner in the original principal amount of Nine Million Six
Hundred Thousand Dollars ($9,600,000.00), the release of the Existing Mezzanine
Loan, and cancellation of Two Hundred Thousand Dollars ($200,000.00) in accrued
interest relating to the Existing Mezzanine Loan.
 
“Continuing Liabilities” shall include liabilities arising under Operating
Contracts, Leases, equipment leases, loan agreements, or proration credits at
Closing, but shall exclude any liabilities arising from any other arrangement,
agreement or pending litigation.
 
“Deposit” shall mean the amount of Five Hundred Thousand Dollars ($500,000.00)
paid by Acquirer.
 
 “Escrow Agent” shall mean Fidelity National Title Insurance Company,
111Founders Plaza #600, East Hartford, CT 06108; Phone: 860-528-9548; Fax:
860-528-7847.
 
“Existing Mezzanine Loan” shall mean the existing promissory note, pledge and
security agreements and loan agreement, each dated as of October 9, 2006, as
amended, from Hersha Hospitality Limited Partnership in the original principal
amount of Two Million Dollars ($2,000,000.00) secured by interests in 44 West
Haven Hospitality, LLC.
 
“Existing Mortgage” shall mean that certain Open-End Building Mortgage,
Assignment of Rents and Security Modification Agreement securing a loan from M&T
Bank to the Property Owner, in the original principal amount of Nine Million Six
Hundred Thousand Dollars ($9,600,000.00).
 
“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.
 
 
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“Hotel” shall mean the 98-room Hampton Inn and Suites 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 Subject Company 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 “Hampton Inn and Suites West Haven” 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 Northeast Interests, and the Patel Interests,
consisting of One Hundred Percent (100%) of the interests in the Subject
Company.
 
“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.
 
“Knowledge” shall mean the knowledge of the Contributors that they would have
had after making reasonable investigation.
 
 “Land” shall mean that certain land condominium unit lying and being in the
County of New Haven and State of Connecticut located at 510-544 Saw Mill Road,
West Haven, Connecticut, 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,
interest, 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.
 
“Manager” shall mean Hersha Hospitality Management, LP, a Pennsylvania limited
partnership.
 
 
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“Northeast Interests” shall mean all right, title and interest of Northeast
Contributor in the Subject Company, consisting of a Sixty Seven Percent (67%)
membership interest in the Subject Company.
 
“Operating Contracts” 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
fee 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.
 
“Patel Interests” shall mean all right, title and interest of Patel Contributor
in the Subject Company, consisting of a Thirty-Three Percent (33%) membership
interest in the Subject Company.
 
“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 Sawmill Three, LLC, a Connecticut limited liability
company, which owns, as its only assets, the fee interest in the Land, the Hotel
and Improvements located on the Land.
 
“Property Owner Operating Agreement” shall mean the current operating agreement
of the Property Owner, attached hereto as Exhibit G.
 
“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.
 
“Subject Company” shall mean 44 West Haven Hospitality, LLC, a Connecticut
limited liability company, which owns, as its only assets, One Hundred Percent
(100%) membership interest in the Property Owner.
 
 
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“Subject Company Operating Agreement” shall mean the current operating agreement
of the Subject Company, attached hereto as Exhibit G.
 
“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 Subject Company 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 Fidelity National Title Insurance Company,
111Founders Plaza #600, East Hartford, CT 06108; Phone: 860-528-9548; Fax:
860-528-7847.
 
“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.
 
 
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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 acquisition 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 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.
 
 
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2.3           Payment of the Consideration. Acquirer shall pay the Consideration
to the Contributors in the following manner:
 
(a)           Acquirer shall receive a credit of Nine Million Six Hundred
Thousand Dollars ($9,600,000.00) for the pay off, assumption or modification of
the existing loan from M&T Bank.

(b)           Acquirer shall release the Existing Mezzanine Loan for the benefit
of Contributors.

(c)           Acquirer shall cancel Two Hundred Thousand Dollars ($200,000.00)
in accrued interest relating to the Existing Mezzanine Loan for the benefit of
Contributors.

(d)           Acquirer shall receive a credit of Five Hundred Thousand Dollars
($500,000.00) for the amount of the Deposit.

(e)           Acquirer shall pay to Contributors the remainder of the
Consideration in the form of immediately available good funds of lawful money of
the United States.

(f)           All mechanics’ liens shall be paid in full on or before closing,
or Escrow Agent shall hold back an amount equal to one-hundred and twenty-five
percent (125%) of the amount of any unpaid liens.

(g)           At Closing, the Existing Mortgage shall be paid off, assumed or
modified by Acquirer, and, if assumed or modified, 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.

(h)           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.

 
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ARTICLE III
 
 
CONTRIBUTORS’ REPRESENTATIONS, WARRANTIES AND COVENANTS
 
To induce the Acquirer to enter into this Agreement and to acquire the
Interests, Contributors hereby each 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)           Each Contributor has 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 Subject Company or assets of the Property Owner,
under any of  the terms, conditions, or provisions of, the Articles of
Organization, the Subject Company 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
Subject Company or the Property Owner is a party, or by which the Subject
Company or the Property Owner may be bound, or to which the Subject Company 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 Subject Company 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.
 
 
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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 Subject Company.
 
(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 fee owner
of the Real Property and the sole owner of the Property.  The Contributors own
One Hundred Percent (100%) of the only outstanding securities and membership
interests of the Subject Company.  As of the Closing Date, Acquirer will own One
Hundred Percent (100%) of the only outstanding securities and membership
interests of the Subject Company. The Subject Company owns One Hundred Percent
(100%) of the only outstanding securities and membership interests of the
Property Owner.
 
3.5           Bankruptcy.  No Act of Bankruptcy has occurred with respect to any
of the Contributors.
 
3.6           Brokerage Commission.  The Contributors have not engaged the
services of, nor are they or will they 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 Subject Company and the Property Owner.
 
(a)           The Subject Company is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Connecticut
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)           The Property Owner is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Connecticut
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 Subject Company 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 Subject Company or the Property Owner, under
any of the terms, conditions, or provisions of, the Articles of Organization,
the Subject Company 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 Subject Company or the
Property Owner is a party, or by which the Subject Company or the Property Owner
may be bound, or to which the Subject Company 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 Subject Company or the Property
Owner or any of the Subject Company’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
Subject Company and no party has any interest in the Property Owner, or any
portion thereof, or the right or option to acquire any interest in the Subject
Company, the Property Owner or the Property or any portion thereof.  The Subject
Company and the Property Owner have no subsidiaries and do not directly or
indirectly own any securities of or interest in any entity, including, without
limitation, any limited liability company or joint venture.
 
(e)           The Subject Company and the Property Owner have 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
Subject Company 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 Partnership Acquirer.
 
 
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(b)           The Contributors represent and warrant that they have 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 Partnership
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 Subject Company 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 Subject Company and the Property Owner under the
laws of the United States and of each state or other jurisdiction in which the
Subject Company and the Property Owner conduct business activities requiring the
filing of tax returns or reports.  All tax returns and reports filed by the
Subject Company and the Property Owner are true and correct in all material
respects.  The Subject Company and the Property Owner have paid in full all
taxes of whatever kind or nature for the periods covered by such returns.  The
Subject Company and the Property Owner have not been delinquent in the payment
of any tax, assessment, or governmental charge or deposit and have 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 Subject Company 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 Subject Company 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 Subject Company and the Property Owner or any
of their respective assets.  The federal, state, and local tax returns of the
Subject Company and the Property Owner have not been audited, nor have the
Subject Company, the Property Owner or the Contributors received any notice of
any federal, state, or local audit.  The Subject Company and the Property Owner
have 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 Subject Company or the Property Owner.
 
(d)           All taxes, including real property taxes and rental taxes or the
equivalent, and all interest and penalties due thereon, required to be paid or
collected by the Subject Company or the Property Owner 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 Contributors shall cause the
Subject Company and the Property Owner to file, all necessary returns and
petitions required to be filed through the Closing Date.  The Contributors shall
cause the Subject Company and the Property Owner to 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 Subject Company and
the Property Owner.
 
 
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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 Subject Company or the Property Owner is a party or by which their
assets are bound other than the Permitted Title Exceptions, the Leases, and the
Operating Contracts.
 
3.11          No Special Taxes.  The Contributors have no Knowledge of, nor have
they received any written notice of, any special taxes or assessments relating
to the Subject Company, the Property Owner or the 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 Subject Company and the
Property Owner possess all Authorizations, each of which is valid and in full
force and effect, and, to Contributors’ Knowledge, no provision, condition or
limitation of any of the Authorizations has been breached or violated.   Neither
the Subject Company nor the Property Owner has misrepresented or failed to
disclose any relevant fact in obtaining all Authorizations, and the Contributors
have no 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 Knowledge, nor have they
received written notice within the past three (3) years, of any existing
violation of any provision of any applicable building, zoning, subdivision,
environmental or other governmental ordinance, resolution, statute, rule, order
or regulation, including but not limited to those of environmental agencies or
insurance boards of underwriters, with respect to the ownership, operation, use,
maintenance or condition of the Property or any part thereof, or requiring any
repairs or alterations other than those that have been made prior to the date
hereof.
 
3.13          Operating Contracts.  The Subject Company and the Property Owner
have performed all of their respective obligations under each of the Operating
Contracts and no fact or circumstance has occurred which, by itself or with the
passage of time or the giving of notice or both, would constitute a material
default under any of the Operating Contracts.  Without the prior written consent
of the Acquirer, which consent will not be unreasonably withheld or delayed, the
Contributors shall cause the Subject Company and the Property Owner not to enter
into any new management agreement, maintenance or repair contract, supply
contract, lease in which it is lessee or other agreements with respect to the
Property, nor shall the Contributors cause the Subject Company or the Property
Owner to enter into any agreements modifying the Operating Contracts.
 
3.14          Warranties and Guaranties.  The Contributors shall cause the
Subject Company and the Property Owner not to release or modify any warranties
or guarantees, if any, of manufacturers, suppliers and installers relating to
the Improvements and the Tangible Personal Property or any part thereof, except
with the prior written consent of the Acquirer.  A complete list of all such
warranties and guaranties in effect as of the date of this Agreement is attached
hereto as Exhibit D.
 
 
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3.15          Insurance.  All of the Subject Company’s and the Property Owner’s
Insurance Policies are valid and in full force and effect, all premiums for such
policies were paid when due and the Contributors shall cause the Subject Company
and the Property Owner to pay all future premiums for such policies (and any
replacements thereof) on or before the due date therefor.  The Contributors
shall cause the Subject Company and the Property Owner to pay all premiums on,
and shall cause the Subject Company and the Property Owner not to cancel or
allow to expire, any of their respective Insurance Policies prior to the Closing
Date unless such policy is replaced, without any lapse of coverage, by another
policy or policies providing coverage at least as extensive as the policy or
policies being replaced.  The Contributors shall cause the Subject Company and
the Property Owner to name the Acquirer as additional insureds on each of the
Insurance Policies.
 
3.16          Condemnation Proceedings; Roadways.  Neither the Subject Company
nor the Property Owner have received written notice of any condemnation or
eminent domain proceeding pending or threatened against the Property or any part
thereof.  The Contributors have no Knowledge of any change or proposed change in
the route, grade or width of, or otherwise affecting, any street or road
adjacent to or serving the Real Property.
 
3.17          (a) Litigation with Respect to the Subject Company.  Except as set
forth on Exhibit E there is no action, suit or proceeding pending or known to be
threatened against or affecting the Subject Company or any part of or interest
in the Property in any court, before any arbitrator or before or by any
governmental agency which (a) in any manner raises any question affecting the
validity or enforceability of this Agreement or any other material agreement or
instrument to which the Subject Company is a party or by which it is bound and
that is or is to be used in connection with, or is contemplated by, this
Agreement, (b) could materially and adversely affect the business, financial
position or results of operations of the Subject Company, (c) could materially
and adversely affect the ability of the Subject Company to perform its
obligations hereunder, or under any document to be delivered pursuant hereto,
(d) could create a material lien on the Property, any part thereof or any
interest therein, or (e) could otherwise materially and adversely affect the
Property, any part thereof or any interest therein or the use, operation,
condition or occupancy thereof.
 
(b) Litigation with Respect to the Property Owner.  Except as set forth on
Exhibit E there is no action, suit or proceeding pending or known to be
threatened against or affecting the Property Owner or any part of or interest in
the Property in any court, before any arbitrator or before or by any
governmental agency which (a) in any manner raises any question affecting the
validity or enforceability of this Agreement or any other material agreement or
instrument to which the Property Owner is a party or by which it is bound and
that is or is to be used in connection with, or is contemplated by, this
Agreement, (b) could materially and adversely affect the business, financial
position or results of operations of the Property Owner, (c) could materially
and adversely affect the ability of the Property Owner to perform its
obligations hereunder, or under any document to be delivered pursuant hereto,
(d) could create a material lien on the Property, any part thereof or any
interest therein, or (e) could otherwise materially and adversely affect the
Property, any part thereof or any interest therein or the use, operation,
condition or occupancy thereof.
 
 
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3.18           Labor Disputes and Agreements.  There are not currently any labor
disputes pending or, threatened as to the operation or maintenance of the
Property or any part thereof.   Neither the Subject Company nor the Property
Owner is a party to any union or other collective bargaining agreement with
employees employed in connection with the ownership, operation or maintenance of
the Property.  The Acquirer will not be obligated to give or pay any amount to
any employee of the Subject Company or the Property Owner, and the Acquirer
shall not have any liability under any pension or profit sharing plan that the
Subject Company or the Property Owner may have established with respect to the
Property or their or its employees.
 
3.19           Financial Information.
 
(a)           To the Contributors’ Knowledge, except as otherwise disclosed in
writing to the Acquirer prior to the end of the Study Period, for each of the
Subject Company’s accounting years, when a given year is taken as a whole, all
of the Subject Company’s financial information previously delivered or to be
delivered to the Acquirer is and shall be correct and complete in all material
respects and presents accurately the financial condition of the Subject Company
and results of the operations of the Property for the periods indicated, except
that such statements do not have footnotes or schedules that may otherwise be
required by GAAP.  If requested by the Acquirer, the Contributors shall cause
the Subject Company to deliver promptly all four-week period ending financial
information available to the Subject Company.  The Subject Company’s financial
information is prepared based on books and records maintained by the Subject
Company in accordance with the Subject Company’s accounting system.  The Subject
Company’s financial information has been provided to the Acquirer without any
changes or alteration thereto.  To the best of Contributors’ Knowledge, since
the date of the last financial statement included in the Subject Company’s
financial information, there has been no material adverse change in the
financial condition or in the operations of the Property.
 
(b)          To the Contributors’ Knowledge, except as otherwise disclosed in
writing to the Acquirer prior to the end of the Study Period, for each of the
Property Owner’s accounting years, when a given year is taken as a whole, all of
the Property Owner’s financial information previously delivered or to be
delivered to the Acquirer is and shall be correct and complete in all material
respects and presents accurately the financial condition of the Property Owner
and results of the operations of the Property for the periods indicated, except
that such statements do not have footnotes or schedules that may otherwise be
required by GAAP.  If requested by the Acquirer, the Contributors shall cause
the Property Owner to deliver promptly all four-week period ending financial
information available to the Property Owner.  The Property Owner’s financial
information is prepared based on books and records maintained by the Property
Owner in accordance with the Property Owner’s accounting system.  The Property
Owner’s financial information has been provided to the Acquirer without any
changes or alteration thereto.  To the best of Contributors’ Knowledge, since
the date of the last financial statement included in the Property Owner’s
financial information, there has been no material adverse change in the
financial condition or in the operations of the Property.
 
 
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3.20          Organizational Documents.  The Articles of Organization, the
Subject Company Operating Agreement and the Property Owner Operating Agreement,
are in full force and effect and have not been modified or supplemented, and no
fact or circumstance has occurred that, by itself or with the giving of notice
or the passage of time or both, would constitute a default thereunder.
 
3.21          Operation of Property.  The Contributors covenant that between the
date hereof and the Closing Date, Contributors shall cause the Subject Company
and the Property Owner to (a) operate the Property only in the usual, regular
and ordinary manner consistent with the Subject Company’s and the Property
Owner’s prior practice, (b) maintain the books of account and records in the
usual, regular and ordinary manner, in accordance with sound accounting
principles applied on a basis consistent with the basis used in keeping its
books in prior years, and (c) use all reasonable efforts to preserve intact the
present business organization, keep available the services of the present
officers and employees and preserve their relationships with suppliers and
others having business dealings with them.  The Contributors shall cause the
Subject Company and the Property Owner to continue to make good faith efforts to
take guest room reservations and to book functions and meetings and otherwise to
promote the business of the Property in generally the same manner as the Subject
Company and the Property Owner did prior to the execution of this
Agreement.  Except as otherwise permitted hereby, from the date hereof until
Closing, the Contributors shall use their good faith efforts to ensure that the
Subject Company and the Property Owner shall not take any action or fail to take
action the result of which (i) would have a material adverse effect on the
Property or the Acquirer’s ability to continue the operation thereof after the
Closing Date in substantially the same manner as presently conducted, (ii)
reduce or cause to be reduced any room rents or any other charges over which
Contributors have operational control, or (iii) would cause any of the
representations and warranties contained in this Article III to be untrue as of
Closing.
 
3.22          Bankruptcy with respect to the Subject Company and the Property
Owner.  No Act of Bankruptcy has occurred with respect to the Subject Company or
the Property Owner.
 
3.23          Hazardous Substances.  Except for matters in the Subject
Company’s, the Property Owner’s or Acquirer’s audits, Contributors have no
Knowledge:  (a) of the presence of any Hazardous Substances (as defined below)
on the Property, or any portion thereof, or, (b) of any spills, releases,
discharges, or disposal of Hazardous Substances that have occurred or are
presently occurring on or onto the Property, or any portion thereof, or (c) of
the presence of any PCB transformers serving, or stored on, the Property, or any
portion thereof, and Contributors have no Knowledge of any failure to comply
with any applicable local, state and federal environmental laws, regulations,
ordinances and administrative and judicial orders relating to the generation,
recycling, reuse, sale, storage, handling, transport and disposal of any
Hazardous Substances (as used herein, “Hazardous Substances” shall mean any
substance or material whose presence, nature, quantity or intensity of
existence, use, manufacture, disposal, transportation, spill, release or effect,
either by itself or in combination with other materials is either:  (1)
potentially injurious to the public health, safety or welfare, the environment
or the Property, (2) regulated, monitored or defined as a hazardous or toxic
substance or waste by any Governmental Body, or (3) a basis for liability of the
owner of the Property to any Governmental Body or third party, and Hazardous
Substances shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, crude oil, or any products, by-products or components thereof, and
asbestos).  Notwithstanding anything to the contrary contained herein
Contributors shall have no liability to Acquirer for any Hazardous Substances of
which Contributors have no Knowledge.
 
 
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3.24          Room Furnishings.  All public spaces, lobbies, meeting rooms, and
each room in the Hotel available for guest rental is furnished in accordance
with commercially reasonable standards for the Hotel and room type.
 
3.25          Independent Audit.  Contributors shall provide access by
Acquirer’s representatives, to all financial and other information relating to
the Property, the Subject Company and the Property Owner.
 
3.26          Bulk Sale Compliance.  Contributors shall indemnify Acquirer
against any claim, loss or liability arising under the bulk sales law in
connection with the transaction contemplated herein.
 
3.27          Sufficiency of Certain Items.  The Property contains not less
than:
 
(a)           a sufficient amount of furniture, furnishings, color television
sets, carpets, drapes, rugs, floor coverings, mattresses, pillows, bedspreads
and the like, to furnish each guest room, so that each such guest room is, in
fact, fully furnished; and
 
(b)           a sufficient amount of towels, washcloths and bed linens, so that
there are three (3) sets of towels, washcloths and linens for each guest room
(one on the beds, one on the shelves, and one in the laundry), together with a
sufficient supply of paper goods, soaps, cleaning supplies and other such
supplies and materials, as are reasonably adequate for the current operation of
the Hotel.
 
3.28          Leases.  True, complete copies of the Leases, are attached as
Exhibit C hereto.  The Leases are, and will at Closing be, in full force and
effect and neither Contributors, the Subject Company nor the Property Owner, are
in default and the Contributors shall make good faith efforts for themselves,
the Subject Company and the Property Owner not to be in default with respect
thereto (with or without the giving of any notice and/or lapse of time).
 
3.29          Noncontravention.  The execution and delivery of, and the
performance by the Contributors of, their obligations under this Agreement do
not and will not contravene, or constitute a default under, any provision of
applicable law or regulation, or any agreement, judgment, injunction, order,
decree or other instrument binding upon the Contributors, or result in the
creation of any lien or other encumbrance on any asset of the
Contributors.  There are no outstanding agreements (written or oral) pursuant to
which the Contributors (or any predecessor to or representative of the
Contributors) have agreed to contribute or has granted an option or right of
first refusal to acquire the Interests or the Property or any part thereof.
 
3.30          Patriot Act Representations.  Each Contributor and, to the actual
knowledge of each such Contributor, any direct owner of the Subject Company, the
Property Owner or such Contributor, (i) are not included on any Government List
(as defined below), (ii) are not persons who have been determined by competent
authority to be subject to the prohibitions contained in the Presidential
Executive Order No. 13224 or any other similar prohibitions contained in the
rules and regulations of the OFAC or in any enabling legislation or other
Presidential Executive Orders in respect thereof, (iii) have not been indicted
or convicted of any Patriot Act Offenses, or (iv) are not currently under
investigation by any governmental authority for alleged criminal activity.  For
purposes of this Agreement, (i) “Government List” means (A) the Specially
Designated Nationals and Blocked Persons List maintained by OFAC, (B) any other
list of terrorists, terrorist organizations or narcotics traffickers maintained
pursuant to any of the Rules and Regulations of OFAC, or (C) any similar list
maintained by the United States Department of State, the United States
Department of Commerce or any other governmental authority or pursuant to any
Executive Order of the President of the United States of America; (ii) “OFAC”
means the Office of Foreign Asset Control, U.S. Department of the Treasury,
(iii) “Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT)
Act of 2001, as the same may be amended from time to time, and corresponding
provisions of future laws, and (iv) “Patriot Act Offense” means any violation of
the criminal laws of the United States of America or of any of the several
states, or that would be a criminal violation if committed within the
jurisdiction of the United States of America or any of the several states,
relating to terrorism or the laundering of monetary instruments, including any
offense under (A) the criminal laws against terrorism, (B) the criminal laws
against money laundering, (C) the Bank Secrecy Act, as amended, (D) the Money
Laundering Control Act of 1986, as amended, or (E) the Patriot Act and also
includes the crimes of conspiracy to commit, or aiding and abetting another to
commit, any of the foregoing.
 
 
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Each of the representations, warranties and covenants contained in this Article
III and its various subparagraphs are intended for the benefit of the Acquirer
and may be waived in whole or in part, by the Acquirer, but only by an
instrument in writing signed by the Acquirer.  Each of said representations,
warranties and covenants shall survive the closing of the transaction
contemplated hereby for twelve (12) months, and no investigation, audit,
inspection, review or the like conducted by or on behalf of the Acquirer shall
be deemed to terminate the effect of any such representations, warranties and
covenants, it being understood that the Acquirer has the right to rely thereon
and that each such representation, warranty and covenant constitutes a material
inducement to the Acquirer to execute this Agreement and to close the
transaction contemplated hereby and to pay the Consideration to the
Contributors.  Acquirer acknowledges and agrees that, except for the
representations and warranties expressly set forth herein, Acquirer is acquiring
the Subject Company, the Property Owner and the Property “AS-IS, WHERE-IS” with
no representations or warranties by or from Contributors, express or implied, or
any nature whatsoever.
 
ARTICLE IV
 
ACQUIRER’S REPRESENTATIONS, WARRANTIES AND COVENANTS
 
To induce the Contributors to enter into this Agreement and to sell the
Interests, the Acquirer hereby makes the following representations, warranties
and covenants upon each of which the Acquirer acknowledges and agrees that the
Contributors are entitled to rely and have relied:
 
4.1           Organization and Power.
 
 
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(a) The Acquirer is a limited partnership duly organized, validly existing and
in good standing under the laws of the Commonwealth of Virginia, and has all
partnership powers and all governmental licenses, authorizations, consents and
approvals to carry on its business as now conducted and to enter into and
perform its obligations under this Agreement and any document or instrument
required to be executed and delivered on behalf of the Partnership Acquirer
hereunder.
 
4.2           Noncontravention.  The execution and delivery of this Agreement
and the performance by the Acquirer of its obligations hereunder do not and will
not contravene, or constitute a default under, any provisions of applicable law
or regulation, the Partnership Acquirer’s partnership agreement, or any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Acquirer or result in the creation of any lien or other encumbrance on any
asset of the Acquirer.
 
4.3           Litigation.  There is no action, suit or proceeding, pending or
known to be threatened, against or affecting the Acquirer in any court or before
any arbitrator or before any Governmental Body which (a) in any manner raises
any question affecting the validity or enforceability of this Agreement or any
other agreement or instrument to which the Acquirer are a party or by which it
is bound and that is to be used in connection with, or is contemplated by, this
Agreement, (b) could materially and adversely affect the ability of the Acquirer
to perform its obligations hereunder, or under any document to be delivered
pursuant hereto.
 
4.4           Bankruptcy.  No Act of Bankruptcy has occurred with respect to the
Acquirer.
 
4.5           No Brokers.  The Acquirer has not engaged the services of, nor is
it or will it become liable to, any real estate agent, broker, finder or any
other person or entity for any brokerage or finder’s fee, commission or other
amount with respect to the transaction described herein.
 
 
ARTICLE V
 
CONDITIONS AND ADDITIONAL COVENANTS
 
The Acquirer’s obligations hereunder are subject to the satisfaction of the
following conditions precedent and the compliance by the Contributors with the
following covenants:
 
5.1           Contributors’ Deliveries.  The Contributors shall have delivered
to the Escrow Agent or the Acquirer, as the case may be, on or before the date
of Closing, all of the documents and other information required of Contributors
pursuant to Section 6.2.
 
5.2           Representations, Warranties and Covenants; Obligations of
Contributors; Certificate.  All of the Contributors’ representations and
warranties made in this Agreement shall be true and correct as of the date
hereof and as of the Closing Date as if then made, there shall have occurred no
material adverse change in the financial condition of the Property, the Subject
Company or the Property Owner since the date hereof, the Contributors shall have
performed all of their material covenants and other obligations under this
Agreement and the Contributors shall have executed and delivered to the Acquirer
at Closing a certificate to the foregoing effect.
 
 
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5.3           Title Insurance.  Good and indefeasible title to the fee interest
in the Real Property shall be insurable as such by the Title Company at or below
its regularly scheduled rates subject only to Permitted Title Exceptions as
determined in accordance with Section 2.2.
 
5.4           Condition of Improvements.  The Improvements and the Tangible
Personal Property (including but not limited to the mechanical systems,
plumbing, electrical, wiring, appliances, fixtures, heating, air conditioning
and ventilating equipment, elevators, boilers, equipment, roofs, structural
members and furnaces) shall be in the same condition at Closing as they are as
of the date hereof, reasonable wear and tear excepted.  Prior to Closing, the
Contributors shall not have diminished the quality or quantity of maintenance
and upkeep services heretofore provided to the Real Property and the Tangible
Personal Property and the Contributors shall not have diminished the
Inventory.  The Contributors shall not have removed or caused or permitted to be
removed any part or portion of the Real Property or the Tangible Personal
Property unless the same is replaced, prior to Closing, with similar items of at
least equal quality and acceptable to the Acquirer.
 
5.5           Utilities.  All of the Utilities shall be installed in and
operating at the Property, and service shall be available for the removal of
garbage and other waste from the Property.
 
5.6           Interests.  From the date hereof to and including the Closing
Date, Contributors shall not sell, assign, pledge, hypothecate or otherwise
transfer the Interests, except as contemplated by this Agreement, nor shall the
Contributors cause or permit the Subject Company or the Property Owner to issue
any securities, partnership or membership interests, as the case may be, to any
person or to sell, pledge, transfer or otherwise dispose of the Property or any
interest therein.
 
5.7           Existing Mortgage.  Acquirer acknowledges that the Property and
the Property Owner are subject to the Existing Mortgage, a loan in the original
principal amount of Nine Million Six Hundred Thousand Dollars ($9,600,000.00)
from M&T Bank.  As part of the Consideration, Acquirer will assume, modify or
pay off the Existing Mortgage.
 
5.8           Third Party Consents.  In the event of an assumption or
modification of the Existing Mortgage as contemplated in Sections 2.3(b) and
5.7, then as a condition to Closing, the Contributors shall cause the Property
Owner to receive approval from M&T Bank. (i) to the contribution of the
Interests to Acquirer as contemplated hereunder and (ii) to the percentage lease
structure whereby, on the Closing Date, the Property Owner shall lease the
Property to a REIT subsidiary (“Lessee”) pursuant to a percentage lease, and
Lessee shall enter into a new management agreement with Manager.
 
 
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ARTICLE VI
 
CLOSING
 
6.1           Closing.  Closing shall be held at a location that is mutually
acceptable to the parties.  The anticipated Closing Date is September 1, 2009,
which date may be modified by the mutual consent of the parties.
 
6.2           Contributor’ Deliveries.  At Closing, the Contributors shall
deliver to Acquirer all of the following instruments, each of which shall have
been duly executed and, where applicable, acknowledged on behalf of the
Contributors and shall be dated as of the date of Closing:
 
(a)           Certificates representing the Interests.
 
(b)           The closing certificate required by Section 5.2.
 
(c)          The Assignment and Assumption Agreement.
 
(d)           Any and all service contracts, space leases, and agreements.
 
(e)           Such agreements, affidavits or other documents as may be required
by the Title Company to issue the Owner’s Title Policy with affirmative coverage
over mechanics’ and materialmen’s liens.
 
(f)           The FIRPTA Certificate.
 
(g)           True, correct and complete copies of all warranties, if any, of
manufacturers, suppliers and installers possessed by the Contributors, the
Subject Company or the Property Owner and relating to the Improvements and the
Personal Property, or any part thereof.
 
(h)           Copies of the Articles of Organization, the Subject Company
Operating Agreement and the Property Owner Operating Agreement.
 
(i)           Appropriate consent of the Subject Company, authorizing (A) the
execution of any documents to be executed and delivered by the Subject Company
prior to, at or otherwise in connection with Closing and in connection with the
transactions contemplated by this Agreement, and (B) the performance by the
Subject Company of its obligations hereunder and under such documents.
 
(j)           Appropriate consent of the Property Owner, authorizing (A) the
execution of any documents to be executed and delivered by the Property Owner
prior to, at or otherwise in connection with Closing and in connection with the
transactions contemplated by this Agreement, and (B) the performance by the
Property Owner of its obligations hereunder and under such documents.
 
(k)           Valid, final and unconditional certificate(s) of occupancy for the
Real Property and Improvements, issued by the appropriate Governmental Body.
 
 
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(l)           Such proof, reasonably acceptable to the Acquirer, evidencing the
payment by Contributors of all transfer taxes incurred in connection with the
transactions contemplated by this Agreement.
 
(m)           A written instrument executed by the Contributors, conveying and
transferring to the Acquirer all of the Contributors’ right, title and interest
in any telephone numbers and facsimile numbers relating to the Property, and, if
the Contributors maintain a post office box, conveying to the Acquirer all of
their interest in and to such post office box and the number associated
therewith, so as to assure a continuity in operation and communication.
 
(n)           All current real estate and personal property tax bills in the
Contributors’ possession or under their control.
 
(o)           A complete set of all guest registration cards, guest transcripts,
guest histories, and all other available guest information.
 
(p)           An updated schedule of employees, showing salaries and duties with
a statement of the length of service of each such employee, brought current to a
date not more than 48 hours prior to the Closing.
 
(q)           A complete list of all advance room reservations, functions and
the like, in reasonable detail so as to enable the Acquirer to honor the
Contributors’ commitments in that regard.
 
(r)           A list of the Contributors’ outstanding accounts receivable as of
midnight on the date prior to the Closing, specifying the name of each account
and the amount due the Contributors.
 
(s)           Possession of the Property and all keys for the Property.
 
(t)           All books, records, operating reports, appraisal reports, files
and other materials in the Contributors’, the Subject Company’s or the Property
Owner’s possession or control which are necessary in the Acquirer’s discretion
to maintain continuity of operation of the Property.
 
(u)           To the extent permitted under applicable law, documents of
transfer necessary to transfer to the Acquirer the Contributors’ employment
rating for workmens’ compensation and state unemployment tax purposes.
 
(v)           As assignment of all warranties and guarantees from all
contractors and subcontractors, manufacturers, and suppliers in effect with
respect to the Improvements.
 
(w)           Complete set of “as-built” drawings for the Improvements as
available in Contributors’, the Subject Company’s or the Property Owner’s
possession.
 
(x)           Any other document or instrument reasonably requested by the
Acquirer or required hereby.
 
 
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6.3           Acquirer’s Deliveries.  At Closing, the Acquirer shall pay or
deliver to the Contributor the following:
 
(a)           The Consideration described in Section 2.3.
 
(b)           The Assignment and Assumption Agreement.
 
(c)           Any other document or instrument reasonably requested by the
Contributors or required hereby.
 
6.4           Closing Costs.    Each party shall pay its own legal fees and
expenses.  All filing fees and all charges for title insurance premiums shall be
paid by Acquirer.  Any other costs, expenses or taxes shall be paid by
Contributor.
 
6.5           Income and Expense Allocations.  All income, except any Intangible
Personal Property, and expenses with respect to the Property, determined in
accordance with United States generally accepted accounting principles
consistently applied, shall be allocated between the Contributors and the
Acquirer.  The Contributors shall be entitled to all income (including all cash
box receipts and cash credits for unused expendables), and responsible for all
expenses for the period of time up to but not including 12:01 a.m. on the
Closing Date, and the Acquirer shall be entitled to all income and responsible
for all expenses for the period of time from, after and including 12:01 a.m. on
the Closing Date.  Only adjustments for ground rent, if applicable, and real
estate taxes shall be shown on the settlement statements (with such supporting
documentation as the parties hereto may require being attached as exhibits to
the settlement statements) and shall increase or decrease (as the case may be)
the amount payable by the Acquirer.  All other such adjustments shall be made by
separate agreement between the parties and shall be payable by check or wire
directly between the parties.  Without limiting the generality of the foregoing,
the following items of income and expense shall be allocated as of the Closing
Date:
 
(a)           Current and prepaid rents, including, without limitation, prepaid
room receipts, function receipts and other reservation receipts.
 
(b)           Real estate and personal property taxes.
 
(c)           Amounts under the Operating Contracts.
 
(d)           Utility charges (including but not limited to charges for water,
sewer and electricity).
 
(e)           Wages, vacation pay, pension and welfare benefits and other fringe
benefits of all persons employed at the Property who the Acquirer elects to
employ.
 
(f)           Value of fuel stored on the Property at the price paid for such
fuel by the Contributors, including any taxes.
 
 
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(g)           All prepaid reservations and contracts for rooms confirmed by
Contributors prior to the Closing Date for dates after the Closing Date, all of
which Acquirer shall honor.
 
The Tray Ledger shall be retained by the Contributors.  The Contributors shall
be required to pay all sales taxes and similar impositions currently up to the
Closing Date.
 
Acquirer shall not be obligated to collect any accounts receivable or revenues
accrued prior to the Closing Date for Contributors, but if Acquirer collects
same, such amounts will be promptly remitted to Contributor in the form
received.
 
If accurate allocations cannot be made at Closing because current bills are not
obtainable (as, for example, in the case of utility bills or tax bills), the
parties shall allocate such income or expenses at Closing on the best available
information, subject to adjustment upon receipt of the final bill or other
evidence of the applicable income or expense.  Any income received or expense
incurred by the Contributors or the Acquirer with respect to the Property after
the date of Closing shall be promptly allocated in the manner described herein
and the parties shall promptly pay or reimburse any amount due.  The
Contributors shall pay at Closing all special assessments and taxes applicable
to the Property.
 
The certificates evidencing the Contributors’ ownership of the Interests will be
dated as of the Closing Date
 
 
ARTICLE VII
 
CONDEMNATION; RISK OF LOSS
 
7.1           Condemnation.  In the event of any actual or threatened taking,
pursuant to the power of eminent domain, of all or any portion of the Real
Property, or any proposed sale in lieu thereof, the Contributors shall give
written notice thereof to the Acquirer promptly after the Contributors learn or
receive notice thereof.  If all or any part of the Real Property is, or is to
be, so condemned or sold, the Acquirer shall have the right to terminate this
Agreement pursuant to Section 8.3.  If the Acquirer elects not to terminate this
Agreement, all proceeds, awards and other payments arising out of such
condemnation or sale (actual or threatened) shall be paid or assigned, as
applicable, to the Acquirer at Closing.
 
7.2           Risk of Loss.   The risk of any loss or damage to the Property
prior to the recordation of the Deed shall remain upon Contributors.  If any
such loss or damage to more than Ten Percent (10%) of the value of the
Improvements occurs prior to Closing or any such loss or damage is uninsured or
underinsured, the Acquirer shall have the right to terminate this Agreement
pursuant to Section 8.3.  If the Acquirer elects not to terminate this
Agreement, all insurance proceeds and rights to proceeds arising out of such
loss or damage shall be paid or assigned, as applicable, to the Acquirer at
Closing.
 
 
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ARTICLE VIII

 
LIABILITY OF ACQUIRER; INDEMNIFICATION BY CONTRIBUTORS;
 
TERMINATION RIGHTS
 
8.1           Liability of Acquirer.  Except for any obligation expressly
assumed or agreed to be assumed by the Acquirer hereunder and in the Assignment
and Assumption Agreement, the Acquirer does not assume any obligation of the
Contributors or any liability for claims arising out of any occurrence prior to
Closing.
 
8.2           Indemnification by Contributors.  The Contributors hereby
indemnify and hold the Acquirer harmless from and against any and all suits,
actions, claims, costs, penalties, damages, losses, liabilities and expenses,
subject to Section  9.11, that may at any time be incurred by the Acquirer,
whether before or after Closing, (i) as a result of any breach by the
Contributors of any of their representations, warranties, covenants or
obligations set forth herein or in any other document delivered by the
Contributors pursuant hereto, (ii) relating to any suits, litigation or actions
brought against any Contributors, the Subject Company or the Property Owner
prior to the Closing Date, (iii) in connection with any and all liabilities and
obligations of the Subject Company or the Property Owner occurring, accruing or
arising prior to the Closing Date, and/or (iv) as a result of or in connection
with the use or operation of the Property prior to the Closing Date.
 
8.3           Termination by Acquirer.  If any condition set forth herein cannot
or will not be satisfied prior to Closing, or upon the occurrence of any other
event that would entitle the Acquirer to terminate this Agreement and its
obligations hereunder, and the Contributors fail to cure any such matter within
five (5) days after notice thereof from the Acquirer, the Acquirer, at its
option and as its sole remedy, shall elect either (a) to terminate this
Agreement, and all other rights and obligations of the Contributors and the
Acquirer hereunder shall terminate immediately, or (b) to waive its right to
terminate and, instead, to proceed to Closing.
 
8.4           Termination by Contributors.  If, prior to Closing, the Acquirer
defaults in performing any of its obligations under this Agreement, and the
Acquirer fails to cure any such default within five (5) business days after
notice thereof from the Contributors, then the Contributors’ sole remedy for
such default shall be to terminate this Agreement.
 
 
ARTICLE IX
 
MISCELLANEOUS PROVISIONS
 
9.1           Completeness; Modification.  This Agreement constitutes the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior discussions, understandings,
agreements and negotiations between the parties hereto.  This Agreement may be
modified only by a written instrument duly executed by the parties hereto.
 
 
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9.2           Assignments.  The Acquirer may assign its rights hereunder to any
affiliate of Acquirer without the consent of the Contributors.  No such
assignment shall relieve the Acquirer of any of its obligations and liabilities
hereunder.
 
9.3           Successors and Assigns.  The benefits and burdens of this
Agreement shall inure to the benefit of and bind the Acquirer and the
Contributors and their respective successors and assigns.
 
9.4           Days.  If any action is required to be performed, or if any
notice, consent or other communication is given, on a day that is a Saturday or
Sunday or a legal holiday in the jurisdiction in which the action is required to
be performed or in which is located the intended recipient of such notice,
consent or other communication, such performance shall be deemed to be required,
and such notice, consent or other communication shall be deemed to be given, on
the first business day following such Saturday, Sunday or legal holiday.  Unless
otherwise specified herein, all references herein to a “day” or “days” shall
refer to calendar days and not business days.
 
9.5           Governing Law.  This Agreement and all documents referred to
herein shall be governed by and construed and interpreted in accordance with the
laws of the State of Connecticut.
 
9.6           Counterparts.  To facilitate execution, this Agreement may be
executed in as many counterparts as may be required.  It shall not be necessary
that the signature on behalf of both parties hereto appear on each counterpart
hereof.  All counterparts hereof shall collectively constitute a single
agreement.
 
9.7           Severability.  If any term, covenant or condition of this
Agreement, or the application thereof to any person or circumstance, shall to
any extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to other persons or
circumstances, shall not be affected thereby, and each term, covenant or
condition of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
 
9.8           Costs.  Regardless of whether Closing occurs hereunder, and except
as otherwise expressly provided herein, each party hereto shall be responsible
for its own costs in connection with this Agreement and the transactions
contemplated hereby, including without limitation fees of attorneys, engineers
and accountants.
 
9.9           Notices.  All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand, transmitted by
facsimile transmission, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by the United States mail, certified,
postage prepaid, return receipt requested, at the addresses and with such copies
as designated below.  Any notice, request, demand or other communication
delivered or sent in the manner aforesaid shall be deemed given or made (as the
case may be) when actually delivered to the intended recipient.
 
If to the
Contributors:                                                      Hersha
Northeast Associates, LLC
 
 
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44 Hersha Drive
         
Harrisburg, PA 17102
         
Phone:
(717) 236-4400
   
Fax:
(717) 774-7383
                   
Kirit Patel
         
245 Whiting Farms Road
         
Holyoke, MA 01040
                 
With a copy to:
Paul M. Maleck, Esquire
         
Doherty, Wallace, Pillsbury and Murphy, P.C.
         
One Monarch Place, Suite 1900
         
Springfield, MA 01144
         
Phone:
(413) 733-3111
           
Fax:
(413) 734-3910
                 
If to the Acquirer:
Hersha Hospitality Limited Partnership
   
44 Hersha Drive
   
Harrisburg, PA 17102
   
Phone:
(717) 236-4400
   
Fax:
(717) 774-7383
           
Attn: Ashish R. Parikh
                 
With a copy to:
Lok Mohapatra, Esquire
   
Franklin Firm, LLP
         
Penn Mutual Towers
   
510 Walnut Street, 9th floor
   
Philadelphia, PA  19106
   
Phone:
(215) 238-1045
   
Fax:
(267) 238-1874

 
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Or to such other address as the intended recipient may have specified in a
notice to the other party.  Any party hereto may change its address or designate
different or other persons or entities to receive copies by notifying the other
party and the Escrow Agent in a manner described in this Section.
 
9.10           Incorporation by Reference.  All of the exhibits attached hereto
are by this reference incorporated herein and made a part hereof.
 
9.11           Survival.  All of the representations, warranties, covenants and
agreements of the Contributors and the Acquirer made in, or pursuant to, this
Agreement shall survive for a period of twelve (12) months following Closing and
shall not merge into the Assignment and Assumption Agreement or any other
document or instrument executed and delivered in connection herewith, except for
the representations and warranties set forth in Sections 3.4, 3.7 and 3.9, which
shall survive for periods coterminous with applicable statutes of limitations.
 
9.12           Further Assurances.  The Contributors and the Acquirer each
covenant and agree to sign, execute and deliver, or cause to be signed, executed
and delivered, and to do or make, or cause to be done or made, upon the written
request of the other party, any and all agreements, instruments, papers, deeds,
acts or things, supplemental, confirmatory or otherwise, as may be reasonably
required by either party hereto for the purpose of or in connection with
consummating the transactions described herein.
 
9.13           No Partnership.  This Agreement does not and shall not be
construed to create a partnership, joint venture or any other relationship
between the parties hereto except the relationship of Contributors and Acquirer
specifically established hereby.
 
9.14           Time of Essence.  Time is of the essence with respect to every
provision of this Agreement.
 
9.15           Confidentiality.  Contributors and their representatives,
including any professionals representing Contributors, shall keep the existence
and terms of this Agreement strictly confidential, except to the extent
disclosure is compelled by law, and then only to the extent of such compulsion.
 
 
[The remainder of this page is left intentionally blank.]
 
 
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IN WITNESS WHEREOF, the Contributors and the Acquirer have caused this
Contribution Agreement to be executed in their names by their respective
duly-authorized representatives.

 
CONTRIBUTORS:
 
 

 
HERSHA NORTHEAST ASSOCIATES, LLC, a Delaware limited liability company

 

 
By:
/s/ Bharat C. Mehta
   
Name:
Bharat C. Mehta
   
Title:
Manager
 

 

 
/s/ Kirit Patal
   
KIRIT PATEL, an individual

 
ACQUIRER:
 

 
HERSHA HOSPITALITY LIMITED PARTNERSHIP, a Virginia limited partnership
           
By:
Hersha Hospitality Trust, a Maryland real estate investment trust, its sole
general partner
                       
By:
/s/ Ashish R. Parikh
     
Name:
Ashish R. Parikh
     
Title:
CFO
 

 
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