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EXHIBIT 2.3
KENTWOOD (GRAND RAPIDS)
CONTRIBUTION AGREEMENT
dated as of September 16, 1996
among
KENTWOOD RESIDENCE ASSOCIATES,
a Kansas general partnership
as Contributor,
INNKEEPERS USA LIMITED PARTNERSHIP,
a Virginia limited partnership,
as Acquiror,
and
INNKEEPERS USA TRUST,
a Maryland real estate investment trust,
in connection with the
RESIDENCE INN HOTEL
KENTWOOD, MICHIGAN
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE II
CONTRIBUTION AND ACQUISITION; DEPOSIT;
PAYMENT OF CONTRIBUTION CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . 13
2.1 Contribution and Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3 Study Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4 Payment of Contribution Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.5 Allocation of Contribution Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.6 Determination of Number of Preferred Partnership Units . . . . . . . . . . . . . . . . . . . . 17
2.7 Pay Off Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.8 Authorization and Reservation of Common Shares . . . . . . . . . . . . . . . . . . . . . . . . 18
2.9 Contributor's Study Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE III
CONTRIBUTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . 19
3.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.2 Authorization and Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.4 No Special Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.5 Compliance with Existing Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.6 Operating Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.7 Warranties and Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.9 Condemnation Proceedings; Roadways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.11 Labor Disputes and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.12 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.13 Organizational Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.14 Operation of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.15 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.16 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.17 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.18 Zoning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.19 Historical Districts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.20 Brokerage Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.21 Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.22 Room Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.23 Franchisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.24 Liquor License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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3.25 Independent Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.26 Sufficiency of Certain Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.27 Additional Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.28 Securities Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.29 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.30 No Misrepresentations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.31 Tax Opinion Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.32 Mortgage Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.33 Capital Expenditure Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.34 Updating of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF ACQUIROR AND REIT . . . . . . . . . . . . . . . . . . . . . . . 31
4.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.2 Authorization and Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.4 Compliance with Existing Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.6 Labor Disputes and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.8 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.9 Zoning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.10 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.11 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.12 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.13 Brokerage Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.14 Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.15 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.16 Organizational Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.17 Options, Warrants, and Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.18 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.19 No Misrepresentations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.20 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.21 Common Shares and Redemption Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.22 Tax Consequences to Contributor and its Partners . . . . . . . . . . . . . . . . . . . . . . . 37
4.23 Updating of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE V
CONDITIONS AND ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . 38
5.1 Acquiror's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.2 Contributor's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VI
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.2 Contributor's Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
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6.3 Acquiror's Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.4 Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.5 Income and Expense Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VII
POST CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . 50
7.1 Taxable Sale of Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.2 Maintaining Debt Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.3 Guaranty of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.4 Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.5 Re-election of Board Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.6 Timely Filing of SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.7 Book Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.8 Indemnification with Respect to Mortgage Documents . . . . . . . . . . . . . . . . . . . . . . 52
7.9 Contributor's Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.10 Preferred Partnership Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VIII
CONDEMNATION; RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . 53
8.1 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.2 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE IX
LIABILITY OF ACQUIROR; INDEMNIFICATION; TERMINATION RIGHTS . . . . . . . . . . . . . 54
9.1 Liability of Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.2 Indemnification by Contributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.3 General Indemnification by Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.4 Tax Indemnification by Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.5 Termination by Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.6 Termination by Contributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE X
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 58
10.1 Completeness; Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.2 Taking Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.4 Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.9 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.10 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.11 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.12 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.13 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
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LIST OF EXHIBITS
Exhibit A - Land
Exhibit B - Operating Agreements
Exhibit C - Contributor's Organizational Documents
Exhibit D - Mortgage Documents
Exhibit E - [Intentionally Deleted]
Exhibit F - Authorized Capital Expenditures
Exhibit G - Title Policy Exceptions
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CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT, dated as of the 16th day of September,
1996, among KENTWOOD RESIDENCE ASSOCIATES, a Kansas general partnership (the
"Contributor"), INNKEEPERS USA LIMITED PARTNERSHIP, a Virginia limited
partnership (the "Acquiror"), and INNKEEPERS USA TRUST, a Maryland Real Estate
Investment Trust ("REIT") (REIT and Acquiror, collectively, "Innkeepers"),
provides:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
1.1 Definitions. The following terms shall have the indicated
meanings:
"Acquiror's Knowledge" shall mean the actual knowledge of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇▇.
"Acquiror's Partnership Agreement" shall mean the Amended
and Restated Agreement of Limited Partnership of the Acquiror, as amended by
the First Amendment to the Amended and Restated Agreement of Limited
Partnership.
"Acquiror's Second Amended Partnership Agreement" shall mean
the Second Amended and Restated Agreement of Limited Partnership of the
Acquiror which authorizes the issuance of the Preferred Partnership Units, the
preferences and terms thereof, and the conversion and redemption privileges, in
the form of Item 1 to the Master Addendum.
"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
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partnership action for the purpose of effecting any of the foregoing; or if a
proceeding or case shall be commenced, without the application or consent of a
party hereto or any general partner thereof, in any court of competent
jurisdiction seeking (1) the liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of debts, of such party or
general partner, (2) the appointment of a receiver, custodian, trustee or
liquidator or such party or general partner or all or any substantial part of
its assets, or (3) other similar relief under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
and such proceeding or case shall continue undismissed; or an order (including
an order for relief entered in an involuntary case under the Federal Bankruptcy
Code, as now or hereafter in effect) judgment or decree approving or ordering
any of the foregoing shall be entered and continue unstayed and in effect, for
a period of 60 consecutive days.
"Affiliate" shall mean any individual, corporation, general
or limited partnership, stock company or association, joint venture,
association, company, trust, bank, trust company, land trust, business trust,
or other entity, or any government, agency or political subdivision thereof
(each such entity, a "person") that, directly or indirectly, controls or is
controlled by or is under common control with Acquiror, any other person that
owns, beneficially, directly or indirectly, five percent or more of the
outstanding capital stock, shares or equity interests of Acquiror, or any
officer, director, employee, partner or trustee of Acquiror or any person
controlling, controlled by or under common control with Acquiror (excluding
trustees and persons serving in similar capacities who are not otherwise an
Affiliate of such person). For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to Acquiror, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of Acquiror, through the ownership of
voting securities, partnership interests or other equity interests.
"Approved Investors" shall mean the Contributor and the
partners of the Contributor who meet the "Accredited Investor" qualifications
set forth in Rule 501(a) of Regulation D of the Securities Act, and who have
provided the Representation Letter in the Study Period.
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"Assignment and Assumption Agreement" shall mean that
certain assignment and assumption agreement whereby the Contributor (a) assigns
and the Acquiror (or its designee) assumes the Operating Agreements that have
not been canceled at Acquiror's request and (b) assigns all of the
Contributor's right, title and interest in and to the Intangible Personal
Property, to the extent assignable to the Acquiror (or its designee).
"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.
"▇▇▇▇ of Sale [Inventory]" shall mean that certain ▇▇▇▇ of
sale conveying title to the Inventory to the Acquiror's property manager,
lessee or designee.
"▇▇▇▇ of Sale [Personal Property]" shall mean that certain
▇▇▇▇ of sale conveying title to the Tangible Personal Property, Intangible
Personal Property (other than Authorizations related to the operation and use
of the Property, general intangibles, business records and share of the Tray
Ledger, which all shall be conveyed to Acquiror's designee) and the Reservation
System from the Contributor to the Acquiror.
"Closing" shall mean the Closing of the contribution of the
Property pursuant to this Agreement.
"Closing Date" shall mean the date on which the Closing
occurs.
"Closing Documents" shall mean the documents required to be
delivered on the Closing Date by Acquiror pursuant to Section 6.3 and the
Contributor pursuant to Section 6.2.
"Code" shall mean the Internal Revenue Code of 1986, as
amended. References to particular sections or provisions of the Code shall
include any successor sections or provisions.
"Common Partnership Units" shall mean the common partnership
units in the Acquiror.
"Contribution Consideration" shall mean $7,263,592, payable
in the manner described in Article II.
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"Contributor Material Adverse Effect" shall have the meaning
ascribed to that term in Section 3.1.
"Contributor's Financial Information" shall mean the
financial information delivered by Contributor to Acquiror consisting of the
Manager-prepared Property Income Statement and Property Balance Sheets for the
year 1993, and for each four-week period ending on a Friday in 1994, 1995, and
1996 to date.
"Contributor's Knowledge" shall mean the actual knowledge of
▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇, provided, however, that except as otherwise set
forth in this Agreement, the knowledge or actions of Marriott International,
Inc. and Residence Inn by Marriott, Inc., as franchisor or manager, shall not
be imputed or attributed to Contributor.
"Contributor's Organizational Documents" shall mean the
current Partnership Agreement and Certificate of Limited Partnership of the
Contributor, true and correct copies of which are attached hereto as Exhibit C.
"Contributor's Study Period" shall have the meaning ascribed
to that term in Section 2.9.
"▇▇▇▇▇▇ Affiliated Partnerships" shall mean the seven (7)
partnerships commonly controlled by ▇▇▇▇ ▇. ▇▇▇▇▇▇ which own and are
contributing to the Acquiror pursuant to this Agreement and the Other
Contribution Agreements, seven (7) Residence Inn Hotels (Denver Downtown
Residence Associates, L.P.; East Lansing Residence Associates; Kentwood
Residence Associates; Oakmead Residence Associates, L.P.; San Mateo Residence
Associates, L.P.; Sunnyvale Residence Associates, L.P.; and Wichita East
Residence Associates, L.P.).
"Deed" shall mean that certain deed conveying title to the
Real Property with limited warranty from the Contributor to the Acquiror,
subject only to Permitted Title Exceptions. The description of the Land in the
Deed shall be by courses and distances and, if there is a discrepancy between
the description of the Land attached hereto as Exhibit A and the description of
the Land as shown on the Survey, the description of the Land in the Deed shall
be identical to the description shown on the Survey.
"Deposit" shall mean all amounts deposited from time to time
with the Escrow Agent by the Acquiror pursuant to Section 2.2,
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plus all interest accrued thereon. The Deposit shall be invested by the Escrow
Agent in a manner acceptable to the Contributor and the Acquiror and shall be
held and disbursed by the Escrow Agent in strict accordance with the terms and
provisions of this Agreement.
"Emergency Expenditures" Expenditures required to take
necessary or appropriate actions to respond to Emergency Situations.
"Emergency Situations" Fire, any other casualty, or any
other events, circumstances or conditions which threaten the safety or physical
well-being of the Property's guests or employees or which involve the risk of
material property damage or material loss to the Property.
"Escrow Agent" shall mean Tri-State Commercial Closings, Inc.
"Final Determination" shall have the meaning ascribed to
that term in Section 9.4(a).
"First Closing" shall mean the first closing of the
contribution of a Residence Inn hotel to occur pursuant to this Agreement or
any Other Contribution Agreement.
"FIRPTA Certificate" shall mean the affidavit of the
Contributor under Section 1445 of the Code certifying that the Contributor is
not a foreign corporation, foreign partnership, foreign trust, foreign estate
or foreign person (as those terms are defined in the Code and the regulations
thereunder), in form and substance satisfactory to the Acquiror.
"Franchise" shall mean the license from the Franchisor to
operate the Property as a Residence Inn by Marriott.
"Franchisor" shall mean Marriott International, Inc., the
issuer of the Residence Inn by Marriott franchise owned by the Contributor.
"GAAP" shall mean generally accepted accounting principles
consistently applied as promulgated by the Financial Accounting Standards Board
and, as to Innkeepers, the SEC pursuant to Regulation S-X.
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"Guarantors" shall mean the Contributor and those of its
general and limited partners electing to sign the Guaranty Agreement.
"Guaranty Agreement" shall mean the Guaranty Agreement in
the form of Item 3 of the Master Addendum which provides for the guarantee
under certain circumstances of the Acquiror's (or its affiliate's) debt which
Contributor and its partners may elect to execute on the Closing Date.
"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 agency, or (3) a basis for liability of the owner of the
Property to any governmental agency 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.
"Hotel" shall mean the 96-room 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.
"Indemnifiable Claim" shall have the meaning ascribed to
that term in Section 9.4(a).
"Indemnitees" shall have the meaning ascribed to that term
in Section 9.4(a).
"Innkeepers Financial Statements" shall mean the
consolidated financial statements of Innkeepers for the calendar years ended
December 31, 1994 and December 31, 1995, and for the quarterly periods ended
March 31, 1996 and June 30, 1996 and such other financial statements delivered
after the date hereof as provided in Section 4.7 hereof.
"Innkeepers Hotel Properties" shall mean the hotels owned by
the REIT or any partnership in which it or any wholly-
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owned subsidiary is the general partner and which are leased to an Innkeepers
Lessee.
"Innkeepers Lease" shall mean a lease between the Acquiror
or an affiliated partnership and an Innkeepers Lessee with respect to the
operation of Innkeepers Hotel Properties.
"Innkeepers Lessees" shall mean JF Hotel, Inc., a Virginia
corporation, and JF Hotel II, Inc., a Virginia corporation.
"Innkeepers Property Owning Partnerships" shall mean the
Acquiror, Innkeepers Financing Partnership, L.P., a Virginia limited
partnership, and Innkeepers Financing Partnership II, L.P., a Virginia limited
partnership.
"Insurance Policies" shall mean all policies of insurance
relating to the Property, or any portion thereof.
"Intangible Personal Property" shall mean all intangible
personal property owned or possessed by the Contributor and used in connection
with the ownership, operation, leasing, occupancy or maintenance of the
Property, including, without limitation, the right to use the trade name
"Residence Inn" (but only to the extent Contributor may assign such right), the
Authorizations, general intangibles, business records relating to the Property,
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 determined under Section 6.5, excluding (a) any of the aforesaid rights
the Acquiror elects not to acquire, (b) the Contributor's replacement reserves,
(c) deposits, working capital, marketable securities, escrows, prepaid items,
the Contributor's cash on hand, in bank accounts and invested with financial
institutions, and (d) accounts receivable except for the above described share
of the Tray Ledger.
"Interested Party" shall have the meaning ascribed to that
term in Section 9.4(c).
"Inventory" shall mean all "inventories" including all
inventories of merchandise and inventories of supplies (as such terms are used
in the Uniform System of Accounts for Hotels [8th
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Revised Edition, 1986] as published by the Hotel Association of New York City,
Inc., as the same may be revised) and similar consumable supplies.
"IRS" shall mean the Internal Revenue Service.
"Issuer" shall mean the Michigan Job Development Authority.
"JF Hotel Financial Statements" shall mean the combined
financial statements of the Innkeepers Lessees for the calendar years 1994 and
1995, and for the quarterly periods ended March 31, 1996 and June 30, 1996 and
such other financial statements delivered after the date hereof as provided in
Section 4.7 hereof.
"Land" shall mean that certain parcel of real estate lying
and being in Kentwood, Kent County, Michigan, as more particularly described on
Exhibit A attached hereto, together with all easements, rights, privileges,
remainders, reversions and appurtenances thereunto belonging or in any way
appertaining, and all of the estate, right, title, interest, claim or demand
whatsoever of the Contributor 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.
"Manager" shall mean Residence Inn by Marriott, Inc.
"Master Addendum" shall mean the Master Addendum, dated as
of the date hereof, executed by the ▇▇▇▇▇▇ Affiliated Partnerships, and the
Acquiror, which is incorporated herein by reference and made a part of this
Agreement, which addendum contains documents that have also been incorporated
as part of the Other Contribution Agreements.
"Marriott" shall mean Marriott International, Inc. and the
Manager.
"Marriott's Knowledge" shall mean the actual knowledge of
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and the property manager at the Property.
"Marriott Management Agreement" shall mean the contract for
the management of the Hotel between the Contributor and the Manager.
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"Mortgage Documents" shall mean collectively all documents
listed on Exhibit D and all documents executed or delivered in connection
therewith, including all modifications thereto.
"Mortgagee" shall mean First Bank National Association,
sucessor to First National Bank of Minneapolis.
"Operating Agreements" shall mean the management agreements,
service contracts and other agreements, if any, in effect with respect to the
construction, ownership, operation, occupancy or maintenance of the Property,
excluding the Franchise. All of the Operating Agreements in force and effect as
of the date hereof are listed on Exhibit B attached hereto.
"Other Contribution Agreements" shall mean the six other
Contribution Agreements, each between Acquiror and a ▇▇▇▇▇▇ Affiliated
Partnership, for the contribution by Contributor and the acquisition by
Acquiror of a Residence Inn By Marriott.
"Owner's Title Policy" shall mean an owner's policy of title
insurance issued to the Acquiror by the Title Company, pursuant to which the
Title Company insures the Acquiror's ownership of fee simple title to the Real
Property (including the marketability thereof) subject only to Permitted Title
Exceptions. The Owner's Title Policy shall insure the Acquiror in the amount of
the Contribution Consideration and shall be acceptable in form and substance to
the Acquiror. The description of the Land in the Owner's Title Policy shall be
by courses and distances and shall be identical to the description shown on the
Survey.
"Partner" for purposes of Section 9.4 only, shall have the
meaning ascribed to that term in Section 9.4(a).
"Pay Off Loan" shall have the meaning ascribed to that term
in Section 2.7.
"Permitted Title Exceptions" shall mean those exceptions to
title to the Real Property that are satisfactory to the Acquiror as determined
pursuant to Section 2.3(f) and those exceptions to title in Contributor's
existing title insurance policy which are set forth on Exhibit G.
"Personal Property" shall mean the Tangible Personal
Property and the Intangible Personal Property.
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"Preferred Partnership Units" shall mean the preferred
partnership units of Acquiror issued to Contributor as part of the Contribution
Consideration, and as described and defined in the Acquiror's Second Amended
Partnership Agreement.
"Property" shall mean collectively the Real Property, the
Inventory, the Tangible Personal Property and the Intangible Personal Property.
"Property Improvement Plan" or "PIP" shall mean the
requirements established by the Franchisor for the Property as a condition of
the transfer of the Franchise.
"Real Property" shall mean the Land and the Improvements.
"Redemption and Registration Rights Agreement" shall mean
the Redemption and Registration Rights Agreement in the form of Item 2 to the
Master Addendum which provides the holders of Preferred Partnership Units with
certain redemption and registration rights.
"Redemption Shares" shall mean all of the shares of the REIT
which are to be issued to a Unit Holder upon conversion of the Preferred
Partnership Units or Common Partnership Units directly or indirectly into REIT
Shares pursuant to the Acquiror's Second Amended Partnership Agreement.
"REIT" shall mean Innkeepers USA Trust, a Maryland real
estate investment trust.
"REIT Shares" shall mean common shares of beneficial
interest of the REIT, par value $0.01 per share.
"Representation Letter" shall mean a representation letter
in the form of Item 4 of the Master Addendum.
"Required Indebtedness" shall have the meaning ascribed to
that term in Section 7.2.
"Reservation System" shall mean the Contributor's
Reservation Terminal and Reservation System equipment and software, if any.
"SEC" shall mean the Securities and Exchange Commission.
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"SEC Filings" shall mean all filings made with the SEC by
the REIT from and after the initial Registration Statement filed in connection
with its initial public offering to the Closing Date.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Stepped-Up Basis Units" shall have the meaning ascribed to
that term in Section 7.2.
"Study Period" shall mean the period commencing at 9:00 a.m.
on the date hereof, and continuing through 5:00 p.m. E.D.T. on the date that is
thirty (30) days from the date hereof. Acquiror shall have the right to extend
the Study Period for an additional period of ten (10) days or such additional
time period as Acquiror may deem reasonably necessary up to December 31, 1996,
upon notice to Contributor, for purposes of (i) completing financial audits
commenced during the thirty (30) day period, and (ii) investigating any
environmental or structural problems uncovered during the thirty (30) day
period.
"Survey" shall mean the survey prepared pursuant to Section
5.1(d).
"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 (excluding all
Franchisor signage used thereon), 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 Contributor; provided, however, that
the Acquiror agrees that, all Inventory shall be conveyed to the Acquiror's
designee.
"Title Commitment" shall mean the commitment by the Title
Company to issue the Owner's Title Policy.
"Title Company" shall mean Tri-State Commercial Closings,
Inc.
"Transfer" for purposes of Section 3.31 only, shall have the
meaning ascribed to that term in Section 3.31(b).
"Tray Ledger" shall mean the final night's room revenue
(revenue from rooms occupied as of 12:01 a.m. on the Closing Date, exclusive
of food, beverage, telephone and similar charges which
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shall be retained by the Contributor), including any sales taxes, room taxes or
other taxes thereon.
"Trustee" shall mean Michigan National Bank.
"Unit Holder" shall mean a person holding Preferred
Partnership Units or Common Partnership Units which were issued in connection
with this transaction or were issued on conversion of Preferred Partnership
Units issued in this transaction, to the Contributor, its partners, or a
permitted transferee of such person.
"Utilities" shall mean public sanitary and storm sewers,
natural gas, telephone, public water facilities, electrical facilities and all
other utility facilities and services necessary for the operation and occupancy
of the Property as a hotel.
1.2 Rules of Construction. The following rules shall apply to
the construction and interpretation of this Agreement:
(a) Singular words shall connote the plural number as
well as the singular and vice versa, and the masculine shall include the
feminine and the neuter.
(b) All references herein to particular articles,
sections, subsections, clauses or exhibits are references to articles,
sections, subsections, clauses or exhibits of this Agreement.
(c) The table of contents and 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; DEPOSIT;
PAYMENT OF CONTRIBUTION CONSIDERATION
2.1 Contribution and Acquisition. The Contributor agrees to
contribute and the Acquiror agrees to acquire the Property for the Contribution
Consideration and in accordance with the other terms and conditions set forth
herein.
2.2 Deposit. The Acquiror shall make on the date hereof an
initial cash deposit of Thirty-Three Thousand and 00/100 Dollars $33,000.00
with the Escrow Agent (the "Deposit"). The Deposit, plus all interest that
accrues thereon, less expenses incurred pursuant to Section 6.4 and allocable
to this Agreement in the same ratio that the Deposit bears to the aggregate of
all deposits under this Agreement and the Other Contribution Agreements
($500,000.00), shall be returned to Acquiror if Acquiror, prior to the end of
the Study Period, notifies the Contributor in writing, pursuant to Section 2.3,
that the Acquiror elects not to proceed to Closing. If Acquiror fails to give
such notice timely, the Deposit, less expenses incurred pursuant to Section
6.4, shall be (a) applied at the Closing against the Contribution
Consideration, (b) returned to the Acquiror pursuant to Section 9.5, or (c)
paid to the Contributor pursuant to Section 9.6. All interest on the Deposit
shall accrue in favor of the Acquiror.
2.3 Study Period. (a) The Acquiror shall have the right, until
the end of the Study Period (and thereafter if the Acquiror does not notify the
Contributor that the Acquiror has elected to terminate this Agreement in the
manner described below) to enter upon the Real Property during normal business
hours with reasonable notice and Contributor's permission, which permission
shall not be unreasonably withheld, conditioned or delayed, and to perform, at
the Acquiror's expense, such economic, surveying, engineering, environmental,
topographic and marketing tests, studies and investigations as the Acquiror may
deem appropriate.
(b) If such tests, studies, investigations and audits
reveal (i) material structural or environmental problems, or (ii) material
discrepancies in the financial statements, the Acquiror may elect not to
proceed to Closing and shall so notify the Contributor prior to the expiration
of the Study Period. If the Acquiror notifies the Contributor, in writing,
prior to the expiration of the Study Period that it has determined not to
proceed to Closing for one or more of the reasons set forth in this Section
2.3(b), this Agreement automatically shall terminate, the
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Deposit shall be returned to the Acquiror and upon return of the Deposit, the
Acquiror shall be released from any further liability or obligation under this
Agreement; provided, however, that if the Acquiror determines not to proceed to
Closing because of a material structural problem, the Acquiror shall provide
the Contributor with the written report from a structural engineer describing
the structural problem and the Contributor shall have the right to cure such
structural problem within thirty (30) days to the satisfaction of Acquiror, and
the Closing shall be extended to the last day of the Marriott accounting period
immediately after the date of Closing set forth in Section 6.1, as such date
may have otherwise been extended.
(c) If such tests, studies and investigations do not
warrant, in the Acquiror's sole, absolute and unreviewable discretion, the
acquisition of the Property for any reason not set forth in Section 2.3(b) or
2.3(f), the Acquiror may elect not to proceed to Closing and shall so notify
the Contributor prior to the expiration of the Study Period. If the Acquiror
notifies the Contributor, in writing, prior to the expiration of the Study
Period that it has determined not to proceed to Closing pursuant to this
Section 2.3(c), this Agreement and each of the Other Contribution Agreements
shall automatically terminate, the Deposit shall be returned to the Acquiror as
provided in Section 2.2 and upon return of the Deposit, the Acquiror shall be
released from all further liability and obligations, if any, under this
Agreement and the Other Contribution Agreements.
(d) During the Study Period, the Contributor shall make
available to the Acquiror, 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 and other related materials or information if any, relating to
the Property which are in, or come into, the Contributor's possession or
control.
(e) The Acquiror shall indemnify and defend the
Contributor against any costs, loss, damage, claim, or expense (including
reasonable costs and attorneys fees) arising from entry upon the Real Property
by the Acquiror or any agents, contractors or employees of the Acquiror. The
indemnity contained in this Section 2.3(e) shall not be subject to the survival
limitation set forth in Section 10.10(b)(i) nor shall the indemnity be subject
to the $500,000 floor set forth in Section 9.3.
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(f) During the Study Period, the Acquiror, at its
expense, shall cause an examination of title to the Property to be made and
shall promptly order the Title Commitment and the Survey, and, prior to the
expiration of the Study Period, shall notify the Contributor of any defects in
title (other than Permitted Title Exceptions) shown by such examination that
the Acquiror is unwilling to accept. Within seven (7) business days after such
notification, the Contributor shall notify the Acquiror whether the Contributor
is willing to attempt to cure such defects. If the Contributor is willing to
attempt to cure such defects, the Contributor shall act promptly and diligently
to cure such defects at its expense, and, in any event, shall cure such defects
prior to Closing. 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 Contributor shall pay and discharge (and the Escrow Agent is
authorized to pay and discharge at Closing) such defects at Closing. If the
Contributor is unwilling or unable to cure any other such defects by Closing,
the Acquiror shall elect (1) to waive such defects and proceed to Closing
without any abatement in the Contribution Consideration or (2) to terminate
this Agreement and receive a full refund of the Deposit. The Contributor shall
not, after the date of this Agreement, knowingly subject the Property 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 Acquiror's prior written
consent. All title matters revealed by the Acquiror's title examination and not
objected to by the Acquiror as provided above shall be deemed Permitted Title
Exceptions. If Acquiror shall fail to examine title and notify the Contributor
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.
During the Study Period, Acquiror shall use its best efforts to obtain
the consent of the Mortgagee and, if required under the Mortgage Documents, the
consent of the Issuer and the Trustee to the assumption of the Contributor's
obligations under the Mortgage Documents on terms acceptable to Acquiror. In
the event such consent(s) are not obtained by Acquiror, then Acquiror may
notify Contributor in writing prior to the expiration of the Study Period that
it has elected not to proceed to Closing, this Agreement automatically shall
terminate, the Deposit shall be returned to the Acquiror and upon return of the
Deposit, the Acquiror shall be
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released from any further liability or obligation under this Agreement.
(g) The Contributor shall have the right, until the end
of the Study Period, to terminate this Agreement and all (but not fewer than
all) Other Contribution Agreements, if the REIT's closing share price on any
day in the Study Period is less than $9.00 by delivery to Acquiror of written
notice within the earlier of (i) five (5) days after such date or (ii) the end
of the Study Period. In the event Contributor so terminates this Agreement (and
all Other Contribution Agreements), Acquiror shall pay Contributor's costs
incurred up to the date of said termination as determined by and subject to the
limitations set forth in Section 6.4(c).
2.4 Payment of Contribution Consideration. The Contribution
Consideration shall be paid to the Contributor in the following manner:
(a) The Acquiror shall receive a credit against the
Contribution Consideration in an amount equal to the Deposit to the extent that
any cash is required to be paid to the Contributor; otherwise the Deposit shall
be returned to the Acquiror, together with any interest accrued thereon.
(b) The balance of the Contribution Consideration shall
be paid as follows:
(i) The Acquiror shall take the Property subject
to existing indebtedness evidenced by the Mortgage Documents and the Acquiror
shall receive a credit against the Contribution Consideration in an amount
equal to the principal balance of the indebtedness evidenced by the Mortgage
Documents, plus all accrued interest to the Closing Date plus any other
incidental charges incurred by the Acquiror and required by the mortgagee in
connection with the transactions contemplated by this Agreement. In addition,
the Acquiror shall be charged and the Contributor shall be paid for the amount
of the sums being held in escrow by the mortgagee (as confirmed by the
mortgagee) and being assigned and transferred to the Acquiror.
(ii) The Acquiror shall pay the balance of the
Contribution Consideration in the form of Preferred Partnership Units, all as
more particularly described in Section 2.6. Upon receipt of the Preferred
Partnership Units, the Contributor shall
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become a limited partner of the Acquiror and shall execute the Acquiror's
Second Amended Partnership Agreement.
(c) The Acquiror shall pay the closing costs at Closing
by making a wire transfer of immediately available federal funds to the account
of the Contributor or other applicable party as specified in writing by the
Contributor. Innkeepers shall cause JF Hotel, Inc. (or its Affiliate) to enter
into a separate agreement with Contributor, for JF Hotel, Inc. (or its
Affiliate) to purchase from the Contributor its current assets, except for
cash, net of its current liabilities.
The parties agree that, to the extent that the Contributor receives
Preferred Partnership Units, the transfer of the Property to the Acquiror shall
be treated for federal income tax purposes as a contribution of the Property in
exchange for a partnership interest in the Acquiror that qualifies as a
tax-free contribution under Section 721 of the Code.
2.5 Allocation of Contribution Consideration. The parties agree
that the Contribution Consideration shall be allocated 5% to the Tangible
Personal Property, and the balance to the Land and to the Improvements as the
parties may agree. The Acquiror and the Contributor agree to use the allocation
of Contribution Consideration in this Section 2.5 to complete IRS Form 8594, if
such form is required to be filed by the Acquiror and the Contributor.
2.6 Determination of Number of Preferred Partnership Units. For
purposes of determining the number of Preferred Partnership Units to be
delivered by the Acquiror at the Closing, each Preferred Partnership Unit shall
be deemed to have a value equal to $11.00. The Contributor shall receive
certificates at the Closing representing the number of Preferred Partnership
Units. The certificates evidencing the Preferred Partnership Units will bear
appropriate legends indicating (a) that the Preferred Partnership Units have
not been registered under the Securities Act, and (b) that the Acquiror's
Second Amended Partnership Agreement restricts the transfer of Preferred
Partnership Units. The Preferred Partnership Units shall carry an income and
distribution preference, shall be convertible into Common Partnership Units
which are subject to redemption and conversion into REIT common shares, shall
have a liquidation preference and such other characteristics all as more fully
described in the Acquiror's Second Amended Partnership Agreement.
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2.7 Pay Off Loan. If Manager does not release the capital
expenditure reserve held by Manager on behalf of Contributor with respect to
this Hotel at Closing, Acquiror agrees to finance Contributor's payoff of all
items creating liens or encumbrances on any of the Personal Property or
Inventory, capital leases and for the termination of any Operating Agreements
for which Acquiror has requested Contributor to terminate, up to an amount
equal to the lesser of (i) the unreleased balance of such capital expenditure
reserve or (ii) $150,000 (the "Pay Off Loan"). Acquiror's receipt of evidence
reasonably satisfactory to it that Manager has not released reserves of a
specified amount is a condition precedent to Acquiror's obligation to advance
the Pay Off Loan. The proceeds of the Pay Off Loan, if any, will be applied
directly by Acquiror to pay off all items creating liens or encumbrances on any
of the Personal Property and Inventory, capital leases, and to terminate any
Operating Agreements. Contributor will repay the Pay Off Loan, with accrued
interest, by the application of (i) 33.33% of all distributions paid on the
Preferred Partnership Units (or Common Partnership Units into which the
Preferred Partnership Units are convertible) and (ii) any amounts received by
the Contributor from the Manager as a result of the release of the capital
expenditure reserve held by Manager. All amounts applied to the Pay Off Loan
shall be applied first to accrued interest and then to repayment of principal.
Contributor may repay the Pay-Off Loan and accrued interest in whole or part at
any time by making supplemental cash payment(s). The interest rate on the Pay
Off Loan will be 9% per annum.
2.8 Authorization and Reservation of Common Shares. The REIT
shall at all times take all such action as may be required to authorize and
reserve for issuance all of the Redemption Shares and shall take all such
action as may be required to issue and deliver the Redemption Shares to the
Acquiror at such time or times and in such manner as may be reasonably required
in order for the Acquiror to deliver the Redemption Share to the Contributor,
its partners and their permitted transferees, as provided in the Acquiror's
Second Amended Partnership Agreement.
2.9 Contributor's Study Period. Contributor shall have the
right, until 5:00 pm E.D.T. on the date that is seven (7) days from the date
hereof ("Contributor's Study Period") (i) to review, prepare and approve the
Exhibits to the Agreement and Master Addendum, to approve documents related to
Innkeepers Hotel Properties requested by Contributor, and to enter upon the
Innkeepers Hotel Properties during normal business hours with reasonable notice
and Acquiror's permission, which permission shall
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not be unreasonably withheld, conditioned or delayed, and to perform such
economic, surveying and marketing tests, studies, investigations and audits as
the Contributor may deem appropriate. If such tests, studies, investigations
and audits or other information known to Contributor do not warrant, in
Contributor's sole, absolute and unreviewable discretion, the consummation of
the transactions contemplated by this Agreement for any reason, the Contributor
may elect not to proceed to Closing and shall so notify the Acquiror prior to
the expiration of the Contributor's Study Period, in which event this Agreement
and each of the Other Contribution Agreements shall automatically terminate,
the Deposit shall be returned to the Acquiror and the Acquiror shall be
released from all further liability and obligations, if any, under this
Agreement and the Other Contribution Agreements (including any expenses
incurred pursuant to Section 6.4).
ARTICLE III
CONTRIBUTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the Acquiror to enter into this Agreement and to purchase
the Property, the Contributor hereby makes the following representations,
warranties and covenants with respect to the Property, upon each of which the
Contributor acknowledges and agrees that the Acquiror is entitled to rely and
has relied.
3.1 Organization and Power. The Contributor is a general
partnership duly formed, validly existing and in good standing under the laws
of the State of Kansas and has all requisite powers and all governmental
licenses, authorizations, consents and approvals, except where the failure to
have such governmental licenses, authorizations, consents and approvals would
not have a material adverse affect on the business or financial condition of
Contributor (a "Contributor Material Adverse Effect") to carry on its business
as now conducted and to enter into and perform its obligations hereunder and
under any document or instrument required to be executed and delivered on
behalf of the Contributor hereunder.
3.2 Authorization and Execution. This Agreement has been duly
authorized by all necessary action on the part of the Contributor, has been
duly executed and delivered by the Contributor, constitutes the valid and
binding agreement of the Contributor and is enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other similar laws and equitable principles affecting creditors'
rights generally. There is no other person or
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entity who has an ownership interest in the Property or whose consent is
required in connection with the Contributor's performance of its obligations
hereunder, except the Manager, the Franchisor, and the Mortgagee.
3.3 Noncontravention. The execution and delivery of, and the
performance by the Contributor of its obligations under, this Agreement do not
and will not contravene, or constitute a default under, any provision of
applicable law or regulation, the Contributor's Organizational Documents or any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Contributor, except to the extent that the performance by the Contributor
of its obligations hereunder violates the Mortgage Documents, the Franchise and
the Marriott Management Agreement or result in the creation of any lien or
other encumbrance on any asset of the Contributor. There are no outstanding
agreements (written or oral) pursuant to which the Contributor (or any
predecessor to or representative of the Contributor) has agreed to sell or has
granted an option or right of first refusal to purchase the Property or any
part thereof.
3.4 No Special Taxes. The Contributor and, to Contributor's
Knowledge, Marriott, have no knowledge of, nor has either received any notice
of, any special taxes or assessments relating to the Property or any part
thereof or any planned public improvements that may result in a special tax or
assessment against the Property which are not reflected on the Title
Commitment.
3.5 Compliance with Existing Laws. The Contributor and Marriott
possess all Authorizations, except where the failure to have such
Authorizations would not have a Contributor Material Adverse Effect, each of
which is valid and in full force and effect, and no provision, condition or
limitation of any of the Authorizations has been breached or violated in any
material respect. The Contributor has neither misrepresented nor failed to
disclose any material relevant fact in obtaining all Authorizations, and to
Contributor's Knowledge there has been no change in the circumstances under
which those Authorizations were obtained that result in their termination,
suspension, modification or limitation. The Contributor has no knowledge, nor
has Contributor received notice since January 1, 1996, nor to the best of ▇▇▇▇
▇. ▇▇▇▇▇▇'▇ knowledge has the Contributor received notice within the past three
years, of any existing or threatened violation of any provision of any
applicable building, zoning, subdivision, environmental or other governmental
ordinance, resolution, statute, rule, order or regulation, including but not
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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.
3.6 Operating Agreements. Each of the Operating Agreements,
except the Marriott Management Agreement, may be terminated by the Contributor
or the Acquiror upon not more than 30 days' prior written notice and without
the payment of any penalty, fee, premium or other amount. To Contributor's
Knowledge, the Contributor has performed all of its obligations under each of
the Operating Agreements 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 Agreements. The
Contributor shall not 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 Contributor enter into
any agreements modifying the Operating Agreements, unless (a) any such
agreement or modification will not bind the Acquiror or the Property after the
Closing Date or (b) the Contributor has obtained the Acquiror's prior written
consent to such agreement or modification. The Contributor agrees to cancel and
terminate all of the Operating Agreements unless the Acquiror requests in
writing prior to Closing that one or more remain in effect after Closing;
provided, however, that the Acquiror shall be responsible for negotiating the
termination, transfer, renegotiation, or assignment of the Marriott Management
Agreement and shall be solely responsible for any and all transfer or
termination fees, charges, or costs relating directly to such transfer or
termination.
3.7 Warranties and Guaranties. The Contributor shall not before
or after Closing, release or modify any warranties or guarantees, if any, of
manufacturers, suppliers and installers relating to the Improvements and the
Personal Property or any part thereof, except with the prior written consent of
the Acquiror.
3.8 Insurance. All of the Contributor's insurance policies are
valid and in full force and effect, all premiums for such policies were paid
when due and all future premiums for such policies (and any replacements
thereof) shall be paid by the Contributor on or before the due date therefor.
Prior to Closing, the Contributor shall pay all premiums on, and shall not
cancel or voluntarily allow to expire, any of the Contributor's insurance
policies unless such policy is replaced, without any lapse of
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coverage, by another policy or policies providing coverage at least as
extensive as the policy or policies being replaced. The Contributor agrees to
cancel any such policies as of the date of Closing.
3.9 Condemnation Proceedings; Roadways. The Contributor, and, to
Contributor's Knowledge, Marriott, have received no notice of any condemnation
or eminent domain proceeding pending or, to the Contributor's Knowledge
threatened against the Property or any part thereof. The Contributor, and, to
Contributor's Knowledge, Marriott, 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.
3.10 Litigation. There is no action, suit or proceeding pending
or known to be threatened against or affecting the Contributor 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
Contributor 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 Contributor, (c) could materially and adversely affect the ability of
the Contributor to perform its obligations hereunder, or under any document to
be delivered pursuant hereto, (d) could create a lien on the Property, any part
thereof or any interest therein, or (e) could otherwise materially adversely
affect the Property, any part thereof or any interest therein or the use,
operation, condition or occupancy thereof.
3.11 Labor Disputes and Agreements. The Contributor currently has
no employees and has never had any hotel employees. To Contributor's Knowledge,
the Manager has no labor disputes pending or, threatened as to the operation or
maintenance of the Property or any part thereof. To Contributor's Knowledge,
the Manager is not a party to any union or other collective bargaining
agreement with employees employed in connection with the ownership, operation
or maintenance of the Property. Except with respect to the accounts payable of
Contributor assumed by the Acquiror hereunder, to Contributor's Knowledge, the
Acquiror will not be obligated to give or pay any amount to any employee of the
Manager unless the Acquiror elects to hire that employee or continue the
management arrangement with the Manager, and the Acquiror shall not have any
liability under any pension or profit sharing plan that the Manager may have
established with respect to the Property or
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their or its employees, unless the Acquiror elects to continue the management
arrangement with the Manager.
3.12 Financial Information. To the best of Contributor's
Knowledge except as otherwise disclosed in writing to Acquiror prior to the end
of the Study Period, for each of Marriott's accounting years, when a given year
is taken as a whole, all of Contributor's Financial Information previously
delivered to Acquiror is correct and complete in all material respects and
presents accurately the results of the operations of the Property for the
periods indicated, except such statements do not have footnotes or schedules
that may otherwise be required by GAAP. If requested by Acquiror, Contributor
will forward promptly all four-week period-ending financial information it
receives from Manager. Contributor's Financial Information is prepared based
on information provided by Manager based on books and records maintained by
Manager in accordance with Manager's accounting system. Contributor's Financial
Information provided by Manager to Contributor has been provided to Acquiror
without any changes or alterations thereto. Contributor has not independently
verified Manager's financial data and has relied thereon in preparing
Contributor's Financial Information. To the best of Contributor's Knowledge,
since the date of the last financial statement included in the Contributor's
Financial Information, there has been no material adverse change in the
financial condition or in the operations of the Property.
Between the date of the latest financial information provided to
Acquiror before the end of the Study Period and Closing there will be no
material changes in the financial condition of the Contributor other than
changes made in the usual and ordinary conduct of the business of the
Contributor, none of which has been or will be materially adverse and all of
which have been or will be recorded in its books of account.
3.13 Organizational Documents. The Contributor's Organizational
Documents 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.
3.14 Operation of Property. The Contributor covenants that
between the date hereof and the date of Closing it will use its best efforts to
cause the Manager to (a) operate the Property only in the usual, regular and
ordinary manner consistent with the Manager's prior practice, (b) maintain its
books of account and
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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 its present business organization, keep available the services
of its present officers and employees and preserve its relationships with
suppliers and others having business dealings with it; provided, however, that
the Contributor shall use its best efforts not to make and to prevent Marriott
from making any capital expenditures other than (i) those capital expenditures
incurred after June 1, 1996 and prior to Closing in the amounts set forth on
Exhibit F attached hereto and made a part hereof and (ii) Emergency
Expenditures. The Contributor shall encourage the Manager to continue to use
its best 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 Manager did prior to the execution of this Agreement.
Except as otherwise permitted hereby, from the date hereof until Closing, the
Contributor shall use its best efforts to ensure that the Manager 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 Acquiror's ability to continue
the operation thereof after the date of Closing in substantially the same
manner as presently conducted, (ii) reduce or cause to be reduced any room
rents or any other charges over which the Contributor has operational control,
or (iii) would cause any of the representations and warranties contained in
this Article III to be untrue as of Closing.
3.15 Personal Property. Subject only to the Permitted Title
Exceptions and the Mortgage Documents, all of the Personal Property and
Inventory being conveyed by the Contributor to the Acquiror or to the
Acquiror's managing agent, lessee or designee, will be free and clear of all
liens and encumbrances (including capital leases) on the Closing Date and the
Contributor has good, merchantable title thereto and the right to convey same
in accordance with the terms of this Agreement.
3.16 Bankruptcy. No Act of Bankruptcy has occurred with respect
to the Contributor.
3.17 Title to Property. The Contributor is the sole owner of good
and marketable fee simple title to the Tangible Personal Property free and
clear of all liens, leases (capital or otherwise), encumbrances, restrictions,
conditions, and agreements except for Permitted Title Exceptions. The
Contributor shall not have taken any action from the date hereof and through
and
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including the Closing Date that would adversely affect the status of title to
the Real Property. The Contributor has a title insurance policy insuring its
fee simple title to the Real Property.
3.18 Zoning. To Contributor's Knowledge, the current use and
occupancy of the Property for hotel purposes are permitted as a matter of right
as a principal use under all laws applicable thereto without the necessity of
any special use permit, special exception or other special permit, permission
or consent.
3.19 Historical Districts. Neither the Property, nor any portion
thereof, is (a) listed, or eligible to be listed, in any national, state or
local register of historic places or areas, or (b) located within any
designated district or area in which the permitted uses of land located therein
are restricted by regulations, rules or laws other than those specified under
local zoning ordinances.
3.20 Brokerage Commission. The Contributor 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 (other than a 0.75% broker's fee
paid to Consolidated Holdings, Inc.) for any brokerage or finder's fee,
commission or other amount with respect to the transactions described herein.
The Contributor shall pay any such fee, commission or other amount if it
becomes due prior to, at, or after Closing and shall indemnify and hold
Acquiror harmless for any such fee, commission or other amount.
3.21 Hazardous Substances. Neither Contributor nor Marriott has
knowledge: (a) of the presence of any Hazardous Substances 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
Contributor has 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.
3.22 Room Furnishings. To Contributor's Knowledge, all public
spaces, lobbies, meeting rooms, and each room in the Hotel available for guest
rental is furnished in accordance with
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Franchisor's standards for the Hotel and room type, except to the extent of the
changes required by the Property Improvement Plan.
3.23 Franchisor. The Franchise from the Franchisor is, and at
Closing will be, valid and in full force and effect, and Contributor is not and
will not be in default with respect thereto (with or without the giving of any
required notice and/or lapse of time), except to the extent that the assignment
thereof at Closing would constitute an event of default. Acquiror shall be
responsible, at its sole cost and expense, for obtaining a new Franchise
Agreement, if any, or a permissive assignment of the Franchise, if any.
3.24 Liquor License. The Contributor has no liquor licenses in
its name at the Property. The Contributor shall cooperate with the Acquiror:
(i) to determine (from the Manager or otherwise) what entity, if any, possesses
a liquor license with respect to the Property; (ii) to provide Acquiror with,
or assist Acquiror in obtaining a copy of, the liquor license prior to the end
of the Study Period; and (iii) to transfer said liquor license to Acquiror's
designee.
3.25 Independent Audit. Contributor shall provide access by
Acquiror's representatives to all financial and other information relating to
the Property in its possession which would be reasonably required to prepare
audited financial statements in conformity with Regulation S-X of the SEC and
to prepare a registration statement, report or disclosure statement for filing
with the SEC. Contributor shall also provide to Acquiror's representatives a
signed representation letter for use in rendering an opinion on the financial
statements related to the Property. Acquiror acknowledges that some of the
books and records are in the care, custody and control of the Manager.
Contributor shall use its best efforts to assist Acquiror in obtaining (i)
access to the Manager-maintained records and (ii) a signed representation
letter from Manager for use in rendering an opinion on the financial statements
related to the Property.
3.26 Sufficiency of Certain Items. To the Contributor's
Knowledge, 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
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(b) a sufficient amount of towels, washcloths and bed
linens, so that there are at least three 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.
3.27 Additional Representations and Warranties. (a) There are no
outstanding options, warrants or other rights to acquire any equity interest in
the Contributor. The Contributor will not issue any option, warrant or other
right to acquire any equity interest in the Contributor prior to the Closing
Date [except for the right in favor of the Mortgagee to acquire equity in the
Contributor under the Mortgage Documents and, except for sales, assignments,
transfers and conveyances among Approved Investors who are also existing
partners and transfers to Code Section 501(c)(3) charities and to charitable
trusts, will not, without the consent of the Acquiror, which consent shall not
be unreasonably withheld, permit any partner to sell, assign, transfer or
convey or otherwise attempt to dispose of any portion of his or her interest in
the Contributor, as applicable. Each Approved Investor will, prior to the
Closing Date, complete, sign and deliver to Acquiror a Representation Letter;
and
(b) Contributor understands that the Preferred
Partnership Units have not been registered under state or federal securities
laws and that the Common Partnership Units or Redemption Shares issuable upon
the conversion of the Preferred Partnership Units shall not have been
registered under state or federal securities laws and neither the Preferred
Partnership Units, the Common Partnership Units, nor the Redemption Shares may
be sold or transferred except according to the terms of this Agreement, the
Second Amended Partnership Agreement or the Redemption and Registration Rights
Agreement, and in any event must be pursuant to an effective registration
statement under the Securities Act or pursuant to an exemption from
registration under the Securities Act.
3.28 Securities Matters. The Contributor represents and warrants
that (i) as of the Closing the Contributor and each Approved Investor will have
received, reviewed, been given the opportunity to ask questions of
representatives of the Acquiror and the REIT, and to Contributor's Knowledge
received answers regarding, and understands, Acquiror's Second Amended
Partnership Agreement, Acquiror's business, the Preferred Partnership ▇▇▇▇▇,
▇▇
33
and each filing of the REIT in 1996 under the Securities Exchange Act of 1934,
as amended, (ii) the Contributor and each Approved Investor is an "accredited
investor" as defined under Regulation D under the Securities Act, and (iii) the
Contributor and each Approved Investor will complete, execute and deliver the
Representation Letter on or before the end of the Study Period.
3.29 Taxes. (a) The Contributor has filed all income tax
information returns on IRS Form 1065 (including K-1s for each partner) and
applicable state tax forms required to be filed with the United States
Government and with all states and political subdivisions thereof where any
such returns are required to be filed and where the failure to file such return
or report would subject any of them to any material liability or penalty. All
income taxes imposed by the United States, or by any foreign country, or by any
state, municipality, subdivision, or instrumentality of the United States or of
any foreign country, or by any other taxing authority, which are due and
payable by Contributor to have been paid in full or adequately provided for by
reserves shown in their records and books of account and in the Contributor's
Financial Information. Contributor has not obtained or received any extension
of time for the assessment of deficiencies for any years. To Contributor's
Knowledge no unassessed tax deficiency is proposed or threatened against it.
(b) Other than with respect to the subject matter of the
opinion delivered pursuant to Section 6.3(f), the Contributor represents and
warrants that it has obtained, and has advised each of its partners to obtain,
from its own counsel advice regarding the tax consequences of becoming a
partner in the Acquiror.
3.30 No Misrepresentations. Neither this Agreement nor, to
Contributor's Knowledge, the Contributor's Financial Information pursuant to or
in connection with this Agreement and the transactions contemplated hereby,
contains or will contain any misstatement of a material fact or omits or will
omit to state a material fact necessary to make the statements contained herein
or therein not misleading.
3.31 Tax Opinion Representations. Contributor represents,
warrants, and covenants that:
(a) The Contributor at all times has been and is
classified as a partnership for federal income tax purposes;
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(b) The Acquiror will assume, or take the Property
subject to, only liabilities that fall into one of the following four
categories (for this purpose, treating any refinancing as a continuation of the
original debt to the extent that the net proceeds of the refinancing are used
to repay the original debt): (i) debt that is more than two years old and has
encumbered the Property throughout such two-year period; (ii) debt that has not
been outstanding for more than two years, but that was incurred to purchase, or
is properly allocable to capital expenditures with respect to, the Property;
(iii) a trade payable or other similar obligation incurred in the ordinary
course of the Contributor's trade or business (regardless of how long such
payable or obligation has been outstanding); or (iv) debt incurred within two
years prior to the transfer of the Property from the Contributor to the
Acquiror (the "Transfer") that has been secured by the Property since the
debt's incurrence and that was not incurred in anticipation of such transfer.
(c) During the two-year period immediately preceding the
Transfer, the total amount of the distributions of available cash flow
(including available cash flow from a prior year that was retained by the
Contributor) made by the Contributor to each partner of the Contributor for
each year did not exceed the product of the Contributor's net cash flow from
operations for the year multiplied by such partner's percentage interest in
overall profits of the Contributor for that year.
(d) As of the Closing Date, the Contributor does not have
the current intention of selling or otherwise disposing of any of its Preferred
Partnership Units within the two-year period immediately following the
Transfer.
3.32 Mortgage Documents. The Mortgage Documents are in full force
and effect and have not been modified or supplemented, except as otherwise
disclosed, 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
under any of the Mortgage Documents. The Contributor has not been advised nor
has Contributor received any notice asserting that a default exists under any
of the Mortgage Documents. The Contributor shall not amend or supplement the
Mortgage Documents in whole or in part. The Contributor shall pay or make, as
and when due and payable, all payments of principal, interest and other amounts
required to be paid or made under the Mortgage Documents.
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3.33 Capital Expenditure Reserve. To the Contributor's Knowledge,
the capital expenditure reserves for the Property held by the Manager as of the
end of Marriott's accounting period 8, are accurate and complete as shown on
the balance sheet delivered to Acquiror. The Contributor will not authorize or
direct the Manager to use or expend the capital expenditure reserve except as
set forth on Exhibit F.
3.34 Updating of Representations and Warranties. Between the date
hereof and the Closing Date, Contributor will promptly disclose to Acquiror in
writing any information of which it has actual knowledge (a) concerning any
event that would render any representation or warranty of any of them untrue if
made as to the date of such event, (b) which renders any information set forth
in the Agreement no longer correct in all material respects, or (c) which
arises after the date hereof and which would have been required to be included
in the Agreement if such information had existed on the date hereof.
Each of the representations, warranties and covenants contained in
this Article III and its various subparagraphs are intended for the benefit of
the Acquiror and may be waived in whole or in part, by the Acquiror, but only
by an instrument in writing signed by the Acquiror. Each of said
representations, warranties and covenants shall survive the closing of the
transaction contemplated hereby, for the period specified in Section 10.10 and
no investigation, audit, inspection, review or the like conducted by or on
behalf of the Acquiror shall be deemed to terminate the effect of any such
representations, warranties and covenants, it being understood that the
Acquiror has the right to rely thereon and that each such representation,
warranty and covenant constitutes a material inducement to the Acquiror to
execute this Agreement and to close the transaction contemplated hereby and to
pay the Contribution Consideration to the Contributor. Provided however, that
if, no later than three (3) business days prior to the expiration of the Study
Period, Contributor advises Acquiror in writing of any information which
modifies in whole or in part any representation, warranty or covenant made by
Contributor herein and Acquiror does not thereafter elect to terminate this
Agreement pursuant to Section 2.3(b) then in such event such representation,
warranty or covenant of Contributor shall be deemed modified for all purposes
to the extent of such written information as if modified as of the execution of
this Agreement.
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ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF ACQUIROR AND REIT
To induce the Contributor to enter into this Agreement and to
contribute the Property, the Acquiror, and the REIT jointly and severally
hereby make the following representations, warranties and covenants, upon each
of which Innkeepers acknowledges and agrees that the Contributor is entitled to
rely and has relied:
4.1 Organization and Power. (a) The Acquiror 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 Acquiror hereunder.
(b) The REIT is a Maryland real estate investment trust,
duly organized, validly existing and in good standing under the laws of the
State of Maryland, and has all trust powers and all material 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 REIT hereunder.
4.2 Authorization and Execution. This Agreement constitutes the
valid and binding obligation of each of the Innkeepers, enforceable against
each of them in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws and
equitable principles affecting creditors' rights generally. The execution,
delivery, and performance of this Agreement, the Closing Documents, and the
transactions contemplated by all such agreements have been duly authorized by
the respective boards of trustees/directors of the REIT and the general partner
of the Acquiror.
4.3 Noncontravention. (a) The execution and delivery of this
Agreement and the performance by the Acquiror of its obligations hereunder do
not and will not contravene, or constitute a default under, any provisions of
applicable law or regulation, the Acquiror's Partnership Agreement or any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Acquiror or result in the creation of any lien or other encumbrance
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on any asset of the Acquiror. The Acquiror is not in violation of its
Partnership Agreement or in default with respect to any material agreements.
(b) The execution and delivery of this Agreement and the
performance by the REIT of its obligations hereunder do not and will not
contravene, or constitute a default under, any provisions of applicable law or
regulation, the REIT's declaration of trust or any agreement, judgment,
injunction, order, decree or other instrument binding upon the REIT or result
in the creation of any lien or other encumbrance on any asset of the REIT. The
REIT is not in violation of its declaration of trust or in default with respect
to any material agreements.
4.4 Compliance with Existing Laws. Innkeepers Property Owning
Partnerships and Innkeepers Lessees possess all Authorizations, each of which
is valid and in full force and effect, and no provision, condition or
limitation of any of the Authorizations has been breached or violated in any
material respect. Innkeepers Property Owning Partnerships and Innkeepers
Lessees have not misrepresented or failed to disclose any material relevant
fact in obtaining all Authorizations, and have no knowledge of any change in
the circumstances under which those Authorizations were obtained that result in
their termination, suspension, modification or limitation. Innkeepers Property
Owning Partnership and Innkeepers Lessees have no knowledge of any existing or
threatened material 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 Innkeepers Hotel
Properties or any part thereof, or requiring any repairs or alterations other
than those that have been made prior to the date hereof.
4.5 Litigation. There is no action, suit or proceeding, pending
or known to be threatened, against or affecting REIT, Innkeepers Property
Owning Partnerships or Innkeepers Lessees in any court or before any arbitrator
or before 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 Innkeepers is 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 business, financial
position or results of operations of
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the REIT, Innkeepers Property Owning Partnerships or Innkeepers Lessees, (c)
could materially and adversely affect the ability of any of them to perform its
respective obligations hereunder, or under any document to be delivered
pursuant hereto, (d) could create a lien on any of their assets, any part
thereof or any interest therein, or (e) could otherwise materially adversely
affect any of their assets, any part thereof or any interest therein or the
use, operation, condition or occupancy thereof.
4.6 Labor Disputes and Agreements. None of REIT, Innkeepers
Property Owning Partnership or Innkeepers Lessee has any labor disputes pending
or to Acquiror's Knowledge threatened as to the operation or maintenance of the
Innkeepers Hotel Properties. None of REIT, Innkeepers Property Owning
Partnership or Innkeepers Lessee is a party to any union or other collective
bargaining agreement with employees employed in connection with the ownership,
operation or maintenance of the Innkeepers Hotel Properties.
4.7 Financial Statements. The REIT or Innkeepers Lessee has
previously provided Contributor with the Innkeepers Financial Statements and JF
Hotel Financial Statements, all of which are true and complete in all material
respects and have been prepared in accordance with GAAP consistently followed
throughout the periods indicated, subject in the case of interim financial
statements, to normal recurring year-end adjustments (the effect of which will
not, individually or in the aggregate, be materially adverse) and the absence
of notes (which if presented would not differ materially from those included in
the most recent year-end financial statements).
As soon as practicable between the date hereof and the Closing Date,
the Acquiror and the REIT will deliver to Contributor copies of all monthly
operating and other financial statements of each from and after June 30, 1996,
and of all reports delivered to Nomura Asset Capital Corporation. There have
been, and prior to the Closing Date there will be, no material changes in the
financial condition of the REIT, or Acquiror other than changes made in the
usual and ordinary conduct of the businesses of the REIT, and Acquiror, none of
which has been or will be materially adverse and all of which have been or will
be recorded in their respective books of account.
4.8 Title to Properties. The Innkeepers Property Owning
Partnerships have title insurance policies insuring their fee simple title or
leasehold interest, as the case may be, to all lands and buildings described in
the REIT's 1995 Form 10-K and 1996
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Annual Report to Shareholders, or otherwise disclosed in its most recent
Financial Statements as being owned by it.
4.9 Zoning. The current use and occupancy of the Innkeepers
Hotel Properties for hotel and restaurant purposes are permitted as a matter of
right as a principal use under all laws applicable thereto without the
necessity of any special use permit, special exception or other special permit,
permission or consent.
4.10 Insurance. All of the Innkeepers Property Owning
Partnerships' insurance policies are valid and in full force and effect, all
premiums for such policies were paid when due and all future premiums for such
policies (and any replacements thereof) shall be paid by the Innkeepers
Property Owning Partnerships on or before the due date therefor. Prior to
Closing, the Innkeepers Property Owning Partnerships shall pay all premiums on,
and shall not cancel or voluntarily allow to expire, any of the Innkeepers
Property Owning Partnerships' insurance policies 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.
4.11 Personal Property. An Innkeepers Property Owning Partnership
or an Innkeepers Lessee have good and marketable title to all of the machinery,
equipment, materials, supplies, and other property of every kind, tangible or
intangible, contained in its offices and other facilities and shown as assets
in its records and books of account, free and clear of all liens, encumbrances,
and charges.
4.12 Bankruptcy. No Act of Bankruptcy has occurred with respect to
Innkeepers.
4.13 Brokerage Commission. Innkeepers have not engaged the
services of, nor are any of them or will any of them 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. The Acquiror shall pay any such fee, commission or other
amount if it becomes due prior to, at, or after Closing and shall indemnify and
hold Contributor harmless for any such fee, commission or other amount.
4.14 Hazardous Substances. Innkeepers and Innkeepers Lessee have
no knowledge: (a) of the presence of any Hazardous Substances on their
properties, or any portion thereof, or, (b) of any spills,
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releases, discharges, or disposal of Hazardous Substances that have occurred or
are presently occurring on or onto their properties, or any portion thereof, or
(c) of the presence of any PCB transformers serving, or stored on, their
properties, or any portion thereof, and Innkeepers 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.
4.15 Capitalization. (a) The REIT is authorized to issue
100,000,000 voting common shares, par value $0.01 per share, of which
10,821,168 shares are validly issued and outstanding, and 20,000,000 preferred
shares, par value $0.01 per share, of which none are validly issued and
outstanding.
(b) Before the issuance of Preferred Partnership Units to
a ▇▇▇▇▇▇ Affiliated Partnership on the First Closing, there was only one class
of partnership units of Acquiror outstanding, Common Partnership Units, of
which a total of 11,568,687 are presently issued and outstanding. The general
partner of Acquiror is Innkeepers Financial Corporation, a Virginia
corporation, which owns ninety three and one-half percent (93.5%) of the Common
Partnership Units.
(c) Except as contemplated by this Agreement, Acquiror
will not issue or agree to issue any additional units prior to Closing.
4.16 Organizational Documents. True and correct copies of the
current declaration of trust and bylaws of the REIT and the certificate of
limited partnership of the Acquiror, with all amendments thereto, are set forth
as Item 5 of the Master Addendum.
4.17 Options, Warrants, and Other Rights. Neither the REIT, nor
the Acquiror has outstanding any options, warrants, or rights of any kind
requiring it to sell or issue to anyone any capital stock or equity interest of
any class and neither of them has agreed to issue or sell any additional equity
interests except, with respect to Acquiror, the agreements with the ▇▇▇▇▇▇
Affiliated Partnerships and an unexecuted agreement between the Acquiror and
Marriott International, Inc. to acquire a Residence Inn by Marriott, in
Portland, Maine (which agreement Acquiror contemplates will be executed prior
to Closing) and the Partnership Agreement and except, with respect to the REIT,
as described in its 1995 Form
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10-K filed with the SEC, or any Form 10-Qs filed in the period after the filing
of the 1995 10-K and the date of this Agreement.
4.18 Taxes. (a) Innkeepers and Innkeepers Lessee have filed all
tax returns on IRS Form 1120-REIT and applicable state tax forms required to be
filed with the United States Government and with all states and political
subdivisions thereof where any such returns are required to be filed and where
the failure to file such return or report would subject any of them to any
material liability or penalty. All taxes imposed by the United States, or by
any foreign country, or by any state, municipality, subdivision, or
instrumentality of the United States or of any foreign country, or by any other
taxing authority, which are due and payable by any of them have been paid in
full or adequately provided for by reserves shown in their records and books of
account and in the Financial Statements or JF Hotel Financial Statements.
Innkeepers and Innkeepers Lessees have not obtained or received any extension
of time for the assessment of deficiencies for any years. To Acquiror's
Knowledge, no unassessed tax deficiency is proposed or threatened against any
of them.
(b) The REIT is properly taxed as a real estate
investment trust and no act or event has occurred which may adversely affect
its tax classification as a REIT.
4.19 No Misrepresentations. Neither this Agreement, the
Innkeepers Financial Statements, JF Hotel Financial Statements, nor any of the
SEC filings, contains or will contain any misstatement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
4.20 Leases. The leases of the Innkeepers Hotel Properties to
Innkeepers Lessees are in full force and effect, valid and enforceable in
accordance with their terms except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws and equitable
principles affecting creditors' rights generally, and are not in default. No
event or occurrence exists which with notice or the passage of time, or both,
would constitute an event of default thereunder. The leases will not adversely
affect the tax qualification of the REIT as a real estate investment trust for
federal income tax purposes.
4.21 Common Shares and Redemption Shares. (a) All of the issued
and outstanding shares of the REIT have been duly
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authorized, validly issued, and are fully paid and non-assessable, with no
preemptive rights.
(b) All of the Redemption Shares, when issued pursuant to
the Acquiror's Second Amended Partnership Agreement, will be duly authorized,
validly issued, fully paid, and non-assessable.
4.22 Tax Consequences to Contributor and its Partners. To the
extent that the Contributor receives Preferred Partnership Units (as opposed to
cash consideration pursuant to Section 6.4 or otherwise) in connection with the
transfer of the Property to the Acquiror (i) such transfer will be
characterized as a tax-free contribution to Acquiror by Contributor under
Section 721 of the Code and (ii) for Contributor and those partners of
Contributor who execute the Guaranty Agreement, will not result in the
recognition of income or gain associated with the portion of any negative
capital account balance allocable to the Preferred Partnership Units (as
opposed to cash consideration) upon Closing of the contribution (to the extent
that the aggregate negative capital account balance (as determined in
accordance with Section 1.704-(1)(b)(2)(iv) of the Treasury Regulations) for
which tax deferral is sought does not exceed the aggregate amount of debt that
is guaranteed pursuant to the Guaranty Agreement).
4.23 Updating of Representations and Warranties. Between the date
hereof and the Closing Date, Innkeepers will promptly disclose to Contributor
in writing any information of which any of them has actual knowledge (a)
concerning any event that would render any representation or warranty of any of
them untrue if made as to the date of such event, (b) which renders any
information set forth in the Agreement no longer correct in all material
respects, or (c) which arises after the date hereof and which would have been
required to be included in the Agreement if such information had existed on the
date hereof.
Each of the representations, warranties and covenants contained in
this Article IV and its various subparagraphs are intended for the benefit of
the Contributor and may be waived in whole or in part, by the Contributor, but
only by an instrument in writing signed by the Contributor. Each of said
representations, warranties and covenants shall survive the closing of the
transaction contemplated hereby, for the period specified in Section 10.10 and
no investigation, audit, inspection, review or the like conducted by or on
behalf of the Contributor shall be deemed to terminate the effect of any such
representations, warranties and covenants, it being understood that the
Contributor
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has the right to rely thereon and that each such representation, warranty and
covenant constitutes a material inducement to the Contributor to execute this
Agreement and to transfer the Property to the Acquiror. Provided however, that
if, no later than three (3) business days prior to the expiration of the
Contributor's Study Period, Acquiror advises Contributor in writing of any
information which modifies in whole or in part any representation, warranty or
covenant made by Acquiror herein then in such event such representation,
warranty or covenant of Acquiror shall be deemed modified for all purposes to
the extent of such written information as if modified as of the execution of
this Agreement.
ARTICLE V
CONDITIONS AND ADDITIONAL COVENANTS
5.1 Acquiror's Obligations. The Acquiror's obligations hereunder
are subject to the satisfaction of each of the following conditions precedent
and the compliance by the Contributor with each of the following covenants,
each of which may be waived by the Acquiror, in its sole discretion:
(a) Contributor's Deliveries. The Contributor shall have
delivered to the Escrow Agent, the Acquiror, or Acquiror's designee, as the
case may be, on or before the Closing Date, all of the documents and other
information required of Contributor pursuant to Section 6.2.
(b) Representations, Warranties and Covenants;
Obligations of Contributor; Certificate. All of the Contributor's
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 since the date hereof, the Contributor shall have performed all of its
covenants and other obligations under this Agreement and the Contributor shall
have executed and delivered to the Acquiror at Closing a certificate to the
foregoing effect.
(c) Title Insurance. Good and marketable fee simple title
to 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
and the Mortgage Documents.
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(d) Survey. The Acquiror shall have obtained a current
survey of the Land delineating the boundary lines of the Land, the location of
the Improvements, all rights of way and easements thereon and contiguous public
roads and otherwise acceptable to the Acquiror. The Survey shall be prepared
for the benefit of, and shall be certified to, the Acquiror, the Title Company,
Nomura Asset Capital Corporation, and any other lender or underwriter.
Furthermore, the Survey shall be adequate for the Title Company to delete any
exception for general survey matters in the Owner's Title Policy.
(e) 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 substantially the same condition
at Closing as they are at the end of the Study Period, reasonable wear and tear
excepted, and taking into account the Contributor's obligation to make only (i)
the capital expenditures set forth on Exhibit F and (ii) Emergency
Expenditures. Prior to Closing, the Contributor 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 Contributor shall
not have diminished the Inventory. Between the end of the Study Period and
Closing, the Contributor 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 Acquiror.
(f) 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. Between the date hereof and the
date of Closing, the Contributor shall have received no notice of any
extraordinary increase or proposed increase in the rates charged for the
Utilities from the rates in effect as of the date hereof.
(g) Land Use. The current use and occupancy of the
Property for hotel purposes are permitted as a matter of right as a principal
use under all laws applicable thereto without the necessity of any special use
permit, special exception or other special permit, permission or consent.
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(h) Hotel Franchise. Acquiror or its designee shall have
received a franchise with respect to the Hotel from the Franchisor for a
minimum term of ten (10) years from the date hereof, all upon terms and
conditions reasonably acceptable to Acquiror. Acquiror will use its best
efforts to obtain such approval and shall pay all costs and expenses associated
therewith. From the date hereof to and including the Closing Date, Contributor
shall comply with and perform all of the duties and obligations of licensee
under the Franchise.
(i) Management Agreement. Acquiror or its designee shall
have entered into a new management agreement or shall have received an
assignment of the existing Marriott Management Agreement in form reasonably
acceptable to Acquiror. Acquiror will use its best efforts to obtain such new
agreement or assignment, and Acquiror shall pay all costs and expenses
associated therewith. From the date hereof to and including the Closing Date,
Contributor shall comply with and perform all of its duties and obligations
under the Marriott Management Agreement.
(j) Simultaneous Closing. Except to the extent (i) any of
the Other Contribution Agreements have been terminated pursuant to Sections
2.3(b) or (f) therein, or (ii) the Closing Date has been extended pursuant to
Section 2.3(b) hereof, or (iii) the Closing date under any Other Contribution
Agreements have been extended pursuant to Section 2.3(b) thereof, Contributor
shall simultaneously close on the acquisition of each of the seven hotel
properties owned by the ▇▇▇▇▇▇ Affiliated Partnerships under the Other
Contribution Agreements.
(k) Acquiror's Financing. Acquiror shall have obtained
debt or equity financing on terms and conditions acceptable to Acquiror and
shall have assumed Contributor's obligations under the Mortgage Documents at no
additional cost or expense to Acquiror.
5.2 Contributor's Obligations. The Contributor's obligations
hereunder are subject to the satisfaction of each of the following conditions
precedent and the compliance by the Acquiror with each of the following
covenants, each of which may be waived by the Contributor in its sole
discretion:
(a) Innkeepers Deliveries. Innkeepers shall have
delivered to the Escrow Agent, the Contributor, or Contributor's designee, as
the case may be, on or before the date of Closing, all of the documents and
other information required of Innkeepers pursuant to Section 6.3.
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(b) Representations, Warranties and Covenants;
Obligations of Innkeepers; Certificate. All of the Innkeepers representations
and warranties made in this Agreement shall be true and correct as of the date
hereof and as of the date of Closing as if then made, there shall have occurred
no material adverse change in the financial condition of Innkeepers since the
date hereof, Innkeepers shall have performed all of its covenants and other
obligations under this Agreement and Innkeepers shall have executed and
delivered to the Contributor at Closing a certificate to the foregoing effect.
(c) Hotel Franchise. Acquiror or its designee shall have
received a franchise with respect to the Hotel from the Franchisor for a
minimum term of ten (10) years from the date hereof, all upon terms and
conditions reasonably acceptable to Acquiror. Acquiror shall use its best
efforts to obtain such approval and shall pay all costs and expenses associated
therewith.
(d) Management Agreement. (i) Acquiror or its designee
shall have entered into a new management agreement or shall have received an
assignment of the existing Marriott Management Agreement in form reasonably
acceptable to Acquiror. Acquiror will use its best efforts to obtain such new
agreement or assignment, and Acquiror shall pay all costs and expenses
associated therewith.
(ii) Contributor shall have been released from any
obligations to the Manager under the Marriott Management Agreement except for a
final accounting and settlement.
(e) New Board Member. ▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have been
appointed to the Board of Trustees of the REIT as a trustee, to be effective on
the Closing Date.
(f) Simultaneous Closing. Except to the extent (i) any of
the Other Contribution Agreements have been terminated pursuant to Sections
2.3(b) or (f) therein, or (ii) the Closing Date has been extended pursuant to
Section 2.3(b) hereof, or (iii) the Closing date under any Other Contribution
Agreements have been extended pursuant to Section 2.3(b) thereof, Acquiror
shall simultaneously close on the acquisition of each of the seven hotel
properties owned by the ▇▇▇▇▇▇ Affiliated Partnerships under the Other
Contribution Agreements.
(g) Franchise. Contributor shall have been relieved from
any obligations under the Franchise except for a final accounting of the
current year's royalty payments, which, if
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Acquiror or Lessee assumes the Franchise, shall be prorated as of the Closing
Date.
(h) Acquiror's Debt. Acquiror shall have in place debt
with an initial aggregate principal balance equal to the amount of Acquiror
debt guaranteed by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ plus the lesser of: (A) $45,000,000 and
(B) the aggregate negative capital account balances of the ▇▇▇▇▇▇ Affiliated
Partnerships from which Acquiror acquires Residence Inn Hotels pursuant to this
Agreement or the Other Contribution Agreements. The amount of such debt may be
reduced as provided in Section 7.2.
(i) SEC Filings. Innkeepers shall have timely filed and
shall have provided Contributor with all SEC filings made by Innkeepers after
June 30, 1996.
ARTICLE VI
CLOSING
6.1 Closing. Closing shall be held at 10:00 a.m. at the
Washington, D.C. offices of Hunton & ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇,
▇.▇., on November 1, 1996 at 10:00 a.m. or such later time as the parties shall
mutually agree, provided that Acquiror may automatically extend the Closing for
up to twenty eight (28) additional days in order to complete an audit of the
Contributor's books and records and to complete the conditions to Closing. In
that event, Closing shall be held at the location set forth in the preceding
sentence as soon as practicable. Closing may occur before November 1, 1996, at
Acquiror's election, upon three (3) business days' notice from Acquiror to
Contributor. Possession of the Property shall be delivered to the Acquiror at
Closing, subject only to Permitted Title Exceptions and the Mortgage Documents;
provided, however, that if the Closing occurs on November 4 or 5, which are the
first two business days following the Marriott accounting period ending date of
November 1, the Closing shall be effective on the first day following the
Marriott accounting period closing date, November 1, 1996, at 12:01 a.m.
6.2 Contributor's Deliveries. At Closing, the Contributor shall
deliver to Acquiror all of the following instruments, each of which shall have
been duly executed and, where applicable, acknowledged on behalf of the
Contributor and shall be dated as of the date of Closing:
(a) The certificate required by Section 5.1(b).
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(b) The Deed.
(c) The ▇▇▇▇ of Sale [Inventory].
(d) The ▇▇▇▇ of Sale [Personal Property].
(e) The Assignment and Assumption Agreement.
(f) Any and all other documentation reasonably requested
by the Acquiror, and at the expense of the Acquiror, or required hereby.
(g) Certificate(s)/Registration of Title for any vehicle
owned by the Contributor and used in connection with the Property.
(h) Such agreements, affidavits or other documents as may
be required by the Title Company to issue the Owner's Title Policy.
(i) The FIRPTA Certificate.
(j) True, correct and complete copies of all warranties,
if any, of manufacturers, suppliers and installers possessed by the Contributor
and relating to the Improvements and the Personal Property, or any part
thereof.
(k) Certified copies of the Contributor's Organizational
Documents.
(l) Recordable releases of all documents which Marriott
International, Inc., or the Manager have filed relating to the franchise or
otherwise.
(m) Appropriate consents of the partners of the
Contributor, where required, together with all other necessary approvals and
consents of the Contributor, authorizing the execution on behalf of the
Contributor of this Agreement and the documents to be executed and delivered by
the Contributor prior to, at or otherwise in connection with Closing, and the
performance by the Contributor of its obligations hereunder and under such
documents.
(n) A legal opinion from the Contributor's counsel in a
form satisfactory to Acquiror's counsel stating that this Agreement (i) has
been duly authorized by all necessary action on the part of the Contributor,
(ii) has been duly executed and delivered by the Contributor, (iii) constitutes
the valid and binding agreements of
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the Contributor, and (iv) is enforceable in accordance with its respective
terms.
(o) If required by Acquiror's lender, a valid, final and
unconditional certificate of occupancy for the Real Property and Improvements,
issued by the appropriate governmental authority.
(p) If the Acquiror is assuming the Contributor's
obligations under any or all of the Operating Agreements, the originals of such
agreements, duly assigned to the Acquiror and with such assignment acknowledged
and approved by the other parties to such Operating Agreements.
(q) The written consent of the Franchisor to the transfer
of the license, if applicable, and if so required.
(r) A written instrument executed by the Contributor,
conveying and transferring to the Acquiror all of the Contributor's right,
title and interest in any telephone numbers and facsimile numbers relating to
the Property, and, if the Contributor maintains a post office box, conveying to
the Acquiror all of its interest in and to such post office box and the number
associated therewith, so as to assure a continuity in operation and
communication.
(s) All current real estate and personal property tax
bills in the Contributor's possession or under its control.
(t) To the extent permitted under applicable law,
documents of transfer necessary to transfer to the Acquiror the Contributor's
employment rating for workmen's compensation and state unemployment tax
purposes.
(u) A letter signed by Contributor authorizing and
directing Marriott and the Manager to provide to Acquiror the following
materials:
(i) An affidavit from the Manager's chief
financial officer setting forth the date through which each employee of Manager
has been paid and setting forth and describing, as to each employee, all
accrued but unpaid vacation pay and other fringe benefits.
(ii) A complete set of all guest registration
cards, guest transcripts, guest histories, and all other available guest
information.
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(iii) An updated schedule of Manager's 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.
(iv) A complete list of all advance room
reservations, functions and the like, in reasonable detail so as to enable the
Acquiror to honor the Contributor's or Manager's commitments in that regard.
(v) A list of the Contributor's outstanding
accounts receivable as of midnight on the date prior to the Closing, specifying
the name of each account and the amount due the Contributor.
(vi) All keys for the Property.
(vii) All books, records, operating reports,
appraisal reports, files and other materials in the Contributor's possession or
control which are necessary in the Acquiror's discretion to maintain continuity
of operation of the Property.
(viii) Written notice executed by Contributor
notifying all interested parties, including all tenants under any leases of the
Property, that the Property has been conveyed to the Acquiror and directing
that all payments, inquiries and the like be forwarded to the Acquiror at the
address to be provided by the Acquiror.
(ix) Either (i) a receipt from the [Executive
Director] of the Michigan [Department of Revenue] showing that all sales and
use taxes, interest, and penalties due as of the Closing Date have been paid by
the Contributor or (ii) a certificate from the Department of Revenue that no
such taxes, interest, or penalties are due from the Contributor as of the
Closing Date. In the event the Contributor does not produce such receipt or
certificate at Closing, this covenant shall survive the Closing to the end of
the limitations period for audits relating to such taxes, interest or
penalties. If Acquiror receives notice relating to such taxes, interest or
penalties that Acquiror is or may be liable for such taxes, interest or
penalties, Acquiror shall notify Contributor and Marriott of such notice, and
request Contributor and/or Marriott to pay such taxes, interest or penalties
for any period for which they were obligated to pay. If Contributor or Marriott
refuses or fails to pay such taxes, interest or penalties within sixty (60)
days of such notice, Acquiror agrees to finance
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Contributor's payment of those items in the manner for capital expenditure
reserves set forth in Section 2.7.
(x) An agreement between Acquiror and ▇▇▇▇ ▇.
▇▇▇▇▇▇ limiting his right, only to the extent set forth therein, to engage in
certain competitive activities with the Acquiror.
6.3 Acquiror's Deliveries. At Closing, the Acquiror shall pay or
deliver to the Contributor the following:
(a) The Contribution Consideration.
(b) The Assignment and Assumption Agreement.
(c) The certificates representing Contributor's ownership
of the Preferred Partnership Units described in Section 2.6.
(d) The fully executed Acquiror's Second Amended
Partnership Agreement.
(e) A legal opinion from Hunton & ▇▇▇▇▇▇▇▇ in a form
satisfactory to Contributor's counsel stating that:
(i) this Agreement, and each agreement referred to in
this Agreement which Innkeepers shall execute and deliver in connection with
the transaction contemplated by this Agreement, have been duly authorized by
all necessary action on the part of Innkeepers, have been duly executed and
delivered by the Innkeepers, constitute the valid and binding agreements of
Innkeepers and are enforceable in accordance with their respective terms;
(ii) that the Acquiror's Second Amended Partnership
Agreement has been duly adopted and is in full force and effect;
(iii) the Preferred Partnership Units are duly
authorized, and will be validly issued and outstanding when delivered in
accordance with this Agreement; and
(iv) the appointment of ▇▇▇▇ ▇. ▇▇▇▇▇▇ to the Board
of Trustees of Innkeepers is effective.
(f) The opinion of Hunton & ▇▇▇▇▇▇▇▇ in the form of Item
7 of the Master Addendum that, to the extent that the Contributor receives
Preferred Partnership Units (as opposed to cash
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consideration pursuant to Section 6.4 or otherwise) in connection with the
transfer of the Property to the Acquiror (i) such transfer will be
characterized as a tax-free contribution to Acquiror by Contributor under
Section 721 of the Code and (ii) for Contributor and those partners of
Contributor who execute the Guaranty Agreement, such transfer will not result
in the recognition of income or gain associated with the portion of any
negative capital account balance allocable to the Preferred Partnership Units
(as opposed to cash consideration) upon closing of the contribution (to the
extent that the aggregate negative capital account balance for which tax
deferral is sought does not exceed the aggregate amount of debt that is
guaranteed pursuant to the Guaranty Agreement).
(g) A fully executed copy of the lease of the Property to
JF Hotel, Inc., or its Affiliate, substantially similar to the Innkeepers
Lease, except with respect to rent formulas and term, set forth as Item 6 of
the Master Addendum.
(h) Any other document or instrument reasonably requested
by the Contributor, provided at the expense of Contributor, except as to items
set forth in Section 6.4, or required hereby.
6.4 Closing Costs. Whether or not the transaction contemplated
hereby closes, Acquiror agrees to pay certain costs incurred by Contributor and
Acquiror in preparation for Closing:
(a) The Acquiror shall pay for all transactional costs
associated with this transaction, of any kind or nature, including all filing
fees, recording fees, survey costs, title insurance fees, inspection fees,
environmental review fees, transfer taxes, sales taxes, mortgage taxes, escrow
fees and closing costs.
(b) Acquiror will pay all costs associated with obtaining
an audit report on the financial statements of Contributor.
(c) Acquiror will pay Contributor's costs for reasonable
legal, accounting, and tax advice incurred after June 24, 1996, in connection
with this transaction and for pre-approved due diligence and inspection costs
incurred by Contributor in inspecting the books, records, and properties of
Innkeepers and JF Hotel, Inc. (which approval will not be unreasonably
withheld), up to $160,000 for the aggregate of all of such costs for the
transactions contemplated by this Agreement and the Other Contribution
Agreements. If Acquiror elects to terminate this Agreement as
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permitted by Section 2.3 or Section 9.5, Acquiror's obligation as to the
foregoing costs in this Section 6.4(c) shall terminate as to costs incurred
after the effective date of such termination. If Contributor willfully or
intentionally breaches or defaults in its obligations under this Agreement at
any time prior to Closing, Acquiror shall not be obligated to pay any of said
costs and the Deposit shall be returned immediately to Acquiror. If Contributor
otherwise breaches or defaults in its obligations under this Agreement,
Acquiror will pay 50% of the costs described in this subsection and incurred by
Contributor prior to the date of termination up to $80,000.
(d) Acquiror shall pay all capital expenditures in the
amounts set forth on Exhibit F.
6.5 Income and Expense Allocations. All income, except from any
Intangible Personal Property, and expenses with respect to the Property, and
applicable to the period of time before and after Closing, determined in
accordance with GAAP, shall be allocated between the Contributor and the
Acquiror. The Contributor shall be entitled to all income and responsible for
all expenses accrued for the period up to but not including the date of
Closing, and the Acquiror shall be entitled to all income and responsible for
all expenses for the period of time from, after and including the date of
Closing. Only adjustments for 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 Acquiror
pursuant to Section 2.4. 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 so allocated as of Closing:
(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 paid under the Operating Agreements to be
assigned to and assumed by the Acquiror.
(d) Utility charges (including but not limited to charges
for water, sewer and electricity).
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(e) Wages, vacation pay, pension and welfare benefits and
other fringe benefits of all persons employed at the Property who the Acquiror
elects to employ.
(f) Value of fuel stored on the Property at the price
paid for such fuel by the Contributor, including any taxes.
(g) All prepaid reservations and contracts for rooms
confirmed by Contributor prior to the Closing Date for dates after the Closing
Date, all of which Acquiror shall honor.
(h) The Tray Ledger, which shall be equally divided
between the parties.
The Contributor shall be required to pay all sales and use taxes and
similar impositions relating to the conduct of business at the Property
currently through the date of Closing, but excluding those arising from the
Contribution.
Acquiror shall not be obligated to collect any accounts receivable or
revenues, which Acquiror or its Affiliate has not purchased from Contributor,
accrued prior to the Closing Date for Contributor, but if Acquiror 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
▇▇▇▇ or other evidence of the applicable income or expense. Any income received
or expense incurred by the Contributor or the Acquiror 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.
Acquiror is assuming, pursuant to Section 2.4(b)(i), accrued but
unpaid interest under the Mortgage Documents; such amount shall not be
pro-rated for income or expense purposes.
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ARTICLE VII
POST CLOSING COVENANTS
7.1 Taxable Sale of Real Property. The Acquiror agrees that, as
long as any of (i) the Contributor, (ii) a partner of the Contributor or (iii)
a Permitted Transferee holds either any of the Preferred Partnership Units
issued to the Contributor on the Closing Date or any of the Common Partnership
Units that were received by such persons as a result of the conversion of such
Preferred Partnership Units, for a period of five (5) years after the First
Closing, the Acquiror will not dispose of the Real Property in a transaction
that would result in the allocation of taxable income or gain by the Acquiror
to any of such persons under Section 704(c) of the Code. "Permitted
Transferees" are those persons who received from the Contributor or a partner
thereof, and at the relevant time retain, a carryover tax basis, in whole or in
part, in either Preferred Partnership Units or Common Partnership Units into
which the Preferred Partnership Units were converted. The Acquiror further
agrees that, if the Contributor, the ▇▇▇▇▇▇ Affiliated Partnerships, any of
their partners (or their Permitted Transferees) hold at least 40% of the
Preferred Partnership Units issued to any of the ▇▇▇▇▇▇ Affiliated
Partnerships, during the period beginning 5 years after the First Closing and
ending 10 years after the First Closing, the Acquiror will not dispose of the
Real Property in a transaction that would result in the allocation of taxable
income or gain by the Acquiror to the Contributor or its partners under Section
704(c) of the Code. If the Acquiror disposes of the Real Property in violation
of the foregoing covenant, and notwithstanding such prohibition, then in such
event the Acquiror shall pay to the Contributor, Contributor's partners, or its
Permitted Transferees the amount of federal and state taxes (together with any
interest and penalties thereon) of the Contributor, its partners or Permitted
Transferees attributable to such Code Section 704(c) allocation.
7.2 Maintaining Debt Levels. The Acquiror agrees that, for a
period of 10 years following the First Closing, the Acquiror will maintain
indebtedness (above and beyond amounts guaranteed by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and any
other guarantors) (the "Required Indebtedness") in an amount equal to the
lesser of: (A) $45,000,000 or (B) the aggregate negative capital account
balances of the ▇▇▇▇▇▇ Affiliated Partnerships from which the Acquiror acquires
Residence Inn Hotels pursuant to this Agreement or the Other Contribution
Agreements. The indebtedness will be structured so that the Guaranteed Amount,
as that term is defined in the Guaranty Agreement, will be considered an amount
at risk for
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purposes of Section 465 of the Code. The Required Indebtedness shall be further
reduced to the extent that the Contributor, its Partners or their Permitted
Transferees redeem in whole or in part, their Preferred Partnership Units in
exchange for REIT shares, redeem their Preferred Partnership Units in full for
cash, or otherwise dispose of some or all of their Preferred Partnership Units
(other than by a conversion to Common Partnership Units) or die (the Preferred
Partnership Units that are so redeemed, disposed of, or held by transferees of
deceased holders are referred to as "Stepped-Up Basis Units"). In such a case,
the Required Indebtedness shall be reduced by an amount equal to the original
Required Indebtedness prior to any reduction multiplied by a fraction equal to
(i) the aggregate negative capital account balances of the partners of
Contributor listed on Exhibit C to the Guaranty Agreement (the "Initial
Negative Capital Accounts") minus the aggregate negative capital balances
associated with the Stepped-Up Basis Units redeemed or transferred immediately
prior to the reduction of the Required Indebtedness, divided by (ii) the
Initial Negative Capital Accounts. If the Acquiror fails to maintain such level
of debt, then the Acquiror shall pay to the Contributor, its partners, or its
Permitted Transferees the amount of federal and state income taxes (together
with interest and penalties) of the Contributor, its partners, or its Permitted
Transferees which are created by the reduction in debt. To the extent at the
end of the ten (10) year period Acquiror has debt not otherwise guaranteed,
Acquiror, to the extent permitted by lender, will permit Contributor, its
partners, or its Permitted Transferees to guarantee such debt (or to enter into
reimbursement agreements with the Innkeepers Party to whom such debt is
recourse, if any); provided, however, that nothing contained herein shall
prevent Acquiror from incurring, retiring, repaying, or prepaying such debt at
any time after such ten (10) year period.
7.3 Guaranty of Debt. The Contributor and the Approved Investors
shall have the option to personally guarantee debt of the Acquiror (above and
beyond the debt guaranteed by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇) pursuant to the Guaranty
Agreement. The Guaranty Agreement shall provide for the executing partners and
the Contributor to guarantee an amount up to their respective negative capital
accounts at the Closing Date not to exceed an aggregate amount of $45,000,000
in principal for all ▇▇▇▇▇▇ Affiliated Partnerships and all partners therein.
The Guarantors shall guarantee a maximum of $45,000,000 of Acquiror debt,
superior only to the preexisting guaranty of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇. Section 9 of
the Guaranty Agreement is intended to permit Acquiror and Lender to make the
modifications to the Loan Documents permitted thereby
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without the consent of the Guarantors. Except as specifically permitted
therein, Acquiror shall make no other changes to the Loan Documents without
first giving notice to the Guarantors of such proposed changes and obtaining
either the Guarantors' waiver of any defenses created thereby or reaffirmation
of the guaranty.
7.4 Tax Elections. Acquiror shall make an election under section
704(c) of the Code to allocate the tax items arising from the ownership of the
Property, including the items of depreciation, amortization, and gain or loss
under the "traditional method" as provided in Treasury Regulation 1.704-3(b).
7.5 Re-election of Board Member. The Board of Trustees of
Innkeepers shall renominate ▇▇▇▇ ▇. ▇▇▇▇▇▇ to the Board of Trustees of the REIT
and support his election by shareholders as long as he continues to own
directly or indirectly 25% of the Preferred Partnership Units received directly
or indirectly by him at Closing under the Other Contribution Agreements
(including REIT Shares into which such Preferred Shares are redeemable), (i) in
the absence of acts or failures to act (other than, without more, participation
by ▇▇. ▇▇▇▇▇▇ and his affiliates in the hotel business) by ▇▇. ▇▇▇▇▇▇ which the
Board unanimously decides are detrimental to the REIT and as a result of which
the Board makes a unanimous good faith determination that it cannot nominate
him or support his nomination or (ii) unless he is otherwise legally
disqualified from serving as a trustee.
7.6 Timely Filing of SEC Filings. Innkeepers will maintain its
qualification to use shelf registration statements to register Common Shares
issuable upon the redemption of Preferred Partnership Units in accordance with
the Redemption and Registration Rights Agreement.
7.7 Book Capital Accounts. The initial book capital account of
Contributor to be reflected on the partnership books and records of Acquiror
shall be the face amount of the Preferred Partnership Units.
7.8 Indemnification with Respect to Mortgage Documents. The
Acquiror shall indemnify and hold harmless Contributor from all liability under
the Mortgage Documents.
7.9 Contributor's Financing. Each of the ▇▇▇▇▇▇ Affiliated
Partnerships (including Contributor) (or ▇▇▇▇ ▇. ▇▇▇▇▇▇, to the extent
distributed to him) shall be entitled to pledge the Preferred Partnership Units
received under this Agreement and the
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Other Contribution Agreements provided that the following conditions are
satisfied: (i) the principal amount of loan secured by the pledged Preferred
Partnership Units shall not be more than 60% of the face value of such pledged
Preferred Partnership Units, (ii) the principal amount of the loan secured by
the Preferred Partnership Units shall not be more than $7,500,000, (iii) a
mechanism, acceptable to both the ▇▇▇▇▇▇ Affiliated Partnerships (including
Contributor) (or ▇▇. ▇▇▇▇▇▇, as the case may be) and the Acquiror, shall be
established that ensures that all distributions on the pledged Preferred
Partnership Units are applied first to make payments of accrued interest and
principal on the loan, and (iv) the pledgor of the Preferred Partnership Units
pledged to secure the loan shall not transfer or redeem such units while the
loan remains outstanding.
7.10 Preferred Partnership Units. The Contributor shall not
distribute or transfer the Preferred Partnership Units for at least six (6)
months and thereafter only in accordance with the terms of this Agreement or
the Acquiror's Second Amended Partnership Agreement.
ARTICLE VIII
CONDEMNATION; RISK OF LOSS
8.1 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 Contributor shall give
written notice thereof to the Acquiror promptly after the Contributor learns or
receives notice thereof. If all or any part of the Real Property is, or is to
be, so condemned or sold, the Acquiror shall have the right to terminate this
Agreement pursuant to Section 9.4. If the Acquiror 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 Acquiror at Closing.
8.2 Risk of Loss. The risk of any loss or damage to the Property
prior to the Closing shall remain upon the Contributor. If any such loss or
damage occurs prior to Closing, the Acquiror shall have the right to terminate
this Agreement pursuant to Section 9.4. If the Acquiror 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 Acquiror
at Closing.
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ARTICLE IX
LIABILITY OF ACQUIROR; INDEMNIFICATION; TERMINATION RIGHTS
9.1 Liability of Acquiror. Except for any obligation expressly
assumed or agreed to be assumed by the Acquiror hereunder, the Acquiror does
not assume any obligation of the Contributor or any liability for claims
arising out of any occurrence prior to Closing.
9.2 Indemnification by Contributor. Subject to the provisions of
Section 10.10, the Contributor hereby indemnifies and holds the Acquiror
harmless from and against any and all claims, costs, penalties, damages,
losses, liabilities and expenses (including reasonable attorneys' fees), net of
any insurance proceeds, income tax benefits, or other benefits or recoveries,
that may at any time be incurred by the Acquiror, whether before or after
Closing, as a result of any breach by the Contributor of any of its
representations, warranties, covenants or obligations set forth herein or in
any other document delivered by the Contributor pursuant hereto to the extent
claims of the Acquiror arising under such breaches exceed in the aggregate
$500,000. If the Contributor makes a distribution to its partners of Preferred
Partnership Units during the time period set forth in Section 10.10(a)(ii)
hereof, then for such period only the liability of the partners of Contributor
shall be joint and several to the extent the loss exceeds the assets of
Contributor, but shall be limited to the value of the Preferred Partnership
Units thus distributed. After that time the liability of Contributor's partners
shall be several in proportion to the aggregate amount of Preferred Partnership
Units each such partner receives for the Property being contributed pursuant to
this Agreement, as compared to the total amount of Preferred Partnership Units
being received by Contributor to the extent such Preferred Partnership Units
have been distributed. The liability of Contributor under this Agreement shall
be limited to the sum of the value of Preferred Partnership Units received by
Contributor under this Agreement and the liability of each partner shall be its
prorata share of such Preferred Partnership Units to the extent received by
such partner. For purposes of this paragraph, the Preferred Partnership Units
shall be deemed to have a fair market value equal to the face value. All
indemnification obligations of the partners under this Article IX may be
satisfied by payment in Preferred Partnership Units (or Common Partnership
Units or REIT Shares, if converted) which will be deemed to have the same value
on the payment date as the value of the Preferred Partnership Units on the
Closing Date.
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9.3 General Indemnification by Acquiror. Subject to the
provisions of Section 10.10, the Acquiror hereby indemnifies and holds the
Contributor harmless from and against any and all claims, costs, penalties,
damages, losses, liabilities and expenses (including reasonable attorneys'
fees), net of any insurance proceeds, income tax benefits, or other benefits or
recoveries, that may at any time be incurred by the Contributor, whether before
or after Closing, as a result of any breach by the Acquiror of any of its
representations, warranties, covenants or obligations set forth herein or in
any other document delivered by the Acquiror pursuant hereto, other than the
representation set forth in Section 4.22 hereof regarding the tax consequences
of the transaction to the Contributor and its partners who execute the Guaranty
Agreement, the liabilities agreed to be assumed by the Acquiror, include the
Mortgage and accounts payable, and Post Closing Covenants of Acquiror pursuant
to Article VII, to the extent claims of the Contributor arising under such
breaches exceed in the aggregate $500,000.
9.4 Tax Indemnification by Acquiror. (a) Subject to Section
10.10(b)(ii), the Acquiror hereby agrees to indemnify and hold the partners of
the Contributor who execute the Guaranty Agreement (each, a "Partner," and in
the aggregate, the "Indemnitees") harmless from and against any and all claims
(each, an "Indemnifiable Claim") and the costs, penalties, interest,
liabilities and expenses (including reasonable attorneys' fees) relating
thereto, net of any other benefits or recoveries, that may be asserted against
or incurred by any Indemnitee as a result of any breach by the Acquiror of the
representation set forth in Section 4.22 regarding the tax consequences of the
transaction to the Contributor and the Indemnitees provided, however, that a
Final Determination (as defined below) pursuant to which the federal income tax
liability of an Indemnitee was increased has occurred with respect to such
Indemnifiable Claim or Claims; and provided, further, that the Acquiror shall
not indemnify any Indemnitee with respect to the amount of any federal income
tax liability that such Indemnitee would have incurred irrespective of any
breach by the Acquiror of the representation set forth in Section 4.22.
For purposes of this Section, the term "Final Determination"
means (i) a final decision, judgment, decree or other order by any court of
competent jurisdiction, (ii) any settlement agreement entered into in
connection with any administrative or judicial proceeding, including, but not
limited to, a closing agreement entered into under Section 7121 of the Code, or
an IRS Form 870-AD, or (iii) notice from the Acquiror to
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the Contributor that any proposed adjustment or disallowance by the IRS will
not be contested or protested.
(b) Audit Notice. The Contributor shall notify the
Acquiror within thirty (30) days after it receives notice thereof if the IRS
(i) proposes to audit the 1996 tax return of the Contributor or any Indemnitee
or (ii) proposes any adjustments to a tax return of the Contributor or any
Indemnitee.
(c) Control of Proceedings. In the case of any audit or
administrative or judicial proceeding involving an issue which would, upon a
Final Determination, result in an indemnification obligation of the Acquiror
under Section 9.4(a), the Acquiror or its Affiliate shall have the right to
control such audit or proceeding at the Acquiror's (or its Affiliate's) cost.
If the Acquiror opts to control any such audit or proceeding, the Acquiror
shall notify the relevant Partner or Partners (each, an "Interested Party")
promptly and periodically as to the status and material developments of such
audit or proceeding, provide the Interested Parties with copies of all reports,
notices and correspondence relating to such matters, and convey to the IRS all
procedural requests made by the Interested Parties, unless any such request
relates to the issue of the tax consequences of the transaction contemplated by
this Agreement and is reasonably objectionable to the Acquiror's tax counsel.
The Acquiror shall not enter into a settlement agreement relating to any issue
not related to the tax consequences of the transaction contemplated by this
Agreement which results in the imposition of any additional tax, interest or
penalties on the Interested Parties unless (i) Acquiror obtains the consent of
the Interested Parties or (ii) Acquiror pays the cost of such Settlement
(including any future years' taxes resulting from such change). Each Interested
Party and its counsel shall have the right, at its sole cost and expense, to be
present at in all meetings with the IRS relating to any audit or proceeding
described in this Section 9.4(c). Notwithstanding the foregoing, nothing in
this Section 9.4(c) shall require the Acquiror to defend any audit of or
proceeding against the Contributor or any Partner.
(d) Costs. If any audit or proceeding described in
Section 9.4(c) results in a Final Determination which is favorable to the
Interested Party or Parties, the Contributor, or to the extent the Contributor
has distributed the Preferred Partnership Units to the Interested Parties, the
Interested Parties, shall reimburse the Acquiror for the reasonable costs and
expenses (including reasonable legal and accounting fees but excluding any
taxes, interest or penalties paid by the Acquiror) the Acquiror
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incurred in connection with the audit or proceeding on behalf of the Interested
Parties.
9.5 Termination by Acquiror. If any condition set forth herein
or in any of the Contribution Agreements being simultaneously executed for the
acquisition of the ▇▇▇▇▇▇ Affiliated Partnership hotel properties cannot or
will not be satisfied prior to Closing, or upon the occurrence of any other
event that would entitle the Acquiror to terminate this Agreement and its
obligations hereunder, and the Contributor fails to cure any such matter within
ten (10) business days after notice thereof from the Acquiror, the Acquiror, at
its option, may elect either (a) to terminate this Agreement, in which event
the Deposit shall be forthwith returned to the Acquiror and all other rights
and obligations of the Contributor and the Acquiror hereunder shall terminate
immediately, or (b) to waive its right to terminate and, instead, to proceed to
Closing. Notwithstanding any termination hereof, the parties shall nevertheless
remain liable under Sections 3.20 and 4.13. If the Acquiror terminates this
Agreement as a consequence of a knowing or wilful misrepresentation or breach
of a warranty or covenant by the Contributor, or a wilful failure by the
Contributor to perform its obligations hereunder, the Acquiror shall retain all
remedies accruing as a result thereof. If the Acquiror terminates this
Agreement because of the unwillingness or inability of the Contributor to cure
a title defect, the Contributor will have no liability to the Acquiror
hereunder beyond the return of the Deposit, less expenses set forth on Exhibit
6.4(c).
9.6 Termination by Contributor. If, prior to Closing, the
Acquiror defaults in performing any of its obligations under this Agreement
(including its obligation to acquire the Property), or any of its obligations
under the Other Contribution Agreements, and the Acquiror fails to cure any
such default within ten (10) business days after notice thereof from the
Contributor, then the Contributor's sole remedy for such default shall be to
terminate this Agreement, retain the Deposit and receive reimbursement of its
expenses as discussed in Section 6.4(c). The Contributor and the Acquiror agree
that, in the event of such a default, the damages that the Contributor would
sustain as a result thereof would be difficult if not impossible to ascertain.
Therefore, the Contributor and the Acquiror agree that the Contributor shall
retain the Deposit as full and complete liquidated damages and as the
Contributor's sole remedy.
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ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 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.
10.2 Taking Title. The Acquiror may designate an Affiliate which
is a partnership in which Acquiror owns at least 95% of the partnership
interests to take title to the Property, without the consent of the
Contributor. The Acquiror may not assign its rights hereunder without the prior
written consent of the Contributor. The Contributor may not assign its rights
hereunder without the prior written consent of the Acquiror.
10.3 Successors and Assigns. This Agreement shall bind and inure
to the benefit of the parties hereto and their respective successors and
assigns.
10.4 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.
10.5 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 Kansas, except those provisions relating to the Real
Property, which shall be governed by the laws of the state where the Real
Property is located, and except the Acquiror's Second Amended Partnership
Agreement, which shall be governed by the laws of Virginia.
10.6 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
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hereto appear on each counterpart hereof. All counterparts hereof shall
collectively constitute a single agreement.
10.7 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.
10.8 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 Contributor: CONSOLIDATED HOLDINGS, INC.
Lakepoint Office Park
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: 316/▇▇▇-▇▇▇▇
with a copy to: Foulston & Siefkin, L.L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax: 316/▇▇▇-▇▇▇▇
If to the Acquiror: INNKEEPERS USA LIMITED PARTNERSHIP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: 407/▇▇▇-▇▇▇▇
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with a copy to: Hunton & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: 202/▇▇▇-▇▇▇▇
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.
10.9 Incorporation by Reference. All of the exhibits attached
hereto are by this reference incorporated herein and made a part hereof.
10.10 Survival. (a) The representations, warranties, and covenants
of Contributor contained in this Agreement shall survive the Closing only to
the limited extent provided herein:
(i) Representations, warranties, and covenants as
to the title to the Real Property shall be merged with the Deed and shall not
survive delivery of the Deed.
(ii) All other representations, warranties, and
covenants, except those related to the tax opinion in Section 3.31, shall
survive until six (6) months after the Closing Date.
(iii) The representations, warranties, and
covenants related to the tax opinion in Section 3.31 shall survive the Closing
and continue until all applicable statutes of limitations for state and federal
income taxes (including extensions and waivers thereof) have elapsed.
(iv) All post-Closing covenants shall survive until
they expire by their terms.
(v) Any pre-condition to Closing shall be deemed
satisfied and waived if Closing occurs unless the parties otherwise agree in
writing.
(b) The representations, warranties, and covenants of
Acquiror contained in this Agreement shall survive the Closing only to the
limited extent provided herein:
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(i) All representations, warranties, and covenants
contained in this Agreement, except those related to the tax consequences of
the transaction to Contributor and its partners, shall survive until six (6)
months after the Closing Date.
(ii) The representations, warranties, and covenants
related to the tax consequences of the transaction to Contributor and its
partners shall survive the Closing and continue until all applicable statutes
of limitation for state and federal income taxes (including extensions and
waivers thereof) have lapsed.
(iii) All post-Closing covenants shall survive until
they expire by their terms.
(iv) Any pre-condition to Closing shall be deemed
satisfied and waived if Closing occurs unless the parties otherwise agree in
writing.
(c) Nothing herein is intended to modify or limit the
obligations of any of the Innkeepers under the Securities Act.
10.11 Further Assurances. The Contributor and the Acquiror 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.
10.12 Time of Essence. Time is of the essence with respect to
every provision hereof.
10.13 Confidentiality. Until the Acquiror elects to proceed to
Closing under Section 2.3, the Contributor, the Acquiror, and their
representatives, including any brokers or other professionals representing the
Contributor or the Acquiror, shall keep the existence and terms of this
Agreement strictly confidential, and shall issue no press release relating to
it, except to the extent disclosure is compelled by law or the Acquiror is
compelled to respond to a rumor in the marketplace, and then only to the extent
of such compulsion. If, however, a registration statement is filed by the REIT
with the SEC prior to the Closing Date, then the substance of this transaction
may be disclosed in such registration statement.
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IN WITNESS WHEREOF, the Contributor and the Acquiror have caused this
Agreement to be executed in their names by their respective duly-authorized
representatives.
CONTRIBUTOR:
KENTWOOD RESIDENCE ASSOCIATES, a Kansas
general partnership
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, General Partner
ACQUIROR:
INNKEEPERS USA LIMITED PARTNERSHIP, a
Virginia limited partnership
By: Innkeepers Financial Corporation, a
Virginia Corporation, its sole
general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Title: President
------------------------------
REIT:
INNKEEPERS USA TRUST,
a Maryland Real Estate Investment Trust
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Title: Chairman of the Board and President
--------------------------------------
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EXHIBIT A
LAND - Legal Description
__________________
EXHIBIT B
OPERATING AGREEMENTS
__________________
EXHIBIT C
CONTRIBUTOR'S ORGANIZATIONAL DOCUMENTS
__________________
EXHIBIT D
MORTGAGE DOCUMENTS
__________________
EXHIBIT E
[INTENTIONALLY DELETED]
___________________
EXHIBIT F
AUTHORIZED CAPITAL EXPENDITURES
___________________
EXHIBIT G
TITLE POLICY EXCEPTIONS
___________________
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MASTER ADDENDUM
TABLE OF CONTENTS
Item No.
--------
1. Acquiror's Second Amended Partnership Agreement
2. Redemption and Registration Rights Agreement
3. Guaranty Agreement
4. Representation Letter
5. Organizational Documents
6. Innkeepers Lease
7. Hunton & ▇▇▇▇▇▇▇▇ Tax Opinion