EXHIBIT 99.2
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SECURITIES PURCHASE AGREEMENT
Dated as of February 24, 1999
among
CNL HOSPITALITY PROPERTIES, INC.,
CNL HOTEL INVESTORS, INC.
and
FIVE ARROWS REALTY SECURITIES II L.L.C.
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TABLE OF CONTENTS
Page
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ARTICLE I............................................................2
1. PURCHASE OF CHP COMMON STOCK.............................2
1.1. Purchase of CHP Common Stock.......................2
1.2. Timing of Purchases................................2
1.3. Use of Proceeds....................................2
1.4. Purchase Price.....................................2
1.5. Issuance of Note in lieu of CHP Common Stock.......3
1.6. Conversion of Note........... .....................3
ARTICLE II...........................................................3
2. REPRESENTATIONS AND WARRANTIES OF CHP 3
2.1. Corporate Power and Authority 3
2.2. Consents and Approvals; Authorization and
Noncontravention 3
2.3. Existence and Good Standing 4
2.4. Capital Stock 5
2.5. Valid Issuance of Shares; No Personal Liability 5
2.6. Subsidiaries and Investments 5
2.7. Financial Statements and No Material Changes 6
2.8. Title to Properties; Encumbrances 7
2.9. Leases 7
2.10. Contracts 7
2.11. Restrictive Documents 8
2.12. Litigation 8
2.13. ERISA 9
2.14. Environmental Matters 10
2.15. Taxes 12
2.16. Compliance with Laws 13
2.17. No Changes Since Balance Sheet Date 13
2.18. Disclosure 13
2.19. Broker's or Finder's Fees 14
2.20. Insurance 15
ARTICLE III 15
3. REPRESENTATIONS AND WARRANTIES OF FIVE ARROWS 15
3.1. Power and Authority 15
3.2. Existence and Good Standing 15
3.3. Consents; Authorization 15
3.4. Accredited Investor 15
3.5. Investment 15
3.6. Rule 144 15
3.7. Brokers or Finders 16
3.8. Ownership Limits 16
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ARTICLE IV 16
4. COVENANTS 16
4.1. Use of Proceeds 16
4.2. Notice of Default 16
4.3. Stockholder Approval 16
4.4. Appointment of Five Arrows Director 17
4.5. Further Assurances 18
4.6 Supplemental Disclosure 18
4.7 Prohibition on Issuance of Securities 18
ARTICLE V 18
5. CONDITIONS TO CHP'S OBLIGATIONS 18
5.1. Representations and Warranties 18
5.2. Approvals 18
5.3. Proceedings 18
ARTICLE VI 19
6. CONDITIONS TO THE INITIAL PURCHASE 19
6.1. Representations and Warranties 19
6.2. Performance of Agreements 19
6.3. Approvals 19
6.4. Opinion of CHP's Counsel 19
6.5. Good Standing and Other Certificates 19
6.6. No Material Adverse Change 19
6.7. Registration Rights Agreement 20
6.8. Hotel Investors Subscription Agreement 20
6.9. Valid Issuance 20
6.10. Appointment of Five Arrows Director 20
6.11. D&O Insurance 20
6.12. Investment in Advisor 20
6.13. Proceedings 20
6.14 Opinion of CHP's Tax Counsel 20
6.15 Approval of Financing and Other Material
Documents 20
ARTICLE VII 21
7. CONDITIONS TO SUBSEQUENT PURCHASES 21
7.1. Representations and Warranties 21
7.2. Performance of Agreements 21
7.3. Assurance of Performance 21
7.4. Performance of Hotel Investors Subscription
Agreement 21
7.5. No Material Adverse Change 21
7.6. Valid Issuance 21
7.7. Five Arrows Director 21
7.8. D&O Insurance 21
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ARTICLE VIII 22
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY 22
8.1. Survival 22
8.2. Indemnification 22
ARTICLE IX 24
9. MISCELLANEOUS 24
9.1. Preservation of Confidential Information 24
9.2. Governing Law 24
9.3. Prevailing Party 24
9.4. Captions 24
9.5. Publicity 24
9.6. Notices 24
9.7. Successors and Assigns 25
9.8. Counterparts 25
9.9. Entire Agreement 25
9.10. Amendments 25
9.11. Severability 25
9.12. Termination of Agreement 26
Exhibits and Schedules
Schedule 2.1 - Liens, Encumbrances, Restrictions and Claims
Schedule 2.2 - Contravention
Schedule 2.3 - Jurisdictions Where CHP is Qualified to Do Business
Schedule 2.4 - Capitalization
Schedule 2.6 - Subsidiaries and Investments
Schedule 2.7(b) - Material Adverse Changes
Schedule 2.8 - Title to Properties Encumbrances
Schedule 2.9 - Leases
Schedule 2.10 - Material Contracts
Schedule 2.11 - Restrictive Documents
Schedule 2.12 - Litigation
Schedule 2.13 - ERISA Plans
Schedule 2.14 - Environmental Matters
Schedule 2.15 - Taxes
Schedule 2.16 - Non-Compliance
Exhibit 1 - Hotels
Exhibit 1.2 - Promissory Note
Exhibit 6.4 - Opinion of CHP's Counsel
Exhibit 6.7 - Registration Rights Agreement
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SECURITIES PURCHASE AGREEMENT
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SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as
of February 24, 1999, among CNL Hospitality Properties, Inc., a Maryland
corporation ("CHP"), CNL Hotel Investors, Inc., a Maryland corporation
("Hotel Investors"), and Five Arrows Realty Securities II L.L.C., a
Delaware limited liability company ("Five Arrows").
W I T N E S S E T H:
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WHEREAS, Five Arrows, CHP and CNL Hospitality Partners, LP,
a Delaware limited partnership ("Hospitality Partners") 100% of the
partnership interests of which are owned by CHP through its wholly owned
subsidiaries have formed Hotel Investors to be operated as a real estate
investment trust ("REIT") within the meaning of Section 856 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, a purpose of Hotel Investors is to acquire from
various sellers affiliated with Western International ("WI") 100% of the
partnership interests in partnerships that own certain hotels identified
on Exhibit 1 hereto or, with the consent of Five Arrows, such other
hotels as may be substituted in lieu thereof of similar quality,
characteristics and subject to the same cross-default obligations as the
hotels on Exhibit 1 (the "Hotels") and to manage the Hotels
(collectively, the "Business"); and
WHEREAS, the Hotels are expected to be subject to leases
with a new entity affiliated with WI; and
WHEREAS, in accordance with the Subscription and
Stockholders' Agreement, (the "Hotel Investors Subscription Agreement")
dated as of February 24, 1999, among Five Arrows, CHP and Hospitality
Partners, Five Arrows has agreed to contribute to Hotel Investors up to
a maximum amount of $50,886,508.86 (the "Five Arrows Commitment"), and
Hospitality Partners has agreed to contribute to Hotel Investors up to a
maximum of $39,982,488.90 (the "Hospitality Commitment"), for the
acquisition of the Hotels; and
WHEREAS, pursuant to the Hotel Investors Subscription
Agreement upon making advances on the Five Arrows Commitment and in
consideration therefor, Five Arrows will purchase from Hotel Investors
shares of 8% Class A Cumulative Preferred Stock of Hotel Investors (the
"Class A Preferred Stock") having an aggregate liquidation preference
equal to the aggregate amount of such advances; and
WHEREAS, the Class A Preferred Stock shall be exchangeable
for newly issued shares of CHP common stock, par value $.01 per share
("CHP Common Stock"), upon the terms set forth in the Hotel Investors
Subscription Agreement; and
WHEREAS, to provide a portion of the funds necessary in
order for Hospitality Partners to satisfy the Hospitality Commitment
therefor, CHP desires to issue the CHP Common Stock required to be
delivered to the holders of the Class A Preferred Stock upon any such
exchange; and
WHEREAS, Five Arrows desires to purchase and CHP desires to
sell up to an additional 1,578,947 shares of CHP Common Stock, at
purchase price of $9.50 per share, for a maximum aggregate investment of
$14,999,996.50, each upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and of the
respective representations and warranties hereinafter set forth and the
respective covenants and agreements contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
1. PURCHASE OF CHP COMMON STOCK
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1.1. Purchase of CHP Common Stock. Upon the terms and
subject to the conditions herein stated, CHP agrees to issue and sell to
Five Arrows, and Five Arrows agrees to purchase from CHP, up to
1,578,947 shares of CHP Common Stock (the "Shares") at a purchase price
(the "Purchase Price") of $9.50 per share, for a maximum aggregate
investment of $14,999,996.50 (the "Five Arrows Investment"). On any
Closing Date (as defined in Section 1.2 hereof) on which Five Arrows
purchases Shares, CHP shall deliver to Five Arrows a certificate
registered in Five Arrows' name (or satisfactory evidence of such
issuance), representing the Shares to be issued to Five Arrows at the
closing on the applicable Closing Date (each a "Closing"). Five Arrows
may elect to pay that portion of the Purchase Price required to be paid
by Five Arrows at each Closing by wire transfer to either (i) an account
designated by CHP within two days before the applicable Closing Date or
(ii) an account designated by Hospitality Partners, for the benefit of
Hotel Investors and on behalf of CHP, within two days before the
applicable Closing Date.
1.2. Timing of Purchases. At any time or from time to
time between the date hereof and December 31, 1999, Five Arrows shall be
required, subject to the conditions set forth below, to purchase Shares
within 10 days of receipt of a notice from CHP (a "Notice of Purchase")
which notice shall (a) state that CHP has received notice from
Hospitality Partners requesting that Hospitality Partners fund all or
any portion of the Hospitality Commitment (each such amount to be funded
to be referred to as an "Incremental Funding") and (b) specify the
portion of the Five Arrows Investment to be made which shall not exceed
the lesser of the balance of the Five Arrows Commitment or 37.52% of the
applicable Incremental Funding; provided, however, that such portion
shall be rounded down to the nearest whole share so as to avoid the
issuance of fractional shares of CHP Common Stock, and the date (each a
"Closing Date") such Shares are to be purchased (a "Purchase," and the
first Purchase, the "Initial Purchase").
1.3. Use of Proceeds In no event shall Five Arrows be
required to purchase any Shares other than by reason of the funding of
any Hospitality Commitment.
1.4. Purchase Price. Five Arrows shall, on each
Closing Date, pay to CHP (or, in accordance with Section 1.1 hereof, to
Hospitality Partners) the Purchase Price for the number of Shares
specified in the applicable Notice of Purchase. Upon receipt of such
Purchase Price, CHP shall deliver to Five Arrows that number of Shares
equal to the Purchase Price divided by 9.5. For example, if the portion
of the Hospitality Commitment required by Hotel Investors on a
particular Closing Date (i.e., the Incremental Funding) is $22,000,000,
then the Purchase Price shall be $8,254,400 for 868,884 Shares and the
remaining Five Arrows Commitment shall be $6,745,596.
1.5. Issuance of Note in lieu of CHP Common Stock.
Notwithstanding the foregoing, in the event that Five Arrows would own
more than 9.8% of the outstanding CHP Common Stock as a result any
purchase of Shares hereunder and the ownership limitations set forth in
the Articles of Incorporation of CHP (the "Ownership Limits") have not
theretofore been amended or waived to permit Five Arrows to hold in
excess of such limitations, Five Arrows shall (i) purchase in the
aggregate that number of whole Shares that would cause Five Arrows to
own up to but not in excess of 9.8% of the outstanding CHP Common Stock
and (ii) loan to CHP the balance of any Incremental Funding in exchange
for the promissory note of CHP and Hotel Investors substantially in the
form of Exhibit 1.5 attached hereto (the "Note").
1.6. Conversion of Note. The principal amount of the
Note shall be converted automatically into shares of CHP Common Stock,
at one time or from time to time as the holder of the Note is permitted
under the amended or waived Ownership Limits to own additional shares of
CHP Common Stock. The per share conversion price shall be equal to the
principal amount converted divided by 9.5 and upon any such conversion,
the accrued and unpaid interest on the converted portion of the Note
shall be paid immediately by CHP. All shares of CHP Common Stock issued
upon such conversion shall be fully paid and nonassessable, and the
Holder (as defined below) thereof shall be entitled to the same rights
with respect to such shares (including, without limitation, registration
rights) as if such shares were purchased pursuant to Section 1.4 hereof.
ARTICLE II
2. REPRESENTATIONS AND WARRANTIES OF CHP. CHP, with
respect to itself and each of its Subsidiaries (as such term is defined
in Section 2.6 hereof), represents and warrants, as of the date
hereof(except as otherwise specified herein), and as may be updated
pursuant to Section 4.6 hereof as of each Closing Date as if made on
such Closing Date, as follows:
2.1. Corporate Power and Authority CHP has the full
legal right, power and authority to enter into this Agreement, the Note,
the Registration Rights Agreement, dated February 24, 1999 by and
between CHP and Five Arrows (the "CHP Registration Rights Agreement"),
the Hotel Investors Subscription Agreement and any other agreements
executed in connection herewith or therewith (collectively with this
Agreement, the "Transaction Documents"), and to issue and sell the
Shares to be issued pursuant to this Agreement and to consummate the
other transactions contemplated hereby and thereby.
2.2. Consents and Approvals; Authorization and
Noncontravention. Except as set forth in Schedule 2.2 attached hereto,
there is no requirement applicable to CHP or any of its Subsidiaries to
make any filing with, or obtain any permit, authorization, consent or
approval of, any governmental authority or any other person as a
condition to the lawful consummation by CHP and any of its Subsidiaries
of the transactions contemplated by this Agreement and the Transaction
Documents. This Agreement and each other Transaction Document has been
duly and validly authorized, executed and delivered by CHP and any of
its Subsidiaries party thereto and constitute the valid and legally
binding agreements of CHP and each Subsidiary who is a party thereto,
enforceable against them in accordance with their terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles. The execution and delivery by CHP and such
subsidiaries of this Agreement, and the other agreements and instruments
to be executed and delivered by CHP in connection herewith and
therewith, do not and the consummation of the transactions contemplated
hereby and thereby will not, in any manner which would have a material
adverse effect on CHP: (i) violate any provision of the Articles of
Incorporation or By-Laws of CHP or of any of CHP's Subsidiaries; (ii)
except as set forth on Schedule 2.2, violate any provision of, or result
in the termination or acceleration of, or default under, or entitle any
party to accelerate (whether after the filing of notice or lapse of time
or both) any obligation under, or result in the creation or imposition
of any lien, charge, pledge, security interest or other encumbrance upon
any of the assets of CHP or of any of CHP's Subsidiaries pursuant to any
provision of any mortgage, lien, lease, agreement, license, or
instrument, or violate any law, regulation, order, arbitration award,
judgment or decree to which CHP or any of CHP's Subsidiaries is a party
or by which CHP or any of CHP's Subsidiaries or any of their respective
properties is bound, or (iii) violate or conflict with, or create a
default under, any other material contract, including, without
limitation, those contracts listed on Schedule 2.10 attached hereto, or
restriction of any kind or character to which CHP or any of its
Subsidiaries is bound or subject.
2.3. Existence and Good Standing
(a) CHP and each of CHP's Subsidiaries is a
corporation or partnership, duly formed or organized, validly existing
and in good standing under the laws of its organization, as the case may
be. CHP and each of CHP's Subsidiaries has the requisite power,
corporate or otherwise, to own its property and to carry on its business
as it is now being conducted. CHP is duly qualified to do business and
is in good standing in the jurisdictions listed on Schedule 2.3 attached
hereto, which are the only jurisdictions in which the character or
location of the properties owned or leased by CHP or the nature of the
business conducted by CHP makes such qualification necessary, except
where the failure to so qualify would not have a material adverse effect
on CHP.
(b) CHP has qualified as a REIT under the Code
and has taken no action or omitted to take any action, the effect of
which reasonably could be expected to disqualify CHP as a REIT under the
Code.
2.4. Capital Stock
(a) The authorized capital stock of CHP consists
of: (i) 60,000,000 shares of Common Stock; (ii) 3,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"); and
(iii) 63,000,000 shares of excess stock, par value $.01 per share (the
"Excess Stock"). As of November 20, 1998, (i) 3,290,417.022 shares of
Common Stock were validly issued and outstanding, fully paid and
nonassessable, and no shares of Preferred Stock or Excess Stock have
been issued or are outstanding; and (ii) no shares of Common Stock and
no shares of Preferred Stock were reserved for issuance. All of such
shares of capital stock of CHP have been duly authorized, validly
issued, are fully paid and nonassessable and were issued in compliance
with all applicable federal and state securities laws. Except as set
forth on Schedule 2.4, (i) no shares of capital stock of CHP or any of
CHP's Subsidiaries are subject to preemptive rights or any other similar
rights; (ii) no securities, directly or indirectly, are convertible into
or exchangeable for any of the capital stock of CHP or any of CHP's
Subsidiaries; and (iii) no options, warrants, rights, calls or
commitments relating to such shares or other such securities, are
outstanding.
(b) Except as set forth on Schedule 2.4, neither
CHP nor any of its Subsidiaries are subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire
any shares of its capital stock nor are there any outstanding rights to
repurchase capital stock of CHP or any of its Subsidiaries, except as
set forth in or contemplated by this Agreement. Except as set forth on
Schedule 2.4, there are no agreements between CHP's shareholders with
respect to the voting, transfer or registration of CHP's capital stock.
2.5. Valid Issuance of Shares; No Personal Liability.
(a) When issued, sold and delivered in accordance
with the terms hereof for the consideration expressed herein, the Shares
will be duly and validly issued, fully paid and non-assessable. The
Shares are not subject to preemptive rights or any other similar rights
and will be issued in compliance with all applicable federal and state
securities laws. Five Arrows, upon purchase of the Shares, will not be
subject to personal liability by reason of being a holder of Shares.
(b) The shares of CHP Common Stock when issued
and delivered upon exchange for shares of Class A Preferred Stock in
accordance with the terms hereof will be duly and validly issued, fully
paid and non-assessable and will not be subject to preemptive rights or
any other similar rights. Such shares of CHP Common Stock will be
issued in compliance with all applicable federal and state securities
laws. Five Arrows, upon issuance of such shares of CHP Common Stock,
will not be subject to personal liability by reason of being a holder of
such shares.
2.6. Subsidiaries and Investments. CHP's only direct
or indirect Subsidiaries are listed in Schedule 2.6 attached hereto.
The outstanding shares of capital stock, partnership or other equity
interests of each Subsidiary have been duly authorized and validly
issued and are fully paid and non-assessable, as applicable, and are
owned by CHP, directly or through one or more Subsidiaries, free and
clear of any lien, charge, encumbrance or other security interests
except as set forth in Schedule 2.6. For purposes of this Agreement,
"Subsidiary" shall mean a Person (as defined in Section 2.10) in which
CHP has the ability, whether by the direct or indirect ownership of
shares or other equity interests, by contract or otherwise, to elect a
majority of the directors of a corporation or the trustees of a real
estate investment trust, to select the managing partner of a
partnership, or otherwise to select, or have the power to remove and
then select, a majority of those persons exercising governing authority
over such Person. In the case of a limited partnership, the sole
general partner, all of the general partners to the extent each has
equal management control and authority, or the managing general partner
or managing general partners thereof shall be deemed to have control of
such partnership and, in the case of a trust other than a real estate
investment trust, any trustee thereof or any Person having the right to
select any such trustee shall be deemed to have control of such trust.
2.7. Financial Statements and No Material Changes
(a) CHP has heretofore furnished Five Arrows with
true and correct copies of (i) the audited consolidated balance sheet
and the related statements of income and cash flows, including the
footnotes thereto, of CHP and CHP's Subsidiaries as of the end of their
latest fiscal year ended December 31, 1997 ("Fiscal 1997"), all of which
were audited by Coopers & ▇▇▇▇▇▇▇ L.L.P., and (ii) the unaudited
consolidated balance sheet of CHP and CHP's Subsidiaries and the related
statements of income and cash flows as of September 30, 1998 prepared by
CHP. (The balance sheet of CHP and CHP's Subsidiaries at December 31,
1997 is hereinafter referred to as the "Balance Sheet" and such date is
hereinafter referred to as the "Balance Sheet Date"). Such financial
statements including the footnotes thereto, except as indicated therein,
have been prepared in accordance with generally accepted accounting
principles ("GAAP"), consistently applied throughout the periods
presented. The Balance Sheet fairly presents the financial condition of
CHP and CHP's Subsidiaries at the date thereof and, except as indicated
therein, reflects all known or asserted material claims against and all
material debts and liabilities of CHP and CHP's Subsidiaries, fixed or
contingent, as at the date thereof, and the related statements of income
and retained earnings fairly present the results of the operations of
CHP and CHP's Subsidiaries and the changes in its financial position for
the period indicated each in accordance with GAAP, except as specified
therein.
(b) CHP has filed all forms, reports and
documents (the "SEC Reports") required to be filed by it pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
the Securities and Exchange Commission (the "SEC") since September 30,
1998. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Exchange Act and the
Securities Act and the applicable rules and regulations promulgated by
the SEC thereunder. None of the SEC Reports, as of their respective
dates, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements made, in light of the circumstances under
which they were made, not misleading. CHP has heretofore furnished or
offered to furnish Five Arrows with true and correct copies of all SEC
Reports and Exhibits and Schedules thereto required to be filed by CHP
with SEC.
(c) Since the respective dates of the material
SEC Reports, except as otherwise listed on Schedule 2.7(c) attached
hereto, there has been no material adverse change in the assets or
liabilities, or in the business affairs or business prospects of CHP or
any of its Subsidiaries (present or anticipated) or condition, financial
or otherwise, or in the results of operations of CHP or any of CHP's
Subsidiaries; and to the best knowledge, information and belief of CHP,
no fact or condition (not of general knowledge) exists or is
contemplated or threatened which might reasonably be expected to cause
such a change in the future.
2.8. Title to Properties; Encumbrances. Except as set
forth on Schedule 2.8 attached hereto and except for properties and
assets reflected in the Balance Sheet or acquired since the Balance
Sheet Date which have been sold or otherwise disposed of in the ordinary
course of business, CHP and each of CHP's Subsidiaries has, and on each
Closing Date, will have, good, valid and marketable title to (a) all of
its material properties and assets (real and personal, tangible and
intangible), including, without limitation, all of the properties and
assets reflected in the Balance Sheet, except as indicated in the notes
thereto or in a Schedule to this Agreement, and (b) all of the material
properties and assets purchased by CHP or any of CHP's Subsidiaries
since the Balance Sheet Date, in each case subject to no material
encumbrance, lien, charge or other restriction of any kind or character,
except for (i) liens reflected in the Balance Sheet or in a Schedule to
this Agreement, (ii) liens consisting of zoning or planning
restrictions, easements, permits and other restrictions or limitations
on the use of real property or irregularities in title thereto which do
not detract from the value of, or impair the use of, such property by
CHP or any of CHP's Subsidiaries in the operation of their respective
businesses, and (iii) liens for current taxes, assessments or
governmental charges or levies on property not yet due and delinquent
and liens of carriers, warehousemen, vendors and material men incurred
in the ordinary course of business securing sums not yet due and payable
(liens of the type described in clauses (i), (ii) and (iii) above are
hereinafter sometimes referred to as "Permitted Liens").
2.9. Leases. Except as set forth on Schedule 2.9, each
lease of material real or personal property to which CHP and each of its
Subsidiaries is a party is in full force and effect, and there exists no
event of default or event, occurrence, condition or act (including the
purchase of the Shares or any of the conditions precedent hereunder)
which, with the giving of notice, the lapse of time or the happening of
any further event or condition, would become a default under such lease
to real or personal property. CHP and each of its Subsidiaries is not
currently in default of any of the terms or conditions under any such
lease to real or personal property and, to the best knowledge,
information and belief of CHP, all of the material covenants to be
performed by any other party under any such lease to real or personal
property have been fully performed. The real or personal property
leased by CHP and each of its Subsidiaries is in a state of good
maintenance and repair in all material respects.
2.10. Contracts. Except as set forth on Schedule 2.10
attached hereto, neither CHP nor any of CHP's Subsidiaries is bound by
(a) any material contract or other agreements relating to the
acquisition or disposition by CHP or any of CHP's Subsidiaries of any
operating business or the capital stock or assets of any person, (b) any
material agreement, contract or commitment relating to the employment of
any person by CHP or any of CHP's Subsidiaries, or any bonus, deferred
compensation, pension, profit sharing, stock option, employee stock
purchase, retirement or other employee benefit plan, (c) any material
agreement, indenture or other instrument which contains restrictions
with respect to payment of dividends or any other distribution in
respect of its capital stock, (d) any material agreement, contract or
commitment relating to capital expenditures not yet made, (e) any
material loan or advance to, or material investment in, any individual,
partnership, limited liability company, joint venture, corporation,
trust, unincorporated organization, government or other entity (each a
"Person") or any material agreement, contract or commitment relating to
the making of any such loan, advance or investment, (f) any material
guarantee or other contingent liability in respect of any indebtedness
or obligation of any Person (other than the endorsement of negotiable
instruments for collection in the ordinary course of business), (g) any
material management service, consulting or any other similar type of
contract, unless entered into or incurred in the ordinary course of
business, (h) any material agreement, contract or commitment limiting
the freedom of CHP or any of CHP's Subsidiaries to engage in any line of
business or to compete with any Person, (i) any material bank debt,
loan, credit or other financing arrangement, and (j) except as otherwise
disclosed in this Agreement or a Schedule or Exhibit annexed hereto, any
material agreement, contract or commitment not entered into in the
ordinary course of business. Each contract or agreement set forth on
Schedule 2.10 (or required to be set forth on Schedule 2.10) is in full
force and effect and except as set forth on Schedule 2.10, there exists
no default or event of default or event, occurrence, condition or act
(including the purchase of the Shares, or any of the conditions
precedent hereunder) which, with the giving of notice, the lapse of time
or the happening of any further event or condition, would become a
default or event of default thereunder.
2.11. Restrictive Documents. Except as set forth on
Schedule 2.11 attached hereto, neither CHP nor any of CHP's Subsidiaries
is subject to, or a party to, any charter, by-law, mortgage, lien,
lease, license, permit, agreement, contract, instrument, law, rule,
ordinance, regulation, order, judgment or decree, or any other
restriction of any kind or character, in any such case which is material
to CHP, which would prevent consummation of the transactions
contemplated by this Agreement, compliance by CHP with the terms,
conditions and provisions hereof or the continued operation of CHP's or
any of CHP's Subsidiaries' business after the date hereof or each
Closing Date on substantially the same basis as heretofore operated or
which would restrict the ability of CHP or any of CHP's Subsidiaries to
acquire any property or conduct business in any area.
2.12. Litigation. Except as set forth on Schedule 2.12
attached hereto, there is no material action, suit, proceeding at law or
in equity, arbitration or administrative or other proceeding by or
before or any investigation by any governmental or other instrumentality
or agency, pending, or, to the best knowledge, information and belief of
CHP threatened, against or affecting CHP or any of CHP's Subsidiaries,
or any of their respective properties or rights, and CHP does not know
of any valid basis for any action, proceeding or investigation. Except
as set forth on Schedule 2.12, neither CHP nor any of CHP's Subsidiaries
is subject to any judgment, order or decree entered in any lawsuit or
proceeding which is reasonably likely to have a material adverse effect
on its operations, business practices, present or anticipated, or
ability to acquire any property or conduct business.
2.13. ERISA. (i) Each employee benefit plan defined in
Section 3(3) of ERISA in respect of which CHP or any ERISA Affiliate is,
or within the immediately preceding six (6) years was, an "employer" as
defined in Section 3(5) of ERISA of CHP (each a "Plan") is in
substantial compliance with the applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, ("ERISA") and the
Code, (ii) no Termination Event has occurred nor is reasonably expected
to occur with respect to any Benefit Plan, (iii) the most recent annual
report (Form 5500 Series) with respect to each Plan, including Schedule B
(Actuarial Information) thereto, copies of which have been filed with the
Internal Revenue Service, is complete and correct in all material
respects and fairly presents the funding status of such Benefit Plan,
and since the date of such report there has been no material adverse
change in such funding status, (iv) no Benefit Plan had an accumulated
(whether or not waived) funding deficiency or permitted decreases which
would create a deficiency in its funding standard account within the
meaning of Section 412 of the Code at any time during the previous 60
months, and (v) no lien imposed under the Code or ERISA exists or is
likely to arise on account of any Benefit Plan within the meaning of
Section 412 of the Code. Neither CHP nor any of its ERISA Affiliates has
incurred any withdrawal liability under ERISA with respect to any
Multiemployer Plan, and CHP is not aware of any facts indicating that CHP
or any of its ERISA Affiliates may in the future incur any such
withdrawal liability. Except as required by Section 4980B of the Code,
CHP does not maintain a welfare plan (as defined in Section 3(1) of
ERISA) which provides benefits or coverage after a participant's
termination of employment. Neither CHP nor any of its ERISA Affiliates
have incurred any liability under the Worker Adjustment and Retraining
Notification Act. All Plans in existence on the initial Closing Date are
set forth on Schedule 2.13 attached hereto. For purposes of this
Agreement, (i) "Termination Event" means (a) a Reportable Event with
respect to any Benefit Plan (with respect to which the 30 day notice
requirement has not been waived); (b) the withdrawal of CHP or any ERISA
Affiliate from a Benefit Plan during a plan year in which CHP or any
ERISA Affiliate was a "substantial employer" as defined in Section
4001(a)(2) of ERISA; (c) providing a written notice of intent to
terminate a Benefit Plan to affected parties of a distress termination
described in Section 4041(c) of ERISA; or (d) the institution by the
Pension Benefit Guarantee Corporation of proceedings to terminate a
Benefit Plan, (ii) "Benefit Plan" means a defined benefit plan as
defined in Section 3(35) of ERISA that is subject to Title IV of ERISA
(other than a Multiemployer Plan) and in respect of which CHP or any
ERISA Affiliate is or within the immediately preceding six (6) years was
an "employer" as defined in Section 3(5) of ERISA, (iii) "Multiemployer
Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of
ERISA and subject to Title IV of ERISA which is, or within the
immediately preceding six (6) years was, contributed to by CHP or any
ERISA Affiliate, (iv) "ERISA Affiliate" means any (a) corporation which
is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as CHP, (b) partnership or other
trade or business (whether or not incorporated) under common control
(within the meaning of Section 414(c) of the Code) with CHP, or (c)
member of the same affiliated service group (within the meaning of
Section 414(m) of the Code) as CHP, any corporation described in clause
(a) above or any partnership or trade or business described in clause
(b) above and (v) "Reportable Event" means any of the events described in
Section 4043(b) of ERISA (other than events for which the notice
requirements have been waived).
2.14. Environmental Matters. Except as set forth in
Schedule 2.14 attached hereto, to the best knowledge of the Company and
its Subsidiaries:
(a) The operations and properties of CHP and its
Subsidiaries are in material compliance with Environmental Laws;
(b) CHP and its Subsidiaries have obtained and
is in compliance with all necessary permits or authorizations that are
required under Environmental Laws to operate the facilities, assets and
business of CHP and its Subsidiaries;
(c) There has been no Release (i) at any assets,
properties or businesses owned or operated by CHP, any of its
Subsidiaries or any predecessor in interest; (ii) from adjoining
properties or businesses; or (iii) from or onto any facilities which
received Hazardous Materials generated by CHP, any of its Subsidiaries
or any predecessor in interest that would result in any Environmental
Liabilities except to the extent that any such Release is not reasonably
likely to have a material adverse effect on the business (present or
anticipated) or condition (financial or otherwise), properties, results
of operations or prospects of CHP or its Subsidiaries;
(d) No Environmental Claims have been asserted
against CHP, any of its Subsidiaries or any predecessor in interest nor
does CHP or any of its Subsidiaries have knowledge or notice of any
threatened or pending Environmental Claims against CHP or any of its
Subsidiaries which is reasonably likely to result in Environmental
Liabilities except to the extent that any such Environmental Claims are
not reasonably likely to have a material adverse effect on the business
(present or anticipated) or condition (financial or otherwise),
properties, results of operations or prospects of CHP or its
Subsidiaries;
(e) No Environmental Claims have been asserted
against any facilities that may have received Hazardous Materials
generated by CHP, any of its Subsidiaries or any predecessor in interest
which is reasonably likely to result in Environmental Liabilities except
to the extent that any such Environmental Claims are not reasonably
likely to have a material adverse effect on the business (present or
anticipated) or condition (financial or otherwise), properties, results
of operations or prospects of CHP or its Subsidiaries;
(f) CHP has delivered to Five Arrows true and
complete copies of all Phase I environmental assessments, environmental
reports, studies, material correspondence or investigations in their
possession regarding any Environmental Liabilities, or any environmental
conditions, at the assets, properties or businesses of CHP or any of its
Subsidiaries; and
(g) To the extent that any of the assets,
properties or businesses owned or operated by CHP or any of its
Subsidiaries are located in "wetlands" regulated under Environmental
Laws, CHP and its Subsidiaries are in compliance with Environmental Laws
regulating those "wetlands" except to the extent that any such failure
to comply is not reasonably expected to have a material adverse effect
on the business (present or anticipated) or condition of CHP or its
Subsidiaries or any predecessor in interest.
(h) Schedule 2.14(h) is a true, complete and
accurate list of each instance where the operations of CHP and its
Subsidiaries or the environmental conditions of the real estate
presently or formerly owned or operated by CHP or its Subsidiaries or
its predecessors in interest are not in material compliance with an
Environmental Law or give rise to Environmental Liabilities. None of
the items listed on Schedule 2.14 individually or in the aggregate would
have a material adverse effect on CHP and its Subsidiaries.
For purposes of this Agreement, (i) "Environmental Laws"
means the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq., as amended; the
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. 6901 et seq.,
as amended; the Clean Air Act ("CAA"), 42 U.S.C. 7401 et seq., as
amended; the Clean Water Act ("CWA"), 33 U.S.C. 1251 et seq., as
amended; the Occupational Safety and Health Act ("OSHA"), 29 U.S.C. 655
et seq.; and any other federal, state, local or municipal laws,
statutes, regulations, rules or ordinances imposing liability or
establishing standards of conduct for protection of the environment,
(ii) "Environmental Liabilities" means any monetary obligations, losses,
liabilities (including strict liability), damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable out-of-pocket fees, disbursements and expenses of counsel,
out-of-pocket expert and consulting fees and out-of-pocket costs for
environmental site assessments, remedial investigation and feasibility
studies), fines, penalties, sanctions and interest incurred as a result
of any Environmental Claim filed by any governmental authority or any
third party against CHP or its Subsidiaries or any predecessors in
interest which relate to any violations of Environmental Laws, Remedial
Actions, Releases or threatened Releases of Hazardous Materials from or
onto (a) any assets, properties or businesses presently or formerly
owned by CHP, its Subsidiaries or a predecessor in interest, or (b) any
facility which received Hazardous Materials generated by the Company,
its Subsidiaries or a predecessor in interest, (iii) "Environmental
Claim" means any complaint, summons, citation, notice, directive, order,
claim, litigation, investigation, judicial or administrative proceeding,
judgment, letter or other communication from any governmental agency,
department, bureau, office or other authority, or any third party
alleging violations of Environmental Laws or Releases of Hazardous
Materials (a) from any assets, properties or businesses of CHP and its
Subsidiaries or any predecessor in interest, (b) from adjoining
properties or businesses, or (c) from or onto any facility, which
received hazardous materials generated by CHP and its Subsidiaries or
any predecessor in interest, (iv) "Hazardous Materials" include (a) any
element, compound, or chemical that is defined, listed or otherwise
classified as a contaminant, pollutant, toxic pollutant, toxic or
hazardous substances, extremely hazardous substance or chemical,
hazardous waste, medical waste, biohazardous or infectious waste,
special waste, or solid waste under Environmental Laws; (b) petroleum,
petroleum-based or petroleum-derived products; (c) polychlorinated
biphenyls; (d) any substance exhibiting a hazardous waste characteristic
including but not limited to corrosivity, ignitibility toxicity or
reactivity as well as any radioactive or explosive materials; and (e)
any raw materials, building components exhibiting a Hazardous Material
characteristic, including but not limited to asbestos-containing
materials, (v) "Release" means any spilling, leaking, pumping, emitting,
emptying, discharging, injecting, escaping, leaching, migrating,
dumping, or disposing of Hazardous Materials (including the abandonment
or discarding of barrels, containers or other closed receptacles
containing Hazardous Materials) into the environment, (vi) "Remedial
Action" means all actions taken to (a) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate or in any other way address
Hazardous Materials in the indoor or outdoor environment; (b) prevent or
minimize a Release or threatened Release of Hazardous Materials so they
do not migrate to cause substantial danger to public health or welfare
or the indoor or outdoor environment; (c) perform pre-remedial studies
and investigations and post-remedial operation and maintenance
activities; or (d) any other actions authorized by 42 U.S.C. 9601.
2.15. Taxes. Except as set forth on Schedule 2.15
attached hereto:
(a) All taxes and assessments, including,
without limitation, income, property, sales, use, franchise, value
added, employees' income withholding and social security taxes and
import duties, including interest and penalties thereon, 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, for which CHP or any of CHP's
Subsidiaries may be liable in respect of all periods prior to each
Closing Date (including taxes in respect of tax periods ending on each
Closing Date and taxes in respect of tax periods ending after each
Closing Date to the extent attributable to the portion of that period
which ends on each Closing Date), either have been paid when due or will
be paid when due. All tax returns required to be filed through the date
hereof taking into account all lawful extensions of due dates (and each
Closing Date), including, without limitation, information returns, have
been (or will be) duly and timely filed taking into account all lawful
extensions of due dates and are (or will be) true, complete and correct
in all material respects and all deposits and payments required by law
to be made by CHP or any of CHP's Subsidiaries, including with respect
to employees' withholding taxes, have been duly made in accordance with
all applicable laws, except to the extent that such failure to make such
payment would not reasonably be expected to have a material adverse
effect on CHP or any of its Subsidiaries. As of the date hereof, no
such returns have been the subject of an audit or examination by any
taxing authority. There is not now in force any waiver or agreement by
CHP or any of CHP's Subsidiaries for the extension of time for the
assessment of any tax.
(b) There are no tax sharing agreements or
arrangements or tax indemnity agreements between CHP or any of CHP's
Subsidiaries and any other person, including any agreements or
undertakings provided by CHP or any of CHP's Subsidiaries to any Person
requiring CHP or such Subsidiary to take any action, or refrain from
taking any action, to reduce or defer the tax liability of such other
Person.
(c) Neither CHP nor any of CHP's Subsidiaries
has ever been an includable corporation in any affiliated group of
corporations within the meaning of Section 1504 of the Code of 1986 (or
any similar provision of state or other tax law).
(d) Neither CHP nor any of CHP's Subsidiaries
has filed a consent pursuant to the collapsible corporation provisions
of section 341(f) of the Code (or any similar provision of state or
other tax law) or agreed to have section 341(f)(2) of the Code or any
similar provision of state or other tax law) apply to any disposition of
any asset owned by CHP or any of CHP's Subsidiaries.
2.16. Compliance with Laws. Except as set forth on
Schedule 2.16 attached hereto, CHP and each of CHP's Subsidiaries is in
compliance in all material respects with all applicable laws,
regulations, orders, judgments and decrees. Neither CHP nor any of
CHP's Subsidiaries, any employee of CHP nor any of CHP's Subsidiaries
nor any of CHP's affiliates acting upon CHP's request has at any time
made any payments for unlawful political contributions or made any
bribes, kickback payments or other illegal payments.
2.17. No Changes Since Balance Sheet Date. Since the
Balance Sheet Date, except as expressly contemplated hereby or as
disclosed in a Schedule or Exhibit hereto (including, without
limitation, Schedule 2.17) or any SEC Report, neither CHP nor any of
CHP's Subsidiaries has (a) incurred any material liability or obligation
of any nature (whether accrued, absolute, contingent or otherwise),
except in the ordinary course of business (and neither CHP nor any of
CHP's Subsidiaries is in default in respect of the terms or conditions
of any indebtedness), (b) permitted any of its assets to be subjected to
any material mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind (other than Permitted Liens), (c)
sold, transferred or otherwise disposed of any material assets except in
the ordinary course of business, (d) made any material capital
expenditure or commitment therefor, except in the ordinary course of
business, (e) declared or paid any dividend or made any distribution on
any shares of its capital stock, or redeemed, purchased or otherwise
acquired any shares of its capital stock or any option, warrant or other
right to purchase or acquire any such shares, other than regularly
scheduled cash dividends, (f) made any material bonus or profit sharing
distribution or payment of any kind, (g) materially increased its
indebtedness for borrowed money or made any material loan to any Person,
(h) written off as uncollectible any notes or accounts receivable,
except write-offs in the ordinary course of business charged to
applicable reserves, (i) granted any increase in the rate of wages,
salaries, bonuses or other remuneration of any executive employee or
other employees, except in the ordinary course of business, (j) canceled
or waived any claims or rights of substantial value, (k) made any
material change in any method of accounting or audit practice, (l)
otherwise conducted its business or entered into any transaction, except
in the ordinary course of business, or (m) agreed, whether or not in
writing, to do any of the foregoing.
2.18. Disclosure. None of this Agreement, the
financial statements referred to in Section 2.7 hereof (including the
footnotes thereto), any Schedule, Exhibit or certificate attached hereto
or delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by CHP or by any of its
directors or officers in connection with the transactions contemplated
by this Agreement contains any untrue statement of material fact, or
omits any statement of material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which made.
2.19. Broker's or Finder's Fees. Except for a fee
payable by CHP to CNL Hospitality Advisors, Inc. in the amount of
$600,000, CHP has not incurred, and will not incur, directly or
indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or
any other Transaction Document or any of the transactions contemplated
hereby.
2.20. Insurance. CHP and each of its Subsidiaries
maintains insurance policies, including but not limited to fire and
casualty and worker's compensation policies, which provide with
reputable third party insurers coverage customary for companies
similarly situated and otherwise adequate for its businesses.
ARTICLE III
3. REPRESENTATIONS AND WARRANTIES OF FIVE ARROWS. Five
Arrows hereby represents, warrants and agrees, as of the date hereof and
as of each Closing Date, as if made on such Closing Date, as follows:
3.1. Power and Authority. Five Arrows has the full
legal right, power and authority to enter into this Agreement and the
Transaction Documents, and to consummate the other transactions
contemplated hereby and thereby.
3.2. Existence and Good Standing. Five Arrows is a
limited liability company, duly formed or organized, validly existing
and in good standing under the laws of its organization.
3.3. Consents; Authorization. There is no requirement
applicable to Five Arrows to make any filing with, or obtain any permit,
authorization, consent or approval of, any governmental authority or any
other person as a condition to the lawful consummation by Five Arrows of
the transactions contemplated by this Agreement and the Transaction
Documents. This Agreement, when executed and delivered by Five Arrows,
will constitute a valid and legally binding obligation of Five Arrows,
enforceable against it in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditor's rights generally and of
general principles of equity (regardless of whether considered in a
proceeding at law or in equity).
3.4. Accredited Investor. Five Arrows is an accredited
investor as defined in Rule 501 under the Securities Act.
3.5. Investment. Five Arrows is acquiring the Shares
for investment for its own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution
thereof. Five Arrows understands that the Shares have not been, and
will not be, registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act, and
cannot be transferred by it unless subsequently registered under the
Securities Act or if an exemption from the registration requirements
exists.
3.6. Rule 144. Five Arrows acknowledges that the
Shares must be held indefinitely unless subsequently registered under
the Securities Act, or unless an exemption from such registration is
available. Five Arrows is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of
securities purchased in a private placement subject to the satisfaction
of certain conditions, which presently include, among other things, in
most circumstances (i) the existence of a public market for the Shares,
(ii) the availability of certain current public information about CHP,
(iii) the resale occurring not less than one year after a party has
purchased and fully paid for the securities to be sold from CHP or
affiliate of CHP, (iv) the sale being effected through a "broker's
transaction" or in transactions directly with a "market maker" (as
provided by Rule 144(f)), and (v) the number of shares being sold during
any three-month period not exceeding specified limitations.
3.7. Brokers or Finders. Five Arrows has not incurred,
and will not incur, directly or indirectly, as a result of any action
taken by Five Arrows, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
3.8. Ownership Limits. The issuance of shares of CHP
Common Stock to Five Arrows pursuant to this Agreement will not cause
Five Arrows or any member of Five Arrows to Beneficially or
Constructively Own (as such terms are defined in the Articles of
Incorporation of CHP) shares in excess of the Ownership Limits that are
applicable to Five Arrows and its members pursuant to Section 7.6 and
7.7 of the Articles of Incorporation of CHP as such Articles are in
effect at the time of any issuance, taking into account the waiver of
certain Ownership Limits referred to in Section 4.3(a) hereof.
ARTICLE IV
4. COVENANTS
4.1. Use of Proceeds. Any portion of the Five Arrows
Investment received by CHP on account of Five Arrows' purchase of Shares
pursuant to this Agreement shall immediately be contributed by CHP to
Hospitality Partners to immediately fund its corresponding capital
commitment to Hotel Investors.
4.2. Notice of Default. As soon as practicable and in
any event within 5 business days of the occurrence of a default or
failure by CHP or Hospitality Partners to perform or observe any
covenant, agreement, or obligation contained in this Agreement, the
Registration Rights Agreement, the Hotel Investors Subscription
Agreement or any Transaction Document contemplated hereby or thereby,
CHP shall notify Five Arrows of such default or failure.
4.3. Stockholder Approval.
(a) CHP covenants that it will call a meeting of
stockholders of CHP to be held no later than June 30, 1999 (the
"Stockholder Meeting Deadline"), for purposes of securing stockholder
approval for the waiver of the Ownership Limits set forth in Section
7.6(ii)(a) and (b) of the Articles of Incorporation of CHP.
Notwithstanding anything to the contrary contained herein, any waiver of
the Ownership Limits shall neither waive nor purport to waive the
limitations contained in Sections 7.6(ii)(c), (d) or (e) of CHP's
Articles of Incorporation. CHP will promptly prepare and file and will
provide to each of its stockholders entitled to vote at such meeting in
advance of such meeting, a proxy statement complying with Section 14 of
the Exchange Act soliciting each such stockholder's affirmative vote at
such stockholder meeting in favor of the amendment of CHP's Articles of
Incorporation to permit the Board of Directors of CHP to waive the
Ownership Limits with respect to issuance of the shares of CHP Common
Stock and upon the exchange of Class A Preferred Stock pursuant to the
Hotel Investors Subscription Agreement. Such proxy statement shall
reflect that the Board of Directors has approved the waiver of such
ownership limitation with respect to Five Arrows, subject to stockholder
approval. CHP and its Board of Directors shall recommend to the
stockholders that they approve such proposal and shall use its best
efforts to solicit its stockholders' approval of such amendment. Such
proxy statement shall not seek approval of any matters other than the
approval described in the preceding sentence and the election of
directors, which shall include a nominee designated by Five Arrows,
which may be the director designated pursuant to Section 4.4 hereof.
CHP shall file such proxy statement with the SEC on a timely basis so as
to permit the stockholders' meeting to be held by the Stockholder
Meeting Deadline. Five Arrows shall have the opportunity to review and
comment on each version of the Proxy Statement submitted to or filed
with the SEC.
(b) Upon approval by CHP's stockholders of the
amendment of CHP's Articles of Incorporation to permit the Board of
Directors of CHP to waive the Ownership Limits with respect to the
issuance of shares and the exchange of shares of Class A Preferred Stock
for shares of CHP Common Stock pursuant to the Hotel Investors
Subscription Agreement, (i) CHP shall deliver to Five Arrows (A) a
certificate of the Secretary of CHP certifying that the stockholders of
the Company have approved such amendment and (B) a certified copy of the
amended Articles of Incorporation of CHP as filed with the State of
Maryland and (ii) the balance of the outstanding principal amount of the
Note shall be converted into shares of CHP Common Stock as provided in
Section 1.6 hereof and any accrued and unpaid interest thereon shall be
paid to the holder of the Note as set forth in Section 1.6 hereof.
(c) Notwithstanding anything to the contrary
contained herein, any waiver of the Ownership Limits shall (i) neither
waive nor purport to waive the limitations contained in Sections
7.6(ii)(c), (d) or (e) of CHP's Articles of Incorporation and (ii) be
subject to the condition that Five Arrows make representations at the
time of such waiver that the issuance of shares of CHP Common Stock in
excess of the Ownership Limits to Five Arrows pursuant to this Agreement
or the exchange of shares of Class A Preferred Stock for shares of CHP
Common Stock in excess of the Ownership Limits pursuant to the Hotel
Investors Subscription Agreement will neither (a) cause any individual
within the meaning of Section 542(a)(2) of the Code, as modified by
Section 856(h) of the Code, to own more than 9.9% of the stock of CHP,
directly or indirectly through the application of Section 544 of the
Code, as modified by Section 856(h) of the Code nor (b) cause the
Company to own (directly or Constructively (as defined in Section 7.6(i)
of CHP's Articles of Incorporation)) an interest in an tenant that is
described in Section 856(d)(2)(B) of the Code.
4.4. Appointment of Five Arrows Director. CHP shall
use it best efforts to qualify, nominate and recommend to the
stockholders that they elect to the Board of Directors the nominee
designated by Five Arrows from time to time (the "Five Arrows Director")
at each meeting of stockholders at which directors are generally
elected.
4.5. Further Assurances. CHP and Five Arrows shall
take any and all actions, in a manner satisfactory to the other, to meet
each condition to closing set forth herein, keep all its respective
representations and warranties hereunder true, complete and correct and
effect all applicable actions contemplated by this Agreement required to
be effected on or prior to each Closing Date.
4.6. Supplemental Disclosure. CHP shall have the
continuing obligation up to and until the entire amount of the Five
Arrows Investment has been invested in CHP to supplement promptly or
amend the Schedules with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or listed in the Schedules;
provided, however, that for the purpose of the rights and obligations of
Five Arrows hereunder, (a) any such supplemental disclosure that may be
reasonably considered by Five Arrows to be material and adverse to Five
Arrows, CHP or any of its Subsidiaries shall not be deemed to have been
disclosed as of the date of this Agreement unless so agreed to in
writing by Five Arrows and (b) such supplemental disclosure other than
as described in clause (a) shall be deemed to have been disclosed as of
the date of this Agreement.
4.7. Prohibition on Issuance of Securities. For so
long as any shares of Class A Preferred Stock are outstanding, other
than in accordance with and pursuant to employee benefit plans approved
by the Board of Directors of CHP, CHP shall not issue any shares of CHP
Common Stock (or rights, warrants or other securities convertible into
or exchangeable for CHP Common Stock) after the date hereof at a
purchase price per share (or having a conversion, exchange or exercise
price per share of CHP Common Stock) (excluding the value of services
and other intangible assets) of less than $9.50.
ARTICLE V
5. CONDITIONS TO CHP'S OBLIGATIONS. The obligation of CHP
to consummate the transactions contemplated by this Agreement on each
Closing Date is conditioned upon satisfaction, on or prior to such date,
of the following conditions:
5.1. Representations and Warranties. The
representations and warranties of Five Arrows contained in this
Agreement shall be true, complete and correct in all material respects
(except that representations and warranties qualified by materiality,
material adverse effect or knowledge shall, as so qualified, be true and
correct in all respects) on and as of the applicable Closing Date with
the same effect as though such representations and warranties had been
made on and as of such date.
5.2. Approvals. All governmental and other consents
and approvals, if any, necessary to permit the consummation of the
transactions contemplated by this Agreement shall have been received
(including but not limited to the waiting period under the ▇▇▇▇-▇▇▇▇▇-
▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, having expired,
if applicable).
5.3. Proceedings. All proceedings to be taken in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to CHP and its counsel, and CHP shall have received copies of
all such documents and other evidences as it or its counsel may
reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith.
ARTICLE VI
6. CONDITIONS TO THE INITIAL PURCHASE. The obligation of
Five Arrows to purchase Shares pursuant to the Notice of Purchase for
the Initial Purchase on such Closing Date is conditioned upon
satisfaction, on or prior to such date, of the following conditions:
6.1. Representations and Warranties. The
representations and warranties of CHP contained in this Agreement or in
any Exhibit or Schedule attached hereto shall be true, complete and
correct in all material respects (except that representations and
warranties qualified by materiality, material adverse effect or
knowledge shall, as so qualified, be true and correct in all respects)
on and as of such Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and
CHP shall have delivered to Five Arrows a certificate, dated such
Closing Date, to such effect.
6.2. Performance of Agreements. All of the covenants
and agreements of CHP to be performed on or before such Closing Date
pursuant to the terms hereof or the terms of any Exhibit hereto, shall
have been duly performed in all material respects, and CHP shall have
delivered to Five Arrows a certificate, dated such Closing Date, to such
effect.
6.3. Approvals. All material governmental and other
material consents, filings and approvals necessary to permit the
consummation of the transactions contemplated by this Agreement shall
have been received and be in full force and effect (including but not
limited to the waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, having expired, if applicable).
6.4. Opinion of CHP's Counsel. CHP shall have
furnished Five Arrows with a favorable opinions, dated such Closing
Date, of both of ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, special counsel to
CHP, and Lowndes Drosdick ▇▇▇▇▇▇ & ▇▇▇▇, P.A., Florida counsel to CHP,
each in form and substance satisfactory to Five Arrows and its counsel,
to the effect set forth on Exhibit 6.4 attached hereto.
6.5. Good Standing and Other Certificates. CHP shall
have delivered to Five Arrows a certificate from the Secretary of State
or other appropriate official of the State of Maryland, and such other
states as applicable to the effect that CHP and each of CHP's
Subsidiaries are in good standing or subsisting in each such State and
listing all charter documents of CHP and each of CHP's Subsidiaries on
file with each such State.
6.6. No Material Adverse Change. Since the Balance
Sheet Date and prior to such Closing Date, there shall be no material
adverse change in the assets or liabilities, the business (present or
anticipated), or condition, financial or otherwise, the results of
operations, of CHP and each of CHP's Subsidiaries and CHP shall have
delivered to Five Arrows a certificate, dated such Closing Date, to such
effect.
6.7. Registration Rights Agreement. On such Closing
Date, CHP shall have properly and validly executed the Registration
Rights Agreement in the form of Exhibit 6.7 annexed hereto.
6.8. Hotel Investors Subscription Agreement. On such
Closing Date, Hotel Investors, CHP and Hospitality Partners shall have
properly and validly executed the Hotel Investors Subscription Agreement
and taken all actions required to be taken by it hereunder.
6.9. Valid Issuance. The Shares to be issued and sold
by CHP and to be acquired by Five Arrows shall be duly authorized and
validly issued to Five Arrows, free and clear of all liens,
encumbrances, restrictions and claims of every kind. Five Arrows shall
have received properly completed stock certificates representing the
number of Shares being purchased by Five Arrows on such Closing Date.
6.10. Appointment of Five Arrows Director. Prior to or
concurrent with the Initial Purchase, the Five Arrows Director shall
have been elected and qualified to become a member of the Board of
Directors of CHP.
6.11. D&O Insurance. CHP shall have purchased
officers' and directors' liability insurance with respect to the Five
Arrows Director and on such terms and with such carrier as are
reasonably acceptable to Five Arrows.
6.12. Investment in Advisor. Prior to or concurrent
with the Initial Closing, the investment by Five Arrows in CNL
Hospitality Advisors, Inc. shall be occurring substantially with the
Initial Purchase.
6.13. Proceedings. All proceedings to be taken in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be satisfactory in form and substance
to Five Arrows and its counsel, and Five Arrows shall have received
copies of all such documents and other evidences as it or its counsel
may request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
6.14. Opinion of CHP's Tax Counsel. CHP shall have
furnished Five Arrows with a reasoned opinion satisfactory to Five
Arrows and its counsel, dated the Closing Date, of
PriceWaterhouseCoopers LLP, or other tax counsel satisfactory to Five
Arrows and its counsel, that Five Arrows should not recognize "unrelated
business taxable income" within the meaning of Section 512 of the Code
as a result of Five Arrows' investment in CNL Hotel Investors, Inc.
6.15. Approval of Financing and Other Material
Documents. CHP shall have furnished Five Arrows with all documents
related to the financing of the Hotels by Hotel Investors and all other
material documents required to be delivered by Hotel Investors
thereunder or in connection with the transactions contemplated hereunder
and thereunder, and all such documents including any material changes,
amendments, modifications or waivers thereto shall have been approved by
Five Arrows and its counsel, in their sole discretion.
ARTICLE VII
7. CONDITIONS TO SUBSEQUENT PURCHASES. The obligation of
Five Arrows to purchase Shares pursuant to any Notice of Purchase after
the Initial Purchase on such Closing Date is conditioned upon
satisfaction, on or prior to such date, of the following conditions:
7.1. Representations and Warranties. Subject to
Section 4.6 hereof, the representations and warranties of CHP contained
in this Agreement or in any Exhibit or Schedule attached hereto shall be
true, complete and correct in all material respects (except that
representations and warranties qualified by materiality, material
adverse effect or knowledge shall, as so qualified, be true and correct
in all respects) on and as of such Closing Date with the same effect as
though such representations and warranties had been made on and as of
such date.
7.2. Performance of Agreements. All of the covenants
and agreements of Hotel Investors, CHP and Hospitality Partners to be
performed on or before such Closing Date pursuant to the terms hereof,
the Note or the terms of any other agreement contemplated hereby and
thereby, shall have been duly performed in all material respects.
7.3. Assurance of Performance. CHP shall have
delivered to Five Arrows evidence that the Purchase Price to be paid at
any Closing hereunder shall immediately be contributed by CHP to
Hospitality Partners who in turn will use such proceeds to fund its
capital commitment to Hotel Investors.
7.4. Performance of Hotel Investors Subscription
Agreement. All of the agreements to be performed or observed by Hotel
Investors, CHP and Hospitality Partners pursuant to the terms of the
Hotel Investors Subscription Agreement or the terms of the Articles
Supplementary shall have been duly performed or observed.
7.5. No Material Adverse Change. Prior to such Closing
Date, there shall be no material adverse change in the assets or
liabilities, the business (present or anticipated), or condition,
financial or otherwise, the results of operations, of CHP and each of
CHP's Subsidiaries.
7.6. Valid Issuance. The Shares to be issued and sold
by CHP and to be acquired by Five Arrows on such Closing Date shall be
duly authorized and validly issued to Five Arrows, free and clear of all
liens, encumbrances, restrictions and claims of every kind. Five Arrows
shall have received properly completed stock certificates representing
the number of Shares being purchased by Five Arrows on such Closing
Date.
7.7. Five Arrows Director. The Five Arrows Director
shall be serving as a member of the Board of Directors of CHP.
7.8. D&O Insurance. CHP shall have maintained
officers' and directors' liability insurance with respect to the Five
Arrows Director and on such terms and with such carrier as are
reasonably acceptable to Five Arrows.
ARTICLE VIII
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY.
8.1. Survival. The respective representations and
warranties and covenants and agreements of CHP and Five Arrows contained
in this Agreement or in any Schedule or Exhibit attached hereto shall
survive the Closing and shall terminate on January 1, 2002, except that
the representations and warranties and covenants and agreements
contained in Sections 2.13, 2.14 and 2.15 (and any applicable Schedule)
shall terminate upon the expiration of the applicable statute of
limitations giving effect to any extensions thereof.
8.2. Indemnification.
(a) Each of CHP and Five Arrows, as the case may
be (each, an "Indemnifying Party"), agrees to indemnify and hold the
other and such other's respective stockholders, partners, officers,
directors, members, employees, counsel, accountants and agents (each, an
"Indemnified Party") harmless from any damages, liabilities, losses,
costs or expenses (including, without limitation, reasonable counsel
fees and expenses) suffered or paid, directly or indirectly, as a result
of or arising out of (without regard to any materiality, material
adverse effect or knowledge qualifier) (i) the breach or non-compliance
with any covenant, agreement or obligation contained herein by an
Indemnifying Party, (ii) the breach of or the failure of any respective
representation or warranty contained herein made by an Indemnifying
Party, (iii) any breach of any covenant, agreement or obligation
contained in the Registration Rights Agreement, or any other Transaction
Document by an Indemnifying Party, (iv) all Taxes resulting from CHP
being severally liable for any Taxes pursuant to Section 1.1502-6 of the
Treasury Regulations or any analogous state or local provision or (v)
any Environmental Liabilities arising out of any (A) any Releases or
threatened Releases of Hazardous Materials at or from the properties of
CHP or its Subsidiaries; (B) any violations of Environmental Laws; (C)
any Environmental Claim related to the conditions existing prior to each
applicable Closing Date; and (D) any personal injury (including wrongful
death) or property damage (real or personal) arising out of exposure to
Hazardous Material used, handled, generated, transported or disposed by
CHP, any of its Subsidiaries or any predecessor in interest at the
properties of CHP or its Subsidiaries. However, the Indemnifying Party
shall be obligated to indemnify the Indemnified Party only when the
aggregate of all damages, liabilities, losses, costs or expenses
suffered or paid by the Indemnified Party as to which a right of
indemnification is provided under this Article VIII exceeds $200,000
(the "Threshold Amount"). After the aggregate amount of all damages,
liabilities, losses, costs or expenses suffered or paid by the
Indemnified Party exceeds the Threshold Amount, the Indemnifying Party
shall be obligated to indemnify the Indemnified Party for all such
damages, liabilities, losses, costs or expenses suffered or paid.
Notwithstanding anything in this Agreement to the contrary, the
liability of CHP hereunder shall in no event exceed the Five Arrows
Investment received by CHP pursuant to this Agreement (except for CHP's
liability under clause (iv) of this paragraph (a)).
(b) If any action, suit, proceeding or
investigation is commenced, as to which an Indemnified Party proposes to
demand indemnification, it shall notify the Indemnifying Party with
reasonable promptness and the Indemnifying Party shall have the right to
assume the defense thereof; provided, however, that any failure by an
Indemnified Party to notify the Indemnifying Party shall not relieve the
Indemnifying Party from its obligations hereunder, except to the extent
that the Indemnifying Party shall have been materially prejudiced in its
ability to defend the action, suit, proceedings or investigation for
which such indemnification is sought by reason of such failure. An
Indemnified Party shall have the right to retain counsel of its own
choice in its sole discretion, and the Indemnifying Party shall pay the
reasonable fees, reasonable expenses and reasonable disbursements of
such counsel only if the Indemnifying Party has declined or failed to
assume the defense thereof or if the Indemnifying Party's counsel would
be unable to defend such claim on behalf of the Indemnified Party by
virtue of a conflict of interest; and such counsel shall to the extent
consistent with its professional responsibilities cooperate with the
Indemnifying Party and any counsel designated by the Indemnifying Party.
The Indemnifying Party shall be liable for any settlement of any claim
against an Indemnified Party made with the Indemnifying Party's written
consent, which consent shall not be unreasonably withheld. The
Indemnifying Party shall not, without prior written consent of an
Indemnified Party, settle or compromise any claim, or permit a default
or consent to the entry of any judgment in respect thereof, unless such
settlement, compromise or consent includes, as an unconditional term
thereof, the giving by the claimant to an Indemnified Party of an
unconditional release from all liability in respect to such claim.
(c) In order to provide for just and equitable
contribution, if a claim for indemnification pursuant to these
indemnification provisions is made but it is found in a final judgment
by a court of competent jurisdiction (not subject to further appeal)
that such indemnification may not be enforced in such case, even though
the express provisions hereof provide for indemnification in such case,
then the Indemnifying Party, on the one hand, and an Indemnified Party,
on the other, shall contribute to the losses, claims, damages,
obligations, penalties, judgments, awards, liabilities, costs and
expenses to which the indemnified persons may be subject in accordance
with the relative benefits received by the Indemnifying Party, on the
one hand, and an Indemnified Party, on the other hand, in connection
with the statements, acts or omissions which resulted in expenses and
the relevant equitable considerations shall also be considered. No
person found liable for a fraudulent misrepresentation shall be entitled
to contribution on account thereof from any person who is not also found
liable for such fraudulent misrepresentation.
(d) The obligations to indemnify and hold
harmless pursuant to this Section 8.2 shall survive each Closing Date
and shall terminate with respect to any unasserted claim based on a
breach of or the non-compliance with any covenant, agreement or
obligation or a breach of or a failure of any representation or warranty
contained in (i) this Agreement (other than Sections 2.13, 2.14 and
2.15) on January 1, 2002 and (ii) Sections 2.13, 2.14 and 2.15 and the
obligation set forth in Section 8.2(a)(iv) hereof upon expiration of the
applicable statute of limitations giving effect to any extensions
thereof.
ARTICLE IX
9. MISCELLANEOUS.
9.1. Preservation of Confidential Information. Five
Arrows shall keep confidential any and all non-public information
obtained from CHP concerning CHP's properties, operations and business
(unless readily ascertainable from public or published information or
trade sources) until the same ceases to be non-public (or becomes so
ascertainable).
9.2. Governing Law. The interpretation and
construction of this Agreement, and all matters relating hereto, shall
be governed by the laws of the State of New York applicable to
agreements executed and to be performed solely within such State.
9.3. Prevailing Party. The prevailing party or parties
in any litigation shall be entitled to receive from the losing party or
parties all costs and expenses, including reasonable counsel fees,
incurred by the prevailing party or parties.
9.4. Captions. The Article and Section captions used
herein are for reference purposes only, and shall not in any way affect
the meaning or interpretation of this Agreement.
9.5. Publicity. Except as otherwise required by law,
none of the parties hereto shall issue any press release or take any
other public statement, in each case relating to, connected with or
arising out of this Agreement or the matters contained herein. Any
statement so issued or made shall require the reasonable prior approval
of the other parties hereto as to the contents and the manner of
presentation and publication thereof.
9.6. Notices. All notices, statements, instructions or
other documents required to be given hereunder, shall be in writing and
shall be given either by hand delivery, by overnight delivery service,
by facsimile transmission or by mailing the same in a sealed envelope,
first-class mail, postage prepaid and either certified or registered,
return receipt requested, addressed as follows:
if to Five Arrows, to:
Five Arrows Realty Securities II L.L.C.
c/o Rothschild Realty, Inc.
1251 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to its counsel:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
if to CHP or Hotel Investors, to:
CNL Hospitality Properties, Inc.
or CNL Hotel Investors, Inc. (as the case may be)
c/o CNL Hospitality Group
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: C. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
with a copy to its counsel:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
and to any other parties at their addresses reflected in the stock
records of CHP. Five Arrows, by written notice given to CHP in
accordance with this Section 9.6, and CHP by written notice to Five
Arrows, may change the address to which notices, statements, instruction
or other documents are to be sent to such party. All notices,
statements, instructions and other documents delivered hereunder shall
be deemed effective upon receipt.
9.7. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns.
9.8. Counterparts. This Agreement may be executed in
two or more counterparts, all of which taken together shall constitute
one instrument.
9.9. Entire Agreement. This Agreement, including the
other documents referred to herein or annexed as Exhibits or Schedules
hereto which form a part hereof, contains the entire understanding of
the parties hereto with respect to the subject matter contained herein
and therein and supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
9.10. Amendments. This Agreement may not be changed
orally, but only by an agreement in writing signed by the parties
hereto.
9.11. Severability. In case any provision in this
Agreement shall be held invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions hereof will not
in any way be affected or impaired thereby.
9.12. Termination of Agreement. The Agreement may be
terminated upon mutual written agreement of the parties.
[The remainder of this page has been intentionally left blank.]
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the day and year first above written.
CNL HOSPITALITY PROPERTIES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
FIVE ARROWS REALTY SECURITIES II L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Manager
CNL HOTEL INVESTORS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
EXHIBIT 1
Hotels
Project Owner
Courtyard:
Addison, TX Acourt Property, Ltd.
Plano, TX PLC Hotel Property, Ltd.
Scottsdale, AZ ▇▇▇▇ Property, L.P.
Seattle, WA Westlake Hotel Property, L.P.
Residence Inn:
Las Vegas, NV LVHC Hotel Property,
Limited Partnership
Phoenix, AZ PARI Hotel Property, L.P.
Plano, TX PLRI Hotel Property, Ltd.
Marriott Suites:
Dallas, TX Marcen Property, Ltd.
EXHIBIT 1.5
Form of Promissory Note