8-K
PROCACCIANTI HOTEL REIT, INC. (PRXA)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest eventreported): February 27, 2020
PROCACCIANTI HOTEL REIT, INC.
(Exact Name of Registrant as Specifiedin Its Charter)
| Maryland | 333-217578 | 81-3661609 |
|---|---|---|
| (Stateor other jurisdiction ofincorporation or organization) | (CommissionFileNumber) | (I.R.S.EmployerIdentification No.) |
1140 Reservoir Avenue
Cranston, Rhode Island 02920-6320
(Address of principal executive offices)
(401) 946-4600
(Registrant’s telephone number,including area code)
N/A
(Former name or former address, if changedsince last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| N/A | N/A | N/A |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company | x |
|---|---|
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | x |
Item 1.01 Entry into a Material Definitive Agreement.
Hotel Acquisition
On February 27, 2020 (the “Closing”), Procaccianti Hotel REIT, Inc. (the “Company”), through Procaccianti Hotel REIT, L.P., the operating partnership of the Company (the “Partnership”), completed the acquisition of the membership interests in Gano Holdings, LLC (“Gano”) for a purchase price of $28.5 million (the “Purchase Price”). Gano owns 100% of the fee simple interest in a 137-room select-service Hilton Garden Inn hotel property located in Providence, Rhode Island (the “Property”). The Purchase Price was determined by two independent appraisals of the Property commissioned in May 2019 and September 2019. The Purchase Price, exclusive of closing costs and typical hotel closing date adjustments, was comprised of three components as follows: (a) a $10,281,855 cash payment, (b) the issuance of 128,124 Class K Units of limited partnership interests in the Partnership (“Class K OP Units”), valued at $10.00 per Class K OP Unit, and (c) the assumption of the existing debt balance on the Property (the “Existing Debt”) as evidenced by a promissory note and other loan documents. The cash portion of the acquisition was funded with net proceeds from the Company’s public offering. Individuals with direct or indirect interests in the seller (as defined herein) of the Property who are direct or indirect owners of Procaccianti Companies, Inc. (the “Sponsor”), the sponsor of the Company, and Procaccianti Hotel Advisors, LLC (the “Advisor”), the external advisor to the Company, received only Class K OP Units and no cash as consideration.
The Procaccianti Group, LLC (“Procaccianti Group”), an affiliate of the Sponsor, had the right to purchase the membership interests in Gano pursuant to that certain Membership Interest Purchase Agreement by and among Procaccianti Group, as buyer, and TPG DP JV, LLC, ETJ Gano Holdings, Inc., PRJA Gano Holdings, LLC, EHI Gano Holdings, Inc. and TPG DP Investors, LLC, collectively as seller (“Seller”), dated as of January 14, 2020 (as amended, the “MIPA”). The Seller entities are affiliated with the Sponsor, and some are controlled by certain members of the investment committee members of the Advisor. On February 27, 2020, Procaccianti Group assigned, and the Partnership assumed, Procaccianti Group’s right, title and interest in and under the MIPA (the “Assignment”), pursuant to that certain Assignment of Membership Interest Purchase Agreement, by and between Procaccianti Group and the Partnership (the “Assignment Agreement”), giving the Partnership the right to acquire the membership interests of Gano for the Purchase Price.
At the Closing, the Lender increased the loan by $2,000,000 to provide additional capital for the acquisition of the Property (as assumed and increased, the “Loan”). The Loan is collateralized by the Property, has an outstanding principal amount of approximately $16.9 million and bears interest at a fixed rate of 4.25% per annum. The Loan matures on May 15, 2025 (the “Maturity Date”). The Loan provides for interest only monthly payments for 35 months, with payments based on a 30-year amortization schedule thereafter. The Loan may be prepaid at any time with 15 days’ prior notice, subject to a declining prepayment premium ranging from 2.0% - 0.5% of the outstanding loan balance, depending on the year of prepayment, as more fully described in the loan agreement. The loan agreements contain affirmative covenants, negative covenants and events of default.
In connection with the acquisition, because the Company is prohibited from operating hotels pursuant to certain tax laws relating to its qualification as a real estate investment trust under the Internal Revenue Code of 1986, as amended, the Property was leased to PHR Gano OPCO Sub, LLC (the “Lessee”), a single purpose entity 100% owned by Hotel Manager TRS II, LLC, a taxable REIT subsidiary of the Company, pursuant to that certain Hotel Lease between Gano and the Lessee dated as of February 27, 2020 (the “Lease”).
In connection with the acquisition of the Property, the Company incurred an acquisition fee payable to the Advisor of approximately $441,370 or 1.5% of the Gross Contract Purchase Price (as defined in the Company’s prospectus), which will be deferred until the occurrence of a liquidation event of the Company and is subordinate to certain stockholders’ returns.
The foregoing descriptions of the Assignment Agreement, MIPA, Loan documents and Lease are only summaries and are qualified in their entirety by reference to the complete text of the Assignment Agreement, MIPA and Loan documents, which are attached as Exhibits 10.1, 10.2 – 10.5, 10.6 – 10.10, and 10.11 respectively, to this Current Report on Form 8-K.
Hotel Management Agreement
On February 27, 2020, the Lessee entered into a hotel management agreement (the “Hotel Management Agreement”) with Gano Hotel Manager, LLC (“Hotel Manager”), an affiliate of the Advisor, to manage the Property.
Under the Hotel Management Agreement, Hotel Manager operates and manages the Property. Hotel Manager will provide all property management, financial accounting, reporting, marketing, and other operational services for the Property, and employees for operating the hotel. Hotel Manager must generally maintain the Property in good operating condition. Hotel
Manager must operate the Property in accordance with the national franchise agreement that covers the hotel, which includes using franchisor sales and reservation systems.
The Hotel Management Agreement generally requires the Lessee to fund budgeted capital expenditures and operating expenses, except those expenses not related to the operation of the hotel. The Lessee is responsible for obtaining and maintaining insurance policies with respect to the hotel, except for insurance relating to employment matters, which is provided by Hotel Manager.
Hotel Manager will receive a hotel management fee each fiscal year with respect to the Property equal to 3% of total operating revenues of the Property (which exclude the gross receipts of any licensees, lessees and concessionaires) paid on a monthly basis, in addition to certain expense and centralized services costs reimbursements. The Hotel Management Agreement has an initial term of 5 years, with four automatic one-year renewals, unless otherwise terminated in accordance with the Hotel Management Agreement.
The Hotel Management Agreement was approved by a majority of the Company’s board of directors (including a majority of the independent directors) not otherwise interested in the transaction as fair, competitive, and commercially reasonable and no less favorable to the Company than a comparable Hotel Management Agreement between unaffiliated parties under the same circumstances.
All rights of Gano, the Lessee, and Hotel Manager under the Hotel Management Agreement are subordinated to the lien of the mortgage on the Property and all other rights of the Lender under the Loan documents pursuant to a certain Tri-Party Agreement.
The foregoing descriptions of the Hotel Management Agreement and Tri-Party Agreement are only summaries and are qualified in its entirety by reference to the complete text of the Hotel Management Agreement and Tri-Party Agreement, which are attached as Exhibit 10.12 and Exhibit 10.13, respectively, to this Current Report on Form 8-K.
Amended and RestatedOperating Partnership Agreement
In connection with the Assignment, effective February 27, 2020, the Company, as general partner of the Partnership, Procaccianti Hotel REIT, LP, LLC and certain principals and affiliates of the Sponsor that were issued Class K OP Units (as described in Item 1.01 herein) entered into an Amended and Restated Agreement of Limited Partnership of Procaccianti Hotel REIT, L.P. (the “Amended and Restated Operating Partnership Agreement”). Below is a summary of the material terms of the Amended and Restated Operating Partnership Agreement:
Partnership interests in the Partnership are divided into “units.” The Partnership has various classes of units: general partnership units, limited partnership common units, subdivided further into classes corresponding to the Company’s classes of capital stock: Class A limited partnership units (“Class A OP Units”), Class K OP Units, Class K-I limited partnership units (“Class K-I OP Units”), Class K-T limited partnership units (“Class K-T OP Units”) and Class B limited partnership units (“Class B OP Units”). General partnership units represent an interest as a general partner in the Partnership and the Company, as general partner, will hold all such units.
For each limited partnership common unit received, investors generally will be required to contribute money or property, with a net equity value determined by the general partner. Holders of limited partnership units will not be obligated to make additional capital contributions to the Partnership. Further, such holders will not have the right to make additional capital contributions to the Partnership or to purchase additional limited partnership units without the Company’s consent as general partner.
Limited partners do not have the right to participate in the management of the Partnership. Limited partners who do not participate in the management of the Partnership, by virtue of their status as limited partners, generally are not liable for the debts and liabilities of the Partnership beyond the amount of their capital contributions. The Company, however, as the general partner of the Partnership, is liable for any unpaid debts and liabilities. The voting rights of the limited partners are generally limited to approval of specific types of amendments to the Amended and Restated Operating Partnership Agreement. With respect to such amendments, each class of limited partnership common unit has one vote. Further, the limited partners have no right to remove the Company as the general partner.
Under certain circumstances, holders of limited partnership units of any class may be restricted from transferring their interests without the consent of the general partner. After owning a limited partnership common unit for one year, limited
partnership common unitholders generally may, subject to certain restrictions, exchange limited partnership units for the cash value of a corresponding number of units of the Company’s common stock or, at the Company’s option, a corresponding number of units of the Company’s common stock, which may be accelerated in certain extraordinary transactions described in the Amended and Restated Operating Partnership Agreement.
The Amended and Restated Partnership Agreement specifies the manner in which distributions from the Partnership will be made to partners and accrue under the Amended and Restated Partnership Agreement. Holders of Class K OP Units, Class K-I OP Units and Class K-T OP Units are generally entitled to receive payment distributions prior to the holders of any other class of limited partnership units. Distributions accrue automatically with respect to Class K OP Units, Class K-I OP Units and Class K-T OP Units at the same rate as under the Company’s charter with respect to the corresponding common share classes. In general, the priority of distributions in the Amended and Restated Partnership Agreement reflects the same priority as in the Company’s charter with respect to the corresponding common shares.
The foregoing description of the Amended and Restated Partnership Agreement is only a summary and is qualified in its entirety by reference to the complete text of the Amended and Restated Partnership Agreement, which is attached as Exhibit 10.14 to this Current Report on Form 8-K.
Item 2.01 Completion of Acquisition or Disposition of Assets.
The information set forth under Item 1.01 of this Current Report is incorporated herein by reference into this Item 2.01.
Item 2.03 Creation of a Direct FinancialObligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 of this Current Report is hereby incorporated by reference into this Item 2.03.
Item 3.02 Unregistered Sale of EquitySecurities.
The Class K OP Units issued to certain principals and affiliates of the Sponsor on February 27, 2020, as described in Item 1.01 of this Current Report, were issued as consideration in the Company’s acquisition of the Property. Such Class K OP Units were issued in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. The Class K OP Units are exchangeable for cash, or at the election of the Company, into shares of common stock of the Company on a one-for-one basis, subject to the terms of the Amended and Restated Partnership Agreement. The information set forth under Item 1.01 of this Current Report relating to the Class K OP Units is hereby incorporated by reference into this Item 3.02.
Item 9.01 - Financial Statements andExhibits.
(a) Financial Statements.
It is impracticable to provide the required financial statements at this time. The Company hereby confirms that such financial statements, to the extent required, will be filed as an amendment to this Current Report no later than 71 days after the deadline for filing this Current Report.
(b) Pro Forma Financial Information.
See paragraph (a) above.
(d) Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PROCACCIANTI HOTEL REIT, INC. | ||
|---|---|---|
| Date: March<br> 3, 2020 | By: | /s/<br> Gregory Vickowski |
| Gregory Vickowski | ||
| Chief Financial Officer |
Exhibit 10.1
ASSIGNMENT OF MEMBERSHIP INTERESTPURCHASE AGREEMENT
THIS ASSIGNMENT OF MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Assignment”) is dated as of February 27, 2020, and is entered into between The Procaccianti Group, LLC, a Rhode Island limited liability company (the “Assignor”), and Procaccianti Hotel REIT, L.P., a Delaware limited partnership (the “Assignee”).
A. Assignor is the purchaser under that certain Membership Interest Purchase Agreement between TPG DP JV, LLC, ETJ Gano Holdings, Inc., PRJA Gano Holdings, LLC, EHI Gano Holdings, Inc. and TPG DV Investors, LLC (collectively, the “Seller”) dated as of January 14, 2020 (as amended, the “Agreement”); and
B. Assignor desires to assign to Assignee all of Assignor's right, title and interest in and under the Agreement to Assignee; and
C. Assignee desires to accept such assignment and assume all of Assignor's duties and obligations thereunder.
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, receipt of which is hereby acknowledged, Assignor and Assignee agree as follows:
1. Assignor assigns, transfers and sets over to Assignee all of Assignor's right, title and interest in and under the Agreement and any other permits, rights and obligations arising under the Agreement or the property described therein;
2. Assignee hereby accepts such assignment and assumes and agrees to perform all of Assignor's duties and obligations arising under the Agreement.
3. Assignor represents and warrants to Assignee that the Agreement is in full force and effect. Assignor is not in default under the Agreement and the Seller thereunder has no defense, counterclaim or right of setoff against Assignor; Assignor owned the purchaser's interest under the Agreement and has the right and authority to make this Assignment, and has not previously assigned, transferred or otherwise encumbered its rights under the Agreement.
[Execution appears on the following page.]
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be executed as of the day and year first above written.
| ASSIGNOR: | |
|---|---|
| The Procaccianti Group, LLC | |
| By: | /s/ James A.<br> Procaccianti |
| James A. Procaccianti, a Manager | |
| ASSIGNEE: | |
| Procaccianti Hotel REIT, L.P. | |
| By: | /s/ James A. Procaccianti |
| James A. Procaccianti | |
| Authorized Representative |
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Exhibit 10.2
MEMBERSHIP INTEREST PURCHASE AGREEMENT
(Hilton Garden Inn Providence, RhodeIsland)
THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement” or “Contract”), is made as of the 14^th^ day of January, 2020 (the “Effective Date”), by, between and among the persons and entities signing this Agreement below under the heading “Sellers” (each being referred to individually as “Seller,” and collectively as “Sellers”), and The Procaccianti Group, LLC, a Rhode Island limited liability company (“Purchaser”).
RECITALS:
WHEREAS, Sellers are parties to that certain Amended and Restated Operating Agreement dated as of June __, 2015 (the “LLC Agreement”) with respect to Gano Holdings, LLC, a Rhode Island limited liability company (hereinafter the “Company”); and
WHEREAS, Sellers are all of the members of the Company; and
WHEREAS, the Company is the owner of the land, buildings and other improvements comprising that certain hotel known as the Hilton Garden Inn Providence located at 220 India Street, Providence, Rhode Island 02903 and being more particularly described in Exhibit A attached hereto (the “Property”),
WHEREAS, Purchaser desires to acquire all of the membership interests in the Company from Sellers upon the terms and conditions hereinafter set forth; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows:
ARTICLE1SALE OF THE PROPERTY
1.1 Agreementof Purchase and Sale. Subject to the terms and conditions hereinafter set forth, Sellers agree to sell, assign, transfer and convey to Purchaser, and Purchaser agrees to purchase from the Sellers, all (i.e. 100%) of the outstanding membership interests in the Company (collectively referred to as the “Interests”).
ARTICLE2CONSIDERATION
2.1 Purchase Price.
2.1.1 The purchase price (“Purchase Price”) for the Interests is TWENTY EIGHT MILLION FIVE HUNDRED THOUSAND AND 00/100 Dollars ($28,500,000.00), which shall be payable by Purchaser to Sellers at Closing (subject to prorations and other credits
provided for in this Contract) in immediately available funds to an account designated by Sellers at least two Business Days prior to Closing.
2.1.2 At Purchaser’s election, Seller and Purchaser hereby agree to reasonably cooperate with each other in arranging for the liens securing the Existing Mortgage Loan to be assigned to Purchaser’s lender or other designee, and in the event of such assignment, Purchaser shall purchase the Property subject to the liens securing the Existing Mortgage Loan, as so assigned. Due to the assignment of the liens securing the Existing Mortgage Loan (A) the Balance of the Purchase Price will be decreased by the outstanding balance of all amounts payable under the Existing Mortgage Loan as of the Closing Date, (B) the liens securing the Existing Mortgage Loan (as the same may be amended and assigned) will be deemed approved by Purchaser and to be Permitted Exceptions, (C) the Property will be conveyed subject to such liens as the same may be amended and assigned, and (D) Seller cause the lender under the Existing Mortgage Loan to assign the liens securing the Existing Mortgage Loan to any lender providing financing to Purchaser, which such lender shall be designated by Purchaser within ten (10) Business Days of Closing; provided, however that if for any reason such liens cannot be assigned, then not withstanding anything to the contrary herein, the Property will be conveyed free and clear of such liens and the foregoing provisions of this Section 2.1.2 shall not apply.
2.2 Earnest Money. Within two (2) Business Days following the execution of this Contract by both Sellers and Purchaser, Purchaser shall deposit with First American Title Insurance Company (the “Title Company”), the sum of Five Hundred Thousand and 00/100 Dollars ($500,000) (the “Initial Deposit”) in good funds. No later than two (2) Business Days following the end of the Inspection Period (as hereinafter defined) (provided that this Contract is not sooner terminated in accordance with the terms hereof), Purchaser shall deposit with the Title Company an additional Five Hundred Thousand and 00/100 Dollars ($500,000) (the “Additional Deposit” and together with the Initial Deposit, the “Deposit”). Should Purchaser fail to make the Initial Deposit or the Additional Deposit, if any when due, this Contract shall automatically terminate, whereupon the Title Company shall return to Sellers all executed originals of this Contract then in its possession and Sellers and Purchaser shall have no further rights, liabilities or obligations hereunder except as expressly set forth herein. The Title Company shall deposit the Deposit in an non-interest bearing account maintained at a federally insured bank or savings and loan association, in such a manner that the entire Deposit is, to the extent feasible, protected by federal deposit insurance. To facilitate the timely deposit of such funds, Purchaser hereby represents, warrants, covenants and agrees with Sellers and the Title Company that Purchaser's federal taxpayer identification number is 45-2480908 and that it will promptly execute such documentation as the Title Company may reasonably require to enable the Title Company to comply with the deposit instructions set forth herein.
2.2.1 The Deposit and any interest earned thereon is hereinafter collectively referred to as the “Earnest Money.” If the transaction contemplated by this Contract is consummated in accordance with the terms and provisions hereof, the Earnest Money shall be credited against the Purchase Price and paid to Sellers at Closing. If the transaction is not so consummated, the Earnest Money shall be held and delivered by the Title Company as hereinafter provided.
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2.2.2 The balance of the Purchase Price, subject to the credits, prorations and adjustments set forth herein, shall be paid in cash by wire transfer of immediately available funds.
2.3 Allocation. Sellers and Purchaser shall cooperate with each other in good faith to arrive at a mutually acceptable allocation of the Purchase Price among the Land, Improvements, Personalty and other customary items either party hereto may request to be allocated (the “Allocation”), and if agreed upon in writing such Allocation shall be deemed attached hereto as Schedule 2.2. Upon Purchaser’s request, Sellers shall provide Purchaser with a statement of Sellers’ proposed allocation of the Purchase Price within five (5) Business Days of Purchaser’s request. If the Allocation cannot be agreed upon, each party may use its own determination and bear any consequences related thereto and Purchaser’s allocation shall be utilized in calculating transfer, sales and similar tax and related filings under this Contract; and Purchaser’s allocation shall control with respect to the amount to be stated on any transfer tax declaration submitted in connection with the transfer of the Interests. If the parties are able to agree upon an Allocation, Sellers and Purchaser agree to (i) be bound by the Allocation and (ii) act in accordance with the Allocation in the preparation of financial statements and filing of all tax returns.
2.4 Amendment. In connection with the purchase of the Interest, during the Inspection Period, the parties shall negotiate in good faith an amendment to enable one or more of the Sellers the opportunity to realize the value of its interest in the Company under the Contract by contributing their interests in the Company to the Purchaser in exchange for membership interests in the Purchaser in a tax-free manner under Section 721 of the Code or other structure that may be agreed to by the parties.
ARTICLE3
INSPECTIONS
3.1 Reports. Purchaser hereby acknowledges that Sellers have provided Purchaser with all documents, tests, reports and other materials and information about the Property, including, without limitation, certain environmental reports and certain financial information relating to the Company, in the Sellers’ possession. Purchaser shall be solely responsible for obtaining any updates, revisions, re-certifications, etc., to any environmental or property condition reports. Upon request, from time to time during the Inspection Period, Sellers will use reasonable efforts to furnish to Purchaser or make available to Purchaser all material information which is in Sellers’ possession or control concerning the Company or the Property that Purchaser, its attorneys, accountants, engineers or other representatives shall reasonably request. Except as provided herein, without limiting Article 5 of this Agreement, all items provided to Purchaser by Sellers or Sellers’ Representative in accordance with this Section 3.1 (“Diligence Materials”) are being provided solely as an accommodation to Purchaser and without recourse, representation or warranty of any kind against or by the Company or Sellers or against the third parties who may have prepared the reports and other items delivered to Purchaser except as set forth herein or in any document delivered by Sellers at Closing. If for any reason the Closing shall not occur, Purchaser shall, upon written request, return to Sellers all Property Documents provided by Sellers to Purchaser, it being understood and agreed that the provisions of this sentence shall survive the expiration or termination of this Agreement.
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3.2 Inspection.
3.2.1 During the Inspection Period and thereafter through Closing if this Contract is not earlier terminated, Purchaser shall be permitted to enter or to have its authorized representatives and its and their agents, employees and representatives (“Purchaser's Representatives”) enter upon the Property or any part thereof at any reasonable time, subject to the rights of Tenants, guests and other occupants occupying space in the Property pursuant to Leases or otherwise, for the purpose of reviewing the books and records relating to the Property, including all records relating to operating income and expenses of the Property and the originals of any of the Diligence Materials submitted to Purchaser, and for the further purpose of conducting physical inspections of the Property and making, at Purchaser's sole risk and expense, such other inspections, examinations, investigations and tests as Purchaser considers appropriate, provided that:
(a) All Investigations shall be conducted during the normal business hours of the Property, unless Sellers otherwise approve in writing and upon appropriate notice to any Tenants. Purchaser shall deliver to Sellers a written request to enter the Property at least twenty-four (24) hours prior to the intended date of entry (which may be given by email to Peter Ziegler (pziegler@procaccianti.com). Each such request shall specify the intended date of entry and shall provide a reasonably detailed description of the proposed Investigations, including, without limitation, a list of contractors who will be performing the proposed Investigation and such other information as Sellers reasonably require in connection with such proposed Investigation.
(b) Purchaser and Purchaser's Representatives shall not unreasonably interfere with the usual operation of the Property by Sellers, the Company and its Tenants, guests or other occupants.
(c) Purchaser and Purchaser's Representatives shall exercise due care and ordinary prudence in performing any Investigations and shall not cause or permit any damage or injury to be done to the Property and shall promptly restore the Property to substantially the condition as existed prior to such Investigations.
(d) Neither Purchaser nor any Purchaser's Representative has authority to do anything that may result in a lien or encumbrance against the Property in connection with its inspections. Without limiting the foregoing, however, Purchaser agrees to promptly pay when due all costs associated with its inspections and not to cause, permit or suffer any lien or encumbrance to be asserted against the Property related to its inspections (provided that in the case of an improperly filed lien, Purchaser may bond around such lien provided that it thereafter uses diligence efforts to cause such lien to be removed of record).
(e) Purchaser specifically agrees that neither it nor any of its employees or agents shall contact or communicate directly with any tenant, occupant, or any Hotel Employee unless such communication shall have been approved by Peter Ziegler (or any other representative designated by Seller). Purchaser shall have the right to communicate with the general manager, chief engineer, director of sales and comptroller provided that Purchaser gives notice to Sellers at least 24 hours in advance of such communication and
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provides Sellers with the opportunity to be present for such communication. Commencing fifteen (15) Business Days prior to Closing, Sellers will cooperate to provide Purchaser reasonable access to coordinate transition matters prior to Closing, including interviewing the Hotel Employees for future employment at the Hotel. Sellers shall be entitled to have a representative present during any such communications.
(f) Purchaser shall comply with all federal, state and local laws, rules, regulations and ordinances which might in any way relate to the Investigations.
(g) Other than research of public records and databases, neither Purchaser nor any Purchaser's Representative shall communicate with any regulatory agencies or their individual employees concerning the Property, without giving at least 48 hours prior written notice to Seller. Sellers shall have the right to participate in any meetings or telephone calls with such agencies or employees. Notwithstanding the foregoing or anything contained herein to the contrary, Purchaser and Purchaser’s Representatives shall have the right, without any requirement to notify Seller, to (i) review (and to seek through FOIA requests) land records, building department, health department and other local governmental authority records with respect to the Land and Improvements and the operation of the Hotel (including, without limitation, for the preparation of (and due diligence required therefor) title reports, zoning reports, property condition reports, environmental assessment reports and other customary due diligence), and (ii) apply to (including the pursuit thereof) the applicable governmental authority for any incentives, licenses or permits necessary or desirable for Purchaser’s continued operation of the Hotel after the Closing.
(h) Notwithstanding anything herein contained to the contrary, without the prior written consent of Seller, which consent may be withheld, delayed or conditioned by Sellers in their sole and absolute discretion, Purchaser shall not be entitled to conduct any invasive physical or environmental inspection, testing or sampling at the Property, including without limitation, any environmental testing other than a Phase I study. If Sellers consent to performance of a test or investigation involving physical disturbance or invasive testing of any portion of the Property, prior to conducting such testing Purchaser shall provide Seller with a reasonably detailed testing plan outlining the scope of work and specific tests Purchaser intends to perform, including location of any borings or samples and means and methodology of the tests. No such tests shall be conducted without Sellers’ prior written approval of the testing plan and the specific test or investigation. Sellers shall have the right to have a representative present during any test or any test or Investigation. Purchaser shall, at its own expense, promptly fill and compact any holes, and otherwise restore any damage to the Property related to the Investigations.
(i) Before conducting and during inspections, Purchaser and each Purchaser's Representative conducting any inspection shall maintain workers' compensation insurance in accordance with applicable law, and Purchaser, or the applicable Purchaser's Representative conducting any inspection, shall maintain (1) commercial general liability insurance with limits of at least Two Million Dollars ($2,000,000.00) for bodily or personal injury or death, (2) property damage insurance in the amount of at least One Million Dollars ($1,000,000.00), and (3) contractual liability insurance with respect to Purchaser's
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indemnification obligations hereunder. Purchaser shall deliver to Sellers evidence of such workers' compensation insurance and evidence of the commercial general liability, property damage and contractual liability insurance before conducting any inspections of the Property, including a certificate of insurance on Acord Form 27 (modified to include liability). Each such insurance policy shall be written by a reputable insurance company having a rating of at least “A:VII” by Best's Rating Guide (or a comparable rating by a successor rating service), and shall otherwise be subject to Sellers’ prior approval. Such insurance policies shall name as additional insureds Sellers, the Company, Manager and such other parties holding insurable interests as Sellers may designate.
(j) Purchaser shall indemnify, defend and hold the Company, Sellers, and Manager, and their respective partners, shareholders, officers, members, directors, agents and employees (the “Seller Indemnified Parties”) harmless from any and all losses, costs, liens, claims, causes of action, liability, damages, expenses and liability (including, without limitation, court costs and reasonable attorneys' fees) incurred in connection with or arising in any way from (a) any inspections conducted by Purchaser and/or Purchaser's Representative, (b) the exercise of Purchaser's rights under this Section 3.2, or (c) any breach by Purchaser and/or Purchaser's Representative of the terms of this Section 3.2, except that Purchaser’s obligations as set forth in this sentence shall not extend to previously existing conditions that are discovered by Purchaser or its agents to be present on, under or about the Property, nor shall Purchaser’s obligations extend to conditions that are caused or exacerbated by the actions of a Seller or its employees or agents. This indemnity provision shall survive termination or expiration of this Contract. If any proceeding is filed for which indemnity is required hereunder, Purchaser agrees, upon request therefore, to defend the indemnified party in such proceeding at its sole cost utilizing counsel reasonably satisfactory to the indemnified party.
(k) Purchaser agrees that the Diligence Materials, the information gathered in connection with this Contract and the fact of this transaction shall be considered “Confidential Information”, and such Confidential Information shall be used by Purchaser and Purchaser Representatives solely for the purpose of Purchaser’s evaluation of the Property and the transactions contemplated by this Contract. Neither Purchaser nor any Purchaser Representative shall reveal, disclose, disseminate, publish or communicate to any other persons, parties or entities any Confidential Information, without the prior written consent of Seller, which shall not be unreasonably withheld, conditioned or delayed, other than to Purchaser’s partners, employees, consultants, attorneys, engineers, licensees, prospective investors, and lenders involved in this transaction and who have notified to preserve the confidentiality of such information as required hereby (collectively, “Permitted Outside Parties”). Purchaser shall be responsible for ensuring that any and all Permitted Outside Parties (and any other person for whom Purchaser has responsibility hereunder) complies with this section. Purchaser shall not divulge the contents of the Diligence Materials or other Confidential Information to any party other than Permitted Outside Parties except in connection with a court order or other legal process otherwise in strict accordance with the confidentiality standards set forth in this section. In permitting Purchaser and the Permitted Outside Parties to review the Diligence Materials or any other Confidential Information, neither the Company nor any Seller has not waived any privilege or claim of confidentiality with respect thereto, and no third party benefits or relationships
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of any kind, either express or implied, have been offered, intended or created. Notwithstanding anything to the contrary herein, Confidential Information shall not include information which (a) is or becomes generally available to the public other than as a result of a disclosure by Purchaser or the Permitted Outside Parties, (b) was available to Purchaser or the Permitted Outside Parties on a nonconfidential basis prior to its disclosure by a Seller or its representatives, (c) becomes available to Purchaser or the Permitted Outside Parties on a nonconfidential basis from a person, other than a Seller or its representatives, who is not otherwise bound by a confidentiality agreement with a Seller or any of its representatives not to transmit the information to Purchaser or the Permitted Outside Parties, or (d) is independently developed by any employee or agent of Purchaser or the Permitted Outside Parties who did not have access to the Confidential Information. The provisions of this section shall survive the termination of this Contract. Purchaser shall also promptly notify Sellers in writing of requests for Confidential Information from any third party or regulatory agency.
3.3 Right of Termination. This Contract shall be deemed accepted unless Purchaser shall evidence its intent to terminate this Contract by written notice thereof in accordance with Section 11.3 of this Contract to Sellers and Escrow Agent on or prior to prior to the expiration of the Inspection Period (the “Termination Notice”) which may be given for any reason or no reason in Purchaser’s sole discretion. Upon receipt of the Termination Notice, Escrow Agent shall immediately return the Deposit to Purchaser and this Contract shall thereupon be deemed terminated, and neither party hereto shall have any obligations of any nature to the other hereunder or by reason hereof, except for those provisions that expressly survive such termination.
3.4 Assumption of Contracts. Purchaser shall have the right, at any time before the end of the Inspection Period, to notify Sellers of any Property Contracts that Purchaser has elected not to assume on the Closing Date. With respect to such Property Contracts, Sellers shall promptly terminate such Property Contracts effective as of the Closing Date. Sellers shall deliver the applicable notices of termination as soon as practicable following Sellers’ receipt of the Purchaser’s notice. With respect to the Property Contracts that Purchaser has elected to assume (each, an “Assumed Contract”), Purchaser shall cause the Company shall continue to pay all sums and perform all other covenants and obligations which are to be paid, performed and complied with under the Assumed Contracts first arising or accruing on and after the Closing Date.
3.5 Franchise Agreement. Sellers have informed Purchaser that the Company and the Property is subject to the terms of the Franchise Agreement. As used herein, the “Franchisor Consent” shall mean Franchisor’s agreement to concurrently with Closing either (a) terminate the Franchise Agreement and release Sellers as of the Closing Date from liabilities under the Franchise Agreement (other than those that are expressly stated in the Franchise Agreement to survive a termination of the Franchise Agreement) and enter into its standard franchise agreement in connection its ownership of the Hotel (such new franchise or license agreement, the “New Franchise Agreement”)or (b) consent to the transfer of the Interests pursuant to the terms of the Franchise Agreement. Within fifteen (15) days after the Effective Date, Purchaser shall (i) apply to Franchisor to obtain the Franchisor Consent and use commercially reasonable efforts to submit all information and documentation required by Franchisor in connection therewith; and (ii) thereafter, diligently pursue and use commercially reasonable efforts to obtain the Franchisor Consent prior to Closing. Other than the Company’s payment of any regularly recurring royalties
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or other fees and payments due under the existing Franchise Agreement accrued as of the Closing Date (including without limitation any costs and fees imposed by Franchisor resulting from the Company’s default under the Franchise Agreement prior to Closing but specifically not including any costs, penalties or fees imposed in connection with the closing of the transaction contemplated by this Contract and the termination of the Franchise Agreement in connection therewith, which shall be paid by Sellers at Closing), all costs and expenses associated with seeking and obtaining (including liquidated damages, if any) the New Franchise Agreement shall be borne by Purchaser.
ARTICLE4
TITLEAND SURVEY
4.1 Title Report. Purchaser shall order a title insurance commitment with respect to the Land and Improvements (a “Title Commitment”). Purchaser shall ensure that a duplicate of such Title Commitment be delivered to Sellers’ counsel, together with legible photocopies (to the extent available) of all instruments referred to in such Title Commitment as conditions or exceptions to title to the Property and to the extent available, a current tax search with respect to the Land and Improvements from all applicable taxing authorities.
4.2 Reserved.
4.3 Survey. If Purchaser orders any update to the Existing Survey (a “Survey Update”), Purchaser shall ensure that a duplicate of such Survey Update be delivered to Sellers’ counsel.
4.4 Review of Title and Survey.
4.4.1 If the Title Commitment and/or Survey Update shows matters objectionable to Purchaser, and Sellers have received written notice of such objectionable matters (collectively, “Title Objections”) from Purchaser on or before the date which is five (5) Business Days prior to the expiration of the Inspection Period, Sellers shall deliver to Purchaser a written notice of Sellers’ election to cure any of the Title Objections referenced in Purchaser’s notice three (3) Business Days after Sellers’ receipt of such notice. Failure to deliver such response shall be deemed Sellers’ election not to cure any of the Title Objections referenced therein. If Sellers elect to cure any of such Title Objections, Sellers shall have until the earlier to occur of (i) the date that is thirty (30) days after receipt of such notice or (ii) the Closing Date to cure any such Title Objections. Title Objections will not be deemed to include those matters which (1) are affirmatively insured against by the Title Company without indemnification from Sellers in a manner acceptable to Purchaser in its reasonable discretion; or (2) will be discharged or removed by Sellers at or prior to Closing. Failure to timely notify Sellers of Title Objections shall be deemed a waiver by Purchaser of Purchaser’s right to disapprove any of the matters referenced in the Title Commitment, and Purchaser shall then accept such title as is described in the Title Commitment without reduction of the Purchase Price or reservation of any claim against Seller. Except as expressly set forth herein, Sellers shall have no obligation to remove Title Objections, and any failure or refusal of Sellers to do so shall not be a default of Sellers hereunder. If Sellers elect or are deemed to have elected not to attempt to cure or remove one or more of the Title Objections, Purchaser’s sole and exclusive remedy shall be to either (i) terminate this
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Contract in accordance with Section 3.3 and receive a return of the Deposit, or (ii) accept such title subject to such Title Objections without reduction in the Purchase Price or reservation of any claim against Sellers and to close hereunder, subject, however, to Sellers’ performance of all of the other terms, conditions and covenants of this Agreement to be performed by Sellers hereunder.
4.4.2 Notwithstanding the provisions of this Contract to the contrary, at or prior to Closing, Sellers shall cause the Company to satisfy any mortgages, deeds of trust, construction, mechanics’ or materialmen’s liens, judgment liens, tax liens or other liens or charges evidencing monetary encumbrances, in each case solely to the extent claimed by or through or consented to by Seller (other than liens for non-delinquent general real estate taxes or assessments and liens caused by Purchaser or Purchaser’s agents), and any exceptions set forth in the Title Commitment that can be satisfied by the payment of fines, fees or other monies, and such matters shall not be Permitted Exceptions and that it shall be Sellers’ responsibility to cause the Title Company remove such liens from the Title Policy issued at Closing. If such Title Objections Sellers elect or are required to remove prior to Closing as set forth herein are not cured as of the Closing Date, Purchaser’s sole and exclusive remedy shall be to either (i) terminate this Contract by written notice to Sellers and proceed pursuant to Section 10.2, or (ii) to accept the transfer of the Interests without reduction of the Purchase Price or reservation of any claim against Seller.
4.4.3 If any supplement or revision to the Title Commitment and/or Survey Update issued subsequent to the respective dates of the Title Commitment and the Survey Update contains exceptions to title or defects not shown in the original Title Commitment or the original Survey Update, as applicable, and such additional Title Objections were not caused by Purchaser or any person on behalf of Purchaser, then Purchaser shall be entitled to object to such exceptions by written notice of objection to Seller on or before the fifth (5^th^) day after Purchaser’s receipt of the supplement showing such exceptions. Seller shall have until five (5) Business Days from the receipt of Purchaser’s notice of each such additional Title Objections that comply with the requirements of this Section 4.4 to remove or to remedy the conditions or defects resulting in such exceptions and to procure a supplement to the Title Commitment or the Survey Update, as applicable, removing such Title Objection or to agree in writing to cure such Title Objection(s) prior to Closing. If Seller is either unable or unwilling to provide for the removal of one or more of such additional Title Objections or does not agree to cure such Title Objections, within such five (5) Business Day period, then, at Purchaser’s option, this Contract may be terminated upon written notice given by Purchaser to Seller on or before the second (2nd) Business Day after such five (5) Business Day period. Upon delivery of such termination notice, this Contract shall automatically terminate and the parties shall be released from all further obligations under this Contract (except for those which expressly survive termination of this Agreement), provided that the Earnest Money shall be disbursed by Escrow Agent to Purchaser; provided, further, if Purchaser terminates this Agreement because Seller is unwilling or unable to cure any monetary encumbrance required to be removed or bonded over in accordance with this Agreement, the same shall be treated as a default by Seller and Purchaser shall have the right to avail itself of the remedies provided in, and subject to, Section 10.2. If Purchaser shall have the right to, but does not, terminate this Contract in the manner set forth above in this Section 4.4.3, then Purchaser shall be deemed to have waived its objection to any Title
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Objection referred to in Purchaser’s notice of Title Objections relating to such supplement which shall not have been cured or which Seller elected not to cure prior to Closing, and this Contract shall remain in full force and effect. Anything in this Contract to the contrary notwithstanding, the Closing Date shall be extended to such date as required by this Section 4.4.3 such that all notice and cure periods have timely lapsed or expired.
4.5 Purchaser's Post-Termination Obligations. In the event Purchaser terminates this Contract pursuant to the right to do so set forth in Section 3.3, 8.1, or 4.4 hereof, Purchaser shall remain liable for the costs and expenses of any Title Commitment, UCC Searches, or Survey Update, and Purchaser shall pay all such costs and expenses as and when the same become due and payable. The provisions of this Section 4.5 shall survive the expiration, early termination or Closing of this Contract.
ARTICLE5REPRESENTATIONS AND WARRANTIES
5.1 Sellers’ Representations. Sellers represents and warrants to Purchaser as of the Effective Date, as follows:
5.1.1 Each Seller has the full right and authority to enter into this Agreement and to consummate or cause to be consummated the transaction contemplated by this Agreement, without the necessity for further consent from any third party. Each Seller owns their respective Interest and each Seller has the full right and authority to transfer all of the Interests owned by such Seller. The Interests consist of and account for all ownership, membership, equity and other interests of any kind in the Company, including but not limited ot any options to purchase, warrants, equity conversion rights or the like. The person signing this Agreement on behalf of each Seller is authorized to do so and this Agreement constitutes the valid and binding agreement of such Seller, and is enforceable in accordance with its terms. The execution and delivery of this Agreement, and the performance by such Seller of its obligations hereunder, do not violate any provision of such Sellers’, or the Company’s articles of organization, the LLC Agreement or the articles of organization or the operating agreement or the trust indenture of any Seller or any agreement or judicial order to which such Seller is subject.
5.1.2 Each Seller is duly organized, validly existing and in good standing under the laws of the state of its creation as a Delaware limited liability company, and is qualified or registered to do business and is in good standing in the state in which the Property is located, with full power and authority to enter into and execute this Contract and to consummate the transactions contemplated hereby. Each Seller has received all requisite organizational approvals necessary for the execution of this Contract and the consummation of the transactions contemplated hereby and this Contract constitutes the legal, valid and biding obligation of each Seller, enforceable against such Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting debtors' and creditors' rights generally and general equitable provisions.
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5.1.3 The Company is duly organized, validly existing and in good standing under the laws of the state of its creation as a Delaware limited liability company, and is qualified or registered to do business and is in good standing in the state in which the Property is located. The Company has full limited liability company power and authority to own, operate and lease the Property and to carry on its business as it has been and is currently conducted. Other than the Property, the Company does not own any other property or assets of any kind or nature and does not now conduct and has never conducted any other business other than in connection with the ownership and operation of the Property.
5.1.4 To Sellers’ knowledge, the Company has not engaged in or permitted any operations or activities upon, or any use or occupancy of the Property for the purpose of or in any way involving the handling, manufacture, treatment, storage, use, generation, release, discharge, refining, dumping, or disposal of any Hazardous Materials in violation of Applicable Laws. Except as disclosed on Schedule 5.1.4, the Company has not received any written notice from any governmental or regulatory authority of the presence or release of any Hazardous Materials in violation of any applicable Environmental Laws which remains uncured.
5.1.5 Except as set forth on Schedule 5.1.5, there are no actions, suits, proceedings, arbitrations, governmental investigations, administrative or other adjudicatory proceedings or other legal actions pending or, to Sellers’ knowledge threatened in writing, in any court or before or by any Governmental Authority against or affecting the Company or the Property.
5.1.6 There are no pending eminent domain or condemnation proceedings against the Property or any material part thereof and to Sellers’ knowledge, no such proceedings are presently threatened in writing or contemplated by any authority with the power of eminent domain.
5.1.7 No Seller is a foreign person subject to withholding tax as required by Section 1445 of the Internal Revenue Code.
5.1.8 All individuals are employed at the Property including the Hotel Employees are all employees of the Company. To Sellers’ knowledge, there are no agreements relating to any labor or collective bargaining agreement affecting the Property and there are no pension plans of any type with respect to Hotel Employees that would be binding on Purchaser or the Company after Closing. The Company has not received any written notice from any labor union or group of employees that such union or group represents or believes or claims it represents or intends to represent any of the Hotel Employees nor has the Company received any written notice of any claim of unfair labor practices. To Sellers’ knowledge, Manager is not a party to any written employment agreements with respect to the Property that would be binding on Purchaser or the Company after Closing.
5.1.9 The execution and delivery of this Contract by each Seller and the consummation by such Seller of the transactions contemplated hereby will not (i) violate any judgment, order, injunction, decree, regulation or ruling of any court or governmental entity or (ii) conflict with, result in a breach of, or constitute a default under the
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organizational documents of such Seller, any note or other evidence of indebtedness, any mortgage, deed of trust or indenture, or any lease or other material agreement or instrument to which such Seller is a party or by which such Seller may be bound.
5.1.10 No consent, waiver, approval or authorization is required from any person or entity (that would materially adversely affect each Seller’s ability to consummate the transactions contemplated hereby or has not already been obtained) in connection with the execution and delivery of this Contract by such Seller or the performance by such Seller of the transactions contemplated hereby.
5.1.11 None of the Sellers or the Company has (i) commenced a voluntary case, or had entered against it a petition, for relief under any federal bankruptcy act or any similar petition, order or decree under any federal or state law or statute relative to bankruptcy, insolvency or other relief for debtors, (ii) caused, suffered or consented to the appointment of a receiver, trustee, administrator, conservator, liquidator or similar official in any federal, state or foreign judicial or non-judicial proceedings, to hold, administer and/or liquidate all or substantially all of its property, or (iii) made an assignment for the benefit of creditors.
5.1.12 All Leases are listed in Schedule 5.1.12. Except as set forth on Schedule 5.1.12, there are no leases, licenses or occupancy agreements in effect with respect to the Property, or any portion thereof. To Sellers’ knowledge, there are no outstanding obligations for commissions, tenant improvements or other tenant concessions with respect to the Property.
5.1.13 All Property Contracts are listed in Schedule 5.1.13. All Property Contracts are in full force and effect, and there are no defaults or events that with notice or the passage of time or both, would constitute a default by the Company under any such Property Contract, nor, to Sellers’ knowledge, by any other party thereto.
5.1.14 Sellers have delivered or made available to Purchaser copies of all licenses (including, without limitation, liquor licenses), certificates of occupancy, permits and approvals required to be issued by any Governmental Authority or any third party and used in or necessary to the ownership, operation, leasing, maintenance or use of the Property or any part thereof, including the use of the Hotel as a fully functioning full service hotel (the “Permits”). Except as set forth on Schedule 5.1.14, the Company has not received a notice from any applicable Governmental Authority (i) of any violation, default, intended or threatened non-renewal, suspension or revocation of any of the Permits or (ii) that the Hotel lacks any permits or licenses necessary for the present use and occupancy of the Hotel.
5.1.15 No Seller is or is acting on behalf of an employee benefit plan (a “Plan”) subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”) and none of its assets constitutes or will constitute (or are or will be deemed, for purposes of ERISA or Section 4975 of the Code, or, if applicable, any substantially similar federal, state, local or foreign law, to constitute) assets of any such Plan.
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5.1.16 No Seller nor to Sellers’ knowledge any beneficial owner of any Seller: (i) is listed on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control, Department of the Treasury (“OFAC”) pursuant to Executive Order No. 133224 66 Fed. Reg. 49079 (September 25, 2001) (the “Order”) and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable orders (such lists are collectively referred to as the “Lists”); (ii) is a person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders; (iii) to Sellers’ knowledge is owned or controlled by, or acts for or on behalf of, any person or entity on the Lists or any other person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Order, or (iv) is or has engaged in any dealings or transactions, or is otherwise associated, with any Forbidden Entity. A “Forbidden Entity” is defined as (A) the governments of Cuba, Iran, North Korea, Myanmar, Syria and Sudan (each, a “Prohibited Country”) and any of their agencies, including, but not limited to, political units and subdivisions (each, a “Prohibited Government”); and (B) any company that (1) is wholly or partially managed or controlled by a Prohibited Government, (2) is established, organized under, or whose principal place of business is in any Prohibited Country, or (3) has failed to submit an affidavit following request therefore averring that it does not own or control any property or asset in and has not and does not transact business with any Prohibited Country. For purposes of this Section 5.1.15, a “company” is any entity whether publicly traded or privately owned capable of affecting commerce, including, but not limited to, a government, governmental agency, natural person, legal person, sole proprietorship, partnership, firm corporation, subsidiary, affiliate, franchisor, franchisee, joint venture, trade association, financial institution, utility, public franchise, provider of financial services, trust, or enterprise and any association thereof. The foregoing does not apply to any person or entity to the extent that such person’s interest in a Seller is through a US publicly traded entity.
5.1.17 Subject to the Property Contracts, the Company has good and valid title to all of the tangible personal property, and, other than Property Contracts, shall be free and clear of all liens and encumbrances as of the Closing Date.
5.1.18 There are no existing management contracts or franchise agreements relating to the Property other than (i) the Management Agreement and (ii) the Franchise Agreement. There are no defaults or events that with notice or the passage of time or both, would constitute a default by the Company under the Management Agreement or the Franchise Agreement, nor, to Sellers’ knowledge, by any other party thereto.
5.1.19 Sellers have furnished to Purchaser copies of all financial statements for the Property prepared by the Manager for the periods ending December 31, 2015-2018 and for the calendar months of 2019 and of the current year through the month preceding the date hereof, and all books and records of the Property, or true and complete copies thereof, maintained during Sellers’ ownership of the Company in the ordinary course of business.
5.1.20 Other than pursuant to the Franchise Agreement, the Company has not granted any options, rights of first refusal, rights of first offer or any other rights in favor of third parties with respect to the Property or any interest therein nor do any other unexpired
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rights exist in favor of third persons to purchase or otherwise acquire the Property or any interest therein.
5.1.21 (i) All tax returns of the Company have been properly and timely filed, (ii) all such tax returns were true, complete, and correct in all material respects, and (iii) the Company or Manager have paid all taxes that are due and payable in accordance with Applicable Laws in connection with the Hotel and its operation, including, without limitation, employer withholding taxes, sales and use taxes, occupancy taxes, real property taxes and personal property taxes. There are no tax claims, audits or proceedings pending or threatened against the Company, the Company has not received notice of and has no knowledge of any special tax assessment relating to the Hotel, the Property or any portion thereof, and there are no tax agreements in place affecting the Hotel or the Property. The Property is not subject to any protest or appeal proceedings related to real property tax assessments or subject to “rollback” or similar reassessment for prior years. The Company has been treated as a partnership for federal, state, and local income tax purposes since its formation.
5.1.22 The Company has not received notice of any violation of any applicable laws, rules and regulations related to the Property that has not been cured prior to the Effective Date
5.1.23 To Sellers’ knowledge, no Security Breach or attempted Security Breach has occurred at the Hotel. To Sellers’ knowledge, the Company and Manager have collected, used, imported, exported, stored, processed, and protected all Personal Information and other information protected by Data Rules, in accordance with the privacy policies of Seller, Manager, Franchisor, and in accordance with Data Rules applicable to Seller.
5.1.24 There are no ongoing capital improvement projects at the Property that have commenced on or before the date hereof that will not be completed and paid for in full prior to Closing.
5.2 Sellers’ Knowledge. When used in this Contract or in any certificate or other document delivered pursuant hereto, the phrase “to Sellers’ knowledge,” or derivations thereof shall be construed to mean the current, actual knowledge of Peter Ziegler and shall not include any knowledge which may be imputed to Sellers or of any other person. Purchaser acknowledges that the individuals named above are named solely for the purpose of defining and narrowing the scope of Sellers’ knowledge and not for the purpose of imposing any liability on or creating any duties running from such individuals to Purchaser. Purchaser covenants that it will bring no action of any kind against such individuals, related to or arising out of these representations and warranties.
5.3 Purchaser's Representations. Purchaser represents and warrants to Sellers as of the Effective Date, as follows:
5.3.1 Purchaser is duly organized, validly existing and in good standing under the laws of the state of its formation and is, or will be as of Closing, qualified to do business and in good standing in the state in which the Property is located, with full power and authority to enter into and execute this Contract and to consummate the transactions
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contemplated hereby. Purchaser has received all requisite entity approvals necessary for the execution of this Contract and the consummation of the transactions contemplated hereby and this Contract constitutes the legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting debtors' and creditors' rights generally and general equitable provisions.
5.3.2 Neither the execution of this Contract nor the performance by Purchaser of its obligations hereunder will violate, be in conflict with, result in a breach of, or constitute (with due notice or lapse of time, or both) a default under any Applicable Law.
5.3.3 Neither Purchaser nor to Purchaser’s knowledge any beneficial owner of Purchaser: (i) is listed on OFAC, the Order and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable orders; (ii) is a person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders; (iii) to Purchaser’s knowledge, is owned or controlled by, or acts for or on behalf of, any person or entity on the Lists or any other person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Order, or (iv) is or has engaged in any dealings or transactions, or is otherwise associated, with any Forbidden Entity. The foregoing does not apply to any person or entity to the extent that such person’s interest in a Seller is through a US publicly traded entity.
5.3.4 It is expressly acknowledged by Purchaser that this transaction is not subject to any financing contingency and that no financing for this transaction shall be provided by Seller.
5.4 Survival. The representations and warranties made by Seller in this Contract, including in Section 5.1 and 12.1 hereof, and the representations and warranties made by Purchaser in this Contract, including in Section 5.3 hereof shall be effective as of the Effective Date and continue in full force and effect after the Closing for a period of nine (9) months (the “Survival Period”); provided any claim arising by reason of a claimed breach of such representations and warranties must be stated in a written notice to Sellers or Purchaser, as applicable, on or before the expiration of the Survival Period. Notwithstanding the foregoing, if, prior to the Closing, Purchaser obtains actual knowledge that any representation or warranty of Sellers is inaccurate and Purchaser nonetheless proceeds with the Closing, such representation or warranty by Sellers shall be deemed to be qualified or modified to reflect Purchaser’s actual knowledge of such breach and Purchaser shall have no right to make, and hereby waives, any claim with respect thereto to the extent of such actual knowledge. When used in this Contract or in any certificate or other document delivered pursuant hereto, the phrase “to Purchaser's knowledge,” or derivations thereof shall be construed to mean the current, actual knowledge of Peter Ziegler after making reasonable inquiry of the general manager of the Hotel but without obligation to make any other investigation of the files, documents or studies in the possession of other persons, and shall not include any knowledge which may be imputed to Purchaser or of any other person.
5.5 Limitation of Sellers’ Liability. Notwithstanding any other provision of this Contract, any agreement or other instrument contemplated by this Contract, or any rights which Purchaser might
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otherwise have at law, equity, or by statute, whether based on contract or some other claim (except for liability based upon fraud on the part of Sellers), in no event will Sellers’ liability to Purchaser exceed Five Hundred Seventy Thousand and 00/100 Dollars ($570,000.00) (the “Liability Cap”). Without limiting the generality of the foregoing, the general and limited partners, employees, agent or affiliate of Sellers will not in any manner be personally or individually liable for the obligations of Sellers hereunder or for any claims related to this Contract, any agreement or other instrument contemplated by this Contract, or the Property. The provisions of this Section 5.5 shall survive the Closing.
5.6 As Is; Release. (a) Purchaser acknowledges that Purchaser will have the opportunity to independently and personally inspect the Property and that Purchaser has entered into this Contract based upon its ability to make such examination and inspection. The Property is to be sold to and accepted by Purchaser at Closing in its then present condition “AS IS, WITH ALL FAULTS, (WHETHER LATENT, PATENT OR DETECTABLE OR NOT) AND WITHOUT ANY WARRANTY WHATSOEVER, EXPRESS OR IMPLIED”, and without any reduction in the Purchase Price for any change in the physical or financial condition occurring from and after the Effective Date except for the express representations and warranties of Sellers contained in in this Contract and any closing document delivered by Sellers. Notwithstanding anything contained herein to the contrary, it is understood and agreed that, except for the express representations and warranties of Sellers contained in this Contract and any closing document delivered by Sellers, Sellers and Sellers’ agents or employees have not made and are not now making, and they specifically disclaim, any warranties, representations or guaranties of any kind or character, express or implied, oral or written, past, present or future, with respect to the Property, including, but not limited to, warranties, representations or guaranties as to (1) matters of title; (2) environmental matters of any kind relating to the Property, the Land or the Improvements or any portion thereof (including the condition of the soil or groundwater beneath the Property); (3) geological conditions, including, without limitation, subsidence, subsurface conditions, water table, underground water reservoirs, limitations regarding the withdrawal of water and earthquake faults and the resulting damage of past and/or future earthquakes; (4) whether, and to the extent to which the Property or any portion thereof is affected by any stream (surface or underground), body of water, flood prone area, flood plain, floodway or special flood hazard; (5) drainage; (6) soil conditions, including the existence of instability, past soil repairs, soil additions or conditions of soil fill, or susceptibility to landslides, or the sufficiency of any under shoring; (7) zoning to which the Property or any portion thereof may be subject; (8) the availability of any utilities to the Property or any portion thereof including, without limitation, water, sewage, gas and electric; (9) usages of adjoining property; (10) access to the Property or any portion thereof, (11) the value, compliance with the plans and specifications, size, location, age, use, design, quality, description, suitability, structural integrity, operation, title to, or physical or financial condition of the Property or any portion thereof, or any income, expenses, charges, liens, encumbrances, rights or claims on or affecting or pertaining to the Property or any part thereof; (12) the presence of Hazardous Materials (hereinafter defined) in or on, under or in the vicinity of the Property; (13) the condition or use of the Property or compliance of the Property with any or all past, present or future federal, state or local ordinances, rules, regulations or laws, building, fire or zoning ordinances, codes or other similar laws; (14) the existence or non-existence of underground storage tanks; (15) any other matter affecting the stability or integrity of the Real Property; (16) the potential for further development of the Property; (17) the existence of vested land use, zoning or building entitlements affecting the Property; (18) the merchantability of the Property or fitness of the Property for any
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particular purpose (Purchaser affirming that Purchaser has not relied on Sellers’ or Sellers’ agents’ or employees’ skill or judgment to select or furnish the Property for any particular purpose, and that Sellers makes no warranty that the Property is fit for any particular-purpose); or (19) tax consequences. EXCEPT AS EXPRESSLY SET FORTH HEREIN AND ANY CLOSING DOCUMENT DELIVERED BY SELLER, SELLERS MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND TO PURCHASER, INCLUDING, WITHOUT LIMITATION, THE PHYSICAL CONDITION OF THE PROPERTY AND ANY IMPROVEMENTS LOCATED THEREON, OR THEIR SUITABILITY FOR ANY PARTICULAR PURPOSE OR OF MERCHANTABILITY. PURCHASER SHALL RELY ON ITS INVESTIGATIONS OF THE PROPERTY IN DETERMINING WHETHER TO ACQUIRE IT.
(b) Except as otherwise expressly set forth in this Contract or the documents delivered by Sellers at Closing or any claims based on fraud or intentional misconduct, from and after Closing, Sellers and their respective partners, shareholders, officers, directors, agents, employees, property manager, controlling persons and affiliates (individually a “Seller Party” and collectively the “Seller Parties”) are hereby released from all responsibility and liability regarding the condition (including the presence in the soil, air, structures and surface and subsurface waters, of materials or substances that have been or may in the future be determined to be toxic, hazardous, undesirable or subject to regulation and that may need to be specially treated, handled and/or removed from the Property under current or future federal, state and local laws, regulations or guidelines), valuation, salability or utility of the Property, or its suitability for any purpose whatsoever. Except as specifically provided in the prior sentence, Purchaser specifically releases Sellers from any claims it may have against Sellers now or in the future under the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq., as amended; the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., as amended; any other analogous state or federal statute; and common law arising from the environmental conditions of the Property or the presence of Hazardous Materials, solid wastes, or any other pollutants or contamination the Property.
(c) Purchaser acknowledges that any information of any type which Purchaser has received or may receive from any Seller Party, including, without limitation, any environmental reports and surveys, is furnished on the express condition that Purchaser shall make an independent verification of the accuracy of such information, all such information being furnished without any warranty whatsoever except as expressly set forth in this Contract.
(d) THEPROVISIONS OF THIS SECTION ARE A MATERIAL PART OF THE CONSIDERATION FOR SELLERS’ ENTERING INTO THIS CONTRACT, AND SHALL SURVIVECLOSING.
ARTICLE6CONDITIONS TO CLOSING
6.1 Conditions to Purchaser's Obligation to Close. In addition to the conditions set forth elsewhere in this Contract, the following conditions shall be conditions precedent to the obligation of Purchaser to purchase the Property on the Closing Date as provided herein (and any of the following conditions can be waived only in writing by Purchaser):
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6.1.1 Each of Sellers’ representations and warranties shall be true and correct in all material respects as if made on and as of the Closing Date.
6.1.2 Sellers shall have performed and complied in all material respects with all covenants and conditions required by this Contract to be performed or complied with by Sellers at or prior to Closing.
6.1.3 If, and only if Purchaser has provided the Purchaser’s Pro Forma to Sellers prior to the end of the Inspection Period, at Closing, the Title Company shall issue to the Purchaser or be irrevocably committed to issue to the Purchaser an extended coverage ALTA owner’s policy of title insurance or an endorsement to the Company’s existing owner’s policy (the “Title Policy”), in the form of the Purchaser’s Pro Forma subject only to the Permitted Exceptions and other standard terms and conditions, provided, however that the Purchaser acknowledges that despite the inclusion of endorsements in the Purchaser’s Pro Forma, neither the receipt of any endorsements nor the failure of the Title Company to remove any other standard terms and conditions shall be conditions to the Purchaser’s obligations under this Agreement, nor shall the failure to obtain same result in any reduction or set off against the Purchase Price or delay the Closing. Notwithstanding anything to the contrary, nothing set forth in the previous sentence shall excuse Sellers’ performance of its obligations pursuant to Section 4.4 or Section 7.2.1 hereof.
6.1.4 The existing Management Agreement and the Property Contracts other than the Assumed Contracts shall have been terminated at no cost or expense to Purchaser.
6.1.5 Purchaser shall have received Franchisor Consent and, if applicable, Franchisor shall be ready, willing and able to enter into the New Franchise Agreement with Purchaser at Closing. Purchaser shall be entitled to attempt to negotiate the terms of the New Franchise Agreement (including, without limitation, the PIP) for the Hotel, however, it shall not be a condition of the Purchaser’s obligation to close on the transactions contemplated by this Contract that any of Purchaser’s requested terms be accepted by Franchisor.
6.1.6 Sellers shall have delivered all of the other documents and made all of the other deliveries required from it pursuant to Section 7.2 hereof.
6.2 Conditions to Sellers’ Obligation to Close. In addition to the conditions set forth elsewhere in this Contract, the following condition(s) shall be conditions precedent to the obligation of Sellers to sell the Interests on the Closing Date as provided herein (and any of the following conditions can be waived in writing by Seller):
6.2.1 All of Purchaser’s representations and warranties shall be true and correct in all material respects as of Closing and Purchaser shall have performed and complied in all material respects with all covenants and conditions required by this Contract to be performed or complied with by Purchaser at or prior to Closing.
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ARTICLE7CLOSING
7.1 Closing Date. Provided all of the conditions to Closing have been satisfied, the Closing shall be held by delivery of Closing documents in escrow to the Title Company at 2:00 p.m. Eastern time on the date which is date which is thirty (30) days after the end of the Inspection Period, or at such earlier date and time as may be mutually agreed upon in writing by Sellers and Purchaser (the “Closing Date”). The wire transfer of the cash portion of the Purchase Price must be actually received by Sellers no later than 4:00 p.m. Eastern time on the Closing Date. At any time after the expiration of the Inspection Period, Purchaser may accelerate the Closing Date by delivering written notice to Sellers (the “Acceleration Notice”) stating Purchaser’s intention to accelerate the Closing Date and the date on which the Closing shall occur, which date shall be at least five (5) days after the date of the Acceleration Notice.
7.2 Closing Matters.
7.2.1 Sellers’ Closing Documents. At Closing, Sellers shall execute, deliver and acknowledge the following documents:
(a) If requested by Purchaser, each Seller shall deliver to Purchaser an original certificate for the Interest owned by such Seller in the form required by FATIC (as hereinafter defined) in order to issue the UCC Policy (as hereinafter defined) (a “Certificate”) duly endorsed in blank;
(b) Sellers shall deliver to Purchaser a certificate dated as of the date of Closing, stating that each of the representations set forth in Section 5.1 are, as of such date, true, complete and correct in all material respects; provided, however, in the event that any representation set forth in Section 5.1 needs to be modified due to changes since the Effective Date, such certificate shall identify any representation which is not, or no longer is, true and correct and explaining the state of facts giving rise to the change. In no event shall Sellers be liable to Purchaser for, or be deemed to be in default hereunder by reason of, any breach of representation which results from any change that (i) occurs between the Effective Date and the date of Closing and (ii) is expressly permitted under the terms of this Agreement or is beyond the reasonable control of Sellers to prevent. If, despite changes or other matters described in such certificate, the Closing occurs, Sellers’ representations set forth in this Agreement shall be deemed to have been modified by all statements made in such certificate. Nothing in this Section 7.2.1(b) shall effect or limit Purchaser’s rights under Section 10.2 in connection with a default by Sellers hereunder;
(c) Each Seller shall deliver to Purchaser (i) such evidence as the Title Company may reasonably require as to the authority of the person or persons executing documents on behalf of such Seller, and (ii) affidavits in the form attached hereto as Exhibit B so as to enable the Title Company to issue a Non-Imputation Endorsement to the Title Policy;
(d) Each Seller shall deliver to Purchaser a certificate pursuant to Treasury Regulations Section 1.1445-2(b), substantially in the form attached hereto as Exhibit C
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duly executed by such Seller stating that such Seller is not a “foreign person” within the meaning of Section 1445 of the Code;
(e) Sellers’ Representative shall execute the Closing statement on behalf of all Sellers;
(f) Purchaser may elect to obtain a commitment from First American Title Insurance Company (“FATIC”) to issue an Eagle 9 UCC Insurance Policy in the amount of the Purchase Price subject only to the payment of the applicable premium, together with a Buyer’s Equity Ownership Endorsement, all in substantially the form attached hereto and made a part hereof as Exhibit D, insuring Purchaser’s ownership of the Interests (the “UCC Policy”); provided, however, that (1) Purchaser shall be required to provide any information and take any actions which FATIC may reasonably require of the purchaser of the Interests in order to issue the UCC Policy, and (2) Sellers shall be required to provide any information and take any actions which FATIC may reasonably require of the sellers of the Interests in order to issue the UCC Policy;
(g) Sellers shall deliver such additional documents that Purchaser or the Title Company may reasonably require for the proper consummation of the transaction contemplated by this Agreement (provided, however, no such additional document shall materially expand any obligation, covenant, representation or warranty of Sellers or result in any new or additional obligation, covenant, representation or warranty of Sellers under this Agreement beyond those expressly set forth in this Agreement); and
(h) Sellers shall deliver a certificate of legal existence respecting the Company.
7.2.2 Other Closing Actions by Seller. In addition to the documents to be executed and delivered by Sellers pursuant to Section 7.2.1, at Closing Sellers shall:
(a) Cause Manager to deliver a schedule of Bookings for the Property to Purchaser; and
(b) Deliver such evidence of the authority and capacity of Sellers and its representatives as Purchaser, Purchaser's counsel may reasonably require.
7.2.3 Purchaser's Closing Documents. At Closing, Purchaser shall execute, deliver and acknowledge the following documents:
(a) pay to the Escrow Agent the full amount of the Purchase Price (which amount shall include the Deposit), as increased or decreased by prorations and adjustments as herein provided, for delivery of the balance (after payment by the Escrow Agent of sums in satisfaction of all mortgages and liens to be satisfied by Sellers in accordance with Section 4.4.2 above, subject to Section 2.1.2) in immediately available wire transferred funds pursuant to Section 2.1 hereof;
(b) deliver to Sellers such evidence as the Sellers may reasonably require as to the authority of the person or persons executing documents on behalf of Purchaser;
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(c) execute the Closing statement;
(d) deliver written acknowledgment of receipt of Certificates for all of the Interests, and take any other actions (including, without limitation, delivery of information relating to Purchaser) which FATIC may reasonably require of the purchaser of the Interests in order to issue the UCC Policy; and
(e) deliver such additional documents that Sellers, FATIC or the Title Company may reasonably require for the proper consummation of the transaction contemplated by this Agreement (provided, however, no such additional document shall materially expand any obligation, covenant, representation or warranty of Purchaser or result in any new or additional obligation, covenant, representation or warranty of Purchaser under this Agreement beyond those expressly set forth in this Agreement).
7.2.4 Other Closing Actions by Purchaser. In addition to the documents to be executed, delivered and acknowledged by Purchaser pursuant to Section 7.2.3, at Closing Purchaser shall:
(a) Deliver such evidence of the authority and capacity of Purchaser and its representatives as Sellers, Sellers’ counsel or the Title Company may reasonably require.
7.2.5 Prorations and Adjustments.
(a) Operating Adjustments. The following matters and items pertaining to the Property, the Hotel and the Hotel Business shall be apportioned between Purchaser and Sellers or, where applicable, credited in total to a particular party, as of the Time of Transfer, in accordance with the Closing Statement. The net credits in favor of Purchaser shall be deducted from the balance of the Purchase Price at the Closing and the net credits in favor of Sellers shall be added to the Purchase Price at the Closing. Unless otherwise indicated below, Purchaser shall receive a credit for any of the following items to the extent the same are accrued but unpaid as of the Time of Transfer (whether or not due, owing or delinquent as of the Time of Transfer), and Sellers shall receive a credit to the extent any of the following items shall have been paid prior to the Closing Date to the extent the payment thereof relates to any period of time after the Time of Transfer.
| (i) | Guest<br>Ledger Receivables. Sellers shall receive a credit for all Guest Ledger Receivables, at the face value thereof, for all room<br>nights through the Time of Transfer. Sellers and Purchaser shall each receive a credit equal to one half of the amount of the<br>estimated Guest Ledger Receivables for the full room night on the Closing Date, irrespective of the time of posting thereof (less<br>credit card charges, travel company charges and similar commissions). All kitchen and bar facilities will be closed as of 1:00<br>a.m. on the Closing Date and Sellers shall receive the income from all kitchen and bar facilities through 1:00 a.m. on the Closing<br>Date and Purchaser shall receive the income from all kitchen and bar facilities from and after 1:00 a.m. on the Closing Date,<br>provided that to the extent such income is included in Guest Ledger Receivables it shall be credited in accordance with the prior<br>two sentences of this paragraph. It is acknowledged that under the Company's current accounting system all Guest Ledger |
|---|
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| Receivables for a given date are posted on 1:00 a.m. on the next succeeding date and, notwithstanding that the Time of Transfer is 12:01 a.m., all such receivables posted as of 1:00 a.m. on the Closing Date shall be deemed to relate to the date prior to the Closing Date and shall be credited to Sellers and notwithstanding the fact that Guest Ledger receivables with respect to the Closing Date are posted at 1:00 a.m. on the following date, such amounts shall be deemed to relate to the Closing Date. | |
|---|---|
| (ii) | Function Revenues. Revenues from conferences, receptions, catering, meetings and other functions occurring in any conference, banquet or meeting rooms at the Hotel, including usage charges and related taxes, food and beverage sales, valet parking charges, equipment rentals and telecommunications charges, shall be allocated between Sellers and Purchaser, based on when the function therein commenced, with (a) one-day functions commencing prior to the Time of Transfer being allocated to Seller; (b) one-day functions commencing after the Time of Transfer being allocated to Purchaser; and (c) multi-day functions being allocated between Sellers and Purchaser according to the number of days of the function occurring before the Time of Transfer and the number of days of the function occurring after the Time of Transfer. |
| --- | --- |
| (iii) | Taxes and Assessments. Real estate taxes, personal property taxes, taxes, special assessments and vault charges, if any, shall be apportioned as of the Closing Date on the basis of the fiscal period for which assessed. If any such taxes, assessments or charges which have been apportioned shall subsequently be reduced by abatement, the amount of such abatement, less the cost of obtaining the same, shall be prorated as of the Closing Date as part of the post-closing adjustments conducted pursuant to Section 7.2.5. |
| --- | --- |
| (iv) | Utility Contracts. Telephone and communications contracts and contracts for the supply of heat, steam, electric power, gas, lighting and any other utility service, with Sellers receiving a credit for all deposits, if any, made by the Company as security under any such public service contracts if the same are transferable and provided such deposits remain on deposit for the benefit of Purchaser. Where possible, cutoff readings will be secured for all utilities as of the Time of Transfer. To the extent they are not available, the cost of such utilities shall be apportioned between the parties on the basis of the latest actual (not estimated) bill for such service and adjusted as necessary post-closing as contemplated in Section 7.2.5. |
| --- | --- |
| (v) | Contracts,<br>Leases and Permit Fees. Any amounts prepaid or payable under any Property Contracts that are assumed by Purchaser shall be<br>prorated at the Closing as of the Closing Date with Sellers obligated for all sums accrued prior to the Time of Transfer and Purchaser<br>obligated for all sums accrued after the Time of Transfer. Purchaser shall receive a credit for the total value of any outstanding<br>gift certificates, vouchers, coupons or other discounted or free services or accommodations. Any rents and other amounts prepaid,<br>accrued or due and payable under the Leases, if any, shall be prorated as of the Time of Transfer between Sellers and Purchaser.<br>The Purchaser shall receive a credit for all security deposits which are not on the books of the Company at Closing. Sellers shall<br>receive a credit for any recurring fees for all Permits which have been paid by Sellers prior to the Closing and relate to the<br>period from and after the Closing Date, and |
| --- | --- |
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| Purchaser shall receive a credit for any such fees which have not been paid as of the Closing and relate to the period prior to the Closing Date. Any additional amounts not known at the Closing will be part of the post-closing adjustments contemplated in Section 7.2.5(d). | |
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| (vi) | Consumables, FF&E and Small Operating Equipment. There shall be no adjustment with respect to the Consumables, FF&E and Small Operating Equipment. |
| --- | --- |
| (vii) | Bookings. Purchaser shall receive a credit for advance payments, if any, under Bookings to the extent the Bookings relate to a period after the Time of Transfer, net of any commissions paid or incurred by the Company for such Bookings. |
| --- | --- |
| (viii) | Restaurants and Bars. Sellers shall close out the transactions in the restaurants and bars in the Property through the time of closing as of the Closing Date and shall retain all monies accrued as of the Closing Date and Purchaser shall be entitled to any monies accrued from the restaurants and bars thereafter. |
| --- | --- |
| (ix) | Petty Cash Funds and House Banks. Purchaser shall purchase from Sellers (or Sellers shall receive a credit therefor) all petty cash funds and cash in house banks at 100% of face value at the Time of Transfer. At the Time of Transfer, Sellers’ Representative shall, in the presence of a representative of Purchaser, perform, or cause to be performed, an accounting of all petty cash funds and cash in house banks. Vending machine monies, if any, will be removed and retained by Sellers as of the Time of Transfer. |
| --- | --- |
| (x) | Security Deposits. Purchaser shall be entitled to a credit for all Security Deposits held by Sellers as of the Time of Transfer which are not transferred to Purchaser. |
| --- | --- |
| (xi) | Employee Compensation. Purchaser shall receive a credit for all earned wages and benefits that any Hotel Employee is owed, as of the Closing Date. |
| --- | --- |
| (xii) | Trade Payables. Trade payables shall mean (for all purposes) under this Contract open accounts payable to trade vendors or suppliers of the Hotel and all related facilities. At Closing, Purchaser shall receive a credit for (i) all trade payables which have been invoiced and are due and owing as of the Closing. With respect to trade payables that are not yet due and payable as of the Closing but which have accrued or relate to that period on or prior to the Time of Transfer, Purchaser shall receive a credit against the Purchase Price in the amount of such payables as of the Closing and Purchaser shall be obligated to pay such payables if and to the extent it has received a credit from Sellers at Closing. Purchaser agrees to pay all trade payables from the Hotel which accrue and relate to that period after the Time of Transfer, including any payables for supplies ordered before Closing but delivered to the Hotel on or after the Closing Date. |
| --- | --- |
| (xiii) | Other. Such other items as are provided for in this Contract or as are normally prorated and adjusted in the sale of real property in or about Providence, Rhode Island or of a hotel. |
| --- | --- |
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(b) Receivables. Sellers shall be entitled to receive one hundred percent (100%) of the amount of all receivables and Purchaser shall pay same over to Sellers within five (5) days after receipt following the Closing (other than Guest Ledger Receivables, which shall be prorated pursuant to Section 7.2.5(a)).
(c) Preparation of Closing Statement. No later than two (2) Business Days prior to the Closing, Sellers’ Representative shall deliver to Purchaser a draft closing statement (the “Closing Statement”). The Closing Statement shall contain the Sellers’ estimate of the amounts of the items requiring the prorations and adjustments in this Contract. The amounts set forth on the Closing Statement shall be adjusted as of the Closing and shall be the basis upon which the prorations and adjustments provided for herein shall be made at the Closing.
(d) Post-Closing Adjustments. To the extent the exact amount of any adjustment item provided for in this Section 7.2.5 cannot be precisely determined on the Closing Date, the parties shall estimate the amount thereof, for purposes of computing the net amount due Sellers or Purchaser pursuant to this Section 7.2.5 and shall determine the exact amount thereof not later than one hundred twenty (120) days after the Closing Date or as soon thereafter as is reasonably practicable (with no time limit for any reproration of taxes).
7.3 Intentionally Omitted.
7.4 Closing Costs. Sellers shall pay one-half of the escrow fee charged by the Title Company, its share of the prorations as set forth in Section 7.2.5 hereof, documentary stamp tax associated with the transfer of the Interests, and its own attorney's fees. Purchaser shall pay the cost of the Survey, the premium for Purchaser’s owner’s policy of title insurance including the premium for any extended coverage or endorsements to Purchaser’s owner’s policy that Purchaser elects to purchase, the premium for any lender’s policy of title insurance as well as any endorsements to such lender’s policy, all inspections undertaken pursuant to ARTICLE 3 hereof, one-half of the escrow fee charged by the Title Company, all fees and charges for recording any other instruments other than any documents filed to remove a Title Objection to be filed or recorded at Closing, documentary stamp tax and intangible tax other than documentary stamp tax associated with the transfer of the Interests, (and any documents filed to remove a Title Objection) to be filed or recorded at Closing, its proportionate share of the prorations as set forth in Section 7.2.5 hereof, all sales tax associated with the transfer of any Personalty pursuant to this Agreement, and its own attorney's fees. Except as otherwise provided in this Section, all other expenses hereunder shall be paid by the party incurring such expenses unless local custom dictates otherwise. The provisions of this Section 7.4 shall survive the Closing.
7.5 Liquor License.
7.5.1 Purchaser or its designated manager (together, hereinafter “Operator”) shall, pursuant to all Applicable Laws, execute such forms, license applications and other documents as may be reasonably necessary for Operator to obtain a transfer of the existing Liquor Licenses or the issuance of new liquor and alcoholic beverage licenses (collectively, the “New Liquor Licenses”) necessary to operate any restaurants, bars, lounges and other liquor facilities presently located within the Improvements from and after the Closing Date.
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7.5.2 Seller shall, in all cases, cooperate reasonably with Operator's execution and filing of all forms, applications and other documents necessary to cause the acquisition or transfer of the Liquor Licenses or New Liquor Licenses, as applicable, by or to Operator. Operator's attempts to obtain the transfer of the Liquor Licenses or issuance of the New Liquor Licenses shall, under no circumstances, diminish, prior to the Closing, the full force and effect of the Liquor Licenses presently maintained in the operation of the restaurants, bars, lounges and other liquor facilities presently located within the Improvements.
7.5.3 Purchaser shall be responsible for all third party fees and costs in connection with Sellers’ cooperation regarding the foregoing. At such time after Closing as the New Liquor Licenses are obtained, Existing Permittee or Seller, as applicable, will convey, at no additional cost, all alcoholic beverages to Operator by a conveyance document in form reasonably acceptable to Seller and Purchaser and in accordance with the requirements of all Applicable Laws. If it is anticipated that upon Closing Purchaser or Operator will not have received a new liquor license or a temporary liquor license permitting the continuation of the sale and consumption of alcoholic beverages at the Hotel after the Closing and an Interim Liquor Agreement is not permitted pursuant to Applicable Laws, then Purchaser shall have the one (1) time right to extend the initial Closing Date by a period not to exceed thirty (30) days, by delivering written notice to the Seller on or prior to the date that is three (3) days prior to the initial Closing Date of its election to exercise such extension right.
7.5.4 In no event shall a Seller be required to cause the Company to obtain any additional Liquor Licenses which such Existing Permitee does not possess at the time of Closing; provided, however, Sellers shall or shall cause the Existing Permitee to maintain in good standing any Liquor Licenses in effect as of the Effective Date.
7.5.5 This Section 7.5 shall survive the Closing.
7.6 Reserved.
7.7 Guest Baggage. On the Closing Date, all baggage and other property of registered guests in the Hotel on the Closing Date which has been checked with or left in the care of Sellers shall be inventoried, sealed, and tagged jointly by Sellers and Purchaser and transferred to the care of Purchaser.
7.8 Safe Deposit Boxes. On the Closing Date, Sellers shall deliver to Purchaser all keys or combinations to the safe deposit boxes at the Hotel, all receipts and agreements relating to the then current use or rental of such safe deposit boxes and a complete list of the name and room number of each depositor. On the Closing Date, Sellers shall send written notice to the registered parties who have safe deposit boxes, advising them of the sale of the Property to Purchaser and the procedures to be followed pursuant to this Section and requesting the removal and verification of the contents of the relevant safe deposit box or boxes within three (3) Business Days of the Closing Date. Safe deposit boxes of such depositors who have not responded to such written notice shall be listed at the end of such three (3) Business Day period. Said boxes shall be opened in the presence of representatives of Sellers and Purchaser and the contents thereof inventoried, sealed and tagged. Any such contents so inventoried, sealed and tagged and thereafter remaining in Purchaser's custody, and the contents of any unopened safe deposit boxes, shall be the sole
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responsibility of Purchaser and Purchaser hereby agrees to indemnify and hold Sellers harmless from and against any loss, cost, liability or damage arising in connection with such contents or lack of contents arising after the date that such contents are so inventoried, sealed and tagged. The provisions of this Section 7.8 shall survive the Closing.
ARTICLE8DAMAGE TO PROPERTY
8.1 Casualty; Condemnation. Sellers agree to give Purchaser prompt notice of any casualty affecting the Land, the Improvements or any material portion of the Personalty between the date hereof and the Closing Date or of any actual or threatened (in writing) taking or condemnation of all or any portion of the Land or the Improvements.
8.1.1 If prior to the Closing there shall occur:
(a) damage to the Property caused by fire or other casualty which would cost an amount equal to three and one-half percent (3.5%) of the Purchase Price or more to repair or restore, as reasonably determined by Sellers (“Material Casualty”); or
(b) the taking or condemnation of all or any portion of the Land and the Improvements (i) cause the Hotel to be in violation of any Applicable Law, including, without limitation, zoning laws and requirements, (ii) result in any permanent material reduction or restriction in access to the Land and Improvements, or (iii) have a materially adverse effect on the business as conducted prior to such taking (in Purchaser’s commercially reasonable discretion) (“Material Taking”);
then in any such event, Purchaser may at its option terminate this Contract by notice to Sellers within ten (10) days after Purchaser has received the notice referred to above or at the Closing, whichever is later. If Purchaser does not elect to terminate this Contract, then the Closing shall take place as provided herein without abatement of the Purchase Price, and Sellers shall assign to Purchaser at the Closing without recourse or warranty all interest of Sellers in and to any insurance proceeds or condemnation awards which may be payable to Sellers on account of any such occurrence and Purchaser shall receive as a credit against the Purchase Price the amount of any unpaid deductible applicable to such insurance proceeds (less any portion of the deductible that has been applied to covered losses).
8.1.2 If prior to the Closing there shall occur damage to the Property other than a Material Casualty, or a taking or condemnation other than a Material Taking, then in any such event, Purchaser shall have no right to terminate its obligations under this Contract, but there shall be assigned to Purchaser at Closing without recourse or warranty all interest of Sellers in and to any insurance proceeds or condemnation awards which may be payable to Sellers on account of any such occurrence and Purchaser shall receive as a credit against the Purchase Price the amount of any unpaid deductible applicable to such insurance proceeds (less any portion of the deductible that has been applied to covered losses).
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ARTICLE9INTERIM AND POST-CLOSING RESPONSIBILITIES
9.1 Interim Responsibilities.
9.1.1 Management of the Property. Sellers agree that during the period between the Effective Date and the Closing Date:
(a) Sellers shall cause the Property to be operated, managed and maintained in the manner which is substantially similar to the manner it has been operated and maintained during the twelve (12) month period prior to the Effective Date, so that the Property shall, except for normal wear and tear, be in substantially the same condition on the Closing Date as on the Effective Date;
(b) Sellers will cause the Company to maintain property and liability insurance coverage in the ordinary course of the Company’s business with respect to the Property from the date hereof through the Closing Date or earlier termination of this Contract;
(c) promptly notify Purchaser within five (5) Business Days of receipt by Seller, of (x) any notice of any violations of zoning, building, fire, health environmental or other Applicable Laws relating or referring to the Company, the Hotel or any improvements thereon, (y) of any written claim or notice of dispute relating to or affecting the Company or the Hotel, and (z) any written notice of default received by the Company under any Lease or other third party contract following the Effective Date;
(d) cause the Company to renew all Permits;
(e) Sellers will not permit the Company to grant any lien or cause any instrument to be recorded that would further encumber the Property in any manner, other than memoranda of lease and/or subordination, non-disturbance and attornment agreements with respect to Leases entered into in accordance with the terms hereof or liens or encumbrances to be discharged as of the Closing Date;
(f) Following the end of the Inspection Period until the Closing Date or earlier termination of this Agreement, without the prior written consent of Purchaser, Sellers shall not (x) enter into any third party contracts, equipment leases or other material agreements affecting the Company or the Property, or (y) amend, modify, terminate or accept the surrender of any existing tenancies pursuant to any Lease; provided, however, that during the Inspection Period, Sellers shall promptly notify Purchaser of any such contract, agreement or tenancy that is entered into or modified as described in (x) or (y), and deliver to Purchaser copies of all documents executed in connection therewith.
(g) Sellers shall deliver a notice of termination with respect to the Contracts with respect to the Company and the Property except the Assumed Contracts. All termination fees and any other costs and expenses relating to such termination shall be the responsibility solely of Sellers, and Purchaser shall not have any responsibility or liability therefor; and
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ARTICLE10REMEDIES
10.1 Sellers’ Remedies. In the event Purchaser fails to perform its obligations pursuant to this Contract before Closing for any reason except (a) failure by Sellers to perform any of its obligations hereunder or (b) the termination of this Contract by Sellers or Purchaser pursuant to the terms hereof, Sellers shall be entitled as its sole and exclusive remedy hereunder to terminate this Contract by written notice to Purchaser and recover the Earnest Money as liquidated damages and not as a penalty, in full satisfaction of claims against Purchaser hereunder, and the Title Company shall immediately pay the Earnest Money to Sellers, and the parties shall have no further rights or obligations under this Contract, except those which expressly survive such termination. Sellers and Purchaser agree that Sellers’ damages resulting from Purchaser's default are difficult, if not impossible, to determine and the Earnest Money is a fair estimate of those damages which has been agreed to in an effort to cause the amount of said damages to be certain.
10.2 Purchaser's Remedies. Except as otherwise provided in Section 6.1.5, in the event Sellers fails to perform its obligations pursuant to this Contract for any reason except (a) failure by Purchaser to perform hereunder or (b) a termination of this Contract by Sellers or Purchaser pursuant to the terms hereof, Purchaser may, as its sole remedy, either terminate this Contract by giving Sellers timely written notice of such election prior to or at Closing or enforce specific performance of this Contract against Sellers provided that such action is commenced within thirty (30) days of the scheduled Closing Date. In the event Purchaser elects to terminate this Contract pursuant to this Section 10.2, the Earnest Money shall be returned to Purchaser, Sellers shall promptly reimburse Purchaser for Purchaser’s thirty-party costs and expenses related to the transaction contemplated by this Contract, in an amount not to exceed $75,000.00 in the aggregate (“Purchaser’s Due Diligence Costs”), and thereafter the parties shall have no further rights or obligations under this Contract, except those which expressly survive such termination.
10.3 Attorney's Fees. In the event either party hereto is required to employ an attorney because of the other party's default, the defaulting party shall pay the nondefaulting party's reasonable attorney's fees incurred in the enforcement of this Contract; it being understood and agreed that the determination of the prevailing party shall be included in the matters which are the subject of such action or suit. The terms of this Section shall survive the Closing.
10.4 Disposition of Earnest Money. In the event of a termination of this Contract by either Sellers or Purchaser, the Title Company is authorized to deliver the Earnest Money to the party entitled to same pursuant to the terms hereof on or before the tenth (10th) day following receipt by the Title Company and the nonterminating party of written notice of such termination from the terminating party, unless the other party hereto notifies the Title Company that it disputes the right of the other party to receive the Earnest Money prior to the expiration of such ten (10) day period; provided, however, in the event Purchaser delivers a Termination Notice in accordance with Section 3.3 hereof, the Title Company shall immediately return the Earnest Money to Purchaser in accordance with Section 3.3. In such event the Title Company shall have the right to hold such funds until it receives further mutual direction from Sellers and Purchaser or to interplead the Earnest Money into a court of competent jurisdiction in the county in which the Property is located. All attorneys' fees and costs and expenses of the Title Company incurred in connection with such
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interpleader shall be assessed against the party that is not awarded the Earnest Money in the event that such Earnest Money is interplead or otherwise pursuant to a court order or if the Earnest Money is distributed in part to both parties, then in the inverse proportion of such distribution.
10.5 Following Closing.
10.5.1 Indemnification by Sellers. Following the Closing, Sellers shall indemnify and hold Purchaser and Purchaser’s Indemnified Parties harmless from and against any and all costs, fees, expenses, damages, deficiencies, interest and penalties (including, without limitation, reasonable attorneys’ fees and disbursements) suffered or incurred by any such indemnified party (“Costs”) in connection with any and all losses, liabilities, claims, damages and expenses (“Losses”), arising out of, or in any way relating to, (i) claims for any debts or obligations occurring on or about or in connection with the Property or any portion thereof which occurs prior to the Closing, and (ii) the business or operation of the Hotel at any time during Sellers’ ownership of the Company; provided, however, that this indemnity shall expressly exclude all liabilities with respect to the physical condition of the Property, subject to Sections 5.4, 5.5 and 5.6.
10.5.2 Indemnification by Purchaser. Following the Closing, Purchaser shall indemnify and hold Sellers and Sellers’ Indemnified Parties harmless from any and all Costs in connection with Losses arising out of, or in any way relating the business or operation of the Property from and after Closing, such obligations to survive Closing, subject to the Survival Period. Notwithstanding the foregoing, in no event shall Purchaser have any obligations under this Section 10.5.2 or otherwise to indemnify or defend Sellers’ Indemnified Parties from, against and with respect to liabilities arising from any claims arising prior to the Closing in connection with the violation of Environmental Laws and any claims by third parties for personal injury or property damage arising out of events occurring prior to the Closing (whether as a result of any violation of Environmental Laws or otherwise).
10.5.3 Survival. This Section 10.5 shall survive the Closing.
ARTICLE11MISCELLANEOUS
11.1 Entire Contract. This Contract contains the entire agreement of the parties hereto and supersedes and replaces any letter of intent or term sheet between the parties, which the parties hereby agree is null and void and of no further force or effect. There are no other agreements, oral or written, and this Contract can be amended only by written agreement signed by the party against whom enforcement is sought, and by reference made a part hereof.
11.2 Binding. This Contract, and the terms, covenants, and conditions herein contained, shall be covenants running with the Land and shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. Neither party shall assign or transfer or permit the assignment or transfer of its rights or obligations under this Contract without the prior written consent of the other, any such assignment or transfer without such prior consent being hereby
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declared to be null and void; provided, however, that Purchaser shall have the right to either nominate one or more Affiliates to take title to all or any portion the Property or assign all or any portion of this Contract to one or more Affiliates without Sellers’ consent, upon written notice to Sellers no later than five (5) days prior to the Closing Date, but Purchaser shall remain jointly and severally liable following any such assignment for all pre-Closing obligations of “Purchaser” hereunder and such assignee(s) shall assume Buyer’s rights and obligations under this Contract.
11.3 Notice. Any notice, communication, request, reply or advice (collectively, “Notice”) provided for or permitted by this Contract to be made or accepted by either party must be in writing. Notice may, unless otherwise provided herein, be (i) delivered by hand with receipt; (ii) sent by recognized overnight delivery service; (iii) sent by certified or registered mail, postage prepaid, with return receipt requested or (iv) by electronic mail or facsimile transmission during normal business hours with a confirmation copy delivered by another method permitted under this Section. For the purposes of notice, the addresses of the parties shall, until changed as hereinafter provided, be as follows:
| Purchaser: | c/o The Procaccianti Group |
|---|---|
| 1140 Reservoir Avenue | |
| Cranston, RI 02920 | |
| Attention: Ggregory D. Vickowski | |
| Facsimile: 401-943-6320 | |
| Email: gvick@procaccianti.com | |
| with a copy to: | Morrison & Foerster LLP |
| 250 West 55th Street | |
| New York, NY 10019-9601 | |
| Attention: Jeffrey J. Temple, Esq. | |
| Facsimile: (212) 468-7900 | |
| Email: jtemple@mofo.com | |
| and with a copy to: | The Procaccianti Group |
| 1140 Reservoir Avenue | |
| Cranston, RI 02920 | |
| Attention: Ron Hadar | |
| Facsimile: 401-943-6320 | |
| Email: rhadar@procaccianti.com |
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| Sellers: | to the address set forth beneath such Seller’s name on the signature page below |
|---|---|
| with a copy to: | The Procaccianti Group |
| 1140 Reservoir Avenue | |
| Cranston, RI 02920 | |
| Attention: Peter Ziegler | |
| Facsimile: 401-943-6320 | |
| Email: pziegler@procaccianti.com | |
| with a copy to: | Greenberg Traurig, LLP |
| One International Place – Suite 2000 | |
| Boston, MA 02110 | |
| Attention: James P. Redding, Esq. | |
| Facsimile: 617-897-0961 | |
| Email: reddingj@gtlaw.com |
The parties hereto shall have the right from time to time to change their respective addresses, and each shall have the right to specify as its address any other address within the United States of America by at least five (5) days written notice to the other party. Notices may be given by attorneys on behalf of the party whom they represent. Notices shall be deemed to be effective upon receipt (which a print-out confirmation shall be deemed to satisfy in the case of notices given by facsimile or electronic confirmation of delivery generated by sender’s computer or device shall be deemed to satisfy in case of notices given by e-mail) or refusal of the addressee to accept delivery.
11.4 Reporting Person. Purchaser and Sellers hereby designate Title Company as the “reporting person” pursuant to the provisions of Section 6045(e) of the Internal Revenue Code of 1986, as amended.
11.5 Time. Time is of the essence in all things pertaining to the performance of this Contract.
11.6 Governing Law. This Contract shall be construed in accordance with the laws of the State where the Land is situated.
11.7 Currency. All dollar amounts are expressed in United States currency.
11.8 Section Headings. The section headings contained in this Contract are for convenience only and shall in no way enlarge or limit the scope or meaning of the various and several sections hereof.
11.9 No Survival of Obligations. Except as otherwise expressly otherwise provided herein, the terms, conditions, warranties, representations, obligations and rights set forth herein shall not survive Closing.
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11.10 Business Days. If the date for the performance of any obligation, or the giving of any notice, by Sellers or Purchaser hereunder falls upon a day other than a Business Day, then the time for such performance or the giving of such notice shall be extended until the next Business Day.
11.11 Irrevocable Option. To the extent that this Contract is ever construed as an option agreement, Sellers and Purchaser hereby acknowledge that independent consideration for such option in the sum of $10.00 has been (or will upon demand, be) paid to Sellers by Purchaser, and based on such consideration and the mutual covenants of Sellers and Purchaser contained herein, Sellers hereby agrees that any such option granted Purchaser is irrevocable, and Sellers shall not terminate said option without the prior written consent of Purchaser, except to the extent that termination may be expressly provided for herein.
11.12 No Recordation. Without the prior written consent of Seller, there shall be no recordation of either this Contract or any memorandum hereof, or any affidavit pertaining hereto, and any such recordation of this Contract or memorandum hereof by Purchaser without the prior written consent of Sellers shall constitute a default hereunder by Purchaser, whereupon this Contract shall, at the option of Seller, terminate and be of no further force and effect and all Earnest Money deposited hereunder shall be immediately delivered to the Seller, whereupon the parties shall have no further duties or obligations one to the other.
11.13 Reserved.
11.14 Waiver of Trial By Jury. Sellers and Purchaser hereby waives trial by jury in any action arising out of matters related to this Contract, which waiver is informed and voluntary.
11.15 No Waiver. Failure by any party to enforce against any other party any term or provision of this Contract shall not waive such party's right to enforce against any other party the same or any other term or provision. No waiver by any party hereto of any condition hereunder for its benefit shall constitute a waiver of any other or further right, nor shall any single or partial exercise of any right preclude any other or further exercise thereof or any other rights. The waiver of any breach hereunder shall not be deemed to be a waiver of any other or subsequent breach hereof. No extensions of time for the performance of any obligations shall be deemed or construed as an extension of time for the performance of any other obligation.
11.16 Counterparts. This Contract may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. Signatures transmitted via facsimile and/or electronic mail shall be deemed originals.
11.17 Further Assurances. The parties agree to execute such instructions to the Title Company and such other instruments or to do such further acts as may be reasonably necessary to carry out the provisions of this Contract; provided, however, that no party shall be obligated to provide such other instruments and to do such further acts that would materially increase such party’s liabilities hereunder or materially decrease such party’s rights hereunder. The provisions of this section shall survive the Closing.
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ARTICLE12REAL ESTATE COMMISSIONS
12.1 Commissions. Sellers and Purchaser each hereby severally represents to the other party hereto that it has not contacted or worked with any agent, broker or other similar party with respect to the transactions contemplated by this Contract.
12.2 Sellers hereby agrees to indemnify and hold Purchaser harmless from the claims of any agent, broker or other similar party claiming by, through or under Sellers with respect to the transactions contemplated by this Contract and this indemnification shall survive the Closing. Purchaser hereby agrees to indemnify and hold Sellers harmless from the claims of any agent, broker or other similar party claiming by, through or under Purchaser with respect to the transactions contemplated by this Contract other than the Broker, and this indemnification shall survive the Closing or earlier termination of this Contract.
12.3 Marketing. During the pendency of this Contract, Sellers shall cease (and cause to be ceased) all efforts to market the Property and shall not solicit (or cause to be solicited) offers for the purchase of the Property.
ARTICLE13ESCROW PROVISIONS
13.1 By executing the joinder hereto, Title Company agrees to hold the Earnest Money pursuant to the provisions of Article 2 and upon the following terms:
13.1.1 The Title Company shall have no duties or responsibilities other than those expressly set forth herein. The Title Company shall have no duty to enforce any obligation of any person to make any payment or delivery or to enforce any obligation of any person to perform any other act. The Title Company shall be under no liability to the other parties hereto or to anyone else by reason of any failure on the part of any party hereto (other than the Title Company) or any maker, guarantor, endorser or other signatory of any document or any other person to perform such person’s obligations under any such document. Except for amendments to this Contract hereinafter referred to and except for joint instructions given to the Title Company by Sellers and Purchaser relating to the Earnest Money, Title Company shall not be obligated to recognize any agreement between any or all of the persons referred to herein, notwithstanding that references thereto may be made herein and whether or not it has knowledge thereof.
13.1.2 In its capacity as escrow agent, the Title Company shall not be responsible for the genuineness or validity of any security, instrument, document or item deposited with it and shall have no responsibility other than to faithfully follow the instructions contained herein, and it is fully protected in acting in accordance with any written instrument given to it hereunder by any of the parties hereto and reasonably believed by the Title Company to have been signed by the proper person, except that Title Company shall act in accordance
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with Section 10.4 in connection with the disposition of the Earnest Money. The Title Company may assume that any person purporting to give any notice hereunder has been duly authorized to do so. The Title Company is acting as a stakeholder only with respect to the Earnest Money. Promptly after the receipt by the Title Company of (a) notice of any demand by either party claiming that it is entitled to the Earnest Money or (b) any other claim or the commencement of any action, suit or proceeding by either party, the Title Company shall, if a claim in respect thereof is to be made against any of the other parties hereto, send a copy of such notice to the other party and inform the other party of such claim; but the failure by the Title Company to give such notice shall not relieve any party from any liability which such party may have to the Title Company hereunder. In the event that, prior to the expiration of the Inspection Period, the Title Company receives a copy of a Termination Notice from Purchaser, the Title Company shall, by not later than the second (2nd) Business Day following receipt of Purchaser’s request, return the Initial Deposit (unless Purchaser and Sellers advise you in writing otherwise) held by you to Purchaser regardless of any instruction to the contrary from Seller.
13.1.3 It is understood and agreed that the duties of the Title Company are purely ministerial in nature. The Title Company shall not be liable to the other parties hereto or to anyone else for any action taken or omitted by it, or any action suffered by it to be taken or omitted, in good faith and in the exercise of reasonable judgment, except for acts of willful misconduct or gross negligence. Except with respect to the disposition of the Earnest Money pursuant to Section 10.4, the Title Company may rely conclusively and shall be protected in acting upon any order, notice, demand, certificate, opinion or advice of counsel (including counsel chosen by the Title Company), statement, instrument, report or other paper or document (not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth and acceptability of any information therein contained) which is reasonably believed by the Title Company to be genuine and to be signed or presented by the proper person or persons. The Title Company shall not be bound by any notice or demand, or any waiver, modification, termination or rescission of this Contract or any of the terms hereof, unless evidenced by a final judgment or decree of a court of competent jurisdiction in the State of New York, or a Federal court in such jurisdiction or a writing delivered to the Title Company signed by the proper party or parties (subject to Section 10.4) and, if the duties or rights of the Title Company are affected, unless it shall give its prior written consent thereto.
13.1.4 The Title Company shall have the right to assume in the absence of written notice to the contrary from the proper person or persons that a fact or an event by reason of which an action would or might be taken by the Title Company does not exist or has not occurred, without incurring liability to the other parties hereto or to anyone else for any action taken or omitted, or any action suffered by it to be taken or omitted, in good faith and in the exercise of reasonable judgment, in reliance upon such assumption.
13.1.5 Except in connection with the Title Company’s willful misconduct or gross negligence, the Title Company shall be indemnified and held harmless jointly and severally by the other parties hereto from and against any and all expenses or loss suffered by the Title Company (as escrow agent), including reasonable attorneys’ fees, in connection with any action, suit or other proceeding involving any claim, which arises out of or relates to
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this Contract, the services of the Title Company hereunder or the monies held by it hereunder.
13.1.6 From time to time on and after the date hereof, Sellers and Purchaser shall deliver or cause to be delivered to the Title Company such further documents and instruments and shall do and cause to be done such further acts as the Title Company shall reasonably request (it being understood that the Title Company shall have no obligation to make any such request except as reasonably required herein) to carry out more effectively the provisions and purposes of this Contract, to evidence compliance herewith or to assure itself that it is protected in acting hereunder.
13.1.7 The Title Company may resign at any time as the escrow agent hereunder upon giving five (5) days’ prior written notice to that effect to both Sellers and Purchaser. In such event, the successor escrow agent shall be a nationally recognized title insurance company or other person acceptable to both Sellers and Purchaser. Such party that will no longer be serving as escrow agent shall deliver, against receipt, to such successor escrow agent, the Earnest Money held by such party, to be held by such successor escrow agent pursuant to the terms and provisions of this Contract. If no such successor has been designated on or before such party ceases to be escrow agent hereunder, whether by resignation or otherwise, its obligations as escrow agent shall continue until such successor is appointed, provided, however, its sole obligation thereafter shall be to safely keep all monies then held by it and to deliver the same to the person, firm or corporation designated as its successor or until directed by a final order or judgment of a court of competent jurisdiction or upon mutual direction of Purchaser and Seller, whereupon the Title Company shall make disposition thereof in accordance with such order; provided further, however, that the Title Company, in such event, shall deliver the Earnest Money against receipt, to any bank or trust company or title insurance company mutually designated by the Purchaser and Seller. If no successor escrow agent is designated and qualified within five (5) days after its resignation is effective, such party that will no longer be serving as escrow agent may apply to any court of competent jurisdiction for the appointment of a successor escrow agent.
ARTICLE14DEFINITIONS
As used in this Contract, the following terms shall have the respective meanings ascribed to them
14.1 Affiliate or affiliate shall mean, with reference to a Person, (a) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person, (b) any officer, director or partner of such Person, or (c) any company of which such Person is an officer, director or partner. For the purposes hereof, the term “control” (including “controlling,” “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and the policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
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14.2 Applicable Laws shall mean any and all presently existing and future judicial decisions, statutes, rulings, rules, regulations, permits, certificates or ordinances of any Governmental Authority applicable to the Property.
14.3 Bookings shall mean all contracts or reservations for the use of guest rooms, banquet facilities, restaurants or meeting rooms or any other space in the Hotel.
14.4 Business Day shall mean Monday through Friday excluding Saturday, Sunday or any other day on which national banks in Providence, Rhode Island are not open for business.
14.5 Consumables shall mean all unused food and beverages (including, subject to Section 7.5, all liquor, wine, beer, and other spirits), contents of all vending machines, all unused engineering, maintenance and housekeeping supplies, including soap, cleaning materials, and other materials, all unused stationery, brochures, advertising materials and other printed items, and all other unused supplies of all kinds which are held in storage and available for use in connection with the maintenance and operation of the Hotel and which have a useful life which extends beyond the Closing Date (collectively, the “Consumables”;
14.6 Data Rules shall mean any federal, state or local law, statute, ordinance, code, order, decrees, or other governmental rule, regulation or requirement, with respect to the collection, storage, use, processing and transfer of Personal Information in any way, including data protection laws, privacy laws, laws regulating marketing communications and/or electronic communications, information security regulations, security breach notification rules, including without limitation, PCI DDS, as well as any requirement, term or condition contained in any agreement affecting Seller, Manger or the Hotel.
14.7 Effective Date shall mean the date on which this Contract has been executed and delivered by all parties hereto.
14.8 Environmental Laws means any and all federal, state, county and local statutes, laws, regulations and binding rules in effect on the Effective Date relating to the protection of the environment or to the use, transportation and disposal of Hazardous Materials.
14.9 Existing Mortgage Loan means that certain mortgage loan in the original amount of $13,135,000 to the Company from East Boston Savings Bank dated as of May 27, 2015.
14.10 FF&E shall mean all fixtures, furniture, furnishings, fittings, vehicles, equipment, machinery, apparatus, appliances and other articles of personal property located or to be located at the Improvements and used or usable in connection with the Hotel Business, excluding (i) Consumables, (ii) Small Operating Equipment, (iii) equipment leased by Sellers or provided to Sellers pursuant to a Property Contract and not owned by Seller, or (iv) property owned or leased by tenants, guests, employees or persons furnishing goods or services to the Hotel.
14.11 Franchise Agreement means that certain Marriott Hotel Relicense Agreement, dated as of May 3, 2007, by and between Marriott International, Inc. and Seller, as amended, restated, supplemented, extended or otherwise modified from time to time.
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14.12 Governmental Authority shall mean the United States, the state, the county, the city, or any other political subdivision in which the Property is located, and any other political subdivision, agency or instrumentality exercising jurisdiction over the Property.
14.13 Guest Ledger Receivables means amounts, including, without limitation, room charges, telephone charges, parking garage charges, food, beverage and entertainment revenue, and all other fees in connection with any services provided at the Hotel accrued or accruable to the accounts of the guests occupying rooms in the Hotel, whether as transient guests or otherwise, as of the Time of Transfer.
14.14 Hazardous Material shall mean any substance:
(a) the presence of which requires investigation or remediation under any statute, regulation, ordinance, order or policy of a Governmental Authority; or
(b) which is defined as a “hazardous waste,” “hazardous substance,” pollutant, or contaminant under any Environmental Law, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.) and/or the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.).
14.15 Hotel means the hotel located on and operating at the Property as of the Effective Date.
14.16 Hotel Business means the business relating to the operation and management of the Hotel.
14.17 Hotel Employees means all individuals employed in regular full-time, regular part-time, temporary and on-call job positions at the Hotel at the time in question, and specifically excluding any independent contractors.
14.18 Improvements shall mean all of the buildings and other structures and improvements situated on the Land, and all mechanical, heating, air conditioning, plumbing, electrical and ventilating systems and all other fixtures and equipment servicing the Land and which constitute real property under applicable Laws.
14.19 Inspection Period means the period of time commencing on the Effective Date and terminating at 6:00 pm (Eastern Standard Time) on February 12, 2020.
14.20 Intangible Hotel Assets all electronic files, data and information, software licenses, internet domain names, URLs and websites, telephone and facsimile numbers listing in directories, customer and supplier lists and files, including, without limitation, all guest or customer profiles, contact information, histories, preferences and any other guest or customer information, credit records, labels, promotional literature, security codes, goodwill of Sellers related to the Hotel, contract rights, leases, concessions, trademarks, servicemarks, logos, names of hotel restaurants and other food and beverage outlets or other identifying symbols used in connection with the Hotel, transferable Permits (as hereinafter defined), including the Liquor License, all assignable warranties and guaranties, if any, relating to the Land, Improvements or Personalty (collectively, the “Warranties”), rights to apply for any tax credits in connection with the Hotel or the Land or Improvements, signage rights, utility and development rights and privileges, technology and
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technical information, employee records and information, reservation system software and other items of intangible personal property relating to the ownership or operation of the Hotel and owned by Sellers whether on paper, electronic format, DVD or CD-Rom, but excluding the Excluded Property.
14.21 Land means all of the land located in Providence, and more particularly described in Exhibit A attached hereto and incorporated herein for all purposes, together with (i) all strips or gores, if any, between the Land and abutting properties, whether owned or claimed by deed, limitations or otherwise, and whether or not they are located inside or outside of the boundaries of the Land, (ii) any land lying in or under the bed of any highway, avenue, street, road, alley, easement or right-of-way, open or proposed, in, on, across, abutting or adjacent to the Land, to the center line thereof, and (iii) all easements in or upon the Land and all other rights and appurtenances belonging or in anywise pertaining to the Land or the Improvements.
14.22 Leases means those leases set forth on Schedule 5.1.12 annexed hereto.
14.23 Liquor License means any alcoholic beverage licenses issued in connection with the operation of the Property.
14.24 Management Agreement that certain Hotel Management Agreement by and between the Company and Manager dated December 28, 1995 as amended February 27, 2007 and February 27, 2017.
14.25 Manager shall mean Lenox Hotels, Inc., a Rhode Island corporation.
14.26 PCI DDS shall mean the Payment Card Industry and Data Security Standard(s), as each may be amended from time to time.
14.27 Permitted Exceptions shall mean All (i) real estate taxes not due and payable as of the Closing Date, (ii) Title Exceptions disclosed in the Title Commitment and all matters disclosed on the Survey, that are not objected to by Purchaser in any Title Objection, or are otherwise deemed Permitted Exceptions pursuant to the terms of this Agreement, (iii) all Leases, (iv) the exceptions and exclusions customarily contained in pre-printed title policy jackets in the state in which the Property is located unless, and then only to the extent that, the same can be deleted from the title policy jacket upon Seller’s delivery of customary seller’s title affidavit, (v) all liens and encumbrances created by Purchaser or its agents or consultants, (vi) any supplemental taxes, if any, assessed following the sale of the Real Property and the Improvements to Purchaser on the Closing Date, (vii) all equipment leases and security interests recorded in connection with the assumed contracts, (viii) right, interest or claim that may exist, arise or be asserted against the title to the Land or Improvements under or pursuant to the Perishable Agricultural Commodities Act of 1930, as amended, 7 USC 499a et seq., the Packers and Stockyard Act of 1921, as amended, 7 USC 181 et seq., or any similar state laws, (ix) guests of the Hotel in the ordinary course of business, (x) governmental laws, codes, ordinances and restrictions now or hereafter in effect so far as these affect the Land or Improvement or any part thereof, including, without limitation, zoning ordinances (and amendments and additions relating thereto) and the Americans with Disabilities Act of 1990, as amended, and (xi) any other items created in accordance with the terms of this Agreement.
38
14.28 Personalty shall mean the Consumables; the FF&E and the Small Operating Equipment.
14.29 Personal Information means (a) any personally identifiable information of any individual or payment cardholder, including without limitation, name, address, account number, bank account information, social security number, driver’s license number, email addresses, passwords, log-ins and other non-public personal financial information or room preference, or that otherwise can be used (alone or when combined with other information in Sellers or Manager’s control) to identify, locate or contact an individual and (b) any similar information that relates to a payment card authorized by or bearing the logo of a member of the Payment Card Industry (“PCI”) Security Standards Council (the “PCI SSC”) or any similar organization. Personal Information can be in any media or format, including computerized or electronic records as well as paper-based files.
14.30 Person shall mean any individual, partnership, limited liability company, corporation, trust or other entity.
14.31 Property Contracts shall mean all written service, supply and maintenance contracts and written leases of personal property relating to the maintenance, ownership, use, possession or operation of the Land, Improvements or Personalty, but excluding the Management Agreement and Franchise Agreement.
14.32 Purchaser Indemnified Parties means Purchaser and its Affiliates, and each of their respective shareholders, directors, officers, members, partners, trustees, employees and agents, and the successors, assigns, heirs and legal representatives of each of the foregoing.
14.33 Security Breach means any unauthorized use, disclosure, modification or access of Personal Information.
14.34 Small Operating Equipment all china, glassware, stemware, bath mats, bath rugs, shower curtains, tools, linens, towels, uniforms, bedding, silverware and other serving utensils, telephones, televisions, cable equipment, computers and any other equipment, goods, utensils, supplies or reserve stock owned by Seller, located in the Hotel or at the Improvements and used or held in reserve or storage for future use in connection with the maintenance and operation of the Hotel, excluding the Consumables and the FF&E.
14.35 Time of Transfer means 12:01 a.m. eastern time on the Closing Date.
14.36 Uniform System of Accounts shall mean the Uniform System of Accounts for the Lodging Industry used by the Company in preparing the books and records of the Hotel.
[remainder of page intentionally blank]
39
IN WITNESS WHEREOF, this Contract has been duly executed in multiple counterparts (each of which is to be deemed original for all purposes) by the parties hereto.
| SELLERS: | ||
|---|---|---|
| TPG DP JV, LLC, | ||
| a Delaware limited liability company | ||
| By: | /s/ Elizabeth A. Procaccianti | |
| Name: | Elizabeth A. Procaccianti | |
| Title: | Manager | |
| Address: | ||
| ETJ Gano Holdings, Inc. | ||
| a Rhode Island corporation | ||
| By: | /s/ Elizabeth A. Procaccianti | |
| Name: | Elizabeth A. Procaccianti | |
| Title: | President | |
| Address: | ||
| PRJA Gano Holdings, LLC, | ||
| a Delaware limited liability company | ||
| By: | /s/ Elizabeth A. Procaccianti | |
| Name: | Elizabeth A. Procaccianti | |
| Title: | Manager | |
| Address: | ||
| EHI Gano Holdings, Inc. | ||
| a Rhode Island corporation | ||
| By: | /s/ Elizabeth A. Procaccianti | |
| --- | --- | |
| Name: | Elizabeth A. Procaccianti | |
| Title: | President | |
| Address: |
[signatures continue on following page]
40
| PURCHASER: | |
|---|---|
| THE PROCACCIANTI GROUP, LLC, | |
| a Rhode Island limited liability company | |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Title: | Manager |
41
JOINDER BY TITLE COMPANY
The undersigned, referred to in the foregoing Contract as the “Title Company,” hereby acknowledges receipt of a fully executed copy (or executed counterparts) of the foregoing Contract on this 14^th^ day of January, 2020, and accepts the obligations of the Title Company as set forth therein. Upon receipt, the Title Company hereby agrees to hold the Earnest Money as directed in this Contract and to distribute the Earnest Money in accordance with the terms and provisions of the Contract.
| FIRST AMERICAN TITLE INSURANCE COMPANY | ||
|---|---|---|
| By: | /s/ Mark Krivelevich | |
| Name: | Mark Krivelevich | |
| Title: | Associate Underwriter | |
| Address: | 110 East 42^nd^ street, | |
| New York, NY 10017 |
42
JOINDER
The undersigned, in consideration of being an affiliate of Sellers and therefore having a financial interest, hereby covenants and agrees that, for the duration of the Survival Period (and, if a proceeding is commenced by Purchaser within the time limits required under Section 5.4 of this Agreement, during the pendency of such proceeding if longer), it shall cause Sellers to have capital in an amount not less than the Liability Cap (or the amount of damages claimed by Purchaser if such amount is less than the Liability Cap after the expiration of the Survival Period). This Joinder shall survive the Closing.
| TPG<br> DP JV, LLC,<br><br> <br>a Delaware limited liability company | |
|---|---|
| By: | /s/ Elizabeth A. Procaccianti |
| Name: | Elizabeth A. Procaccianti |
| Title: | Manager |
43
EXHIBITS AND SCHEDULES
EXHIBITS
| Exhibit A | Description of Land |
|---|---|
| Exhibit B | Non-Imputation Endorsement |
| Exhibit C | Non-Foreign Affidavit |
| Exhibit D | Buyer’s Equity Ownership Endorsement |
| Schedule 2.2 | Allocation |
| Schedule 5.1.4 | Environmental Law Violations |
| Schedule 5.1.5 | Litigation |
| Schedule 5.1.12 | Leases |
| Schedule 5.1.13 | Property Contracts |
| Schedule 5.1.14 | Permits |
EXHIBIT A
Legal Description
The Land referred to herein below is situated in the County of Providence, State of Rhode Island, and is described as follows:
That certain tract or parcel of land, together with all buildings and improvements thereon, located westerly of India Street and Tockworton Street, in the City of Providence, County of Providence, State of Rhode Island, being bounded and described as follows:
Beginning at a point in the terminus of India Street, said point, being the most southwesterly corner of the herein described parcel;
thence running in a northwesterly direction, by and with land now or formerly of the State of Rhode Island, a distance of 199.16 feet to a corner, said corner being the most southwesterly corner of the herein described parcel;
thence turning an interior angle of 106° 04' 16" and running in a northerly direction, by and with the aforementioned State of Rhode Island land, a distance of 148.27 feet to a corner, said corner being the most northwesterly corner of the herein described parcel;
thence turning an interior angle of 126° 47' 47" and running in a northeasterly direction, by and with the southerly State Freeway Line of Route 195. a distance of 31.22 feet to a point;
thence turning an interior angle of 139° 01' 22" and running in an easterly direction. by and with the aforementioned State Freeway Line of Route 195, a distance of 91.64 feet to a point;
thence turning an interior angle of 348° 01' 18" and running in a northeasterly direction, by and with the aforementioned State Freeway Line of Route 195, a distance of 44.34 feet to a point;
thence turning an interior angle of 22° 46' 24" and running in a northeasterly direction, by and with the aforementioned State Freeway Line of Route 195, a distance of 64.59 feet to a point;
thence turning an interior angle of 157° 13' 36" and running in a southeasterly direction. by and with the aforementioned State Freeway Line of Route 195. a distance of 117.70 feet to a corner, said corner being the most northeasterly corner of the herein described parcel;
thence turning an interior angle of 90° 00' 00" and running in a southwesterly direction. by and with the terminus of Tockwotton Street, a distance of 25.00 feet to a corner, said corner being the southwesterly corner of Tockwotton Street;
A-1
thence turning an Interior angle of 179° 38' 45" and continuing in a southwesterly direction, by and with land now or formerly of Brown University, a distance of 161.01 feet to a corner, said corner being the most southwesterly corner of said Brown University land;
thence turning an interior angle of 180° 26' 00" and continuing in a southwesterly direction, by and with the previously mentioned terminus of India Street, a distance of 25.08 feet to the point and place of beginning;
The last course making an angle of 90° 00' 00" with the first herein described course.
Continuing by calculation, 44,145 square feet of land.
And
Beginning at a point 126.109 feet right of station 108+21.80 of the Interstate 195 Centerline;
Thence, S05°16'22"E along the former freeway line, a distance of 149.15 feet to a point 274.230 feet right of station 108+04.29;
Thence, S79°12'06"E, along the former freeway line, a distance of 199.16 feet to a point 346.104 feet right of station 110+21.04;
Thence, S10°53'32"W, along the former freeway line, a distance of 26.23 feet to a point 371.103 feet right of station 110+10.64;
Thence, N80°11'14"W, along the new freeway line, a distance of 146.26 feet to a point 321.231 feet right of station 110+41.89;
Thence, N74°24'50"W, along the new freeway line, a distance of 39.55 feet to a point 302.908 feet right of station 108+06.84;
Thence, N59°50'10"W, along the new freeway line, a distance of 28.26 feet to a point 283.931 feet right of station 107+85.90;
Thence, N42°28'23"W, along the new freeway line, a distance of 10.75 feet to a point 274.661 feet right of station 107+80.44;
Thence, N14°46'22"W, along the new freeway line, a distance of 10.61 feet to a point 264.067 feet right of station 107+79.93;
Thence, N05°11'07"W, along the new freeway line, a distance of 124.00 feet to a point 140.947 feet right of station 107+94.68;
Thence, N49°18'14"E, along the new freeway line, a distance of 30.92 feet to the point of beginning.
A-2
The herein described parcel is delineated as Parcel A on Rhode Island Highway Plat No. 2869 and contains 9,227 square feet of land more or less.
And
Beginning at a point 113.352 feet right of station 109+02.94 of the Interstate I95 Centerline;
Thence, S76°56'05"E along the former freeway line, a distance of 41.08 feet to a point 129.594 feet right of station 109+43.94;
Thence, N89°43'06"W, along the former freeway line, a distance of 91.66 feet to a point 111.466 feet right of station 108+48.57;
Thence, N80°17'31"E, along the new freeway line, a distance of 52.39 feet to the point of beginning.
The herein described parcel is delineated as Parcel B on Rhode Island Highway Plat No. 2869 and contains 417 square feet of land more or less.
Being the same property conveyed to Gano Holdings, LLC from Fordson Associates I, L.P. by Warranty Deed dated February 29, 1997 and recorded March 7, 1997 in book 3508, Page 187, also acquired title from State of Rhode Island and Providence Plantations by Bargain and Sale Deed, dated September 18, 2015 and recorded November 23, 2015 in book 11266, Page 315.
A-3
EXHIBIT B
Non-Imputation Endorsement
[to be attached prior to end of Inspection Period]
B-1
EXHIBIT CNon-Foreign Affidavit
Section 1445 of the Internal Revenue Code provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. For U.S. tax purposes (including section 1445), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity. To inform the transferee, _______________, a ____________ (“Transferee”) that withholding of tax is not required upon the disposition of a U.S. real property interest by [________] (“Transferor”), and with the knowledge that the Transferee will rely upon the following statements, the undersigned hereby certifies the following on behalf of Transferor.
1. Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations);
2. Transferor is not a disregarded entity as defined in § 1.1445-2(b)(2)(iii);
3. Transferor's U.S. employer identification number is _____________; and
4. Transferor's office address is ___________________________________.
Transferor understands that this certification may be disclosed to the Internal Revenue Service by transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of Transferor.
| SELLER | |
|---|---|
| [], a [] limited liability company | |
| By: | |
| Name: | |
| Title: |
Source CFR, Section 1.1445-2T(b)(2)(iii)(B)
C-1
EXHIBIT D
Buyer’s Equity Ownership Endorsement
[to be provided prior to end of the Inspection Period]
D-1
Schedule 5.1.3
Environmental Laws Violations
[see attached]
Schedule 5.1.5
Litigation
[see attached]
Schedule 5.1.12
Leases
[see attached]
Schedule 5.1.3
Property Contracts
[see attached]
Schedule 5.1.14
Permits
[see attached]
Exhibit 10.3
FIRST AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Amendment”) is dated as of February 12, 2020, by, between and among the persons and entities signing this Amended below under the heading “Sellers” (each being referred to individually as “Seller,” and collectively as “Sellers”) and THE PROCACCIANTI GROUP, LLC a Rhode Island limited liability company (“Purchaser”). Seller and Purchaser are sometimes referred to herein individually as a “Party”, and collectively as the “Parties”.
W I T N E S S E T H:
WHEREAS, Seller and Purchaser are parties to that certain Membership Interest Purchase Agreement with an Effective Date as of January 14, 2020 (collectively, the “Original Agreement”);
WHEREAS, Seller and Purchaser desire to modify certain time periods contained in the Original Agreement as provided herein; and
WHEREAS, unless otherwise defined herein, capitalized terms used in this Amendment shall have the meanings ascribed to such terms in the Original Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser hereby agree as follows:
1. Amendments. The following amendments to the Original Agreement shall be effective upon the date hereof:
| (a) | Inspection Period. The text of Section 14.19 of the Original Agreement is and shall hereby be deleted in its entirety<br>and replaced with the following: |
|---|
“Inspection Period means the period of time commencing on the Effective Date and terminating at 6:00 pm (Eastern Standard Time) on February 21, 2020.”
| (b) | Closing Date. The first sentence of Section 7.1 of the Original Agreement is and shall<br>hereby be deleted in its entirety and replaced with the following: |
|---|
“Provided all of the conditions to Closing have been satisfied, the Closing shall be held by delivery of Closing documents in escrow to the Title Company at 2:00
p.m. Eastern time on the date which is date which on or before March 13, 2020, or at such earlier date and time as may be mutually agreed upon in writing by Sellers and Purchaser (the “Closing Date”).”
2. No Other Amendment or Modification; Ratification. The Original Agreement remains in full force and effect and is hereby ratified and confirmed by Seller and Purchaser, except with respect to matters set forth in this Amendment. From and after the date hereof, all references to the Agreement shall be deemed to refer to the Original Agreement as amended by this Amendment. In the event of a conflict between the terms and conditions of the Original Agreement and those set forth in this Amendment, the terms and conditions of this Amendment shall control.
3. Counterparts; Facsimile and PDF. This Amendment may be executed in any number of counterparts each of which when so executed and delivered shall be deemed to be an original, but all such counterparts shall constitute one and the same agreement. Facsimile and portable document format (PDF) signatures shall have the same force and effect as original signatures.
4. Amendments. This Amendment may not be changed, modified or terminated, nor may any provision hereunder be waived, except by an instrument executed by the parties hereto.
5. No Third-Party Beneficiaries. This Amendment is binding on and inures to the benefit of the parties hereto. The provisions of this Amendment are not intended to benefit any third parties.
6. Entire Agreement. The Original Agreement, as amended by this Amendment, contains all of the terms agreed upon between the parties hereto with respect to the subject matter hereof, and all agreements heretofore had or made between the parties hereto are merged in the Original Agreement, as amended by this Amendment, which alone fully and completely expresses the agreement of said parties.
[Remainder of page intentionally left blank]
2
IN WITNESS WHEREOF, Seller and Purchaser have executed this Amendment as of the date first written above.
| SELLERS: | ||
|---|---|---|
| TPG DP JV, LLC, | ||
| a Delaware limited liability company | ||
| By: | /s/ Elizabeth A.<br> Procaccianti | |
| Name: | Elizabeth A. Procaccianti | |
| Title: | Authorized Signor | |
| Address: | On File | |
| ETJ Gano Holdings, Inc. | ||
| a Rhode Island corporation | ||
| By: | /s/ Elizabeth A.<br> Procaccianti | |
| Name: | Elizabeth A.<br> Procaccianti | |
| Title: | Authorized Signor | |
| Address: | On File | |
| PRJA Gano Holdings, LLC, | ||
| a Delaware limited liability company | ||
| By: | /s/ Elizabeth A.<br> Procaccianti | |
| Name: | Elizabeth A.<br> Procaccianti | |
| Title: | Authorized Signor | |
| Address: | On File | |
| EHI Gano Holdings, Inc. | ||
| a Rhode Island corporation | ||
| By: | /s/ Elizabeth A.<br> Procaccianti | |
| Name: | Elizabeth A.<br> Procaccianti | |
| Title: | Authorized Signor | |
| Address: | On File |
[signatures continue on following page]
3
| PURCHASER: | ||
|---|---|---|
| THE PROCACCIANTI GROUP, LLC, | ||
| a Rhode Island limited liability company | ||
| By: | /s/ Ron M. Hadar | |
| Name: | Ron M. Hadar | |
| Title: | Attorney Duly Authorized |
4
Exhibit 10.4
SECOND AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Amendment”) is dated as of February 20, 2020, by, between and among the persons and entities signing this Amended below under the heading “Sellers” (each being referred to individually as “Seller,” and collectively as “Sellers”) and THE PROCACCIANTI GROUP, LLC a Rhode Island limited liability company (“Purchaser”). Seller and Purchaser are sometimes referred to herein individually as a “Party”, and collectively as the “Parties”.
W I T N E S S E T H:
WHEREAS, Seller and Purchaser are parties to that certain Membership Interest Purchase Agreement with an Effective Date as of January 14, 2020, as amended (collectively, the “Original Agreement”);
WHEREAS, Seller and Purchaser desire to modify certain time periods contained in the Original Agreement as provided herein; and
WHEREAS, unless otherwise defined herein, capitalized terms used in this Amendment shall have the meanings ascribed to such terms in the Original Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser hereby agree as follows:
1. Amendments. The following amendments to the Original Agreement shall be effective upon the date hereof:
| (a) | Inspection Period. The text of Section 14.19 of the Original Agreement is and shall hereby be deleted in its entirety<br>and replaced with the following: |
|---|
“Inspection Period means the period of time commencing on the Effective Date and terminating at 6:00 pm (Eastern Standard Time) on February 27, 2020.”
2. No Other Amendment or Modification; Ratification. The Original Agreement remains in full force and effect and is hereby ratified and confirmed by Seller and Purchaser, except with respect to matters set forth in this Amendment. From and after the date hereof, all references to the Agreement shall be deemed to refer to the Original Agreement as amended by this Amendment. In the event of a conflict between the terms and conditions of the Original
Agreement and those set forth in this Amendment, the terms and conditions of this Amendment shall control.
3. Counterparts; Facsimile and PDF. This Amendment may be executed in any number of counterparts each of which when so executed and delivered shall be deemed to be an original, but all such counterparts shall constitute one and the same agreement. Facsimile and portable document format (PDF) signatures shall have the same force and effect as original signatures.
4. Amendments. This Amendment may not be changed, modified or terminated, nor may any provision hereunder be waived, except by an instrument executed by the parties hereto.
5. No Third-Party Beneficiaries. This Amendment is binding on and inures to the benefit of the parties hereto. The provisions of this Amendment are not intended to benefit any third parties.
6. Entire Agreement. The Original Agreement, as amended by this Amendment, contains all of the terms agreed upon between the parties hereto with respect to the subject matter hereof, and all agreements heretofore had or made between the parties hereto are merged in the Original Agreement, as amended by this Amendment, which alone fully and completely expresses the agreement of said parties.
[Remainder of page intentionally left blank]
2
IN WITNESS WHEREOF, Seller and Purchaser have executed this Amendment as of the date first written above.
| SELLERS: | ||
|---|---|---|
| TPG DP JV, LLC, | ||
| a Delaware limited liability company | ||
| By: | /s/ James A. Procaccianti | |
| Name: | James A. Procaccianti | |
| Title: | Authorized Signor | |
| Address: | ||
| ETJ Gano Holdings, Inc. | ||
| a Rhode Island corporation | ||
| By: | /s/ James A. Procaccianti | |
| Name: | James A. Procaccianti | |
| Title: | Authorized Signor | |
| Address: | ||
| PRJA Gano Holdings, LLC, | ||
| a Delaware limited liability company | ||
| By: | /s/ James A. Procaccianti | |
| Name: | James A. Procaccianti | |
| Title: | Authorized Signor | |
| Address: | ||
| EHI Gano Holdings, Inc. | ||
| a Rhode Island corporation | ||
| By: | /s/ James A. Procaccianti | |
| Name: | James A. Procaccianti | |
| Title: | Authorized Signor | |
| Address: |
[signatures continue on following page]
3
| PURCHASER: | ||
|---|---|---|
| THE PROCACCIANTI GROUP, LLC, | ||
| a Rhode Island limited liability company | ||
| By: | /s/ Ron M. Hadar | |
| Name: | Ron M. Hadar | |
| Title: | Authorized Signor |
4
Exhibit 10.5
THIRDAMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT
(Hilton Garden Inn Providence, RhodeIsland)
THIS THIRD AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Amendment”), made as of the 27th day of February, 2020 by and between by, between and among the persons and entities signing this Agreement below under the heading “Sellers” (each being referred to individually as “Seller,” and collectively as “Sellers”), and (“Buyer”).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Membership Interest Purchase Agreement, dated as of January 14, 2020, between The Procaccianti Group, LLC, a Rhode Island limited liability company (“TPG”) and Sellers, as amended (the “Agreement”), which agreement was assigned by TPG to Buyer pursuant to an assignment dated as of the date hereof, Seller agreed to sell the Interests (as such term is defined in the Agreement) to Buyer, and Buyer agreed to purchase the Interests from Sellers, upon the terms and conditions set forth more particularly therein. All capitalized terms used but not defined herein shall have their respective meanings set forth in the Agreement.
WHEREAS, Sellers and Buyer now desire to amend the Agreement upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants and agreements hereinabove and hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which being hereby acknowledged, the parties hereto agree as follows:
1. Amendments to Agreement**.** The following amendments to the Agreement shall be effective upon the date hereof:
(a) TPG DP Investors, LLC is added to the Agreement as a Seller.
(b) Section 2.2 is amended in its entirety in its entirety to provide as follows:
2.2 Purchase Price. The purchase price (“Purchase Price”) for the Interests is TWENTY EIGHT MILLION FIVE HUNDRED THOUSAND AND 00/100 Dollars ($28,500,000.00), which shall be payable by Purchaser to Seller at Closing less the outstanding balance of the Existing Mortgage Loan as of the Closing Date (subject to (i) Section 2.1.2 and (ii) the prorations and other credits provided for in this Contract) as follows payable at Closing, as follows: (i) 90.390% of the Purchase Price shall be paid in immediately available funds (“Cash Consideration”) and (ii) the balance of the Purchase Price shall be in the form of a capital contribution to Buyer of 9.610% of the Membership Interests in the Company in exchange for a K OP Units interest in Purchaser which K OP
1
Units have an value of $10.00 per unit (the “Rollover Interest”). The Purchase Price shall be allocated to the Sellers (and at the option of each Seller to the Members of such Seller) in accordance with Schedule 2.2(a).
(c) The following new sentence is hereby added to the end of Section 2.1.2 to provide as follows:
Sellers and Purchaser hereby acknowledge and agree that East Boston Savings Bank (the “Mortgage Lender”), has approved the transfer of the Membership Interests from Sellers to Purchaser pursuant to the Agreement and, after the Closing Date, the Existing Mortgage Loan shall continue to be secured by the Property (the “Loan Assumption”). As of the Second Amendment Effective Date, the outstanding principal balance of the Existing Mortgage Loan is $14,936,900.72.
(d) New Section 2.3.1 is hereby added to the Agreement to provide as follows:
Purchaser agrees to use the “traditional method” under Treasury Regulations Section 1.704-3(b) for purposes of making all allocations under Section 704(c) of the Code with respect to the Property.
(e) New Section 5.1.25 is hereby added to the Agreement to provide as follows:
Schedule 5.1.25 attached hereto is a true and complete list of all the loan documents evidencing and/or securing the Existing Mortgage Loan (including all amendments and modifications, the “Mortgage Loan Documents”); true and complete copies of all of the Mortgage Loan Documents have been made available to Purchaser for inspection. Neither the Company nor any Seller has received any written notice from the Mortgage Lender alleging that an Event of Default (as defined in the Mortgage Loan Documents) has occurred pursuant to the Mortgage Loan Documents that remains uncured, and, to Sellers’ knowledge, no Event of Default (as defined in the Mortgage Loan Documents) exists under the Mortgage Loan Documents.”
(f) New Section 5.3.5 is added to the Agreement to provide as follows:
5.3.5 When issued and delivered in accordance with this Agreement, the Rollover Interest issued to the Sellers will be validly issued and nonassessable, free and clear of all preemptive rights and any and all mortgages, liens, pledges, security interests, charges, claims, restrictions and encumbrances of any nature whatsoever other than applicable federal and state securities laws. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any
2
federal, state or local governmental authority is required on the part of Buyer in connection with the consummation of the transactions contemplated by this Agreement, except for filings, if any, pursuant to the Securities Act of 1933, as amended (the “Securities Act”), and applicable state securities laws.
(g) New Section 7.2.1(i) is added to the Agreement to provide as follows:
| (i) | Deliver to Buyer, the Buyer’s limited partnership agreement in the form previously provided<br>to the Sellers. |
|---|
(h) New Section 7.2.1(i) is added to the Agreement to provide as follows:
| (j) | Without cost to Sellers, Sellers shall deliver, or cause<br>the Company to deliver, executed counterparts to any documents that Mortgage Lender or Purchaser deems reasonably necessary or<br>desirable to effectuate or evidence the Loan Assumption. |
|---|
(i) New Section 7.2.2(f) is added to the Agreement to provide as follows:
(f) Deliver to Sellers Buyer’s LLC Agreement duly executed by Buyer and the other members and managers of Buyer.
| (i) | New Section 9.1.2 is hereby added to the Agreement to provide as follows: |
|---|
9.2.1 Existing Mortgage Loan. Sellers agree that during the period between the Effective Date and the Closing Date, Sellers shall, and shall cause the Company to: (a) perform all obligations of Sellers, if any, and of the Company required to be performed under the Mortgage Loan Documents; and (b) promptly advise Purchaser of any written notice of default received by any Seller or the Company under any of the Mortgage Loan Documents.
(g) New Schedule 2.2(a) is attached hereto is added to the Agreement.
2. No Other Amendment or Modification; Ratification. The Original Agreement remains in full force and effect and is hereby ratified and confirmed by Seller and Purchaser, except with respect to matters set forth in this Amendment. From and after the date hereof, all references to the Agreement shall be deemed to refer to the Original Agreement as amended by this Amendment. In the event of a conflict between the terms and conditions of the Original Agreement and those set forth in this Amendment, the terms and conditions of this Amendment shall control.
3. Counterparts; Facsimile and PDF. This Amendment may be executed in any number of counterparts each of which when so executed and delivered shall be deemed to be an original, but all such counterparts shall constitute one and the same agreement. Facsimile and
3
portable document format (PDF) signatures shall have the same force and effect as original signatures.
4. Amendments. This Amendment may not be changed, modified or terminated, nor may any provision hereunder be waived, except by an instrument executed by the parties hereto.
5. No Third-Party Beneficiaries. This Amendment is binding on and inures to the benefit of the parties hereto. The provisions of this Amendment are not intended to benefit any third parties.
6. Entire Agreement. The Original Agreement, as amended by this Amendment, contains all of the terms agreed upon between the parties hereto with respect to the subject matter hereof, and all agreements heretofore had or made between the parties hereto are merged in the Original Agreement, as amended by this Amendment, which alone fully and completely expresses the agreement of said parties.
[Remainder of page intentionally left blank]
4
IN WITNESS WHEREOF, Seller and Purchaser have executed this Amendment as of the date first written above.
| SELLERS: | ||
|---|---|---|
| TPG DP JV,<br> LLC, | ||
| a Delaware<br> limited liability company | ||
| By: | /s/ James A. Procaccianti | |
| Name: | James A. Procaccianti | |
| Title: | Authorized Signatory | |
| Address: | ||
| ETJ Gano<br> Holdings, Inc. | ||
| a Rhode Island<br> corporation | ||
| By: | /s/ James A. Procaccianti | |
| Name: | James A. Procaccianti | |
| Title: | Authorized Signatory | |
| Address: | ||
| PRJA Gano<br> Holdings, LLC, | ||
| a Delaware<br> limited liability company | ||
| By: | /s/ James<br>A. Procaccianti | |
| Name: | James A. Procaccianti | |
| Title: | Authorized Signatory | |
| Address: | ||
| EHI Gano<br> Holdings, Inc. | ||
| a Rhode Island<br> corporation | ||
| By: | /s/ James A. Procaccianti | |
| Name: | James A. Procaccianti | |
| Title: | Authorized Signatory | |
| Address: |
[signatures continue on following page]
5
| TPG DP Investors,<br> LLC, | ||
|---|---|---|
| a Delaware<br> limited liability company | ||
| By: | /s/ James A. Procaccianti | |
| Name: | James A. Procaccianti | |
| Title: | Authorized Signatory | |
| Address: | ||
| PURCHASER: | ||
| THE PROCACCIANTI<br> GROUP, LLC, | ||
| a Rhode Island<br> limited liability company | ||
| By: | /s/<br> Ron M. Hadar | |
| Name: | Ron M. Hadar | |
| Title: | Authorized Signatory |
6
Schedule 2.2(a)
TO BE COMPLETED BY THE PARTIES AT CLOSING
| Seller | Purchase Price |
|---|---|
| TPG DP JV, LLC, | $11,987,230.71 in Cash |
| ETJ Gano<br> Holdings, Inc. | $6,666.20,<br> represented by 666.62 K OP Units in |
| Buyer | |
| PRJA Gano Holdings, LLC, | $3,999.72, represented<br> by 399.97 K OP Units in |
| Buyer | |
| EHI Gano Holdings, Inc. | $2,666.48, represented<br> by 266.65 K OP Units in |
| Buyer | |
| TPG DP Investors, LLC | (i) $63,932.00 in<br> cash to be distributed to certain of its members being Scott Harrell and P Squared Investments, LLC; and (ii) $l,267,911.91<br> represented by 126,791.19 K OP Units in Buyer, to be distributed to the following members of TPG DP Investors, LLC as follows: |
| LFHI, LLC-22,641.10 K OP UNITS | |
| PEH 1999 Realty Trust II- 11,321.19 K OP UNITS | |
| THE LHG 1997 Realty Trust, 11,321.19 K OP UNITS | |
| TH INVESTMENT HOLDINGS II, LLC. 81,507.72 K OP UNITS |
7
Schedule 5.1.25
Mortgage Loan Documents
| LOAN DOCUMENTS | ||
|---|---|---|
| 1. | Loan Commitment | |
| 2. | Commercial Real Estate Promissory Note | |
| 3. | Loan Agreement | |
| 4. | Open-End Mortgage, Security Agreement, Assignment to Secure Present and Future Loans | |
| 5. | UCC-1 Financing Statement(s) | |
| 6. | Guaranty from Guarantor | |
| 7. | Certificate as to Oil and Hazardous Materials and Indemnity Agreement | |
| 8. | Pledge and Security Agreement (Bank Accounts) | |
| 9. | Assignment of Borrower’s Interests in Leases, Rents and Profits | |
| 10. | Assignment of Interests in Licenses, Permit and Agreements | |
| 11. | Collateral Assignment of Architect’s Contract | |
| 12. | Collateral Assignment of Construction Contract | |
| 13. | Assignment and Subordination of Management Agreement | |
| 14. | Compliance Agreement | |
| 15. | Statement of Purpose | |
| 16. | I.R.S. Form W-9<br><br> <br>(a) Borrower<br><br> <br>(b) Guarantor | |
| 17. | Customer ID Form<br><br> <br>(a) Borrower<br><br> <br>(b) Guarantor | |
| 18. | Account Number for Borrower’s operating account at Lender: | |
| 19. | Loan Disbursement Statement and Authorization (_____) |
8
| 2019 LOAN MODIFICATION DOCUMENTS | ||
|---|---|---|
| 20. | (a) Omnibus<br> Amendment and Reaffirmation Agreement<br><br> <br>(b) Promissory<br> Note<br><br> <br>(c) Second<br> Amendment to Mortgage and Assignment of Rents and Leases<br><br> <br>(d) UCC<br> Continuation<br><br> <br>(e) Loan<br> Closing Statement and Authorization |
9
Exhibit 10.6
OMNIBUS AMENDMENT, ASSIGNMENT, ASSUMPTION,
RELEASE AND REAFFIRMATION AGREEMENT
(Loan from East Boston Savings Bank)
This Omnibus Amendment, Assignment, Assumption, Release and Reaffirmation Agreement (“Omnibus Agreement”) is made as of the 27^th^ day of February, 2020, between and among GANO HOLDINGS, LLC (“Borrower”, sometimes “PropCo”), a Rhode Island limited liability company, PHR GANO OPCO SUB, LLC (“OpCo”, sometimes “Franchisee”), a Delaware limited liability company; Procaccianti Hotel REIT, Inc. (“GPHREIT”), a Maryland corporation; and James A. Procaccianti (“JProcaccianti”), all of the foregoing (collectively, the “Procaccianti Parties”) having a mailing address c/o The Procaccianti Group, 1140 Reservoir Avenue, Cranston, Rhode Island 02920-6032, Attn: James A. Procaccianti, President and CEO, and EAST BOSTON SAVINGS BANK (“Bank”), a Massachusetts banking corporation with its principal office at 67 Prospect Street, Peabody, Massachusetts 01960.
WHEREAS, the Bank earlier made a loan to Borrower in the original amount of Thirteen Million One Hundred Thirty-Five Thousand Dollars ($13,135,000.00) and later increased in 2019 by Two Million Five Hundred Thousand Dollars ($2,500,000.00), which loan (as previously increased, the “Existing Loan”) is secured in part by improved property located at 220 India Street, Providence, Rhode Island, on which there is a 137-key hotel and parking area known as the Hilton Garden Inn (the “Hotel”); and
WHEREAS, the Borrower and Bank have agreed that the collateral granted as security for the Existing Loan will also serve as collateral for the Existing Loan as increased and modified, amended and restated as evidenced by an Amended and Restated Commercial Promissory Note of even date herewith from Borrower to the order of Bank in the face amount of $16,936,900.72 which shall amend, restate and replace the promissory notes evidencing the Existing Loan (the “2020 Note”) and the other Loan Documents (as “Loan Documents” is defined in the 2020 Note)); and
WHEREAS, the Existing Loan is guaranteed, in part, by JProcaccianti pursuant to the terms of the Guaranty earlier signed and delivered by him that is one of the Loan Documents (“Guaranty”); and
WHEREAS, Borrower and JProcaccianti have approached the Bank and asked it to further modify and increase the Existing Loan, to allow for (i) the transfer of certain interests held, directly or indirectly, in the Borrower, (ii) a change and replacement of Guarantor and the release of JProcaccianti’s obligations to the Bank with respect to the Existing Loan as now existing and/or as evidenced by the Loan Documents (as “Loan Documents” is defined in the 2020 Note), and (iii) the Bank’s consent to an operating lease and a new franchise agreement for the Hotel; and
1
WHEREAS, the parties hereto agree on the following terms on which the Existing Loan may be increased and modified;
NOW THEREFORE, for good and valuable consideration, including the changes to the Loan Documents hereinafter noted, the receipt and sufficiency of which are acknowledged, the Bank and undersigned Procaccianti Parties do agree as follows:
| 1. | Capitalized terms used herein and not otherwise defined in this Agreement shall have the meanings<br>ascribed to them by the Third Amendment to (i) an Open-End Mortgage, Security Agreement and Assignment to Secure Present and Future<br>Loans Under Chapter 25 of Title 34 of the General Laws of the State of Rhode Island and (ii) an Assignment of Borrower’s<br>Interests in Leases, Rents and Profits being executed and delivered in connection herewith by the Borrower (the “ThirdAmendment”). |
|---|---|
| 2. | PHR TRS II, LLC (“MM”), a Delaware limited liability company, is the Member<br>Manager of OpCo. Procaccianti Hotel REIT, Inc. (“GPHREIT”) is a Maryland corporation, whose limited partner<br>is Procaccianti Hotel REIT, LP, LLC (“LPHREIT”) a majority of which is owned by GPHREIT. |
| --- | --- |
| 3. | The Procaccianti Parties acknowledge and agree that the term “Loan Documents”<br>shall mean “Loan Documents” as defined in the 2020 Note, including, without limitation, this Omnibus Agreement, a Pledge<br>Agreement Regarding Liquor License from Borrower to Bank being executed and delivered in connection herewith, a Collateral Assignment<br>and Security Agreement in Respect of Contracts, Licenses and Permits from Borrower to Bank (“Borrower’s ContractAssignment”) being executed and delivered in connection herewith, and a Collateral Assignment and Security Agreement<br>in Respect of Contracts, Licenses and Permits from OpCo to the Bank (“OpCo’s Contract Assignment”) being<br>executed and delivered in connection herewith. |
| --- | --- |
| 4. | JProcaccianti is and shall hereby be released and discharged from each obligation arising under<br>the Guaranty and/or any of the other Loan Documents from facts, circumstances or conditions first arising on or after the date<br>hereof. |
| --- | --- |
| 5. | GPHREIT (a) has assumed and agreed to pay and perform all the obligations of the Guarantor arising<br>on and after the date hereof with respect to: (i) the Guaranty as if it had originally been named as the Guarantor therein, and/or<br>(ii) the Certificate as to Oil and Hazardous Materials and Indemnity Agreement that was executed and delivered in connection with<br>the Existing Loan (“EIA”); and (b) confirms by signing below that (i) each of the Guaranty and EIA remains in<br>full force and effect and applicable to the obligations arising under the Loan Documents as “Loan Documents” is defined<br>in the 2020 Note, and (ii) GPHREIT has reviewed all such Loan Documents. |
| --- | --- |
| 6. | PropCo and OpCo represent and warrant to Bank that attached<br>hereto as Exhibit A is a true, accurate and complete copy of the lease (“Operating Lease” or “OpCoLease”) between them, and that: (i) such Operating Lease (a) reflects the entire |
| --- | --- |
2
| agreement between them with respect to the Property, and (b) is in full force and effect;<br> (ii) neither Landlord nor Tenant is in default thereunder; (iii) neither of them as landlord or tenant has any knowledge of<br> any fact or occurrence which, but for notice or the passage of time, would be a default under such Operating Lease; and (iv)<br> no sums due landlord from tenant thereunder have been paid in advance. | |
|---|---|
| 7. | OpCo represents and warrants to Bank that attached hereto as Exhibit B is a true, accurate and<br>complete copy of the franchise agreement between it and Hilton Franchise Holding, LLC (“HFH”), and that: (i)<br>such Franchise Agreement (“Franchise Agreement”) (a) reflects the entire agreement between them with respect<br>to the Property, and (b) is in full force and effect; (ii) neither OpCo nor, to OpCo’s knowledge, HFH is in default thereunder;<br>(iii) neither OpCo nor, to OpCo’s knowledge, HFH has any knowledge of any fact or occurrence which, but for notice or the<br>passage of time, would be a default under such Franchise Agreement. Where used in the Loan Documents, the term “Franchise<br>Agreement” shall mean the “Franchise Agreement” as defined in this paragraph. |
| --- | --- |
| 8. | The Bank hereby consents to: (i) the execution and performance by the Borrower and OpCo of the<br>Operating Lease; (ii) the transfers and change of ownership of the Borrower which will result in the corporate and ownership structure<br>as shown on Exhibit C attached hereto; (iii) the termination of the existing franchise agreement applicable to the Hotel and the<br>execution by OpCo of the Franchise Agreement with HFH in form as noted above; and (iv) the termination of the existing hotel management<br>agreement applicable to the Hotel and the execution by OpCo of the a new Hotel Management Agreement with Gano Hotel Manager, LLC<br>(an affiliate of JProcaccianti) in the form previously provided to the Bank by OpCo. |
| --- | --- |
| 9. | Each of the Procaccianti Parties represents and warrants that he/it has full power and authority<br>to execute and deliver this Agreement, and the person signing on behalf of the Borrower represents and warrants that he/it has<br>full power and authority to execute and deliver this document on behalf of such Procaccianti Party and that its signature shall<br>conclusively evidence that this document has been voluntarily signed and delivered and is binding upon such Procaccianti Party. |
| --- | --- |
| 10. | Borrower and JProcaccianti each represents and warrants to the Bank for itself/himself that it/he<br>is not in default under the respective Loan Documents to which it/he is a party and that, to the best of its/his knowledge, the<br>Bank is not in default under the respective Loan Documents to which he or it is a party. |
| --- | --- |
| 11. | Except for the transactions noted herein, Borrower represents and warrants to the Bank that it<br>has not granted any rights or interests in any of the Loan collateral to anyone other than Bank. |
| --- | --- |
| 12. | In the Financial Covenants section of the Loan Agreement, the following changes are made, effective<br>from and after the date hereof: |
| --- | --- |
3
| a. | The term “Minimum Ratio” shall mean a ratio of at least 1.4 to 1.0 when calculated<br>with respect to the Debt Service Coverage Ratio for the Property and/or the Debt Service Coverage Ratio for the Hotel. |
|---|---|
| b. | The term “Net Operating Income” shall mean (i) for determining the Debt Service<br>Coverage Ratio for the Property, the amount obtained by subtracting the Property Operating Expenses from Gross Income from Property<br>Operations; and (ii) when determining the Debt Service Coverage Ratio for the Hotel, the amount obtained by subtracting the Hotel<br>Operating Expenses from Gross Income from Hotel Operations. |
| --- | --- |
| c. | “Gross Income from Property Operations” shall mean all income received by Borrower<br>from the ownership of the Property from whatever source, computed on an accrual basis in accordance with generally accepted accounting<br>practices and principles, including, but not limited to, rent received pursuant to the OpCo Lease (“OpCo Rent Payments”)<br>and/or, if any, all guest room revenues, all food, beverage, and merchandise sales receipts, all revenues from group bookings and<br>functions, all interest income, if any, rent, utility charges, escalations, forfeited security deposits, service fees or charges,<br>license fees, parking fees, rent concessions or credits, and any business interruption insurance proceeds but excluding sales,<br>use and occupancy or other taxes on receipts required to be accounted for by Borrower to any government or governmental agency,<br>refunds and uncollectible accounts, sales of furniture, fixtures and equipment or any capital assets, proceeds of casualty insurance<br>and condemnation awards, interest on credit accounts and all revenue generated from non-recurring or one-time events. In no event<br>shall any Advance be deemed to be all or any part of the Gross Income from Property Operations. |
| --- | --- |
| d. | “Gross Income from Hotel Operations” shall mean all income received by OpCo<br>from the operation of the Hotel from whatever source, computed on an accrual basis in accordance with generally accepted accounting<br>practices and principles, including, but not limited to, all guest room revenues, all food, beverage, and merchandise sales receipts,<br>all revenues from group bookings and functions, all interest income, if any, rent, utility charges, escalations, forfeited security<br>deposits, service fees or charges, license fees, parking fees, rent concessions or credits, and any business interruption insurance<br>proceeds but excluding sales, use and occupancy or other taxes on receipts required to be accounted for by Borrower to any government<br>or governmental agency, refunds and uncollectible accounts, sales of furniture, fixtures and equipment in the usual course of business,<br>proceeds of casualty insurance and condemnation awards, interest on credit accounts and all revenue generated from non-recurring<br>or one-time events. In no event shall any Advance be deemed to be all or any part of the Gross Income from Hotel Operations. |
| --- | --- |
| e. | “Property Operating Expenses” shall<br>mean, without duplication for any amounts which are included in Hotel Operating Expenses, the total of all expenditures paid or<br>payable solely as obligations of Borrower of whatever kind relating to the operation, maintenance and management of the Property<br>that are |
| --- | --- |
4
| incurred on a regular monthly or other periodic basis (both department expenses and<br> undistributed operating expenses), including without limitation, the following costs if the same are actual direct<br> obligations of the Borrower, rent, if any, utilities, ordinary repairs and maintenance, insurance, license fees, taxes and<br> assessments, advertising expenses, management fees in an amount equal to the greater of the actual fees or three percent (3%)<br> of Gross Income from Operations, all franchise fees and other fees and contributions payable pursuant to the Franchise<br> Agreement, if any, all required contributions to reserves and/or escrows required to be made by Borrower under the Loan<br> Documents, if any, net of the distributions from such reserves and/or escrows allocable to the same reporting period, payroll<br> and related taxes (if any), computer processing charges, operational equipment and/or other lease payments as approved by<br> Bank, and other similar costs, but excluding depreciation, other non-cash charges, debt service on the Loan and capital<br> expenditures, all calculated on a monthly basis in accordance with generally accepted accounting practices and principles<br> consistently applied, all without duplication for such charges as are included within, and paid via payment of, any other<br> expense. | |
|---|---|
| f. | “Hotel Operating Expenses” shall mean, without duplication for any Property<br>Operating Expenses, the total of all expenditures paid or payable of whatever kind relating to the operation, maintenance and management<br>of the Hotel that are incurred on a regular monthly or other periodic basis (both department expenses and undistributed operating<br>expenses), including without limitation, rent, utilities, ordinary repairs and maintenance, insurance, license fees, taxes and<br>assessments, advertising expenses, management fees in an amount equal to the greater of the actual fees or three percent (3%) of<br>Gross Income from Operations, all franchise fees and other fees and contributions payable pursuant to the Franchise Agreement,<br>all required contributions to reserves and/or escrows under the Franchise Agreement and/or the Loan Documents, if any, net of the<br>distributions from such reserves and/or escrows allocable to the same reporting period, payroll and related taxes, computer processing<br>charges, operational equipment and/or other lease payments as approved by Bank, and other similar costs, but excluding depreciation,<br>rents paid under the OpCo Lease, non-cash charges, debt service on the Loan, and capital expenditures, all calculated on a monthly<br>basis in accordance with generally accepted accounting practices and principles consistently applied, all without duplication for<br>such charges as are included within, and paid via payment of, any other expense. |
| --- | --- |
| g. | “Net Operating Income” shall mean (i) with respect to a calculation of Debt<br>Service Coverage Ratio for the Property, the amount obtained by subtracting Property Operating Expenses from Gross Income from<br>Property Operations, and (ii) with respect to a calculation of Debt Service Coverage Ratio for the Hotel, shall mean the amount<br>obtained by subtracting Hotel Operating Expenses from Gross Income from Hotel Operations. |
| --- | --- |
| h. | “Debt Service Coverage Ratio” or “DSCR”<br>shall mean each and both of the Debt Service Coverage |
| --- | --- |
5
| Ratio for the Property and the Debt Service Coverage Ratio for the Hotel. The DSCR for the<br> Property shall be the ratio for the applicable period in which: (A) the numerator is the Net Operating Income for such<br> period; and (B) the denominator is the aggregate amount of principal and interest due and payable on the Note for such<br> period. The DSCR for the Hotel shall be the ratio for the applicable period in which: (A) the numerator is the sum of the Net<br> Operating Income for the Hotel plus the OpCo Rent Payments for such period; and (B) the denominator is the aggregate amount<br> of principal and interest due and payable on the Note for such period. |
|---|
[END OF TEXT; SIGNATURES ON NEXT PAGE]
6
Executed under seal as of the date first above written.
| BORROWER/PROPCO: | bank: | ||
|---|---|---|---|
| GANO HOLDINGS, LLC, | EAST BOSTON SAVINGS BANK, | ||
| a Rhode Island limited liability company | a Massachusetts banking corporation | ||
| By: | /s/ James A. Procaccianti | By: | /s/<br> Jonpaul Sallese |
| James A. Procaccianti, | Jonpaul Sallese | ||
| Its: Authorized Signatory | Vice President, Commercial Real Estate | ||
| OPCO/FRANCHISEE: | |||
| PHR GANO OPCO SUB, LLC, | |||
| a<br> Delaware limited liability company | |||
| By: | /s/ James A. Procaccianti | ||
| James A. Procaccianti, | |||
| Its:<br> Authorized Signatory | |||
| GPHREIT: | |||
| PROCACCIANTI HOTEL REIT, Inc. | |||
| a<br> Maryland corporation | |||
| By: | |||
| By: | /s/ James A. Procaccianti | ||
| Name: James A. Procaccianti | |||
| Its:<br> Authorized Signatory | |||
| JPROCACCIANTI, executing to | |||
| confirm the release of the | |||
| undersigned as provided above: | |||
| /s/ James A. Procaccianti | |||
| James<br> A. Procaccianti |
7
STATE OF RHODE ISLAND
Providence, ss.
On this 26^th^ day of February, 2020, before me, the undersigned notary public, personally appeared James A. Procaccianti, proved to me through satisfactory evidence of identification, which was being personally known to me to be the person whose name is signed on the preceding or attached document, and acknowledged to me that he signed it voluntarily for its stated purpose.
| /s/ Natasha<br> V. Ruane |
|---|
| NOTARY PUBLIC |
| [Affix Notarial Seal] |
| --- |
8
COMMONWEALTH OF MASSACHUSETTS
__________________, ss.
On this ____ day of ______________, 2020, before me, the undersigned notary public, personally appeared Jonpaul Sallese, as Vice President, Commercial Real Estate, of East Boston Savings Bank, proved to me through satisfactory evidence of identification, which was __________________ to be the person whose name is signed on the preceding or attached document, and acknowledged to me that he signed it voluntarily for its stated purpose.
| NOTARY PUBLIC | |
|---|---|
| [Affix Notarial Seal] | Printed Name: |
| My Commission Expires: |
9
EXHIBIT A
Operating Lease
(BG Doc #879855)
EXHIBIT B
Franchise Agreement
(BG Doc #881108)
EXHIBIT C
Organization Chart
(BG Doc #881912)
Exhibit 10.7
East Boston Savings Bank
AMENDEDAND RESTATED Commercial Real Estate Promissory Note
| $ | 16,936,900.72 | Boston, Massachusetts |
|---|---|---|
| As of February 27, 2020 |
This Amended andRestated Commercial Real Estate Promissory Note (this “Note”) amends, restates and replaces in its entirety, but doesnot extinguish the obligations evidenced by, the $13,135,000.00 Commercial Promissory Note dated May 27, 2015 (the “2015Note”) and/or the $2,500,000.00 Commercial Promissory Note dated May 31, 2019 (the “2019 Note”), each made bythe Borrower (as defined below) payable to the order of the Bank (as defined below), but which obligations are now restated andevidenced herein without duplication.
FOR VALUE RECEIVED, GANO HOLDINGS, LLC (hereinafter, the “undersigned” or the “Borrower”), a Rhode Island limited liability company having a mailing address c/o The Procaccianti Group, 1140 Reservoir Avenue, Cranston, Rhode Island 02920-6032, Attn: James A. Procaccianti, President and CEO, promises to pay to the order of
EAST BOSTON SAVINGS BANK
(hereinafter, with any subsequent holder, the “Bank”)
at an office of the Bank, the sum of SIXTEEN MILLION, NINE HUNDRED THIRTY-SIX THOUSAND, NINE HUNDRED AND 72/100 DOLLARS ($16,936,900.72), with interest from and after February 14, 2020 on the unpaid principal balance of the within Commercial Real Estate Promissory Note (hereinafter, the “Note”), or so much thereof as has been advanced and remains unrepaid hereunder, at the fixed, annual rate (the “Fixed Rate”) of FOUR and 25/100 percent (4.25%), provided that during the continuance of an Event of Default hereunder, interest shall accrue at the aggregate of the Fixed Rate plus five percent (5.0%) [500 basis points] per annum. All interest shall be payable in arrears and calculated on the basis of a 360 day year and the actual number of days elapsed.
Principal and interest on this Note shall be repaid as follows:
(a) Commencing on March 15, 2020, and continuing on the 15^th^ day of each month thereafter (each such day, a “Payment Day”) for the next 35 months, Borrower shall pay the Bank a monthly payment in the amount of the accrued and unpaid interest.
(b) Commencing March 15, 2023, and on the 15^th^ day of each month thereafter prior to the Maturity Date, Borrower will pay Lender monthly a payment in the amount determined by Lender in good faith as the monthly payment sufficient to fully amortize the principal balance of the loan evidenced by this Note (“Loan”) that is outstanding on
| -1- |
| --- |
February 15, 2023 in substantially equal payments of principal and interest assuming a thirty-year amortization period commencing on February 15, 2023.
(c) The entire outstanding principal balance hereof and all accrued and unpaid interest and other charges due hereon shall be due and payable on May 15, 2025 (the “Maturity Date”).
Borrower shall pay, upon billing therefor, a “Late Charge” equal to five percent (5%) of the amount of any scheduled monthly installment (but excluding any amounts due at maturity) not paid within ten (10) days after the due date thereof.
This Note or any portion thereof may be prepaid in full or in part at any time upon fifteen (15) days’ prior written notice to the holder of this Note.
This Note or any portion thereof may be prepaid in full or in part at any time upon fifteen (15) days’ prior written notice to the holder of this Note, subject to the payment of, in addition to sums otherwise payable, a prepayment fee (subject to the exceptions provided below) equal to two (2.00%) percent of the sums prepaid if prepaid on or before May 31, 2020; one-half of one percent (.50%) percent of the sums prepaid if prepaid after May 31, 2020 and on or before May 31, 2022; and zero (0%) percent of the sums prepaid if prepaid after May 31, 2022.
Notwithstanding the foregoing, if during the 6 months next after the date hereof there is no Event of Default then continuing beyond applicable notice and cure periods, to the extent the Borrower elects to prepay any amounts under this Note, with respect any such prepayments of sums in excess of the principal balance that was outstanding on February 14, 2020, there shall be no prepayment premium payable on such excess amount as is prepaid. As used herein, the term “Loan Year” shall mean each successive twelve (12) month period during the term of this Note, with the first Loan Year beginning on the date hereof and each successive Loan Year beginning at the end of the prior Loan Year.
Any partial prepayment of principal shall first be applied to any installment of principal then due and then shall be applied to the principal due in the reverse order of maturity, and no such partial prepayment shall relieve Borrower of the obligation to pay each subsequent installment of principal when due. No amounts repaid hereunder may be reborrowed.
Any payments received by the Bank on account of this Note prior to an Event of Default (defined below) shall be applied to reduce the Liabilities (as defined in the undersigned’s Open-End Mortgage, Security Agreement and Assignment to Secure Present and Future Loans Under Chapter 25 of Title 34 of the General Laws of the State of Rhode Island originally delivered from Lender to Borrower together with the 2015 Note, later modified in 2019 to additionally secure the 2019 Note (collectively, “Prior Loan”) and now further amended in connection herewith (as so further amended, the “Mortgage”) by application first, to any costs, expenses, or charges then owed the Bank by the Borrower, second, to accrued and unpaid interest, and third, to the unpaid principal balance hereof. Any payments so received after an Event of Default then continuing beyond applicable notice and cure periods shall also be applied to reduce the Liabilities, but by application to costs, expenses, charges, interest, principal and other changes owing under the Loan Documents in such order and amounts as the Bank may determine. The Borrower hereby
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authorizes the Bank to charge any deposit account which the Borrower may maintain with the Bank for any payment required hereunder.
The Borrower represents to the Bank that the proceeds of this Note will be used for commercial purposes.
The Bank, at its option, may declare the entire unpaid principal balance of this Note and accrued unpaid interest thereon to be immediately due and payable without demand, notice or protest (which are hereby waived), during the continuation of any one or more of the following events ( each an “Event of Default”):
(a) the failure by the undersigned to pay any amount due under this Note at the Maturity Date, or the failure of the undersigned to pay any installment of interest or principal hereunder within ten (10) days after the same is due; (b) the failure by the undersigned to pay within ten (10) days after written notice is given by the Bank of such failure of any of the undersigned’s other monetary liabilities, obligations, and indebtedness to the Bank arising under the Loan Documents (as defined in the Mortgage); (c) the failure by the undersigned to promptly, punctually, and faithfully perform, discharge, or comply with any of the undersigned’s nonmonetary liabilities, obligations, indebtedness or covenants arising under the Loan Documents to the Bank within thirty (30) days after written notice is given by the Bank of such failure; provided; however, to the extent such failure is not reasonably capable of cure in such time period, but Borrower commences cure within the first fifteen (15) days of such thirty (30) day period, then Borrower will be provided with additional time to cure not in excess of an addition ninety (90) days, provided that it is diligently pursuing a cure of such matter (the Note, liabilities, obligations, indebtedness, and covenants described in (b) and (c) are referred to herein as the “Liabilities”); (d) the determination by the Bank in good faith that any representation or warranty heretofore, now, or hereafter made by the undersigned to the Bank, in any document, instrument, agreement, or paper was not true or accurate in any material respect when given; (e) the occurrence of any event of default under any other Loan Documents not cured within any applicable grace or cure periods (notwithstanding that the Bank may not have exercised its rights upon default under any such Loan Documents); (f) any act by, against, or relating to the undersigned, or its property or assets, which act constitutes the application for, consent to, or sufferance of the appointment of a receiver, trustee, or other person, pursuant to court action or otherwise, over all, or any significant part of the undersigned’s property and which, if resulting from acts of others, is not dismissed within ninety days of filing; (g) the granting of any trust mortgage or execution of a general assignment for the benefit of the creditors of the undersigned; (h) or the occurrence of any other voluntary or involuntary liquidation of the undersigned; adjudication of bankruptcy or insolvency relative to the undersigned; (i) the entry of an order for relief or similar order with respect to the undersigned in any proceeding pursuant to the Bankruptcy Reform Act of 1978 (commonly referred to as the Bankruptcy Code) or any other federal bankruptcy law; (j) the filing of any complaint, application, or petition by or against the undersigned initiating any matter in which the undersigned is or may be granted any relief from the debts of the undersigned pursuant to the Bankruptcy Code or to any other insolvency statute or procedure (provided that the filing of any such complaint, application or petition against the undersigned shall not constitute an Event of Default hereunder until the earlier of the expiry of ninety (90) days after filing without dismissal thereof or the entry of an Order for Relief against
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the undersigned); (k) Borrower’s calling of or participation in a meeting of creditors of the undersigned; (l) the offering by, or entering into by, the undersigned of any composition, extension or any other arrangement seeking general relief or extension for the debts of the undersigned, or the initiation of or participation in any other judicial or non-judicial proceeding or agreement by, against, or including the undersigned which seeks or intends to accomplish a reorganization or arrangement with creditors; (m) the entry of any final judgment without appeal pending, in excess of $100,000.00 by a court of competent jurisdiction against the undersigned, which judgment remains unsatisfied or is not discharged or dissolved by a bond (or by cash collateral acceptable to the Bank) for a period of sixty (60) days after the Borrower has actual knowledge of same; (k) the termination of existence, dissolution (other than administrative dissolution provided reinstatement is undertaken promptly after Borrower has knowledge of such dissolution) winding up, or liquidation of the undersigned; or (l) an Event of Default occurs under any of the Loan Documents (as “Loan Documents” is defined in the Mortgage as it is amended in connection herewith).
Any and all deposits or other sums at any time credited by, or due to the undersigned from, the Bank or any of its banking or lending affiliates or any bank acting as a participant under any loan arrangement between the Bank and the undersigned, and any cash, securities, instruments, or other property of the undersigned in the possession of the Bank, or any of its banking or lending affiliates, or any bank acting as a participant under any loan arrangement between the Bank and the undersigned, whether for safekeeping, or otherwise, or in transit to or from the Bank or any of its banking or lending affiliates or any such participant, or in the possession of any third party acting on the Bank’s behalf (regardless of the reason the Bank had received same or whether the Bank has conditionally released the same) shall at all times constitute security for any and all Liabilities, and may be applied or set off against such Liabilities at any time during the continuation of an Event of Default and whether or not other collateral is available to the Bank (provided, however, deposits or other sums held in trust or escrow for the benefit of a third party shall not be subject to such security or setoff and, in all events but subject to the requirements in the Mortgage that Borrower maintain an operating account with respect to the Mortgaged Premises (as defined in the Mortgage), any and all deposits or other sums may be withdrawn and utilized by the Borrower without restriction unless and until an Event of Default under the Loan Documents has occurred and is then continuing.
No delay or omission by the Bank in exercising or enforcing any of the Bank’s powers, rights, privileges, remedies, or discretions hereunder shall operate as a waiver thereof on that occasion nor on any other occasion. No waiver of any default hereunder shall operate as a waiver of any other default hereunder, nor as a continuing waiver.
The undersigned shall indemnify, defend, and hold the Bank harmless against any claim brought or threatened against the Bank unless arising from Bank’s gross negligence, willful misconduct or bad faith (excluding consequential or indirect damages) by the undersigned, by any endorser or guarantor, or (if brought against the Bank on account of or arising from a Borrower default with respect to the Loan (as defined in the Mortgage) or fraud or material misrepresentation made in connection with the Loan as evidenced by the Loan Documents) by any other person (as well as from attorneys reasonable fees and expenses in connection therewith) on account of the Bank’s relationship with the undersigned or any endorser or guarantor hereof (each of which may
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be defended, compromised, settled, or pursued by the Bank with counsel of the Bank’s selection, but at the expense of the undersigned), and if brought by any person other than Borrower or any endorser or guarantor, provided the Bank gives the Borrower prompt written notice thereof and the opportunity to itself address and defend such claim with counsel of its choosing reasonably acceptable to the Bank.
The undersigned will pay on demand during the continuation of an Event of Default, all attorneys’ reasonable fees, reasonable out-of-pocket expenses incurred by the Bank’s attorneys and all reasonable out-of-pocket costs incurred by the Bank (excluding consequential or indirect costs and damages), including, without limitation, reasonable costs and expenses associated with travel on behalf of the Bank, which costs and expenses are directly or indirectly related to the preservation, protection, collection or enforcement of any of the Bank’s rights against the undersigned or any endorser or guarantor of the Liabilities and against any collateral given the Bank to secure this Note or any other Liabilities of the undersigned or such endorser and guarantor to the Bank (whether or not suit is instituted by or against the Bank).
The undersigned, and each endorser and guarantor of this Note, respectively waives presentment, demand, notice, and protest, and also waives any delay on the part of the holder hereof. Each assents to any extension or other indulgence (including, without limitation, the release or substitution of collateral) permitted the undersigned or any endorser or guarantor by the Bank with respect to this Note and/or any collateral given to secure this Note or any extension or other indulgence, as described above, with respect to any other liability or any collateral given to secure any other liability of the undersigned or any endorser or guarantor to the Bank.
The Bank may at any time pledge all or any portion of its rights under this Note and any document executed in connection herewith to any of the twelve (12) Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341.
The Bank shall have the unrestricted right at any time or from time to time, and without Borrower’s consent, to assign all or any portion of its rights and obligations hereunder to one or more banks or other financial institutions (each, an “Assignee”), and Borrower agrees that it shall execute, or cause to be executed, such documents, including without limitation, amendments to this Note and to any other documents, instruments and agreements executed in connection herewith as the Bank shall deem necessary to effect the foregoing (but without any material adverse change to, or increase in, any liabilities or obligations of the Borrower or material diminution of any of the rights of the Borrower under the Loan Documents and at no material cost to the Borrower). Upon the execution and delivery of appropriate assignment documentation, amendments and any other documentation required by the Bank in connection with such assignment, and the payment by Assignee of the purchase price agreed to by the Bank, and such Assignee, such Assignee shall be a party to this Note and shall have all of the rights and obligations of the Bank hereunder (and under any and all other guaranties, documents, instruments and agreements executed in connection herewith) to the extent that such rights and obligations have been assigned by the Bank pursuant to the assignment documentation between the Bank and such Assignee, and the Bank shall be released from its obligations hereunder and thereunder to a corresponding extent from and after the date of such assignment, the Bank remaining liable for
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any liabilities of Bank that may have occurred during the period that the Bank held this Note. The Bank may furnish any information concerning Borrower in its possession from time to time to prospective Assignees, provided that the Bank shall require any such prospective Assignees to agree in writing to maintain the confidentiality of such information.
The Bank shall have the unrestricted right at any time and from time to time, and without the consent of or notice to Borrower to grant to one or more banks or other financial institutions (each, a “Participant”) participating interests in any or all of the loans held by the Bank hereunder. In the event of any such grant by the Bank of a participating interest to a Participant, whether or not upon notice to Borrower, the Bank shall remain responsible for the performance of its obligations hereunder and Borrower shall continue to deal solely and directly with the Bank in connection with the Bank’s rights and obligations hereunder. The Bank may furnish any information concerning Borrower in its possession from time to time to prospective Participants, provided that the Bank shall require any such prospective Participant to agree in writing to maintain the confidentiality of such information.
This Note shall be binding upon the undersigned and each endorser and guarantor hereof and upon their respective heirs, successors, assigns, and representatives, and shall inure to the benefit of the Bank and its successors, endorsees, and assigns.
The undersigned and the Bank by the acceptance of this Note, make the following waiver knowingly, voluntarily, and intentionally, and the Borrower understands that the Bank, in the establishment and maintenance of the Bank’s relationship with the Borrower contemplated by the within Note, is relying thereon. THE UNDERSIGNED AND THE BANK, TO THE EXTENT ENTITLED THERETO, WAIVE ANY PRESENT OR FUTURE RIGHT OF THE BANK OR THE UNDERSIGNED, OR OF ANY GUARANTOR OR ENDORSER OF THE UNDERSIGNED OR OF ANY OTHER PERSON LIABLE TO THE BANK ON ACCOUNT OF OR IN RESPECT TO THE LIABILITIES, TO A TRIAL BY JURY IN ANY CASE OR CONTROVERSY IN WHICH THE BANK IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE BANK OR IN WHICH THE BANK IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT TO, ANY RELATIONSHIP AMONGST OR BETWEEN THE UNDERSIGNED, ANY SUCH PERSON, AND THE BANK.
[REMAINDER OF PAGELEFT INTENTIONALLY BLANK]
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This Note is delivered to the Bank at one of its offices in Massachusetts, shall be governed by the laws of the Commonwealth of Massachusetts, and shall take effect as a sealed instrument. The Bank, the undersigned and each endorser and guarantor of this Note each submits to the jurisdiction of the courts of the Commonwealth of Massachusetts and/or, with respect to the undersigned and each endorser and guarantor of this Note, the courts of the State of Rhode Island for all purposes with respect to this Note, any collateral given to secure their respective liabilities, obligations and indebtedness to the Bank, and their respective relationships with the Bank.
| WITNESS: | BORROWER (or the “undersigned”): | ||
|---|---|---|---|
| Gano Holdings, LLC, a Rhode Island limited<br><br>liability company | |||
| By: | /s/ James A. Procaccianti | ||
| James A. Procaccianti | |||
| Authorized Signatory |
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STATE OF RHODE ISLAND
Providence, ss.
On this 26^th^ day of February 2020, before me, the undersigned notary public, personally appeared James A. Procaccianti, proved to me through satisfactory evidence of identification, which was being personally known to me to be the person whose name is signed on the preceding or attached document, and acknowledged to me that he signed it voluntarily for its stated purpose.
| /s/ Natasha V. Ruane | |
|---|---|
| NOTARY PUBLIC | |
| [Affix Notarial<br> Seal] |
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Exhibit 10.8
COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
IN RESPECT OF CONTRACTS, LICENSES ANDPERMITS
(BORROWER’S CONTRACT ASSIGNMENT)
Effective Date as of February 27,2020
1. PARTIES. GANO HOLDINGS, LLC, a Rhode Island limited liability company, having its chief executive office and principal place of business at c/o Procaccianti Companies, 1140 Reservoir Avenue, Cranston, Rhode Island 02920 (hereinafter called “Borrower”) hereby assigns, transfers, sets over, pledges and, if applicable, delivers, to EAST BOSTON SAVINGS BANK, a Massachusetts banking corporation, having a place of business at 67 Prospect Street, Peabody, Massachusetts (hereinafter called “Bank”), and hereby grants to Bank a continuing security interest in all of the Assigned Contracts and Permits (as defined herein) to secure the Obligations (as defined herein).
2. LOAN AGREEMENT; DEFINED TERMS. This Collateral Assignment and Security Agreement In Respect of Contracts, Licenses and Permits (“Collateral Assignment” or “Agreement”) is given pursuant to the terms, provisions and conditions of that certain Omnibus Amendment, Assignment, Assumption, Release and Reaffirmation Agreement dated as of even date herewith by and among Borrower, the parties defined therein as the “Procaccianti Parties” and Bank (as the same may be amended from time to time, the “Omnibus Agreement”), pursuant to which Omnibus Agreement the Bank has agreed to modify the Prior Loan (as “Prior Loan” is defined in the Omnibus Agreement). CAPITALIZED TERMS NOT OTHERWISE SPECIFICALLY DEFINED HEREIN SHALL HAVE THE MEANINGS ASCRIBED TO THEM BY THE OMNIBUS AGREEMENT.
3. ASSIGNED CONTRACTS AND PERMITS. The term “Assigned Contracts and Permits” shall mean all of Borrower’s right, title and interest in and to all contracts, licenses, permits, approvals, agreements and warranties, whether now owned or hereafter acquired, and all proceeds and products thereof, and all accounts, contract rights and general intangibles related thereto, which are in any manner related to any or all of the following: (a) the land located at 220 India Street, Providence, Rhode Island, and which is more particularly described on Exhibit A attached hereto (the “Land”); and (b) all Improvements now or hereafter located on the Land and all Improvements to be constructed on the Land (the Land and all such Improvements being hereinafter together called the “Property”).
The Assigned Contracts and Permits include, but are not limited to, those described on Schedule A which is annexed hereto and made a part hereof.
4. OBLIGATIONS. The term “Obligations” shall mean the payment and performance of all obligations in favor of the Bank arising hereunder and/or under the other Loan Documents.
5. COVENANTS, WARRANTIES AND REPRESENTATIONS. Borrower covenants with Bank that, and warrants and represents to Bank that:
5.1 Borrower is and shall be the holder of the Assigned Contracts and Permits free and clear of all pledges, liens, security interests and other encumbrances of every nature whatsoever except in favor of Bank;
5.2 Borrower has the full right, power and authority to assign, and to grant the pledge of and security interest in, the Assigned Contracts and Permits as herein provided;
5.3 The execution, delivery and performance of this Collateral Assignment by Borrower does not and will not result in the violation of any mortgage, indenture, contract, instrument, agreement, judgment, decree, order, statute, rule or regulation to which Borrower is subject or by which it or any of its property is bound;
5.4 Borrower shall not make any other assignment of, or permit any pledge, lien, security interest or encumbrance to exist with respect to, the Assigned Contracts and Permits except in favor of Bank, and Borrower shall not otherwise transfer, assign, sell or exchange its interest in the Assigned Contracts and Permits;
5.5 To the extent requested by Bank, a true and complete copy of each Assigned Contract and Permit which now exists and which is evidenced by a written agreement or document has been delivered to Bank and, to the extent required pursuant to the terms of the Loan Agreement or if otherwise requested by Bank, a true and complete copy of each Assigned Contract and Permit which becomes effective or is issued in the future shall be promptly delivered to Bank;
5.6 Each Assigned Contract and Permit presently in existence is in full force and effect, is valid and enforceable against Borrower (and to the best of Borrower’s knowledge, against all other parties thereto) in accordance with its terms (subject to bankruptcy, insolvency and similar laws of general application affecting the rights and remedies of creditors and, with respect to the availability of remedies of specific enforcement, subject to the discretion of the court before which proceedings therefor may be brought); has not been modified in any material respect except as has been disclosed to Bank in writing; and, to the best of Borrower’s knowledge, no default exists thereunder on the part of any party thereto. Each Assigned Contract and Permit which comes into existence after the date hereof shall be valid and enforceable against Borrower (and to the best of Borrower’s knowledge, against all other parties thereto) in accordance with its terms (subject to bankruptcy, insolvency and similar laws of general application affecting the rights and remedies of creditors and, with respect to the availability of remedies of specific enforcement, subject to the discretion of the court before which proceedings therefor may be brought);
5.7 No Assigned Contract and Permit shall be amended, modified or changed in any material respect, have any of its material terms waived by Borrower, or be canceled or terminated, without Bank's prior written consent in each instance, such consent not to be unreasonably withheld, so long as no Event of Default is continuing;
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5.8 Borrower shall pay and perform all of its obligations under or with respect to each Assigned Contract and Permit and not permit any default by it to exist with respect thereto. Borrower shall exercise all commercially reasonable efforts necessary to enforce or secure performance by any other party to each Assigned Contract and Permit; and
5.9 In the case of any contract, license, permit, approval, agreement or warranty relating to the Property which cannot be assigned by Borrower to Bank without the consent of a third party and which consent has not yet been obtained, upon Bank’s written request, Borrower shall make all commercially reasonable efforts to obtain such consent.
6. RIGHTS OF BORROWER PRIOR TO DEFAULT. So long as there exists no Event of Default, Borrower shall have and may exercise all rights as the owner or holder of the Assigned Contracts and Permits which are lawful and are not inconsistent with the provisions of the Loan Documents. Upon the occurrence and during the continuance of any Event of Default, at Bank’s option and upon written notice to Borrower, the right described in the preceding sentence shall cease and terminate, and in such event Bank is hereby expressly and irrevocably authorized, but not required, on its own behalf and on behalf of the Lenders, to exercise every right, option, power or authority inuring to Borrower under any one or more of the Assigned Contracts and Permits as fully as Borrower could itself.
7. IRREVOCABLE DIRECTION. Borrower hereby irrevocably directs the contracting party to, or grantor or licensor of, any such Assigned Contract and Permit, to the extent not prohibited by either such Assigned Contract and Permit or applicable law, or to the extent permitted under any recognition or other agreement executed by such grantor or licensor, upon demand and after notice from Bank of the occurrence of an Event of Default under any of the Loan Documents, to recognize and accept Bank as the holder of such Assigned Contract and Permit for any and all purposes as fully as it would recognize and accept Borrower and the performance of Borrower thereunder. Borrower does hereby constitute and appoint Bank, while this Collateral Assignment remains in force and effect, irrevocably, and with full power of substitution and revocation, its true and lawful attorney for and in its name, place and stead, after the occurrence and during the continuance of such an Event of Default, to demand and enforce compliance with all the terms and conditions of the Assigned Contracts and Permits and all benefits accrued thereunder, whether at law, in equity or otherwise.
8. UCC RIGHTS AND REMEDIES. Further, and without limitation of the foregoing rights and remedies, upon the occurrence and during the continuance of any Event of Default, Bank shall have the rights and remedies of a secured party under the Uniform Commercial Code, as enacted in the Commonwealth of Massachusetts and in the State where the Property is located, with respect to the Assigned Contracts and Permits, in addition to the rights and remedies otherwise provided for herein or by law or in equity or in any other Loan Document. The Bank shall give Borrower ten (10) days' prior written notice of the time and place of any public sale of any such Assigned Contract and Permit or the time after which any private sale or any other intended disposition is to be made. After deducting all expenses incurred in connection with the enforcement of its rights hereunder, Bank shall cause the proceeds of the Assigned Contracts and Permits to be applied to the Obligations in such order as Bank may determine and Borrower shall remain liable for any deficiency.
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9. INDEMNIFICATION. Borrower hereby agrees to indemnify and to defend and hold Bank and each Lender harmless against and from all liability, loss, damage and expense, including reasonable attorneys' fees, which any of them may or shall incur by reason of this Agreement, or by reason of any commercially reasonable action taken in good faith by Bank hereunder or with respect to the Assigned Contracts and Permits, and against and from any and all claims and demands whatsoever which may be asserted against Bank or any Lender by reason of any alleged obligation or undertaking on its part to perform or discharge any of the terms, covenants and conditions contained in any of the Assigned Contracts and Permits. Notwithstanding the foregoing, Borrower shall have no obligation to indemnify Bank or any Lender against any liability, loss, damage or expense which is directly caused by such indemnified parties' own gross negligence or willful misconduct. BORROWER SHALL INDEMNIFY BANK AND EACH LENDER REGARDLESS OF WHETHER THE ACT, OMISSION, FACTS,CIRCUMSTANCES OR CONDITIONS GIVING RISE TO SUCH INDEMNIFICATION WERE CAUSED IN WHOLE OR IN PART BY BANK’S OR ANY LENDER’SSIMPLE (BUT NOT GROSS) NEGLIGENCE. Should Bank or any Lender incur any such liability, loss, damage or expense, the amount thereof, together with interest thereon at the Default Rate of interest under the Note, shall be payable by Borrower to Bank immediately upon demand, or at the option of Bank, Bank may reimburse itself therefor out of any receipts, rents, income or profits of the Property collected by Bank before the application of such receipts, rents, income or profits to any other Obligations.
10. BANK AND LENDERS NOT OBLIGATED. Nothing contained herein or elsewhere shall operate to obligate, or be construed to obligate, Bank to perform any of the terms, covenants or conditions contained in any of the Assigned Contracts and Permits or otherwise to impose any obligation upon Bank with respect to the Assigned Contracts and Permits prior to written notice by Bank to Borrower of Bank's election to assume Borrower's obligations under one or more of the Assigned Contracts and Permits. Prior to such written notice from Bank of such election, this Agreement shall not operate to place upon Bank any responsibility for the operation, control, care, management or repair of the Property or for the payment, performance or observance of any obligation, requirement or condition under any such Assigned Contract and Permit, or under any agreement in respect to any such Assigned Contract and Permit, and the execution of this Agreement by Borrower shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Property as well as the payment, performance or observance of any obligation, requirement or condition under the Assigned Contracts and Permits is and shall be that of Borrower, prior to written notice from Bank of such election. Even if Bank does exercise its rights, it shall be liable to the other contracting parties only during the period that it is exercising the rights of Borrower under the Assigned Contracts and Permits, and at all times Borrower retains the obligation to reimburse Bank promptly upon demand or otherwise pay when due all obligations incurred in connection with the Assigned Contracts and Permits.
11. FURTHER ASSURANCES; UCC FILINGS. Borrower agrees to execute and deliver to Bank, at any time or times during which this Agreement shall be in effect, such further instruments as Bank in good faith may deem necessary to make effective this Agreement, the security interest created hereby and the covenants of Borrower herein contained. To evidence such
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security interest, Bank is expressly authorized to file (without the signature of Borrower) Uniform Commercial Code financing statements and continuation statements or other amendments in a form reasonably satisfactory to Bank, pursuant to the provisions of the Uniform Commercial Code as enacted in the Commonwealth of Massachusetts, and/or the state of formation of the Borrower, as debtor, as applicable. Borrower shall pay all costs for the preparation and filing thereof.
12. NO WAIVER; CUMULATIVE RIGHTS. Failure of Bank to avail itself of any of the terms, covenants, and conditions of this Agreement for any period of time, or at any time or times, shall not be construed or deemed to be a waiver of any of its rights hereunder. The rights and remedies of Bank under this Collateral Assignment are cumulative and are not in lieu of, but are in addition to, any other rights and remedies which Bank and/or Lenders shall have under or by virtue of the Obligations and the Loan Documents. The rights and remedies of Bank hereunder may be exercised from time to time and as often as such exercise is deemed expedient by Bank.
13. BANK; RIGHT TO ASSIGN. Borrower agrees that upon any sale or transfer of the Loan Documents, or upon any Person acquiring the Property or any interest therein, Bank may deliver to the purchaser or transferee the Assigned Contracts and Permits and may assign to such purchaser or transferee the rights of Bank hereunder, who shall thereupon become vested with all powers and rights given to Bank in respect thereto, and Bank shall be forever relieved and fully discharged from any liability or responsibility thereafter accruing in connection therewith. In no event shall Bank be liable with respect to, or on account of, the Assigned Contracts and Permits, except for the safekeeping of any instruments actually delivered to Bank pursuant hereto, and Bank shall specifically have no obligation to enforce any rights against any contractor, or grantor or issuer.
14. TERMINATION AND REASSIGNMENT. Upon full payment and performance of the Obligations, this Collateral Assignment shall become and be void and of no effect and, in that event, upon the request of Borrower and at its cost, Bank covenants to execute and deliver to Borrower instruments effective to evidence the termination of this Collateral Assignment and the reassignment (without recourse) to Borrower of the Assigned Contracts and Permits and the rights, title, interest, power and authority assigned herein; provided, however, that any affidavit, certificate or other written statement of any officer of Bank stating that any part of the Obligations remains unpaid shall be and constitute conclusive evidence of the then validity, effectiveness and continuing force of this Agreement and any Person receiving any such affidavit, certificate or statement may, and is hereby authorized to rely thereon.
15. COPIES OF DEFAULT NOTICES. Borrower agrees to provide Bank promptly, but in any event within five (5) Business Days after receipt or knowledge thereof by Borrower, with copies of any and all notices received by Borrower which allege, either directly or indirectly, that Borrower is in default of, or deficient in the performance of the terms of any obligation of Borrower under, any Assigned Contract and Permit which is material to the ownership and operation of the Property, or that any fact or circumstance exists which could reasonably lead to the termination, suspension, revocation or loss of any Assigned Contract and Permit which is material to the ownership and operation of the Property.
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16. NOTICES. Any notices given pursuant to this Agreement shall be sufficient only if given in the manner provided for in the Mortgage.
17. SUCCESSORS AND ASSIGNS. All of the agreements, obligations, undertakings, representations and warranties herein made by Borrower shall inure to the benefit of Bank and Lenders and Bank's and Lenders' respective successors and assigns and shall bind Borrower and its successors and assigns.
18. CAPTIONS AND HEADINGS. Captions and headings in this Agreement are intended solely for the convenience of the parties and shall not be considered in the determination of the meaning of any provision hereof.
19. COUNTERPARTS. This Collateral Assignment may be executed in several counterparts, each of which when executed and delivered is an original, but all of which together shall constitute one instrument. In making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart which is executed by the party against whom enforcement of this Collateral Assignment is sought.
20. GOVERNING LAW. This Collateral Assignment shall be enforced and construed in accordance with the substantive law of the Commonwealth of Massachusetts without resort to that state’s conflict of laws rules.
21. SEVERABILITY. If any provision of this Collateral Assignment is held to be invalid, illegal or unenforceable in any respect, this Collateral Assignment shall be construed without such provision and the validity, legality and enforceability of the remaining provisions of this Collateral Assignment shall not be affected thereby.
22. OTHER SECURITY AGREEMENTS. This Collateral Assignment shall not be deemed to affect, limit, modify or otherwise have any impact on, or be affected, limited, modified or otherwise impacted by, any other security agreement or similar instrument (including, but not limited to, any Security Document) given by Borrower or any other debtor in connection with the Loan or the Loan Documents. Notwithstanding anything to the contrary herein contained, this Collateral Assignment shall be deemed supplemental to, and not in derogation of, any such security agreement or similar instrument (including, but not limited to, any Security Document) now or hereafter executed by Borrower or any other debtor in favor of Bank.
[Rest of page intentionally left blank; signatures on following page(s).]
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IN WITNESS WHEREOF, Borrower has caused this Collateral Assignment to be duly executed and delivered, as a sealed instrument, as of the date first above written.
| BORROWER: | |
|---|---|
| GANO HOLDINGS, LLC, | |
| a Rhode Island limited liability company | |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Title: | Authorized Representative |
SCHEDULE A
Contracts, Licenses and Permits
| 1. | Hotel Management Agreement with ______________, dated __________________ (the “Tenant<br>Collateral Assignment”). |
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| 2. | Franchise Agreement with ______________, dated _____________, as collaterally assigned by Tenant<br>to Borrower pursuant to the Tenant Collateral Assignment. |
| --- | --- |
| 3. | Other, including, without limitation, the following: |
| --- | --- |
| a. | |
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| b. | |
| --- | |
| c. | |
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EXHIBIT A
Legal Description of Land
PARCEL ONE (Fee Estate)
That certain tract or parcel of land, together with all buildings and improvements thereon located westerly of India Street and Tockwotton Street, in the City of Providence, County of Providence and State of Rhode Island, being bounded and described as follows:
Beginning at a point in the terminus of India Street, said point, being the most southwesterly corner of the herein described parcel;
Thence running in a northwesterly direction, by and with land now or formerly of the State of Rhode Island, a distance of 199.16 feet to a corner, said corner being the most southwesterly corner of the herein described parcel;
Thence turning an interior angle of 106° 04’ 16” and running in a northerly direction, by and with the aforementioned State of Rhode Island land, a distance of 148.27 feet to a corner, said corner being the most northwesterly corner of the herein described parcel;
Thence turning an interior angle of 126° 47’ 47” and running in a northeasterly direction, by and with the southerly State Freeway Line of Route 195, a distance of 31.22 feet to a point;
Thence turning an interior angle of 139° 01’ 22” and running in an easterly direction, by and with the aforementioned State Freeway Line of Route 195, a distance of 91.64 feet to a point;
Thence turning an interior angle of 348° 01’ 18” and running in a northeasterly direction, by and with the aforementioned State Freeway Line of Route 195, a distance of 44.34 feet to a point;
Thence turning an interior angle of 22° 46’ 24” and running in a northeasterly direction, by and with the aforementioned State Freeway Line of Route 195, a distance of 64.59 feet to a point;
Thence turning an interior angle of 157° 13’ 36” and running in a southeasterly direction, by and with the aforementioned State Freeway Line of Route 195, a distance of 111.70 feet to corner, said corner being the most northeasterly corner of the herein described parcel;
Thence turning an interior angle of 90° 00’ 00” and running in a southwesterly direction, by and with the terminus of Tockwotton Street, a distance of 25.00 feet to a corner, said corner being the southwesterly corner of Tockwotton Street;
Thence turning an interior angle of 179° 38’ 45” and continuing in a southwesterly direction by and with land now or formerly of Brown University, a distance of 161.01 feet to a corner, said corner being the most southwesterly corner of said Brown University land;
Thence turning an interior angle of 180° 26’ 00” and continuing in a southwesterly direction, by and with the previously mentioned terminus of India Street, a distance of 25.08 feet to the point and place of beginning;
The last course making an angle of 90° 00’ 00” with the first herein described course.
PARCEL TWO (Leasehold Estate)
That certain tract or parcel of land, together with all buildings and improvements thereon, located westerly of India and Tockwotton Streets, in the City of Providence, County of Providence, State of Rhode Island, being bounded and described as follows:
Beginning at a point in the westerly terminus of India Street, said point being the most southeasterly corner of land now or formerly of Gano Holdings, LLC;
Thence running in a southerly direction, by and with the aforementioned westerly terminus of India Street, a distance of 26.27 feet to a corner, said corner being the most southerly end of westerly terminus of India Street, said corner also being the most southeasterly corner of the herein described parcel;
Thence turning an interior angle of 91° 03’ 58” and running in a westerly direction, by and with the northerly Highway Line of I-195, a distance of 146.26 feet to a point;
Thence turning an interior angle of 174° 13’ 07” and continuing in a westerly direction, by and with the aforementioned northerly Highway Line of I-195, a distance of 39.55 feet to a point;
Thence turning an interior angle of 165° 24’ 18” and running in a northwesterly direction, by and with the aforementioned northerly Highway Line of I-195, a distance of 28.27 feet to a point;
Thence turning an interior angle of 162° 37’ 37” and continuing in a northwesterly direction, by and with the aforementioned westerly Highway Line of I-195, a distance of 10.76 feet to a point;
Thence turning an interior angle of 153° 59’ 11” and continuing in a northwesterly direction, by and with the aforementioned westerly Highway Line of I-195, a distance of 10.76 feet to a point;
Thence turning an interior angle of 169° 22’ 07” and continuing in a northwesterly direction, by and with the aforementioned westerly Highway Line of I-195, a distance of 124.00 feet to a corner, said corner being the most westerly corner of the herein described parcel;
Thence turning an interior angle of 120° 51’ 49” and running in a northeasterly direction, by and with the aforementioned westerly Highway Line of I-195, a distance of 30.19 feet to a corner, said corner being the most northwesterly corner of and now or formerly of Gano Holdings, LLC, said corner also being the most northerly corner of the herein described parcel;
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Thence turning an interior angle of 58° 58’ 09” and running in a southeasterly direction, by and with the aforementioned Gano Holdings, LLC land a distance of 148.27 feet to a corner, said corner being the most southwesterly corner of land now or formerly of Gano Holdings, LLC;
Thence turning an interior angle of 283° 55’ 44” and running in an easterly direction, by and with the aforementioned Gano Holdings, LLC land, a distance of 199.16 feet to the point and place of beginning.
The last course making an angle of 90° 00’ 00” with the first herein described course.
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Exhibit 10.9
COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
IN RESPECT OF CONTRACTS, LICENSES ANDPERMITS
(OPCO’S CONTRACT ASSIGNMENT)
Effective Date as of February 27, 2020
1. PARTIES. PHR GANO OPCO SUB, LLC, a Delaware limited liability company, having its chief executive office and principal place of business at c/o Procaccianti Companies, 1140 Reservoir Avenue, Cranston, Rhode Island 02920 (hereinafter called “Tenant”) hereby assigns, transfers, sets over, pledges and, if applicable, delivers, to GANO HOLDINGS, LLC, a Rhode Island limited liability company, having its chief executive office and principal place of business at c/o Procaccianti Companies, 1140 Reservoir Avenue, Cranston, Rhode Island 02920 (hereinafter called “Landlord”), and hereby grants to Landlord a continuing security interest in all of the Assigned Contracts and Permits (as defined herein) to secure the Obligations (as defined herein).
2. LEASE AGREEMENT; DEFINED TERMS. This Collateral Assignment and Security Agreement in Respect of Contracts, Licenses and Permits (“Collateral Assignment” or “Agreement”) is given in accordance with that certain lease dated as of even date herewith by and among Tenant and Landlord (the “Operating Lease”). Reference is hereby made to that certain Omnibus Amendment, Assignment, Assumption, Release and Reaffirmation Agreement dated as of even date herewith by and among (i) Landlord, as Borrower, (ii) East Boston Savings Bank (“Bank”), and (iii) James Procaccianti and other entities affiliated with Borrower (collectively defined therein and hereinafter referred to as the “Procaccianti Parties”) (as the same may be amended from time to time, the “Omnibus Agreement”), pursuant to which Bank has agreed to further increase and modify the terms of the Prior Loan (as “Prior Loan” is defined in the Omnibus Agreement; and as so further increased and modified, the “Loan”). CAPITALIZED TERMS NOT OTHERWISE SPECIFICALLY DEFINED HEREIN SHALL HAVE THE MEANINGS ASCRIBED TO THEM BY THE OMNIBUS AGREEMENT.
3. ASSIGNED CONTRACTS AND PERMITS. The term “Assigned Contracts and Permits” shall mean all of Tenant’s right, title and interest in and to all contracts, licenses, permits, approvals, agreements and warranties, whether now owned or hereafter acquired, and all proceeds and products thereof, and all accounts, contract rights and general intangibles related thereto, which are in any manner related to any or all of the following: (a) the land located at 220 India Street, Providence, Rhode Island, and which is more particularly described on Exhibit A attached hereto (the “Land”); and (b) all Improvements now or hereafter located on the Land and all Improvements to be constructed on the Land (the Land and all such Improvements being hereinafter together called the “Property”).
The Assigned Contracts and Permits include, but are not limited to, those described on Schedule A which is annexed hereto and made a part hereof.
4. OBLIGATIONS. The term “Obligations” shall mean:
A. The full and prompt payment and performance of each covenant, warranty, representation, undertaking and condition to be paid, performed, satisfied and complied with by Tenant under and pursuant to the Operating Lease;
B. The payment of all costs, expenses, legal fees and liabilities incurred by Landlord in connection with the enforcement of any of Landlord’s rights or remedies under this Collateral Assignment or any other instrument, agreement or document which evidences or secures any other Obligations or collateral therefor, whether now in effect or hereafter executed; and
C. The payment, performance, discharge and satisfaction of all other liabilities and obligations of Tenant to Landlord, whether now existing or hereafter arising, direct or indirect, absolute or contingent and each amendment, extension, modification, replacement or recasting of any one or more of the instruments, agreements and documents referred to herein or in the Operating Lease or executed in connection with the transactions contemplated hereby or thereby.
5. COVENANTS, WARRANTIES AND REPRESENTATIONS. Tenant covenants with Landlord that, and warrants and represents to Landlord that:
5.1 Tenant is and shall be the holder of the Assigned Contracts and Permits free and clear of all pledges, liens, security interests and other encumbrances of every nature whatsoever except in favor of (i) Landlord, pursuant to this Agreement, and (ii) Bank, pursuant to that certain Collateral Assignment and Security Agreement In Respect of Contracts, Licenses and Permits from Landlord to Bank of even date herewith (the “Landlord Collateral Assignment”) and/or the Pledge Agreement Regarding Liquor License from Landlord to Bank of even date herewith (the “License Pledge”);
5.2 Tenant has the full right, power and authority to assign, and to grant the pledge of and security interest in, the Assigned Contracts and Permits as herein provided;
5.3 The execution, delivery and performance of this Collateral Assignment by Tenant does not and will not result in the violation of any mortgage, indenture, contract, instrument, agreement, judgment, decree, order, statute, rule or regulation to which Tenant is subject or by which it or any of its property is bound;
5.4 Tenant shall not make any other assignment of, or permit any pledge, lien, security interest or encumbrance to exist with respect to, the Assigned Contracts and Permits except in favor of Landlord pursuant to this Agreement, and Bank pursuant to the Loan Documents, and Tenant shall not otherwise transfer, assign, sell or exchange its interest in the Assigned Contracts and Permits;
5.5 To the extent requested by Landlord or Bank, a true and complete copy of each Assigned Contract and Permit which now exists and which is evidenced by a written agreement or document has been delivered to Landlord and Bank or if otherwise requested by
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Landlord and/or Bank, a true and complete copy of each Assigned Contract and Permit which becomes effective or is issued in the future shall be promptly delivered to Landlord and Bank;
5.6 Each Assigned Contract and Permit presently in existence is in full force and effect, is valid and enforceable against Tenant (and to the best of Tenant’s knowledge, against all other parties thereto) in accordance with its terms (subject to bankruptcy, insolvency and similar laws of general application affecting the rights and remedies of creditors and, with respect to the availability of remedies of specific enforcement, subject to the discretion of the court before which proceedings therefor may be brought); has not been modified in any material respect except as has been disclosed to Landlord in writing; and, to the best of Tenant’s knowledge, no default exists thereunder on the part of any party thereto. Each Assigned Contract and Permit which comes into existence after the date hereof shall be valid and enforceable against Tenant (and to the best of Tenant’s knowledge, against all other parties thereto) in accordance with its terms (subject to bankruptcy, insolvency and similar laws of general application affecting the rights and remedies of creditors and, with respect to the availability of remedies of specific enforcement, subject to the discretion of the court before which proceedings therefor may be brought);
5.7 No Assigned Contract and Permit shall be amended, modified or changed in any material respect, have any of its material terms waived by Tenant, or be canceled or terminated, without Landlord’s prior written consent in each instance;
5.8 Tenant shall pay and perform all of its obligations under or with respect to each Assigned Contract and Permit and not permit any default by it to exist with respect thereto. Tenant shall exercise all commercially reasonable efforts necessary to enforce or secure performance by any other party to each Assigned Contract and Permit; and
5.9 In the case of any contract, license, permit, approval, agreement or warranty relating to the Property which cannot be assigned by Tenant to Landlord without the consent of a third party and which consent has not yet been obtained, upon Landlord’s written request, Tenant shall make all commercially reasonable efforts to obtain such consent.
6. RIGHTS OF TENANT PRIOR TO DEFAULT. So long as there exists no Event of Default, Tenant shall have and may exercise all rights as the owner or holder of the Assigned Contracts and Permits which are lawful and are not inconsistent with the provisions of the Landlord Collateral Assignment. Upon any event of default under the Operating Lease (continuing beyond applicable notice and cure periods) or any exercise of Bank’s rights under the Landlord Collateral Assignment and upon written notice to Landlord and Tenant, the right described in the preceding sentence shall cease and terminate, and in such event Landlord is hereby expressly and irrevocably authorized, but not required, to exercise every right, option, power or authority inuring to Tenant under any one or more of the Assigned Contracts and Permits as fully as Tenant could itself. Notwithstanding the foregoing or anything else to the contrary in this Agreement, as long as the Loan remains outstanding and prior to the discharge in full of all obligations in favor of Bank arising out of the Loan Documents, Landlord agrees that (i) Landlord shall not take any enforcement action under this Agreement or otherwise exercise any legal and equitable remedies with respect to the Assigned Contracts and Permits, and (ii) Bank shall have the exclusive right to pursue any enforcement action with respect to the Assigned Contracts and Permits upon the
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occurrence of an Event of Default, in accordance with the terms of the Landlord Collateral Assignment and any other Loan Document.
7. IRREVOCABLE DIRECTION. Tenant hereby irrevocably directs the contracting party to, or grantor or licensor of, any such Assigned Contract and Permit, to the extent not prohibited by either such Assigned Contract and Permit or applicable law, or to the extent permitted under any recognition or other agreement executed by such grantor or licensor, upon demand and after (i) notice from Landlord of an event of default under the Operating Lease (continuing beyond applicable notice and cure periods) or (ii) any exercise of Bank’s rights under the Landlord Collateral Assignment Bank, to recognize and accept Landlord as the holder of such Assigned Contract and Permit for any and all purposes as fully as it would recognize and accept Tenant and the performance of Tenant thereunder. Tenant does hereby constitute and appoint Landlord, while this Collateral Assignment remains in force and effect, irrevocably, and with full power of substitution and revocation, its true and lawful attorney for and in its name, place and stead, after the occurrence and during the continuance of such an Event of Default, to demand and enforce compliance with all the terms and conditions of the Assigned Contracts and Permits and all benefits accrued thereunder, whether at law, in equity or otherwise.
8. UCC RIGHTS AND REMEDIES. Further, and without limitation of the foregoing rights and remedies, upon the occurrence and during the continuance of any Event of Default, Landlord shall have the rights and remedies of a secured party under the Uniform Commercial Code, as enacted in the Commonwealth of Massachusetts and in the State where the Property is located, with respect to the Assigned Contracts and Permits, in addition to the rights and remedies otherwise provided for herein or by law or in equity or in any other Loan Document. The Landlord shall give Tenant ten (10) days' prior written notice of the time and place of any public sale of any such Assigned Contract and Permit or the time after which any private sale or any other intended disposition is to be made. After deducting all expenses incurred in connection with the enforcement of its rights hereunder, Landlord shall cause the proceeds of the Assigned Contracts and Permits to be applied to the Obligations in such order as Landlord may determine and Tenant shall remain liable for any deficiency.
9. INDEMNIFICATION. Tenant hereby agrees to indemnify and to defend and hold Landlord harmless against and from all liability, loss, damage and expense, including reasonable attorneys' fees, which Landlord may or shall incur by reason of this Agreement, or by reason of any commercially reasonable action taken in good faith by Landlord hereunder or with respect to the Assigned Contracts and Permits, and against and from any and all claims and demands whatsoever which may be asserted against Landlord by reason of any alleged obligation or undertaking on its part to perform or discharge any of the terms, covenants and conditions contained in any of the Assigned Contracts and Permits. Notwithstanding the foregoing, Tenant shall have no obligation to indemnify Landlord against any liability, loss, damage or expense which is directly caused by Landlord’s own gross negligence or willful misconduct. TENANT SHALL INDEMNIFYLANDLORD REGARDLESS OF WHETHER THE ACT, OMISSION, FACTS, CIRCUMSTANCES OR CONDITIONS GIVING RISE TO SUCH INDEMNIFICATION WERE CAUSEDIN WHOLE OR IN PART BY LANDLORD’S SIMPLE (BUT NOT GROSS) NEGLIGENCE. Should Landlord incur any such liability, loss, damage or expense, the amount thereof, together with interest thereon at the Default Rate of
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interest under the Note, shall be payable by Tenant to Landlord immediately upon demand, or at the option of Landlord, Landlord may reimburse itself therefor out of any receipts, rents, income or profits of the Property collected by Landlord before the application of such receipts, rents, income or profits to any other Obligations.
10. LANDLORD NOT OBLIGATED. Nothing contained herein or elsewhere shall operate to obligate, or be construed to obligate, Landlord to perform any of the terms, covenants or conditions contained in any of the Assigned Contracts and Permits or otherwise to impose any obligation upon Landlord with respect to the Assigned Contracts and Permits prior to written notice by Landlord to Tenant of Landlord’s election to assume Tenant’s obligations under one or more of the Assigned Contracts and Permits. Prior to such written notice from Landlord of such election, this Agreement shall not operate to place upon Landlord any responsibility for the payment, performance or observance of any obligation, requirement or condition under any such Assigned Contract and Permit, or under any agreement in respect to any such Assigned Contract and Permit, and the execution of this Agreement by Tenant shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Property as well as the payment, performance or observance of any obligation, requirement or condition under the Assigned Contracts and Permits is and shall be that of Tenant, prior to written notice from Landlord of such election. Even if Landlord does exercise its rights, it shall be liable to the other contracting parties only during the period that it is exercising the rights of Tenant under the Assigned Contracts and Permits, and at all times Tenant retains the obligation to reimburse Landlord promptly upon demand or otherwise pay when due all obligations incurred in connection with the Assigned Contracts and Permits.
11. FURTHER ASSURANCES; UCC FILINGS. Tenant agrees to execute and deliver to Landlord, at any time or times during which this Agreement shall be in effect, such further instruments as Landlord in good faith may deem necessary to make effective this Agreement, the security interest created hereby and the covenants of Tenant herein contained. To evidence such security interest, Landlord is expressly authorized to file (without the signature of Tenant) Uniform Commercial Code financing statements and continuation statements or other amendments in a form reasonably satisfactory to Landlord, pursuant to the provisions of the Uniform Commercial Code as enacted in the Commonwealth of Massachusetts. Tenant shall pay all costs for the preparation and filing thereof.
12. NO WAIVER; CUMULATIVE RIGHTS. Failure of Landlord to avail itself of any of the terms, covenants, and conditions of this Agreement for any period of time, or at any time or times, shall not be construed or deemed to be a waiver of any of its rights hereunder. The rights and remedies of Landlord under this Collateral Assignment are cumulative and are not in lieu of, but are in addition to, any other rights and remedies which Landlord shall have under or by virtue of the Obligations and the Operating Lease. The rights and remedies of Landlord hereunder may be exercised from time to time and as often as such exercise is deemed expedient by Landlord.
13. LANDLORD; RIGHT TO ASSIGN. Tenant agrees that upon any sale or transfer of the Operating Lease or Loan Documents, or upon any Person acquiring the Property or any interest therein, Landlord may deliver to the purchaser or transferee the Assigned Contracts and Permits and may assign to such purchaser or transferee the rights of Landlord hereunder, who shall
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thereupon become vested with all powers and rights given to Landlord in respect thereto, and Landlord shall be forever relieved and fully discharged from any liability or responsibility thereafter accruing in connection therewith. In no event shall Landlord be liable with respect to, or on account of, the Assigned Contracts and Permits, except for the safekeeping of any instruments actually delivered to Landlord pursuant hereto, and Landlord shall specifically have no obligation to enforce any rights against any contractor, or grantor or issuer.
14. COPIES OF DEFAULT NOTICES. Tenant agrees to provide Landlord and Bank promptly, but in any event within five (5) Business Days after receipt or knowledge thereof by Tenant, with copies of any and all notices received by Tenant which allege, either directly or indirectly, that Tenant is in default of, or deficient in the performance of the terms of any obligation of Tenant under, any Assigned Contract and Permit which is material to the ownership and operation of the Property, or that any fact or circumstance exists which could reasonably lead to the termination, suspension, revocation or loss of any Assigned Contract and Permit which is material to the ownership and operation of the Property.
15. NOTICES. Any notices given pursuant to this Agreement shall be sufficient only if given in the manner provided for in Section 12.5 of the Operating Lease to the relevant party’s address first noted above, provided also, however, that any notices to be given by or to the Bank shall be delivered in hand, or by any delivery service regularly requesting a signed receipt upon delivery.
16. SUCCESSORS AND ASSIGNS. All of the agreements, obligations, undertakings, representations and warranties herein made by Tenant shall inure to the benefit of Landlord and Landlord’s successors and assigns and shall bind Tenant and its successors and assigns.
17. CAPTIONS AND HEADINGS. Captions and headings in this Agreement are intended solely for the convenience of the parties and shall not be considered in the determination of the meaning of any provision hereof.
18. COUNTERPARTS. This Collateral Assignment may be executed in several counterparts, each of which when executed and delivered is an original, but all of which together shall constitute one instrument. In making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart which is executed by the party against whom enforcement of this Collateral Assignment is sought.
19. GOVERNING LAW. This Collateral Assignment shall be enforced and construed in accordance with the substantive law of the Commonwealth of Massachusetts without resort to that state’s conflict of laws rules.
20. SEVERABILITY. If any provision of this Collateral Assignment is held to be invalid, illegal or unenforceable in any respect, this Collateral Assignment shall be construed without such provision and the validity, legality and enforceability of the remaining provisions of this Collateral Assignment shall not be affected thereby.
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21. OTHER SECURITY AGREEMENTS. This Collateral Assignment shall not be deemed to affect, limit, modify or otherwise have any impact on, or be affected, limited, modified or otherwise impacted by, any other security agreement or similar instrument given by Tenant, Landlord or any other debtor in connection with the Operating Lease, the Loan or the Loan Documents. Notwithstanding anything to the contrary herein contained, this Collateral Assignment shall be deemed supplemental to, and not in derogation of, any such security agreement or similar instrument now or hereafter executed by Tenant or any other debtor in favor of Landlord or Bank.
[Rest of page intentionally left blank; signatures on following page(s).]
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IN WITNESS WHEREOF, Tenant has caused this Collateral Assignment to be duly executed and delivered, as a sealed instrument, as of the date first above written.
| TENANT: | |
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| PHR GANO OPCO SUB, LLC, | |
| a Delaware limited liability<br> company | |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Title: | Authorized Signatory |
SCHEDULE A
Contracts, Licenses and Permits
| 1. | Hotel Management Agreement with _________________, of even date herewith. |
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| 2. | Franchise Agreement with _________________, dated _____________. |
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| 3. | Other, including those specifically listed below: |
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| a. |
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| b. |
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EXHIBIT A
Legal Description of Land
PARCEL ONE (Fee Estate)
That certain tract or parcel of land, together with all buildings and improvements thereon located westerly of India Street and Tockwotton Street, in the City of Providence, County of Providence and State of Rhode Island, being bounded and described as follows:
Beginning at a point in the terminus of India Street, said point, being the most southwesterly corner of the herein described parcel;
Thence running in a northwesterly direction, by and with land now or formerly of the State of Rhode Island, a distance of 199.16 feet to a corner, said corner being the most southwesterly corner of the herein described parcel;
Thence turning an interior angle of 106° 04’ 16” and running in a northerly direction, by and with the aforementioned State of Rhode Island land, a distance of 148.27 feet to a corner, said corner being the most northwesterly corner of the herein described parcel;
Thence turning an interior angle of 126° 47’ 47” and running in a northeasterly direction, by and with the southerly State Freeway Line of Route 195, a distance of 31.22 feet to a point;
Thence turning an interior angle of 139° 01’ 22” and running in an easterly direction, by and with the aforementioned State Freeway Line of Route 195, a distance of 91.64 feet to a point;
Thence turning an interior angle of 348° 01’ 18” and running in a northeasterly direction, by and with the aforementioned State Freeway Line of Route 195, a distance of 44.34 feet to a point;
Thence turning an interior angle of 22° 46’ 24” and running in a northeasterly direction, by and with the aforementioned State Freeway Line of Route 195, a distance of 64.59 feet to a point;
Thence turning an interior angle of 157° 13’ 36” and running in a southeasterly direction, by and with the aforementioned State Freeway Line of Route 195, a distance of 111.70 feet to corner, said corner being the most northeasterly corner of the herein described parcel;
Thence turning an interior angle of 90° 00’ 00” and running in a southwesterly direction, by and with the terminus of Tockwotton Street, a distance of 25.00 feet to a corner, said corner being the southwesterly corner of Tockwotton Street;
Thence turning an interior angle of 179° 38’ 45” and continuing in a southwesterly direction by and with land now or formerly of Brown University, a distance of 161.01 feet to a corner, said corner being the most southwesterly corner of said Brown University land;
Thence turning an interior angle of 180° 26’ 00” and continuing in a southwesterly direction, by and with the previously mentioned terminus of India Street, a distance of 25.08 feet to the point and place of beginning;
The last course making an angle of 90° 00’ 00” with the first herein described course.
PARCEL TWO (Leasehold Estate)
That certain tract or parcel of land, together with all buildings and improvements thereon, located westerly of India and Tockwotton Streets, in the City of Providence, County of Providence, State of Rhode Island, being bounded and described as follows:
Beginning at a point in the westerly terminus of India Street, said point being the most southeasterly corner of land now or formerly of Gano Holdings, LLC;
Thence running in a southerly direction, by and with the aforementioned westerly terminus of India Street, a distance of 26.27 feet to a corner, said corner being the most southerly end of westerly terminus of India Street, said corner also being the most southeasterly corner of the herein described parcel;
Thence turning an interior angle of 91° 03’ 58” and running in a westerly direction, by and with the northerly Highway Line of I-195, a distance of 146.26 feet to a point;
Thence turning an interior angle of 174° 13’ 07” and continuing in a westerly direction, by and with the aforementioned northerly Highway Line of I-195, a distance of 39.55 feet to a point;
Thence turning an interior angle of 165° 24’ 18” and running in a northwesterly direction, by and with the aforementioned northerly Highway Line of I-195, a distance of 28.27 feet to a point;
Thence turning an interior angle of 162° 37’ 37” and continuing in a northwesterly direction, by and with the aforementioned westerly Highway Line of I-195, a distance of 10.76 feet to a point;
Thence turning an interior angle of 153° 59’ 11” and continuing in a northwesterly direction, by and with the aforementioned westerly Highway Line of I-195, a distance of 10.76 feet to a point;
Thence turning an interior angle of 169° 22’ 07” and continuing in a northwesterly direction, by and with the aforementioned westerly Highway Line of I-195, a distance of 124.00 feet to a corner, said corner being the most westerly corner of the herein described parcel;
Thence turning an interior angle of 120° 51’ 49” and running in a northeasterly direction, by and with the aforementioned westerly Highway Line of I-195, a distance of 30.19 feet to a corner, said corner being the most northwesterly corner of and now or formerly of Gano Holdings, LLC, said corner also being the most northerly corner of the herein described parcel;
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Thence turning an interior angle of 58° 58’ 09” and running in a southeasterly direction, by and with the aforementioned Gano Holdings, LLC land a distance of 148.27 feet to a corner, said corner being the most southwesterly corner of land now or formerly of Gano Holdings, LLC;
Thence turning an interior angle of 283° 55’ 44” and running in an easterly direction, by and with the aforementioned Gano Holdings, LLC land, a distance of 199.16 feet to the point and place of beginning.
The last course making an angle of 90° 00’ 00” with the first herein described course.
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Exhibit 10.10
THIRD AMENDMENT TO (i) OPEN-END MORTGAGE,
SECURITY AGREEMENTAND ASSIGNMENT TO SECURE PRESENT AND FUTURE LOANS UNDER CHAPTER 25 OF TITLE 34 OF THE GENERAL LAWS OF THE STATE OF RHODE ISLANDAND (ii) ASSIGNMENT OF BORROWER’S INTERESTS IN LEASES, RENTS AND PROFITS
Reference is hereby made to (i) an OPEN-END MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT TO SECURE PRESENT AND FUTURE LOANS UNDER CHAPTER 25 OF TITLE 34 OF THE GENERAL LAWS OF THE STATE OF RHODE ISLAND dated as of May 27, 2015 granted to East Boston Savings Bank (hereinafter, the “Mortgagee”), a Massachusetts banking corporation with its principal office at 67 Prospect Street, Peabody, Massachusetts 01960, by GANO HOLDINGS, LLC, a Rhode Island limited liability company (hereinafter, the “Mortgagor”) having a mailing address c/o The Procaccianti Group, 1140 Reservoir Avenue, Cranston, Rhode Island 02920-6032, Attn: James A. Procaccianti, President and CEO, which mortgage (the “Original Mortgage”) was recorded with the Providence Land Evidence Records (“Land Records”) on June 15, 2015 in Book 11142, Page 152, and (ii) an ASSIGNMENT OF BORROWER’S INTEREST IN LEASES, RENTS AND PROFITS dated as of May 27, 2015 from Mortgagor to Mortgagee, which assignment (the “Original Assignment”) was recorded with such Land Records on June 15, 2015 in Book 11144, Page, 181, which Original Mortgage and Original Assignment were previously modified by both a First Amendment to Open-End Mortgage, Security Agreement and Assignment to Secure Present and Future Loans Under Chapter 25 of Title 34 of the General Laws of the State of Rhode Island and an Assignment of Borrower’s Interests in Leases, Rents and Profits recorded with the Land Records on February 12, 2016 in Book 11325, Page 294 (the “First Amendment”), and a Second Amendment to Open-End Mortgage, Security Agreement and Assignment to Secure Present and Future Loans Under Chapter 25 of Title 34 of the General Laws of the State of Rhode Island and an Assignment of Borrower’s Interests in Leases, Rents and Profits recorded with the Land Records on June 7, 2019 in Book 12379, Page 129 (the “Second Amendment”). The Original Mortgage as modified by the First Amendment and Second Amendment is hereinafter referred to as the “Mortgage”, and the Original Assignment is modified by the First Amendment and Second Amendment as hereinafter referred to as the “Assignment”).
WHEREAS, Mortgagee has agreed to amend and restate its existing loans with the Borrower which are secured, in part, by the Mortgage and the Assignment and advance an additional $2,000,000.00 to Mortgagor, all to be evidenced by an Amended and Restated Promissory Note of even date herewith (“2020 Note”) to be secured, in part, by the Mortgage and the Assignment;
NOW THEREFORE, for good and valuable consideration received, the receipt and sufficiency of which are hereby acknowledged, Mortgagor and Mortgagee agree as follows:
| 1. | Capitalized terms used herein and<br> not otherwise defined herein shall have the meanings ascribed to them in the Mortgage. |
|---|---|
| 2. | Except<br> where otherwise required by the context, as used in the Loan Documents, the term “Loan”<br> shall refer to the loan evidenced by the 2020 Note, which amends, restates |
| --- | --- |
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and supplements: (i) the Promissory Note delivered in connection with the Original Mortgage (“Original Note”), and (ii) the Promissory Note executed and delivered in connection with the Second Amendment (“2019 Note”). Except as otherwise required by the context, wherever occurring in the Loan Documents, the term “Note” shall refer to the 2020 Note, and the term “Loan Documents” shall include each and all of the Loan Documents (as defined in the Mortgage) as now existing and/or as hereafter supplemented, amended, modified and/or restated.
| 3. | Section 4.9 of the Mortgage is<br> and shall hereby be amended by adding the words” After an Event of Default continuing<br> beyond applicable notice and cure periods, “ to the beginning of the first sentence<br> of Section 4.9. |
|---|---|
| 4. | Section 6.3 of the Mortgage is<br> and shall hereby be deleted in its entirety and replaced with the following: |
| --- | --- |
“The sale, transfer, assignment of other disposition of any direct or indirect ownership interest of or in the Mortgagor, or the sale, transfer, assignment , pledge, mortgage or other disposition or grant or any interest in all or any portion of the Collateral other than the Permitted Encumbrances, and notwithstanding anything contained herein or contained in any of the other Loan Documents to the contrary, the following transfers shall be permitted without the consent of or notice to Mortgagee, except as may be limited by the last sentence of this paragraph: such transfers as are either : (i) any transfers, sales, redemptions, pledges, trades and/or issuances of any shares or other interests held directly or indirectly in Procaccianti Hotel REIT, Inc., a Maryland corporation; (ii) transfers permitted by Section 12.2.1.1 and its subsections of the Franchise Agreement (“Franchise Agreement”) between PHR GANO OPCO SUB, LLC (“OpCo”), a Delaware limited liability company, and Hilton Franchise Holding LLC (“HFH”) being entered into in connection herewith, or (iii) specifically permitted in a writing from Mortgagee to Mortgagor dated after the date of this document. Notwithstanding the foregoing, Gano Holdings, LLC (“PropCo”), a Rhode Island limited liability company, and OpCo must always remain subject to direct or indirect Control. “Control” means indirectly, beneficially owned by Procaccianti Hotel REIT, Inc., which entity shall have day to day decision-making under the actual control of one or more of: James Procaccianti, Elizabeth Procaccianti, Greg Vickowski, and/or Ron Hadar, except only for such decisions as are required by law, generally accepted public company corporate custom or by the guidelines required by FINRA or the North American Securities Administrators Association (or similar guidelines, regulations or rules of other similar bodies and entities) with respect to a REIT to be made by its independent board, provided further, however, that such board has at all times no fewer than 40% of its directors being one of the Procaccianti individuals; and provided, finally, that actual management and operation of the Property encumbered by the Mortgage is addressed pursuant to the terms of a Management Agreement similar to the agreement referenced in the Assignment and Subordination of Management Agreement being executed and delivered herewith by the management company named therein, and such company remains wholly owned and controlled by James
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Procaccianti, Elizabeth Procaccianti, and other entities subject to their direct or indirect control (as “Control is defined in the Franchise Agreement).”
| 5. | As modified as provided above,<br> all the terms and provisions of the Mortgage and Assignment remain in full force and<br> effect. |
|---|
[page ends here – signature page to follow]
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IN WITNESS WHEREOF, the Mortgagor has executed this Third Amendment as a sealed instrument as of the 27^th^ day of February, 2020.
| MORTGAGOR: | |
|---|---|
| Gano<br> Holdings, LLC, a Rhode Island limited liability company | |
| By: | /s/ James A. Procaccianti |
| --- | --- |
| James<br> A. Procaccianti, | |
| its<br> Authorized Signatory |
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STATE OF RHODE ISLAND
Providence, ss.
On this 26^th^day of February, 2020, before me, the undersigned notary public, personally appeared James A. Procaccianti, as Authorized Representative of Gano Holdings, LLC, proved to me through satisfactory evidence of identification, which was known to me to be the person whose name is signed on the preceding or attached document, and acknowledged to me that she signed it voluntarily for its stated purpose.
| /s/ Natasha<br> V. Ruane | |
|---|---|
| NOTARY PUBLIC | |
| [Affix Notarial Seal] | |
| Printed Name: | |
| My Commission Expires: |
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IN WITNESS WHEREOF, the Mortgagor has executed this Second Amendment as a sealed instrument as of the date first above written.
| MORTGAGEE: | ||
|---|---|---|
| EAST BOSTON<br> SAVINGS BANK | ||
| By: | /s/ Jonpaul<br> Sallese | |
| Name: | Jonpaul<br> Sallese | |
| Title: | Vice President, Commercial<br> Real Estate |
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COMMONWEALTH OF MASSACHUSETTS
__________________, ss.
On this _____ day of ____________, 2020, before me, the undersigned notary public, personally appeared Jonpaul Sallese, as Vice President, Commercial Real Estate, of East Boston Savings Bank, proved to me through satisfactory evidence of identification, which was ________________________ to be the person whose name is signed on the preceding or attached document, and acknowledged to me that she signed it voluntarily for its stated purpose.
| NOTARY PUBLIC | |
|---|---|
| [Affix Notarial Seal] | |
| Printed Name: | |
| My Commission Expires: |
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Exhibit 10.11
HOTEL LEASE
between
GANO HOLDINGS, LLC, a Rhode Island limited liability company, as Landlord
and
PHR GANO OPCO SUB, LLC, a Delaware limited liability company, as Tenant
Dated as of February 27, 2020
Hilton Garden Inn, Providence, RI
220 India Street, Providence RI
| TABLE OF CONTENTS | ||
|---|---|---|
| Page | ||
| ARTICLE I DEFINITIONS | 1 | |
| ARTICLE 2 DEMISE AND TERM | 5 | |
| 2.1 | Demise | 5 |
| 2.2 | Term | 5 |
| 2.3 | Termination Upon Sale by Landlord | 6 |
| 2.4 | Effect of Termination | 6 |
| ARTICLE 3 RENT | 6 | |
| 3.1 | Rent | 6 |
| 3.2 | Apportionments | 7 |
| 3.3 | Additional Rent | 7 |
| 3.4 | Late Charge | 8 |
| 3.5 | Intentionally Omitted | 8 |
| 3.6 | Personal Property Limitation | 8 |
| 3.7 | Sublease Rent Limitation | 8 |
| 3.8 | No Commingling of Funds | 8 |
| 3.9 | Manager; Management | 8 |
| 3.10 | Books and Records | 9 |
| 3.11 | Rent without Setoff | 10 |
| 3.12 | Rent Acceptance | 10 |
| 3.13 | Place Where Rent Paid | 10 |
| 3.14 | Key Money | 10 |
| ARTICLE 4 USE | 11 | |
| 4.1 | General Operating Covenants | 11 |
| 4.2 | Prohibited Uses | 11 |
| 4.3 | Records. | 11 |
| 4.4 | Guests | 12 |
| 4.5 | Advertising and Promotion | 12 |
| 4.6 | Services and Purchases. | 12 |
| 4.7 | Permits | 12 |
| 4.8 | Compliance with Law, Franchise Agreement and Mortgages. | 12 |
| 4.9 | Payment of Taxes. | 13 |
| 4.10 | Removal of Liens | 14 |
| 4.11 | Utilities | 14 |
| 4.12 | Notice to Landlord | 14 |
| 4.13 | Franchise Agreement. | 15 |
| 4.14 | Representations, Warranties and Covenants of Landlord | 16 |
| 4.15 | Representations and Warranties of Tenant | 16 |
| 4.16 | Mutual Representations, Warranties and Covenants of Landlord and Tenant. | 18 |
| 4.17 | “As Is” Leased Property | 18 |
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| 4.18 | Third Party Manager | 18 |
|---|---|---|
| ARTICLE 5 FINANCIAL STATEMENTS; TRANSACTIONS WITH AFFILIATES | 19 | |
| 5.1 | Financial Statements to be Provided by Tenant | 19 |
| 5.2 | Transactions with Affiliates | 19 |
| ARTICLE 6 MAINTENANCE, REPAIRS AND ALTERATIONS | 19 | |
| 6.1 | Maintenance and Repairs | 19 |
| 6.2 | Alterations | 19 |
| 6.3 | Capital Expenditures | 20 |
| ARTICLE 7 LIABILITY CLAIMS AND INSURANCE | 20 | |
| 7.1 | Waiver of Claims | 20 |
| 7.2 | Liability Insurance | 20 |
| 7.3 | Property Insurance | 21 |
| 7.4 | Business Interruption Coverage. | 21 |
| 7.5 | Waiver of Subrogation | 21 |
| 7.6 | Other | 21 |
| 7.7 | Single Policy | 22 |
| ARTICLE 8 DEFAULT AND TERMINATION | 22 | |
| 8.1 | Tenant Default | 22 |
| 8.2 | Collateral Assignment | 23 |
| 8.3 | Landlord’s Remedies | 23 |
| 8.4 | Surrender of the Leased Property | 23 |
| 8.5 | Landlord’s Right to Cure | 24 |
| 8.6 | Tenant’s Bankruptcy or Insolvency | 24 |
| 8.7 | Attorneys’ Fees | 25 |
| 8.8 | Remedies Cumulative | 25 |
| 8.9 | Liability for Tenant’s Obligations | 25 |
| 8.10 | Default by Landlord | 25 |
| 8.11 | Holding Over | 25 |
| ARTICLE 9 CASUALTY OR CONDEMNATION | 26 | |
| 9.1 | Restoration | 26 |
| 9.2 | Condemnation | 26 |
| ARTICLE 10 ASSIGNMENT AND SUBLETTING | 27 | |
| 10.1 | Assignment or Subletting | 27 |
| 10.2 | Notice | 27 |
| 10.3 | Continued Primary Liability | 27 |
| 10.4 | Miscellaneous | 27 |
| ARTICLE 11 SUBORDINATION | 27 | |
| 11.1 | Subordination. | 27 |
| ARTICLE 12 MISCELLANEOUS | 29 | |
| 12.1 | Quiet Enjoyment | 29 |
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| 12.2 | Landlord’s Right of Entry | 29 |
|---|---|---|
| 12.3 | Estoppel Certificates | 29 |
| 12.4 | Delivery of Notices | 29 |
| 12.5 | Notices | 29 |
| 12.6 | No Broker | 30 |
| 12.7 | Quarterly Meetings | 30 |
| 12.8 | No Joint Venture | 31 |
| 12.9 | Partial Invalidity | 31 |
| 12.10 | Third Parties | 31 |
| 12.11 | Waivers and Enforcement | 31 |
| 12.12 | Modification | 31 |
| 12.13 | Non-Recourse Liability | 31 |
| 12.14 | Captions | 32 |
| 12.15 | Time of Essence | 32 |
| 12.16 | Successors and Assigns | 32 |
| 12.17 | No Recordation | 32 |
| 12.18 | Name | 32 |
| 12.19 | Survival | 32 |
| 12.20 | Confidentiality | 32 |
| 12.21 | Conveyance by Landlord | 32 |
| 12.22 | Governing Law | 33 |
| 12.23 | Counterparts | 33 |
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HOTEL LEASE
THIS HOTEL LEASE (this “Lease”) is made and entered into as of the 27^th^ day of February 2020, by and between GANO HOLDINGS, LLC, a Rhode Island limited liability company, having its principal office at c/o Procaccianti Companies, 1140 Reservoir Avenue, Cranston, Rhode Island 02920-6320 (“Landlord”), and PHR GANO OPCO SUB, LLC, a Delaware limited liability company, having its principal office at c/o Procaccianti Companies, 1140 Reservoir Avenue, Cranston, Rhode Island 02920-6320 (“Tenant”).
RECITALS
A. Landlord is the owner of the real property located at 220 India Street, Providence, RI and legally described on Exhibit A attached hereto (the “Land”) and all improvements thereon, including the building that is being operated as a hotel consisting of 137 guest rooms, and other facilities. The Property (as hereinafter defined) and that portion of the FF&E (as hereinafter defined) that is owned by Landlord (and not paid for herein by Tenant) are hereinafter collectively referred to as the “Leased Property”.
B. Landlord desires to lease the Leased Property to Tenant and Tenant desires to lease the Leased Property from Landlord, all on the terms and conditions set forth herein.
AGREEMENT
In consideration of the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:
ARTICLE I
DEFINITIONS
In addition to other terms that are defined elsewhere in this Lease, the following terms shall have the meanings set forth below when used herein:
“Additional Rent” has the meaning set forth in Section 3.3.
“Affiliate” means, with respect to any Person, any other Person (a) directly or indirectly controlled by, controlling or under direct or indirect common control with the Person in question, (b) who owns, directly or indirectly, 5% or more of the equity interest of the Person in question, or (c) who is an immediate family member (e.g., a parent, spouse, sibling, child or grandchild) of the Person in question. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or other beneficial interest, by contract or otherwise; and the terms “controlling” and “controlled” have the meanings correlative to the foregoing.
“Assigned Items” has the meaning set forth in Section 2.1.
“Base Rent” has the meaning set forth in Section 3.1.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any corresponding provision or provisions of prior or succeeding law.
“Commencement Date” means February 27, 2020.
“Consumer Price Index” means the Consumer Price Index for All Urban Consumers (CPI-U) for the U.S. City Average for All Items, 1982-84=100 as published by the United States Department of Labor, Bureau of Labor Statistics. If the Consumer Price Index shall cease to use 1982-84 as the base period, the Consumer Price Index shall be converted in accordance with the conversion factor, if any, published by the United States Department of Labor, Bureau of Labor Statistics. If the Consumer Price Index is discontinued or revised during the Term hereof such other governmental index or computation, if any, with which it is replaced shall be used. If no conversion factor is supplied by the United States Department of Labor, Bureau of Labor Statistics, either for a new base year or a new index, the parties hereto shall agree upon a replacement for the Consumer Price Index to be used.
“Cut-Off Time” means 12:01 a.m. on the Commencement Date.
“Debtor’s Law” has the meaning set forth in Section 8.6.
“Default Interest Rate” means an annual rate equal to the Prime Rate, plus five percent (5%).
“Event of Default” has the meaning set forth in Section 8.1.
“Executive Order 13224” has the meaning set forth in Section 4.15(e)(i).
“Expiration Date” has the meaning set forth in Section 2.2.
“FF&E” means the furniture, furnishings, equipment, fixtures, apparatus and other personal property used in, or held in storage for use in, the operation of the Hotel, or any replacement or substitution of such furniture, furnishings, equipment, fixtures or apparatus.
“Fixed Rent” has the meaning set forth in Section 3.1(a).
“Foreclosure Purchaser” means the holder of a Mortgage or the designee or assignee of the holder of a Mortgage in the case of a deed-in-lieu of foreclosure, or the purchaser in a foreclosure proceeding.
“Franchise” means the franchise rights of Tenant under the Franchise Agreement.
“Franchise Agreement” means that certain Franchise Agreement dated on or about the date hereof, between Franchisor and Tenant, for the use of the franchise rights, the “Hilton Garden Inn” trademark, services and related rights, subject to the obligations and limitations set forth therein, as amended from time to time, and any substitute therefor mutually agreed to by Franchisor and Tenant.
“Franchisor” means Hilton Franchise Holding LLC.
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“GAAP” has the meaning set forth in Section 3.1(d).
“Governmental Authority” means any federal, state, county or municipal government and any appropriate department, commission, board or other authority having jurisdiction over the Hotel now or hereafter in force, including, without limitation, any alcoholic beverage control board, health inspector, the Board of Fire Underwriters, and any insurance company providing the insurance required to be carried under this Lease.
“Gross Revenue” has the meaning set forth in Section 3.1(d).
“Hazardous Materials” means any flammables, explosives, radioactive materials, hazardous wastes, hazardous and toxic substances or related materials, asbestos or any material containing asbestos, or any other substance or material included in the definition of “hazardous substances”, “hazardous wastes”, “hazard materials”, “toxic substances”, “contaminants” or any other pollutant, or otherwise regulated by any federal, state or local environmental law, ordinance, rule or regulation, including the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, the Hazardous Materials Transportation Act, as amended, and the Resource Conservation and Recovery Act, as amended, and in the regulations adopted and publications promulgated pursuant to each of the foregoing Acts.
“Hotel” means the hotel operated on the Land by Tenant, currently commonly known as the Hilton Garden Inn, Providence, and all improvements constructed thereon, all related FF&E, and all rights appurtenances and interests in connection therewith.
“Hotel Personalty” has the meaning set forth in Section 3.6(a).
“Land” has the meaning set forth in Recital A.
“Landlord” has the meaning set forth in the preamble.
“Law” has the meaning set forth in Section 4.8(a).
“Lease” has the meaning set forth in the preamble.
“Lease Year” means a consecutive twelve-month period, commencing on the first day of the first full month after the Commencement Date, except that the final Lease Year shall end on the Expiration Date (unless this Lease shall be sooner terminated in accordance with its terms).
“Leased Property” has the meaning set forth in Recital A.
“Licenses” has the meaning set forth in Section 4.7.
“Lien” has the meaning set forth in Section 4.10.
“Management Agreement” means that certain Management Agreement, dated as of the date hereof, between Tenant and Manager for the management and operation of the Hotel, as amended from time to time, and any substitute therefor mutually agreed to by Manager and Tenant.
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“Manager” means GANO Hotel Manager, LLC.
“Mortgage” means any first mortgage, deed of trust, deed to secure debt or other security instrument recorded against all or any portion of the Property for current indebtedness of Landlord and all renewals, modifications, refinancings, rearrangements, consolidations, replacements and extensions thereof, as evidenced or deemed to be evidenced by any mortgage, deed of trust, deed to secure debt, assignment of leases or profits, security agreement or fixture filing from Landlord to a lender.
“Notices” has the meaning set forth in Section 12.5.
“OFAC” has the meaning set forth in Section 4.15(e)(i).
“OFAC Lists” has the meaning set forth in Section 4.15(e)(i).
“Officer’s Certificate” has the meaning set forth in Section 3.1(c).
“Operating Supplies” means all supplies, except for FF&E and kitchen, restaurant and bar equipment, used or held in storage for future use in connection with operation of the Hotel in accordance with the Operational Standards, including, without limitation, all engineering, maintenance and housekeeping supplies, guest room cleaning supplies, soap and other toiletries, toilet paper, stationery, writing pens, office supplies, and food and beverages of all kinds.
“Operational Standards” means the operating standards required for the Hotel to be operated as a first-class, hotel staffed and equipped and having inventories comparable to other similar first-class hotels in comparable metropolitan areas in the United States, and at all times in accordance with the requirements established and set forth by the Franchisor.
“Parking Contracts” means any agreements providing for vehicle parking (valet or otherwise) rights associated with the guests, invitees or employees of the Hotel.
“Percentage Rent” has the meaning set forth in Section 3.1(b).
“Person” means any individual, corporation, partnership, limited liability company, association, trust or other entity or organization.
“Personal Property Limitation” has the meaning set forth in Section 3.6(a).
“Persons Within Tenant’s Control” means all of Tenant’s subtenants and assignees, and all of their respective principals, officers, agents, contractors, servants, employees, licensees, guests and invitees.
“Prime Rate” means the prime rate of interest published from time to time (and as the same may be changed from time to time) in the Money Rates section of The Wall Street Journal, or its successor publication, from time to time.
“Property” means the Land and the Hotel, in whole or in part, and all improvements, FF&E, appurtenances, rights and interests relating thereto.
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“Proposed Party” has the meaning set forth in Section 10.2.
“Renewal Term” has the meaning set forth in Section 2.2.
“Rent” means Base Rent, Additional Rent, Percentage Rent and any other sum payable from Tenant to Landlord pursuant to this Lease.
“Required Improvements” has the meaning set forth in Section 4.13(b).
“Service Contracts” has the meaning set forth in Section 4.6(a).
“Tenant” has the meaning set forth in the preamble.
“Tenant’s Representative” has the meaning set forth in Section 8.6.
“Term” has the meaning set forth in Section 2.2.
The terms “herein,” “hereof,” “hereunder” and like terms, unless otherwise specified, shall be deemed to refer to this Lease in its entirety and shall not be limited to any particular section or provision hereof. The terms “include” and “including” as used herein shall be deemed to mean “including, but not limited to.” References herein to “Sections,” and “Exhibits” shall be deemed to respectively mean sections of and exhibits to this Lease unless otherwise specified.
ARTICLE 2
DEMISE AND TERM
2.1 Demise. Upon the terms and conditions hereinafter set forth and in consideration of the payment from time to time by Tenant of the Rent and the prompt performance by Tenant and Landlord of each and every one of the respective covenants and agreements hereinafter contained to be kept and performed by Tenant and Landlord, the performance of each and every one of which is declared to be an integral part of the consideration to be furnished respectively by Tenant and Landlord, (i) Landlord does hereby lease, let and demise unto Tenant, and Tenant does hereby lease of and from Landlord, for the Term, at the Rent and upon all of the other provisions of this Lease, the Leased Property together with any and all improvements now or hereafter erected or installed thereon relating to the Leased Property and all present or future appurtenances, rights, service contracts, equipment leases, privileges, licenses and easements benefiting, belonging or pertaining thereto; and (ii) effective as of the Commencement Date, Landlord does hereby assign to Tenant and Tenant does hereby assume from Landlord, for the Term, all of Landlord’s right, title and interest in and to, and all of Landlord’s obligations under, the Parking Contracts, the Service Contracts, the Licenses, the hotel reservations and any proprietary rights, records, documents and intangible property required in the ordinary course of business in operating the Hotel (collectively, the “Assigned Items”).
2.2 Term. The term of this Lease (the “Term”) shall commence on the Commencement Date and shall continue until the tenth (10^th^) anniversary of the first full month of this Lease, or such earlier date upon which this Lease is sooner terminated in accordance with its terms (the “Expiration Date”). Provided that no Event of Default shall have occurred and be continuing, this Lease shall automatically extend for two (2) renewal terms of five (5) years each
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(each a “Renewal Term”) unless Tenant elects, by providing notice to Landlord no later than 12 months prior to then next scheduled expiration of the Term or Renewal Term of this Agreement to terminate this Agreement upon the expiration of the then current Term or Renewal Term. Base Rent and Percentage Rent shall be renegotiated by Landlord and Tenant prior to the commencement of each Renewal Term at rental rates with shall be “market rent” (meaning such rent which a willing tenant would pay a willing landlord to lease the Leased Property taking into account the terms and conditions of this Lease and permitting compliance with Sections 3.6 and 3.7 hereof) which shall be evidenced by a transfer pricing report prepared by an independent national accounting firm. All of the terms, covenants and provisions of this Agreement shall apply to each Renewal Term. Tenant shall have no right to extend the Term beyond the expiration of third Renewal Term. If Tenant does not give notice that it elects to terminate this Agreement in accordance with this Section 2.2, this Lease shall automatically renew at the end of the Term or Renewal Term then in effect as provided in the this Section 2.2.
2.3 Termination Upon Sale by Landlord. Notwithstanding anything to the contrary contained herein, the Term shall automatically expire and this Lease shall automatically terminate immediately upon completion of a sale by Landlord of Landlord’s interest in all or substantially all of the Leased Property.
2.4 Effect of Termination. Upon any termination of this Lease, Tenant shall pay to Landlord any Rent due and payable as of the date of such termination.
ARTICLE 3
RENT
3.1 Rent. Tenant agrees to pay for use of the Leased Property during each Lease Year (or partial Lease Year, if applicable with respect to the first and last Lease Year), the rent (the “Base Rent”) equal to the sum of Fixed Rent and Percentage Rent, as each are calculated in accordance Schedule 3.1 attached hereto and made a part hereof.
(a) “Fixed Rent” shall have the meaning contained in Schedule 3.1.
(b) “Percentage Rent” shall have the meaning contained in Schedule 3.1.
(c) Tenant shall pay an amount equal to the Fixed Rent on the first (1^st^) day of each calendar month during the Term (including the calendar month next succeeding the last month of the term hereof). Percentage Rent for each Lease Year shall be payable monthly in arrears on the 15^th^ day following the end of each calendar month based upon a written statement, signed and certified by an officer of Tenant (an “Officer’s Certificate”) to be true and correct, setting forth the total amount of Tenant’s Gross Revenue made during the immediately preceding calendar month. For the last month of the Term, which shall be a partial month, the dollar thresholds set forth in Sections 3.1(b)(i) through (v) above shall be multiplied by a fraction equal to (i) the number of days in such month divided by (ii) 30.
(d) With respect to any applicable time period, “Gross Revenue” means all revenues and income of any kind derived from the use of rooms at the Hotel, including, without limitation, revenue derived from rooms and suites rented or leased for part of a day, a week, a
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month or longer, and all revenues and income of any kind derived from the sale of all food, liquor, soft drinks or other beverages at the Hotel, including mini-bars, and the sale, rental or use of kitchen facilities and services, conference facilities and services, meeting rooms, miscellaneous banquet income and service charges or audio/video equipment, and all revenues and income of any kind derived from minor operating departments income from the operations of the Hotel. Notwithstanding anything to the contrary contained herein, revenue from guests who guaranteed their arrival but did not “show”, shall be included in Gross Revenue when collection is reasonably assured. The calculation of all types of revenue shall be determined on the accrual method of accounting in accordance with generally accepted accounting principles consistently applied (“GAAP”) and shall include sales made on a cash basis or on credit, but shall exclude the following items:
(i) Federal, state and municipal excise taxes and sales taxes paid by customers in connection with goods, merchandise or services purchased by them to the extent that such taxes are separately levied, whether or not itemized on the customer’s bill or checks; and
(ii) Service charges or tips paid directly to employees if not separately itemized or if not included in package prices on the customer’s bill or checks; and
(iii) All applicable room, excise, sales and use taxes or similar government charges collected directly from guests of the Hotel; and
(iv) Revenues from the sale or financing of all or any part of the Leased Property, the operating inventory, or surplus items; and
(v) Except for proceeds under any business interruption policies, any insurance or condemnation proceeds related to the Leased Property.
(e) Landlord and Tenant hereby agree to allocate fairly (based on relative value) the Base Rent payments between the lease of the Hotel, on the one hand, and the lease of the Hotel Personalty, on the other hand.
3.2 Apportionments. In the event that Tenant receives any income or incurs any expenses attributable to the period prior to the Cut-Off Time, Tenant shall assign such items of income and expense to the designee of Landlord, and Landlord’s designee shall retain all such income and pay all such expenses attributable to this period. In the event that Landlord receives any income (or a credit therefor in connection with Landlord’s purchase of the Leased Property) or incurs any expense attributable to the period following the Cut-Off Time, and Tenant would have been entitled to such income or responsible for such expense had such income or expense been received or incurred directly by Tenant, Landlord shall assign such items of income and expense to Tenant, and Tenant shall retain such income and pay all such expense attributable to this period.
3.3 Additional Rent. All payments (whether or not specifically denoted as such) to be made by Tenant pursuant to the provisions of this Lease in addition to Base Rent shall constitute “Additional Rent”.
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3.4 Late Charge. Any amount payable hereunder that shall not have been paid within ten (10) days after the date on which the same shall become due and payable shall bear interest at a rate equal to eighteen percent (18%) per annum, compounded monthly, but in no event in excess of the maximum rate permitted by applicable law.
3.5 Intentionally Omitted.
3.6 Personal Property Limitation.
(a) Anything contained in this Lease to the contrary notwithstanding, the amount of Hotel Personalty subject to this Lease shall be limited so that the rents attributed to Hotel Personalty shall not exceed fifteen percent (15%) of the total rents from all property demised under this Lease determined at the time that the Hotel Personalty is placed in service (the “Personal Property Limitation”). “Hotel Personalty” is defined to include, without limitation, all property related to the Hotel that is not “real property” within the meaning of Treas. Reg. Section 1.856-10. Landlord and Tenant shall at all times cooperate in good faith and use their best efforts to permit Landlord to comply with the Personal Property Limitation, which compliance may include, without limitation, the purchase by Tenant at fair market value of personal property used in the operation of the Hotel sufficient to permit compliance with the Personal Property Limitation set forth in this Section 3.6. All such compliance shall be effected in a manner that has no material net economic detriment to Tenant. This Section 3.6 is intended to ensure that the rents from personal property fall below the fifteen percent (15%) limitation of Section 856(d)(1) of the Code and shall be interpreted in a manner consistent with such intent.
(b) If and to the extent the ownership of any portion of the Hotel Personalty would cause the Base Rent not to qualify as “rents from real property” for purposes of Section 856(d)(1) of the Code, or if deemed appropriate or desirable by Landlord, Tenant agrees that, upon request of Landlord, Tenant will acquire such of the Hotel Personalty at its fair market value as Landlord shall reasonably specify, and Landlord and Tenant agree to adjust the Base Rent (including any revenue breakpoints set forth in the Percentage Rent) to appropriately reflect such acquisition, and Landlord and Tenant agree to amend this Lease accordingly.
3.7 Sublease Rent Limitation. Anything contained in this Lease to the contrary notwithstanding, Tenant shall not sublet the Hotel or enter into any similar arrangement on any basis such that the rental or other amounts to be paid by the sublessee thereunder would be based, in whole or in part, on either (a) the net income or profits derived by the business activities of the sublessee, or (b) any other formula such that any portion of the Rent would fail to qualify as “rents from real property” within the meaning of Section 856(d)(1) of the Code, or any similar or successor provision thereto.
3.8 No Commingling of Funds. Tenant shall not commingle monies received and held by Tenant from the possession and operation of the Leased Property with any other funds of Tenant or of any other Person.
3.9 Manager; Management.
(a) Pursuant to the Management Agreement, Manager has agreed to manage the Leased Property on the terms and conditions contained therein. Tenant shall (i) at all
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times comply with the terms and conditions contained in the Management Agreement, (ii) do all things necessary to preserve and keep unimpaired its material rights under the Management Agreement and (iii) notify Landlord in writing of any default, alleged default, or event which with notice or the passage of time would constitute a default under the Management Agreement, which default or event shall be and constitute a default hereunder.
(b) Tenant hereby covenants and agrees to promptly enforce the performance and observance of all of the material covenants and agreements required to be performed and/or observed by Manager under the Management Agreement and all of its rights and remedies under the Management Agreement against Manager.
(c) Tenant hereby covenants and agrees not to do any of the following without the prior written consent of Landlord: (i) surrender, terminate or cancel the Management Agreement, (ii) reduce or consent to the reduction of the term of the Management Agreement, (iii) increase or consent to the increase of the amount of any charges under the Management Agreement, or (iv) otherwise modify, change, supplement, alter or amend in any material adverse respect any of the provisions of the Management Agreement or any of Tenant’s rights and remedies under the Management Agreement.
(d) If Tenant receives any notice of or becomes aware of a violation or circumstances likely to result in a violation of the Management Agreement, Tenant shall promptly deliver to Landlord written notice of such violation or circumstances and, to the extent the same is the responsibility of Tenant under this Lease, take all remedial action necessary for compliance with the Management Agreement; provided that Tenant may contest any such violation if Landlord consents to such contest by Tenant, which consent shall not be unreasonably withheld. If Tenant contests such violation, Tenant shall hold Landlord harmless from any loss, cost, damage or expense, including reasonable attorneys’ fees, resulting from such contest, unless the contested violation resulted from an intentional act or omission in contravention of this Lease by Landlord, its agents or employees.
(e) Tenant shall deliver to Landlord, within three (3) days after receipt of same by Tenant, copies of all written notices sent to Tenant by Manager relating to the Management Agreement.
(f) Landlord and Tenant agree to cooperate fully with each other in the event it becomes necessary to obtain an extension or modification of the Management Agreement or a new management agreement for the Leased Property.
(g) Tenant shall ensure that the Management Agreement (or any successor management agreement) obligates the Manager to provide information Landlord deems reasonably necessary to ensure that the Manager is an “eligible independent contractor” as such term is defined in Section 856(d)(9)(A) of the Code.
3.10 Books and Records. In addition to any other requirements set forth herein (including, without limitation, Sections 4.3(a) and 5.1), Tenant covenants that, for the purposes of ascertaining the amount payable to Landlord as Percentage Rent, Tenant shall keep books of account and other records in which full, true and correct entries will be made of all financial
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dealings and actions in relation to the business and affairs of the Hotel in accordance with generally accepted accounting principles, consistently applied, and will preserve such records and books of account throughout the Term. All such books and records shall be maintained at the Leased Property or the principal business office of Tenant or Manager during the Term and, upon the Expiration Date, shall be delivered to Landlord, subject to Tenant’s continuing right to review such books and records and to make copies or extracts of the same. Landlord shall keep such books and records for five (5) years after the expiration or earlier termination of this Lease. Landlord shall have access to such books and records during regular business hours during the Term and shall have the right, at its expense, to make copies or extracts thereof.
3.11 Rent without Setoff. Except as otherwise expressly provided herein, there shall be no deduction or setoff of any nature whatsoever from Rent payable under this Lease, by reason of (a) any damage to or destruction of the Leased Property or any portion thereof from whatever cause or any condemnation; (b) the lawful or unlawful prohibition of, or restriction upon, Tenant’s use of the Leased Property, or any portion thereof, unless caused by Landlord or unless the same is a breach of warranty or covenant by Landlord; (c) any claim that Tenant may have against Landlord by reason of any default or breach of any warranty by Landlord under this Lease or any other agreement between Landlord and Tenant, or to which Landlord and Tenant are parties; (d) any bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution, winding up or other proceedings affecting Landlord or any assignee or transferee of Landlord; or (e) for any other cause whether similar or dissimilar to any of the foregoing. Except as otherwise specifically provided in this Lease, Tenant hereby waives all rights arising from any occurrence whatsoever, which may now or hereafter be conferred upon it by law, to entitle Tenant to any abatement, reduction, suspension or deferment of the Rent or other sums payable or other obligations to be performed by Tenant hereunder. The obligations of each party hereunder shall be separate and independent covenants and agreements, and the Rent and all other sums payable by Tenant hereunder shall continue to be payable in all events unless the obligations to pay the same shall be terminated pursuant to the express provisions of this Lease.
3.12 Rent Acceptance. If Landlord, at any time or times, accepts any Rent or any other sum due to it hereunder after the same becomes due and payable, such acceptance shall not excuse delay upon any subsequent occasion, or constitute, or be construed as, a waiver of any of Landlord’s rights hereunder as to payment of any Rent or any other sums due to it thereafter. Furthermore, Landlord’s acceptance at any time of less than the full amount of any item of Rent due shall not be deemed a waiver of any unpaid amount, whether or not there is any dispute thereon between Landlord and Tenant, and whether or not Tenant expressly asserts, and/or Landlord expressly disclaims or denies, such acceptance as being in full settlement, full payment or the like of any such dispute.
3.13 Place Where Rent Paid. All Rent shall be payable to Landlord at the place provided in this Lease for the sending of notices to Landlord, or at such other place as Landlord may specify by notice to Tenant from time to time. A place once specified as the place for the payment of Rent shall continue until changed by notice by Landlord to Tenant.
3.14 Key Money. To the extent any key money is provided by Franchisor to Tenant pursuant to the terms of any Franchise Agreement, Tenant agrees to transfer such key money to Landlord as an advance payment of Rent.
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ARTICLE 4
USE
4.1 General Operating Covenants. During the Term, Tenant shall continuously use and occupy the Hotel as a hotel which meets or exceeds the Operational Standards. Tenant shall operate the Hotel under the name “Hilton Garden Inn Providence,” or such other name as Landlord may approve from time to time, and shall maintain the Hotel in compliance with all applicable Laws, the Operational Standards, all Mortgages and the Franchise Agreement. Tenant shall proceed with diligence and exercise reasonable good faith efforts to obtain and maintain all approvals necessary to operate and use the Hotel for its intended purpose under all applicable Laws. Tenant shall use reasonable good faith efforts to promote the maximum possible amount of trade, commerce and business for the Hotel. Tenant shall not hold itself out as the agent of Landlord. Upon written request from Tenant, which request shall not be delivered more frequently than quarterly, Landlord shall perform an inspection of the Leased Property, and, promptly following such inspection, confirm that Tenant is in compliance with this Section 4.1, or, if Tenant is not in compliance with this Section 4.1, specify any violations of this Section 4.1.
4.2 Prohibited Uses. Tenant will not knowingly make or permit to be made any use of the Hotel or any part thereof that would violate any of the covenants, terms, provisions and conditions of this Lease, the Franchise Agreement or any Mortgage, or that directly or indirectly is forbidden by applicable Laws or that may be dangerous to life, limb or property or that may invalidate or materially increase the premium cost of any policy of insurance carried on the Leased Property or covering the operation of the Leased Property or the Hotel. Tenant shall not, and shall not knowingly permit anyone else to, bring into, use, store or dispose of on the Leased Property any materials or substances in violation of any applicable Laws. Tenant will not, and will not knowingly suffer or permit the Leased Property or any part thereof to be used in any manner or permit anything to be brought into or kept therein that would in any way materially impair or tend to materially impair the character, reputation or appearance of the Hotel or that would materially impair or interfere with or tend to materially impair or interfere with any of the services performed by Landlord for the Hotel or that could threaten the safety of the Hotel or any of its occupants. Tenant will not, and will not knowingly suffer or permit the Leased Property or any part thereof to be used in any manner to conduct wagering activities by any person who is engaged in the business of accepting wagers and who is otherwise legally authorized to engage in such business.
4.3 Records.
(a) In addition to any other requirements set forth herein (including, without limitation, Sections 3.10 and 5.1), Tenant shall maintain complete books and records for the Hotel, including the books of account, guest records, front office records and general records of the Hotel.
(b) Tenant shall prepare and file all forms, reports and returns for the Hotel required by all federal, state or local laws in connection with unemployment insurance, worker’s compensation insurance, disability benefits, income tax withholding, and social security. Tenant shall prepare for review, approval and, where appropriate, auditing by Landlord’s independent accounting firm, all financial statements with respect to the operation of the Hotel.
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4.4 Guests. Tenant shall maintain business-like relations with guests of the Hotel. Tenant shall collect with diligence the rents and other income due from guests and concessionaires and use reasonable good faith efforts to enforce compliance with all terms of overnight occupancy rights.
4.5 Advertising and Promotion. Tenant shall arrange, contract and pay for all advertising and promotion that Tenant deems necessary for the successful operation of the Hotel in order to meet or exceed the Operational Standards.
4.6 Services and Purchases.
(a) Tenant shall enter into, perform its obligations under, administer, pay and use reasonable good faith efforts to enforce service contracts required in the ordinary course of business in operating the Hotel, including contracts for water, electricity, gas, telephone, refuse removal, vermin extermination, snow removal, cable, Internet, cleaning, laundry, pool service, vending services, fire systems inspection and testing, elevator and boiler maintenance, and all other services (collectively, “Service Contracts”) that are provided in comparable hotels.
(b) Tenant shall take reasonable measures, as directed by Landlord and as are consistent with the provisions of this Lease, to provide for security in the Hotel.
(c) Tenant shall make all payments on or before the applicable due dates required to maintain the insurance regarding the Hotel that Tenant is required to carry under Article 7.
4.7 Permits. To the extent not required to be provided by Landlord, Tenant shall apply for, obtain and maintain (or shall require Manager to apply for, obtain and maintain) for the benefit of the Hotel all licenses and permits required in connection with the management and operation of the Hotel (collectively, “Licenses”). Landlord shall execute and deliver any and all applications and other documents and otherwise cooperate to the fullest extent with Tenant in applying for, obtaining and maintaining such Licenses. Tenant shall assign (or cause Manager to assign) all such Licenses for the Hotel to Landlord or its designee upon termination of this Lease (to the extent assignable).
4.8 Compliance with Law, Franchise Agreement and Mortgages.
(a) Subject to Section 4.8(c) below, Tenant shall comply with and abide by all applicable statutes, laws, rules, regulations, requirements, orders, notices, determinations and ordinances of any Governmental Authority (all of the foregoing hereinafter referred to collectively as “Laws”), and with the terms and provisions of the Franchise Agreement and any Mortgage, to the extent performance of such terms and provisions are within the control of Tenant under this Lease.
(b) Subject to Section 4.8(c) below, if Tenant receives notice of or becomes aware of a violation or circumstances likely to result in a violation of any Law, the Franchise Agreement, or any Mortgage, Tenant shall promptly deliver to Landlord, Franchisor, and the holder of such Mortgage written notice of such violation or circumstances and, to the extent the same is the responsibility of Tenant under this Lease, take all remedial action necessary for
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compliance with the Law, the Franchise Agreement and any Mortgage; provided that Tenant may contest any such violation if Landlord consents to such contest by Tenant, which consent shall not be unreasonably withheld. If Tenant contests such violation, Tenant shall hold Landlord harmless from any loss, cost, damage or expense, including, reasonable attorneys’ fees, resulting from such contest, unless the contested violation resulted from an intentional act or omission in contravention of this Lease by Landlord, its agents or employees. Upon written request from Tenant, which request shall not be delivered more frequently than quarterly, Landlord shall perform an inspection of the Leased Property, and, promptly following such inspection, confirm that there is no violation or circumstances likely to result in a violation of any Law, the Franchise Agreement or any Mortgage, or, if such a violation or circumstance shall exist, specify any such violation or circumstance. In addition, Tenant shall, at Tenant’s expense, comply with all requirements set forth in the Franchise Agreement.
(c) Notwithstanding the foregoing provisions of this Section 4.8, Landlord shall be solely responsible for all cost and expense arising from the presence, suspected presence, release or suspected release of any Hazardous Materials in or into the air, soil, surface water or ground water, or any portion thereof, at, on, about, under or within the Leased Property, including any costs of investigation or remediation, whether prior to or subsequent to the Commencement Date; provided, however, that Tenant shall be solely responsible for all cost and expense arising from the presence, suspected presence, release or suspected release of any Hazardous Materials in or into the air, soil, surface water or ground water, or any portion thereof, at, on, about, under or within the Leased Property, including any costs of investigation or remediation, if and to the extent caused by the intentional act or willful misconduct of Tenant.
4.9 Payment of Taxes.
(a) Tenant shall pay all taxes (including, without limitation, all ad valorem, sales and use, single business, gross receipts, transaction, privilege, imposition, rent or similar taxes as the same relate to or are imposed upon Tenant or the business conducted upon the Leased Property) not included in Section 4.9(b) below, water, sewer or other rents and charges, excises, tax levies, fees (including, without limitation, license, permit, inspection, authorization and similar fees) and all other governmental charges not included in Section 4.9(b) below, in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, of every character in respect of the Leased Property or the business conducted thereon by Tenant (including all interest and penalties thereon due to any failure in payment by Tenant), which at any time during or in respect of the Term hereof may be assessed or imposed on or in respect of or be a lien upon (i) Landlord’s interest in the Leased Property; (ii) the Leased Property, any part thereof, any rent therefrom, or any estate, right, title, or interest therein; or (iii) any occupancy, operation, use or possession of, or sales from, or activity conducted on or in connection with the Leased Property or the leasing or use of the Leased Property or any part thereof by Tenant, including, without limitation, (A) all social security taxes, unemployment insurance taxes, withholding taxes and similar taxes and assessments of any nature imposed on Tenant in connection with any employees or personnel of Tenant; (B) all hotel taxes, gross receipts taxes, amusement taxes, excise taxes, sales or use taxes, rent taxes or similar taxes as the same relate to or are imposed upon Tenant or the business conducted upon the Leased Property (excluding the income of any sublessees, licensees or concessionaires of Tenant, but including the rent or other amounts received by Tenant under any such subleases, licenses or concession agreements); and (C) all personal property taxes
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or similar taxes or assessments with respect to any period during the Term, it being agreed that any personal property taxes payable in part with respect to the Term and in part with respect to periods before or after the Term shall be prorated between Landlord and Tenant based on the number of days of the period for which such personal property tax is payable that fall within the Term and that fall outside of the Term.
(b) Landlord shall pay all real property or similar taxes or assessments, whether special or general, of any nature whatsoever assessed against the Leased Property, with respect to any period before, during or after the Term, but the foregoing shall not include any sales, use, gross receipts, occupancy, single business, transaction, privilege, imposition, rent, ad valorem or other tax not specifically enumerated herein.
4.10 Removal of Liens. Except as contemplated under any mortgage loan associated with the Leased Property, Tenant shall at all times keep the Leased Property free of any claim, lien, encumbrance or security interest other than liens for real and personal property taxes and assessments not then delinquent (hereinafter collectively called a “Lien”), except for taxes that are then due and payable and that, if not then paid, would be delinquent. In the event a Lien is asserted against the Leased Property or any part thereof, Tenant shall immediately give Landlord written notice thereof and shall, to the extent that the Lien would be the responsibility of Tenant hereunder, within twenty (20) days after such notice is given, take all reasonable steps necessary for removal thereof or bonding over unless Landlord notifies Tenant in writing within such 20-day period that Landlord wishes to contest such Lien or permit Tenant to contest such Lien. Landlord shall retain all right to contest and control all matters involving real property tax assessments and valuations regarding the Property. Tenant shall promptly notify Landlord of any notice received by it regarding such matters.
4.11 Utilities. Tenant shall be solely responsible for, and shall promptly pay directly to the utility or service provider the cost (including connection and other charges), of all heat, air conditioning, water, gas, electrical, light, power, sewer charges, telephone service, and other services and utilities supplied to the Leased Property, together with any taxes thereof. Landlord shall reasonably cooperate with Tenant in connection with any energy conservation program, provided that the same shall be accomplished without Landlord being required to incur any out-of-pocket cost or expense thereby. If such cooperation by Landlord shall result in any out-of-pocket cost or expense to Landlord (including reasonable attorneys’ fees and disbursements), Tenant shall nonetheless have the right to require Landlord’s cooperation in connection therewith, provided that Tenant shall reimburse Landlord for such out-of-pocket costs or expenses, as Additional Rent, within thirty (30) days after demand therefor.
4.12 Notice to Landlord. Tenant shall promptly notify Landlord in writing:
(a) if, to the actual knowledge of Tenant, the condition of the Hotel or any part thereof fails to meet any Law or the standards imposed hereunder;
(b) upon receipt by Tenant of any notice, demand or similar communication with respect to the violation of (i) any Law, (ii) the Franchise Agreement, or (iii) the obligation of Landlord under any Mortgage;
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(c) upon receipt by Tenant of any summons, notice, demand or similar communication regarding any action at law or in equity or before any regulatory body in connection with or involving the Hotel, or any portion thereof;
(d) upon receipt by Tenant of any notice or communication from an insurance carrier regarding a material change to insurance coverages or the insurability of the Leased Property; and
(e) upon receipt by Tenant of any notice or communication of any nature, written or oral, that, in the reasonable opinion of Tenant, may have a material adverse effect on the Hotel.
4.13 Franchise Agreement.
(a) On or before the Commencement Date, Tenant shall deliver to Landlord a copy of the Franchise Agreement and Tenant shall be the holder and owner of the Franchise to permit the Hotel to be operated as a “Hilton Garden Inn”.
(b) Landlord acknowledges and agrees that Franchisor, as a condition to its execution of the Franchise Agreement, has required that the Hotel undergo certain modifications or renovations (the “Required Improvements”). Landlord shall cause such Required Improvements to be completed at Landlord’s expense and in accordance with the terms set forth by the Franchisor. Landlord acknowledges that Tenant would be unwilling to enter into this Lease without Landlord’s commitment to complete the Required Improvements and, as such, Landlord will receive material benefit from completing the Required Improvements.
(c) Landlord shall indemnify, defend (with legal counsel reasonably approved by Tenant), and hold Tenant harmless from all causes of action, claims, debts, liabilities, controversies, damages, costs, losses, and expenses (including reasonable attorneys’ fees) suffered or incurred by Tenant, including lost profits, by reason of Landlord’s failure to complete the Required Improvements as required by Franchisor, except to the extent that such damage or loss is attributable to the gross negligence, willful misconduct or fraud of Tenant.
(d) Except as set forth in Section 4.13(b), Tenant shall be responsible for the performance of all obligations imposed on the franchisee under the Franchise Agreement. Neither Landlord nor Tenant shall take any actions that violate the terms of the Franchise Agreement. To the extent any of the provisions of the Franchise Agreement impose a greater obligation on Tenant than the corresponding provisions of this Lease, then Tenant shall be obligated to comply with, and to take all reasonable actions necessary to prevent breaches or defaults under, the provisions of the Franchise Agreement. It is the intent of the parties hereto that Tenant shall comply in every material respect with the provisions of the Franchise Agreement to avoid any default under the Franchise Agreement during the term of this Lease. In the event that it becomes necessary to obtain an extension to the Franchise Agreement or a new franchise for the Leased Property, Landlord shall cooperate with Tenant to the extent necessary in connection therewith.
(e) Tenant shall indemnify, defend (with legal counsel reasonably approved by Landlord), and hold Landlord harmless from all causes of action, claims, debts,
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liabilities, controversies, damages, costs, losses, and expenses (including reasonable attorneys’ fees) suffered or incurred by Landlord, including lost profits, by reason of Tenant’s failure (or the failure of any Person occupying all or any portion of the Leased Property under or through Tenant) to comply with the terms of the Franchise Agreement, except to the extent that such damage or loss is attributable to the gross negligence, willful misconduct or fraud of Landlord.
(f) Tenant hereby covenants and agrees to promptly enforce the performance and observance of all of the material covenants and agreements required to be performed and/or observed by Franchisor under the Franchise Agreement and all of its rights and remedies under the Franchise Agreement against the Franchisor.
(g) Tenant hereby covenants and agrees not to do any of the following without the prior written consent of Landlord and the holder of any Mortgage: (i) surrender, terminate or cancel the Franchise Agreement, (ii) reduce or consent to the reduction of the term of the Franchise Agreement, (iii) increase or consent to the increase of the amount of any charges under the Franchise Agreement, or (iv) otherwise modify, change, supplement, alter or amend in any material adverse respect any of the provisions of the Franchise Agreement or any of Tenant’s rights and remedies under the Franchise Agreement.
(h) Tenant shall deliver to Landlord, within three (3) days after receipt of same by Tenant, copies of all written notices sent to Tenant by Franchisor relating to the Franchise Agreement.
(i) If the terms of this Lease conflict with the terms of the Franchise Agreement, the terms of the Franchise Agreement shall control.
4.14 Representations, Warranties and Covenants of Landlord. Landlord hereby represents, warrants and covenants to Tenant that as of the Commencement Date:
(a) Organization; Binding and Enforceable. Landlord is a duly organized limited liability company validly existing under the laws of the State of Delaware. Landlord has full power and authority to perform its obligations under this Lease, and this Lease is the legal, valid and binding obligation of Landlord and is enforceable against Landlord in accordance with its terms.
(b) No Conflicts; Consents Obtained. The execution and delivery of this Lease does not violate or conflict with the formation document or the operating document of Landlord or any agreement, judgment, license, permit, order or other document applicable to or binding upon Landlord. Landlord has obtained all consents and approvals required by any third party with respect to Landlord in connection with the execution and delivery of this Lease.
4.15 Representations and Warranties of Tenant. Tenant hereby represents and warrants to Landlord that as of the Commencement Date:
(a) Organization; Binding and Enforceable. Tenant is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Tenant has full power and authority to perform its obligations under this Lease, and
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this Lease is the legal, valid and binding obligation of Tenant, and enforceable against Tenant in accordance with its terms.
(b) No Conflicts; Consents Obtained. The execution and delivery of this Lease does not violate or conflict with the formation document or the operating document of Tenant or any agreement, judgment, license, permit, order or other document applicable to or binding upon Tenant. Tenant has obtained all consents and approvals required by any third party with respect to Tenant in connection with the execution and delivery of this Lease.
(c) Management Agreement. (i) The Management Agreement is in full force and effect, (ii) there is no material uncured default, breach or violation existing thereunder by either party thereto, and (iii) to Tenant’s knowledge, no event has occurred (other than payments due but not yet delinquent) that, with the passage of time or the giving of notice, or both, would constitute a material default, breach or violation by either party thereunder.
(d) Franchise Agreements. (i) The Franchise Agreement is in full force and effect, (ii) there is no material uncured default, breach or violation existing thereunder by either party thereto, and (iii) to Tenant’s knowledge, no event has occurred (other than payments due but not yet delinquent) that, with the passage of time or the giving of notice, or both, would constitute a material default, breach or violation by either party thereunder.
(e) OFAC Lists.
(i) Neither Tenant, nor any member of Tenant, nor, to Tenant’s knowledge, any Person with actual authority to direct the actions of any member of Tenant, nor, to Tenant’s present, actual knowledge, any other Persons holding any legal or beneficial interest whatsoever in Tenant, (A) are named on any list of persons, entities, and governments issued by the Office of Foreign Assets Control of the United States Department of the Treasury (“OFAC”) pursuant to Executive Order 13224 – Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism (“Executive Order 13224”), as in effect on the date hereof, or any similar list known to Tenant or publicly issued by OFAC or any other department or agency of the United States of America (collectively, the “OFAC Lists”), (b) are included in, owned by, controlled by, knowingly acting for or on behalf of, knowingly providing assistance, support, sponsorship, or services of any kind to, or otherwise knowingly associated with any of the Persons referred to or described in the OFAC Lists; or (c) has knowingly conducted business with or knowingly engaged in any transaction with any Person named on any of the OFAC Lists or any Person included in, owned by, controlled by, acting for or on behalf of, providing assistance, support, sponsorship, or services of any kind to, or, to Tenant’s present, actual knowledge otherwise associated with any of the Persons referred to or described in the OFAC Lists.
(ii) Neither Tenant, nor any Persons holding any legal or beneficial interest whatsoever in Tenant (whether directly or indirectly), will conduct business with or engage in any transaction with any Person named on any of the OFAC Lists or any Person included in, owned by, controlled by, acting for or on behalf of, providing assistance, support, sponsorship, or services of any kind to, or otherwise associated with any of the Persons referred to or described in the OFAC Lists.
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(iii) Tenant shall comply at all times with the requirements of Executive Order 13224; the International Emergency Economic Powers Act, 50 U.S.C. Sections 1701-06; the United and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56; the Iraqi Sanctions Act, Pub. L. 101-513, 104 Stat. 2047-55; the United Nations Participation Act, 22 U.S.C. Section 287c; the Antiterrorism and Effective Death Penalty Act, (enacting 8 U.S.C. Section 219, 18 U.S.C. Section 2332d, and 18 U.S.C. Section 2339b); the International Security and Development Cooperation Act, 22 U.S.C. Section 2349 aa-9; the Terrorism Sanctions Regulations, 31 C.F.R. Part 595; the Terrorism List Governments Sanctions Regulations, 31 C.F.R. Part 596; and the Foreign Terrorist Organizations Sanctions Regulations, 31 C.F.R. Part 597 and any similar laws are regulation currently in force or hereafter enacted.
4.16 Mutual Representations, Warranties and Covenants of Landlord and Tenant.
(a) Single Purpose Entities. Except as otherwise permitted by this Lease, each of Landlord and Tenant hereby represents and warrants that it has been organized as a single purpose entity, solely for the purpose of entering into this Lease and the other agreements contemplated hereby and performing the obligations required hereunder and under the other agreements contemplated hereby. Each of Landlord and Tenant covenants that as of the date hereof and through the Term it will comply with the special purpose entity covenants contained in the loan documents related to any Mortgage by the Landlord.
(b) No Discrimination. Each of Landlord and Tenant covenants by and for itself, its successors and assigns, and all persons claiming under or through them, and this Lease is made and accepted upon and subject to the condition that there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin or ancestry in the leasing, subleasing, transferring, use or enjoyment of the Property herein leased, nor shall the Lease itself, or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants or vendees of the Property herein leased.
4.17 “As Is” Leased Property. Tenant agrees to accept the Leased Property on the Commencement Date “AS IS” in the condition existing on the date hereof, subject to the provisions of Section 6.3 below. Landlord shall have no obligation to do any work in order to make the Leased Property suitable and ready for occupancy and use by Tenant. Landlord shall deliver actual possession of the Leased Property to Tenant in such condition on the Commencement Date. Tenant agrees that, except as expressly provided herein, (a) Tenant enters into this Lease without any representations, warranties or promises, express or implied, by Landlord, its agents, representatives, employees, servants or any other person in respect of the Leased Property, and (b) no rights, easements or licenses are acquired by Tenant by implication or otherwise.
4.18 Third Party Manager. Tenant shall have the right to cause Manager to perform all obligations of Tenant to be performed under this Lease, provided that Tenant shall
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remain liable to Landlord for the performance of all such obligations, notwithstanding any liability of Manager to Tenant.
ARTICLE 5
FINANCIAL STATEMENTS; TRANSACTIONS WITH AFFILIATES
5.1 Financial Statements to be Provided by Tenant. In addition to any other requirements set forth herein (including, without limitation, Sections 3.10 and 4.3(a)), Tenant shall maintain accurate and complete books of account and records showing the assets and liabilities, operations, transactions and financial condition of Tenant and the Property on an accrual basis in accordance with GAAP. The books of account and records of Tenant and the Property shall at all times be maintained at the principal business office of Tenant or Manager. All such books of account and records may be inspected, copied and audited by Landlord or any of its members or their designees or representatives from time to time and upon reasonable prior notice at the office of Tenant or Manager. Tenant shall, as and when received (or required to be received), furnish to Landlord copies of the financial statements and reports furnished (or required to be furnished) by Manager to Tenant pursuant to the terms of the Management Agreement. In addition, if not furnished pursuant to the immediately preceding sentence, Tenant shall furnish to Landlord, as and when required pursuant to the terms of any Mortgage, any and all operating statements, financial statements, balance sheets, budgets and reports regarding the Leased Property, including the Hotel, that shall be required under such Mortgage.
5.2 Transactions with Affiliates. In Tenant’s management and operation of the Hotel, Tenant may not purchase goods, supplies or services from or through any of its Affiliates, except with the prior written consent of Landlord, which consent shall not be unreasonably withheld.
ARTICLE 6
MAINTENANCE, REPAIRS AND ALTERATIONS
6.1 Maintenance and Repairs. Subject to Landlord’s performance of its obligations under this Lease with respect to the condition of the Leased Property (including, without limitation, with respect to the Required Improvements), Tenant shall keep and maintain the Leased Property, the heating, air conditioning, ventilating, plumbing, mechanical, electrical, telephone, elevator, escalator, life and safety and security systems, floor and wall coverings in good order, repair and condition, including making and paying for necessary replacements, additions and substitutions in order to maintain the Hotel in compliance with any Mortgage, the Operational Standards, the Franchise Agreement, and all applicable Laws; provided, however, that Landlord shall have the right to (i) participate in meetings with Tenant’s contractors performing any such repairs, replacements, additions and substitutions and (ii) require that any such repairs, replacements, additions and substitutions be supervised by Landlord.
6.2 Alterations. Except for Tenant’s obligations hereunder to renew and replace (which may, without Landlord’s consent, be made with the same, similar, or better materials and workmanship), Tenant shall not have any right to make any alterations, changes, additions or improvements to the Hotel or the FF&E, if and to the extent such FF&E is owned by Landlord, without the prior written consent of Landlord, which consent Landlord may withhold in
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its sole discretion. Any work that Tenant may perform in the Hotel that is done with Landlord’s consent, if given, may be conditioned on (i) Landlord’s approval of Tenant’s plans therefor, (ii) Landlord’s participation in meetings with Tenant’s contractors performing any such alterations, changes, additions or improvements, (iii) Landlord’s supervision of the performance of any such alterations, changes, additions or improvements, and (iv) compliance by Tenant with such terms and conditions as Landlord may reasonably impose or as are required to maintain the quality of the improvements on the Land in accordance with the Operational Standards, any Mortgage or the Franchise Agreement. All alterations, additions, and improvements in, on, or to the Hotel made or installed by Tenant, including carpeting and wall covering, shall be and become a part of the realty and owned by Landlord without compensation to Tenant.
6.3 Capital Expenditures. Landlord shall be responsible for any capital expenditure (determined in accordance with GAAP) necessary to operate and maintain the Leased Property in accordance with the Operational Standards.
ARTICLE 7
LIABILITY CLAIMS AND INSURANCE
7.1 Waiver of Claims. To the extent permitted pursuant to applicable Laws, Tenant agrees that Landlord, its Affiliates, and each of their respective shareholders, directors, partners, members, officers, employees and agents, shall not be liable to Tenant, and Tenant hereby releases said parties from any liability, for any personal injury to Tenant’s employees, invitees, guests or licensees, for loss of income or damage to or loss of persons or personal property in or about the Hotel from any cause whatsoever except to the extent that such damage or loss of income is attributable to the gross negligence, willful misconduct or fraud of Landlord. To the extent permitted pursuant to applicable Laws, Landlord agrees that Tenant, its Affiliates and each of their respective shareholders, directors, partners, members, officers, employees and agents shall not be liable to Landlord, and Landlord hereby releases said parties from any liability for any personal injury to Landlord’s employees, invitees, guests or licensees, for loss of income or damage or loss of income of persons or property in or about the Hotel from any cause whatsoever except to the extent that such damage or loss is attributable to the gross negligence, willful misconduct or fraud of Tenant.
7.2 Liability Insurance. Tenant will secure and maintain broad form commercial general liability insurance (including innkeeper’s legal liability insurance and dram shop insurance, if applicable) designating Landlord, Manager, and Tenant as named insureds and Franchisor and the holder of each Mortgage as additional insureds, from financially responsible insurance companies, covering the Hotel in forms and with limits that are in compliance with the Franchise Agreement, the Management Agreement and each Mortgage and which are reasonable and appropriate based on the Operational Standards. The companies issuing such policies and the form and coverage of such policies shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld. Tenant shall cause Manager to maintain workers’ compensation insurance and employer’s liability insurance in forms and amounts required by law. Tenant shall supply Landlord with certificates of insurance for all the above-described policies of insurance. Such certificates shall provide that Tenant’s insurance may not be terminated, canceled or amended except upon thirty (30) days’ prior written notice to Landlord.
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7.3 Property Insurance. Subject to the terms of Section 7.7 below, Landlord shall obtain and keep in full force and effect “all risk” property insurance on the Hotel, including all FF&E owned by Landlord, in compliance with each Mortgage and the Franchise Agreement, for the full replacement cost thereof, excluding deductibles. Tenant shall insure all FF&E owned by Tenant, in compliance with each Mortgage and the Franchise Agreement, for the full replacement cost thereof, excluding deductibles. Landlord shall supply Tenant, and Tenant shall supply Landlord, with certificates of insurance for all the above-described policies of insurance and each shall name Landlord, Manager, and Tenant as named insured parties. In addition, each policy maintained by Landlord under this Section 7.3 shall name the holder of each Mortgage as loss payee. Such certificates shall provide that such insurance may not be terminated, canceled or amended except upon thirty (30) days’ prior written notice to Landlord and Tenant. Tenant hereby waives any claims against Landlord for any loss or damage to the Leased Property as a result of fire or other casualty covered by insurance (unless such loss or damage is a direct result of Landlord’s negligence, willful misconduct or fraud).
7.4 Business Interruption Coverage.
(a) Subject to the terms of Section 7.7 below, Landlord shall obtain coverage for the actual loss sustained (including rental value) resulting from the necessary interruption of business caused by direct physical damage to or destruction of real or personal property resulting from an occurrence covered by the insurance described in Section 7.3 above, including one hundred eighty (180) days subsequent to completion of any required repairs or replacements necessary to return the Leased Property to a condition at least as good as the condition prior to the interruption event and sufficient to satisfy the requirements of the Franchise Agreement, any Mortgage and the Operational Standards. The insurance described in this Section 7.4(a) shall name Landlord as named insured party and each mortgagee under any Mortgage as loss payee.
(b) Subject to the terms of Section 7.7 below, Tenant shall obtain coverage for the actual loss of profits sustained resulting from the necessary interruption of business caused by direct physical damage to or destruction of real or personal property resulting from an occurrence covered by the insurance described in Section 7.3 above, including one hundred eighty (180) days subsequent to completion of any required repairs or replacements necessary to return the Leased Property to a condition at least as good as the condition prior to the interruption event and sufficient to satisfy the requirements of the Franchise Agreement and the Operational Standards.
7.5 Waiver of Subrogation. All insurance policies described in Sections 7.1, 7.2, 7.3 and 7.4(a) shall provide for waiver of rights of subrogation against Landlord, Tenant, Manager and the holder of each Mortgage.
7.6 Other. Any insurance provided by Tenant under this Article 7 may be provided under the blanket insurance policies of Manager, which policies cover other hotel properties managed by Manager, subject, however, to the prior written approval of Landlord (which approval shall not be unreasonably withheld) if Landlord shall have an approval right pursuant to this Article 7 over the insurance coverage being provided by any such blanket insurance policy. All premiums, costs and expenses shall be allocated among the properties
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participating in such program. Coverage extended to any additional insured or additional named insured under these policies will expire on the Expiration Date.
7.7 Single Policy. Notwithstanding anything to the contrary contained in this Article 7, any insurance coverage required to be provided by Landlord under this Article 7 may be provided by Tenant on behalf of Landlord under a single policy, and any insurance required to be provided by Tenant under this Article 7 may be provided by Landlord on behalf of Tenant under a single policy, provided that (i) any such coverage shall otherwise comply with the foregoing provisions of this Article 7, including with respect to the naming of loss payees, named insureds and additional insureds, (ii) in the result of an insured claim, any such coverage shall result in the same allocation of proceeds as would have been made had the policies been maintained separately, and (iii) notwithstanding the fact that one party may maintain insurance coverage for the benefit of the other party, the cost of insurance under this Article 7 shall be allocated such that each party shall pay for its respective share of such insurance.
ARTICLE 8
DEFAULT AND TERMINATION
8.1 Tenant Default. The following events shall constitute a default by Tenant (subsequent to the associated notice and cure periods set forth in this Section 8.1, each an “Event of Default”) under this Lease:
(a) Tenant shall fail to pay when due and payable any of the Rent herein provided for or any other sum agreed or required by this Lease to be paid by Tenant upon the respective dates that the same becomes due and payable and such failure shall continue for a period of five (5) business days after written notice of non-payment from Landlord; or
(b) Tenant shall fail to perform any other covenant of this Lease to be kept and performed by Tenant, and such failure shall thereafter continue for a period of thirty (30) days after written notice from Landlord to Tenant specifying the nature of said failure; provided that, if the default is one that cannot, by its nature, reasonably be cured within thirty (30) days, no Event of Default will have occurred hereunder if Tenant commences reasonable and diligent efforts to cure such default within such 30-day period after receipt of Landlord’s notice and thereafter diligently prosecutes such efforts to completion; or
(c) Tenant shall file an application for, or consent to, the appointment of a receiver, trustee or liquidator of itself or of all of its assets, or file a voluntary petition in bankruptcy or for reorganization, or have filed against it an involuntary petition in bankruptcy which is not dismissed within sixty (60) days, or file a pleading in any court of record admitting in writing its inability to pay its debts as they come due, or make a general assignment for the benefit of creditors or file an answer admitting the material allegations of, or its consenting to, or defaulting in answering, a petition filed against it in any bankruptcy or reorganization proceeding; or
(d) any order, judgment or decree by any court of competent jurisdiction, is entered adjudicating Tenant as bankrupt, or appointing a receiver, trustee or
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liquidator of it or of all of its assets, and such order, judgment or decree continues unstayed and in effect for any period of ninety (90) consecutive days; or
(e) the Management Agreement is terminated for any reason during the Term, unless terminated by Tenant on account of the default or failure to perform by Manager; or
(f) Tenant is in default (after notice and the expiration of applicable cure periods) under the Franchise Agreement, unless such default is solely as a result of Landlord’s failure to comply with its obligations set forth in Section 4.13(b) hereof; or
(g) an act or omission of Tenant causes a default under the Mortgage; or
(h) Tenant violates Section 12.20.
8.2 Collateral Assignment. To secure payment and performance of Tenant’s obligations to Landlord under this Lease, Tenant hereby irrevocably, absolutely and unconditionally assigns, transfers and conveys to Landlord, its successors and assigns, all of Tenant’s right, title and interest, if any, and grants to Landlord a security interest, in and to all of Tenant’s right, title and interest in and to the property and items set forth on Exhibit B hereto. The foregoing is intended to grant in favor of Landlord a first priority continuing lien and security interest in all of Tenant’s personal property. Tenant authorizes Landlord (or holder of a Mortgage, on Landlord’s behalf) and its counsel to file UCC statements in form and substance satisfactory to Landlord, describing the collateral as all assets and personal property of Tenant, whether now owned or existing or hereafter acquired or arising and wheresoever located, including all accessions thereto and products and proceeds thereof, or using words with similar effect. Tenant acknowledges, agrees and consents to the pledge by Landlord to any holder of a Mortgage of Landlord’s rights, title, and interests herein as collateral security for the Landlord’s obligations to any holder of a Mortgage.
8.3 Landlord’s Remedies. Upon a continuing and uncured Event of Default, Landlord shall have, in addition to all rights and remedies provided by law, the right to terminate this Lease by delivery of written notice thereof to Tenant at any time prior to the cure of the Event of Default.
8.4 Surrender of the Leased Property. Tenant shall, on the Expiration Date, or on the earlier termination hereof, peaceably and quietly leave (subject to any continuing rights of Tenant to enter onto the Leased Property for the purposes specifically contemplated in this Lease), surrender and yield up unto Landlord the Leased Property in good order and repair, excepting reasonable wear and tear. Upon the termination of this Lease for any reason, (i) Landlord, or a purchaser of Landlord’s interest in the Leased Property, shall purchase all of the Hotel Personalty (including FF&E) owned by Tenant and all of the Operating Supplies owned by Tenant and used in connection with the Leased Property (if any) for an amount equal to the fair market value of such Hotel Personalty and Operating Supplies as of the date of termination, (ii) Tenant shall leave at the Hotel the Hotel Personalty and Operating Supplies not owned by Tenant (which shall be in a condition consistent with the Operational Standards), and (iii) Tenant shall assign the Assigned Items to Landlord. Tenant shall also reasonably cooperate for thirty (30) days with any successor
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tenant or owner of the Hotel upon the expiration or termination of this Lease to effect a smooth and efficient transition in the operation of the Hotel. Upon termination of this Lease and surrender of the Hotel by Tenant, Landlord shall either assume or cause to be assumed all of the Assigned Items and perform or otherwise cause to be performed all of Tenant’s obligations thereunder relating to any period after the Expiration Date.
8.5 Landlord’s Right to Cure. Tenant agrees that, if an Event of Default occurs, Landlord may, but shall not be obligated to, after the occurrence of the Event of Default, until the same has been cured, and after notice or demand to Tenant, without waiving or releasing Tenant from any of Tenant’s obligations under this Lease, make any payment or perform such other act in whole or in part to the extent Landlord may deem desirable and, in connection therewith, to pay expenses and employ legal counsel. All sums paid by Landlord pursuant to this Section 8.5 and all reasonable expenses, including reasonable attorneys’ fees, paid in connection therewith, together with interest thereon at the Default Interest Rate calculated from the date of payment by Landlord, shall be deemed to be Rent hereunder and shall be payable upon demand by Landlord, and Landlord shall have the same rights and remedies for the nonpayment thereof as in the case of default in the payment of Rent.
8.6 Tenant’s Bankruptcy or Insolvency. If Tenant shall be subjected to the provisions of the United States Bankruptcy Code or other law of the United States or any state thereof for the protection of debtors as in effect at such time (each a “Debtor’s Law”), the debtor-in-possession and any trustee or receiver of Tenant’s assets (each a “Tenant’s Representative”) shall have no greater right to assume or assign this Lease or any interest in this Lease, or to sublease any of the Leased Property then accorded to Tenant by the specific provisions of this Lease, except to the extent Landlord shall be required to permit such assumption, assignment or sublease by the provisions of such Debtor’s Law. Without limitation of the generality of the foregoing, any right of any Tenant’s Representative to assume or assign this Lease or to sublease any of the Leased Property shall be subject to the conditions that:
(a) Such Debtor’s Law shall provide to Tenant’s Representative a right of assumption of this Lease which Tenant’s Representative shall have timely exercised and Tenant’s Representative shall have fully cured any default of Tenant under this Lease.
(b) Tenant’s Representative or the proposed assignee, as the case shall be, shall have deposited with Landlord as security for the timely payment of rent an amount equal to three (3) months’ Rent and other monetary charges accruing under this Lease, and shall have provided Landlord with adequate other assurance of the future performance of the obligations of Tenant under this Lease. Without limitation, such assurances shall include, at least, in the case of assumption of this Lease, demonstration to the satisfaction of Landlord that Tenant’s Representative has and will continue to have sufficient unencumbered assets after the payment of all secured obligations and administrative expenses to assure Landlord that Tenant’s Representative will have sufficient funds to fulfill the obligations of Tenant under this Lease.
(c) In the case of assignment, submission of current financial statements of the proposed assignee, audited by an independent certified public accountant reasonably acceptable to Landlord and showing a net worth and working capital in amounts determined by
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Landlord to be sufficient to assure the future performance by such assignee of all of Tenant’s obligations under this Lease.
(d) Any existing or proposed assumption or assignment of this Lease and any subleasing of any part or all of the Leased Property will not breach any provision of any other lease, mortgage, financing agreement or other agreement by which Landlord is bound.
8.7 Attorneys’ Fees. If at any time litigation is instituted between Landlord and Tenant with respect to this Lease, the prevailing party in such litigation may recover from the losing party all court costs, reasonable costs of litigation and reasonable attorneys’ fees incurred or expended by the prevailing party in such action.
8.8 Remedies Cumulative. To the maximum extent permitted by law, each legal, equitable or contractual right, power and remedy of Landlord or Tenant, now or hereafter provided either in this Lease or by statute or otherwise, shall be cumulative and concurrent and shall be in addition to every other right, power and remedy and the exercise or beginning of the exercise by Landlord or Tenant (as applicable) of any one or more of such rights, powers and remedies shall not preclude the simultaneous or subsequent exercise by Landlord of any or all of such other rights, powers and remedies.
8.9 Liability for Tenant’s Obligations. Landlord covenants and agrees to look solely to Tenant (and not its Affiliates) for all obligations of Tenant under this Lease.
8.10 Default by Landlord. Landlord shall not be in default of any obligation of Landlord hereunder unless and until Landlord has failed to perform such obligation within thirty (30) days after receipt of written notice of such failure from Tenant; provided, however, that in the event the nature of Landlord’s obligation is such that more than thirty (30) days are required for complete performance, Landlord shall not be in default pursuant to this Section 8.10 if Landlord commences performance within such thirty (30) day period and thereafter diligently prosecutes such performance to completion.
8.11 Holding Over. Tenant acknowledges that (a) Tenant’s complete vacancy and surrender of the Leased Property in strict compliance with Section 8.4 (and all other provisions of this Lease) on or before the Expiration Date or earlier termination may be critical to the sale by Landlord of the Leased Property, and (b) if Tenant or any Person occupying the Leased Property (or any part thereof) by or through Tenant holds over past the Expiration Date for any period of time, however brief, such holding over will compromise and deleteriously affect Landlord’s ability to timely conclude any sale of the Leased Property. In light of the foregoing, (i) Tenant and any Person occupying the Leased Property (or any part thereof) by or through Tenant shall not be permitted to hold over for any period of time beyond the Expiration Date for any reason or length of time, (ii) if Tenant (or any Person holding through Tenant) shall hold over for any period whatsoever, Tenant shall be a tenant at sufferance, subject to eviction without notice, and (iii) Tenant shall indemnify, defend (with legal counsel reasonably approved by Landlord), and hold Landlord harmless from all causes of action, claims, debts, liabilities, controversies, damages, costs, losses, and expenses (including reasonable attorneys’ fees) suffered or incurred by Landlord, including lost profits, by reason of Tenant’s failure (or the failure of any Person occupying all or any portion of the Leased Property under or through Tenant) to completely vacate and surrender
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the Leased Property on or before the Expiration Date in strict compliance with Section 8.4 and all other applicable provisions of this Lease.
ARTICLE 9
CASUALTY OR CONDEMNATION
9.1 Restoration. If, during the Term, the Hotel is damaged or destroyed by fire, casualty or other cause, Landlord shall, at its cost and expense and with all reasonable diligence, comply with the requirements of each Mortgage, as such document pertains to casualty and repair, and with Tenant’s directions so as to enable Tenant to comply with the requirements of the Franchise Agreement, as such document pertains to casualty and repair. If the Leased Property, or any material part thereof, shall be rendered untenantable by reason of such damage and such damage shall not be due to the fault of Tenant or of Persons Within Tenant’s Control, then the Base Rent hereunder, or an amount thereof apportioned according to the area of the Leased Property so rendered untenantable (if less than the entire Leased Property shall be so rendered untenantable), shall be abated for the period from the date of such damage to the date when the damage shall have been repaired as aforesaid. If all or any part of the Leased Property shall be damaged or destroyed by fire or other casualty such that the Hotel is closed and Landlord determines in its reasonable judgment that the damage cannot be fully restored within 365 days, then either Landlord or Tenant may terminate this Lease by notice given to the other party not later than thirty (30) days after the determination by Landlord that the Leased Property cannot be restored within such time period. If this Lease is terminated pursuant to this Section 9.1, all insurance proceeds shall be paid to Landlord free of any claim or interest therein whatsoever of Tenant. If this Lease is not terminated as the result of any fire or other casualty, then, subject to the rights of the holder of each Mortgage, the proceeds of any casualty insurance or the equivalent thereof shall be used by Landlord to pay for the cost of restoration.
9.2 Condemnation. If, during the Term, all or any part of or interest in the Hotel is taken by any public authority under the power of eminent domain or by purchase in lieu thereof, Landlord shall, at its cost and expense and with all reasonable diligence, comply with the requirements of each Mortgage, as such document pertains to condemnation and restoration, and with Tenant’s directions so as to enable Tenant to comply with the requirements of the Franchise Agreement, as such document pertains to condemnation and restoration. If only a part of the Leased Property shall be so condemned or taken, then effective as of the date of vesting of title, the Base Rent and shall be abated in an amount apportioned according to the area of the Leased Property so condemned or taken. If all or any part of or interest in the Hotel is taken by any public authority under the power of eminent domain or by purchase in lieu thereof, such that the Hotel is closed and Landlord determines in its reasonable judgment that the Hotel cannot be reopened within 365 days, then either Landlord or Tenant may terminate this Lease by notice given to the other party within thirty (30) days after possession of the Leased Property has been taken. If this Lease is terminated pursuant to this Section 9.2, then, subject to the rights of the holder of any applicable Mortgage, all awards and proceeds of condemnation shall be paid to Landlord free and clear of any claim or interest therein whatsoever of Tenant. Tenant shall have no claim against the condemning authority, whether for the value of its leasehold estate or otherwise.
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ARTICLE 10
ASSIGNMENT AND SUBLETTING
10.1 Assignment or Subletting. Tenant shall not assign, transfer, mortgage, hypothecate, or encumber, by operation of law or otherwise, this Lease, or any of Tenant’s interest herein or hereto, nor sublet the Leased Property, or any portion thereof, nor grant any license or right of use or occupancy with respect to the Leased Property, without the prior written consent of Landlord, which consent may be withheld by Landlord in its sole and absolute discretion. In addition, Tenant shall not do any of the foregoing without the prior written consent of the holder of any Mortgage if and to the extent such consent is required by such Mortgage or related loan documents. Any consent shall be specifically conditioned upon Tenant’s compliance with all of the provisions of this Article 10. Any attempt to do otherwise shall be absolutely and unconditionally null and void and of no force or effect whatsoever.
10.2 Notice. If Tenant desires to undertake any such transaction, it shall provide Landlord with written notice of such desire, specifying the consideration for, and all other terms and conditions of such proposed transaction, and identifying the proposed assignee or subtenant (the “Proposed Party”). Tenant shall also provide Landlord with such corporate, financial, and insurance information as Landlord may reasonably request concerning the Proposed Party.
10.3 Continued Primary Liability. Notwithstanding any assignment, conveyance or subletting, permitted or otherwise, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of the Rent and for compliance with all of its other obligations under the terms, provisions and covenants of this Lease.
10.4 Miscellaneous. Notwithstanding any other provision of this Article 10 to the contrary, in connection with any proposed assignment or subletting, (a) Tenant shall pay to Landlord all reasonable expenses, including reasonable attorneys’ fees incurred by Landlord in connection with the transaction, (b) Tenant and its proposed party shall, within ten (10) days after notice to do so, execute and deliver to Landlord such documents, including insurance, and take such further action, as Landlord may reasonably require to effect such transaction or to protect Landlord’s rights, (c) the acceptance by Landlord of Rent from any other person other than Tenant shall not be deemed a waiver by Landlord of any provision of this Lease or a consent to any transaction subject to this Article 10, (d) the consent to any particular transaction shall not be deemed a consent to any other transaction subject to this Article 10, and (e) the consent to any assignment, subletting or other such transfer (or the consummation of any such transaction) shall not in any way relieve Tenant of any of its obligations under this Lease, whether arising before or after such consent.
ARTICLE 11
SUBORDINATION
11.1 Subordination.
(a) This Lease shall be subject and subordinate to any existing or future Mortgage. Tenant shall execute such instruments as shall from time to time be reasonably requested by the holder of the Mortgage confirming such subordinated status. Tenant agrees that
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if a Foreclosure Purchaser shall succeed to the interest of Landlord in the Leased Property, (i) this Lease will terminate by operation of law or upon written notice to Tenant from the Foreclosure Purchaser, as applicable, (ii) the holder of such Mortgage shall not have any obligation under this Lease to Tenant, (iii) Tenant’s rights in and ownership of any FF&E or other property or items set forth on Exhibit B hereto owned or leased by Tenant shall terminate by operation of law or upon written notice to Tenant, as applicable (if by written notice to Tenant from the Foreclosure Purchaser, Tenant shall deliver to the Foreclosure Purchaser such assignments and bills of sale as the Foreclosure Purchaser may require to evidence the transfer of such FF&E and other property or items), and (iv) Tenant shall cooperate with the Foreclosure Purchaser with respect to delivery of all licenses and permits, if any, held by Tenant.
(b) In the event of any foreclosure of any Mortgage or conveyance in lieu of foreclosure, neither the Foreclosure Purchaser nor its successors or assigns shall in any way or to any extent (i) be bound by any modification or amendment of this Lease executed after the date of this Lease or by any existing prepayment of Rent for a period greater than one (1) month, unless such modification, amendment or prepayment shall have been expressly approved in writing by such Foreclosure Purchaser, (ii) be bound by any assignment of Tenant’s interest in this Lease by Tenant or by operation of law or otherwise (except for any assignment of Tenant’s interest in this Lease by Tenant made in accordance with the terms of this Lease, which assignment shall be expressly subject to the security interests of the holder of the Mortgage, including, without limitation, any security interests granted to Landlord by Tenant and pledged or assigned including, without limitation, any notices by Landlord to the holder of any Mortgage as permitted under Section 8.2 above) without the express prior written consent of such Foreclosure Purchaser, (iii) be obligated or liable to Tenant with respect to any act or failure to act on the part of Landlord occurring prior to the transfer of title to the Foreclosure Purchaser, or (iv) be obligated or liable to Tenant for failure to complete any proposed construction regarding the Leased Property. Except to the extent permitted in accordance with the preceding sentence, Tenant shall have no right to assert or claim any of the foregoing or any damages arising therefrom against the Foreclosure Purchaser, whether as an offset or defense or otherwise.
(c) After notice is given to Tenant by the Foreclosure Purchaser that the rents under this Lease should be paid to the Foreclosure Purchaser, Tenant shall pay to the Foreclosure Purchaser, or in accordance with the directions of the Foreclosure Purchaser, all rents and other monies due and to become due to Landlord under this Lease, and Landlord hereby expressly authorizes Tenant to make such payments to the Foreclosure Purchaser and hereby releases and discharges Tenant of and from any liability to Landlord on account of any such payments.
(d) Tenant agrees to provide to the Foreclosure Purchaser a copy of any notice, demand or request provided to Landlord under this Lease at the address of the Foreclosure Purchaser provided to Tenant by the Foreclosure Purchaser.
(e) If the terms of this Lease conflict with the terms of any Mortgage regarding the matters set forth in this Section 11.1, the terms of the Mortgage shall control.
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ARTICLE 12
MISCELLANEOUS
12.1 Quiet Enjoyment. Landlord covenants and agrees that Tenant, upon compliance with the obligations of Tenant hereunder, and subject to the provisions hereof, shall lawfully and quietly enjoy the Leased Property and Tenant’s rights hereunder during the Term without hindrance by Landlord or any Persons by, through and under Landlord.
12.2 Landlord’s Right of Entry. Landlord, its employees and agents, shall have the right to enter the Hotel at reasonable times and on reasonable notice to Tenant to examine the condition and use thereof, exhibit the same, and otherwise perform its obligations and exercise its rights hereunder. Landlord will endeavor to examine the Hotel or otherwise perform its obligations and exercise its rights with minimum disruption to the operation of the Hotel.
12.3 Estoppel Certificates. Tenant and Landlord, from time to time within ten (10) business days following written request by the other party or by the holder of any Mortgage of the Leased Property, shall execute, acknowledge and deliver to the requesting party or its designee a written statement in form and substance reasonably requested by such requesting party certifying to such requesting party or to such other Person as such requesting party may designate (i) the commencement and expiration dates of the Term, (ii) that this Lease is unmodified and in full force and effect or, if there have been modifications, that the same is in full force and effect as modified and setting forth the modifications, (iii) the dates to which Rent and other payments due under this Lease from Tenant have been paid in advance, if any, and (iv) whether or not, to the best knowledge of the party signing such certificate, the requesting party is in default in the performance of any term, covenant or condition contained in this Lease or any Mortgage and, if so, specifying each such default of which the signing party may have knowledge. Such certificate shall also set forth such other information regarding this Lease as may reasonably be requested or, with respect to a certificate delivered by Tenant, regarding the Management Agreement as may be reasonably requested, including, without limitation, (A) that the Management Agreement is in full force and effect, and (B) that there is no material uncured default, breach or violation existing thereunder by either party thereto and that, to Tenant’s knowledge, no event has occurred (other than payments due but not yet delinquent) that, with the passage of time or the giving of notice, or both, would constitute a material default, breach or violation by either party thereunder.
12.4 Delivery of Notices.
(a) If Tenant shall give Landlord any notice of a default or breach by Landlord, Tenant shall simultaneously deliver a written notice of such breach or default to the holder of all Mortgages.
(b) If Landlord shall receive any written notice from a Governmental Authority, a mortgagee under any Mortgage or any party commencing a litigation against Landlord or the Leased Property, Landlord shall, upon receipt of such notice, deliver a copy thereof to Tenant.
12.5 Notices. All notices, demands, consents, approvals, requests or other communications that either Landlord or Tenant may desire or be required to give hereunder
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(collectively, “Notices”) shall be in writing and shall be given by personal delivery or facsimile or United States registered or certified mail (postage prepaid, return receipt requested) addressed as hereinafter provided, provided, however, that any Notice given by facsimile shall also be given by personal delivery or United States registered or certified mail. Except as otherwise specified herein, the time period in which a response to any notice or other communication must be made, if any, shall commence to run on the earliest to occur of (a) if by personal delivery, the date of receipt, or attempted delivery, if such communication is refused; (b) if given by facsimile, the date on which such facsimile is transmitted and confirmation of delivery thereof is received; and (c) if sent by mail (as aforesaid), the date of receipt or attempted delivery, if such mailing is refused. Until further notice, notices and other communications under this Agreement shall be addressed to the parties listed below as follows:
(a) Each notice to Tenant shall be delivered to Tenant at the following addresses:
PHR GANO OPCO SUB, LLC
c/o Procaccianti Companies
1140 Reservoir Avenue
Cranston, Rhode Island 02920-6320
Attention: Ron M. Hadar, General Counsel
(b) Each notice to Landlord shall be delivered to Landlord at the following address:
GANO HOLDINGS, LLC
c/o Procaccianti Companies
1140 Reservoir Avenue
Cranston, Rhode Island 02920-6320
Attention: Ron M. Hadar, General Counsel
Either party shall have the right from time to time during the term of this Lease to change the address thereof and to specify as the address thereof any other address within the United States of America.
12.6 No Broker. Tenant and Landlord each represents and warrants to the other that no broker or finder was engaged in connection with the execution of this Lease and each agrees to indemnify and hold the other harmless of and from and against all liabilities, costs and expenses (including reasonable attorneys’ fees) arising from any claim by any such broker or finder arising out of the acts of the indemnifying party.
12.7 Quarterly Meetings. Landlord covenants to meet with Tenant not less frequently than quarterly (and otherwise, as may be reasonably requested by Tenant) so as to review and consult with Tenant with respect to any and all matters concerning the Leased Property that Tenant may desire to discuss, including, without limitation, the condition of the Leased Property.
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12.8 No Joint Venture. Nothing contained in this Lease shall be construed to make Landlord and Tenant partners or joint venturers or to render any of said parties liable for the debts or obligations of the others or to create any agency relationship between the parties.
12.9 Partial Invalidity. If any provisions of this Lease or the application thereof to any Person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such provision to Persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.
12.10 Third Parties. The Lease is made for the exclusive benefit of the parties hereto and their successors and assigns herein permitted and not for any third party other than (only to the extent specifically provided in Section 11.1, 12.3 and 12.4) the holder of any Mortgage and any Foreclosure Purchaser, and, except to such extent, nothing in this Lease, expressed or implied, is intended to confer upon any Person, other than the parties hereto and their respective successors and permitted assigns, any rights or remedies under or by this Lease.
12.11 Waivers and Enforcement. No delay or omission by either of the parties hereto to exercise any right or power accruing upon any non-compliance or failure of performance by the other party under the provisions of this Lease shall impair any such right or power or be construed to be a waiver thereof. The failure herein to specify a right, power or remedy accruing upon any non-compliance or failure of performance by either of the parties hereto shall not be construed to be a waiver thereof so as to impair the right of the party thereby aggrieved to all remedies then available to it at law or in equity by reason of such noncompliance or failure of performance. A waiver by either of the parties hereto of performance of any of the covenants, conditions or agreements hereof to be performed by the other party hereto shall not be construed to be a waiver of any succeeding breach thereof or of any other covenant condition or agreement herein contained.
12.12 Modification. This Lease contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all other agreements, oral or written, between the parties on or prior to the date hereof with respect to such subject matter. None of the covenants, terms or conditions of this Lease to be kept and performed by either party to this Lease shall in any manner be waived, modified, changed or abandoned except by written instrument duly signed, acknowledged and delivered by the parties to this Lease. Any amendment to this Lease that is not ministerial in nature shall require the prior written consent of Franchisor or the holder of any Mortgage to the extent required in the Franchise Agreement or in such Mortgage, as applicable.
12.13 Non-Recourse Liability. Landlord and each of its officers, directors, affiliates, shareholders, members and constituent partners, as applicable, shall in no event or at any time be personally liable for the payment or performance of any obligation required or permitted of Landlord under this Lease or under any document executed in connection herewith. In the event of any actual or alleged failure, breach or default by Landlord under this Lease or any such document, the sole recourse of Tenant shall be against the interest of Landlord in the Leased Property. No attachment, execution, writ, or other process shall be sought or obtained, and no judicial proceeding shall be initiated by or on behalf of Tenant, against Landlord (or any of
31
Landlord’s officers, directors, affiliates or constituent partners or shareholders) personally or Landlord’s assets as a result of any such failure, breach, or default. In no event shall Landlord have any liability for any loss of profits, business interruptions and/or consequential damages of Tenant.
12.14 Captions. The Article and Section headings or captions are for convenience and reference only and in no way define, limit or describe the scope or intent of this Lease, nor in any way affect this Lease.
12.15 Time of Essence. Time is of the essence as to the covenants in this Lease.
12.16 Successors and Assigns. All the covenants, agreements, conditions and undertakings in this Lease shall extend and inure to and be binding upon the successors and permitted assigns of each of the parties hereto, the same as if they were in every case named and expressed.
12.17 No Recordation. Neither party shall record this Lease or any memorandum thereof.
12.18 Name. Subject to the terms of the Franchise Agreement, Landlord shall have the right to change the name of the Hotel at any time and from time to time and the right to place any signs in or on the Hotel from time to time indicating the name of the Hotel as designated by Landlord. Landlord and Tenant shall at all times refer to the Hotel by such name as is designated by Landlord from time to time. Tenant shall have no right to place any signs on the exterior of the Hotel without the prior written consent of Landlord.
12.19 Survival. All of the provisions of this Lease shall survive the termination of this Lease, and, except as otherwise specifically provided herein, neither party shall be relieved from any liability hereunder accruing prior to the Expiration Date.
12.20 Confidentiality. Tenant and Landlord each agree that it and its Affiliates will keep all non-public information obtained by them with respect to the business and business terms of the parties confidential and will not provide such information to any third parties without the prior written consent of the other party, unless required by court order or Law, except to their employees, agents, contractors, lenders, professionals and consultants on a need-to-know basis. Notwithstanding any terms or conditions in this Lease or any related agreement to the contrary, but subject to restrictions reasonably necessary to comply with federal or state securities laws, any Person may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided relating to such tax treatment and tax structure. For the avoidance of doubt, this authorization is not intended to permit disclosure of the names of, or other identifying information regarding, the participants in the transaction, or of any information of the portion of any materials not relevant to the tax treatment or tax structure of the transaction.
12.21 Conveyance by Landlord. If Landlord or any successor owner of all or any portion of the Leased Property conveys all or any portion of the Leased Property in accordance with the terms hereof, other than as security for debt, if the grantee or transferee of such of the Leased Property expressly assumes and agrees to perform, by written instrument in form approved
32
by Tenant, which approval shall not unreasonably be withheld, all obligations of Landlord hereunder arising or accruing from and after the date of such conveyance or transfer, Landlord or such successor owner, as the case may be, shall thereupon be released from all liabilities and obligations hereunder arising or accruing from and after the date of such conveyance or other transfer, all such future liabilities and obligations shall thereupon be binding upon the new owner, and this Lease shall continue in full force and effect.
12.22 Governing Law. This Lease shall be construed and enforced in accordance with the Laws of the State of Rhode Island.
12.23 Counterparts. This Lease may be executed in several counterparts, each of which shall be deemed an original, and all such counterparts shall together constitute one and the same instrument. Executed counterparts of thus Lease delivered by facsimile transmission to the other party shall be binding on the party delivering such executed counterpart.
[the remainder of this page is intentionally blank]
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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed on the day, month and year first above dated.
| LANDLORD: | |
|---|---|
| GANO HOLDINGS, LLC, a Delaware limited liability company | |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Title: | Authorized Representative |
| TENANT: | |
| PHR GANO OPCO SUB, LLC, a Delaware limited liability company | |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Title: | Authorized Representative |
[Signature Page to Hotel Lease – Hilton Garden Inn, Providence, RI]
SCHEDULE 3.1
(a) Fixed Rent” means the monthly Fixed Rent as shown in the chart contained in subsection (c) below for such applicable month (or partial month).
(b) “Percentage Rent” means an amount each month equal to the amount Gross Revenues exceed the applicable Revenue Floor (as defined in the chart contained in subsection (c) below) for such month (or partial month) multiplied by the applicable Percentage Rent Multiplier for such month (or partial month) shown in the chart contained in subsection (c) below.
(c)
| Month/Year | Fixed <br><br>Rent | Revenue <br><br>Floor | Percentage Rent <br><br>Multiplier | |||||
|---|---|---|---|---|---|---|---|---|
| Feb-2020 (Partial month) | $ | 6,306 | $ | 33,629 | 23.22 | % | ||
| Mar-20 | $ | 55,204 | $ | 224,905 | 30.39 | % | ||
| Apr-20 | $ | 70,461 | $ | 240,543 | 36.27 | % | ||
| May-20 | $ | 112,329 | $ | 299,683 | 46.41 | % | ||
| Jun-20 | $ | 111,599 | $ | 305,654 | 45.20 | % | ||
| Jul-20 | $ | 94,011 | $ | 285,467 | 40.77 | % | ||
| Aug-20 | $ | 95,228 | $ | 286,604 | 41.14 | % | ||
| Sep-20 | $ | 80,608 | $ | 264,711 | 37.70 | % | ||
| Oct-20 | $ | 106,510 | $ | 297,409 | 44.34 | % | ||
| Nov-20 | $ | 34,866 | $ | 187,657 | 23.00 | % | ||
| Dec-20 | $ | 52,902 | $ | 114,869 | 15.35 | % | ||
| Jan-21 | $ | 54,665 | $ | 143,508 | 12.70 | % | ||
| Feb-21 | $ | 37,030 | $ | 198,882 | 23.05 | % | ||
| Mar-21 | $ | 56,094 | $ | 229,324 | 30.28 | % | ||
| Apr-21 | $ | 71,702 | $ | 245,269 | 36.19 | % | ||
| May-21 | $ | 114,540 | $ | 305,572 | 46.41 | % | ||
| Jun-21 | $ | 113,797 | $ | 311,660 | 45.21 | % | ||
| Jul-21 | $ | 95,803 | $ | 291,076 | 40.75 | % | ||
| Aug-21 | $ | 97,048 | $ | 292,235 | 41.12 | % | ||
| Sep-21 | $ | 82,088 | $ | 269,912 | 37.65 | % | ||
| Oct-21 | $ | 108,590 | $ | 303,252 | 44.33 | % | ||
| Nov-21 | $ | 35,280 | $ | 191,345 | 22.83 | % | ||
| --- | --- | --- | --- | --- | --- | --- | ||
| Dec-21 | $ | 52,902 | $ | 117,126 | 15.06 | % | ||
| Jan-22 | $ | 54,665 | $ | 146,193 | 12.46 | % | ||
| Feb-22 | $ | 37,527 | $ | 202,603 | 22.93 | % | ||
| Mar-22 | $ | 56,890 | $ | 233,613 | 30.15 | % | ||
| Apr-22 | $ | 72,747 | $ | 249,857 | 36.05 | % | ||
| May-22 | $ | 116,262 | $ | 311,287 | 46.24 | % | ||
| Jun-22 | $ | 115,504 | $ | 317,490 | 45.04 | % | ||
| Jul-22 | $ | 97,224 | $ | 296,520 | 40.60 | % | ||
| Aug-22 | $ | 98,489 | $ | 297,702 | 40.96 | % | ||
| Sep-22 | $ | 83,293 | $ | 274,961 | 37.51 | % | ||
| Oct-22 | $ | 110,215 | $ | 308,925 | 44.17 | % | ||
| Nov-22 | $ | 35,751 | $ | 194,924 | 22.71 | % | ||
| Dec-22 | $ | 52,902 | $ | 119,317 | 14.78 | % | ||
| Jan-23 | $ | 54,665 | $ | 149,855 | 12.16 | % | ||
| Feb-23 | $ | 38,249 | $ | 207,678 | 22.80 | % | ||
| Mar-23 | $ | 58,034 | $ | 239,465 | 30.01 | % | ||
| Apr-23 | $ | 74,241 | $ | 256,116 | 35.89 | % | ||
| May-23 | $ | 118,708 | $ | 319,085 | 46.06 | % | ||
| Jun-23 | $ | 117,931 | $ | 325,443 | 44.86 | % | ||
| Jul-23 | $ | 99,249 | $ | 303,949 | 40.43 | % | ||
| Aug-23 | $ | 100,542 | $ | 305,160 | 40.79 | % | ||
| Sep-23 | $ | 85,014 | $ | 281,849 | 37.34 | % | ||
| Oct-23 | $ | 112,526 | $ | 316,664 | 44.00 | % | ||
| Nov-23 | $ | 36,436 | $ | 199,807 | 24.58 | % | ||
| Dec-23 | $ | 73,481 | $ | 122,306 | 20.03 | % | ||
| Jan-24 | $ | 73,481 | $ | 152,718 | 16.04 | % | ||
| Feb-24 | $ | 38,121 | $ | 211,645 | 22.30 | % | ||
| Mar-24 | $ | 58,036 | $ | 244,040 | 29.44 | % | ||
| Apr-24 | $ | 74,364 | $ | 261,009 | 35.27 | % | ||
| May-24 | $ | 119,136 | $ | 325,181 | 45.36 | % | ||
| Jun-24 | $ | 118,341 | $ | 331,660 | 44.18 | % | ||
| Jul-24 | $ | 99,522 | $ | 309,755 | 39.78 | % | ||
| Aug-24 | $ | 100,825 | $ | 310,989 | 40.14 | % | ||
| Sep-24 | $ | 85,193 | $ | 287,233 | 36.72 | % | ||
| Oct-24 | $ | 112,901 | $ | 322,713 | 43.31 | % | ||
| Nov-24 | $ | 36,305 | $ | 203,624 | 24.07 | % | ||
| Dec-24 | $ | 73,481 | $ | 124,643 | 19.65 | % | ||
| Jan-25 | $ | 73,481 | $ | 155,772 | 15.72 | % | ||
| Feb-25 | $ | 41,360 | $ | 215,878 | 23.72 | % | ||
| Mar-25 | $ | 62,089 | $ | 248,921 | 30.88 | % |
2
| Apr-25 | $ | 78,962 | $ | 266,229 | 36.72 | % |
|---|---|---|---|---|---|---|
| May-25 | $ | 125,454 | $ | 331,685 | 46.83 | % |
| Jun-25 | $ | 124,727 | $ | 338,293 | 45.65 | % |
| Jul-25 | $ | 105,250 | $ | 315,950 | 41.24 | % |
| Aug-25 | $ | 106,595 | $ | 317,209 | 41.60 | % |
| Sep-25 | $ | 90,345 | $ | 292,978 | 38.18 | % |
| Oct-25 | $ | 119,063 | $ | 329,167 | 44.78 | % |
| Nov-25 | $ | 39,404 | $ | 207,696 | 23.49 | % |
| Dec-25 | $ | 0 | $ | 0 | 0.00 | % |
| Jan-26 | $ | 5,140 | $ | 158,888 | 4.01 | % |
| Feb-26 | $ | 41,934 | $ | 220,196 | 23.58 | % |
| Mar-26 | $ | 63,077 | $ | 253,899 | 30.76 | % |
| Apr-26 | $ | 80,288 | $ | 271,554 | 36.61 | % |
| May-26 | $ | 127,710 | $ | 338,319 | 46.74 | % |
| Jun-26 | $ | 126,967 | $ | 345,059 | 45.56 | % |
| Jul-26 | $ | 107,101 | $ | 322,269 | 41.15 | % |
| Aug-26 | $ | 108,473 | $ | 323,553 | 41.51 | % |
| Sep-26 | $ | 91,898 | $ | 298,837 | 38.07 | % |
| Oct-26 | $ | 121,191 | $ | 335,751 | 44.69 | % |
| Nov-26 | $ | 39,939 | $ | 211,850 | 23.34 | % |
| Dec-26 | $ | 0 | $ | 0 | 0.00 | % |
| Jan-27 | $ | 4,978 | $ | 162,066 | 3.80 | % |
| Feb-27 | $ | 42,508 | $ | 224,600 | 23.43 | % |
| Mar-27 | $ | 64,074 | $ | 258,977 | 30.63 | % |
| Apr-27 | $ | 81,629 | $ | 276,985 | 36.49 | % |
| May-27 | $ | 129,999 | $ | 345,085 | 46.64 | % |
| Jun-27 | $ | 129,242 | $ | 351,960 | 45.46 | % |
| Jul-27 | $ | 108,979 | $ | 328,715 | 41.05 | % |
| Aug-27 | $ | 110,378 | $ | 330,024 | 41.41 | % |
| Sep-27 | $ | 93,471 | $ | 304,814 | 37.97 | % |
| Oct-27 | $ | 123,350 | $ | 342,466 | 44.59 | % |
| Nov-27 | $ | 40,473 | $ | 216,087 | 23.19 | % |
| Dec-27 | $ | 0 | $ | 0 | 0.00 | % |
| Jan-28 | $ | 4,802 | $ | 165,307 | 3.60 | % |
| Feb-28 | $ | 43,082 | $ | 229,092 | 23.28 | % |
| Mar-28 | $ | 65,080 | $ | 264,157 | 30.50 | % |
| Apr-28 | $ | 82,986 | $ | 282,524 | 36.37 | % |
| May-28 | $ | 132,324 | $ | 351,987 | 46.54 | % |
| Jun-28 | $ | 131,552 | $ | 359,000 | 45.37 | % |
| Jul-28 | $ | 110,883 | $ | 335,289 | 40.94 | % |
| Aug-28 | $ | 112,310 | $ | 336,625 | 41.31 | % |
3
| Sep-28 | $ | 95,065 | $ | 310,910 | 37.86 | % |
|---|---|---|---|---|---|---|
| Oct-28 | $ | 125,541 | $ | 349,315 | 44.50 | % |
| Nov-28 | $ | 41,007 | $ | 220,409 | 23.03 | % |
| Dec-28 | $ | 0 | $ | 0 | 0.00 | % |
| Jan-29 | $ | 4,611 | $ | 168,613 | 3.39 | % |
| Feb-29 | $ | 43,657 | $ | 233,674 | 23.13 | % |
| Mar-29 | $ | 66,095 | $ | 269,440 | 30.37 | % |
| Apr-29 | $ | 84,359 | $ | 288,175 | 36.24 | % |
| May-29 | $ | 134,683 | $ | 359,026 | 46.45 | % |
| Jun-29 | $ | 133,896 | $ | 366,180 | 45.27 | % |
| Jul-29 | $ | 112,814 | $ | 341,995 | 40.84 | % |
| Aug-29 | $ | 114,269 | $ | 343,357 | 41.20 | % |
| Sep-29 | $ | 96,680 | $ | 317,129 | 37.74 | % |
| Oct-29 | $ | 127,765 | $ | 356,301 | 44.40 | % |
| Nov-29 | $ | 41,540 | $ | 224,817 | 22.88 | % |
| Dec-29 | $ | 0 | $ | 0 | 0.00 | % |
| Jan-30 | $ | 4,694 | $ | 171,985 | 3.38 | % |
| Feb 2030 - Partial month | $ | 36,837 | $ | 197,253 | 23.12 | % |
4
Exhibit A
Legal Description
A.P. 17, Lot 633
#220 India Street
Providence, Rhode Island
That certain tract or parcel of land situated southeasterly of Interstate Route 195, westerly of Tockwotton Street and westerly of India Street in the City of Providence, Providence County, State of Rhode Island and Providence Plantations, delineated on that plan entitled “ALTA / NSPS Land Title Survey Plan, A.P. 17, Lot 633, Wyndham Garden Providence, 220 India Street, Providence, RI 02903, Gano Holdings, L.L.C. c/o The Procaccianti Group, 1140 Reservoir Avenue, Cranston, Rhode Island 02920 Project No. 04-313 Scale: 1”=20’ Date:01/22/20 by Waterman Engineering Company Richard S. Lipsitz, P.L.S. No. 1837”, more particularly bounded and described as follows;
Beginning at a point in the northerly State Highway Line of India Point Park as delineated on Rhode Island Highway Plat No. 2869, said point being at the westerly terminus of India Street and the southeasterly corner of the parcel herein-described;
thence proceeding N 79°51'31" W, by and with the said northerly State Highway Line of India Point Park, a distance of one hundred forty six and 26/100 (146.26') feet to an angle point;
thence proceeding N 74°04'39" W, by and with the said northerly State Highway Line of India Point Park, a distance of thirty nine and 55/100 (39.55') feet to an angle point;
thence proceeding N 59°28'57" W, by and with the said northerly State Highway Line of India Point Park, a distance of twenty eight and 27/100 (28.27') feet to an angle point;
thence proceeding N 42°06'33" W, by and with the said northerly State Highway Line of India Point Park, a distance of ten and 76/100 (10.76') feet to an angle point;
thence proceeding N 16°05'44" W, by and with the said northerly State Highway Line of India Point Park, a distance of ten and 76/100 (10.76') feet to an angle point;
5
thence proceeding N 05°27'51" W, in part by and with the said northerly State Highway Line of India Point Park and in part by and with the southeasterly State Freeway Line of Interstate Route 195 as delineated on Rhode Island Highway Plat No. 1374, a distance of one hundred twenty four and 00/100 (124.00') feet to the northwesterly corner of the parcel herein-described;
thence proceeding N 53°40'20" E, by and with the said southeasterly State Freeway Line of Interstate Route 195, a distance of thirty and 19/100 (30.19') feet to an angle point;
thence proceeding N 47°53'52" E, by and with the said southeasterly State Freeway Line of Interstate Route 195, a distance of thirty one and 22/100 (31.22') feet to an angle point;
thence proceeding N 78°04'49" E, by and with the said southeasterly State Freeway Line of Interstate Route 195, a distance of one hundred thirteen and 72/100 (113.72') feet to an angle point;
thence proceeding S 79°08'48" E, by and with the said southeasterly State Freeway Line of Interstate Route 195, a distance of one hundred seventeen and 70/100 (117.70') feet to the westerly terminus of Tockwotton Street and the northeasterly corner of the parcel herein-described;
thence proceeding S 10°51'12" W, bounded easterly by the said westerly terminus of Tockwotton Street, a distance of twenty five and 00/100 (25.00') feet to land now or formerly of Brown University;
thence proceeding S 11°12'26" W, bounded easterly in part by the said Brown University land and in part by the aforesaid westerly terminus of India Street, a distance of two hundred twelve and 36/100 (212.36') feet to the point and place of beginning.
The above-described parcel contains 53,715 +/- square feet (1.233 +/- acres) of land, more or less
6
Exhibit B
The Collateral
1. Fixtures and Personal Property. All goods, inventory, machinery, equipment, fixtures (including, without limitation, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures), furnishing, building supplies and materials, and all other personal property of every kind and nature whatsoever owned by Tenant (or in which Tenant has or hereafter acquires an interest) and now or hereafter located upon, or appurtenant to, the Property or used or useable in the present or future operation and occupancy of the Property, along with all accessions, replacements or substitutions of all or any portion thereof including, but not limited to, all items of personal property located within or adjacent to the Hotel and included within the definition of “Property and Equipment” and “Inventories” under the Uniform System of Accounts for the Lodging Industry as published by the American Hotel Association of the United States and Canada, including but not limited to, beds, bureaus, chiffoniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains, shades, Venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets, glassware, tableware, uniforms, guest ledgers, foodcarts, cookware, dry cleaning facilities, dining room wagons, tools, keys or other entry systems, bars, bar fixtures, and other drink dispensers, icemakers, radios, televisions sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, medical equipment, potted plants, heating, lighting and plumbing equipment, fire prevention and extinguishing apparatus, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, electrical signs, bulbs, bells, ash and disposals, washers and dryers and other customary hotel equipment, and computer software and hardware, but excluding, in all events, alcoholic beverages inventory;
2. Leases and Rents. All income, rents, room rates, issues, profits, revenues, deposits, accounts and other benefits from the operation of the Hotel, including, without limitation, all revenues, cash and credit card receipts collected from guest rooms, restaurants, bars, mini-bars, meeting rooms, banquet rooms and recreational facilities and otherwise, all receivables, customer obligations, installment payment obligations and other obligations now existing or hereafter arising or created out of sale, lease, sublease, license, concession, or other grant of the right of the possession, use or occupancy of all or any portion of the Land, the Hotel or personalty located therein, or rendering of services by Tenant or any operator or manager of the Hotel or the commercial space located therein or acquired from others including, without limitation, from the rental of any office space, retail space, commercial space, guest room or other space, halls, stores or offices, including any deposits securing reservations of such space, exhibit or sales space of every kind, license, lease, sublease and concession fees and rentals, health club membership fees, food and beverage wholesale and retail sales, service charges, vending
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machine sales, all deposits or other security now or hereafter made with or given to any utility company by Tenant with respect to the Property, and all proceeds, if any, from business interruption or other loss of income insurance relating to the use, enjoyment or occupancy of the Land and/or the Hotel whether paid or accruing before or after the filing by or against Tenant of any petition for relief under any present or future state or federal law regarding bankruptcy (each a “Bankruptcy Code”), reorganization or other relief to debtors and all proceeds from the sale or other disposition of the Tenant Leases (hereinafter defined). All leases, subleases, licenses and other agreements granting others the right to use or occupy all or any part of the Property together with all restatements, renewals, extensions, amendments and supplements thereto, (collectively, the “Tenant Leases”), now existing or hereafter entered into, and whether entered before or after the filing by or against Tenant of any petition for relief under a Bankruptcy Code, and all of Tenant’s right, title and interest in the Tenant Leases, including, without limitation (i) all guarantees, letters of credit and any other credit support given by any tenant or guarantor in connection therewith (collectively, the “Tenant Lease Guaranties”), (ii) all cash, notes, or security deposited thereunder to secure the performance by the tenants of their obligations thereunder (collectively, the “Tenant Security Deposits”), (iii) all claims and rights to the payment of damages and other claims arising from any rejection by a tenant of its Tenant Lease under a Bankruptcy Code (“Bankruptcy Claims”), (iv) all of the landlord’s rights in casualty or condemnation proceeds of a tenant in respect of the leased premises (collectively, the “Tenant Claims”), (v) all rents, ground rents, additional rents, revenues, termination and similar payments, issues and profits (including all oil and gas or other mineral royalties and bonuses) from the Property (collectively with the Tenant Lease Guaranties, Tenant Security Deposits, Bankruptcy Claims and Tenant Claims, the “Rents”), whether paid or accruing before or after the filing by or against Tenant of any petition for relief under a Bankruptcy Code, (vi) all proceeds or streams of payment from the sale or other disposition of the Tenant Leases or disposition of any Rents, and (vii) the right to receive and apply the Rents to the payment of Tenant’s obligations under this Lease and to do all other things which Tenant or a lessor is or may become entitled to do under the Tenant Leases or with respect to the Rents;
3. Condemnation Awards. All awards or payments, including interest thereon, which may heretofore and hereafter be made with respect to the Property, whether from the exercise of the right of eminent domain (including, without limitation, any transfer made in lieu of or in anticipation of the exercise of the right), or for a change of grade, or for any other injury to or decrease in the value of the Property;
4. Insurance Proceeds. All proceeds of, and any unearned premiums on, any insurance policies covering the Property, including, without limitation, the exclusive right to receive and apply the proceeds of any claim awards, judgments, or settlements made in lieu thereof, for damage to the Property;
5. Tax Certiorari. All refunds, rebates or credits in connection with a reduction in any taxes, including, without limitation, rebates as a result of tax certiorari or any other applications or proceedings for reduction;
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6. Agreements. All agreements (including, without limitation, interest rate cap agreements, swaps or other interest hedging agreements), contracts (including, without limitation, the Management Agreement and construction, architectural, service, supply and maintenance contracts), registrations, permits, licenses (including, without limitation, liquor licenses, if any, to the fullest extent assignable by Tenant), franchise (including, without limitation, the Franchise Agreement), plans, specifications and other documents, now or hereafter entered into, and all rights therein and thereto, respecting or pertaining to the use, occupation, construction, management or operation of the Property, or respecting any business or activity conducted from the Property, and all right, title and interest of Tenant therein and thereunder, including, without limitation, the right, while an Event of Default remains uncured, to receive and collect any sums payable to Tenant thereunder;
7. Intangibles. All accounts, escrows, chattel paper, claims, deposits, trade names, trademarks, service marks, logos, copyrights, goodwill, licenses, permits, plans and specifications, environmental audits, engineering reports, warranties, guaranties, books and records and all other general intangibles and payment intangibles relating to or used in connection with the operation of the Property;
8. Accounts. All reserves, escrows and deposit accounts maintained by Tenant with respect to the Property, together with all cash, checks, drafts, certificates, accounts receivable, documents, letter of credit rights, commercial tort claims, securities, investment property, financial assets, instruments and other property from time to time held therein, and all proceeds, products, distributions, dividends or substitutions thereon or thereof, and all accounts (including, without limitation, any deposit accounts), impounds, contract rights, book debts, letters of credit, letter of credit rights, supporting obligations, drafts and notes arising from the operation of a hotel at the Property or arising from the sale, lease or exchange of goods or other property and/or the performance of services, and Tenant’s rights to payment from any consumer credit/charge card organization or entities which sponsor and administer such cards, including, without limitation, the American Express card, the Visa card, the Discover card, and the MasterCard;
9. Rights to Conduct Legal Actions. The right, in the name and on behalf of Tenant, to commence any action or proceeding to protect the interest of Landlord in the Property and to appear in and defend any action or proceeding brought with respect to the Property; and
10. Proceeds. All proceeds and profits arising from the conversion, voluntary or involuntary, of any of the foregoing into cash (whether made in one payment or a stream of payments) and any liquidation claims applicable thereto.
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Exhibit 10.12
HOTEL MANAGEMENT AGREEMENT
between
PHR GANO OPCO SUB, LLC
as Owner
and
GANO HOTEL MANAGER, LLC
as Manager
FOR
Hilton Garden Inn Providence RI
220 India Street, Providence RI
HOTEL MANAGEMENT AGREEMENT
This Hotel Management Agreement (the "Agreement") made as of this 27^th^ day of February 2020 (the “Effective Date”) between PHR GANO TCI OPCO SUB, LLC, a Delaware limited liability company (the "Owner") and GANO HOTEL MANAGER, LLC, a Rhode Island limited liability company, as Manager ("Manager"),
RECITALS:
WHEREAS, GANO HOLDINGS, LLC, a Rhode Island limited liability company (“Fee Owner”) is the owner of the Premises (as defined below), and (ii) all Building and Appurtenances (as defined below), including, without limitation an existing 137 -room hotel which is branded as a Hilton Garden Inn located at 220 India Street, Providence, RI (as more particularly defined in the Article I below, the “Hotel”).
WHEREAS, Owner holds a leasehold interest in the Hotel pursuant to the Lease (as defined below).
WHEREAS, Manager is experienced in the management and operation of hotels.
WHEREAS, Owner desires to retain Manager to manage and operate the Hotel. Manager is willing to perform such services for the account of Owner on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS, TERMS AND REFERENCES
1.1 Definitions. In this Agreement and any Exhibits, the following terms shall have the following meanings:
"AAA” shall have the meaning set forth in Article 30.
"AccountingPeriod" shall mean each calendar month (whether of 28, 29, 30 or 31 days) during each Fiscal Year.
"Affiliate" shall mean any person or entity that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with another person or entity. The term “control” (and correlative terms) shall mean the power, whether by contract, equity ownership or otherwise, to direct the policies or management of a person or entity. Without limiting the foregoing, an "Affiliate" also includes any partner or a partnership of any party to this Agreement, any member or membership parties thereto and any corporation, partnership, individual or trust related to or controlling or controlled by such partnership, individual or trust related to or controlling or controlled by such partnership party or its partners or such membership
**Management Agreement - Page** 1
party or its members. A natural person is related to another natural person if he or she is a spouse, parent, or lineal descendant of the other person.
"AllocatedServices" shall mean certain support services that Manager obtains from a third party and provides on a central or regional basis to the hotels that it manages because such support services can be provided on a more efficient, effective and economical basis to each individual Manager managed hotel if the expenses of such support services are shared by other Manager managed hotels. Such support services include services in the areas of sales and marketing, purchasing, food and beverage, human resources, insurance, technology, training and payroll (each such service, an "Allocated Service"; collectively, the "AllocatedServices"). Owner and Manager agree that Manager shall provide Allocated Services to the Hotel and that the Hotel's portion of the cost thereof shall constitute a Gross Operating Expense so long as (i) the costs of the Allocated Services are allocated in a commercially reasonable fashion on a proportionate basis among the Hotel and the other Manager managed hotels benefiting therefrom; and (ii) the Allocated Services shall not include services that do not benefit the Hotel. The parties agree that Manager (or its Affiliates) and the Hotel shall be returned a proportionate share of any rebates received by Manager with respect to any of the Allocated Services on a proportionate basis as compared to other hotels managed by Manager or its Affiliates.
"Annual OperatingBudget" shall mean an annual operating projection for the Hotel prepared and submitted by Manager to Owner and approved by Owner for each Fiscal Year pursuant to Section 4.4(a).
"Annual Plan" shall mean an annual business plan for the operation of the Hotel prepared by the Manager and approved by the Owner, which shall include the Annual Operating Budget, the Approved Capital Budget and any other material included therein by Manager as provided in Section 4.4.
"ApprovedCapital Budget" shall have the meaning set forth in Section 4.4(b).
"Base Fee" shall have the meaning set forth in Article 11.
"Buildingand Appurtenances" shall mean (i) the hotel building located on the Premises, and (ii) landscaping and other related facilities, together with all installations located at, or used in connection with the operation of the building for hotel purposes including, without limitation, any swimming pools, health club and recreational facilities, walkways, parking facilities, heating, lighting, sanitation equipment, air conditioning, laundry facilities, refrigeration, built-in kitchen equipment, and elevators.
"Capital Budget" shall mean Manager's proposed estimate of FF&E and Capital Improvements submitted to Owner each Fiscal Year pursuant to Section 4.4.
"Capital Improvements" shall have the meaning set forth in Section 8.2 hereof.
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“CentralizedServices” means those services described on Schedule IV attached hereto, which reflects those Centralized Services provided by the Manager and which may be amended from time to time in writing by the Owner and Manager or as set forth in an approved Annual Plan.
“CommencementDate” shall mean the date hereof.
"CompetitiveSet" shall mean the properties listed on Exhibit C attached hereto and any revisions to such list agreed upon by Owner and Manager from time to time**.**
"CPI" shall mean the Consumer Price Index for All Urban Consumers, United States City Average, All Items (1982-84=100), issued by the Bureau of Labor Statistics of the United States Department of Labor.
“DefaultRate” shall mean the lesser of (i) the Prime Rate plus four percent (4%) per annum or (ii) the highest lawful rate permitted by applicable Legal Requirements from time to time.
“EarningsBefore Interest, Taxes, Depreciation and Amortization” or “EBITDA” shall Total Operating Revenues less Gross Operating Expenses, excluding taxes of any kind (including betterments and assessments), interest, depreciation, amortization, reserves, insurance, any debt service payments and costs of the Hotel (including without limitation, debt service, fees to lenders and servicers, penalties, late fees, amortization any equipment lease payments and costs) and property, casualty and hazard insurance.
"EffectiveDate" shall mean the date of this Agreement as set forth on page 1 hereof.
"ERISA” shall have the meaning set forth in Section 4.2(a).
"Event ofDefault" shall mean any of the events described in Article 16, provided that any condition contained therein for the giving of notice or the lapse of time, or both, has been satisfied.
“ExecutivePersonnel” shall mean the general manager, director of sales and the controller of the Hotel.
“Fee Owner” shall have the meaning set forth in the introductory section of this Agreement.
"Fiscal Year" shall mean the fiscal year that ends on the last day of each calendar year. The first Fiscal Year shall be the period commencing on the Commencement Date and ending on December 31^st^ of the same calendar year in which the Commencement Date occurs. The last Fiscal Year shall be the period commencing on January 1st of the same calendar year in which the last day of the Term of this Agreement occurs and ending on such last day of the Term. The words "full Fiscal Year" shall mean any Fiscal Year containing not fewer than 365 days. A partial Fiscal Year after the end of the last full Fiscal Year and ending with the expiration or earlier termination of the Term shall constitute a separate Fiscal Year.
**Management Agreement - Page** 3
"Furniture,Fixtures and Equipment" or "FF&E" shall mean all furniture, furnishings, wall coverings, fixtures, carpeting, rugs, fine arts, paintings, statuary, decorations, and hotel equipment and systems (including the costs associated with the purchase, installation and delivery thereof) located at, or used in connection with, the operation of the Building and Appurtenances as a hotel, including without limitation, major equipment and systems required for the operation of kitchens, bars, laundry and dry cleaning facilities, office equipment, dining room wagons, major material handling equipment, major cleaning and engineering equipment, telephone systems, computerized accounting and vehicles (including the costs associated with the purchase, installation and delivery thereof) together with all replacements therefor and additions thereto, but in all events excluding Operating Equipment and Supplies.
"GAAP” shall have the meaning set forth in Section 4.2.
"Gross OperatingExpenses" shall have the meaning contained on Schedule II attached hereto. .
"Hotel" shall mean (a) the Building and Appurtenances and the Premises owned by Owner and (b) all FF&E, all Operating Equipment and Supplies, and all Inventories owned by Owner located at the address set forth on Schedule I.
"hotel" shall mean any hotel (other than the Hotel), inn, motor inn, motor hotel, motel, suite hotel, conference center, meeting center or any other facility providing either or both of short-term lodging and meeting arrangements.
"Hotel Employees" shall have the meaning set forth in Section 4.2.
"Inventories" shall mean inventories of supplies, in accordance with the Uniform System of Accounts, such as soap, toilet paper, stationery, writing pens, food and beverage inventories, paper products, menus, expendable office and kitchen supplies, fuel, supplies and items similar to any of the foregoing.
“Lease” means that certain Hotel Lease entered into by and between Owner, as tenant, and Fee Owner, as landlord, on or about the date hereof, as the same may be amended from time to time.
"Legal Proceedings" shall mean all complaints, counterclaims or cross-claims filed in a court of competent jurisdiction, any notice of any claim of violation of any legal requirement by any governmental agency or authority, or any summons or other legal process, in each instance by or against the Hotel or by or against Owner, or Manager in connection with the Hotel.
"Legal Requirements" shall mean (a) all laws, ordinances, statutes, regulations and orders relating to the Hotel and the Premises now or hereafter in effect, including but not limited to, environmental laws and (b) all terms, conditions, requirements and provisions of (i) all Permits; (ii) all leases; and (iii) all liens, restrictive covenants and encumbrances affecting the Hotel or the Premises or any part thereof.
**Management Agreement - Page** 4
"Liabilities" shall have the meaning set forth in Section 24.1.
"License Agreement" shall mean the franchise or license agreement from time to time entered into by Owner with respect to the branding and operation of the Hotel. For the purposes of this definition, the following terms used in said section shall have the following meaning:
"Licensor" shall mean the franchisor or licensor under the franchise or license agreement from time to time entered into by Owner with respect to the branding and operation of the Hotel.
"Licensee" shall mean Owner; and the "Manual" shall mean the Licensor's operating manual and other manuals for Licensor described in its standard license agreement.
"Major CapitalExpenditures" shall have the meaning set forth in Section 4.4.
"Major Renovations" shall mean a contemporaneously made set or series of alterations, additions and/or improvements to the Hotel with a total cost in excess of $100,000 (or a lesser amount in the event a project with a total cost less than $100,000 requires material design and purchasing and installation services related thereto and/or results in a material alteration in the design of the Hotel), but shall not include any Repairs or Maintenance with respect to Capital Improvements or FF&E.
"ManagementFee" shall mean the Base Fee and other fees payable or due hereunder, all as set forth in Article 11 hereof and Schedule I attached hereto.
"Manager" shall have the meaning set forth in the introductory section of this Agreement.
"Manager’sLiability Cap" shall have the meaning set forth in Article 33.
"MEPPA” shall have the meaning set forth in Section 4.2(a).
"Minimum Cost" shall have the meaning set forth in Section 15.1.
"Mortgage" shall mean, collectively, each of the documents evidencing or securing current or future indebtedness on the Hotel in favor of a third party lender or financial institution or any successor thereto or replacement thereof (the "Lender").
"OFAC” shall have the meaning set forth in Section 26.18.
“Open forBusiness” shall mean the period of time during which all or substantially all of the Hotel is open for business to the general public.
"OperatingAccount" shall mean a special account or accounts, bearing the name of the Hotel, established by Owner in a federally insured bank or trust company selected by Owner.
**Management Agreement - Page** 5
"OperatingEquipment and Supplies" shall mean supply items which constitute "Operating Equipment and Supplies" under the Uniform System of Accounts, all miscellaneous serving equipment, linen, towels, uniforms, silver, glassware, china and similar items.
“OperatingStandards” shall mean the operation of the Hotel in a manner consistent with (i) the requirements under the License Agreement; (ii) the condition of the Hotel as of the Commencement Date (or, following completion of a Renovation, the condition of the Hotel as of the completion of the Renovation), normal wear and tear excepted; (iii) the condition and level of the operation of hotels of comparable class and standing to the Hotel in its market area; (iv) then current market conditions regarding rental rates and lease terms and conditions with respect to Hotels of comparable class and standing to the Hotel (including but not limited to the Competitive Set); (v) the requirements under the Lease; and (vi) then current business and management practices (including those related to compliance with Legal Requirements) applicable to the management, operation, leasing, maintenance and repair of a hotel comparable in size, character and location to the Hotel.
"Owner" shall have the meaning set forth in the introductory section of this Agreement.
"Owner’sAnnual Plan Objections” shall have the meaning set forth in Section 4.4.
"PerformanceStandard" shall have the meaning set forth in Section 18.2.
"Permits" shall mean all governmental or quasi-governmental licenses and permits, including but not limited to any certificate of occupancy, business licenses and liquor licenses.
"PermittedInvestments" shall mean (subject to modification, addition or deletion from time to time at the option of Owner by written request to Manager) all of which shall be in the name of Owner:
| (a) | interest-bearing deposit<br>accounts (which may be represented by certificates of deposit, time deposit open account agreements or other deposit instruments)<br>in commercial banks having a combined capital and surplus of not less than $50,000,000; or |
|---|---|
| (b) | all other investments approved by<br> Owner. |
| --- | --- |
"Premises" shall mean the land on which the Hotel is located, which land is described in Exhibit A attached hereto.
“Prime Rate” shall mean the rate per annum announced, designated or published from time to time by JP Morgan Chase Bank N.A. as its “prime”, “reference” or “base” rate of interest for commercial loans.
"PrivilegedInformation" shall have the meaning set forth in Section 26.19.
"ProhibitedPersons” shall have the meaning set forth in Section 26.18.
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"ProposedCapital Expenditures Budget" shall have the meaning set forth in Section 4.4.
"ProposedFF& E Budget” shall have the meaning set forth in Section 4.4.
"ProposedOperating Budget” shall have the meaning set forth in Section 4.4.
“ReimbursableExpenses” shall mean all travel, lodging, entertainment, telephone, facsimile, postage, courier, delivery, employee training and other expenses incurred by Manager in accordance with the standard policies for expenses incurred by Manager on its own behalf and which are directly related to its performance of this Agreement, but in no event will Reimbursable Expenses include or duplicate expenses for Manager’s overhead, Allocated Services or Centralized Services.
“Renovation” shall mean a renovation of any portion of the Hotel during the Term, pursuant to a plan proposed by Manager and approved by Owner to, among other things, bring the Hotel to a physical condition that satisfies the standards under the License Agreement and to operate in a manner consistent with the assumptions for the then-current Annual Operating Budget and then-current Annual Plan. A Renovation shall be carried out at the expense of Owner pursuant to plans and specifications and a schedule prepared by Manager and approved by Owner and, to the extent required under the License Agreement, by Licensor.
"Repairs andMaintenance" shall have the meaning as defined in Section 8.1.
"Reserve" shall mean an account maintained as a Permitted Investment for Reserve for replacement of FF&E and/or Capital Improvements, as described in Section 7.1 and funded as provided in Section 7.2.
“ScheduleI” shall mean Schedule I attached to and made a part of this Agreement.
“ScheduleII” shall mean Schedule II attached to and made a part of this Agreement.
“ScheduleIII” shall mean Schedule III attached to and made a part of this Agreement.
“ScheduleIV” shall mean Schedule IV attached to and made a part of this Agreement.
"State" shall mean the State in which the Hotel is located or other as designated.
"Term" shall mean the term of this Agreement, which shall be an initial five (5) year term commencing on the Commencement Date and expiring on the fifth (5^th^) anniversary of the Commencement Date, as such Term may be extended or shortened as expressly set forth in this Agreement or as otherwise agreed to by Owner and Manager.
“Third PartyPurchaser” shall have the meaning set forth in Section 18.1.
"Total OperatingRevenues" has the meaning set forth on Schedule III attached hereto.
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"UnavoidableInterruptions" shall mean interruptions in the operation of or access to the Hotel or any of its essential services on account of an interruption in any one or more of the utility services described in Section 13.2, or on account of labor disputes, strikes, lockouts, fire or other casualty, war, terrorist actions, acts of God and other similar causes beyond the reasonable control of the party claiming an unavoidable interruption, but never financial inability. Other than obligations accruing prior to the occurrence of an event of Unavoidable Interruption or obligations that, if not performed, would cause a material adverse effect on the Hotel or its operations (for instance, the requirement to maintain the Permits or insurance obligations hereunder), the obligations of the party hereunder shall be suspended during the period of an Unavoidable Interruption.
"Uniform Systemof Accounts" shall mean the Uniform System of Accounts for the Lodging Industry, 11th Revised Edition, 2014, as published by the Hotel Association of New York City, Inc. or any later edition thereof.
"Working Capital" shall mean and refer to the funds which are reasonably necessary for the day-to-day operation of the Hotel's business, including, without limitation, amounts sufficient for the maintenance of petty cash funds, operating bank accounts, receivables, payrolls, prepaid expenses, advance deposits, funds required to maintain inventories, and amounts due to/or from Manager and/or Owner less accounts payable and accrued current liabilities.
1.2 Terminology. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all genders; the singular shall include the plural, and the plural shall include the singular. The titles of Articles, Sections and Subsections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement, and all references in this Agreement to Articles, Sections, Subsections, paragraphs, clauses, sub-clauses or exhibits shall refer to the corresponding Article, Section, Subsection, paragraph, clause or sub-clause of, or exhibit attached to, this Agreement, unless specific reference is made to the articles, sections or other subdivisions of, or exhibits to, another document or instrument.
1.3 Exhibits. All exhibits, schedules and other attachments attached hereto are by this reference made a part of this Agreement.
ARTICLE 2
MANAGEMENT OF HOTEL
Owner hereby engages and appoints Manager, pursuant to the terms of this Agreement, to operate and manage the Hotel, and Manager hereby agrees and contracts to plan, operate, repair and manage the Hotel pursuant to the terms of this Agreement.
Subject to the terms of this Agreement, Hotel operations shall be under the exclusive supervision of Manager, which, except as otherwise specifically provided in this Agreement, shall be responsible for the proper and efficient operation**,** maintenance and repair of the Hotel in accordance with the terms of this Agreement. Except as specifically set forth in this Agreement, Manager shall have discretion and control respecting matters relating to management and
**Management Agreement - Page** 8
operation of the Hotel, including, without limitation, charges for rooms and commercial space, credit policies, food and beverage services, other Hotel services, employment policies, granting of concessions or leasing of shops and agencies within the Hotel, procurement of inventories, supplies and services, promotion and publicity and, in general, all activities necessary for operation of the Hotel.
Manager shall devote its knowledge, experience and efforts to operate and manage the Hotel pursuant to this Agreement in a businesslike manner in accordance with the Operating Standards. Manager shall make available to Owner the full benefit of the judgment, experience and advice of the members of Manager's organization and staff with respect to the policies pursued by Owner in operating, maintaining, and servicing the Hotel.
ARTICLE 3
TERM
3.1 Term. The agreement shall be in effect for the initial Term. If this Agreement has not been otherwise terminated in accordance with the terms of this Agreement, upon the expiration of the initial Term, the initial Term shall be automatically be extended by four (4) terms of one (1) year each, unless either Owner and Manager send a termination notice at least thirty (30) days prior to the then expiration of the Term to cancel this Agreement effective as of the then next expiration of the Terms (as it may be extended). Notwithstanding the foregoing, the Agreement may be terminated prior to the scheduled expiration of the Term or any extension thereof (i) upon the sale of the Hotel to a bona fide Third Party Purchaser, subject to and as allowed and provided in Article 18 hereof; and (ii) as otherwise provided in Articles 15, 17 and 18.
3.2**Surrender.**On the expiration or sooner termination of the Term, Manager shall quit and surrender the Premises to Owner in the condition required pursuant to this Agreement and take such other actions as contemplated by Article 20 hereof.
ARTICLE 4
USE AND OPERATION OF THE HOTEL
4.1 Operation. Manager shall be the sole and exclusive manager of the Hotel during the Term and shall operate the Hotel in accordance with the Operating Standards and the provisions of this Agreement. Manager shall act in good faith with respect to the proper protection of and accounting for Owner's assets and shall deal at arm's length with Owner and all third parties.
4.2 Employment. (a) Subject to the terms of this Agreement, Manager shall select, employ, promote, transfer, compensate, terminate where appropriate, supervise, direct, train, and assign the duties of the Executive Personnel and, through the Executive Personnel, a sufficient number of personnel whom Manager reasonably determines to be necessary or appropriate for the proper, adequate and safe operation and management of the Hotel (collectively, the "HotelEmployees"). All such employees of the Hotel shall be employees of Manager or Manager's Affiliate. In addition, Manager may, from time to time, assign one or more of its employees to the staff of the Hotel on a full-time, part-time or temporary basis. Notwithstanding the provisions of this Section 4.2 or any other provision of this Agreement, all costs, expenses and liabilities relating to
**Management Agreement - Page** 9
Hotel Employees shall be expenses of operating the Hotel and the responsibility of Manager for acts or omissions of Hotel Employees shall not extend beyond responsibility for the gross negligence or willful misconduct of, or the willful violation of Legal Requirements by the Executive Personnel. Subject to Section 4.6 below, Manager will negotiate with any union lawfully entitled to represent such employees and may execute collective bargaining agreements or labor contracts resulting therefrom that have been approved by Owner. Manager shall fully comply with all Legal Requirements having to do with worker's compensation, social security, unemployment insurance, hours of labor, wages, working conditions, and other employer-employee related subjects. The cost of all labor, employees and employment arrangements and any benefits and taxes related thereto shall be charged as Gross Operating Expenses of the Hotel and shall be accrued in accordance with generally accepted accounting principles (“GAAP”) and shall be promptly paid by Owner in accordance with the terms of this Agreement. The costs provided for in the immediately preceding sentence shall include, by way of example and not limitation, all reasonable costs and expenses (including, without limitation, all employment related expenses incurred by Manager with respect to the Hotel Employees), such as severance pay, unemployment compensation and health insurance and related costs (i.e., in order to comply with COBRA-type regulations) as a result of the termination of employees and which shall have been paid or accrued in accordance with GAAP. Manager shall use commercially reasonable efforts and exercise reasonable care to select qualified, competent, and trustworthy employees. The Hotel's general cashier and all employees having check signing authority shall be adequately bonded or insured to the reasonable satisfaction of Owner (or as provided herein) and the cost of such bonds or insurance shall be an expense of the Hotel. To the extent possible and reasonably available, Manager shall use local labor to fill non-Executive Personnel positions in the operation of the Hotel. Owner may at any time consult or communicate with Manager regarding any of the Hotel Employees, but will not interfere in the day-to-day activities of Hotel Employees. The Manager shall not discriminate against any employee or applicant for employment because of race, color, religion, national origin, ancestry, age, sex or sexual orientation, and all employment advertising shall indicate that Manager and Owner are each an Equal Opportunity Employer as that term is defined under Legal Requirements.
Notwithstanding anything to the contrary contained in this Agreement, the following subparagraphs (b) and (c) shall apply to any liability that may, from time to time, arise out of the Employee Retirement Income Security Act of 1974 ("ERISA") and the Multi-employer Pension Plan Amendments Acts of 1980 ("MEPPA"), respectively, as from time to time amended.
(b) Employee Benefits: Any Hotel Employees who are not then represented by a collective bargaining representative shall be entitled to participate in the incentive programs, profit sharing and/or other employee retirement, disability, health, welfare or other benefit plan or plans then made available by Manager to similarly situated employees of other hotels managed by Manager, in accordance with their respective terms. Manager will have the right to charge the Hotel with its allocable share of the cost of any such plan or plans and any contributions to be made thereunder provided that such charges and contributions shall be determined by Manager in good faith on a uniform basis with respect to charges and contributions imposed for the same or similar plans at other hotels then managed by Manager, subject to Legal Requirements. Manager's rights under this Subsection (b) shall be subject to the condition that Manager shall not put into
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effect any amendment to any existing plan, or adopt any additional plan, which is not imposed upon all other similarly situated hotels managed by Manager.
Upon the expiration or termination of this Agreement, the sale of the Hotel or other similar event, Manager shall cooperate with the Owner with respect to disposition of such plan or plans (or plan assets) in a mutually satisfactory manner, all in compliance with then applicable Legal Requirements.
(c) Collective Bargaining or Other Multi-employer Plans: Manager and Owner agree that with respect to any withdrawal liability arising under any collective bargaining agreement or other "multi-employer plan" (as defined in Section 3(37) of ERISA) in which the Hotel Employees become participants, the obligations of the parties shall be determined as follows:
(1) Withdrawal liability arising with respect to Hotel Employees shall be the responsibility of Owner, and Owner shall either pay the amount of such withdrawal liability directly to such plan or reimburse Manager for withdrawal liability payments made to such plan by Manager with respect to Hotel Employees (including withdrawal liability arising after the sale or other termination of this Agreement, provided that such liability arises as a result of such sale, disposition, termination or other similar event). To the extent permitted under then applicable laws, regulations and agreements, Manager shall cooperate with Owner in structuring transactions and transferring actual or contingent withdrawal liability to a successor in ownership or purchaser of the Hotel in accordance with "relief" provisions of ERISA, such as ERISA Section 4204 or then applicable statutory or regulatory provisions of a similar nature.
(2) For purpose of this subparagraph (c), the term "withdrawal liability" shall mean the actual amount assessed by and payable to a multi-employer pension fund upon a complete or partial withdrawal of the Hotel or Hotel Employees from such fund. Manager shall cooperate with Owner in challenging a plan's assessment of such liability, provided that all costs of litigation, arbitration or other procedures shall be paid by Owner (including any bonds that must be posted). If Manager or its Affiliates have employees at other locations who participate in the same multi-employer plan as Hotel Employees, Owner shall be charged with and be responsible only for multi-employer plan withdrawal liability arising solely with respect to the participation of Hotel Employees in such plan.
4.3 LegalProceedings. Legal Proceedings of a "non-extraordinary nature" (hereafter defined), may be instituted by Manager, in accordance with guidelines and policies determined from time to time by Manager and Owner, in the name of Manager or the Hotel or Owner and by counsel designated by Manager pursuant to such guidelines and policies. Legal Proceedings of an "extraordinary nature" (hereafter defined) shall require Owner's prior approval of the proceedings and counsel approved by Owner. Manager shall furnish Owner with quarterly status reports with respect to all Legal Proceedings of an extraordinary nature. In addition, Manager shall have the right to defend, through counsel designated by Manager, Legal Proceedings of a non-extraordinary nature against Owner or Manager resulting from the operation of the Hotel. The defense of Legal Proceedings against the Hotel of an extraordinary nature (including, without limitation, any aspect of any claims against Manager or Owner arising out of the operation of the Hotel as to which the insurance company denies coverage) shall be coordinated with Owner, designated counsel shall
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be subject to Owner's reasonable approval and Manager shall furnish Owner with quarterly status reports with respect to such actions. All claims against Owner and/or Manager arising out of the management or operation of the Hotel which (i) are not covered by insurance shall be promptly communicated to Owner and (ii) are covered in whole or in part by insurance shall be promptly forwarded by Manager to the appropriate insurer (with a copy thereof to Owner in the case of claims against Owner). Legal Proceedings of a "non-extraordinary nature" shall be proceedings in which the monetary exposure is less than $50,000 that are (i) initiated by Manager or Owner relating to the operation of the Hotel for matters such as collections, maintenance of licenses and permits, enforcement of contracts and proceedings against Hotel tenants; and/or (ii) defense of actions against the Owner or Manager resulting from the operation of the Hotel, for matters such as guest claims for loss of property or injury to persons and claims relating to employment or the application for employment at the Hotel. Legal Proceedings of an "extraordinary nature" shall mean all other Legal Proceedings. All costs, expenses, fees and liability associated with any Legal Proceedings shall be paid solely by Owner.
4.4 AnnualPlan. On or before the date that is forty-five (45) days following the Commencement Date, Manager shall submit to Owner a proposed Annual Plan in Manager’s format for the remaining portion of the Fiscal Year in which the Commencement Date occurs and Owner and Manager shall cooperate to agree on the annual plan for the remainder of the Fiscal Year in which the Commencement Date occurs, which shall be the “Annual Plan” for such Fiscal Year. On or before December 1^st^ of each year following the Commencement Date, Manager shall submit to Owner a proposed Annual Plan in Manager’s format for the next Fiscal Year. On or before December 15^th^ of each year following the Commencement Date, Owner either shall accept the proposed Annual Plan submitted to Owner by Manager or shall submit to Manager a detailed list of Owner's objections or questions to the proposed Annual Plan ("Owner's Annual Plan Objections"). Within fifteen (15) days after Manager's receipt of Owner's Annual Plan Objections, Owner and Manager shall meet and discuss Owner's Annual Plan Objections with the goal of agreeing upon an Annual Plan for the subject Fiscal Year (the “Annual Plan”). Owner, as part of Owner's Annual Plan Objections, shall have the right to object to the entire proposed Annual Plan or to any specific item or items contained in the proposed Annual Plan. In the event Owner objects to the proposed Annual Plan or any specific item or items of expense in the proposed Annual Plan and Owner and Manager are unable to reach agreement thereon as provided above prior to commencement of the Fiscal Year in question, pending such agreement, the proposed Annual Plan or the specific item or items of expense (not revenue) in question shall be suspended and replaced for such period that the Annual Plan or such item(s) are in question by an amount equal to the lesser of (i) that proposed by Manager for such Fiscal Year, or (ii) if an objection to the entire Annual Plan, the Actual Gross Operating Expenses for the immediately preceding Fiscal Year subject to an adjustment equal to the percentage increase in the CPI over the last twelve (12) month period immediately preceding the start of the Fiscal Year in question, or (iii) if an objection to a specific item or items of expense in the Annual Plan, such item or items of expense for the immediately preceding Fiscal Year subject to an adjustment for each item equal to the percentage increase in the CPI over the twelve (12) month period immediately preceding the start of the Fiscal Year in question.
(a) The Annual Operating Budget shall be prepared in accordance with the Uniform System of Accounts. The proposed Annual Operating Budget shall incorporate
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Manager's good faith reasonable estimates of the items of revenue and expense contained therein and shall contain the proposed budget for operations for the succeeding Fiscal Year. When approved by Owner, the proposed Annual Operating Budget shall be the approved Annual Operating Budget. Any revisions, substitutions or additions to the Annual Operating Budget must be approved by the Owner in writing. The proposed Annual Plan shall include for the ensuing Fiscal Year, the following proposed budgets and programs:
A. A proposed operating budget (the “Proposed Operating Budget”) on a monthly and yearly basis with detailed departmental schedules for each line item and the assumptions underlying the same, including, without limitation: (a) projected occupancy and average room rates by month broken down by room segment; (b) projected Total Operating Revenues; (c) proposed Hotel room rates and charges for other services; (d) projected Gross Operating Expenses; (e) projected EBITDA; (f) proposed staff scheduling and compensation (including, without limitation, any bonuses or other incentive compensation for Hotel Employees which may take the form of a “bonus pool” stating an aggregate amount to be distributed among the Hotel Employees as appropriate, rather than separately setting forth incentive and/or bonus compensation for each Hotel Employee); (g) a narrative comparison of budgeted revenue and expense levels to the previous Fiscal Year’s estimated and actual results, highlighting material changes for the upcoming Fiscal Year; (h) anticipated depreciation and amortization of fixed assets at the Hotel; (i) annual debt service with respect to the Hotel; (j) projected contributions by, and distributions to, Owner as the result of Hotel operations; (k) an estimate of the working capital funds required to be maintained, as of the end of each month; (l) a year-over-year comparison with comments regarding variance; (m) the cost of the Centralized Services, and(o) all other items reasonably requested by Owner in order to provide the projected cash flow for the Hotel during such upcoming Fiscal year.
B. A proposed budget (the “Proposed Capital Expenditures Budget” or “Capital Budget” and when the Annual Plan is approved and agreed, the “Approved Capital Budget”) setting forth Manager’s estimate of the Capital Expenditures to be made respecting the Hotel for both of the following:
(a) major repairs, alterations, improvements, renewals and replacements (which repairs, alterations, improvements, renewals and replacements are not routine maintenance, repairs and alterations referred to in Section 6.1.2(b)) to the structural, mechanical, electrical, heating, ventilating, air conditioning, plumbing and vertical transportation elements of the Hotel building (“MajorCapital Expenditures”); and
(b) non-routine repairs and maintenance to the Hotel building which are normally capitalized under GAAP, such as exterior and interior repainting, resurfacing building walls, floors, roofs and parking areas, and replacing folding walls and the like, but which are not Major Capital Expenditures.
C. A proposed budget (the “Proposed FF&E Budget”) setting forth Manager’s estimate of the FF&E expenditures to be made and the sources of funds for the replacements and renewals to the Hotel’s FF&E, including all information necessary to
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satisfy the reporting requirements in the License Agreement and the Mortgage relating to the FF&E Reserve.
D. A market overview of local competitive properties of the Hotel including narrative descriptions of (a) the Hotel’s target market, (b) the Hotel’s relative position in such market, and (c) the proposed room rate structures and occupancy for the target market.
E. A marketing plan for the Hotel including narrative descriptions and Hotel allocable costs, of (a) Manager’s national or regional or business segment marketing plans, (b) local Hotel marketing, and (c) intended sales initiatives.
F. A staffing plan describing the general staffing needs for the operation and management of the Hotel.
In preparing the Proposed Operating Budget, or otherwise from time to time upon the request of Owner, Manager shall use commercially reasonable efforts to investigate, consider and incorporate into the day-to-day operations of the Hotel certain efficiencies and economies of scale that may be achieved by outsourcing some or all services that may be currently provided “in-house”.
In addition, Manager shall provide to Owner for Owner's review, a written schedule for the Hotel listing all executive and management employees to be employed "on-site" in the direct management of the Hotel including, but not limited to the positions of General Manager, Director of Sales, and Chief Engineer. These schedules shall include such employee's title or job description and the salary range including additional compensation or prerequisites such as lodging, meals, maintenance, moving expenses, bonus/incentive compensation and the like. In the event that any employee's services are shared with (or subsidized through a sharing arrangement with) another hotel, the employee shall be identified together with a description of his/her responsibilities and the amount and source of any subsidy, together with a breakdown of the relative time expended with respect to the Hotel and each other hotel. If Owner notifies Manager that Owner does not believe that some or all of the scheduled wages and salaries are reasonable and customary as required above, then Manager shall promptly provide to Owner a wage and salary survey that supports the scheduled wages and salaries. No proposed amendment including changes in salary or other compensation shall be effective unless the salary or other compensation as changed is reasonable and customary as required above.
4.5 Contracts;Equipment Leases.
Subject to the terms of this Section 4.5, Manager may contract for the purchase of goods and services for the Hotel with third parties that have other contractual relationships with Manager or its Affiliates, so long as the prices charged by such third parties are reasonably competitive.
A. Contracts. Manager is authorized, without the prior written approval of Owner if not otherwise expressly contemplated by the Annual Plan, to enter in the name of Owner any contracts for or covering the Hotel (except for Equipment Leases
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and Space Leases as more fully described in subparagraph B below) with vendors of its choice; provided, however, if not otherwise expressly contemplated by the Annual Plan, Manager may not enter into any contract for or covering the Hotel without Owner’s prior written approval if (a) the contract term is longer than one (1) year and is not terminable by Owner without penalty upon 30 days’ prior written notice, or (b) the total expenditure by the Hotel pursuant to such contract shall be in excess $25,000.
B. Equipment Leases. Manager is authorized, without the prior written approval of Owner if not otherwise a part of the Annual Plan, to enter in the name of Owner any equipment leases and Space Leases covering the Hotel with vendors of its choice; provided, however, if not otherwise expressly contemplated by the Annual Plan, Manager may not enter into any equipment lease without Owner’s prior written consent if (a) the contract term is longer than one (1) year and is not terminable by Owner without penalty upon 30 days’ prior written notice or (b) the total expenditures under such Equipment Lease or Space Lease exceed $25,000.
4.6 LaborRelations. Manager shall have no right to enter into any collective bargaining agreement concerning any employees of the Hotel without the prior written approval of Owner, which may be granted or withheld in its reasonable discretion. Upon Owner’s approval of any such agreement, Manager shall be responsible to perform such agreements. To the extent applicable, Manager: (a) represents that it is an equal opportunity employer as described in Section 202 of Executive Order 11246 dated September 24, 1965, as amended, and as such agrees to comply with the provisions of Paragraphs 1 through 7 of Section 202 of said Executive Order during the performance of this Agreement, (b) agrees to comply with the affirmative action requirements of Part 60.741 of Title 41, Code of Federal Regulations, with respect to handicapped workers during the performance of this Agreement, (c) agrees to comply with the affirmative action requirements of Part 60.250 of Title 41, Code of Federal Regulations, with respect to Disabled Veterans and Veterans of the Vietnam Era during the performance of this Agreement, and (d) shall submit to Owner in the form approved by the Director of the Office of Federal Contract Compliance, U.S. Department of Labor, a certification that Manager does not and will not maintain any facilities that provide for their employees in a segregated manner, or permit their employees to perform their services at any location under its control, where segregated facilities are maintained, and that Manager will obtain a similar certification from its contractors.
4.7 LiquorLicense. Owner shall obtain and maintain throughout the Term all alcoholic beverage licenses either in its name or its designee and shall maintain the alcoholic beverage licenses in good standing and effect, free of all liens (and in compliance with the conditions imposed upon such alcoholic beverage licenses by any alcoholic beverage control commission or other governmental authority or agency, pursuant to the License Agreement.
4.8 EmployeeDiscount. To the extent Manager provides discounted rates to Manager’s employees at other hotels managed by Manager or its Affiliates, pursuant to discount rate programs applicable to other hotels, Manager agrees to include this Hotel in such discounted rate programs (subject to availability and black-out periods determined by Owner and Manager during the Annual Plan process, or as otherwise approved by Manager or Owner as part of the revenue
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management of this Hotel) and to provide the same discounted rates to the Hotel Employees, to the extent allowed under the management and franchise agreements affecting such other hotels.
4.9 Forms. Manager shall prepare or cause to be prepared for execution by Owner all forms, reports and returns, if any, required to be filed by Owner under applicable law with respect to the operation of the Hotel; however, Manager shall not be obligated to prepare any of Owner's income tax returns. Without limitation, Manager shall timely prepare and deliver, as required by law, an Internal Revenue Service Tax Form 1099 with respect to payments made during a calendar year to third party contractors and professionals.
4.10 Noticeof Violations. Manager shall promptly notify Owner in writing of any written notice received from any regulatory or governmental body regarding an actual or perceived violation of any Legal Requirements.
4.11 In-HouseServices. Manager shall have the right to provide in-house services to the Hotel, including without limitation, legal counsel, the reasonable costs of which shall not exceed current market rates for similar services and shall be paid to Manager or its Affiliates as an
Gross Operating Expense of the Hotel; provided, however, that the cost of such in-house services shall not exceed the $25,000 in the aggregate in any Fiscal Year without Owner’s prior written approval. In the event Manager desires to enter into any transaction with an Affiliate or any person in which Manager or any of its Affiliates has any ownership, investment or management interest or responsibility which is on terms that are not arms-length, Manager shall (i) disclose to Owner the nature of such affiliation prior to engaging in any transaction in connection with the Hotel; and (ii) obtain the prior written approval of Owner (which consent shall not be unreasonably withheld, conditioned or delayed), regardless if such transaction was included in the approved Annual Plan.
4.12 CentralizedServices. Subject to the terms and conditions of this Agreement, Manager shall furnish or cause its Affiliates to furnish to the Hotel, the Centralized Services. Subject to the approved Annual Plan and the terms and conditions of this Agreement, Owner shall pay to Manager the Hotel’s allocable share of the Centralized Services actually incurred by Manager or its Affiliates (without profit, premium or mark-up or other element of compensation of any kind). Although the method of allocation of the Centralized Services among the Managed Hotels may change from time to time as agreed to by Owner and Manager, the current method of allocating the Centralized Services is set forth on Schedule IV. Additional Centralized Services may be added by amendment to Schedule IV from time to time only upon Owner’s prior written approval (which shall not be unreasonably withheld, conditioned or delayed) with Manager’s explanation of how the costs of such additional Centralized Services to be charged and allocated among the Manager managed hotels or if provided for in an approved Annual Plan. Except with respect to the Centralized Services, under no circumstances shall Manager charge for any general corporate overhead of Manager or Affiliates (except as otherwise provided or allowed in this Agreement). As part of the Proposed Annual Plan, in addition to the Centralized Services, Manager will set forth a list of those additional services (if any) that are furnished generally on a central or system-wide basis to Managed Hotels, together with Manager’s proposal as to which of such additional services are appropriate for the Hotel.
4.13 Lease. Owner or Manager at Owner’s request shall make any and all lease payments under the Lease as and when they become due, and shall comply with and perform any and all covenants
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contained in the Lease, in each instance before any event of default (as defined in the Lease) or other event occurs under the Lease, which would trigger the lessor’s right to terminate the Lease.
ARTICLE 5
RELATIONSHIP OF PARTIES
Owner and Manager acknowledge and agree that this Agreement creates an agency relationship; provided, however, that (a) each Hotel Employee shall be the employee of Manager or Manager’s Affiliate and not of Owner, (b) Manager's authority is subject to the terms and conditions of this Agreement, and (c) nothing in this Agreement shall constitute, or be construed to be, or create, a partnership, joint venture or lease or employment arrangement between Owner and Manager with respect to the Hotel or the operation thereof. Employees or agents of Manager are not by this Agreement or by any actions of Owner and/or Manager hereunder made employees of Owner, and are not entitled to the benefits provided by Owner or its Affiliates to its employees, including but not limited to, group insurance, leave and pension plan. This Agreement shall not be deemed at any time to be an interest in real estate or a lien or security interest of any nature against the Hotel, the Premises or any other land used in connection with the Hotel, or any equipment, fixtures, inventory, motor vehicles, contracts, documents, accounts, notes, drafts, acceptances, instruments, chattel paper, general intangibles, or other personal property now existing or that may hereafter be acquired or entered into with respect to the Hotel or the operation thereof.
ARTICLE 6
ADVERTISING
Subject to and in strict compliance with the provisions of the License Agreement, Manager shall arrange and contract for all advertising, which Manager may reasonably deem necessary, in accordance with Section 4.4, for the operation of the Hotel. So long as the License Agreement may be in effect, Manager generally shall advertise the Hotel under the name of the Hotel set forth on Schedule I or such other name as Owner may designate or approve.
ARTICLE 7
RESERVE FOR FF&E
7.1. Reservefor Replacement of FF&E. The Reserve shall be funded pursuant to Section 7.2, and Manager shall use amounts in the Reserve to cover the cost of FF&E expenditures and Capital Improvements, as described in Section 4.4 in conjunction with the Approved Capital Budget. All FF&E, Capital Improvements and the Reserve shall be the property of Owner.
7.2 Transfersto Reserve for FF&E. Commencing on the Commencement Date and continuing thereafter during the remainder of the Term, Manager shall deposit monthly into the Reserve for FF&E an amount equal to the amounts required by Lender and/or by Licensor; provided that in no event will the amounts to be deposited monthly into the Reserve be less than an amount equal to such amounts required by the Owner’s lender or the Franchisor.
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7.3 AnnualAdjustment. At the end of each Fiscal Year and following receipt by Manager of the annual accounting referred to in Article 10, an adjustment will be made to such annual account, if necessary and if available, so that the appropriate amount shall have been deposited in the Reserve.
7.4 Maintenanceof Reserve. Checks or other documents of withdrawal shall be signed by representatives of Manager who shall be bonded or otherwise insured pursuant to insurance provisions of this Agreement. The proceeds from the sale of FF&E no longer needed for the operation of the Hotel shall be deposited in the Reserve, but not be credited against the obligation to deposit cash in such fund for the then current Fiscal Year. All interest earned or accrued on amounts invested from the Reserve shall be added to the Reserve (but shall not be credited against Owner's obligations to fund the Reserve), and shall not constitute Total Operating Revenues or be included therein.
7.5 Accumulationof Reserve and Additional Cost of FF&E and Capital Improvements. Owner and Manager acknowledge and agree that portions of the Reserve may, from time to time in accordance with the then-current Annual Plan, be used for more significant expenditures than could be reserved for in a single year. Accordingly, at the end of each Fiscal Year, any amounts remaining in the Reserve shall be carried forward to the next Fiscal Year, and shall be in addition to the amount to be reserved in the next Fiscal Year. In the event at any time there are insufficient funds in the Reserve for any Fiscal Year to pay the cost of FF&E in accordance with the Annual Operating Budget and the Approved Capital Budget, then Owner will, within thirty (30) days after request therefor by Manager shall provide the additional cash to the Manager.
7.6. FinalRemittance. Upon expiration or termination of this Agreement, subject to the other terms and provisions of this Agreement, all remaining amounts in the Reserve shall be remitted forthwith to Owner.
ARTICLE 8
REPAIRS AND MAINTENANCE AND CAPITALIMPROVEMENTS
8.1 Repairsand Maintenance. Subject to the terms hereof, Manager shall, from time to time, make such expenditures from Total Operating Revenues for repairs and maintenance including service contracts ("Repairs and Maintenance") as required by the Lender, the License Agreement, the Legal Requirements, the then current Annual Plan or as necessary to maintain the Hotel in good operating condition in compliance with the License Agreement and otherwise in the condition required by this Agreement, including but not limited to repairs and maintenance of HVAC, mechanical and electrical systems, exterior and interior repainting, resurfacing building walls and parking areas, waterproofing of exterior surfaces of floors, roofs, and replacement of plate glass, or the like. It is Owner's intent that the sums allocated for Repairs and Maintenance in accordance with the then current Annual Plan are to be fully expended during that Fiscal Year exclusively for the purposes identified in such Annual Plan. Except in the event of an emergency due to casualty, act of God or otherwise under circumstances in which it would be unreasonable to seek to obtain prior approval (and provided that Manager shall notify Owner of any such
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expenditure within a reasonable time given the nature and scope of the emergency), all expenditures for the foregoing shall be as provided in the Annual Operating Budget and the Approved Capital Budget. If any such Repairs or Maintenance shall be made necessary by any condition against the occurrence of which Owner has received the guaranty or warranty of the builder or the Hotel or of any supplier of labor or materials for the Hotel or of any supplier of labor or materials for the construction of the Hotel, then Manager may invoke said guarantees or warranties in Owner's or Manager's name and Owner shall cooperate in all reasonable respects with Manager in the enforcement thereof.
8.2 CapitalImprovements. Owner may, from time to time, at its sole expense, make such structural repairs, replacements, substitutions, alterations, additions or improvements (exclusive of FF&E) ("Capital Improvements") in or to the Hotel as Owner shall determine are necessary to comply with the Operating Standards. If Capital Improvements included in the definition of Building and Appurtenances shall be required at any time during the Term by the terms of any Mortgage, the License Agreement, to maintain the Hotel in good operating condition or by reason of any Legal Requirements, or because Manager and Owner jointly agree upon the desirability thereof, then in such event all such Capital Improvements shall be made with as little hindrance to the operation of the Hotel as reasonably possible. Notwithstanding the foregoing, as long as the Hotel can continue to operate without interruption, Owner shall have the right to contest the need for any such Capital Improvements required by any Legal Requirements and may postpone compliance therewith, if so permitted by law and if such postponement will not expose Manager to any civil or criminal liability. All recommendations by Manager of Capital Improvements shall be submitted in conjunction with the Capital Budget for the Fiscal Year described in Section 4.4(b). In the event that Owner elects to perform Major Renovations to the Hotel, the oversight of the performance of the Major Renovations shall be placed to bid, it being agreed that the Manager or its Affiliates may participate in any such bidding process.
8.3 ServiceContracts. Manager, without requiring the consent of Owner, shall enter into any contract for cleaning, maintaining, repairing or servicing the Hotel or any of the constituent parts of the Hotel as Manager deems necessary for the operation of the Hotel, except as specifically provided in Section 4.4 or 4.5. Unless otherwise approved by Owner, all service contracts shall: (a) be in the name of Owner or Owner's nominee, (b) to the extent customary, include a provision for cancellation thereof by Owner or Manager upon not more than thirty (30) days written notice, and (c) shall require that all contractors provide evidence of such insurance as is customarily carried by other contractors involved in similar servicing arrangements.
8.4 Liens. Owner and Manager shall cooperate and use all commercially reasonable efforts to prevent any liens from being filed against the Hotel that arise from any maintenance, changes, repairs, alterations, improvements, renewals or replacements in or to the Hotel. If any such liens are filed, Manager shall, subject to the availability of funds therefor in the Operating Accounts or as otherwise supplied by Owner, obtain the release thereof prior to the institution of legal proceedings in connection therewith. The cost of obtaining such release shall be included in Gross Operating Expenses, unless the imposition of the lien results from a default by Owner or Manager, in which event the cost of obtaining such release shall be borne by such defaulting party.
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8.5 Noticeof Unavoidable Interruptions. In the event of any occurrence constituting an Unavoidable Interruption, Manager shall promptly notify Owner of such occurrence and shall keep Owner informed as to the extent and impact thereof on the Hotel.
ARTICLE 9
WORKING CAPITAL AND BANK ACCOUNTS; DISTRIBUTIONS
9.1 WorkingCapital. Owner shall provide initial Working Capital in the amount set forth on Schedule I in addition to the value of all Inventories. Owner shall at all times cause sufficient funds to be on hand in the Operating Accounts to assure the timely payment of all current liabilities of the Hotel, including but not limited to Gross Operating Expenses, all other costs and expenses incurred in connection with the Hotel pursuant to this Agreement and the performance by Manager of its obligations under this Agreement, all fees, charges and reimbursements payable to Manager hereunder and all amounts required hereunder to be transferred into the Reserve. In no event shall Owner permit the balance in the Operating Accounts to be less than an amount equal to the estimated monthly operating expenses of the Hotel as reflected in the then current Annual Operating Budget. From time to time, upon five (5) days prior written notice from Manager that such funds are required, Owner shall furnish to Manager funds that Manager deems reasonably necessary to assure that the Project shall have adequate working capital as herein provided. In the event Owner fails to supply required working capital in accordance with the provisions of this Section or if Manager otherwise deems such action to be necessary, Manager may use all or part of the funds in the Reserve to supplement the Operating Accounts in order to defray or pay the Hotel's operating costs and expenses, to the extent permitted by the Mortgage. Owner shall promptly reimburse the Reserve for all sums so used or transferred. All unexpended Working Capital, Inventories and Operating Equipment and Supplies purchased with Working Capital shall remain the property of Owner.
9.2 OperatingAccount. All funds (exclusive of funds deposited in the Reserve and house banks at the Hotel) received by Manager in the operation of or otherwise relating to the Hotel, and funds for Working Capital provided by Owner or retained by Manager from Total Operating Revenues, shall be deposited in the Operating Account, provided that in connection with any cash management arrangements with the Lender, all Total Operating Revenues shall be deposited to the Operating Account upon being swept out of the accounts associated with such cash management arrangements. No funds shall be deposited into the Operating Account attributable to any other property. To the extent permitted by the Mortgage, amounts in the Operating Account may be temporarily withdrawn and invested by Manager in any Permitted Investments, having due regard for the timing of cash needs, but in no event shall such funds be co-mingled by Manager with any other funds. From the Operating Account, Manager shall pay all Gross Operating Expenses (other than the excess FF&E if funded by or through Owner) before any penalty or interest accrues thereon, however, taking into account sound cash management. All interest earned or accrued on amounts invested from the Operating Account shall be added to the Operating Account. All checks or other documents of withdrawal from the Operating Account shall be signed by representatives of Manager except as provided in Section 9.3 hereof.
9.3 Maintenanceof Operating Account. Subject to Section 9.4, the Operating Account shall be opened and maintained at all times by Manager and checks and other documents of withdrawal shall be signed only by representatives of Manager who are covered by the insurance required
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herein. The Operating Account and any other bank accounts approved by Owner shall be in Owner's name (for example, “[Owner’sname] d/b/a/ [trade name of Hotel]”).
Manager shall not change the bank or open or close any bank account described in this Article 9 without Owner's prior written approval, which approval Owner shall not unreasonable withhold.
9.4 FinalRemittance. Upon the expiration or termination of this Agreement, after payment of all Gross Operating Expenses for which bills were received to such date, Manager's Management Fee, Reimbursable Expenses, any Termination Fee and any other amounts then due and payable to Manager, all remaining amounts in (i) the Reserve, (ii) the Operating Account and (iii) the Permitted Investments, shall be transferred forthwith to Owner by Manager. Owner shall pay Manager any remaining Management Fee, any Reimbursable Expenses and any other amounts then due and payable to Manager and Owner shall pay, or cause to be paid, and shall hold Manager harmless from and against all Gross Operating Expenses or other costs or expenses received after Manager has so transferred all funds. The provisions hereof shall survive any termination of this Agreement.
9.5 Distributionsof Excess Cash. The Owner agrees that no distributions of cash to Owner or any other party designated by Owner from the Operating Account except in accordance with the following:
Full payment of the following items in the following order has occurred:
| (A) | all due and payable Management Fees,<br> Centralized Services costs, Reimbursable Expenses and/or any other amounts due hereunder<br> to Manager; |
|---|---|
| (B) | due and payable Gross Operating<br> Expenses; and |
| --- | --- |
| (C) | the deposit of any reserves required<br> to be held hereunder, under the Mortgage or the License Agreement. |
| --- | --- |
Upon payment of the same, Manager may distribute from the Operating Account to Owner all sums in the Operating Accounts in excess of the then working capital requirements of the Hotel determined in accordance with Section 9.1 of this Agreement.
ARTICLE 10
BOOKS, RECORDS AND STATEMENTS
10.1 Booksand Records. Manager (at the cost of Owner) shall keep full and adequate books of account and other records reflecting the results of operation of the Hotel in accordance with the Uniform System of Accounts and GAAP. The books of account and all other records relating to or reflecting the operation of the Hotel shall be kept either at the Hotel or at Manager's corporate offices and shall be available to Owner and its representatives and its auditors or accountants, at all reasonable times for examination, audit, inspection and transcription at Owner's sole cost and expense. All of such books and records pertaining to the Hotel including, without limitation, books of account, guest records and front office records at all times shall be the property of Owner. Upon any termination of this Agreement, all of such books and records forthwith shall be turned over to Owner at a location reasonably designated by Owner so as to insure the orderly continuance of the
**Management Agreement - Page** 21
operation of the Hotel, but such books and records shall thereafter be available to Manager at all reasonable times for inspection, audit, examination and transcription for a period of two (2) years. Any books and records relating to Hotel Employees and payroll costs shall be the property of the Manager.
10.2 FinancialReports.
(a) Manager shall deliver to Owner within twenty (20) days following the close of each Accounting Period a monthly profit and loss statement reflecting a comparison of periodic and year-to-date actual revenues and expenses with the Annual Operating Budget as well as a periodic and year-to-date comparison of such actual revenues and expenses with those of the prior Fiscal Year.
(b) Further, Manager shall provide to Owner within twenty (20) days following the close of each Accounting Period a report prepared in accordance with the example set forth in Exhibit B attached hereto and made a part hereof.
(c) Further, within seventy-five (75) days after (i) the end of each Fiscal Year and (ii) the end of the Term of this Agreement, Manager shall deliver to Owner an annual accounting, showing the results of operation of the Hotel during the Fiscal Year and a computation of Total Operating Revenues, Gross Operating Expenses, and any other information necessary to make the computations required hereby or which may be requested by Owner, all for such Fiscal Year. The annual accounting for any Fiscal Year shall be controlling over the interim accountings for such Fiscal Year. Owner shall have the right to conduct an audit of the books.
(d) Further, Manager shall prepare and deliver any additional reports or information as Owner is required to provide under the License Agreement with respect to the operations of the Hotel.
10.3 Auditsby Owner. Owner shall have the right to audit, conducted either by Owner's internal personnel or by a third party auditor retained by Owner at its expense, all items of expense and revenue under this Agreement including, but not limited to, Total Operating Revenues, Gross Operating Expenses, depreciation, the Management Fee and Reserve. Manager shall cooperate and assist with such audit. In the event that an audit reflects an underpayment to Owner or Manager or an overpayment to Manager or Owner, Manager shall correct same by a corrective payment to Owner or Manager, as appropriate, within ten (10) days following notice of the audit results to Manager, subject to Owner’s and Manager’s right to challenge the audit results in accordance with the provisions of Article 30 of this Agreement.
10.4 Segregationof Accounts. In any instance where Manager manages several properties for Owner, Manager shall segregate the income and expenses of each property so that Total Operating Revenues from each property will be applied only to the bills and charges from that property.
ARTICLE 11
**Management Agreement - Page** 22
MANAGER'S MANAGEMENT FEES; TIMING OFPAYMENT TO MANAGER
11.1 **Fees.**For each Fiscal Year or portion thereof, Manager shall receive, by a distribution made by Manager out of Total Operating Revenues at the end of each Accounting Period in respect of its management services hereunder, a fee (collectively, the "ManagementFee(s)") calculated as follows:
(a) the Base Fee set forth on Schedule I; plus
(b) the fees and costs for Centralized Services provided herein.
The Management Fee generally shall be computed separately for each Fiscal Year and shall not be accumulated from Fiscal Year to Fiscal Year. Owner shall reimburse Manager for all Reimbursable Expenses incurred by it in connection with the performance of this Agreement. Any such amount shall be payable within thirty (30) days of billing, and upon request of Owner, Manager shall provide a statement showing in reasonable detail the nature and amount of such expenses, together with supporting documentation reasonably requested by Owner.
11.2 Treatmentof Proceeds of Business Interruption Insurance and Condemnation Awards. In the event of a casualty or condemnation for temporary use resulting in the payment of business interruption insurance (with respect to such casualty) or a condemnation award (with respect to such condemnation for temporary use), the amount of such proceeds shall be considered a part of Total Operating Revenues for the purpose of computing Manager's Management Fee.
ARTICLE 12
INSURANCE
Manager shall procure and maintain (i) the Workers’ Compensation and employer’s liability insurance required under Section 12.2.1 and (ii) Commercial Crime insurance required under Section 12.2.2 and (iii) Employment Practices Liability insurance required under Section 12.2.4 and (iv) at Manager’s sole cost and expense, the professional liability/errors and omissions insurance required under Section 12.2.7. Except to the extent caused by Manager’s or its Affiliate’s negligence or willful misconduct, Owner assumes all risks in connection with the adequacy of any insurance and waives any claim against Manager and its Affiliates for any liability, cost, or expense arising out of any uninsured or under-insured claim. All insurance for the Hotel that is obtained under Manager’s insurance program will terminate effective upon Termination. Except as otherwise provided herein, the costs and expense of the insurance required by the Manager under this Article 12 shall be a Gross Operating Expense or otherwise paid by Owner.
12.1 Property Insurance. Insurance on the Hotel (including the improvements and contents) against loss or damage on an all risk coverage basis and all other risks covered by the usual standard extended coverage endorsements, insuring against loss or damage from windstorm, flood, hail and earthquake, all to the extent available on commercially reasonable terms, with deductible limits in an amount not to exceed $25,000 per occurrence will be procured and
**Management Agreement - Page** 23
maintained by the Owner, provided however with respect to windstorm and earthquake coverage, providing for a deductible reasonably satisfactory to Owner and Manager, all in an amount which shall be sufficient to avoid any coinsurance penalty clause application;
12.1.1 Insurance against loss or damage from explosion of boilers, pressure vessels, pressure pipes and sprinklers, to the extent applicable, installed in the Hotel; and
12.1.2 Business interruption insurance covering net income plus necessary continuing expenses for interruptions caused by any occurrence covered by the insurance referred to in Section 12.1.1 and 12.1.2, for a period of not less than twelve (12) months commencing at the time of loss.
12.2 Operational Insurance.
12.2.1 Workers’ Compensation and employer’s liability insurance as may be required under Applicable Laws covering all of the Hotel Employees, with such deductible limits in an amount not to exceed $25,000 and waiver of subrogation in favor of Owner will be procured and maintained by the Manager.
12.2.2 Fidelity bonds or insurance, subject to a deductible of not more than $25,000 per loss, covering Manager’s on site Hotel Employees in job classifications normally bonded in the hotel industry or as otherwise required by law will be procured and maintained by the Manager. Such coverage shall include a loss payable endorsement in favor of Owner and, to the extent available on commercially reasonable terms, shall include an extension for third party coverage with an endorsement confirming such extension that protects Owner’s property, including, without limitation, monies and securities.
12.2.3 Commercial general public liability insurance and excess umbrella liability insurance, including, but not limited to, coverage against claims for personal injury, death or property damage occurring on, in, or about the Hotel, including, without limitation, innkeeper’s liability, garage liability, garage keeper’s legal liability, liquor liability and automobile insurance on vehicles operated in conjunction with the Hotel, as applicable, with single-limit coverage for personal and bodily injury and bodily damage of at least $1,000,000 per occurrence and $2,000,000 in the aggregate and protection for third party claims will be procured and maintained by the Owner. Manager and any other party or interest requested by Manager shall be included as an additional named insured under the coverages required in this subsection.
12.2.4 Employment practices liability insurance with an extension for third party claims will be procured and maintained by the Manager.
12.2.5 Umbrella liability insurance coverage to a limit of not less than $25,000,000 which shall provide excess coverage of all underlying insurances will be procured and maintained by the Owner.
12.2.6 Manager’s or Manager’s Affiliates’ corporate office professional liability/errors and omissions insurance with a minimum amount of a $2,000,000 limit of liability, covering financial loss arising from errors and omissions committed in the performance of Hotel
**Management Agreement - Page** 24
Management services at the Hotel. Such insurance shall provide coverage for claims arising from professional services performed by Manager for wrongful acts which shall be defined as any actual or alleged negligent act, error or omission, misstatement or misleading statement or personal injury offense committed by the Manager or by any other person or entity acting on Manager’s behalf in the performance of or failure to perform professional services. Personal injury offense also means any actual or alleged false arrest, detention or imprisonment, malicious prosecution, defamation including libel, slander and disparagement, publication or an utterance in violation of an individual’s right to privacy and invasion of the right to private occupancy, including wrongful entry or eviction. The cost of this insurance shall be borne by Manager and is not an Operating Expense.
12.2.7 Cyber Liability Insurance, covering privacy liability, data breach, network security, network extortion, and business interruption, against loss from the failure by the Owner or the Hotel or by an independent contractor for which the Insured is legally responsible (including Manager) to properly handle, manage, store, destroy or otherwise control any : (i) personal information; (ii) third party corporate information in any format provided to the Insured, the Hotel or the Manager and specifically identified as confidential and protected under a nondisclosure agreement or similar contract; (iii) an unintentional violation of the Owner’s, Manager’s or the Hotel’s privacy policy that results in the violation of any law or regulation with respect to privacy and personal information; (iv) a failure of computer network security. Such coverage will provide minimum limits of Five Million Dollars ($5,000,000).
12.3 Cost and Expense. Except as otherwise provided herein, insurance premiums and any costs or expenses respecting the insurance described in this Article 12 shall be a Gross Operating Expense of the Hotel or otherwise paid by Owner. Premiums on policies for more than one year shall be charged pro rata over the period of the policies. Any reserves, losses, costs, damages or expenses which are uninsured, or fall within deductible limits or self-insured retentions, shall be treated as a cost of insurance and shall be a Gross Operating Expense.
12.4 Coverage. All insurance described in this Article 12 to be obtained by Manager (at Owner’s request) may be obtained by endorsement or equivalent means under Manager’s blanket insurance policies, provided that such blanket policies substantially fulfill the requirements specified herein. Deductible limits and self-insured retentions shall be as provided in the blanket policies covering the hotels leased or managed by Manager. In addition, Manager shall not self-insure or otherwise retain such risks or portions thereof as it may respecting other hotels it leases or manages. Notwithstanding the foregoing, all insurance policies and coverages shall be subject to the requirements of all Mortgages and any License Agreement.
12.5 Policies and Endorsements.
12.5.1 Where permitted and as applicable, all insurance provided under this Article 12 shall be carried in the name of Manager. Owner, Fee Owner and each of their officers, members, partners, shareholders, directors, agents, Affiliates, employees, successors and assigns, Licensor and the holder of the Mortgage on the Hotel, if any, shall be named as additional insureds on any insurance hereunder and any losses thereunder shall be payable to the parties as their respective
**Management Agreement - Page** 25
interests may appear. To the extent any insurance is carried in the name of Owner, Manager and its officers, members, partners, shareholders, directors and employees shall be named as additional insureds on any such policies and any losses thereunder shall be payable to the parties as their respective interests may appear. The party procuring such insurance shall deliver to the other party certificates of insurance respecting all policies so procured, including existing, additional and renewal policies and, in the case of insurance about to expire, shall deliver certificates of insurance respecting the renewal policies within ten (10) days of the respective expiration dates.
12.5.2 All policies of insurance provided under this Article 12 shall, to the extent obtainable, have attached an endorsement that such policy shall not be canceled or materially changed without at least thirty (30) days prior notice to Owner, Manager, any Franchisor and the holder of the Mortgage.12.6
12.6. Waiverof Subrogation. Owner and Manager each waive their respective rights of subrogation against each other.
12.7. MortgageRequirements. Insurance shall be maintained in a manner consistent with the terms and conditions of any Mortgage and any conflict between those terms and conditions and the provisions of this Agreement shall be resolved in favor of the Mortgage.
ARTICLE 13
REAL AND PERSONAL PROPERTY TAXES; UTILITIES
13.1 Taxes. Manager shall, on behalf of Owner, pay from the Total Operating Revenues, on or before the dates the same become delinquent, with the right to pay the same in installments to the extent permitted by law, all real estate taxes, all personal property taxes and all betterment assessments levied against the Hotel or any of its component parts. Manager shall promptly deliver to Owner all notices of assessments, valuations and similar documents to be filed by Manager or Owner, which are received from taxing authorities by Manager. Owner shall have the right to hire property tax consultants or like professionals that reasonably provide economic benefits to Owner and the costs thereof shall be a part of Gross Operating Expenses. Notwithstanding the foregoing obligations of Manager, Owner may elect to contest the validity or the amount of any such tax or assessment, provided that such contest does not materially jeopardize Manager's rights under this Agreement. Manager agrees to cooperate with Owner and execute any documents or pleadings required for such purpose, provided Owner agrees to reimburse Manager for any out-of-pocket costs occasioned to Manager by any such contest. At Owner's election, all costs relating to any such contest may be paid from the Operating Account but will not be included as Gross Operating Expenses.
13.2 Utilities,Etc. Manager shall promptly pay all fuel, gas, light, power, water, sewage, garbage disposal, telephone and other utility bills currently as required to operate the Hotel from the Total Operating Revenues.
ARTICLE 14
USE OF NAME
**Management Agreement - Page** 26
14.1 Name. During the Term of this Agreement, the Hotel shall at all times be known by the hotel name designated on Schedule I or by such other name as from time to time may be agreed upon by Owner and Manager. Manager shall not use or employ such name unless such use fully complies with the terms of the License Agreement, if any.
ARTICLE 15
DAMAGE OR DESTRUCTION; CONDEMNATION
15.1 Damageor Destruction. (a) If the Hotel or any portion thereof shall be damaged or destroyed at any time or times during the Term by fire, casualty or any other cause commonly covered by fire and extended coverage insurance and the cost of repairing such damage and restoring the Hotel to substantially its condition immediately prior to such damage or destruction, as reasonably estimated by Owner based upon estimates Owner receives from contractors and other reasonable and customary evidence, will not exceed the sum of $1,000,000 plus adjustments to reflect increases in the CPI for each Fiscal Year after 2019 exclusive of the cost of the foundation and footings ("Minimum Cost"), Owner will, at its own cost and expense (subject to Owner's receipt of insurance proceeds sufficient to pay such costs and expenses) and with due diligence repair and/or restore the Hotel so that after such repair and/or restoration, the Hotel shall be in substantially the same condition as it was immediately prior to such damage or destruction.
(b) If the cost of such repair and/or restoration will, as so reasonably estimated by Owner, exceed the Minimum Cost, then Owner shall, within one hundred twenty (120) days after such damage or destruction, elect by notice to Manager either (x) to carry out such repair and/or restoration, in which case Owner shall complete such repair and/or restoration pursuant to the last sentence of Section 15.1(a) or (y) to terminate this Agreement; should Owner so elect to terminate this Agreement. Upon the termination of this Agreement pursuant to this paragraph, Operator shall be entitled to a Reinstatement Right for a period of 24 months from the date of termination.
(c) In the case of damage or destruction which Owner is required by the preceding provisions of this Section 15.1 to repair or restore or where Owner has not elected under said preceding provisions to terminate this Agreement, Owner shall undertake to so repair and/or restore such damage or destruction and neither Owner nor Manager shall have a right to terminate this Agreement on account of such damage or destruction.
15.2 Condemnation. If the whole of the Hotel shall be taken or condemned in any eminent domain, condemnation, compulsory acquisition or like proceeding by any competent authority or if such a portion thereof shall be taken or condemned as to make it imprudent or unreasonable, in the sole opinion of Owner, to use the remaining portion as a hotel of the type and class immediately preceding such taking or condemnation, then the Term shall terminate as of the date title vests in the condemning authority. Manager has no interest in any award paid to Owner and Manager shall make no claim against the condemnor for any loss to its business as a result of such condemnation or otherwise. If only a part of the Hotel shall be taken or condemned and the taking or condemnation of such part does not, in the opinion of Owner, make it unreasonable or imprudent to operate the remainder as a hotel of the type and class immediately preceding such taking or condemnation, this Agreement shall not terminate, and so much of any award to Owner shall be
**Management Agreement - Page** 27
made available as shall be reasonably necessary for making alterations or modifications of the Hotel, or any part thereof, so as to make it a satisfactory architectural unit as a hotel of similar type and class as prior to the taking or condemnation.
15.3. MortgageRequirements. Actions as to damage or destruction and condemnation shall be taken only in a manner that is consistent with the terms and conditions of the Mortgage and any conflict between those terms and conditions and the provisions of this Agreement shall be resolved in favor of the Mortgage.
ARTICLE 16
EVENTS OF DEFAULT
16.1 ManagerDefaults. Subject to the conditions contained in Section 17.3 below, each of the following shall constitute an Event of Default by Manager:
(a) The failure of Manager to pay any sum of money to Owner provided for herein when the same is payable, if such failure is not cured within ten (10) days after written notice specifying such failure is given by Owner to Manager
| (b) | An assignment by Manager in violation<br> of the provisions of Article 23 hereof. |
|---|
(c) If Manager shall fail to keep, observe or perform any other material covenant, agreement, term or provision of this Agreement to be kept, observed or performed by Manager and such failure shall continue for a period of thirty (30) days after written notice specifying such failure given by Owner to Manager, or if Manager due to any act or omission on the part of Manager and without the fault of Owner, shall fail to maintain the Permits and such failure shall continue for a period of thirty (30) days after written notice specifying such failure given by Owner to Manager; provided that if such failure is incapable of cure within such thirty (30) day period, then the cure period shall be extended provided that Manager commenced the cure during such initial thirty (30) day period and thereafter diligently and continuously pursues the cure thereof to completion.
(d) If because of any act or omission on the part of Manager, and without the fault of Owner, either (i) the License Agreement or (ii) any required license for the sale of alcoholic beverages at the Hotel, is at any time suspended, terminated or revoked for a period of more than thirty (30) consecutive days, provided, however, if, at the end of such thirty (30) day period the cure has not been effectuated notwithstanding Manager's diligent and continuous attempts to cure, then the cure period shall be extended for an additional period of ninety (90) days.
(e) If Manager shall fail to maintain and operate the Hotel in accordance with the standards required under Section 4.1 and such failure shall not be due to a refusal on the part of Owner to approve the Annual Plan submitted by Manager under Section 4.4 or Owner's failure to properly provide funds requested pursuant to the provisions of Article 9 and such failure shall continue for a period of sixty (60) days after written notice by Owner to Manager specifying the matters or conditions which constitute the basis for such Event of Default, provided that if such failure is not reasonably capable of cure within such sixty (60) day period, then the cure period
| Management Agreement - Page 28 |
| --- |
shall be extended provided that Manager commences the cure during such initial sixty (60) day period and thereafter diligently and continuously pursues the cure thereof to completion.
(f) If Manager shall apply for or consent to the appointment of a receiver, trustee or liquidator of Manager or of all or a substantial part of its assets, admit in writing its inability to pay its debts as they come due, make a general assignment for the benefit of creditors, take advantage of any insolvency law, or file an answer admitting the material allegations of a petition filed against Manager in any bankruptcy, reorganization or judgment or if an order, judgment or decree shall be entered by any court of competition jurisdiction, on the application of a creditor, adjudicating Manager bankrupt or insolvent or approving a petition seeking reorganization of Manager or appointing a receiver, trustee or liquidator of Manager or of all or a substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of ninety (90) consecutive days.
(g) The filing of a voluntary petition in bankruptcy or insolvency or a petition for liquidation or reorganization under any bankruptcy law by Manager, or Manager shall consent to, acquiesce in, or fail timely to controvert, an involuntary petition in bankruptcy, insolvency or an involuntary petition for liquidation or reorganization filed against it.
(h) The filing against Manager of a petition seeking adjudication of Manager as insolvent or seeking liquidation or reorganization or appointment of a receiver, trustee or liquidator of all or a substantial part of Manager's assets, if such petition is not dismissed within ninety (90) days.
(i) Failure of Manager (but excluding such a failure which results from the failure by Owner to provide the necessary funds therefor) to maintain at all times throughout the term hereof all of the insurance required to be maintained by Manager under Article 12, if such failure is not cured within fifteen (15) days after written notice specifying such failure is given by Owner to Manager.
(j) The fraud, gross negligence, willful misconduct or criminal conduct of or by Manager in connection with the Hotel.
16.2 OwnerDefaults. Each of the following shall constitute an Event of Default by Owner:
(a) The failure of Owner to pay or furnish to Manager any money Owner is required to pay or furnish to Manager in accordance with the terms hereof on the date the same is payable, if such failure is not cured within five (5) days after written notice specifying such failure is given by Manager to Owner. If any sum of money is not paid within five (5) days following the date same becomes due and payable under this Agreement, and Manager has advanced such sum on behalf of Owner, such sum shall bear interest at the Default Rate from the date Manager advanced such sum on behalf of Owner until the date Owner actually pays such sum. If the failure to pay relates to the Management Fee, such sum shall bear interest at the Default Rate from the date due until the date actually paid.
**Management Agreement - Page** 29
(b) If because of a default under the Mortgage, if any, not caused by the act or omission of Manager, the Mortgage shall be foreclosed, or the Hotel sold in lieu of foreclosure.
(c) If Owner shall apply for or consent to the appointment of a receiver, trustee or liquidator of Owner of all or a substantial part of its assets, or admit in writing its inability to pay its debts as they come due, make a general assignment for the benefit of creditors, take advantage of any insolvency law, or file an answer admitting the material allegations of a petition filed against Owner in any bankruptcy, reorganization or insolvency proceeding, or if an order, judgment or decree shall be entered by any court of competent jurisdiction, on the application of a creditor, adjudicating Owner a bankrupt or insolvent or approving a petition seeking reorganization of Owner or appointing a receiver, trustee or liquidator of Owner or of all or a substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of ninety (90) consecutive days.
(d) The filing of a voluntary petition in bankruptcy or insolvency or a petition for liquidation or reorganization under any bankruptcy law by Owner, or Owner shall consent to, acquiesce in, or fail timely to controvert, an involuntary petition in bankruptcy, insolvency or an involuntary petition for liquidation or reorganization filed against it.
(e) The filing against Owner of a petition seeking adjudication of Owner as insolvent or seeking liquidation or reorganization or appointment of a receiver, trustee or liquidator of all or a substantial part of Owner's assets, if such petition is not dismissed within ninety (90) days.
(f) Failure of Owner to maintain at all times throughout the term hereof all of the insurance required to be maintained by Owner under Article 12, if such failure is not cured within fifteen (15) days after written notice specifying such failure is given by Manager to Owner.
(g) The failure of Owner to perform, keep or fulfill any of the other covenants, undertakings, obligations or conditions set forth in this Agreement, or the failure of Owner to approve expenditures or to authorize procedures necessary to maintain the standards of the Hotel in accordance with the Operating Standards, if such failure shall continue for a period of sixty (60) days after written notice by Manager or Licensor to Owner specifying the matters or conditions which constitute the basis for such Event of Default, provided that if such failure is incapable of cure within such sixty (60) day period, then the cure period shall be extended provided that Owner commences the cure during such initial sixty (60) day period and thereafter diligently and continuously pursues the cure thereof to completion.
ARTICLE 17
TERMINATION UPON EVENT OF DEFAULT; OTHERREMEDIES; OTHER MANAGER TERMINATION
17.1 Termination. Upon the occurrence of an Event of Default, in addition to and cumulative of any and all rights and remedies available to the non-defaulting party under this Agreement, at law or in equity, the non-defaulting party may: (a) terminate this Agreement without penalty, effective upon receipt of written notice of termination to the defaulting party, provided that termination may be effective immediately in the case of fraud, gross negligence, willful
**Management Agreement - Page** 30
misconduct, criminal conduct or misappropriation of funds; and (b) pursue any and all other remedies and damages available to the non-defaulting party at law or in equity. In addition to and cumulative of the foregoing, upon the occurrence of any Event of Default on the part of Owner, all Management Fees, Reimbursable Expenses and all other sums payable to Manager under this Agreement shall be immediately due and payable without notice. In no event shall the provisions of this Agreement with respect to the any allowed termination of this Agreement under certain circumstances be construed as defining or limiting the amount recoverable by Manager from Owner by reason of any Event of Default on the part of Owner.
| 17.2 | Manager’s Rights to Perform. |
|---|---|
| (a) | If Owner shall fail to make any<br> payment or to perform any act required of Owner pursuant to this Agreement, Manager may<br> (but shall not be obligated to), without further notice to, or demand upon, Owner and<br> without waiving or releasing Owner from any obligations under this Agreement, make such<br> payment (either with its own funds or with funds withdrawn for such purpose from the<br> Operating Accounts or the Reserve) or perform such act. All sums so paid by Manager and<br> all necessary incidental costs and expenses incurred by Manager in connection with the<br> performance of any such act, together with interest thereon at the Default Rate from<br> the date of making such expenditure by Manager, shall be payable to Manager on demand. |
| --- | --- |
| (b) | Manager shall have the right to<br> set-off against any payments to be made to Owner by Manager under any provision of this<br> Agreement and against all funds from time to time in the Operating Accounts and the Reserve,<br> any and all liabilities of Owner to Manager. Manager may withdraw from the Operating<br> Accounts and the Reserve from time to time such amounts as Manager deems desirable in<br> partial or full payment of all or any portion of said liabilities, the amount of such<br> withdrawals to be paid by Owner to Manager on demand and to be replaced in the respective<br> account and fund. |
| --- | --- |
17.3 ExcusedNon-Performance. Notwithstanding any contrary provision of this Agreement, Manager shall be excused from the performance of any obligation hereunder (including the obligation to operate the Hotel in conformity with the Operating Standards), and shall not be deemed in default, for such period of time as such performance is prevented by a breach of this Agreement by Owner or a limitation imposed on Manager’s ability to expend funds in respect of the Hotel, due to Owner’s act or Owner’s failure to act upon Manager’s request for funds or payment of Gross Operating Expenses, including, Working Capital and/or payroll costs (provided Manager has provided Owner with reasonably timely notice of the need for additional funds and that the failure to expend or make payment of the same shall reasonably prevent Manager from meeting such obligation).
ARTICLE 18
OWNER'S ADDITIONAL TERMINATION RIGHTS
18.1 Saleof the Hotel. If the Hotel is sold or is otherwise disposed of the Hotel any interests therein, to a bona fide third-party (the "Third-Party Purchaser"), this Agreement will terminate
**Management Agreement - Page** 31
effective upon the consummation of the closing of such sale. Owner shall provide Manager with written notice of termination of this Agreement not less than sixty (60) days prior to the scheduled date of closing of the sale of the Hotel, provided, however, if such a sale does not actually occur, the notice of termination shall be deemed ineffective and no such termination shall occur. Upon such sale, the Manager shall be entitled to a termination fee equal to the average monthly Base Fees payable hereunder prior to such sale multiplied by 12.
18.2 NoOther Termination Right. Except as expressly provided herein, the Owner shall not have any other “without cause” or similar discretionary right to terminate the Manager hereunder.
ARTICLE 19
INTENTIONALLY OMITTED
ARTICLE 20
TRANSFER TO OWNER UPON TERMINATION
Upon the termination or expiration of the Term of this Agreement, whether due to the occurrence of an Event of Default or otherwise, Manager shall cooperate with Owner and shall execute those documents or instruments reasonably requested by Owner in connection with the transfer or reissue the Permits, without payment of a fee to Manager, to Owner or its nominee, provided that Manager shall not be required to incur liability or out of pocket cost in connection with such transfer. Without limiting the generality of the foregoing, Manager shall cause its officials to execute documents and visit licensing authorities, along with Owner's representatives, in order to expedite the orderly transfer or reissuance to Owner or its designee of the Permits. Following the termination or expiration of the Term, Manager will prepare provide a final accounting report in accordance with the provisions set forth in Section 10.2(c) of this Agreement and in the same manner and scope as previously provided by Manager following prior Fiscal Years under this Agreement. In the event that Owner requests additional reports or assistance from Manager following the termination or expiration of this Agreement, Owner shall pay to Manager the such reasonable fees as determined by the Manager through the date on which such additional services or assistance are to be provided. In the event that this Agreement terminates due to any reason other than a default by Manager under this Agreement, a sufficient number of Hotel Employees will be hired by Owner or its successor, assign or designee, and retained for at least 90 days thereafter, so as not to cause a “mass layoff” or “plant closing”, as defined in the Workers Adjustment and Retraining Act, 29 USC, sec 2101 et seq.
ARTICLE 21
NOTICES
All notices, elections, acceptances, demands, consents and reports (collectively "notice") provided for in this Agreement shall be in writing and shall be given to the other party at the address set forth below or at such other address as any of the parties hereto may hereafter specify in writing.
**Management Agreement - Page** 32
| To Owner: | PHR GANO OPCO SUB, LLC |
|---|---|
| 1140 Reservoir Avenue | |
| Cranston, RI 02920 | |
| Attn: Gregory D. Vickowski | |
| With a copy to: | Ron M. Hadar |
| General Counsel | |
| Procaccianti Companies | |
| 1140 Reservoir Avenue | |
| Cranston, Rhode Island 02920 | |
| Telephone: (401) 946-4600 | |
| Email: rhadar@procaccianti.com | |
| Facsimile: (401) 943-6320 | |
| To Manager: | 1140 Reservoir Avenue |
| Cranston, Rhode Island 02920 | |
| Attn: Elizabeth A. Procaccianti | |
| Telephone: (401) 946-4600 | |
| Facsimile: (401) 943-6320 | |
| With copy to: | |
| Natasha Ruane, Esq. | |
| Corporate Counsel | |
| Procaccianti Companies | |
| 1140 Reservoir Avenue | |
| Cranston, Rhode Island 02920 | |
| Telephone: (401) 946-4600 | |
| Facsimile: (401) 943-6320 |
Such notice or other communication may be given by Federal Express or other nationally recognized overnight carrier or by electronic facsimile in which case notice shall be deemed given upon confirmed delivery. Notice may be mailed by United States registered or certified mail, return receipt requested, postage prepaid, deposited in a United States post office or a depository for the receipt of mail regularly maintained by the post office. If mailed, then such notice or other communication shall be deemed to have been received by the addressee on the fifth (5^th^) day following the date of such mailing. Such notices, demands, consents and reports may also be delivered by hand, in which case it shall be deemed received upon delivery.
ARTICLE 22
CONSENT AND APPROVAL
Except as herein otherwise provided, whenever in this Agreement the consent or approval of Manager or Owner is required, such consent or approval shall not be unreasonably withheld or
**Management Agreement - Page** 33
delayed. Such consent or approval shall also be in writing only and shall be executed only by an authorized officer or agent of the party granting such consent or approval.
ARTICLE 23
NON-ASSIGNABILITY
This Agreement shall not be assignable by Manager or Owner; provided however, that either party shall be entitled to assign this Agreement to an Affiliate of such party as part of a modification to such party’s company structure in which all or substantially all of such party’s assets are transferred to an Affiliate of such party; and Manager shall have the right to assign its rights to receive payments under this Agreement as security for indebtedness or other obligations. Notwithstanding the foregoing, any “assignment” by Manager to a successor entity resulting from a merger, acquisition, disposition or consolidation of all or substantially all of the equity or assets of Manager shall be permitted and not require the consent of Owner hereunder so long as (i) either (A) the “Manager” under this Agreement remains controlled by at least any two of James A. Procaccianti, Elizabeth A. Procaccianti, Gregory D. Vickowski, Robert Leven, or Mark Bacon (the “Executive Team”) or, (B) if Manager is itself, or is controlled by, a corporation whose stock is listed and publicly traded over-the-counter on a nationally recognized stock exchange in the United States, so long as at least two (2) members of the Executive Team are on the Board of that corporation, (ii) the assignee continues to comply with all of the obligations of Manager hereunder, (iii) the assignee, in Owner’s good faith reasonable judgment, has the skill, experience, professional resources and financial ability to perform under this Agreement and can provide the comparable operating, management and financial reporting functions of Manager under this Agreement consistent with the Operating Standards, including without limitation providing the Centralized Services and holding the right to use all trademarks and proprietary information related to the Hotel, and (iv) no such assignment shall cause Owner to be in default under the Franchise Agreement or under the Mortgage.
ARTICLE 24
INDEMNITY
24.1 Indemnityby Manager. To the extent that Owner shall not be fully covered by insurance required to be maintained pursuant to this Agreement, Manager shall indemnify, defend and hold harmless Owner, any director, officer, agent or officer or any corporate partner thereof, from and against any damages, loss, liability, cost, action, cause, claim or expense, including attorneys' fees, arising out of or in connection with the management and operation of the Hotel including, without limitation, all employment related claims and litigation (collectively, the "Liabilities"). The costs of such indemnity shall be borne as follows:
(a) If the Liabilities are attributable to the gross negligence or willful misconduct of the Executive Personnel, the cost thereof shall be borne solely by Manager and not paid out of Total Operating Revenues.
(b) If the Liabilities are attributable to any other reason or cause, the cost of such indemnification shall be paid as a Gross Operating Expense of the Hotel or failing payment of the same, by Owner.
**Management Agreement - Page** 34
Manager's obligations under this Section 24.1 shall not include any losses, expenses or damages arising from any matters relating to the structural integrity of the Hotel or other matters relating to defects in design, materials or workmanship in the construction of the Hotel.
24.2 Indemnityby Owner. To the extent that Manager shall not be fully covered by insurance required to be maintained pursuant to this Agreement or if, after giving effect to the provisions of Section 24.1(b) of this Agreement, Total Operating Revenues are not sufficient to pay all Liabilities, Owner shall indemnify, defend and hold harmless Manager and its directors, officers, employees and agents from and against any damages, loss, liability, cost, action, cause, claim or expense, including attorneys' fees, arising out of, or incurred in connection with the management and operation of the Hotel.
24.3 Survival. The provisions of this Article 24 shall survive the expiration or earlier termination of this Agreement.
ARTICLE 25
PARTIAL INVALIDITY
In the event that any one or more of the phrases, sentences, clauses or paragraphs contained in this Agreement shall be declared invalid by the final and unappealable order, decree or judgment of any court, this Agreement shall be construed as if such phrases, sentences, clauses or paragraphs had not been inserted, unless such construction would substantially destroy the benefit of the bargain of this Agreement to either of the parties hereto.
ARTICLE 26
MISCELLANEOUS
26.1 Disputes. Whenever any issue or dispute arises under this Agreement relating to the Annual Operating Budget, the Approved Capital Budget and or the calculation and payment of the Reserves, and the Management Fee, such issue or dispute shall be resolved utilizing the Uniform System of Accounts and the by application of GAAP consistently applied.
26.2 FurtherAssurances. Owner and Manager shall execute and deliver all other appropriate supplemental agreements and other instruments, and take any other action necessary to make this Agreement fully and legally effective, binding and enforceable as between them and as against third parties.
26.3 Waiver. The waiver of any of the terms and conditions of this Agreement on any occasion or occasions shall not be deemed a waiver of such terms and conditions on any future occasion.
26.4 Successorsand Assigns. Subject to and limited by Article 23, this Agreement shall be binding upon and inure to the benefit of Owner, its successors and permitted assigns, and shall be binding upon and inure to the benefit of Manager, its successors and permitted assigns.
**Management Agreement - Page** 35
26.5 GoverningLaw. This Agreement shall be construed, both as to its validity and as to the performance of the parties, in accordance with the laws of the State of Rhode Island.
26.6 Compliancewith Mortgage and License Agreement. In carrying out their respective duties and obligations under the terms of this Agreement, Owner and Manager shall take no action that could reasonably be expected to constitute a material default under any Mortgage or the License Agreement and will take such actions as are reasonably necessary to comply therewith.
26.7 Amendments. This Agreement may not be modified, amended, surrendered or changed, except by a written document signed by the Owner and Manager agreeing to be bound thereby.
26.8 EstoppelCertificates. Owner and Manager agree, at any time and from time to time, as requested by the other party, upon not less than ten (10) days' prior written notice, to execute and deliver to the other a statement certifying that this Agreement is unmodified and in full force and effect (or if there have been modifications, that the same are in full force and effect as modified and stating the modifications), certifying the dates to which required payments have been paid, and stating whether or not, to the best knowledge of the signer, the other party is in default in performance of any of its obligations under this Agreement, and if so, specifying each such default of which the signer may have knowledge, it being intended that such statement delivered pursuant hereto may be relied upon by others with whom the party requesting such certificate may be dealing
26.9 UnavoidableInterruptions. Subject to the express limitations set forth in this Agreement and excluding those obligations that accrue prior to the occurrence of an event of Unavoidable Interruption or obligations that, if not performed, would cause a material adverse effect on the Hotel or its operations (for instance, the requirement to maintain the Permits or insurance obligations hereunder), if either party's failure to comply with, perform or satisfy any representation, warranty, covenant, undertaking, obligation or condition set forth in this Agreement is caused by or due to, in whole or in part, any Unavoidable Interruption, such representation, warranty, covenant, undertaking, obligation or condition (except regarding insurance coverages and monetary payments) shall be adjusted to the extent and for so long as such party's failure is caused by or due to, in whole or in part, such Unavoidable Interruption.
26.10 InspectionRights. Owner shall have the right to inspect the Hotel and examine the books and records of Manager pertaining to the Hotel at all reasonable times during the Term upon reasonable notice to Manager, and Owner and the holder of any Mortgage shall have access to the Hotel and the books and records pertaining thereto at all times during the Term to the extent necessary to comply with the terms of any Mortgage, all to the extent consistent with applicable law and regulations and the rights of guests, tenants and concessionaires of the Hotel.
26.11 Subordination. This Agreement, any extension hereof and any modification hereof shall be subject and subordinate to a Mortgage as provided therein. The provisions of this Section shall be self-operative and no further instrument of subordination shall be required; however, Manager will execute and return to Owner (or to Lender, as designated by Owner) such documentation as Owner or Lender may reasonably request to evidence the subordination of this Agreement to the Mortgage.
**Management Agreement - Page** 36
26.12 Effectof Approval of Plans and Specifications. Owner and Manager agree that in each instance in this Agreement or elsewhere wherein Manager is required to give its approval of plans, specifications, budgets and/or financing, no such approval shall imply or be deemed to constitute an opinion by Manager, nor impose upon Manager any responsibility for the design or construction of additions to or improvements of the Hotel, including but not limited to structural integrity or life/safety requirements or adequacy of budgets and/or financing. The scope of Manager's review and approval of plans and specifications is limited solely to the adequacy and relationship of spaces and aesthetics of the Hotel in order to comply with the Operating Standards.
26.13 EntireAgreement. This Agreement constitutes the entire agreement between the parties relating to the subject matter hereof, superseding all prior agreements or undertakings, oral or written.
26.14 Timeis of the Essence. Time is of the essence in this Agreement.
26.15 Interpretation. No provision of this Agreement shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or dictated such provision.
26.16 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and need not be signed by more than one of the parties hereto and all of which shall constitute one and the same agreement.
26.17 NoElectronic Transactions. The parties hereby acknowledge and agree that this Agreement shall not be executed, entered into, altered, amended or modified by electronic means. Without limiting the generality of the foregoing, the parties hereby agree that the transactions contemplated by this Agreement shall not be conducted by electronic means, except as specifically set forth in Article 21 of this Agreement.
26.18 ProhibitedPersons and Transactions.
(a) Manager is not, and shall not become, a person or entity with whom U. S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control ("OFAC") of the Department of the Treasury (including those named in OFAC's Specially Designated and Blocked Person's List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, or Support Terrorism), or other governmental action (such persons and entities being "Prohibited Persons").
(b) Owner is not and shall not become a Prohibited Person.
26.19 **Confidentiality.**Owner and Manager agree to keep the terms and conditions of all leases and other occupancy agreements in effect at the Hotel (if any) and all other accruements relating to the Hotel, together with all information and data obtained, possessed, or generated by Manager in connection with the Hotel (collectively, "Privileged Information"), strictly
**Management Agreement - Page** 37
confidential and not to make any public announcements or any disclosures to any third parties, either orally or in writing, with respect to any Privileged Information without the express written consent of the other party hereunder; provided, however, the restrictions imposed hereby shall not apply to any Privileged Information (1) which is required to be disclosed in order to comply with any law, ordinance, governmental decree or any rule, regulation or decree of any interested governmental body or (2) which must otherwise be disclosed to relevant third parties, including accountants, attorneys and lenders, in the course of reasonable and diligent management and operation of the Hotel or the business of Owner, or any subsidiary or Affiliate of Owner or Manager. If Manager makes such disclosure, it shall notify such third party of this provision and of the requirement of Owner for confidentiality. The provisions of this Section 26.19 shall survive the expiration or termination of this Agreement for two (2) years after any termination or expiration of this Agreement.
26.20 NoThird Party Rights. This Agreement shall inure solely to the parties hereto. Notwithstanding any other provision of this Agreement, no third party shall have any rights pursuant to the terms of this Agreement.
ARTICLE 27
NO REPRESENTATIONS AS TO INCOME OR FINANCIALSUCCESS OF HOTEL
In entering into this Agreement, Manager and Owner acknowledge that neither Owner nor Manager has made any representation to the other regarding projected earnings, the possibility of future success or any other similar matter respecting the Hotel, and that Manager and Owner understand that no guarantee is made to the other as to any specific amount of income to be received by Manager or Owner or as to the future financial success of the Hotel.
ARTICLE 28
REPRESENTATIONS OF MANAGER
In order to induce Owner to enter into this Agreement, Manager does hereby make the following representations and warranties:
(a) the execution of this Agreement is permitted by the certificate of formation and partnership agreement of Manager and this Agreement has been duly authorized, executed and delivered and constitutes the legal, valid and binding obligation of Manager enforceable in accordance with the terms hereof;
(b) to the best knowledge of Manager, there is no claim, litigation, proceeding or governmental investigation pending, or, as far as is known to Manager, threatened, against or relating to Manager, the properties or business of Manager or the transactions contemplated by this Agreement which does, or may reasonably be expected to, materially and adversely affect the ability of Manager to enter into this Agreement or to carry out its obligations hereunder, and to the best knowledge of Manager, there is no basis for any such claim, litigation, proceedings or governmental investigation, except as has been fully disclosed in writing to Owner; and
**Management Agreement - Page** 38
(c) neither the consummation of the transactions contemplated by this Agreement on the part of Manager or to be performed, nor the fulfillment of the terms, conditions and provisions of this Agreement, conflicts with or will result in the breach of any of the terms, conditions or provisions of, or constitute a default under, any agreement, indenture, instrument or undertaking to which Manager is a party or by which it is bound.
ARTICLE 29
REPRESENTATIONS OF OWNER
In order to induce Manager to enter into this Agreement, Owner does hereby make the following representations and warranties:
(a) the execution of this Agreement is permitted by the Limited Liability Company Agreement of Owner and this Agreement has been duly authorized, executed and delivered and constitutes the legal, valid and binding obligation of Owner enforceable in accordance with the terms hereof;
(b) there is no claim, litigation, proceeding or governmental investigation pending, or as far as is known to Owner, threatened, against or relating to Owner, the properties or business of Owner or the transactions contemplated by this Agreement which does, or may reasonably be expected to, materially and adversely affect the ability of Owner to enter into this Agreement or to carry out its obligations hereunder, and there is no basis for any such claim, litigation, proceedings or governmental investigation, except as has been fully disclosed in writing to Manager; and
(c) neither the consummation of the transactions contemplated by this Agreement by this Agreement on the part of Owner to be performed nor the fulfillment of the terms, conditions and provisions of this Agreement, conflicts with or will result in the breach of any of the terms, conditions or provisions of, or constitute a default under, any agreement, indenture, instrument or undertaking to which Owner is a party or by which it is bound.
ARTICLE 30
DISPUTE RESOLUTION
Except as specifically provided in Section 4.4 of this Agreement, Owner and Manager agree that any dispute between the parties related to or arising out of this Agreement that cannot be amicably settled by the parties hereunder, shall first be submitted for non-binding mediation before resorting to any litigation, equitable proceeding or other enforcement action. Such mediation shall be held within a twenty-five mile radius of the Hotel (or such other location mutually agreed by the parties) and the parties shall cooperate in good faith to agree on a mediator who shall be a retired or semi-retired judge having at least ten (10) years of experience on the bench hearing complex commercial transactions. If the parties hereto have failed to designate, by a joint written statement, a mediator within thirty (30) days following the date of a written request therefor by either Manager or Owner to the other, then either Owner or Manager may notify the local office of the American Arbitration Association ("AAA") or JAMS and request such entity to select a person to act as the mediator to assist in the resolution of the dispute. The mediation will be a non-binding conference between the parties conducted in accordance with the applicable rules and procedures of AAA or JAMS (as
**Management Agreement - Page** 39
determined by the mediator). The compensation of the mediator and all related expenses shall be borne equally by the parties, each of whom shall bear their own costs, irrespective of the outcome of the mediation. If any dispute remains unresolved between the parties after the mediation is complete, then either party shall be entitled to pursue its rights and remedies at law or in equity. The provisions of this Article 30 shall survive the expiration or earlier termination of this Agreement.
ARTICLE 31
ADDITIONAL OBLIGATIONS OF MANAGER
Manager acknowledges that Owner is vitally interested in the qualifications of the individuals designated as the general manager and the director of sales of the Hotel. Manager shall, from time to time, consult with Owner and obtain Owner's approval as to the appointment of individuals to such positions; provided, however, Owner and Manager acknowledge that nothing in this Article is intended to limit or negate the authority of Manager elsewhere provided in this Agreement to remove and replace, in its sole discretion, the Executive Personnel of the Hotel.
ARTICLE 32
TERMINATION OF THE LICENSE AGREEMENT
Owner reserves and shall have the absolute right in its sole and unfettered discretion, at any time and without the consent or approval of (but with notice to) Manager, to terminate the License Agreement, provided, however, that (i) Owner shall have no such right in order to establish its own independent operations, such as an operation without a franchise or license or in its own hotel name; (ii) in the event of such a termination by Owner, Manager shall have the right of approval (which right shall be reasonably exercised) of any new franchise or license for the Hotel; and (iii) if Owner's decision to terminate the License Agreement is made without the consent of Manager, then the provisions of Section 18.2 of this Agreement shall no longer apply.
ARTICLE 33
RECOURSE
Any provision of this Agreement to the contrary notwithstanding, Manager hereby agrees that no personal, partnership or corporate liability of any kind or character (including, without limitation, the payment of any judgment) whatsoever now attaches or at any time hereafter under any condition shall attach to Owner or any of Owner's constituent entities and affiliates or any mortgagee for payment of any amount payable under this Agreement or for the performance of any obligation under this Agreement. The exclusive remedies of Manager for the failure of Owner to perform any of its obligations under this Agreement shall be to proceed against the interest of Owner in and to the Hotel for Manager's actual, out-of-pocket damages (and not any consequential, punitive or exemplary damages), and Owner shall not be personally liable for any deficiency.
Notwithstanding any other provision of this Agreement to the contrary, the liability of Manager arising out of or in connection with this Agreement and the transactions and obligations contemplated hereby shall at all times be limited to the aggregate amount of management fees
**Management Agreement - Page** 40
payable to Manager under this Agreement during the initial Term (the “Manager’s Liability Cap”), and in any litigation, arbitration or any other dispute, neither Owner nor any other party shall seek or have recourse to any other asset of Manager’s members, partners, directors, officers, employees, associates, agents, executives or affiliates. Without limiting the foregoing, neither Manager nor any party associated with Manager shall have any liability in excess of the Manager’s Liability Cap for any act by Manager (either prior to or during the Operating Term of or after the expiration or earlier termination of this Agreement); provided, however, that the Manager Liability Cap shall not apply to any liability of Manager or its Affiliates resulting from the fraud, gross negligence or willful misconduct of Manager or its Affiliates. Notwithstanding anything contained in this Agreement to the contrary in no event shall Manager be liable under this Agreement for any consequential, speculative, punitive, treble, or other special damages.
The rest of this page is intentionallyleft blank.
**Management Agreement - Page** 41
IN WITNESS WHEREOF, Owner has caused this Agreement to be executed and its seal affixed by its partners duly authorized thereunto and Manager has caused this Agreement to be executed and its seal affixed by its officer duly authorized thereunto, the day and year first above written, in duplicate.
| OWNER: | |
|---|---|
| PHR GANO OPCO SUB, LLC | |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Title: | Authorized Representative |
| MANAGER: | |
| GANO HOTEL MANAGER, LLC | |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Title: | Manager |
**Signature Page to Management Agreement - Solo Page**
SCHEDULEI
| Trade Name/Brand of Hotel: | Hilton Garden Inn Providence |
|---|---|
| Physical Address of Hotel: | 220 India Street, Providence RI |
| Number of Guest Rooms: | 137 |
| Licensor: | Hilton Franchise Holding, LLC |
| Initial Working Capital: | $TBD |
| Base Fee: | The base fee payable (the "Base Fee")<br> shall be an amount equal to three percent (3.0%) of Total Operating Revenues (which exclude the gross receipts of any licensees,<br> lessees and concessionaires) in respect of any applicable period. |
| Incentive Fee: | None |
**Schedules – Page 1**
SCHEDULE II
Gross Operating Expenses
1.1 Gross Operating Expenses. “Gross Operating Expenses” means, except to the extent excluded below or in the Agreement, all costs and expenses of operating the Hotel during the Term pursuant to this Agreement attributable to the Accounting Period, Fiscal Year or portion of a Fiscal Year under consideration including, without limitation, the following:
(a) salaries and wages of Hotel Employees, including employee benefits, costs of payroll, and payroll and similar taxes but only to the extent such expenses are attributable to such Hotel Employee’s employment at the Hotel;
(b) costs incurred with respect to sales and other revenues generated at the Hotel;
(c) the costs of all utilities and services including, without limitation, heat, air conditioning, water, light and power, local and long distance telephone service, and data communication and computer services, except as such costs may be appropriately capitalized in accordance with GAAP;
(d) the costs of all food and beverages sold or consumed and of all Operating Equipment and Inventories and Consumable Supplies placed in use, including the sale, consumption and placement in use of Operating Equipment and Supplies initially supplied pursuant to this Agreement;
(e) the costs of all other goods and services provided, arranged or obtained by Manager in connection with its operation of the Hotel, including, without limitation, public utilities charges and the cost of accounting systems, data processing, payroll processing and telecommunications equipment, office supplies, services performed by third parties and all other supplies, services and hotel equipment of the nature and type normally used by operators of hotels similar to the Hotel and as is common in the industry, except as such costs may be appropriately capitalized in accordance with GAAP;
(f) all costs and fees of any arbitrators, auditors, lawyers and similar persons who perform services required or permitted pursuant to this Agreement;
(g) all costs and expenses of technical consultants and specialized operational experts or personnel for services rendered to the Hotel, except if such costs are incurred in connection with a capital transaction outside of the normal operations of the Hotel;
(h) all expenses related to marketing of the Hotel;
(i) the costs of maintaining books of account and other records and producing statements pursuant to Article 7 of this Agreement;
**Schedules – Page 2**
(j) the actual amount of any goods and services or other similar value added taxes imposed by any governmental authority having jurisdiction and paid as a result of the operations of the Hotel, less any credits with respect to such taxes otherwise granted with respect to the operations of the Hotel;
(k) reasonable reserves for bad debts in accordance with GAAP;
(l) any insurance premiums for insurance obtained by or on behalf of Manager or Owner with respect to the Hotel, except for insurance premiums for Manager’s or Manager’s Affiliates’ corporate office professional liability/errors and omissions;
(m) any deposits into any Reserve;
(n) all Property taxes and any similar taxes, charges and assessments against the Hotel;
(o) any fees payable under the License Agreement to Licensor;
(p) the Base Fee and the Centralized Services;
(q) Allocated Services;
(r) the cost of non-capital repairs to and maintenance of the Hotel;
(s) all expenses otherwise contemplated by this Agreement that are to be treated or contemplated to be treated as Gross Operating Expenses; and
(t) all expenses reimbursable to Manager pursuant to the terms and conditions of this Agreement.
1.2 Exclusions from Gross Operating Expenses. For purposes of calculating the fees payable pursuant to this Agreement, Operating Expenses shall not include any of the following:
(a) any repayments of advances by Manager on account of Capital Expenditures pursuant to this Agreement;
(b) any payments from the FF&E Reserve, whether principal or interest, relating to capital improvements to or encumbrances with respect to the Hotel, including, without limitation, any payments relating to expenditures for initial FF&E and replacements or substitutions therefor or additions thereto;
(c) land or building rental or mortgage payments;
(d) depreciation and amortization expenses, including costs of capital improvements which are made in accordance with this Agreement;
(e) income, capital or franchise taxes of a party hereto;
**Schedules – Page 3**
(f) any Capital Expenditures;
(g) excise, sales, use and other taxes (including room taxes) or similar charges (i) collected directly from patrons or guests or as part of the sale price of any goods or services or displays, (ii) remitted to a governmental authority and (iii) excluded from Gross Revenues;
(h) salaries, wages, asset management fees or amounts paid to individuals or entities by or upon the instruction of Owner to the extent such individuals or entities are not under the supervision or direction of Manager;
(i) interest payable on any credit facility provided to fund working capital; and
(j) expenses of Owner related to asset management.
**Schedules – Page 4**
SCHEDULE III
Total Operating Revenues
1.1 Total Operating Revenues. “Total Operating Revenues” means, subject to the exclusions provided for herein, all of the following revenue, income and proceeds resulting from the operation of the Hotel and properly attributable to the Accounting Period, Fiscal Year or portion of a Fiscal Year under consideration:
(a) Subject to the provisions below and in the Agreement, all revenues from the rental of guest rooms and suites in the Hotel and all revenues earned from guests, patrons and other persons occupying space in or using the Hotel, including, without limitation, all revenues derived from goods sold, food and beverage sales, meetings and other events, parking services, spa, health club or other Hotel facilities’ use or membership, telephone, cable or access television or internet use and all other services provided in connection with Hotel activities;
(b) The net proceeds actually received by Owner of use and occupancy or business interruption insurance with respect to the operation of the Hotel after deduction from such proceeds of all necessary expenses incurred in the adjustment or collection thereof.
1.2 Exclusions from Total Operating Revenues. For purposes of calculating the fees payable pursuant to this Agreement, Total Operating Revenues shall not include any of the following:
(a) excise, sales, use and other similar taxes (including room taxes) or similar charges which are required by Applicable Laws to be collected directly from patrons or guests or as part of the sale price of any goods or services or displays and which must be remitted to a governmental authority;
(b) bad debts arising from Total Operating Revenues, provided that any recovered bad debts shall again become part of Total Operating Revenues in the Fiscal Year in which they are recovered;
(c) gratuities, service charges or other similar receipts collected for payment to and paid to Hotel Employees and complimentary food and beverage bills for Hotel Employees (to the extent that the complimentary food and beverage expenditures do not exceed the amount set forth in Operating Budget unless Owner’s consent is received with respect to such excess amounts) the and guests;
(d) revenue, income and proceeds of sales of tenants, licensees and concessionaires;
(e) revenues, including gains or losses arising from the sale or other disposition of capital assets, including, without limitation, FF&E no longer required for the operation of the Hotel;
**Schedules – Page 5**
(f) proceeds or awards arising from a taking or condemnation of capital property;
(g) receipts or credits for settlement of claims for loss or theft of or damage to personal property or furnishings, or any recoveries relating to a breach of warranty or guaranty, excluding, however, those amounts that are compensation for items that would otherwise be included in Total Operating Revenues hereunder;
(h) proceeds from any insurance policy other than the net proceeds actually received by Owner of use and occupancy or business interruption insurance;
(i) receipts of a capital nature, including any financing of the Hotel;
(j) Existing Lease and License Arrangements;
(k) interest, if any, earned on any FF&E Reserve or on funds invested on behalf of Owner; or
(l) working capital provided by Owner.
**Schedules – Page 6**
SCHEDULE IV
Centralized Services
TBD
**Schedules – Page 7**
EXHIBIT A
DESCRIPTION OF PREMISES
EXHIBIT B
EXAMPLE OF MONTHLY TRANSACTIONS REPORT
| For Properties | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Actual | % | Budget | % | Last Year | % | As of 6/30/2016 | YTD | % | YTD Budget | % | YTD Last Year | % | ||||||||||||
| SUMMARY OPERATING STATEMENT | ||||||||||||||||||||||||
| 3,060 | 0 | 3,060 | ROOMS AVAILABLE | 18,564 | 0 | 18,462 | ||||||||||||||||||
| 0 | 0 | 0 | ROOMS SOLD | 0 | 0 | 0 | ||||||||||||||||||
| 0.00 | % | 0.00 | % | 0.00 | % | OCCUPANCY | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||||
| 0.00 | 0.00 | 0.00 | ADR | 0.00 | 0.00 | 0.00 | ||||||||||||||||||
| 0.00 | 0.00 | 0.00 | ROOMS RevPAR | 0.00 | 0.00 | 0.00 | ||||||||||||||||||
| 0.00 | 0.00 | 0.00 | TOTAL RevPAR | 0.00 | 0.00 | 0.00 | ||||||||||||||||||
| OPERATING REVENUE | ||||||||||||||||||||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Rooms | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Food and Beverage | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Other Operated Departments | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Miscellaneous Income | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Total Operating Revenue | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| DEPARTMENTAL EXPENSES | ||||||||||||||||||||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Rooms | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Food and Beverage | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Other Operated Departments | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Total Departmental Expenses | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | TOTAL DEPARTMENTAL PROFIT | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| UNDISTRIBUTED OPERATING<br> EXPENSES | ||||||||||||||||||||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Administrative and General | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Information and Telecommunications<br> Systems | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Sales and Marketing | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Property Operation and<br> Maintenance | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Utilities | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Total Undistributed Expenses | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | GROSS OPERATING PROFIT | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | MANAGEMENT FEES | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| INCOME BEFORE NON-OPERATING | ||||||||||||||||||||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | INCOME AND EXPENSES | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| For Properties | ||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| Actual | % | Budget | % | Last Year | % | As of 6/30/2016 | YTD | % | YTD Budget | % | YTD Last Year | % | ||||||||||||
| NON-OPERATING INCOME AND<br> EXPENSES | ||||||||||||||||||||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Income | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Rent | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Property and Other Taxes | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Insurance | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Other | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Total Non-Operating Income & Exp | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| EARNINGS BEFORE INTEREST, TAXES, | ||||||||||||||||||||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | DEPRECIATION AND AMORTIZATION | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| INTEREST, DEPRECIATION &<br> AMORTIZATION | ||||||||||||||||||||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Interest | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Depreciation | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Amortization | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Total Interest, Depreciation & Amortization | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | TOTAL INCOME BEFORE TAXES | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Income Taxes | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | NET INCOME | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | Captial Expenditure Reserve<br> (memo) | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | ||||||
| 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % | NET INCOME LESS CAP EXPENDITURE RESERVE | 0 | 0.00 | % | 0 | 0.00 | % | 0 | 0.00 | % |
EXHIBIT C
COMPETITIVE SET
[TBD]]
| STR# | Name | City, State | Rooms |
|---|
Exhibit 10.13
TRI-PARTY AGREEMENT
By
GANO HOLDINGS, LLC
as OWNER
And
PHR GANO OPCO SUB, LLC
as TENANT
EAST BOSTON SAVINGS BANK
as LENDER
And
GANO HOTEL MANAGER, LLC
as OPERATOR
Hotel:
Hilton Garden Inn
220 India Street
Providence, Rhode Island
TRI-PARTY AGREEMENT
This Tri-Party Agreement (this “Agreement”) is made as of the 27th day of February, 2020 by GANO HOLDINGS,LLC, a Rhode Island limited liability company having a principal place of business at c/o Procaccianti Companies, 1140 Reservoir Avenue, Cranston, Rhode Island 02920 (the “Owner”), PHR GANO OPCO SUB, LLC, a Delaware limited liability company having a principal place of business at c/o Procaccianti Companies, 1140 Reservoir Avenue, Cranston, Rhode Island 02920 (the “Tenant”), GANO HOTEL MANAGER, LLC, a Rhode Island limited liability company having a place of business at 1140 Reservoir Avenue, Cranston, Rhode Island 02920 (the “Operator”) and EAST BOSTON SAVINGS BANK, a Massachusetts banking corporation having a place of business at 67 Prospect Street, Peabody, Massachusetts (“Lender”).
RECITALS
A. Operator and Tenant are parties to that certain Hotel Management Agreement of even date herewith, as the same may be amended, restated, modified or supplemented from time to time with the consent of Lender (such agreement, as in effect from time to time, and only as it relates to the Hotel and the Project (defined below), being hereinafter referred to as the “Management Agreement”), pursuant to which Tenant and Operator provided for the operation of certain real estate located at 220 Indian Street, Providence, Rhode Island and more particularly described on Exhibit A (the “Property”), upon which is situated a hotel containing approximately 137 guest rooms plus other amenities commonly known as the “Hilton Garden Inn” (the “Hotel”; together with the Property collectively referred to hereinafter as the “Project”).
B. Owner, as landlord, and Tenant, as tenant, entered into that certain Hotel Lease on or about the date hereof, pursuant to which Tenant has leased the Property from Owner (the “Master Lease” or “OpCo Lease”).
C. Tenant has collaterally assigned to Owner all of its right, title and interest in and to the Management Agreement pursuant to that certain Collateral Assignment and Security Agreement in Respect of Contracts, Licenses and Permits dated as of the date hereof (the “CollateralAssignment”), as security for the rental payments due under the Master Lease.
D. Owner (also referred to herein as the “Borrower”), Lender have entered into that certain Omnibus Amendment, Assignment, Assumption, Release and Reaffirmation Agreement dated as of the date hereof, as the same may be amended, restated, modified or supplemented from time to time (such agreement, as in effect from time to time, being hereinafter referred to as the “Omnibus Agreement”), pursuant to which Lender agreed to modify a loan to Borrower in the amended and restated principal amount of $16,936,900.72 (the “Loan”); all capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Omnibus Agreement.
E. Owner and Lender have advised Operator that pursuant to the terms of the Omnibus Agreement, Owner has, among other things, executed and delivered to Lender an Amended and Restated Commercial Real Estate Promissory Note in the original principal amount of $16,936,900.72 (the “Note”), which is secured by, among other things, a Mortgage (as defined in the Omnibus Agreement) and other Loan Documents (as defined in the Omnibus Agreement) encumbering the Project.
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F. As further security for the Loan, Lender has required Owner to assign all of its right, title and interest in and to the Management Agreement and the Collateral Assignment to Lender.
G. It is to the benefit of Operator, Tenant and Owner that Lender make the Loan to Owner; and Tenant and Operator are willing to consent to the assignment of the Management Agreement to Lender and to have the Loan Documents constitute a first lien upon the Hotel prior and superior to the Management Agreement to the extent provided herein.
H. Lender is not willing to make the Loan unless Owner, Tenant and Operator agree to subordinate the Management Agreement and, to the extent set forth herein, Operator's rights, interests and benefits under the Management Agreement, to the lien of the Mortgage and all other rights of Lender under the Loan Documents on the terms and to the extent set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
ARTICLEI
DEFINITIONS
Section 1.1 Definitions. As used herein, the following terms shall have the meanings ascribed to them below:
“Lender's Notice Address” shall mean:
East Boston Savings Bank
67 Prospect Street
Peabody, MA 01960
Attn: Jonpaul Sallese, Vice President, Commercial Real Estate
Facsimile: (978) 573-0926
with a copy to:
Bernkopf Goodman, LLP
Two Seaport Lane
Boston, MA 02210
Attn: David L. Doyle, Esq.
Facsimile: (617) 790-3300
“Collateral” shall have the meaning set forth in the Loan Documents.
“Event of Default” shall have the meaning set forth in the Mortgage.
“Foreclosure” shall mean any exercise of the remedies available to the holder of the Mortgage upon the occurrence of an Event of Default under the Mortgage, which results in a
3
transfer of title to or possession of all or substantially all of the Project to such holder, its designee, a Subsequent Owner in foreclosure or any other third party. The term “Foreclosure” shall include, without limitation: (i) a transfer by judicial foreclosure; (ii) a transfer by deed in lieu of foreclosure; (iii) a transfer of either ownership or control of the Owner, by exercise of a stock pledge or otherwise; (iv) a transfer resulting from an order given in a bankruptcy, reorganization, insolvency or similar proceeding; (v) if title to the real property interests included in the Project is held by a tenant under a ground lease, an assignment of the tenant's interest in such ground lease; or (vi) any similar judicial or non-judicial, exercise of the remedies held by the holder of the Mortgage.
“Foreclosure Date” shall mean the later of the dates on which title to or possession of the Project is transferred to a Subsequent Owner by means of a Foreclosure.
“Hotel” shall have the meaning set forth in Paragraph A of the recitals of this Agreement.
“Mortgagee” shall mean any of the following: (i) the entity identified as the Lender in the first sentence of this Agreement; (ii) any successors or assigns of that entity as holder of the Mortgage; (iii) any nominee or designee of that entity (or any other entity described in this definition); (iv) any initial or subsequent assignee of all or any portion of the interest of that entity in the Mortgage; or (v) any entity which is a participant in the financing secured by the Mortgage, or otherwise acquires an equitable interest in the Mortgage, provided that the holder of the Mortgage then of record shall have the power to act as Lender hereunder for the purpose of giving or receiving notices, consents or waivers or otherwise exercising the rights of Lender hereunder.
“New Agreement” shall have the meaning set forth in Section 7.1(a)(2) of this Agreement.
“Notice” shall have the meaning set forth in Section 12.1 of this Agreement.
“Obligations” shall have the meaning set forth in the Mortgage.
“Operator's Notice Address” shall mean:
Gano Hotel Manager, LLC
1140 Reservoir Avenue
Cranston, Rhode Island 02920
Attention: Elizabeth A. Procaccianti
Facsimile: (401) 943-6320
with a copy to:
Procaccianti Companies
1140 Reservoir Avenue
Cranston, Rhode Island 02920
Attention: Natasha Ruane, Corporation Counsel
Facsimile: (401) 943-6320
4
“Owner's Notice Address” shall mean:
Gano Holdings, LLC
c/o Procaccianti Companies
1140 Reservoir Avenue
Cranston, Rhode Island 02920
Attention: Gregory D. Vickowski
Facsimile: (401) 943-6320
with a copy to:
Procaccianti Companies
1140 Reservoir Avenue
Cranston, Rhode Island 02920
Attention: Ron Hadar, General Counsel
Facsimile: (401) 943-6320
“Person” shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, institution, entity, party or government (whether territorial, national, federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof).
“Subsequent Owner” shall mean any individual or entity which acquires title to or possession of the Hotel at or through a Foreclosure (together with any successors or assigns thereof), who may include, without limitation, (i) Lender or an affiliate thereof, (ii) any purchaser of the Hotel from Lender, or any lessee of the Hotel from Lender (after a Foreclosure), or (iii) any purchaser of the Hotel at Foreclosure.
“Tenant's Notice Address” shall mean:
PHR GANO OPCO SUB, LLC
c/o Procaccianti Companies
1140 Reservoir Avenue
Cranston, Rhode Island 02920
Attention: Gregory D. Vickowski
Facsimile: (401) 943-6320
with a copy to:
Procaccianti Companies
1140 Reservoir Avenue
Cranston, Rhode Island 02920
Attention: Ron Hadar, General Counsel
Facsimile: (401) 943-6320
5
“Termination Period” shall mean the period of time which begins on the date on which an Event of Default occurs and ends on the one hundred eightieth (180th) day after the Foreclosure Date.
ARTICLEII
PLEDGE
Section 2.1 Pledge of Management Agreement. Each of Owner and Tenant hereby grants, pledges, transfers, assigns and sets over to Lender, and grants to Lender a security interest in, all of its right, title and interest in and to the Management Agreement and the proceeds of the Management Agreement, including all interests in accounts maintained by it or its Lenders in connection therewith, in accordance with the terms, conditions and provisions of this Agreement. Such pledge shall be unconditional and absolute, conditional only to reconveyance in the event that all Obligations of Owner to Lender under the Loan Documents are discharged in full. Notwithstanding the foregoing, no Lender shall have any obligation or liability of any kind under or with respect to the Management Agreement unless and until the date (the “Exercise Date”) on which Lender exercises its rights hereunder, and then only to the extent expressly provided herein. Operator hereby acknowledges and consents to the foregoing pledge from Owner and Tenant to Lender.
Section 2.2 Owner Indemnity. Each of Owner and Tenant agrees to defend, save and hold Lender and the Lender harmless of and from, and to indemnify Lender against, any and all such obligations and liabilities, contingent or otherwise arising out of this Agreement or the Management Agreement prior to the Exercise Date (but excluding liabilities resulting from Lender’s or any Lender's gross negligence or willful misconduct).
Section 2.3 Assignment of Service Contracts. Subject to the terms and conditions herein set forth, Operator does hereby transfer, assign and deliver unto Lender, and grants to Lender a security interest in, all of the right, title and interest of Operator in, to and/or under: (a) any and all service, utility, maintenance and other contracts and agreements relating to all or any portion of the Project (collectively, the “ServiceContracts”); (b) any warranties, guaranties or representations made by any of the other parties to the Service Contracts, whether or not contained in the Service Contracts; and (c) any and all licenses obtained by Operator with respect to the operation of the Hotel; provided, however that Lender shall have no obligation or liability of any kind under or with respect to the Service Contracts, nor shall Lender exercise any rights thereunder, unless and until Lender terminates the Management Agreement as provided herein and expressly assumes the obligations of Borrower, Tenant or Operator under any such Service Contracts.
ARTICLEIII
REPRESENTATIONS REGARDING
MANAGEMENT AGREEMENT
Section 3.1 Representations as to Management Agreement. Owner, Tenant and Operator, each for itself only, represent to Lender that:
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(a) The Management Agreement has been executed, has not been modified and is in full force and effect without default.
(b) Attached hereto as Exhibit B is a correct and complete copy of the Management Agreement. There are no other agreements, written or oral, among Owner, Tenant and Operator or any of their respective Affiliates regarding the management of the Hotel.
(c) The Management Agreement constitutes the valid and binding agreement of the parties thereto, enforceable in accordance with its terms, and Owner, Tenant and Operator have full authority under all state or local laws and regulations to perform all of their obligations under the Management Agreement.
(d) Except as set forth herein, none of Owner, Tenant or Operator has made any assignment, pledge, delegation or other transfer of any interest, right or obligation under or in the Management Agreement, and none of Owner, Tenant or Operator is under any restriction or prohibition in regard to entering into or undertaking the obligations of this Agreement.
(e) All fees, expense reimbursements and payments due from Owner or Tenant under the Management Agreement to the date hereof have been paid in full.
(f) Except as set forth in the Management Agreement, neither Operator, nor any other Person related to Operator has any right or claim to any fees, commissions, compensation or other remuneration in connection with or arising out of the use, occupancy and operation of the Hotel which are payable by the Tenant or Owner.
ARTICLEIV
COVENANTS OF OWNER
Section 4.1 Covenants of Owner as to Management Agreement. Owner covenants to Lender that:
(a) Owner shall observe and perform, or shall cause to be observed and performed, all of its and the Tenant’s respective obligations under the Management Agreement and shall not by agreement or conduct (i) alter, modify, terminate or waive any material terms or provision of the Management Agreement, or (ii) permit the alteration, modification, termination or waiver of any material terms or provisions of the Management Agreement, in each instance without the prior consent of Lender. No amendment or modification of the Management Agreement that is prohibited pursuant to the terms of the Loan Agreement shall become effective without Lender's consent. Any modifications, supplements, replacements and extensions of the original Management Agreement made by any party without Lender's prior written consent (which consent may be withheld at Lender’s sole discretion), shall be voidable at the option of Lender or any Subsequent Owner.
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(b) Subject to the terms of the Loan Agreement, Owner agrees to accept performance of Operator in compliance with this Agreement and the Loan Documents for so long as any obligation of Borrower to Lender remains outstanding and unsatisfied.
(c) Owner shall not assign, pledge, delegate, waive or transfer, or permit the Tenant to assign, pledge, delegate, waive or transfer, any interests, rights or obligations under the Management Agreement, including the proceeds thereof. Neither Owner nor Tenant shall borrow, or accept any forbearance to collect, any amount due from it to Operator or any affiliate of Operator without the prior written consent of Lender.
(d) In the event of any material default by Operator in performance or breach under the Management Agreement, or any other party for any reason gives notice to Operator pursuant to the Management Agreement, notice thereof shall promptly be given to Lender specifying the default, breach or other matter in reasonable detail.
(e) Lender shall be entitled, without obligation to do so, to tender a cure or to cure any default or purported default in the obligations of Owner or Tenant. Owner agrees that any cost incurred by Lender in connection with such cure or attempt to cure shall constitute an additional advance as a demand obligation of Owner under the Loan Documents and shall be secured by the Mortgage and other Loan Documents.
(f) Owner, Tenant and Operator agree not to change the name or “flag” of the Hotel without the prior written consent of Lender, which consent may be withheld at Lender’s sole discretion.
ARTICLEV
COVENANTS OF OPERATOR
Section 5.1 Covenants of Operator as to Management Agreement. Operator covenants to Lender that:
(a) Operator shall not alter, modify, terminate or waive any term or provision of the Management Agreement without the prior consent of Lender, which consent may be withheld at Lender’s sole discretion. No amendment or modification of the Management Agreement shall become effective without Lender's consent, which consent may be withheld at Lender’s sole discretion. Any material modifications, supplements, replacements and extensions of the original Management Agreement made without Lender's prior written consent, which consent may be withheld at Lender’s sole discretion, shall be voidable at the option of Lender or any Subsequent Owner.
(b) Operator shall not consent to any assignment, pledge, delegation, waiver or transfer of any interests, rights or obligations by Owner or Tenant under the Management Agreement, including any proceeds, to any other Person. Operator shall not, and shall not permit any affiliate of Operator to, loan or forbear to collect any amount due to it from Owner or Tenant without the prior written consent of Lender.
8
(c) In the event that Operator asserts a default by Owner or Tenant in performance or breach under the Management Agreement, or for any other reason gives notice to Owner and/or Tenant pursuant to the Management Agreement, Operator shall send a copy of any notice or statement sent by it to Owner and/or Tenant pursuant to the Management Agreement simultaneously to Lender and by the same manner of transmittal. On the occurrence of (i) any default under the Management Agreement by Owner or Tenant, or (ii) any other event giving Operator the right to terminate the Management Agreement for any reason, Operator shall promptly deliver notice to Lender detailing such occurrence with reasonable specificity and stating its intended date of termination.
(d) Lender shall be entitled, without obligation to do so, to tender a cure or to cure any default or purported default in the obligations of Owner or Tenant in accordance with the provisions of the Management Agreement pursuant to which Owner or Tenant may cure any such default or other cause for termination. No termination of the Management Agreement shall be effective until Operator has given notice to Owner, Tenant and Lender, pursuant to the notice requirements set forth in Section 5.1(c) hereof, and ninety (90) days have elapsed since the receipt of such notice by Owner, Tenant and Lender and cure has not been effected. Operator agrees to accept such tender of cure if made within such ninety (90) day period, so long as Operator is paid its base and any incentive management fees and reimbursements as provided in the Management Agreement during such ninety (90) day period.
(e) In the event that Lender informs Operator that it elects to pursue a Foreclosure or otherwise enforce its remedies against Borrower pursuant to the Loan Documents, Operator shall not thereafter seek to declare a default by Owner or Tenant or otherwise pursue the termination of the Management Agreement during the pendency of the Foreclosure or other enforcement proceedings, and shall cease and suspend any action to enforce a remedy or termination of the Management Agreement then underway. Operator shall continue to operate the Hotel pursuant to the Management Agreement and this Agreement during that action's pendency, so long as Operator is paid its base and any incentive management fees and reimbursements as provided in the Management Agreement during the pendency of that action.
(f) Operator agrees that it shall not directly or indirectly, by way of transfer of shares, partnership interests or otherwise, sell, assign, transfer, or otherwise dispose of all or any part of its interest in the Management Agreement without the prior written consent of Lender, which consent may be withheld at Lender’s sole discretion. Notwithstanding the foregoing, Lender’s consent to an assignment (but not a pledge) of Operator’s right to receive payments under the Management Agreement shall not be unreasonably withheld, provided that (i) no Event of Default shall have occurred and be continuing, and (ii) such assignee has executed, acknowledged and delivered a subordination agreement pursuant to which such assignee shall acknowledge and agree to the terms and conditions of this Agreement and subordinate all of such assignee’s interest in the Management Agreement and any right to payment thereunder to Lender's and Lender’ rights under this Agreement.
(g) Notwithstanding anything in the Management Agreement to the contrary, Operator agrees and acknowledges that is shall not take any action or enter into any
9
agreements that the Owner shall not be permitted to take or enter into pursuant to the terms of the Loan Documents. Without limiting the generality of the foregoing, Operator agrees that all books and records pertaining to the Project shall be kept at the Hotel.
ARTICLEVI
SUBORDINATION OF RIGHTS OF OPERATOR
Section 6.1 Subordination of Rights of Operator. The rights of Operator under the Management Agreement, including, without limitation, (i) the right to receive payment of fees and all other amounts, and (ii) any option, right of first refusal or other similar rights contained in the Management Agreement, or otherwise existing, to acquire all or any portion of the Project are hereby made subject and subordinate to Lender's and Lender’ rights arising from the obligations of Borrower, except as set forth herein.
Section 6.2 Subordination of Interest of Operator in other Assets of Owner. Operator agrees that its interest in the specific assets of Owner or Tenant shall be subordinate as follows in favor of Lender and has assigned its rights thereunder to Lender:
(a) In the event of a transfer of title to all or any interest in the Project to Lender or its designee after an Event of Default by Borrower (whether by the deed-in-lieu of foreclosure or otherwise), or to any Subsequent Owner, such transferee shall take title to such real estate interests free and clear of any interest of Operator or any affiliate of Operator. Operator agrees that any judgment lien obtained by Operator or any affiliate shall be junior and subordinate to the interests of Lender in the Project and other Collateral. Lender shall not be required to join or name Operator and its affiliates as parties in any Foreclosure or other proceeding to effect such subordination, although Lender may choose to do so for avoidance of doubt or for the benefit of title insurers.
(b) In the event of any transfer of personal property, including, without limitation, inventory, intangibles, accounts and interests in cash, to Lender or its designee after the occurrence of an Event of Default by Owner under this Agreement, or to any Subsequent Owner in a U.C.C. or common law foreclosure, such transferee shall acquire such property free and clear of any interest of Operator or any affiliate of Operator.
(c) Subject to the foregoing, Operator shall continue to have an unsecured claim against Owner or Tenant for any amount accrued and unpaid to it under the Management Agreement, including any claim for incentive fees accrued but required to remain unpaid by the terms of the Loan Documents. Such claim shall be enforceable by Operator against the assets of Owner or Tenant, if any, remaining after satisfaction of the obligations of Borrower to Lender and the Lender.
Section 6.3 Subordination of Leases. Any sublease entered into by Operator on behalf of Owner or Tenant with respect to the Project, or any portion thereof, shall be made expressly subject and subordinate to the Mortgage, the other Loan Documents and any modifications or supplements thereto.
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ARTICLE VII
CONTINUATION AFTER TRANSFER
Section 7.1 Continuation after Transfer. Operator and Lender agree:
(a) In the event that Lender, at its sole option and discretion, intends to exercise its remedies under the Loan Documents or by any other means allowed under the Loan Documents or permitted by law, to acquire possession and title to the Hotel through Foreclosure, Lender or any Subsequent Owner, shall have the right, at its sole option and discretion, to:
(1) elect by notice to Operator, delivered at any time within the Termination Period, stating that Lender or Subsequent Owner, as the case may be, does not intend to enter into a New Agreement (as hereinafter defined) with Operator, and such notice shall result in the termination of the Management Agreement as of thirty (30) days after the receipt of such notice or such later date as is set forth in such notice; or
(2) elect by notice to Operator, delivered at any time within the Termination Period, requiring that Operator enter into a new management agreement (the “New Agreement”) with Lender or Subsequent Owner, as the case may be, for the further operation of the Hotel, which New Agreement shall be on the same terms as the Management Agreement except that (i) the term of the New Agreement shall be for a term equal to the remainder of the term of the Management Agreement, and (ii) all references to Owner or Tenant or to any control of the Hotel by Owner or Tenant shall be deleted and replaced by references to Subsequent Owner; provided, however; that notwithstanding anything to the contrary in this Agreement, in no event will Lender or the Subsequent Owner, as the case may be, be obligated to change, modify or alter any existing condition of the Hotel.
(3) The failure of Lender or Subsequent Owner, as the case may be, to deliver notices as required under either (1) or (2) above shall be deemed the equivalent of a notice under (1) above made as of the last day of the Termination Period, provided, however, that in such case the deemed termination of the Management Agreement shall be effective as of the 30th day after the Termination Period.
(b) In the event that Lender or Subsequent Owner, as the case may be, elects not to enter into a New Agreement with Operator as provided above, no termination fees shall be owed by Lender or Subsequent Owner to Operator following any such election. Operator's rights to compensation for services rendered after the Foreclosure Date shall be limited to collection from the Operating Account of base and any incentive fees accruing for that period under the Management Agreement. Owner and Tenant shall continue to be liable to Operator for all fees, charges and indemnifications under the Management Agreement, accruing prior to the Foreclosure Date, provided, however, that any right or remedy Operator may have to collect such fees, charges or indemnifications from Owner,
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Tenant or the Hotel shall be subordinated to the indefeasible payment in full in cash of all amounts due to Lender under the Loan Documents.
(c) Unless and until Lender or Subsequent Owner, as the case may be, elects to require Operator to enter into a New Agreement as provided in Section 7.1(a)(2) hereof and Operator does enter such New Agreement, Lender or Subsequent Owner shall have no liability or obligation to Operator, except as otherwise provided for in Sections 5.1(d) and (e). Any such liabilities or obligations of Lender or Subsequent Owner shall be limited to those expressly contained in the New Agreement and accruing after the effective date thereof. In no event shall Lender be responsible for any reserve fund deposits, fees, costs, reimbursements, termination fees, or other fees, charges and indemnifications, or for any costs of maintenance, remodeling or upgrades to the Hotel, or loans or advances or other amounts that were owed by Owner or Tenant to Operator or were the obligation of Owner or Tenant, as the case may be, under the terms of the Management Agreement prior to the effective date of the New Agreement. Operator shall not be deemed to have waived any rights it may have to collect such outstanding fees, charges and indemnifications from Owner or Tenant which shall continue to be liable for such fees, charges and indemnifications; provided, however, Operator agrees that such outstanding fees, charges and indemnifications and any right or remedy Operator may have to collect such outstanding fees, charges and indemnifications shall be subordinated to the indefeasible payment in full in cash of all amounts due under the Loan Documents (irrespective of any reduction of same as an allowed amount in any bankruptcy proceeding), nor shall Operator place a lien on, attach or otherwise encumber the Hotel or the proceeds thereof. Should any payment on account of, or any collateral for, any obligation which is subordinated by the preceding sentence be received by Operator during the continuance of an Event of Default under the Loan Documents, such payment or collateral shall be delivered forthwith to the Lender by Operator for application to the loans outstanding under the Loan Documents. Until so delivered, any such payment or collateral shall be held by Operator in trust for Lender and shall not be commingled with other funds or property of Operator.
(d) Notwithstanding any of the provisions of this Agreement to the contrary, Lender or Subsequent Owner, as the case may be, at any time after any Event of Default has occurred and is continuing under any of the Loan Documents, may elect to, or require Owner to, cancel and terminate the Management Agreement, or cause the Tenant to cancel and terminate the Management Agreement, effective as of thirty (30) days after written notice to Operator, and neither Lender, nor Subsequent Owner, as the case may be, shall have any liability to Operator for any costs, fees, reimbursements or termination fees owed by Owner to Operator under the Management Agreement, and such outstanding fees and any right Operator may have to collect such outstanding fees shall be subordinated in full to the repayment of Lender as set forth in Section 7.1(c) hereof, and prior to such repayment in full, the Operator will not place a lien on, attach, or otherwise encumber the Hotel or any proceeds thereof.
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ARTICLEVIII
RELATIONSHIPS
Section 8.1 Relationships. For avoidance of doubt and notwithstanding anything to the contrary stated or implied from the Management Agreement, this Agreement, or any other course of dealing between any of the parties, the parties agree that:
(a) Owner enters into in this Agreement only as the owner of the Project, the landlord under the Master Lease and a Borrower from Lender. Tenant enters into this Agreement only as the “Tenant” under the Master Lease.
(b) Lender enters into this Agreement only for itself and holder of a mortgage lien upon the Project and security interest in the other Collateral. No relationship of partner or joint venturer is intended or should be implied.
(c) Operator enters into this Agreement only in regard to its engagement as manager of the Hotel under the Management Agreement. No relationship of guarantor, partner, tenant, joint venturer or indemnitor of obligations of Owner or Tenant to third parties is intended or should be inferred. Operator undertakes no obligation to advance its own funds to Owner or Tenant or otherwise for the continued operation of the Hotel except as set forth in the Management Agreement.
(d) Except as set forth in the Management Agreement, all books, plans, contracts, accounts, receipts, tapes, records and the like maintained by Operator with respect to the operation, leasing or maintenance of the Hotel shall, at all times, be and constitute the property of Owner or Tenant subject to the Loan Documents as part of the Collateral and shall be surrendered to Owner, Tenant or Lender in accordance with the terms hereof, without charge or expense. Nothing herein shall create an agency coupled with, an interest and Operator and Lender expressly waive any such interest.
ARTICLEIX
INSURANCE
Section 9.1 Insurance. Notwithstanding the provisions of the Management Agreement to the contrary, the insurance coverages to be provided by Owner for the Project, together with the required amounts of such coverages shall be governed by Section 9.5 of the Loan Agreement; provided, however, if the Management Agreement imposes additional insurance requirements on Owner or Tenant, Lender shall not object to Owner, Tenant or Operator obtaining such additional coverages, so long as the aggregate cost of all insurance does not exceed the amount allocated for such expense in the Hotel budget.
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ARTICLEX
CONDEMNATION AWARDS; INSURANCE PROCEEDS
Section 10.1 Application of Proceeds. Notwithstanding any provision contained in the Management Agreement to the contrary, so long as the Loan remains outstanding, the collection and distribution of all insurance proceeds and condemnation awards with respect to the Property (and the right of Lender to apply the same to the Obligations of Owner under the Loan Documents) shall be governed by the Loan Documents.
ARTICLEXI
BINDING EFFECT
Section 11.1 Binding Effect. This Agreement shall be binding on and, to the extent such successors or assigns are permitted, inure to the benefit of the successors and assigns of Owner, Tenant, Operator and Lender.
ARTICLEXII
MISCELLANEOUS
Section 12.1 Notices.
(a) Any notice, demand, request or other communication which any party hereto may be required or may desire to give hereunder shall be in writing; addressed to Owner, Tenant, Operator or Lender, as the case may be, at the notice address for each as provided in Section 1.1 of this Agreement, and shall be deemed to have been properly given if hand delivered, if sent by reputable overnight courier (effective the Business Day following delivery to such courier), if sent by telecopy with confirmation of receipt and a hard copy mailed in accordance with the provisions of this Section 12.1 (effective the business day on which receipt of confirmation is received by the sender if delivered before 5:00 P.M.), and effective the business day after the date on which receipt of confirmation is received by the sender if delivered after 5:00 P.M.) or if mailed (effective two business days after mailing) by United States registered or certified mail, postage prepaid, return receipt requested. Copies of any Notices (a) terminating this Agreement, (b) asserting any default or claim hereunder or any claim for which Owner is indemnified pursuant to the terms hereof or (c) commencing or relating to any action, suit or proceeding whether against Owner, Tenant or Operator relating in any way to Operator's, Tenant's or Owner's acts or omissions hereunder or any of Operator's, Tenant's or Owner's activities in respect of the Hotel shall also be sent to Lender at Lender's Notice Address. Any party may, by notice as aforesaid actually received, designate a different address or addressee for communications intended for it.
(b) Notices given hereunder by any party may be given by counsel for such party. The foregoing Notice provisions shall in no way prohibit a Notice from being given
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as provided in the rules of civil procedure for the Commonwealth of Massachusetts, as the same may be amended from time to time.
Section 12.2 Lender's Right to Inspect. Lender or its designated representative shall have access to the Hotel at any time as provided in the Loan Agreement and other Loan Documents, including, without limitation, for the purpose of inspecting the Hotel or any portion thereof, protecting same against fire or other casualty, prevention of damage in the Hotel or any portion thereof, or showing the Hotel to prospective purchasers or mortgagees; provided that such access does not unreasonably interfere with the use and enjoyment of the Property by Hotel guests.
Section 12.3 No Liability; Indemnification. Each of Borrower and Tenant shall indemnify, defend, protect and hold harmless Lender and each of its respective officers, directors, servicers, employees and Lenders from and against all obligations, liabilities, losses, costs, expenses, civil fines, penalties and damages (including reasonable attorneys' and expert witnesses' fees and costs, including those incurred on appeal) which Lender and/or any indemnified person may incur or which arise during the term hereof by reason of this Agreement, the Management Agreement or any activity conducted pursuant thereto or in connection therewith, provided that such obligations, liabilities, losses, costs, expenses, civil fines, penalties and damages do not arise directly out of the willful misconduct of Lender.
Section 12.4 Partial Invalidity. In the event that any portion of this Agreement shall be declared invalid, illegal, or unenforceable in any respect by order, decree or judgment of a court, or governmental agency having jurisdiction, this Agreement shall be construed as if such portion had not been inserted herein, except when such construction would operate as an undue hardship on Operator, Tenant or Owner or constitute a substantial deviation from the general intent and purpose of such parties as reflected in this Agreement.
Section 12.5 Time of the Essence. It is expressly agreed that time is of the essence with respect to the obligations of all parties under this Agreement.
Section 12.6 Lender Discretion. Notwithstanding anything hereto to the contrary, the commencement and prosecution of Foreclosure proceedings under the Mortgage is a matter entirely within the discretion of Lender. No delay, modification, forbearance or other act or omission of Lender in respect of Foreclosure shall modify or waive the terms of this Agreement.
Section 12.7 Gender. The use of the neuter gender in this Agreement shall be deemed to include any other gender, and words in the singular number shall be held to include the plural, when the sense requires.
Section 12.8 Modification, etc. The provisions of this Agreement shall not be modified, amended, waived, discharged or terminated except by a written document signed by all of the parties hereto. In the event the Management Agreement shall be amended, modified or supplemented, the Management Agreement, as so amended, modified or supplemented, shall continue to be subject to the provisions of this Agreement without the necessity of any further act by the parties hereto.
Section 12.9 Further Assurances.
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(a) Operator shall execute such documents, estoppels and agreements as Lender, or any third party specified by Lender, may reasonably require to evidence Operator's consent to, or waiver of any claim against, the transfer of the Hotel and its undertaking to (i) continue to operate the Hotel pursuant to the terms of the Management Agreement or New Agreement, and (ii) grant each Subsequent Owner the same rights as Owner holds under the Management Agreement or New Agreement to implement an orderly transfer of the books, records, and reservations in the event of any Transfer to such successor.
(b) The parties hereto agree to execute, acknowledge, deliver and record such certificates, amendments, instruments, and documents, and to take such other action, as may be reasonably necessary to carry out the intent and purposes of this Agreement.
Section 12.10 Estoppel Certificates. Operator shall, at any time and from time to time upon not less than thirty (30) days' prior written notice from Lender, execute, acknowledge and deliver to Lender, or to any third party specified by Lender, a statement in writing: (A) certifying (i) that the Management Agreement is unmodified and in full force and effect (or if there have been modifications, that the same, as modified, is in full force and effect and stating the modifications) and (ii) the date through which the management fees due under the Management Agreement have been paid; (B) stating whether or not to the actual knowledge of Operator (i) there is a continuing default by Owner or Tenant in the performance or observance of any covenant, agreement or condition contained in the Management Agreement, or (ii) there shall have occurred any event which, with the giving of notice or passage of time or both, would become such a default, and, if so specifying each such default or occurrence of which Operator may have knowledge; and (C) stating such other information as Lender may reasonably request. Such statement shall be binding upon Operator and may be relied upon by Lender and/or such third party specified by Lender as aforesaid. The obligation of Operator to deliver the foregoing estoppel certificate shall be limited to one per calendar quarter.
Section 12.11 Expenses and Attorney's Fees. If it becomes necessary to employ counsel to protect or enforce the interests of Lender under this Agreement, Borrower agrees to pay reasonable out-of-pocket attorneys' fees, whether suit be brought or not, and all other out-of-pocket costs and expenses actually and reasonably incurred by Lender in connection with such protection and enforcement.
Section 12.12 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the executors, heirs, administrators, successors and permitted assigns of Lender, Borrower, Tenant, and Operator, including any receiver appointed in a foreclosure proceeding or any trustee or debtor-in-possession appointed in any bankruptcy proceeding.
Section 12.13 Counterpart Execution. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
Section 12.14 No Third Party Beneficiaries. Owner, Tenant, Operator and Lender acknowledge that this Agreement is solely for their own benefit and that of their successors and
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assigns, and that no third party shall have any rights or claims arising hereunder, nor is it intended that any third party shall be a third party beneficiary of any provisions hereof.
Section 12.15 Waiver, Entire Agreement. No modification, amendment, discharge or change of this Agreement, except as otherwise provided herein, shall be valid unless the same is in writing and signed by the party against which the enforcement of such modification, amendment, discharge or change is sought. No waiver of any breach of any covenant, condition or agreement contained herein shall be construed to be a subsequent waiver of that covenant, condition or agreement or of any subsequent breach thereof of this Agreement. This Agreement contains the entire agreement between the parties relating to the transaction contemplated hereby, and all prior or contemporaneous agreements, understandings, representations or statements, oral or written, are merged herein.
Section 12.16 Captions. Titles or captions contained in this Agreement are inserted only as a matter of convenience, and for reference only, and in no way limit, define or extend the provisions of this Agreement.
Section 12.17 Interpretation; Conflict. In interpreting this Agreement, the provisions in this Agreement shall not be construed against or in favor of either party on the basis of which party drafted this Agreement. In the event of any conflict between the Management Agreement and the terms of this Agreement, the terms of this Agreement shall control.
Section 12.18 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Rhode Island.
Section 12.19 Jury Trial Waiver. OWNER, TENANT, LENDER AND OPERATOR EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR RELATING THERETO OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
[Signatures appear on following page.]
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IN WITNESS WHEREOF the parties have executed this Agreement as of the date first written above.
| OWNER: | |
|---|---|
| GANO HOLDINGS, LLC, | |
| a Rhode<br> Island limited liability company | |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Its: | Authorized Signatory |
| TENANT: | |
| PHR GANO OPCO SUB, LLC, | |
| a Delaware<br> limited liability company | |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Its: | Authorized Signatory |
| OPERATOR: | |
| --- | --- |
| GANO HOTEL MANAGER, LLC, | |
| a Rhode Island limited liability<br> company | |
| By: | /s/ Elizabeth A. Procaccianti |
| Name: | Elizabeth A. Procaccianti |
| Its: | Authorized Signatory |
| LENDER: | |
| --- | --- |
| EAST BOSTON SAVINGS BANK, | |
| a Massachusetts<br> banking corporation | |
| By: | /s/ Jonpaul<br> Sallese |
| Name: | Jonpaul Sallese |
| Its: | Vice<br> President, Commercial Real Estate |
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
EXHIBIT B
MANAGEMENT AGREEMENT
Exhibit 10.14
AMENDED AND RESTATED AGREEMENT OF LIMITEDPARTNERSHIPOF PROCACCIANTI HOTEL REIT, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF PROCACCIANTI HOTEL REIT, L.P., a Delaware limited partnership (the “Partnership”), dated as of February 27, 2020 (the “Effective Date”), is entered into by and among Procaccianti Hotel REIT, Inc., a Maryland corporation holding a general partnership interest in the Partnership (the “General Partner”), Procaccianti Hotel REIT LP, LLC, a Delaware limited liability company holding a limited partnership interest in the Partnership (“Procaccianti LP”), together with any other Persons who become Partners in the Partnership as provided herein.
WHEREAS, the Partnership was formed when a Certificate of Limited Partnership was filed and accepted by the Secretary of State of the State of Delaware;
WHEREAS, the General Partner and Procaccianti LP entered into that certain Agreement of Limited Partnership of the Partnership dated as of August 26, 2016 (the “Initial Agreement”); and
WHEREAS, the General Partner and Procaccianti LP desire to amend and restate the Initial Agreement as set forth herein.
NOW, THEREFORE, BE IT RESOLVED, that for good and adequate consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINED TERMS
Section 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.
“Act” means the Delaware Revised Uniform Limited Partnership Act (6 Del. C. Section 17-101 et seq.), as it may be amended from time to time, and any successor to such statute.
“Acquisition Expenses” means any and all expenses, exclusive of Acquisition Fees, incurred by the General Partner, the Partnership, the Advisoror any of their Affiliates (as such term is defined in the Advisory Agreement) in connection with the selection, evaluation, acquisition, origination, making or development of any Real Estate Assets, whether or not acquired, including legal fees and expenses, travel and communications expenses, brokerage fees, costs of appraisals, nonrefundable option payments on property not acquired, accounting fees and expenses, title insurance premiums and the costs of performing due diligence.
“Acquisition Fee” means the fee payable to the Advisor or its assignees pursuant to Section 9(a) of the Advisory Agreement.
“Additional Funds” shall have the meaning set forth in Section 4.4A.
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“Additional Limited Partner” means a Person admitted to the Partnership as a Limited Partner pursuant to Section 12.2 and who is shown as such on the books and records of the Partnership.
“Adjusted Capital Account Deficit” means, with respect to any Partner, the deficit balance, if any, in such Partner’s Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments:
(a) such deficit shall be decreased by any amounts which such Partner is obligated to restore pursuant to this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentence of each of Regulations Sections 1.704-2(i)(5) and 1.704-2(g)(1); and
(b) such deficit shall be increased by the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. A positive balance in a Partner’s Capital Account, after giving effect to the adjustments described above in clauses (a) and (b), is referred to in this Agreement as an “Adjusted Capital Account Balance.”
“Advisor” shall have the meaning set forth in the introduction.
“Advisory Agreement” means that certain Amended and Restated Advisory Agreement by and among the General Partner, Procaccianti LP and the Advisor, dated as of August 2, 2018, as amended or restated from time to time.
“Affected Gain” has the meaning set forth in subparagraph 4(b) of Exhibit B.
“Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such Person. Control of any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Agreement” means this Amended and Restated Agreement of Limited Partnership, as it may be amended, modified, supplemented or restated from time to time.
“Appraisal” means with respect to any assets, the opinion of an independent third party experienced in the valuation of similar assets, selected by the General Partner in good faith; such opinion may be in the form of an opinion by such independent third party that the value for such property or asset as set by the General Partner is fair, from a financial point of view, to the Partnership.
“Assignee” means a Person to whom one or more OP Units have been transferred in a manner permitted under this Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5.
“Available Cash” means, with respect to the applicable period of measurement (i.e., any period (other than the first period in which this calculation of Available Cash is being made) beginning on the first day of the fiscal year, quarter or other period commencing immediately after the last day of the fiscal year, quarter or other applicable period for purposes of the prior calculation of Available Cash for or with respect to which a distribution has been made, and ending on the last day of the fiscal year, quarter or other applicable period immediately preceding the date of the calculation), the excess, if any, as of such date, of
(a) the gross cash receipts of the Partnership for such period from all sources whatsoever, including the following:
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(i) all rents, revenues, income and proceeds derived by the Partnership from its operations, including distributions received by the Partnership from any Entity in which the Partnership has an interest;
(ii) all proceeds and revenues received by the Partnership on account of any sales of any Partnership property or as a refinancing of or payment of principal, interest, costs, fees, penalties or otherwise on account of any borrowings or loans made by the Partnership or financings or refinancings of any property of the Partnership;
(iii) the amount of any insurance proceeds and condemnation awards received by the Partnership;
(iv) all capital contributions and loans received by the Partnership from its Partners;
(v) all cash amounts previously reserved by the Partnership, to the extent such amounts are no longer needed for the specific purposes for which such amounts were reserved; and
(vi) the proceeds of liquidation of the Partnership’s property in accordance with this Agreement;
over
(b) the sum of the following:
(i) all operating costs and expenses, including taxes and other expenses of the properties directly and indirectly held by the Partnership and capital expenditures made during such period (without deduction, however, for any capital expenditures, charges for Depreciation or other expenses not paid in cash or expenditures from reserves described in clause (viii) below);
(ii) all costs and expenses expended or paid during such period in connection with the sale or other disposition, or financing or refinancing, of the property directly or indirectly held by the Partnership or the recovery of insurance or condemnation proceeds;
(iii) all fees provided for under this Agreement;
(iv) all debt service, including principal and interest, paid during such period on all indebtedness (including under any line of credit) of the Partnership;
(v) all capital contributions, advances, reimbursements, loans or similar payments made to any Person in which the Partnership has an interest;
(vi) all loans made by the Partnership in accordance with the terms of this Agreement;
(vii) all reimbursements to the General Partner or its Affiliates during such period; and
(viii) the amount of any new reserve or reserves or increase in reserves established during such period which the General Partner determines is necessary or appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any cash received or reductions in reserves, or take into account any disbursements made or reserves established, after commencement of the dissolution and liquidation of the Partnership.
“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in New York,
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New York are authorized or required by law to be closed.
“Capital Account” means with respect to any Partner, the Capital Account maintained for such Partner in accordance with the following provisions:
(a) to each Partner’s Capital Account there shall be credited;
(i) such Partner’s Capital Contributions;
(ii) such Partner’s distributive share of Net Income and any items in the nature of income or gain which are specially allocated to such Partner pursuant to paragraphs 1, 2 or 3 of Exhibit B; and
(iii) the amount of any Partnership liabilities assumed by such Partner or which are secured by any asset distributed to such Partner;
(b) to each Partner’s Capital Account there shall be debited;
(i) the amount of cash and the Gross Asset Value of any property distributed to such Partner pursuant to any provision of this Agreement;
(ii) such Partner’s distributive share of Net Losses and any items in the nature of expenses or losses which are specially allocated to such Partner pursuant to paragraphs 1, 2 and 3 of Exhibit B; and
(iii) the amount of any liabilities of such Partner assumed by the Partnership or which are secured by any asset contributed by such Partner to the Partnership; and
(c) if all or a portion of a Partnership Interest is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred Partnership Interest.
The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Sections 1.704-1(b) and 1.704-2 of the Regulations, and shall be interpreted and applied in a manner consistent with such Regulations. If the General Partner shall reasonably determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including debits or credits relating to liabilities which are secured by contributed or distributed assets or which are assumed by the Partnership, the General Partner or any Limited Partner) are computed in order to comply with such Regulations, the General Partner may make such modification; provided, that, all allocations of Partnership income, gain, loss and deduction continue to have “substantial economic effect” within the meaning of Section 704(b) of the Code and that no Limited Partner is materially adversely affected by any such modification.
“Capital Contribution” means, with respect to any Partner, any cash, cash equivalents or the Gross Asset Value of property (net of any liabilities secured by contributed property that the Partnership is considered to assume or take subject to under Section 752 of the Code) which such Partner contributes or is deemed to contribute to the Partnership pursuant to Article 4 hereof.
“Capital Transaction” means any transaction outside the ordinary course of the Partnership’s business involving the sale, exchange, other disposition, or refinancing of any Partnership asset.
“Cash Amount” means, with respect to any OP Units subject to a Redemption, an amount of cash equal to the
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Deemed Partnership Interest Value attributable to such OP Units.
“Certificate” means the Certificate of Limited Partnership relating to the Partnership filed in the office of the Secretary of the State of the State of Delaware, as amended from time to time in accordance with the terms hereof and the Act.
“Change of Control” means any event (including, without limitation, issue, transfer or other disposition of REIT Shares or equity interests in the Partnership, merger, share exchange or consolidation) after which any “person” (as that term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-j of the Exchange Act), directly or indirectly, of securities of the Company or the Partnership representing greater than 50% or more of the combined voting power of the Company’s or the Partnership’s then outstanding securities, respectively; provided, that, a Change of Control shall not be deemed to occur as a result of any widely distributed public offering of the REIT Shares.
“Charter” means the Second Articles of Amendment and Restatement of the General Partner filed with the State Department of Assessments and Taxation of Maryland on April 28, 2017, as amended or restated from time to time.
“Class” means a class of REIT Shares or OP Units, as the context may require.
“Class A OP Unit” means an OP Unit entitling the holder thereof to the rights of a holder of a Class A OP Unit as provided in this Agreement.
“Class A REIT Shares” means the REIT Shares classified as “Class A Common Stock” in the Charter.
“Class B OP Unit” means an OP Unit entitling the holder thereof to the rights of a holder of a Class B OP Unit as provided in this Agreement.
“Class B REIT Shares” means the REIT Shares classified as “Class B Capital Stock” in the Charter.
“Class K OP Unit” means an OP Unit entitling the holder thereof to the rights of a holder of a Class K OP Unit as provided in this Agreement.
“Class K OP Unit Distribution Base” means $10.00 per Class K OP Unit, subject to reduction as provided in this Agreement.
“Class K REIT Shares” means the REIT Shares classified as “Class K Common Stock” in the Charter.
“Class K-I OP Unit” means an OP Unit entitling the holder thereof to the rights of a holder of a Class K-I OP Unit as provided in this Agreement.
“Class K-I OP Unit Distribution Base” means $10.00 per Class K-I OP Unit, subject to reduction as provided in this Agreement.
“Class K-I REIT Shares” means the REIT Shares classified as “Class K-I Common Stock” in the Charter.
“Class K-T OP Unit” means an OP Unit entitling the holder thereof to the rights of a holder of a Class K-T OP Unit as provided in this Agreement.
“Class K-T OP Unit Distribution Base” means $10.00 per Class K-T OP Unit, subject to reduction as provided in this
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Agreement.
“Class K-T REIT Shares” means the REIT Shares classified as “Class K-T Common Stock” in the Charter.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Common Stock” means the capital stock of the General Partner, $0.01 par value per share. Common Stock may be issued in one or more classes or series in accordance with the terms of the Charter. The term “Common Stock” shall, as the context requires, be deemed to refer to the class or series of Common Stock that correspond to the class or series of Partnership Interests for which the reference to Common Stock is made.
“Consent” means the consent to, approval of, or vote on a proposed action by a Partner given in accordance with Article 14.
“Consent of the Limited Partners” means the Consent of a Majority in Interest of the Limited Partners, which Consent shall be obtained prior to the taking of any action for which it is required by this Agreement and may be given or withheld by a Majority in Interest of the Limited Partners, unless otherwise expressly provided herein, in their sole and absolute discretion.
“Consent of the Partners” means the Consent of Partners holding Percentage Interests that in the aggregate are equal to or greater than fifty percent (50%) of the aggregate Percentage Interests of all Partners, which Consent shall be obtained prior to the taking of any action for which it is required by this Agreement and may be given or withheld by such Partners, in their sole and absolute discretion.
“Constructively Own” means ownership under the constructive ownership rules described in the Charter.
“Contributed Property” means each property, partnership interest, contract right or other asset, in such form as may be permitted by the Act, contributed or deemed contributed to the Partnership by any Partner, including any interest in any successor partnership occurring as a result of a termination of the Partnership pursuant to Section 708 of Code.
“Cost of Assets” means, with respect to a Real Estate Asset, the purchase price, Acquisition Expenses, capital expenditures and other customarily capitalized costs, but shall exclude Acquisition Fees associated with such Real Estate Asset.
“Debt” means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services; (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds, guarantees and other similar instruments guaranteeing payment or other performance of obligations by such Person; (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person’s interest in such property, even though such Person has not assumed or become liable for the payment thereof; and (iv) lease obligations of such Person which, in accordance with generally accepted accounting principles, should be capitalized.
“Deemed Partnership Interest Value” means, as of any date with respect to any class of Partnership Interests, the Deemed Value of the Partnership Interests of such class multiplied by the Partner’s relative Percentage Interest of such class.
“Deemed Value of the Partnership Interests” means, as of any date with respect to any class or series of
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Partnership Interests, (i) the total number of OP Units of the General Partner issued and outstanding as of the close of business on such date multiplied by the Fair Market Value determined as of such date of a share of common stock of the General Partner which corresponds to such Partnership Interest, as adjusted (x) pursuant to Section 7.5 (in the event the General Partner acquires material assets, other than on behalf of the Partnership) and (y) for stock dividends and distributions, stock splits and subdivisions, reverse stock splits and combinations, distribution of warrants or options and distributions of evidences of indebtedness or assets not received by the General Partner pursuant to a pro rata distribution by the Partnership; (ii) divided by the Percentage Interest of the General Partner on such date; provided, that if no outstanding shares of capital stock of the General Partner correspond to a class or series of Partnership Interests, the Deemed Value of the Partnership Interests with respect to such class or series shall be equal to an amount reasonably determined by the General Partner.
“Depreciation” means, with respect to any asset of the Partnership for any fiscal year or other period, the depreciation, depletion, amortization or other cost recovery deduction, as the case may be, allowed or allowable for federal income tax purposes in respect of such asset for such fiscal year or other period; provided, however, that except as otherwise provided in Section 1.704-2 of the Regulations, if there is a difference between the Gross Asset Value and the adjusted tax basis of such asset at the beginning of such fiscal year or other period, Depreciation for such asset shall be an amount that bears the same ratio to the beginning Gross Asset Value of such asset as the federal income tax depreciation, depletion, amortization or other cost recovery deduction for such fiscal year or other period bears to the beginning adjusted tax basis of such asset; provided further, however, that if the federal income tax depreciation, depletion, amortization or other cost recovery deduction for such asset for such fiscal year or other period is zero, Depreciation of such asset shall be determined with reference to the beginning Gross Asset Value of such asset using any reasonable method selected by the General Partner.
“Disposition Fees” means the fee payable to the Advisor for services provided in connection with the Sale of one or more Properties pursuant to the Advisory Agreement.
“Distributions” means any dividends or other distributions of money or other property paid by the General Partner to Stockholders, including distributions that may constitute a return of capital for U.S. federal income tax purposes.
“Effective Date” shall have the meaning set forth in the introduction.
“Entity” means any general partnership, limited partnership, corporation, joint venture, trust, business trust, real estate investment trust, limited liability company, limited liability partnership, cooperative or association.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Excess Cash” means the amount of cash available for Distribution after the General Partner establishes any working capital reserves or other reserves it deems necessary for the Partnership (but excluding Net Sales Proceeds) and after the full payment of (a) all accumulated, accrued and unpaid Distributions on the Class K OP Units, Class K-I OP Units and Class K-T OP Units, (b) the full asset management fees payable to the Advisor pursuant to the Advisory Agreement, including any deferred amounts and any interest accrued thereon, and (c) all accumulated, accrued and unpaid distributions with respect to Class A OP Units. The General Partner shall determine annually, other than upon a liquidation, the amount, if any, of Excess Cash and shall authorize Distribution payments of any Excess Cash on an annual basis.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder and any successor statute thereto.
“Fair Market Value” means, with respect to any share of capital stock of the General Partner, (i) if such shares are
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listed or admitted to trading on any securities exchange or automated quotation system, the average of the daily market price for the ten (10) consecutive trading days immediately preceding the date with respect to which “Fair Market Value” must be determined hereunder or, if such date is not a Business Day, the immediately preceding Business Day, using as the market price for each such trading day the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, or (ii) if such shares are not listed or admitted to trading on any securities exchange or automated quotation system, the price at which such shares are then being offered to the public pursuant to any public offering of the General Partner minus the maximum selling commissions and dealer manager fee allowed in the Offering or pursuant to its distribution reinvestment plan (before giving effect to any discounts in effect and made available to participants in such plan); provided that, if there is no ongoing public offering or if the General Partner is not then offering its shares pursuant to a distribution reinvestment plan, the Fair Market Value of such shares shall be determined by the General Partner acting in good faith on the basis of the most recent, publicly reported net asset value of the General Partner and other information as it considers, in its reasonable judgment, appropriate. In the event the REIT Shares Amount for such shares includes rights that a holder of such shares would be entitled to receive, then the Fair Market Value of such rights shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate; and provided, further that, in connection with determining the Deemed Value of the Partnership Interests for purposes of determining the number of additional OP Units issuable upon a Capital Contribution funded by an underwritten public offering of shares of capital stock of the General Partner, the Fair Market Value of such shares shall be the public offering price per share of such class of capital stock sold. Notwithstanding the foregoing, the General Partner in its reasonable discretion may use a different “Fair Market Value” for purposes of making the determinations under subparagraph (b) of the definition of “Gross Asset Value” and in connection with the contribution of Property or cash to the Partnership by a third party, provided such value shall be based upon the value per REIT Share (or per OP Unit) agreed upon by the General Partner and such third party for purposes of such contribution.
“General Partner” shall have the meaning set forth in the introduction.
“General Partner Interest” means a Partnership Interest held by the General Partner. A General Partner Interest may be expressed as a number of OP Units.
“General Partner’s Prospectus” means any prospectus, supplement, or other communication satisfying the standards set forth in Section 10 of the Securities Act, and contained in a currently effective registration statement filed by the General Partner with, and declared effective by, the U.S. Securities and Exchange Commission, or if no registration statement is currently effective, then the prospectus (and any supplement or supplements thereto) contained in the most recently effective registration statement.
“Gross Asset Value” means, with respect to any asset of the Partnership, such asset’s adjusted basis for federal income tax purposes, except as follows:
(a) the initial Gross Asset Value of any asset contributed by a Partner to the Partnership shall be the gross fair market value of such asset, without reduction for liabilities, as determined by the contributing Partner and the Partnership on the date of contribution thereof;
(b) if the General Partner determines that an adjustment is necessary or appropriate to reflect the relative economic interests of the Partners, the Gross Asset Values of all Partnership assets shall be adjusted in accordance with Sections 1.704-1(b)(2)(iv)(f) and (g) of the Regulations to equal their respective gross fair market values, without reduction for liabilities, as reasonably determined by the General Partner, as of the following times:
(i) a Capital Contribution (other than a deminimis Capital Contribution) to the Partnership by a new or
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existing Partner as consideration for a Partnership Interest;
(ii) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership assets as consideration for the repurchase or redemption of a Partnership Interest;
(iii) the liquidation of the Partnership within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations; and
(iv) the grant of an interest in the Partnership (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Partnership by an existing Partner acting in a partner capacity, or by a new Partner acting in a partner capacity or in anticipation of becoming a Partner;
(c) the Gross Asset Values of Partnership assets distributed to any Partner shall be the gross fair market values of such assets without reduction for liabilities, as determined by the General Partner as of the date of distribution; and
(d) the Gross Asset Values of Partnership assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Sections 734(b) or 743(b) of the Code, but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations; provided, however, that Gross Asset Values shall not be adjusted pursuant to this paragraph (d) to the extent that the General Partner determines that an adjustment pursuant to paragraph (b) above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this paragraph (d).
If the Gross Asset Value of any asset of the Partnership has been determined or adjusted pursuant to paragraph (a), (b), or (d) above, such Gross Asset Values shall thereafter be adjusted by any Depreciation taken into account with respect to the Partnership’s assets for purposes of computing Net Income and Net Loss.
“Gross Proceeds” means the aggregate purchase price of all shares of Common Stock sold for the account of the General Partner through an Offering, without deduction for Organization and Offering Expenses. For the purpose of computing Gross Proceeds, the purchase price of any share of Common Stock for which selling commissions or dealer manager fees are reduced from the standard selling commission and dealer manager fees, each as provided in the Registration Statement, and are paid to (i) SC Distributors, LLC or any successor dealer manager to the General Partner or (ii) a broker-dealer (where net proceeds to the General Partner are not reduced (for example, as described in the Registration Statement under “Plan of Distribution - Special Discounts” and “Plan of Distribution - Volume Discounts”)), shall be deemed to be the full amount of the offering price per share of Common Stock pursuant to the Registration Statement for such Offering without reduction.
“Immediate Family Member” means, with respect to any natural Person, such natural Person’s estate or heirs or current spouse or former spouse, parents, parents-in-law, children (whether natural, adopted or by marriage), siblings and grandchildren and any trust or estate, all of the beneficiaries of which consist of such Person or such Person’s spouse or former spouse, parents, parents-in-law, children, siblings or grandchildren.
“Incapacity” or “Incapacitated” means, (i) as to any individual Partner, death, total physical disability or entry by a court of competent jurisdiction adjudicating him or her incompetent to manage his or her Person or his or her estate; (ii) as to any corporation which is a Partner, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter; (iii) as to any partnership which is a Partner, the dissolution and commencement of winding up of the partnership; (iv) as to any estate which is a Partner, the distribution by the fiduciary of the estate’s entire interest in the Partnership; (v) as to any trustee of a trust which is a Partner, the termination of the trust (but not the substitution of a new trustee); or (vi) as to any Partner, the bankruptcy of such Partner. For purposes of this definition, bankruptcy of a Partner
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shall be deemed to have occurred when (a) the Partner commences a voluntary proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and nonappealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Partner, (c) the Partner executes and delivers a general assignment for the benefit of the Partner’s creditors, (d) the Partner files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Partner in any proceeding of the nature described in clause (b) above, (e) the Partner seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Partner or for all or any substantial part of the Partner’s properties, (f) any proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within 120 days after the commencement thereof, (g) the appointment without the Partner’s consent or acquiescence of a trustee, receiver or liquidator has not been vacated or stayed within 90 days of such appointment, or (h) an appointment referred to in clause (g) is not vacated within 90 days after the expiration of any such stay.
“Included Assets” has the meaning set forth in Section 5.1(D)(2)(a).
“Indemnitee” means (i) any Person subject to a claim or demand or made or threatened to be made a party to, or involved or threatened to be involved in, an action, suit or proceeding by reason of his or her status as (A) the General Partner or (B) a director, officer or employee of the Partnership or the General Partner, and (ii) such other Persons (including Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion.
“Independent Appraiser” means a person with no material current or prior business or personal relationship with the General Partner (or its directors) and who is a qualified appraiser of real property of the type held by the Partnership or of other assets as determined by the General Partner. Membership in a nationally recognized appraisal society such as the American Institute of Real Estate Appraisers or the Society of Real Estate Appraisers shall be conclusive evidence of such qualification as to real property.
“Independent Director” shall have the meaning set forth in the Charter.
“Investments” means investments made by the Partnership, directly or indirectly, in a Property, Loan or Other Permitted Investment Asset.
“IRS” means the U.S. Internal Revenue Service.
“Limited Partner” means any Person named as a Limited Partner in Exhibit A attached hereto, as such Exhibit may be amended from time to time, or any Substituted Limited Partner or Additional Limited Partner, in such Person’s capacity as a Limited Partner in the Partnership.
“Limited Partner Interest” means a Partnership Interest of a Limited Partner representing a fractional part of the Partnership Interests of all Limited Partners and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Limited Partner Interest may be expressed as a number of OP Units.
“Liquidating Event” shall have the meaning set forth in Section 13.1.
“Liquidating Gain” means net capital gain realized in connection with an actual or hypothetical Capital Transaction, including the amount of any adjustment of the Gross Asset Value of any Real Estate Asset which requires that the Capital Accounts of the Partners be adjusted pursuant to Sections 1.704-1(b)(2)(iv)(e), (f) and (g) of the Regulations.
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“Liquidator” shall have the meaning set forth in Section 13.2A.
“Liquidity Event” means the first to occur of the following: (i) an OP Unit Transaction, (ii) a Listing, or (iii) a Termination Without Cause.
“Listing” means the listing of the shares of Common Stock on a national securities exchange.
“Loans” means notes and other evidences of indebtedness or obligations acquired, originated or entered into, directly or indirectly, by the Partnership as lender, noteholder, participant, note purchaser or other capacity, including but not limited to first or subordinate mortgage loans, construction loans, development loans, loan participations, loans secured by capital stock or any other assets or form of equity interest and any other type of loan or financial arrangement, such as providing or arranging for letters of credit, providing guarantees of obligations to third parties, or providing commitments for loans. Loans shall not include leases which are not recognized as leases for federal income tax reporting purposes.
“Majority in Interest of the Limited Partners” means Limited Partners holding in the aggregate Percentage Interests that are greater than fifty percent (50%) of the aggregate Percentage Interests of all Limited Partners.
“Mortgage” means, in connection with mortgage financing provided, invested in or purchased by the General Partner, all of the notes, deeds of trust, security interests or other evidences of indebtedness or obligations, which are secured or collateralized by Real Property owned by the borrowers under such notes, deeds of trust, security interests or other evidences of indebtedness or obligations.
“Net Income” or “ Net Loss” means, for each fiscal year or other applicable period, an amount equal to the Partnership’s taxable income or loss for such year or period as determined for federal income tax purposes by the General Partner, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a) of the Code shall be included in taxable income or loss), adjusted as follows:
(a) by including as an item of gross income any tax-exempt income received by the Partnership and not otherwise taken into account in computing Net Income or Net Loss;
(b) by treating as a deductible expense any expenditure of the Partnership described in Section 705(a)(2)(B) of the Code (or which is treated as a Section 705(a)(2)(B) expenditure pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations) and not otherwise taken into account in computing Net Income or Net Loss;
(c) by taking into account Depreciation in lieu of depreciation, depletion, amortization and other cost recovery deductions taken into account in computing taxable income or loss;
(d) by computing gain or loss resulting from any disposition of Partnership property with respect to which gain or loss is recognized for federal income tax purposes by reference to the Gross Asset Value of such property rather than its adjusted tax basis;
(e) in the event the Gross Asset Value of any asset of the Partnership is adjusted pursuant to paragraphs (b) or (c) of the definition of “Gross Asset Value,” the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Income or Net Loss;
(f) to the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or
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Code Section 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Partner’s interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Net Income or Net Loss; and
(g) by not taking into account in computing Net Income or Net Loss items separately allocated to the Partners pursuant to paragraphs 2 and 3 of Exhibit B.
“Net Sales Proceeds” means, in the case of a transaction described in clause (A) of the definition of Sale, the proceeds of any such transaction less the amount of selling expenses incurred by or on behalf of the General Partner or the Partnership, including all Disposition Fees, closing costs and legal fees and expenses. In the case of a transaction described in clause (B) of such definition, Net Sales Proceeds means the proceeds of any such transaction less the amount of selling expenses incurred by or on behalf of the General Partner or the Partnership, including any legal fees and expenses and other selling expenses incurred in connection with such transaction. In the case of a transaction described in clause (C) of such definition, Net Sales Proceeds means the proceeds of any such transaction actually distributed to the General Partner or the Partnership from the joint venture less the amount of any selling expenses, including legal fees and expenses incurred by or on behalf of the General Partner or the Partnership (other than those paid by the joint venture). In the case of a transaction or series of transactions described in clause (D) of the definition of Sale, Net Sales Proceeds means the proceeds of any such transaction (including the aggregate of all payments under a Mortgage or in satisfaction thereof other than regularly scheduled interest payments) less the amount of selling expenses incurred by or on behalf of the General Partner or the Partnership, including all commissions, closing costs and legal fees and expenses. In the case of a transaction described in clause (E) of such definition, Net Sales Proceeds means the proceeds of any such transaction less the amount of selling expenses incurred by or on behalf of the General Partner or the Partnership, including any legal fees and expenses and other selling expenses incurred in connection with such transaction. In the case of a transaction described in the last sentence of the definition of Sale, Net Sales Proceeds means the proceeds of such transaction or series of transactions less all amounts generated thereby which are reinvested in one or more Assets within 180 days thereafter and less the amount of any Disposition Fees, closing costs, and legal fees and expenses and other selling expenses incurred by or allocated to the General Partner or the Partnership in connection with such transaction or series of transactions. Net Sales Proceeds shall also include any consideration (including non-cash consideration such as stock, notes, or other property or securities) that the General Partner determines, in its discretion, to be economically equivalent to the proceeds of a Sale, valued in the reasonable determination of the General Partner. Net Sales Proceeds shall not include any reserves established by the General Partner in its sole discretion.
“New Securities” means (i) any rights, options, warrants or convertible or exchangeable securities having the right to subscribe for or purchase REIT Shares or other shares of common stock of the General Partner, or (ii) any Debt issued by the General Partner that provides any of the rights described in clause (i).
“Non-Cause Advisory Agreement Termination” means the non-renewal of the Advisory Agreement or the termination of the Advisory Agreement without Cause (as defined in the Advisory Agreement).
“Nonrecourse Deductions” shall have the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership Year shall be determined in accordance with the rules of Regulations Section 1.704-2(c).
“Nonrecourse Liability” shall have the meaning set forth in Regulations Section 1.704-2(b)(3).
“Notice of Redemption” means the Notice of Redemption substantially in the form of Exhibit C to this Agreement.
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“Offering” means the public offering of shares of Common Stock pursuant to the Registration Statement on Form S-11.
“OP Unit” means a Partnership Unit which is designated as an OP Unit of the Partnership.
“Other Permitted Investment Asset” means assets, other than cash, cash equivalents, short term bonds, auction rate securities and similar short term investments, acquired by the Partnership for investment purposes that is not a Loan or a Property and is consistent with the investment objectives and policies of the Partnership.
“Partner” means a General Partner or a Limited Partner, and “Partners” means the General Partner and the Limited Partners.
“Partner Nonrecourse Debt” has the meaning set forth in Section 1.704-2(b)(4) of the Regulations.
“Partner Nonrecourse Debt Minimum Gain” means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of the Regulations.
“Partner Nonrecourse Deductions” has the meaning set forth in Sections 1.704-2(i)(1) and (2) of the Regulations, and the amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable year shall be determined in accordance with the rules of Section 1.704-2(i)(2) of the Regulations.
“Partnership” shall have the meaning set forth in the introduction.
“Partnership Interest” means an ownership interest in the Partnership of a Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement.
“Partnership Minimum Gain” shall have the meaning set forth in Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net increase or decrease in Partnership Minimum Gain, for a Partnership Year shall be determined in accordance with the rules of Regulations Section 1.704-2(d).
“Partnership Record Date” means the record date established by the General Partner for the distribution of Available Cash pursuant to Section 5.1 which record date shall be the same as the record date established by the General Partner for a distribution to its stockholders of some or all of its portion of such distribution.
“Partnership Unit” means a fractional, undivided share of the Partnership Interests of all Partners issued hereunder. Partnership Units consist of OP Units and any classes or series of Partnership Units established after the date hereof. The number of Partnership Units outstanding and the Percentage Interests in the Partnership represented by such Partnership Units are set forth in Exhibit A, as such Exhibit may be amended from time to time.
“Partnership Year” means the fiscal year of the Partnership, which shall be the calendar year.
“Percentage Interest” means, as to a Partner, the fractional part of the Partnership Interests owned by such Partner and expressed as a percentage as specified in Exhibit A, as such Exhibit may be amended and adjusted from time to time by the General Partner, or, if used in the context of a particular class or series of Partnership Units, the fractional part of the Partnership Units owned by such Partner expressed as a percentage.
“Person” means an individual, corporation, partnership, limited liability company, trust, unincorporated
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organization, association or other entity.
“Plan Asset Regulation” means the regulations promulgated by the United States Department of Labor in Title 29, Code of Federal Regulations, Part 2510, Section 101.3, and any successor regulations thereto.
“Pledge” shall have the meaning set forth in Section 11.3A.
“Precontribution Gain” has the meaning set forth in subparagraph 4(c) of Exhibit B.
“Procaccianti LP” shall have the meaning set forth in the introduction.
“Property” or “Properties” means a partial or entire interest in real property (including leasehold interests) and personal or mixed property connected therewith. An Investment which obligates the Partnership to acquire a Property will be treated as a Property for purposes of this Agreement.
“PTP Safe Harbor” has the meaning provided in Section 11.6F.
“Qualifying Party” means (a) an Additional Limited Partner; (b) an Immediate Family Member, or a lending institution as the pledgee of a Pledge, who is the transferee in a permitted transfer pursuant to Section 11.3; or (c) a Substituted Limited Partner succeeding to all or part of the Limited Partner Interest of (i) an Additional Limited Partner or (ii) an Immediate Family Member, or a lending institution who is the pledgee of a Pledge, who is the transferee in a permitted transfer pursuant to Section 11.3.
“Qualified REIT Subsidiary” means any Subsidiary of the General Partner that is a “qualified REIT subsidiary” within the meaning of Section 856(i) of the Code.
“Qualified Transferee” means an “Accredited Investor” as such term is defined in Rule 501 promulgated under the Securities Act.
“Real Estate Assets” means any investment by the Partnership in unimproved and improved Real Property (including fee or leasehold interests, options and leases), directly, through one or more subsidiaries or through a joint venture.
“Real Property” means (i) land, (ii) rights in land (including leasehold interests), and (iii) any buildings, structures, improvements, furnishings, fixtures and equipment located on or used in connection with land and rights or interests in land.
“Redemption” shall have the meaning set forth in Section 8.6A.
“Registration Statement” means the Registration Statement on Form S-11 filed by the General Partner with the Securities and Exchange Commission, and any amendments thereof at any time made, relating to the Common Stock.
“Regulations” means the Treasury Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
“Regulatory Allocations” means the allocations set forth in paragraph 2 of Exhibit B
“Remaining Liquidation Cash” means all cash remaining for distribution, as determined by the General Partner in its sole discretion, after (a) payment in full of, or the setting aside of reserves for, all of the Partnership’s debts and
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liabilities, limited, in the case of Nonrecourse Liabilities secured by Real Property, to the value of such Real Property, and excluding liabilities for the payment of deferred Asset Management Fees, Acquisition Fees and disposition fees payable to the Advisor pursuant to the Advisory Agreement and any interest accrued thereon; (b) payment in full of the Liquidation Preferences on all outstanding Class K OP Units, Class K-I OP Units and Class K-T OP Units, (c) payment of the full asset management fees payable to the Advisor pursuant to the Advisory Agreement, including any deferred amounts and interest accrued thereon; (d) payment of the full Acquisition Fees and disposition fees payable to the Advisor, including any interest accrued thereon; (e) payment of all accrued distributions on Class A OP Units pursuant to this Agreement; and (f) payment in full of the stated value of all outstanding Class A OP Units.
“REIT” means a “real estate investment trust”, as defined under Sections 856 through 860 of the Code.
“REIT Requirements” shall have the meaning set forth in Section 5.1.
“REIT Share” means a share of Common Stock, including Class A REIT Shares, Class B REIT Shares, Class K REIT Shares, Class K-I REIT Shares and Class K-T REIT Shares.
“REIT Shares Amount” means, with respect to Tendered Units of a Class, as of any date, an aggregate number of the corresponding Class of REIT Shares equal to the number of Tendered Units of such Class, as adjusted (x) pursuant to Section 7.5 (in the event the General Partner acquires material assets, other than on behalf of the Partnership) and (y) for stock dividends and distributions, stock splits and subdivisions, reverse stock splits and combinations, distributions of rights, warrants or options, and distributions of evidences of indebtedness or assets relating to assets not received by the General Partner pursuant to a pro rata distribution by the Partnership.
“Safe Harbor” has the meaning set forth in Section 10.2B.
“Safe Harbor Election” has the meaning set forth in Section 10.2B.
“Safe Harbor Interest” has the meaning set forth in Section 10.2B.
“Sale” or “Sales” means any transaction or series of transactions whereby: (A) the General Partner or the Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys, or relinquishes its ownership of any Property or portion thereof, including the lease of any Property consisting of a building only, and including any event with respect to any Property which gives rise to a significant amount of insurance proceeds or condemnation awards; (B) the General Partner or the Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest of the General Partner or the Partnership in any joint venture in which it is a co-venturer or partner; (C) any joint venture directly or indirectly (except as described in other subsections of this definition) in which the General Partner or the Partnership as a co-venturer or partner sells, grants, transfers, conveys, or relinquishes its ownership of any Property or portion thereof, including any event with respect to any Property which gives rise to insurance claims or condemnation awards; (D) the General Partner or the Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, conveys or relinquishes its interest in any Mortgage or portion thereof (including with respect to any Mortgage, all repayments thereunder or in satisfaction thereof other than regularly scheduled interest payments) and any event with respect to a Mortgage which gives rise to a significant amount of insurance proceeds or similar awards; or (E) the General Partner or the Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys, or relinquishes its ownership of any other Asset not previously described in this definition or any portion thereof. Notwithstanding the foregoing, “Sale” or “Sales” shall not include any transaction or series of transactions specified in clause (A) through (E) above in which the proceeds of such transaction or series of transactions are reinvested in one or more Assets within 180 days thereafter.
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“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder and any successor statute thereto.
“Special Affiliate” means, as to any Person, (i) any Person directly or indirectly owning, controlling, or holding, with the power to vote, 10% or more of the outstanding voting securities of such Person; (ii) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by such other Person; (iii) any Person, directly or indirectly, controlling, controlled by, or under common control with such Person; (iv) any executive officer, director, trustee or general partner of such Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner.
“Special Fees” means fees or expenses that are required or intended to be borne entirely or disproportionately by one or more particular Classes of OP Units, including but not limited to, selling commissions, dealer manager fees and stockholder servicing fees.
“Specified Redemption Date” means the day of receipt by the General Partner of a Notice of Redemption.
“Sponsor” shall have the meaning set forth in the Charter.
“Stockholder” means a holder of Common Stock.
“Stockholder Servicing Fee” means the stockholder servicing fees referred to in the General Partner’s Prospectus.
“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, joint venture or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person.
“Subsidiary Partnership” means any partnership or limited liability company that is a Subsidiary of the Partnership.
“Substituted Limited Partner” means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4.
“Tax Allocations” means the allocations set forth in paragraph 4 of Exhibit B.
“Tax Items” has the meaning set forth in subparagraph 4(a) of Exhibit B.
“Tenant” means any tenant from which the General Partner derives rent either directly or indirectly through partnerships, including the Partnership, or Qualified REIT Subsidiaries.
“Tendered Units” shall have the meaning set forth in Section 8.6A.
“Tendering Partner” shall have the meaning set forth in Section 8.6A.
“Termination” means the termination of the Advisory Agreement.
“Termination Date” means the date of Termination.
“Termination Without Cause” means the termination of the Advisory Agreement as provided in the Advisory Agreement by the Independent Directors of the General Partner without Cause (as defined in the Advisory Agreement).
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“Transaction” shall have the meaning set forth in Section 11.2C.
“Value” means the Offering price for a share of Common Stock of the relevant class less any selling commissions and dealer manager fee that would be payable with respect to the sale of a share of such Common Stock until such time as the General Partner calculates its net asset value, in which case, such amount will be the per share net asset value of such class.
Certain additional terms and phrases have the meanings set forth in Exhibit B.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Organization.
The Partnership is a limited partnership formed pursuant to the provisions of the Act and upon the terms and conditions set forth in this Agreement. Except as expressly provided herein, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the Act. The Partnership Interest of each Partner shall be personal property for all purposes.
Section 2.2 Name.
The name of the Partnership is Procaccianti Hotel REIT, L.P. The Partnership’s business may be conducted under any other name or names deemed advisable by the General Partner, including the name of the General Partner or any Affiliate thereof. The words “Limited Partnership,” “L.P.,” “Ltd.” or similar words or letters shall be included in the Partnership’s name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole and absolute discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners.
Section 2.3 Registered Office and Agent;Principal Office.
The name and address of the registered office and registered agent of the Partnership is [•]. The principal office of the Partnership is located at 1140 Reservoir Avenue, Cranston, Rhode Island 02920-6320, or such other place as the General Partner may from time to time designate by notice to the other Partners. The Partnership may maintain offices at such other place or places within or ou1140 Reservoir Avenue, Cranston, Rhode Island 02920-6320tamtside the State of Delaware as the General Partner deems advisable.
Section 2.4 Power of Attorney.
A. Each Limited Partner and each Assignee constitutes and appoints the General Partner, any Liquidator, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments or restatements thereof) that the General Partner or the Liquidator deems appropriate or necessary to form,
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qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the Limited Partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (b) all instruments that the General Partner or any Liquidator deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (c) all conveyances and other instruments or documents that the General Partner or any Liquidator deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; (d) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Articles 11, 12 or 13 or the Capital Contribution of any Partner; and (e) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of Partnership Interests; and
(2) execute, swear to, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole and absolute discretion of the General Partner or any Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole discretion of the General Partner or any Liquidator, to effectuate the terms or intent of this Agreement. Nothing contained herein shall be construed as authorizing the General Partner or any Liquidator to amend this Agreement except in accordance with Article 14 or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner and any Liquidator to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive and not be affected by the subsequent Incapacity of any Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner’s or Assignee’s OP Units and shall extend to such Limited Partner’s or Assignee’s heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or any Liquidator, acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee hereby waives any and all defenses which may be available to contest, negate or disaffirm the action of the General Partner or any Liquidator, taken in good faith under such power of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or any Liquidator, within 15 days after receipt of the General Partner’s or Liquidator’s request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator, as the case may be, deems necessary to effectuate this Agreement and the purposes of the Partnership.
Section 2.5 Term.
The term of the Partnership commenced on the date of its formation and the Partnership shall have a perpetual existence unless it is dissolved pursuant to the provisions of Article 13 or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business.
The purpose and nature of the business to be conducted by the Partnership is to (i) conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act, (ii) enter into any partnership, joint venture
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or other similar arrangement to engage in any business described in the foregoing clause (i) or to own interests in any entity engaged, directly or indirectly, in any such business and (iii) do anything necessary or incidental to the foregoing, provided, however, that such business shall be limited to and conducted in such a manner as to permit the General Partner at all times to be classified as a REIT for U.S. federal income tax purposes unless the General Partner, in its sole and absolute discretion, has chosen to cease to qualify as a REIT or has chosen not to attempt to qualify as a REIT for any reason or reasons whether or not related to the business conducted by the Partnership. In connection with the foregoing, and without limiting the General Partner’s right in its sole discretion to cease qualifying as a REIT, the Limited Partners acknowledge that the General Partner’s current status as a REIT inures to the benefit of all the Limited Partners and not solely the General Partner.
Section 3.2 Powers.
The Partnership is empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership, including, without limitation, full power and authority, directly or through its ownership interest in other entities, to enter into, perform and carry out contracts of any kind, borrow money and issue evidences of indebtedness, whether or not secured by mortgage, deed of trust, pledge or other lien, grant guarantees and/or indemnities, acquire, own, manage, improve and develop real property, and lease, sell, transfer and dispose of real property; provided, however, notwithstanding anything to the contrary in this Agreement, the Partnership shall not take, or refrain from taking, any action which, in the judgment of the General Partner, in its sole and absolute discretion, (i) could adversely affect the ability of the General Partner to continue to qualify as a REIT (unless the General Partner has determined in its sole discretion not to continue to so qualify), (ii) absent the consent of the General Partner, which may be given or withheld in its sole and absolute discretion, could subject the General Partner to any taxes under Section 857 or Section 4981 of the Code, or (iii) could violate any law or regulation of any governmental body or agency having jurisdiction over the General Partner or its securities, unless any such action (or inaction) under the foregoing clauses (i), (ii) or (iii) shall have been specifically consented to by the General Partner in writing.
Section 3.3 Partnership only for PurposesSpecified.
The Partnership shall be a partnership only for the purposes specified in Section 3.1, and this Agreement shall not be deemed to create a partnership among the Partners with respect to any activities whatsoever other than the activities within the purposes of the Partnership as specified in Section 3.1. Except as otherwise provided in this Agreement, no Partner shall have any authority to act for, bind, commit or assume any obligation or responsibility on behalf of the Partnership, its properties or any other Partner. No Partner, in its capacity as a Partner under this Agreement, shall be responsible or liable for any indebtedness or obligation of another Partner, nor shall the Partnership be responsible or liable for any indebtedness or obligation of any Partner, incurred either before or after the execution and delivery of this Agreement by such Partner, except as to those responsibilities, liabilities, indebtedness or obligations incurred pursuant to and as limited by the terms of this Agreement and the Act.
Section 3.4 Representations and Warrantiesby the Parties.
A. Each Partner that is an individual represents and warrants to each other Partner that (i) such Partner has the legal capacity to enter into this Agreement and perform such Partner’s obligations hereunder, (ii) the consummation of the transactions contemplated by this Agreement to be performed by such Partner will not result in a breach or violation of, or a default under, any agreement by which such Partner or any of such Partner’s property is or are bound, or any statute,
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regulation, order or other law to which such Partner is subject, (iii) such Partner is a “United States person” within the meaning of Section 7701(a)(30) of the Code, and (iv) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.
B. Each Partner that is not an individual represents and warrants to each other Partner that (i) its execution and delivery of this Agreement and all transactions contemplated by this Agreement to be performed by it have been duly authorized by all necessary action, including without limitation, that of its general partner(s), committee(s), trustee(s), beneficiaries, directors and/or stockholder(s), as the case may be, as required, (ii) the consummation of such transactions shall not result in a breach or violation of, or a default under, its certificate of limited partnership, partnership agreement, trust agreement, limited liability company operating agreement, charter or bylaws, as the case may be, any agreement by which such Partner or any of such Partner’s properties or any of its partners, beneficiaries, trustees or stockholders, as the case may be, is or are bound, or any statute, regulation, order or other law to which such Partner or any of such Partner’s properties or any of its partners, trustees, beneficiaries or stockholders, as the case may be, is or are subject, (iii) such Partner is a “United States person” within the meaning of Section 7701(a)(30) of the Code and (iv) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.
C. Each Partner represents, warrants, and agrees that it has acquired and continues to hold its interest in the Partnership for its own account for investment only and not for the purpose of, or with a view toward, the resale or distribution of all or any part thereof, nor with a view toward selling or otherwise distributing such interest or any part thereof at any particular time or under any predetermined circumstances. Each Partner further represents and warrants that it is a sophisticated investor, able and accustomed to handling sophisticated financial matters for itself, particularly real estate investments, and that it has a sufficiently high net worth that it does not anticipate a need for the funds it has invested in the Partnership in what it understands to be a highly speculative and illiquid investment. Each Partner represents, warrants and agrees that such Partner is an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act).
D. Each Partner acknowledges that (i) the OP Units (and any REIT Shares that might be exchanged therefor) have not been registered under the Securities Act and may not be transferred unless they are subsequently registered under the Securities Act or an exemption from such registration is available (it being understood that the Partnership has no intention of so registering the OP Units), (ii) a restrictive legend in the form set forth in Exhibit D shall be placed on the certificates representing the OP Units, and (iii) a notation shall be made in the appropriate records of the Partnership indicating that the OP Units are subject to restrictions on transfer.
E. Each Limited Partner further represents, warrants, covenants and agrees as follows:
(1) at any time such Partner actually or Constructively Owns a 25% or greater capital interest or profits interest in the Partnership, it does not and will not, without the prior written consent of the General Partner, actually own or Constructively Own (a) with respect to any Tenant that is a corporation, any stock of such Tenant, and (b) with respect to any Tenant that is not a corporation, any interests in either the assets or net profits of such Tenant.
(2) at any time such Partner actually or Constructively Owns a 25% or greater capital interest or profits interest in the Partnership, it does not, and agrees that it will not without the prior written consent of the General Partner, actually own or Constructively Own, any stock in the General Partner, other than any REIT Shares or other shares of capital stock of the General Partner such Partner may acquire as a result of an exchange of Tendered Units pursuant to Section 8.6, subject to the ownership limitations set forth in the General Partner’s Charter.
(3) Upon request of the General Partner, it will disclose to the General Partner the amount of REIT Shares or other shares of capital stock of the General Partner that it actually owns or Constructively Owns.
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(4) It understands that if, for any reason, (a) the representations, warranties or agreements set forth in E(1) or (2) above are violated, or (b) the Partnership’s actual or Constructive Ownership of REIT Shares or other shares of capital stock of the General Partner violates the limitations set forth in the Charter, then (x) some or all of the Redemption rights of the Partners may become non-exercisable, and (y) some or all of the REIT Shares owned by the Partners may be automatically transferred to a trust for the benefit of a charitable beneficiary, as provided in the Charter.
(5) Without the consent of the General Partner, which may be given or withheld in its sole discretion, no Partner shall take any action that would cause the Partnership at any time to have more than 100 partners, as determined for purposes of the safe harbor set forth in Regulations Section 1.7704-1(h) (including as partners those persons indirectly owning an interest in the Partnership through a partnership, limited liability company, S corporation or grantor trust (such entity, a “flow through entity”), but only if substantially all of the value of such person’s interest in the flow through entity is attributable to the flow through entity’s interest (direct or indirect) in the Partnership).
F. The representations and warranties contained in Section 3.4 shall survive the execution and delivery of this Agreement by each Partner and the dissolution and winding-up of the Partnership.
G. Each Partner hereby acknowledges that no representations as to potential profit, cash flows, funds from operations or yield, if any, in respect of the Partnership or the General Partner have been made by any Partner or any employee or representative or Affiliate of any Partner, and that projections and any other information, including, without limitation, financial and descriptive information and documentation, which may have been in any manner submitted to such Partner shall not constitute any representation or warranty of any kind or nature, express or implied.
Section 3.5 Certain ERISA Matters.
Each Partner acknowledges that the Partnership is intended to qualify as a “real estate operating company” (as such term is defined in the Plan Asset Regulation). The General Partner may structure investments in, relationships with and conduct with respect to Investments and any other assets of the Partnership so that the Partnership will be a “real estate operating company” (as such term is defined in the Plan Asset Regulation).
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions ofthe Partners.
At the time of their respective execution of this Agreement, the Partners shall make or shall have made Capital Contributions as set forth in the books and records of the Partnership. The Partners shall own OP Units of the class or series and in the amounts set forth in Exhibit A and shall have a Percentage Interest in the Partnership as set forth in Exhibit A, which Percentage Interest shall be adjusted in Exhibit A from time to time by the General Partner to the extent necessary to reflect accurately exchanges, redemptions, Capital Contributions, the issuance of additional OP Units or similar events having an effect on a Partner’s Percentage Interest. Except as required by law, as otherwise expressly provided herein, or as otherwise agreed to by a Partner and the Partnership, no Partner shall be required or permitted to make any additional Capital Contributions or loans to the Partnership.
Section 4.2 Classes of Partnership Units.
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The General Partner is hereby authorized to cause the Partnership to issue OP Units designated as Class A OP Units, Class B OP Units, Class K OP Units, Class K-I OP Units and Class K-T OP Units. Each such Class of OP Units shall have the rights and obligations attributed to that Class under this Agreement.
Section 4.3 Loans by Third Parties.
Subject to Section 4.4, the Partnership may incur Debt, or enter into other similar credit, guarantee, financing or refinancing arrangements for any purpose (including, without limitation, in connection with any further acquisition of Investments) with any Person that is not the General Partner upon such terms as the General Partner determines appropriate; provided that, the Partnership shall not incur any Debt that is recourse to the General Partner, except to the extent otherwise agreed to by the General Partner in its sole discretion.
Section 4.4 Additional Funding and CapitalContributions.
A. General. The General Partner may, at any time and from time to time determine that the Partnership requires additional funds (“Additional Funds”) for the acquisition of additional Investments or for such other Partnership purposes as the General Partner may determine. Additional Funds may be raised by the Partnership, at the election of the General Partner, in any manner provided in, and in accordance with, the terms of this Section 4.4. No Person shall have any preemptive, preferential or similar right or rights to subscribe for or acquire any Partnership Interest, except as set forth in this Section 4.4.
B. Issuance of Additional Partnership Interests. The General Partner, in its sole and absolute discretion, may raise all or any portion of the Additional Funds by causing the Partnership to accept additional Capital Contributions of cash. The General Partner may also cause the Partnership to accept additional Capital Contributions of real property or any other non-cash assets. In connection with any such additional Capital Contributions (of cash or property) or events, the General Partner is hereby authorized to cause the Partnership from time to time to issue to Partners (including the General Partner) or other Persons (including, without limitation, in connection with the contribution of property to the Partnership) additional OP Units or other Partnership Interests in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers, and duties, including rights, powers, and duties senior to then existing Limited Partner Interests, all as shall be determined by the General Partner in its sole and absolute discretion subject to Delaware law, and as set forth by amendment to this Agreement, including without limitation: (i) the allocations of items of Partnership income, gain, loss, deduction, and credit to such class or series of Partnership Interests; (ii) the right of each such class or series of Partnership Interests to share in Partnership distributions; (iii) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership; and (iv) the right to vote, including, without limitation, the Limited Partner approval rights set forth herein; provided, that no such additional OP Units or other Partnership Interests shall be issued to the General Partner unless either (a)(1) the additional Partnership Interests are issued in connection with the grant, award, or issuance of shares of the General Partner pursuant to Section 4.4C below, which shares have designations, preferences, and other rights (except voting rights) such that the economic interests attributable to such shares are substantially similar to the designations, preferences and other rights of the additional Partnership Interests issued to the General Partner in accordance with this Section 4.4B, and (2) the General Partner shall make a Capital Contribution to the Partnership in an amount equal to the net proceeds raised in connection with such issuance, (b) the General Partner otherwise makes an additional Capital Contribution, or (c) the additional Partnership Interests are issued to all Partners holding Partnership Interests in the same class in proportion to their respective Percentage Interests in such class. The General Partner’s determination that consideration is adequate shall be conclusive insofar as the adequacy of consideration relates to whether the Partnership Interests are validly issued and paid. In the event that the Partnership issues additional Partnership Interests pursuant to
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this Section 4.4B, the General Partner shall make such revisions to this Agreement as it determines are necessary to reflect the issuance of such additional Partnership Interests. Without limiting the foregoing, the General Partner is expressly authorized to cause the Partnership to issue OP Units for less than fair market value, so long as the General Partner concludes in good faith that such issuance of Partnership Interests is in the best interests of the Partnership.
C. Issuance of REIT Shares or Other Securities by the General Partner. The General Partner shall not issue any additional REIT Shares, other shares of capital stock of the General Partner or New Securities (other than REIT Shares issued pursuant to Section 8.6 or such shares, stock or securities pursuant to a dividend or distribution (including any stock split) to all of its stockholders or all of its stockholders who hold a particular class of stock of the General Partner) unless (i) the General Partner shall cause the Partnership to issue to the General Partner (in compliance with the requirements of Section 4.4B), Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights, all such that the economic interests thereof are substantially similar to those of the REIT Shares, other shares of capital stock of the General Partner or New Securities issued by the General Partner and (ii) the General Partner shall make a Capital Contribution of the net proceeds from the issuance of such additional REIT Shares, other shares of capital stock or New Securities, as the case may be, and from the exercise of the rights contained in such additional New Securities, as the case may be. Without limiting the foregoing, the General Partner is expressly authorized to issue REIT Shares of any Class (or combination of any Class), other shares of capital stock of the General Partner or New Securities for no tangible value or for less than fair market value, and the General Partner is expressly authorized to cause the Partnership to issue to the General Partner Partnership Interests of the corresponding Class, so long as (x) the General Partner concludes in good faith that such issuance of Partnership Interests is in the interests of the Partnership; and (y) the General Partner contributes all proceeds, if any, from such issuance to the Partnership. In connection with the General Partner’s initial offering of REIT Shares, any other issuance of REIT Shares, other capital stock of the General Partner or New Securities, the General Partner shall contribute to the Partnership any net proceeds raised in connection with such issuance; provided, that the General Partner may use a portion of the net proceeds from any offering to acquire OP Units or other assets (provided such other assets are contributed to the Partnership pursuant to the terms of this Agreement; and provided further that if the net proceeds actually received by the General Partner are less than the gross proceeds of such issuance as a result of any underwriter’s discount or other expenses paid or incurred in connection with such issuance then, except to the extent such net proceeds are used to acquire OP Units, the General Partner shall be deemed to have made a Capital Contribution to the Partnership in the amount equal to the sum of the net proceeds of such issuance plus the amount of such underwriter’s discount and other expenses paid by the General Partner (which discount and expense shall be treated as an expense for the benefit of the Partnership for purposes of Section 7.4)).
Section 4.5 Other Contribution Provisions.
With the consent of the General Partner, in its sole discretion, one or more Limited Partners may enter into agreements with the Partnership, in the form of a guarantee or contribution agreement, which have the effect of providing a guarantee of certain obligations of the Partnership.
Section 4.6 No Preemptive Rights.
Except to the extent expressly granted by the Partnership pursuant to another agreement, no Person shall have any preemptive, preferential or other similar right with respect to (i) providing funds to the Partnership or (ii) issuance or sale of any OP Units or other Partnership Interests.
Section 4.7 No Interest; No Return.
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No Partner shall be entitled to interest on its Capital Contribution or on such Partner’s Capital Account. Except as provided herein or by law, no Partner shall have any right to demand or receive the return of its Capital Contribution from the Partnership.
Section 4.8 [Intentionally Omitted.]
Section 4.9 Special Fees.
The Partners acknowledge and agree that the following Special Fees, to the extent not otherwise borne by the General Partner, shall be borne by the Classes of OP Units in the manner prescribed under Section 5.1v as follows:
(a) 7% selling commission for each Class K OP Unit (other than Class K OP Units issued in connection with Class K REIT Shares purchased through the General Partner’s distribution reinvestment plan).
(b) 3% selling commission for each Class K-T OP Unit (other than Class K-T OP Units issued in connection with Class K-T REIT Shares purchased through the General Partner’s distribution reinvestment plan).
(c) 3% dealer manager fee for each Class K OP Unit, Class K-T OP Unit, and Class K-I OP Unit (other than Class K OP Units, Class K-I OP Units and Class K-T OP Units issued in connection with Class K REIT Shares, Class K-I REIT Shares and Class K-T REIT Shares purchased through the General Partner’s distribution reinvestment plan).
(d) 1.00% annualized Stockholder Servicing fee for each Class K-T OP Unit (other than Class T OP Units issued in connection with Class K-T REIT Shares purchased through the General Partner’s distribution reinvestment plan) in accordance with the terms set forth in the Registration Statement.
ARTICLE 5
Class K, Class K-I, Class K-T, ClassA and Class B OP Units
Section 5.1
(i) Class K OP Units, Class K-I OP Units and Class K-T OP Units.
A. Cash Distributions. Subject to the preferential rights of the holders of any class or series of Units ranking senior to Class K OP Units, Class K-I OP Units and Class K-T OP Units as to the payment of distributions and except as otherwise provided herein, (a) the holder of each Class K OP Unit shall be entitled to receive cash distributions, when and as authorized by the General Partner, out of Available Cash, on each Class K OP Unit calculated using the Class K OP Unit Distribution Base at the same per annum rate as set forth in the Charter from time to time with respect to Class K REIT Shares, (b) the holder of each Class K-I OP Unit shall be entitled to receive, when and as authorized by the General Partner, out of Available Cash, cash distributions on each Class K-I OP Unit calculated using the Class K-I OP Unit Distribution Base at the same per annum rate as set forth in the Charter from time to time with respect to Class K-I REIT Shares, and (c) the holder of each Class K-T OP Unit shall be entitled to receive, when and as authorized by the General Partner, out of Available Cash, cash distributions on each Class K-T OP Unit calculated using the Class K-T OP Unit Distribution Base at the same per annum rate as set forth in the Charter from time to time with respect to Class K-T REIT Shares. The distributions pursuant to this Section 5.1(i)A shall accrue on each Class K OP Unit, Class K-I OP Unit and Class K-T OP Unit automatically without any action of the General Partner and whether or not there are funds legally available for the payment thereof. If
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at any time the General Partner pays less than the total amount of accumulated, accrued and unpaid distributions pursuant to this Section 5.1(i)A, such payment shall be distributed pro rata among the holders of Class K OP Units, Class K-I OP Units and Class K-T OP Units in accordance with each such Partner’s respective number of Class K-OP Units, Class K-I OP Units or Class K-T OP Units.
Unless and until all accumulated, accrued and unpaid distributions with respect to Class K OP Units, Class K-I OP Units and Class K-T OP Units have been, or contemporaneously are, paid on the Class K OP Units, Class K-I OP Units and Class K-T OP Units, the General Partner shall not pay make any distributions to holders of Class A OP Units and to the holders of Class B OP Units; provided, however, that in the event of a Non-Cause Advisory Agreement Termination, the General Partner shall redeem all Class A OP Units.
B. Excess Cash Distributions. If the Partnership has Excess Cash, Partners holding Class K OP Units, Class K-I OP Units and Class K-T OP Units shall be entitled to receive, pari passu with the holders of Class A OP Units and Class B OP Units, a special distribution of 50% of such Excess Cash (pro rata based on the number of Class K OP Units, Class K-I OP Units and Class K-T OP Units), or, if the Class A OP Units have been repurchased in connection with a Non-Cause Advisory Agreement Termination, 87.5% of such Excess Cash (pro rata based on the number of Class K OP Units, Class K-I OP Units and Class K-T OP Units). In addition, if the General Partner authorizes a distribution on the Class K OP Units, Class K-I OP Units and Class K-T OP Units payable out of Net Sales Proceeds herein from the Sale of Real Property, such distribution shall first be applied against any accumulated, accrued and unpaid distributions on the Class K OP Units, Class K-I OP Units and Class K-T OP Units and then to reduce the remaining portion Class K OP Unit Liquidation Preference, Class K-I OP Unit Liquidation Preference, and Class K-T OP Unit Liquidation Preference.
C. Liquidation Distributions. Except as otherwise provided herein, upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, before any distribution or payment of the assets of the Partnership (whether capital or surplus) shall be made to or set apart for the holders of Class A OP Units and Class B OP Units, (a) the holder of each Class K OP Unit shall be entitled to be paid out of Available Cash, after payment or provision for the Partnership’s debts and liabilities, limited, in the case of non-recourse liabilities secured by properties, to the value of such properties, a liquidation preference equal to $10.00 per Class K OP Unit, plus an amount equal to any and all accumulated, accrued and unpaid distributions on such Class K OP Unit pursuant to Section 5.1(i)A herein (whether or not authorized by the General Partner) up to and including the date of issuance of such Class K OP Unit (the “Class K OP Unit Preference”), (b) the holder of each Class K-I OP Unit shall be entitled to receive a liquidation preference equal to $10.00 per Class K-I OP Unit, plus an amount equal to any and all accumulated, accrued and unpaid distributions on such Class K-I OP Unit pursuant to Section 5.1(i)A herein (whether or not authorized by the General Partner) up to and including the date of issuance of such Class K-I OP Unit (the “Class K-I OP Unit Preference”), and (c) the holder of each Class K-T OP Unit shall be entitled to receive a liquidation preference equal to $10.00 per Class K-T OP Unit, plus an amount equal to any and all accumulated, accrued and unpaid distributions on such Class K-T OP Unit pursuant to Section 5.1(i)A herein (whether or not authorized by the General Partner) up to and including the date of issuance of such Class K-T OP Unit (the “Class K-T OP Unit Preference”, collectively with the Class K OP Unit Preference and Class K-I OP Unit Preference, the “Liquidation Preferences”), The Class K OP Unit Preference, Class K-I OP Unit Preference and Class K-T OP Unit Preference on all then outstanding Class K OP Units, Class K-I OP Units and Class K-T OP Units, respectively, shall be reduced as a result of the payment of distributions pursuant to Section 5.1(i)B. To the extent not applied against any accumulated, accrued, and unpaid distributions on the Class K OP Units, Class K-I OP Units and Class K-T OP Units, such reductions in the Class K OP Unit Preference, Class K-I OP Units Preference and Class K-T OP Unit Preference on all then outstanding Class K OP Units, Class K-I OP Units and Class K-T OP Units, respectively, shall result in corresponding reductions to the Class K OP Unit Distribution Base, Class K-I OP Unit Distribution Base and Class K-T OP Unit Distribution Base, as the case may be. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, 50% of any Remaining Liquidation Cash available for distribution (or 87.5% of any Remaining Liquidation Cash available for Distribution if the Class A OP Units have been redeemed in
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connection with a Non-Cause Advisory Agreement Termination) shall be distributed to the Partners holding Class K OP Units, Class K-I OP Units and Class K-T OP Units, pro rata based on the number of Class K OP Units, Class K-I OP Units and Class K-T OP Units.
D. Listing. Upon a Listing, each Class K OP Unit, Class K-I OP Unit or Class K-T OP Unit that does not have an associated class of REIT Shares Listed by the General Partner shall automatically convert into an OP Unit of the class that corresponds to the Listed class of REIT Shares (subject to any adjustment deemed necessary by the General Partner).
E. Conversion of Class K-T OP Units. Class K-T OP Units (including the associated Class K-T OP Units issued in connection with Class K-T REIT Shares purchased under the General Partner’s distribution reinvestment plan) shall automatically convert into the number of Class K OP Units calculated in accordance with, and pursuant to the terms for Class K-T REIT Shares provided in, Section 5.2.7 of the Charter.
(ii) Class B OP Units.
A. Excess Cash Distributions. If the Partnership has Excess Cash, the holders of Class B OP Units shall be entitled to receive, pari passu with the holders of Class A OP Units, Class K OP Units, Class K-I OP Units and Class K-T OP Units, a special distribution of 12.5% of Excess Cash (pro rata based on the number of Class B OP Units).
B. Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership,12.5% of any Remaining Liquidation Cash available for distribution by the General Partner shall be paid to holders of Class B OP Units, pro rata based on the number of Class B OP Units.
C. Listing. If there is an excess amount in accordance with Section 5.3.5 of the Charter, the General Partner shall cause the outstanding Class B OP Units to be redeemed for the same amount that the Class B REIT Shares would be redeemed pursuant to Section 5.3.5 of the Charter. If there is no excess amount in accordance with Section 5.3.5 of the Charter, the Class B OP Units shall be redeemed and cancelled for no consideration.
(iii) Class A OP Units.
A. Cash Distributions. Following the payment in full of all accumulated, accrued and unpaid distributions on the Class K OP Units, Class K-I OP Units and Class K-T OP Units, and the payment of any accrued asset management fees payable to the Advisor by the General Partner (and any interest thereon), the holder of each Class A OP Unit shall be entitled to receive, when and as authorized by the General Partner, out of Available Cash, distributions on each Class A OP Unit at the same per annum rate as set forth in the Charter from time to time for the Class A REIT Shares. Except in the case of a Liquidation of the Partnership, the Class A OP Units shall not be entitled to participate or receive any distributions on account of Net Sales Proceeds.
B. Excess Cash Distributions. If the Partnership has Excess Cash, Partners holding Class A OP Units shall be entitled to receive, pari passu with the holders of Class K OP Units, Class K-I OP Units, Class K-T OP Units, and Class B OP Units, a special distribution of 37.5% of such Excess Cash (pro rata based on the number of Class A OP Units) unless all Class A OP Units have been repurchased because of a Non-Cause Advisory Agreement Termination, in which case the Excess Cash otherwise apportioned to the Class A OP Units shall be distributed to the holders of Class K OP Units, Class K-I OP Units and Class K-T OP Units.
C. Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, after payment of the Partnership’s debts and liabilities and the Liquidation Preferences, Partners holding Class A OP Units shall be entitled to be paid an amount equal to each Class A OP Unit’s stated value of $10.00 per Unit. In addition, upon any
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voluntary or involuntary liquidation, dissolution or winding up of the Partnership, 37.5% of any Remaining Liquidation Cash available for Distribution shall be paid to the holders of the Class A OP Units, pro rata based on the number of Class A OP Units, unless all Class A OP Units previously have been repurchased because of a Non-Cause Advisory Agreement Termination, in which case the Remaining Liquidation Cash otherwise apportioned to the Class A OP Units shall be distributed to the holders of the Class K OP Units, Class K-I OP Units and Class K-T OP Units.
D. Listing. Class A OP Units shall redeemed by the General Partner or exchanged for the class or series of Common Stock that is Listed in accordance the election of the holder of Class A REIT Shares pursuant to Section 5.4.5 of the Charter.
E. Termination of Advisory Agreement. In the event of a Non-Cause Advisory Agreement Termination, the General Partner shall repurchase all outstanding Class A OP Units for an amount per Class A OP Unit equal to the amount per Class A REIT Share calculated in accordance with Section 5.4.6 of the Charter.
(iv) Consolidation, Merger or Certain Other Transactions. If the Partnership enters into a merger or other acquisition transaction, the merger or acquisition transaction consideration shall be distributed among the holders of the Class K OP Units, Class K-I OP Units, Class K-T OP Units, Class B OP Units and Class A OP Units in the same order of priority as if the Partnership liquidated and wound up and the proceeds from such liquidation and winding up available for distribution to the Limited Partners were equal to the aggregate consideration payable in such merger or acquisition transaction.
(v) Additional Distribution Rules.
(1) Any distributions and redemptions made pursuant to this Section 5.1 shall be made without economic duplication taking into account the intent of the provisions herein.
(2) If the priority distributions applicable to Class K OP Units, Class K-I OP Units and Class K-T OP Units pursuant to this Article 5 prevents the Partnership from being able to distribute sufficient amounts to the General Partner to enable the General Partner to satisfy the REIT Requirement, the General Partner may, in its sole discretion, cause the Partnership to distribute some or all of the Net Sales Proceeds to the General Partner in an amount sufficient to enable the General Partner to pay dividends to the Stockholders in order to satisfy the REIT Requirements; provided, the Partners holding Class K OP Units, Class K-I OP Units and Class K-T OP Units, as applicable, shall be made whole with future distributions as soon as possible thereafter.
(3) In no event may any Partner receive a distribution pursuant to this Section 5.1 with respect to a Partnership Unit if such Partner is entitled to receive a distribution with respect to Common Stock for which such a Partnership Unit has been exchanged.
(vi) Special Fees. Consistent with Section 4.9, if the Partnership directly or indirectly incurs Special Fees: (i) Available Cash or Net Sales Proceeds, as the case may be, available for distribution under this Section 5.1 shall be deemed to be increased by the Special Fees to the extent that Available Cash or Net Sales Proceeds have been previously reduced by such fees; and (ii) the amounts otherwise distributable among the Classes of OP Units based on such deemed increase shall then be reduced (without duplication of any prior reductions made under this Section 5.1v) to reflect their appropriate shares of the Special Fees.
Section 5.2 Qualification as a REIT.
The General Partner shall use its best efforts to cause the Partnership to distribute sufficient amounts to the General Partner under this Article 5 to enable the General Partner to pay dividends to the Stockholders that will enable the
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General Partner to (a) satisfy the requirements for qualification as a REIT under the Code and Regulations (“REIT Requirements”), and (b) avoid any federal income or excise tax liability; provided, however, that the General Partner shall not be bound to comply with this covenant to the extent (a) the General Partner has determined not to continue to qualify as a REIT, or (b) such distributions would (i) violate applicable Delaware law, or (ii) contravene the terms of any notes, mortgages or other types of debt obligations to which the Partnership may be subject in conjunction with borrowed funds.
Section 5.3 Withholding.
With respect to any withholding tax or other similar tax liability or obligation to which the Partnership may be subject as a result of any act or status of any Partner or to which the Partnership becomes subject with respect to any Partnership Unit, the Partnership shall have the right to withhold amounts distributable pursuant to this Article V to such Partner or with respect to such Partnership Units, to the extent of the amount of such withholding tax or other similar tax liability or obligation pursuant to the provisions contained in Section 10.5, and the amount of any withholding shall reduce the right of such Partner to future distribution to the extent provided in Section 10.5.
Section 5.4 Additional Partnership Interests.
If the Partnership issues Partnership Interests in accordance with Section 4.4, the distribution priorities set forth in Section 5.1 shall be amended, as necessary, to reflect the distribution priority of such Partnership Interests and corresponding amendments shall be made to the provisions of Exhibit B.
Section 5.5 Distributions in Kind.
Except as expressly provided herein, no right is given to any Partner to demand and receive property other than cash. The General Partner may determine, in its sole and absolute discretion, to make a distribution in-kind to the Partners of Partnership assets, and such assets shall be distributed in such a fashion as to ensure that the fair market value is distributed and allocated in accordance with Articles 5, 6 and 10.
Section 5.6 Distributions upon Liquidation.
Notwithstanding Section 5.1, proceeds from a Liquidating Event shall be distributed to the Partners in accordance with Section 13.2.
Section 5.7 Reserved.
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations.
Net Income, Net Loss and other Partnership items shall be allocated pursuant to the provisions of Exhibit B.
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ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management.
A. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership are and shall be exclusively vested in the General Partner, and no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the Partnership. The General Partner may not be removed by the Limited Partners with or without cause, except with the consent of the General Partner. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to the other provisions hereof including Sections 7.3 and 11.2, shall have full power and authority to do all things deemed necessary or desirable by it to conduct the business of the Partnership (including, without limitation, all actions consistent with allowing the General Partner at all times to qualify as a REIT unless the General Partner voluntarily terminates its REIT status), to exercise all powers set forth in Section 3.2 and to effectuate the purposes set forth in Section 3.1, including, without limitation:
(1) the making of any expenditures, the lending or borrowing of money (including, without limitation, making prepayments on loans and borrowing money to permit the Partnership to make distributions to its Partners in such amounts as will permit the General Partner (so long as the General Partner has determined to qualify as a REIT) to avoid the payment of any federal income tax (including, for this purpose, any excise tax pursuant to Section 4981 of the Code) and to make distributions to its stockholders sufficient to permit the General Partner to maintain REIT status), the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness (including the securing of same by mortgage, deed of trust or other lien or encumbrance on all or any of the Partnership’s assets) and the incurring of any obligations it deems necessary for the conduct of the activities of the Partnership;
(2) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership, the registration of any class of securities of the Partnership under the Exchange Act, and the listing of any debt securities of the Partnership on any exchange;
(3) subject to the provisions of Section 11.2, the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any assets of the Partnership or the merger or other combination of the Partnership with or into another entity;
(4) the acquisition, disposition, mortgage, pledge, encumbrance or hypothecation of all or any assets of the Partnership, and the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement and on any terms it sees fit, including, without limitation, the financing of the conduct or the operations of the General Partner or the Partnership, the lending of funds to other Persons (including, without limitation, the General Partner or any Subsidiaries of the Partnership) and the repayment of obligations of the Partnership, any of its Subsidiaries and any other Person in which it has an equity investment, and the making of capital contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping, repair, alteration, demolition or improvement of any real property or improvements owned by the Partnership or any Subsidiary of the Partnership;
(6) the negotiation, execution, and performance of any contracts, leases, conveyances or other instruments that the General Partner considers useful or necessary to the conduct of the Partnership’s operations or the
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implementation of the General Partner’s powers under this Agreement, including contracting with contractors, developers, consultants, accountants, legal counsel, other professional advisors and other agents and the payment of their expenses and compensation out of the Partnership’s assets;
(7) the distribution of Partnership cash or other Partnership assets in accordance with this Agreement;
(8) the establishment of one or more divisions of the Partnership, the selection and dismissal of employees of the Partnership (including, without limitation, employees having titles such as “president,” “vice president,” “secretary” and “treasurer”), and agents, outside attorneys, accountants, consultants and contractors of the Partnership, the determination of their compensation and other terms of employment or hiring, including waivers of conflicts of interest and the payment of their expenses and compensation out of the Partnership’s assets;
(9) the maintenance of such insurance for the benefit of the Partnership and the Partners and directors and officers of the Partnership or the General Partner as it deems necessary or appropriate;
(10) the formation of, or acquisition of an interest in, and the contribution of property to, any further limited or general partnerships, limited liability companies, joint ventures, corporations or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property to any Subsidiary and any other Person in which it has an equity investment from time to time); provided, that, as long as the General Partner has determined to continue to qualify as a REIT, the Partnership may not engage in any such formation, acquisition or contribution that could cause the General Partner to fail to qualify as a REIT;
(11) the control of any matters affecting the rights and obligations of the Partnership, including the settlement, compromise, submission to arbitration or any other form of dispute resolution, or abandonment of, any claim, cause of action, liability, debt or damages, due or owing to or from the Partnership, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitration or other forms of dispute resolution, and the representation of the Partnership in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurring of legal expense, and the indemnification of any Person against liabilities and contingencies to the extent permitted by law;
(12) the undertaking of any action in connection with the Partnership’s direct or indirect investment in any Person (including, without limitation, contributing or loaning Partnership funds to, incurring indebtedness on behalf of, or guarantying the obligations of any such Persons);
(13) subject to the other provisions in this Agreement, the determination of the fair market value of any Partnership property distributed in kind using such reasonable method of valuation as it may adopt, provided, that such methods are otherwise consistent with requirements of this Agreement;
(14) the management, operation, leasing, landscaping, repair, alteration, demolition or improvement of any real property or improvements owned by the Partnership or any Subsidiary of the Partnership or any Person in which the Partnership has made a direct or indirect equity investment;
(15) holding, managing, investing and reinvesting cash and other assets of the Partnership;
(16) the collection and receipt of revenues and income of the Partnership;
(17) the exercise, directly or indirectly through any attorney-in-fact acting under a general or limited power of attorney, of any right, including the right to vote, appurtenant to any asset or investment held by the Partnership;
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(18) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of or in connection with any Subsidiary of the Partnership or any other Person in which the Partnership has a direct or indirect interest, or jointly with any such Subsidiary or other Person;
(19) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of any Person in which the Partnership does not have an interest pursuant to contractual or other arrangements with such Person;
(20) the making, execution and delivery of any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or legal instruments or agreements in writing necessary or appropriate in the judgment of the General Partner for the accomplishment of any of the powers of the General Partner enumerated in this Agreement;
(21) the issuance of additional Partnership Interests, as appropriate, in connection with the contribution of Additional Funds pursuant to Section 4.4;
(22) the distribution of cash to acquire OP Units held by a Limited Partner in connection with a Limited Partner’s exercise of its Redemption Right under Section 8.6 hereof;
(23) the amendment and restatement of Exhibit A hereto to reflect accurately at all times the Capital Contributions and Percentage Interests of the Partners as the same are adjusted from time to time to the extent necessary to reflect redemptions, Capital Contributions, the issuance of OP Units, the admission of any Additional Limited Partner or any Substituted Limited Partner or otherwise, which amendment and restatement, notwithstanding anything in this Agreement to the contrary, shall not be deemed an amendment to this Agreement, as long as the matter or event being reflected in Exhibit A hereto otherwise is authorized by this Agreement;
(24) the taking of any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a “publicly traded partnership” under Section 7704 of the Code; and
(25) the delegation to another Person of any powers now or hereafter granted to the General Partner.
B. Each of the Limited Partners agrees that the General Partner is authorized to execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Partnership without any further act, approval or vote of the Partners, notwithstanding any other provisions of this Agreement (except as provided in Section 7.3 or 11.2), the Act or any applicable law, rule or regulation to the fullest extent permitted under the Act or other applicable law, rule or regulation. The execution, delivery or performance by the General Partner or the Partnership of any agreement authorized or permitted under this Agreement shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General Partner may cause the Partnership to obtain and maintain (i) casualty, liability and other insurance on the Investments and (ii) liability insurance for the Indemnities hereunder.
D. At all times from and after the date hereof, the General Partner may cause the Partnership to establish and maintain working capital and other reserves in such amounts as the General Partner, in its sole and absolute discretion, deems appropriate and reasonable from time to time.
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E. Each of the Limited Partners acknowledges that, in exercising its authority under this Agreement, the General Partner may, but shall be under no obligation to, take into account the tax consequences to any Partner (including the General Partner) of any action taken (or not taken) by the General Partner. The General Partner and the Partnership shall not have liability to a Partner under this Agreement as a result of any income tax liability incurred by a Limited Partner as a result of an action (or inaction) by the General Partner pursuant to its authority under this Agreement. There may be circumstances in which the fiduciary duties that the General Partner owes to the Limited Partners conflicts with any duties that the officers and directors of General Partner owe to its stockholders. For so long as the General Partner owns a controlling interest in the Partnership, any such conflict that cannot be resolved in a manner not adverse to either the stockholders or the Limited Partners shall be resolved in favor of the General Partner’s stockholders.
F. Except as otherwise provided herein, to the extent the duties of the General Partner require expenditures of funds to be paid to third parties, the General Partner shall not have any obligations hereunder except to the extent that Partnership funds are reasonably available to it for the performance of such duties, and nothing herein contained shall be deemed to authorize or require the General Partner, in its capacity as such, to expend its individual funds for payment to third parties or to undertake any individual liability or obligation on behalf of the Partnership.
Section 7.2 Certificate of Limited Partnership.
To the extent that such action is determined by the General Partner to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate and do all the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware and to maintain the Partnership’s qualification to do business as a foreign limited partnership in each other state, the District of Columbia or other jurisdiction, in which the Partnership may elect to do business or own property. Subject to the terms of Section 8.5.A(4), the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate or any amendment thereto to any Limited Partner. The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents as may be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware, any other state, or the District of Columbia or other jurisdiction, in which the Partnership may elect to do business or own property.
Section 7.3 Restrictions on General Partner’sAuthority.
A. The General Partner may not take any action in contravention of an express prohibition or limitation of this Agreement without the written Consent of the Limited Partners, and may not (i) perform any act that would subject a Limited Partner to liability as a general partner in any jurisdiction or any other liability except as provided herein or under the Act; or (ii) enter into any contract, mortgage, loan or other agreement that prohibits or restricts, or has the effect of prohibiting or restricting, the ability of a Limited Partner to exercise its rights to a Redemption in full, except in each case with the written consent of such Limited Partner.
B. The General Partner shall not, without the prior Consent of the Partners (in addition to any Consent of the Limited Partners required by any other provision hereof), or except as provided in Section 7.3D, amend, modify or terminate this Agreement.
C. The General Partner may not cause the Partnership to take any action which the General Partner would be prohibited from taking directly under the General Partner’s bylaws as in effect from time to time.
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D. Notwithstanding Section 7.3B, the General Partner shall have the exclusive power to amend this Agreement as may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Limited Partners;
(2) to reflect the issuance of additional Partnership Interests pursuant to Sections 4.4B and 5.4 or the admission, substitution, termination, or withdrawal of Partners in accordance with this Agreement (which may be effected through the replacement of Exhibit A with an amended Exhibit A);
(3) to set forth or amend the designations, rights, powers, duties and preferences of the holders of any additional Partnership Interests issued pursuant to Article 4;
(4) to reflect a change that is of an inconsequential nature and does not adversely affect the Limited Partners in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with law or with other provisions, or make other changes with respect to matters arising under this Agreement that will not be inconsistent with law or with the provisions of this Agreement;
(5) to satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency or contained in federal or state law;
(6) to reflect such changes as are reasonably necessary for the General Partner to maintain its status as a REIT or to mitigate any otherwise payable U.S. federal income or excises taxes, including changes which may be necessitated due to a change in applicable law (or an authoritative interpretation thereof) or a ruling of the IRS; and
(7) to modify the manner in which Capital Accounts are computed or allocations of items thereto are made.
The General Partner will provide notice to the Limited Partners when any action under this Section 7.3D is taken.
E. Notwithstanding Sections 7.3B and 7.3D, this Agreement shall not be amended with respect to any Partner adversely affected, and no action may be taken by the General Partner, without the Consent of such Partner adversely affected if such amendment or action would (i) convert a Limited Partner’s interest in the Partnership into a general partner’s interest (except as the result of the General Partner acquiring such interest), (ii) modify the limited liability of a Limited Partner, (iii) alter rights of the Partner to receive distributions pursuant to Article 5 or Section 13.2A(4), or the allocations specified in Article 6 (except as permitted pursuant to Sections 4.4, 5.4, and Section 7.3D(2)), (iv) materially alter or modify the rights to a Redemption or the REIT Shares Amount as set forth in Section 8.6, and related definitions hereof, or (v) amend this Section 7.3E. Further, no amendment may alter the restrictions on the General Partner’s authority set forth elsewhere in this Section 7.3 or in Section 11.2A without the Consent specified in such section. This Section 7.3E does not require unanimous consent of all Partners adversely affected unless the amendment is to be effective against all partners adversely affected.
Section 7.4 Reimbursement of the GeneralPartner.
A. Except as provided in this Section 7.4 and elsewhere in this Agreement (including the provisions of Articles 5 and 6 regarding distributions, payments and allocations to which it may be entitled), the General Partner shall not be
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compensated for its services as general partner of the Partnership.
B. The Partnership shall be responsible for and shall pay all expenses relating to the Partnership’s and the General Partner’s organization, the ownership of its assets and its operations. The General Partner is hereby authorized to pay compensation for accounting, administrative, legal, technical, management and other services rendered to the Partnership. Except to the extent provided in this Agreement, the General Partner and its Affiliates shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all expenses that the General Partner and its Affiliates incur relating to the ownership and operation of, or for the benefit of, the Partnership (including, without limitation, administrative expenses); provided, that the amount of any such reimbursement shall be reduced by any interest earned by the General Partner with respect to bank accounts or other instruments or accounts held by it on behalf of the Partnership. The Partners acknowledge that all such expenses of the General Partner are deemed to be for the benefit of the Partnership. Such reimbursement shall be in addition to any reimbursement made as a result of indemnification pursuant to Section 7.7 hereof. In the event that certain expenses are incurred for the benefit of the Partnership and other entities (including the General Partner), such expenses will be allocated to the Partnership and such other entities in such a manner as the General Partner in its sole and absolute discretion deems fair and reasonable. All payments and reimbursements hereunder shall be characterized for federal income tax purposes as expenses of the Partnership incurred on its behalf, and not as expenses of the General Partner, with any Special Fees allocated to the applicable class or series of Partnership Units or other securities issued by the Partnership that correspond to the REIT Shares, other shares of capital stock, or New Securities issued by the General Partner.
C. If the General Partner shall elect to purchase from its stockholders REIT Shares for the purpose of delivering such REIT Shares to satisfy an obligation under any dividend reinvestment program adopted by the General Partner, any employee stock purchase plan adopted by the General Partner, or any similar obligation or arrangement undertaken by the General Partner in the future or for the purpose of retiring such REIT Shares, the purchase price paid by the General Partner for such REIT Shares and any other expenses incurred by the General Partner in connection with such purchase shall be considered expenses of the Partnership and shall be advanced to the General Partner or reimbursed to the General Partner, subject to the condition that: (i) if such REIT Shares subsequently are sold by the General Partner, the General Partner shall pay to the Partnership any proceeds received by the General Partner for such REIT Shares (which sales proceeds shall include the amount of dividends reinvested under any dividend reinvestment or similar program; provided, that a transfer of REIT Shares for OP Units pursuant to Section 8.6 would not be considered a sale for such purposes); and (ii) if such REIT Shares are not retransferred by the General Partner within thirty (30) days after the purchase thereof, or the General Partner otherwise determines not to retransfer such REIT Shares, the General Partner, shall cause the Partnership to redeem a number of OP Units held by the General Partner equal to the number of such REIT Shares, as adjusted (x) pursuant to Section 7.5 (in the event the General Partner acquires material assets, other than on behalf of the Partnership) and (y) for stock dividends and distributions, stock splits and subdivisions, reverse stock splits and combinations, distributions of rights, warrants or options, and distributions of evidences of indebtedness or assets relating to assets not received by the General Partner pursuant to a pro rata distribution by the Partnership (in which case such advancement or reimbursement of expenses shall be treated as having been made as a distribution in redemption of such number of OP Units held by the General Partner).
D. As set forth in Section 4.4, the General Partner shall be treated as having made a Capital Contribution in the amount of all expenses that it incurs relating to the General Partner’s offering of REIT Shares, other shares of capital stock of the General Partner or New Securities.
E. If and to the extent any reimbursements to the General Partner pursuant to this Section 7.4 constitute gross income of the General Partner (as opposed to the repayment of advances made by the General Partner on behalf of the Partnership), such amounts shall constitute guaranteed payments within the meaning of Section 707(c) of the Code, shall
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be treated consistently therewith by the Partnership and all Partners, and shall not be treated as distributions for purposes of computing the Partners’ Capital Accounts.
Section 7.5 Outside Activities of theGeneral Partner.
A. Except in connection with a transaction authorized in Section 11.2, without the Consent of the Limited Partners, the General Partner shall not, directly or indirectly, enter into or conduct any business, other than in connection with the ownership, acquisition and disposition of Partnership Interests as a General Partner and the management of the business of the Partnership, its operation as a public reporting company with a class (or classes) of securities registered under the Exchange Act, its operation as a REIT and such activities as are incidental to the same. Without the Consent of the Limited Partners, the General Partner shall not, directly or indirectly, participate in or otherwise acquire any interest in any real or personal property, except its General Partner Interest, its minority interest in any Subsidiary Partnership(s) that the General Partner holds in order to maintain such Subsidiary Partnership’s status as a partnership, and such bank accounts, similar instruments or other short term investments as it deems necessary to carry out its responsibilities contemplated under this Agreement and the Charter. In the event the General Partner desires to contribute cash to any Subsidiary Partnership to acquire or maintain an interest of 1% or less in the capital of such partnership, the General Partner may acquire or maintain an interest of 1% or less in the capital of such partnership, and the General Partner may acquire such cash from the Partnership as a loan or in exchange for a reduction in the General Partner’s OP Units, in an amount equal to the amount of such cash divided by the Fair Market Value of a REIT Share on the day such cash is received by the General Partner. Notwithstanding the foregoing, the General Partner may acquire Investments or other assets in exchange for REIT Shares or cash, to the extent such Investments or other assets are immediately contributed by the General Partner to the Partnership, pursuant to the terms described in Section 4.4. Any Limited Partner Interests acquired by the General Partner, whether pursuant to exercise by a Limited Partner of its right of Redemption, or otherwise, shall be automatically converted into a General Partner Interest comprised of an identical number of OP Units with the same rights, priorities and preferences as the class or series so acquired. The General Partner may also own one hundred percent (100%) of the stock or interests of one or more Qualified REIT Subsidiaries or limited liability companies, respectively, provided that any such entity shall be subject to the limitations of this Section 7.5A. If, at any time, the General Partner acquires material assets (other than Partnership Interests or other assets on behalf of the Partnership) the definition of “REIT Shares Amount” and the definition of “Deemed Value of Partnership Interests” shall be adjusted, as reasonably determined by the General Partner, to reflect the relative Fair Market Value of a share of capital stock of the General Partner relative to the Deemed Partnership Interest Value of the related Partnership Unit. The General Partner’s General Partner Interest in the Partnership, its minority interest in any Subsidiary Partnership(s) (held directly or indirectly through a Qualified REIT Subsidiary) that the General Partner holds in order to maintain such Subsidiary Partnership’s status as a partnership, and interests in such short-term liquid investments, bank accounts or similar instruments as the General Partner deems necessary to carry out its responsibilities contemplated under this Agreement and the Charter are interests which the General Partner is permitted to acquire and hold for purposes of this Section 7.5A.
B. In the event the General Partner exercises its rights under the Charter to purchase REIT Shares, other common stock of the General Partner or New Securities, as the case may be, then the General Partner shall cause the Partnership to purchase from it a number of OP Units equal to the number of REIT Shares and of the same class, other capital stock of the General Partner or New Securities, as the case may be, so purchased on the same terms that the General Partner purchased such REIT Shares, other capital stock of the General Partner or New Securities, as the case may be.
Section 7.6 Contracts with Affiliates.
A. The Partnership may lend or contribute to Persons in which it has an equity investment, and such Persons may
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borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner. The foregoing authority shall not create any right or benefit in favor of any Person.
B. Except as provided in Section 7.5A, the Partnership may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions consistent with this Agreement and applicable law as the General Partner in its sole discretion deems advisable.
C. The General Partner, in its sole and absolute discretion and without the approval of the Limited Partners, may propose and adopt on behalf of the Partnership employee benefit plans funded by the Partnership for the benefit of employees of the General Partner, the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them in respect of services performed, directly or indirectly, for the benefit of the Partnership, the General Partner, or any of the Partnership’s Subsidiaries.
D. Except as expressly permitted by this Agreement, neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, except pursuant to transactions that are determined by the General Partner in good faith to be fair and reasonable.
E. The General Partner is expressly authorized to enter into, in the name and on behalf of the Partnership, a right of first opportunity arrangement and other conflict avoidance agreements with various Affiliates of the Partnership and the General Partner, on such terms as the General Partner, in its sole and absolute discretion, believes are advisable.
Section 7.7 Indemnification.
A. To the fullest extent permitted by law, the Partnership shall indemnify an Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership as set forth in this Agreement in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless (1) Section 12.2.2 of the Charter of the General Partner prohibits the corporation from indemnifying the Indemnitee for a tax matter, in which case the Partnership shall likewise be prohibited from indemnifying the Indemnitee for the matter, or (2) it is established that: (i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith, fraud or was the result of active and deliberate dishonesty; (ii) the Indemnitee actually received an improper personal benefit in money, property or services; or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful. Without limitation, the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or otherwise, for any indebtedness of the Partnership or any Subsidiary of the Partnership (including, without limitation, any indebtedness which the Partnership or any Subsidiary of the Partnership has assumed or taken subject to), and the General Partner is hereby authorized and empowered, on behalf of the Partnership, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.7 in favor of any Indemnitee having or potentially having liability for any such indebtedness. The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, or any entry of an order of probation prior to judgment, does not create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 7.7A. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, and any insurance proceeds from the liability policy covering the General Partner and any Indemnitee, and neither the General Partner nor any Limited Partner shall have any obligation to contribute to the capital of the Partnership or otherwise provide funds to enable the Partnership to fund its obligations under this Section 7.7, except to the extent otherwise expressly agreed to by such Partner and the Partnership.
B. Reasonable expenses incurred by an Indemnitee who is a party to a proceeding may be paid or reimbursed by
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the Partnership in advance of the final disposition of the proceeding upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee’ s good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in this Section 7.7 has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity unless otherwise provided in a written agreement pursuant to which such Indemnitee is indemnified.
D. The Partnership may, but shall not be obligated to, purchase and maintain insurance, on behalf of the Indemnitees and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership’s activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.
E. For purposes of this Section 7.7, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of Section 7.7; and actions taken or omitted by the Indemnitee with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. Any amendment, modification or repeal of this Section 7.7 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the Partnership’s liability to any Indemnitee under this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
I. If and to the extent any reimbursements to the General Partner pursuant to this Section 7.7 constitute gross income of the General Partner (as opposed to the repayment of advances made by the General Partner on behalf of the Partnership) such amounts shall constitute guaranteed payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Partnership and all Partners, and shall not be treated as distributions for purposes of computing the Partners’ Capital Accounts.
J. Any indemnification hereunder is subject to, and limited by, the provisions of Section 17-108 of the Act and Section 12.2.2 of the Charter.
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K. In the event the Partnership is made a party to any litigation or otherwise incurs any loss or expense as a result of or in connection with any Partner’s personal obligations or liabilities unrelated to Partnership business, such Partner shall indemnify and reimburse the Partnership for all such loss and expense incurred, including legal fees, and the Partnership interest of such Partner may be charged therefor. The liability of a Partner under this Section 7.7K shall not be limited to such Partner’s Partnership Interest, but shall be enforceable against such Partner personally.
Section 7.8 Liability of the GeneralPartner.
A. Notwithstanding anything to the contrary set forth in this Agreement, none of the General Partner nor any of its officers, directors, agents or employees shall be liable or accountable in damages or otherwise to the Partnership, any Partners or any Assignees, or their successors or assigns, for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or any act or omission if the General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that the General Partner is acting for the benefit of the Partnership, the Limited Partners and the General Partner’s stockholders collectively. The General Partner is under no obligation to give priority to the separate interests of the Limited Partners or the General Partner’s stockholders (including, without limitation, the tax consequences to Limited Partners or Assignees or to stockholders) in deciding whether to cause the Partnership to take (or decline to take) any actions. If there is a conflict between the interests of the stockholders of the General Partner on one hand and the Limited Partners on the other, the General Partner shall endeavor in good faith to resolve the conflict in a manner not adverse to either the stockholders of the General Partner or the Limited Partners; provided, however, that for so long as the General Partner, owns a controlling interest in the Partnership, any such conflict that cannot be resolved in a manner not adverse to either the stockholders of the General Partner or the Limited Partners shall be resolved in favor of the stockholders. The General Partner shall not be liable under this Agreement to the Partnership or to any Partner for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Limited Partners in connection with such decisions; provided, that the General Partner has acted in good faith.
C. Subject to its obligations and duties as General Partner set forth in Section 7.1A, the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents. The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of the General Partner and any of its officers, directors, agents and employee’s liability to the Partnership and the Limited Partners under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.9 Other Matters Concerningthe General Partner.
(1) The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.
(2) The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters which such General Partner reasonably believes to be within
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such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.
(3) The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform all and every act and duty which is permitted or required to be done by the General Partner hereunder.
(4) Notwithstanding any other provisions of this Agreement or any non-mandatory provision of the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order to protect the ability of the General Partner, for so long as the General Partner has determined to qualify as a REIT, to (i) continue to qualify as a REIT or (ii) avoid the General Partner incurring any taxes under Section 857 or Section 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.
Section 7.10 Title to Partnership Assets.
Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partners, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more subsidiaries or nominees, as the General Partner may determine, including Affiliates of the General Partner. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its best efforts to cause beneficial and record title to such assets to be vested in the Partnership, a subsidiary or a nominee thereof, as soon as reasonably practicable. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.
Section 7.11 Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if it were the Partnership’s sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies which may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.
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ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability.
The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement or under the Act.
Section 8.2 Management of Business.
No Limited Partner or Assignee (other than the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such) shall take part in the operations, management or control (within the meaning of the Act) of the Partnership’s business, transact any business in the Partnership’s name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of LimitedPartners.
Subject to any agreements entered into by a Limited Partner or its Affiliates with the General Partner, Partnership or a Subsidiary, any Limited Partner and any officer, director, employee, agent, trustee, Affiliate or stockholder of any Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities in direct competition with the Partnership or that are enhanced by the activities of the Partnership. Neither the Partnership nor any Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee. Subject to such agreements, none of the Limited Partners nor any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any business ventures of any other Person, other than the Limited Partners benefiting from the business conducted by the General Partner, and such Person shall have no obligation pursuant to this Agreement to offer any interest in any such business ventures to the Partnership, any Limited Partner or any such other Person, even if such opportunity is of a character which, if presented to the Partnership, any Limited Partner or such other Person, could be taken by such Person.
Section 8.4 Return of Capital.
Except pursuant to the rights of Redemption set forth in Section 8.6, no Limited Partner shall be entitled to the withdrawal or return of his or her Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Partnership as provided herein. No Limited Partner or Assignee shall have priority over any other Limited Partner or Assignee either as to the return of Capital Contributions, or as otherwise expressly provided in this Agreement, or as to profits, losses, distributions or credits.
Section 8.5 Rights of Limited PartnersRelating to the Partnership.
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A. In addition to other rights provided by this Agreement or by the Act, and except as limited by Section 8.5C, each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner’s interest as a limited partner in the Partnership, upon written demand with a statement of the purpose of such demand and at such Limited Partner’s expense:
(1) to obtain a copy of the most recent annual and quarterly reports filed with the Securities and Exchange Commission by the General Partner pursuant to the Exchange Act, and each communication sent to the stockholders of the General Partner;
(2) to obtain a copy of the Partnership’s federal, state and local income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known business, residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed; and
(5) to obtain true and full information regarding the amount of cash and a description and statement of any other property or services contributed by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner.
B. The Partnership shall notify each Limited Partner in writing of any adjustment made in the calculation of the REIT Shares Amount within a reasonable time after the date such change becomes effective.
C. Notwithstanding any other provision of this Section 8.5, the General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its sole and absolute discretion to be reasonable, any information that (i) the General Partner believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or (ii) the Partnership or the General Partner is required by law or by agreements with unaffiliated third parties to keep confidential.
Section 8.6 Redemption Rights.
A. At any time after one year following the date of issuance of any OP Units to a Limited Partner, such Limited Partner shall have the right (subject to the terms and conditions set forth herein and in any other such agreement, as applicable) to require the Partnership to redeem all or a portion of the OP Units held by such Limited Partner (such OP Units being hereafter referred to as “Tendered Units”) in exchange for the Cash Amount (a “Redemption”); provided that the terms of such OP Units do not provide that such OP Units are not entitled to a right of Redemption. Unless otherwise expressly provided in this Agreement or in a separate agreement entered into between the Partnership and the holders of such OP Units, all OP Units, including Class A OP Units, Class B OP Units, Class K OP Units, Class K-I OP Units and Class K-T OP Units, shall be entitled to a right of Redemption hereunder. The Tendering Partner shall have no right, with respect to any OP Units so redeemed, to receive any distributions paid on or after the Specified Redemption Date. Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the General Partner by the Limited Partner who is exercising the right (the “Tendering Partner”). The Cash Amount shall be payable to the Tendering Partner within ten (10) days of the Specified Redemption Date in accordance with the instructions set forth in the Notice of Redemption.
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B. Notwithstanding Section 8.6A above, if a Limited Partner has delivered to the General Partner a Notice of Redemption then the General Partner may, in its sole and absolute discretion (subject to the limitations on ownership and transfer of REIT Shares set forth in the Charter), elect to acquire some or all of the Tendered Units from the Tendering Partner in exchange for the REIT Shares Amount (as of the Specified Redemption Date) and, if the General Partner so elects, the Tendering Partner shall sell the Tendered Units to the General Partner in exchange for the REIT Shares Amount. In such event, the Tendering Partner shall have no right to cause the Partnership to redeem such Tendered Units. The General Partner shall promptly give such Tendering Partner written notice of its election, and the Tendering Partner may elect to withdraw its redemption request at any time prior to the acceptance of the cash or REIT Shares Amount by such Tendering Partner.
C. The REIT Shares Amount, if applicable, shall be delivered as duly authorized, validly issued, fully paid and nonassessable REIT Shares and, if applicable, free of any pledge, lien, encumbrance or restriction, other than those provided in the Charter, the Bylaws of the General Partner, the Securities Act, relevant state securities or blue sky laws and any applicable registration rights agreement with respect to such REIT Shares entered into by the Tendering Partner. Notwithstanding any delay in such delivery (but subject to Section 8.6E), the Tendering Partner shall be deemed the owner of such REIT Shares for all purposes, including without limitation, rights to vote or consent, and receive dividends, as of the Specified Redemption Date.
D. Each Limited Partner covenants and agrees with the General Partner that all Tendered Units shall be delivered to the General Partner free and clear of all liens, claims and encumbrances whatsoever and should any such liens, claims and/or encumbrances exist or arise with respect to such Tendered Units, the General Partner shall be under no obligation to acquire the same. Each Limited Partner further agrees that, in the event any state or local property transfer tax is payable as a result of the transfer of its Tendered Units to the General Partner (or its designee), such Partner shall assume and pay such transfer tax.
E. Notwithstanding the provisions of Section 8.6A, 8.6B, 8.6C or any other provision of this Agreement, a Limited Partner (i) shall not be entitled to effect a Redemption for cash or an exchange for REIT Shares to the extent the ownership or right to acquire REIT Shares pursuant to such exchange by such Partner on the Specified Redemption Date could cause such Partner or any other Person, or, in the opinion of counsel selected by the General Partner, may cause such Partner or any other Person, to violate the restrictions on ownership and transfer of REIT Shares set forth in the Charter and (ii) shall have no rights under this Agreement to acquire REIT Shares which would otherwise be prohibited under the Charter. To the extent any attempted Redemption or exchange for REIT Shares would be in violation of this Section 8.6E, it shall be null and void ab initio and such Partner shall not acquire any rights or economic interest in the cash otherwise payable upon such Redemption or the REIT Shares otherwise issuable upon such exchange.
F. Notwithstanding anything herein to the contrary (but subject to Section 8.6E), with respect to any Redemption or exchange for REIT Shares pursuant to this Section 8.6:
(1) All OP Units acquired by the General Partner pursuant thereto shall automatically, and without further action required, be converted into and deemed to be Limited Partner Interests comprised of the same number and class of OP Units.
(2) A Limited Partner may not effect a Redemption for less than one thousand (1,000) OP Units or, if such Partner holds less than one thousand (1,000) OP Units, such Partner may effect a Redemption only with respect to all OP Units held by such Partner.
(3) A Tendering Partner may not effect more than two (2) Redemptions in a single calendar year.
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(4) Without the consent of the General Partner, a Limited Partner may not effect a Redemption during the period after the Partnership Record Date with respect to a distribution and before the record date established by the General Partner for a distribution to its stockholders of some or all of its portion of such distribution.
(5) The consummation of any Redemption or exchange for REIT Shares shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(6) Each Tendering Partner shall continue to own all OP Units subject to any Redemption or exchange for REIT Shares, and be treated as a Partner with respect to such OP Units for all purposes of this Agreement, until such OP Units are transferred to the General Partner and paid for or exchanged on the Specified Redemption Date. Until a Specified Redemption Date, the Tendering Partner shall have no rights as a stockholder of the General Partner with respect to such Tendering Partner’s OP Units.
(7) The General Partner shall be entitled to impose restrictions on the amount of and manner in which OP Units are Redeemed or exchanged pursuant to this Section 8.6 to the extent the General Partner determines, in its sole and absolute discretion, such restrictions are necessary or advisable to reduce any risk of the OP Units being treated as “traded on an established securities market” or “readily tradable on a secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code.
G. In the event that the Partnership issues additional Partnership Interests to any Additional Limited Partner pursuant to Section 4.4B, the General Partner shall make such revisions to this Section 8.6 as it determines are necessary to reflect the issuance of such additional Partnership Interests.
H. Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines to be necessary or appropriate to cause the partnership to comply with any withholding requirements established under the Code or any other federal, state or local law that apply upon a Redemption or exchange of Tendered Units. If a Tendering Partner believes that it is exempt from withholding upon a Redemption or exchange of Tendered Units, such Partner must furnish the General Partner a FIRPTA certificate or other documentation requested by the General Partner is a form acceptable to the General Partner. If the Partnership or the General Partner is required to withhold and pay over to any taxing authority any amount upon a Redemption or exchange of Tendered Units and the Cash Amount or the REIT Shares Amount, as the case may be, equals or exceeds the amount of tax required to be withheld, the amount withheld shall be treated as an amount received by such Partner in redemption of its Tendered Units. If the Cash Amount or the REIT Shares Amount, as the case may be, is less than the amount of tax required to be withheld, the Tendering Partner shall not receive any Cash Amount or REIT Shares Amount, and the Tendering Partner shall contribute the excess of the amount of tax required to be withheld over the Cash Amount or REIT Shares Amount before such excess taxes are required to be paid to the taxing authority.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting.
The General Partner shall keep, or cause to be kept, at the principal office of the Partnership appropriate books and records with respect to the Partnership’s business, including without limitation, all books and records necessary to provide to the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 9.3. Any records maintained by or on behalf of the Partnership in the regular course of its business may be kept on, or be in
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the form of any information storage device, provided, that the records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with generally accepted accounting principles.
Section 9.2 Fiscal Year.
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports.
A. As soon as practicable, but in no event later than 105 days after the close of each Partnership Year, or such earlier date as they are filed with the Securities and Exchange Commission, the General Partner shall cause to be delivered to each Limited Partner as of the close of the Partnership Year, an annual report containing financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the General Partner, for such Partnership Year, presented in accordance with generally accepted accounting principles, such statements to be audited by a nationally recognized firm of independent public accountants selected by the General Partner.
B. As soon as practicable, but in no event later than 45 days after the close of each calendar quarter (except the last calendar quarter of each year), or such earlier date as they are filed with the Securities and Exchange Commission, the General Partner shall cause to be delivered to the each Limited Partner as of the last day of the calendar quarter, a report containing unaudited financial statements of the Partnership, or of the General Partner, if such statements are prepared solely on a consolidated basis with the applicable law or regulation, or as the General Partner determines to be appropriate.
Section 9.4 Nondisclosure of CertainInformation.
Notwithstanding the provisions of Sections 9.1 and 9.3, the General Partner may keep confidential from the Limited Partners any information that the General Partner believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interest of the Partnership or which the Partnership is required by law or by agreements with unaffiliated third parties to keep confidential.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns.
The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for federal and applicable state income tax purposes and shall use all reasonable efforts to furnish, within 90 days of the close of each taxable year, the tax information reasonably required by the Limited Partners for federal and applicable state income tax reporting purposes. Each Limited Partner shall promptly provide the General Partner with any information reasonably requested by the General Partner relating to any Contributed Property contributed (directly or indirectly) by such Partner to the Partnership.
Section 10.2 Tax Elections.
A. Except as otherwise provided herein, the General Partner shall, in its sole and absolute discretion, determine
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whether to make any available election pursuant to the Code, including the election under Section 754 of the Code. The General Partner shall have the right to seek to revoke any such election (including without limitation, any election under Section 754 of the Code) upon the General Partner’s determination in its sole and absolute discretion that such revocation is the best interests of the Partners.
B. The Partners, intending to be legally bound, hereby authorize the Partnership to make an election (the “Safe Harbor Election”) to have the “liquidation value” safe harbor provided in Proposed Treasury Regulation Section 1.83-3(l) and the Proposed Revenue Procedure set forth in Internal Revenue Service Notice 2005-43, as such safe harbor may be modified when such proposed guidance is issued in final form or as amended by subsequently issued guidance (the “Safe Harbor”), apply to any interest in the Partnership transferred to a service provider while the Safe Harbor Election remains effective, to the extent such interest meets the Safe Harbor requirements (collectively, such interests are referred to as “Safe Harbor Interests”). The General Partner is authorized and directed to execute and file any Safe Harbor Election on behalf of the Partnership and the Partners. The Partnership and the Partners (including any person to whom an interest in the Partnership is transferred in connection with the performance of services) hereby agree to comply with all requirements of the Safe Harbor (including forfeiture allocations) with respect to all Safe Harbor Interests and to prepare and file all U.S. federal income tax returns reporting the tax consequences of the issuance and vesting of Safe Harbor Interests consistent with such final Safe Harbor guidance. The General Partner is authorized to take such actions as are necessary to achieve, under the Safe Harbor, the effect that the election and compliance with all requirements of the Safe Harbor referred to above would be intended to achieve under Proposed Treasury Regulation Section 1.83-3, including amending this Agreement.
Section 10.3 [Intentionally Omitted.]
Section 10.4 [Intentionally Omitted.]
Section 10.5 Withholding.
Each Partner hereby authorizes the Partnership to withhold from or pay on behalf of or with respect to such Partner any amount of federal, state, local, or foreign taxes that the General Partner determines that the Partnership is required to withhold or pay with respect to any amount distributable or allocable to such Partner pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Partnership pursuant to Sections 1441, 1442, 1445 or 1446 (including Section 1446(f)) of the Code. Any amount paid on behalf of or with respect to a Limited Partner shall constitute a receivable of the Partnership from such Partner, which receivable shall be paid by such Partner within 15 days after notice from the General Partner that such payment must be made unless (i) the Partnership withholds such payment from a distribution which would otherwise be made to the Partner or (ii) the General Partner determines, in its sole and absolute discretion, that such payment may be satisfied out of the available funds of the Partnership which would, but for such payment, be distributed to the Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as having been distributed to such Partner. Each Limited Partner hereby unconditionally and irrevocably grants to the Partnership a security interest in such Partner’s Partnership Interest to secure such Partner’s obligation to pay to the Partnership any amounts required to be paid pursuant to this Section 10.5. Any amounts payable by a Limited Partner hereunder shall bear interest at the base rate on corporate loans at large United States money center commercial banks, as published from time to time in the Wall Street Journal, plus two percentage points (but not higher than the maximum lawful rate) from the date such amount is due (i.e., 15 days after demand) until such amount is paid in full. Each Limited Partner shall take such actions as the Partnership or the General Partner shall request in order to perfect or enforce the security interest created hereunder.
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ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer.
A. The term “transfer”, when used in this Article 11 with respect to a Partnership Interest, shall be deemed to refer to a transaction by which a Partner purports to assign its Partnership Interest to another Person and includes a sale, assignment, gift (outright or in trust), pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise. The term “transfer” when used in this Article 11 does not include any Redemption or exchange for REIT Shares pursuant to Section 8.6, except as otherwise provided herein. No part of the interest of a Limited Partner shall be subject to the claims of any creditor, any spouse for alimony or support, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered except as may be specifically provided for in this Agreement or consented to by the General Partner.
B. No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article 11. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article 11 shall be null and void ab initio unless otherwise consented to by the General Partner in its sole and absolute discretion.
**Section 11.2 Transfer of the PartnershipInterest of the General Partner.**A. The General Partner may not Transfer any of its General Partner Interest or withdraw as General Partner, or Transfer any of its Limited Partner Interest, except (i) if holders of at least two-thirds of the Limited Partner Interests consent to such Transfer or withdrawal; (ii) if such Transfer is to an entity which is wholly owned by the General Partner and is a Qualified REIT Subsidiary; or (iii) in connection with a transaction described in Section 11.2C or 11.2D (as applicable).
B. In the event the General Partner withdraws as general partner of the Partnership in accordance with Section 11.2A, the General Partner’s General Partner Interest shall immediately be converted into a Limited Partner Interest.
C. Except as otherwise provided in Section 11.2D, the General Partner shall not engage in any merger, consolidation or other combination of the General Partner with or into another Person (other than a merger in which the General Partner is the surviving entity) or sale of all or substantially all of its assets, or any reclassification, or any recapitalization of outstanding REIT Stock (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination of REIT Stock) (a “Transaction”), unless in connection with the Transaction all Limited Partners will either receive, or will have the right to elect to receive, for each OP Unit an amount of cash, securities, or other property equal to the amount of cash, securities or other property or value paid in the Transaction to or received by a holder of one REIT Share corresponding to such OP Unit in consideration of one REIT Share (subject to any adjustments set forth in the definition of the “REIT Shares Amount” as determined by the General Partner) at any time during the period from and after the date on which the Transaction is consummated; provided that if, in connection with the Transaction, a purchase, tender or exchange offer (“Offer”) shall have been made to and accepted by the holders of more than 50% of the outstanding REIT Shares, each holder of OP Units shall be given the option to exchange its OP Units for the amount of cash, securities, or other property which a Limited Partner would have received had it (i) exercised its right of Redemption and (ii) sold, tendered or exchanged pursuant to the Offer the REIT Shares received upon exercise of the right of Redemption immediately prior to the expiration of the Offer.
The foregoing is not intended to, and does not, affect the ability of (i) a stockholder of the General Partner to sell its stock in the General Partner or (ii) the General Partner to perform its obligations (under agreement or otherwise) to such stockholders (including the fulfillment of any obligations with respect to registering the sale of stock under applicable
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securities laws).
D. Notwithstanding Section 11.2C, the General Partner may merge into or consolidate with another entity if immediately after such merger or consolidation: (i) substantially all of the assets of the successor or surviving entity (the “Surviving General Partner”), other than OP Units held by the General Partner, are contributed to the Partnership as a Capital Contribution in exchange for OP Units with a fair market value equal to the value of the assets so contributed as determined by the Surviving General Partner in good faith and (ii) the Surviving General Partner expressly agrees to assume all obligations of the General Partner hereunder.
Upon such contribution and assumption, the Surviving General Partner shall have the right and duty to amend this Agreement as set forth in this Section 11.2D. The Surviving General Partner shall in good faith arrive at a new method for the calculation of the REIT Shares Amount for an OP Unit after any such merger or consolidation so as to approximate the existing method for such calculation as closely as reasonably possible. Such calculation shall take into account, among other things, the kind and amount of securities, cash and other property that was receivable upon such merger or consolidation by a holder of REIT Shares or options, warrants or other rights relating thereto, and which a holder of OP Units could have acquired had such OP Units been redeemed for REIT Shares immediately prior to such merger or consolidation. Such amendment to this Agreement shall provide for adjustment to such method of calculation, which shall be as nearly equivalent as may be practicable to the adjustments provided for in the definition of REIT Shares Amount.
The above provisions of this Section 11.2D shall similarly apply to successive mergers or consolidations permitted hereunder.
Section 11.3 Limited Partners’Rights to Transfer.
A. Prior to the first anniversary of the Effective Date, no Limited Partner shall transfer all or any portion of its Partnership Interest to any transferee without the consent of the General Partner, which consent may be withheld in their sole and absolute discretion; provided, however, that any Limited Partner may, at any time, without the consent of the General Partner, (i) transfer all or any portion of its Partnership Interest to the General Partner, (ii) transfer all or any portion of its Partnership Interest to an Affiliate, another original Limited Partner or to an Immediate Family Member, subject to the provisions of Section 11.6, (iii) transfer all or any portion of its Partnership Interest to a trust for the benefit of a charitable beneficiary or to a charitable foundation, subject to the provisions of Section 11.6, and (iv) subject to the provisions of Section 11.6, pledge (a “Pledge”) all or any portion of its Partnership Interest to a lending institution, which is not an Affiliate of such Limited Partner, as collateral or security for a bona fide loan or other extension of credit, and transfer such pledged Partnership Interest to such lending institution in connection with the exercise of remedies under such loan or extension or credit, and the transfer of such pledged Partnership Interest by the lender to any transferee. Each Limited Partner or Assignee (resulting from a transfer made pursuant to clauses (i)-(iv) of the proviso of the preceding sentence) shall have the right to transfer all or any portion of its Partnership Interest, subject to the provisions of Section 11.6 and the satisfaction of each of the following conditions (in addition to the right of each such Limited Partner or Assignee to continue to make any such transfer permitted by clauses (i)-(iv) of such proviso without satisfying either of the following conditions):
(1) General Partner Right of First Refusal. The transferring Partner shall give written notice of the proposed transfer to the General Partner, which notice shall state (i) the identity of the proposed transferee, and (ii) the amount and type of consideration proposed to be received for the transferred OP Units. The General Partner shall have ten (10) business days upon which to give the transferring Partner notice of its election to acquire the OP Units on the proposed terms. If it so elects, it shall purchase the OP Units on such terms within ten (10) business days after giving notice of such election. If it does not so elect, the transferring Partner may transfer such OP Units to a third party, on economic terms no
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more favorable to the transferee than the proposed terms, subject to the other conditions of this Section 11.3.
(2) Qualified Transferee. Any transfer of a Partnership Interest shall be made only to Qualified Transferees. It is a condition to any transfer otherwise permitted hereunder that the transferee assumes by operation of law or express agreement all of the obligations of the transferor Limited Partner under this Agreement with respect to such transferred Partnership Interest and no such transfer (other than pursuant to a statutory merger or consolidation wherein all obligations and liabilities of the transferor Partner are assumed by a successor corporation by operation of law) shall relieve the transferor Partner of its obligations under this Agreement without the approval of the General Partner, in its reasonable discretion. Notwithstanding the foregoing, any transferee of any transferred Partnership Interest shall be subject to any and all ownership limitations contained in the Charter, which may limit or restrict such transferee’s ability to exercise its Redemption rights, and to the representations in Section 3.4.D. Any transferee, whether or not admitted as a Substituted Limited Partner, shall take subject to the obligations of the transferor hereunder. Unless admitted as a Substituted Limited Partner, no transferee, whether by a voluntary transfer, by operation of law or otherwise, shall have any rights hereunder, other than the rights of an Assignee as provided in Section 11.5.
B. If a Limited Partner is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator, or receiver of such Limited Partner’s estate shall have all the rights of a Limited Partner, but not more rights than those enjoyed by other Limited Partners, for the purpose of settling or managing the estate, and such power as the Incapacitated Limited Partner possessed to transfer all or any part of his or its interest in the Partnership. The Incapacity of a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer otherwise permitted under Section 11.3 by a Limited Partner of his or her OP Units if, in the opinion of legal counsel to the Partnership, such transfer would require the filing of a registration statement under the Securities Act by the Partnership or would otherwise violate any federal or state securities laws or regulations applicable to the Partnership or the Partnership Unit.
Section 11.4 Substituted Limited Partners.
A. No Limited Partner shall have the right to substitute a transferee as a Limited Partner in his or her place (including any transferee permitted by Section 11.3). The General Partner shall, however, have the right to consent to the admission of a transferee of the interest of a Limited Partner pursuant to this Section 11.4 as a Substituted Limited Partner, which consent may be given or withheld by the General Partner in its sole and absolute discretion. The General Partner’s failure or refusal to permit a transferee of any such interests to become a Substituted Limited Partner shall not give rise to any cause of action, whether at law or in equity, against the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited Partner in accordance with this Article 11 shall have all the rights and powers and be subject to all the restrictions and liabilities of a Limited Partner under this Agreement. The admission of any transferee as a Substituted Limited Partner shall be subject to the transferee executing and delivering to the General Partner an acceptance of all of the terms and conditions of this Agreement (including without limitation, the provisions of Section 2.4 and such other documents or instruments as may be required to effect the admission), each in form and substance satisfactory to the General Partner) and the acknowledgment by such transferee that each of the representations and warranties set forth in Section 3.4 are true and correct with respect to such transferee as of the date of the transfer of the Partnership Interest to such transferee and will continue to be true to the extent required by such representations and warranties.
C. Upon the admission of a Substituted Limited Partner, the General Partner shall amend Exhibit A to reflect the name, address, number of OP Units, and Percentage Interest of such Substituted Limited Partner and to eliminate or adjust,
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if necessary, the name, address and interest of the predecessor of such Substituted Limited Partner.
Section 11.5 Assignees.
If the General Partner, in its sole and absolute discretion, does not consent to the admission of any permitted transferee under Section 11.3 as a Substituted Limited Partner, as described in Section 11.4, such transferee shall be considered an Assignee for purposes of this Agreement. An Assignee shall be entitled to all the rights of an assignee of a limited partnership interest under the Act, including the right to receive distributions from the Partnership and the share of Net Income, Net Loss, gain and loss attributable to the OP Units assigned to such transferee, the rights to transfer the OP Units provided in this Article 11, the right of Redemption provided in Section 8.6, but shall not be deemed to be a holder of OP Units for any other purpose under this Agreement, and shall not be entitled to effect a Consent with respect to such OP Units on any matter presented to the Limited Partners for approval (such Consent remaining with the transferor Limited Partner). In the event any such transferee desires to make a further assignment of any such Partnership Units, such transferee shall be subject to all the provisions of this Article 11 to the same extent and in the same manner as any Limited Partner desiring to make an assignment of OP Units. Notwithstanding anything contained in this Agreement to the contrary, as a condition to becoming an Assignee, any prospective Assignee must first execute and deliver to the Partnership an acknowledgment that each of the representations and warranties set forth in Section 3.4 are true and correct with respect to such prospective Assignee as of the date of the prospective assignment of the Partnership Interest to such prospective Assignee and will continue to be true to the extent required by such representations or warranties.
Section 11.6 General Provisions.
A. No Limited Partner may withdraw from the Partnership other than as a result of (i) a permitted transfer of all of such Limited Partner’s OP Units in accordance with this Article 11 and the transferee(s) of such Partnership Units being admitted to the Partnership as a Substituted Limited Partner or (ii) pursuant to the exercise of its right of Redemption of all of such Limited Partner’s OP Units under Section 8.6; provided that after such transfer, exchange or redemption such Limited Partner owns no Partnership Interest.
B. Any Limited Partner who shall transfer all of such Limited Partner’s OP Units in a transfer permitted pursuant to this Article 11 where such transferee was admitted as a Substituted Limited Partner or pursuant to the exercise of its rights of Redemption of all of such Limited Partner’s OP Units under Section 8.6 shall cease to be a Limited Partner; provided that after such transfer, exchange or redemption such Limited Partner owns no Partnership Interest.
C. Transfers pursuant to this Article 11 may only be made on the first day of a fiscal quarter of the Partnership, unless the General Partner otherwise agrees.
D. If any Partnership Interest is transferred, assigned or redeemed during any quarterly segment of the Partnership’s Partnership Year in compliance with the provisions of this Article 11 or transferred or redeemed pursuant to Section 8.6, on any day other than the first day of a Partnership Year, then Net Income, Net Loss, each item thereof and all other items attributable to such Partnership Interest for such Partnership Year shall be divided and allocated between the transferor Partner and the transferee Partner by taking into account their varying interests during the Partnership Year using a method selected by the General Partner that is in accordance with Section 706(d) of the Code. Except as otherwise agreed by the General Partner, all distributions of Available Cash with respect to which the Partnership Record Date is before the date of such transfer, assignment, exchange or redemption shall be made to the transferor Partner, and all distributions of Available Cash thereafter, in the case of a transfer or assignment other than a redemption, shall be made to the transferee Partner.
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E. In addition to any other restrictions on transfer herein contained, including without limitation the provisions of this Article 11, in no event may any transfer or assignment of a Partnership Interest by any Partner (including pursuant to a Redemption or exchange for REIT Shares by the Partnership or the General Partner) be made (i) to any person or entity who lacks the legal right, power or capacity to own a Partnership Interest; (ii) in violation of applicable law; (iii) except with the consent of the General Partner, which may be given or withheld in its sole and absolute discretion, of any component portion of a Partnership Interest, such as the Capital Account, or rights to distributions, separate and apart from all other components of a Partnership Interest;; (iv) if in the opinion of counsel to the Partnership such transfer could cause the Partnership to cease to be classified as a partnership for federal income tax purposes (except as a result of the Redemption or exchange for REIT Shares of all Partnership Interests held by all Limited Partners); (v) if such transfer could, in the opinion of counsel to the Partnership, cause the Partnership to become, with respect to any employee benefit plan subject to Title I of ERISA, a “party-in-interest” (as defined in Section 3(14) of ERISA) or a “disqualified person” (as defined in Section 4975(c) of the Code); (vi) if such transfer could, in the opinion of counsel to the Partnership, cause any portion of the assets of the Partnership to constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section 2510.2-101; (vii) if such transfer requires the registration of such Partnership Interest pursuant to any applicable federal or state securities laws; (viii) except with the consent of the General Partner, which may be given or withheld in its sole and absolute discretion, if such transfer (1) could be treated as effectuated through an “established securities market” or a “secondary market” (or the substantial equivalent thereof) within the meaning of Section 7704 of the Code, (2) could cause the Partnership to become a “publicly traded partnership,” as such term is defined in Sections 469(k)(2) or 7704(b) of the Code, (3) could be in violation of Section 3.4.E(5), or (4) could cause the Partnership to fail one or more of the PTP Safe Harbors (as defined below); (ix) if such transfer subjects the Partnership to be regulated under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or the Employee Retirement Income Security Act of 1974, each as amended; (x) except with the consent of the General Partner, which may be given or withheld in its sole discretion, if the transferee or assignee of such Partnership Interest is unable to make the representations set forth in Section 3.4C; (xi) if such transfer is made to a lender to the Partnership or any Person who is related (within the meaning of Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose loan constitutes a Nonrecourse Liability, except with the consent of the General Partner, which may be given or withheld in its sole and absolute discretion; and provided, that, as a condition to granting such consent the lender may be required to enter into an arrangement with the Partnership and the General Partner to redeem or exchange for the REIT Shares Amount any OP Units in which a security interest is held simultaneously with the time at which such lender would be deemed to be a partner in the Partnership for purposes of allocating liabilities to such lender under Section 752 of the Code; or (xii) if in the opinion of legal counsel for the Partnership such transfer could adversely affect the ability of the General Partner to continue to qualify as a REIT or, except with the consent of the General Partner, which may be given or withheld in its sole and absolute discretion, subject the General Partner to any additional taxes under Section 857 or Section 4981 of the Code.
F. The General Partner shall monitor the transfers of interests in the Partnership (including any acquisition of OP Units by the Partnership or the General Partner) to determine (i) if such interests could be treated as being traded on an “established securities market” or a “secondary market” (or the substantial equivalent thereof), within the meaning of Section 7704 of the Code and (ii) whether such transfers of interests could result in the Partnership being unable to qualify for the “safe harbors” set forth in Regulations Section 1.7704-1 (or such other guidance subsequently published by the IRS setting forth safe harbors under which interests will not be treated as “readily tradable on a secondary market” (or the substantial equivalent thereof), within the meaning of Section 7704 of the Code) (the “PTP Safe Harbors”). The General Partner shall have the authority (but shall not be required) to take any steps it determines are necessary or appropriate in its sole and absolute discretion to prevent any trading of interests which could cause the Partnership to become a “publicly traded partnership” within the meaning of Code Section 7704, or any recognition by the Partnership of such transfers, or to ensure that one or more of the PTP Safe Harbors is met.
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Section 11.7 Put Right of General Partner.
The General Partner shall have the right at any time (the “GP Put Right”) to require the Partnership to redeem any portion of the General Partner Interest for the purpose of providing the General Partner with sufficient funds to enable it to make repurchases of its stock. The General Partner shall exercise the GP Put Right at any time by providing the Partnership with written notice of its desire to exercise the GP Put Right. The purchase price to be paid by the Partnership for the portion of the General Partner Interest that the General Partner desires to be redeemed shall equal the fair market value of such portion as determined by Appraisal, and shall be paid in cash within one hundred twenty (120) days after the General Partner provides the written notice required under this Section 11.7. In the event that the General Partner exercises the GP Put Right, the OP Units held by the General Partner shall be reduced as appropriate.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor GeneralPartner.
A successor to all of the General Partner’s General Partner Interest pursuant to Section 11.2 who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective upon such transfer. Any such transferee shall carry on the business of the Partnership without dissolution. In each case, the admission shall be subject to the successor General Partner executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission. In the case of such admission on any day other than the first day of a Partnership Year, all items attributable to the General Partner Interest for such Partnership Year shall be allocated between the transferring General Partner and such successor as provided in Article 11.
Section 12.2 Admission of AdditionalLimited Partners.
A. After the admission to the Partnership of the initial Limited Partners on the date hereof, a Person who makes a Capital Contribution to the Partnership in accordance with this Agreement shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 and (ii) such other documents or instruments as may be required in the discretion of the General Partner in order to effect such Person’s admission as an Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent may be given or withheld in the General Partner’s sole and absolute discretion. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the receipt of the Capital Contribution in respect of such Limited Partner and the consent of the General Partner to such admission. If any Additional Limited Partner is admitted to the Partnership on any day other than the first day of a Partnership Year, then Net Income, Net Loss, each item thereof and all other items allocable among Partners and Assignees for such Partnership Year shall be allocated among such Limited Partner and all other Partners and Assignees by taking into account their varying interests during the Partnership Year using a method selected by the General Partner that is in accordance with Section 706(d) of the Code. All distributions of Available Cash with respect to which the Partnership Record Date is before the date of such admission shall be made solely to Partners and Assignees other than the Additional Limited Partner (other than in its capacity as an Assignee) and, except as otherwise agreed to by the Additional Limited Partners
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and the General Partner, all distributions of Available Cash thereafter shall be made to all Partners and Assignees including such Additional Limited Partner.
Section 12.3 Amendment of Agreement andCertificate of Limited Partnership.
For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Act to amend the records of the Partnership and, if necessary, to prepare as soon as practical an amendment of this Agreement (including an amendment of Exhibit A) and, if required by law, shall prepare and file an amendment to the Certificate and may for this purpose exercise the power of attorney granted pursuant to Section 2.4.
ARTICLE 13
DISSOLUTION AND LIQUIDATION
Section 13.1 Dissolution.
The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the withdrawal of the General Partner, any successor General Partner (selected as described in Section 13.1B below) shall continue the business of the Partnership. The Partnership shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following (each a “Liquidating Event”):
A. the expiration of its term as provided in Section 2.5;
B. an event of withdrawal of the General Partner, as defined in the Act, unless, within 90 days after the withdrawal, all of the remaining Partners agree in writing, in their sole and absolute discretion, to continue the business of the Partnership and to the appointment, effective as of the date of withdrawal, of a substitute General Partner;
C. subject to compliance with Section 11.2, an election to dissolve the Partnership made by the General Partner, in its sole and absolute discretion;
D. entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Act;
E. any sale or other disposition of all or substantially all of the assets of the Partnership or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Partnership;
F. the Incapacity of the General Partner, unless all of the remaining Partners in their sole and absolute discretion agree in writing to continue the business of the Partnership and to the appointment, effective as of a date prior to the date of such Incapacity, of a substitute General Partner;
G. the redemption or exchange for REIT Shares of all Partnership Interests (other than those of the General Partner) pursuant to this Agreement; or
H. a final and non-appealable judgment is entered by a court of competent jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency laws as now or hereafter in effect, unless prior to the entry of such order or judgment all of the remaining Partners agree in writing to
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continue the business of the Partnership and to the appointment, effective as of a date prior to the date of such order or judgment, of a substitute General Partner.
Section 13.2 Winding Up.
A. Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. No Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnership’s business and affairs. The General Partner (or, in the event there is no remaining General Partner, any Person elected by a Majority in Interest of the Limited Partners (the “Liquidator”)) shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnership’s liabilities and property and the Partnership property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the General Partner, include shares of stock in the General Partner) shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the Partnership’s debts and liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the Partnership’s debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the Partnership’s debts and liabilities to the other Partners; and
(4) The balance, if any, to the General Partner and the Limited Partners in proportion to their positive Capital Account balances, determined after taking into account all Capital Account adjustments for all prior periods and the Partnership taxable year during which the liquidation occurs (other than those made as a result of the liquidating distribution set forth in this Section 13.2A(4)).
(5) Notwithstanding the provisions of Section 13.2A which require liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnership’s assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including to those Partners as creditors) and/or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.2A, undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in-kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in-kind are in the best interest of the Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt.
Section 13.3 Capital Contribution Obligation.
A. If any Partner has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for the taxable years, including the year during which such liquidation occurs), such Partner shall have no
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obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such deficit at any time shall not be considered a debt owed to the Partnership or to any other Person for any purpose whatsoever, except to the extent otherwise expressly agreed to by such Partner and the Partnership.
Section 13.4 Compliance with Timing Requirementsof Regulations.
In the discretion of the Liquidator or the General Partner, a pro rata portion of the distributions that would otherwise be made to the General Partner and Limited Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of the General Partner and Limited Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership, and paying any contingent or unforeseen liabilities or obligations of the Partnership or of the General Partner arising out of or in connection with the Partnership. The assets of any such trust shall be distributed to the General Partner and Limited Partners from time to time, in the reasonable discretion of the Liquidator or the General Partner, in the same proportions and the amount distributed to such trust by the Partnership would otherwise have been distributed to the General Partner and Limited Partners pursuant to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership, provided, that such withheld or escrowed amounts shall be distributed to the General Partner and Limited Partners in the manner and priority set forth in Section 13.2A as soon as practicable.
Section 13.5 Deemed Distribution andRecontribution.
Notwithstanding any other provision of this Article 13, in the event the Partnership is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the Partnership’s property shall not be liquidated, the Partnership’s liabilities shall not be paid or discharged, and the Partnership’s affairs shall not be wound up. Instead, the Partnership shall be deemed to have contributed all of its assets and liabilities to a new partnership in exchange for an interest in the new partnership. Immediately thereafter, the Partnership shall be deemed to distribute interests in the new partnership to the General Partner and Limited Partners in proportion to their respective interests in the Partnership in liquidation of the Partnership.
Section 13.6 Rights of Limited Partners.
Except as otherwise provided in this Agreement, each Limited Partner shall look solely to the assets of the Partnership for the return of his Capital Contribution and shall have no right or power to demand or receive property from the General Partner. No Limited Partner shall have priority over any other Limited Partner as to the return of his Capital Contributions, distributions or allocations.
Section 13.7 Notice of Dissolution.
In the event a Liquidating Event occurs or an event occurs that would, but for provisions of Section 13.1, result in a dissolution of the Partnership, the General Partner shall, within 30 days thereafter, provide written notice thereof to each of the Partners and to all other parties with whom the Partnership regularly conducts business (as determined in the discretion of the General Partner) and shall publish notice thereof in a newspaper of general circulation in each place in which the Partnership regularly conducts business (as determined in the discretion of the General Partner).
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Section 13.8 Cancellation of Certificateof Limited Partnership.
Upon the completion of the liquidation of the Partnership cash and property as provided in Section 13.2, the Partnership shall be terminated and the Certificate and all qualifications of the Partnership as a foreign limited partnership in jurisdictions shall be cancelled and such other actions as may be necessary to terminate the Partnership shall be taken.
Section 13.9 Reasonable Time for Winding-Up.
A reasonable time shall be allowed for the orderly winding-up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Section 13.2, in order to minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement shall remain in effect between the Partners during the period of liquidation.
Section 13.10 Waiver of Partition.
Each Partner hereby waives any right to partition of the Partnership property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS
Section 14.1 Amendments.
A. The actions requiring consent or approval of the Partners or of the Limited Partners pursuant to this Agreement, including Section 7.3, or otherwise pursuant to applicable law, are subject to the procedures in this Article 14.
B. Amendments to this Agreement requiring the consent or approval of Limited Partners may be proposed by the General Partner or by Limited Partners holding twenty-five percent (25%) or more of the Partnership Interests held by Limited Partners. Following such proposal, the General Partner shall submit any proposed amendment to the Partners or to the Limited Partners, as applicable. The General Partner shall seek the written consent of the Limited Partners on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that it may deem appropriate. For purposes of obtaining a written consent, the General Partner may require a response within a reasonable specified time, but not less than 15 days, and failure to respond in such time period shall constitute a consent which is consistent with the General Partner’s recommendation (if so recommended) with respect to the proposal; provided, that, an action shall become effective at such time as requisite consents are received even if prior to such specified time.
Section 14.2 Action by the Partners.
A. Meetings of the Partners may be called by the General Partner and shall be called upon the receipt by the General Partner of a written request by Limited Partners holding twenty-five percent (25%) or more of the Partnership Interests held by Limited Partners. The notice shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Partners not less than seven days nor more than 30 days prior to the date of such meeting. Partners may vote in person or by proxy at such meeting. Whenever the vote or Consent of the Limited Partners or of the Partners is permitted or required under this Agreement, such vote or Consent may be given at a meeting of Partners or may be given in accordance with the procedure prescribed in Section 14.1.
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B. Any action required or permitted to be taken at a meeting of the Partners may be taken without a meeting if a written consent setting forth the action so taken is signed by the percentage as is expressly required by this Agreement for the action in question. Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of the Percentage Interests of the Partners (expressly required by this Agreement). Such consent shall be filed with the General Partner. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified.
C. Each Limited Partner may authorize any Person or Persons to act for him by proxy on all matters in which a Limited Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Limited Partner or his attorney-in-fact. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Limited Partner executing it.
D. Each meeting of Partners shall be conducted by the General Partner or such other Person as the General Partner may appoint pursuant to such rules for the conduct of the meeting as the General Partner or such other Person deems appropriate.
E. On matters on which Limited Partners are entitled to vote, each Limited Partner shall have a vote equal to the number of OP Units held.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice.
Any notice, demand, request or report required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to the Partner or Assignee at the address set forth in Exhibit A or such other address as the Partners shall notify the General Partner in writing.
Section 15.2 Titles and Captions.
All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to “Articles” and “Sections” are to Articles and Sections of this Agreement.
Section 15.3 Pronouns and Plurals.
Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.
Section 15.4 Further Action.
The parties shall execute and deliver all documents, provide all information and take or refrain from taking action
56
as may be necessary or appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.
Section 15.6 Creditors.
Other than as expressly set forth herein with respect to Indemnitees, none of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership.
Section 15.7 Waiver.
No failure or delay by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon any breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.
Section 15.8 Counterparts.
This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto.
Section 15.9 Applicable Law.
This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.
Section 15.10 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.
Section 15.11 Entire Agreement.
This Agreement contains the entire understanding and agreement among the Partners with respect to the subject matter hereof and supersedes any other prior written or oral understandings or agreements among them with respect thereto.
Section 15.12 No Rights as Stockholders.
Nothing contained in this Agreement shall be construed as conferring upon the holders of OP Units any rights whatsoever as stockholders of the General Partner, including without limitation any right to receive dividends or other
57
distributions made to stockholders of the General Partner or to vote or to consent or to receive notice as stockholders in respect of any meeting of stockholders for the election of directors of the General Partner or any other matter.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
58
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of Limited Partnership as of the date first written above.
| GENERAL PARTNER: | |
|---|---|
| Procaccianti Hotel REIT, Inc. | |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Title: | President |
| LIMITED PARTNERS: | |
| --- | --- |
| Procaccianti Hotel REIT L.P., LLC | |
| By: Procaccianti Hotel REIT, Inc., its Sole Member | |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Title: | President |
| LFHI, LLC | |
| --- | --- |
| By: | /s/ Robert Leven |
| Name: | Robert Leven |
| Title: | Manager |
| PEH 1999 Realty Trust Number Two | |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Title: | Trustee |
59
| The LHG 1997 Realty Trust **** | |
|---|---|
| By: | /s/ Elizabeth A. Procaccianti |
| Name: | Elizabeth A. Procaccianti |
| Title: | Trustee |
| TH Investment Holdings II, LLC | |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Title: | Manager |
60
| ETJ GANO HOLDINGS, INC. | |
|---|---|
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Title: | Authorized Signatory |
| PRJA GANO HOLDINGS, LLC | |
| --- | --- |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Title: | Authorized Signatory |
| ****<br><br> <br>EHI GANO HOLDINGS, INC. | |
| By: | /s/ James A. Procaccianti |
| Name: | James A. Procaccianti |
| Title: | Authorized Signatory |
[Signature Page to Amended and RestatedAgreement of Limited Partnershipof Procaccianti Hotel REIT, L.P.]
61
Annex A
Annex A - Certain Audit Matters
(a) Appointment; Resignation. The Partners hereby appoint James A. Procaccianti as the “partnership representative” as provided in Code Section 6223(a) (the “Partnership Representative”). The Partnership Representative can be removed at any time by a vote of the General Partner. The Partnership Representative shall resign if he is no longer a direct or indirect member of the Partnership. In the event of the resignation or removal of the Partnership Representative, the General Partner shall select a replacement Partnership Representative. If the resignation or removal of the Partnership Representative occurs prior to the effectiveness of the resignation or removal under applicable Treasury Regulations or other administrative guidance, the Partnership Representative that has resigned or been removed shall not take any actions in his capacity as Partnership Representative except as directed by the General Partner.
(b) Tax Examinations and Audits. The Partnership Representative shall promptly notify the Partners of the commencement of any tax audit of the Partnership, upon receipt of a tax assessment and upon the receipt of a notice of final partnership administrative adjustment or final partnership adjustment and shall keep the Partners reasonably informed of the status of any tax audit or resulting administrative or judicial proceeding. Without the consent of the General Partner, the Partnership Representative shall not extend the statute of limitations, file a request for administrative adjustment, file suit relating to any Partnership tax refund or deficiency or enter into any settlement agreement relating to items of income, gain, loss or deduction of the Partnership with any taxing authority.
(c) Elections. With respect to any imputed underpayment, the Partnership Representative shall take such actions, on a timely basis, as directed by the General Partner, including whether to (i) file a petition for readjustment in the Tax Court, federal district court, or the Court of Federal Claims, (ii) cause the Partnership to pay the imputed underpayment under Code Section 6225, or (iii) make the election under Code Section 6226. If the General Partner directs the Partnership Representative to cause the Partnership to pay the imputed underpayment under Code Section 6225, (A) the Partners shall take such actions as requested by the Partnership Representative, including filing amended tax returns and paying any tax due under Code Section 6225(c)(2)(A) or paying any tax due and providing applicable information to the Internal Revenue Service under Code Section 6225(c)(2)(B) and (B) the Partnership shall make any modifications available under Code Section 6225(c)(3), (4), and (5) as directed by the General Partner. If the Partnership economically bears (or is required to economically bear) any imputed underpayment and the General Partner determines that any portion of such liability is attributable to a Partner or former Partner, then such amount shall be paid by such Person to the Partnership. Any such payment made by a Partner shall not be treated as a capital contribution, except to the extent required for purposes of maintaining Capital Account balances. Any amount not paid by a Partner or former Partner within fifteen (15) days of a request by the Partnership Representative pursuant to this clause (c) shall accrue interest at an annual rate equal to the lesser of fifteen (15%) and the highest rate permitted by applicable law. Any imputed underpayment amount paid by the Partnership on behalf of a Partner and not reimbursed by that Partner shall be treated as a distribution to such Partner.
(d) Tax Returns and Tax Deficiencies. Each Partner agrees that such Partner shall not treat any Partnership item inconsistently on such Partner’s federal, state, foreign, or other income tax return with the treatment of the item on the Partnership’s return. Any deficiency for taxes imposed on any Partner or former Partner (including penalties, additions to tax or interest imposed with respect to such taxes, and any taxes imposed pursuant to Code Section 6226) shall be paid by such Partner or former Partner and if required to be paid (and actually paid) by the Partnership, will be recoverable from such Partner or former Partner.
Annex A-1
(e) Cooperation by Partners and Former Partners. Each Partner and former Partner shall provide such cooperation and assistance, including timely executing and filing forms or other statements and providing information about the Partner, as is reasonably requested by the Partnership Representative to enable the Partnership to satisfy any applicable tax reporting or compliance requirements, to make any tax election or to qualify for an exception from or reduced rate of tax or other tax benefit or be relieved of liability for any tax regardless of whether such requirement, tax benefit or tax liability existed on the date such Partner was admitted to the Partnership. If a Partner fails to provide any such forms, statements, or other information requested by the Partnership Representative, such Partner shall indemnify the Partnership for the share of any tax deficiency paid or payable by the Partnership that is due to such failure (as reasonably determined by the Partnership Representative).
(f) Indemnification of Partnership Representative. The Partnership shall, to the fullest extent permitted by the Act and other applicable law as it presently exists or may hereafter be amended, indemnify and hold harmless any Person who serves as Partnership Representative, or as an officer or director of a corporate Partnership Representative, with respect to any claim or demand against such Person and any debt, obligation or other liability incurred by such Person by reason of such Person’s former or present capacity as the Partnership Representative (or as an officer or director of a corporate Partnership Representative). The indemnification provided hereunder shall not be deemed exclusive of any other rights to which any Person may be entitled under this Agreement, or under any applicable law, other agreement, vote of the General Partners, or otherwise. For purposes of this paragraph (g), any provisions of the Act that restrict or prohibit the Partnership from indemnifying a General Partner shall be deemed to also restrict or prohibit the Partnership from indemnifying any Person who serves as Partnership Representative, or as an officer or director of a corporate Partnership Representative. Any amendment, modification or repeal of any portion of this paragraph (g) shall not adversely affect any right or protection of a Partnership Representative in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.
(g) Tax Counsel. The Partnership Representative may employ tax counsel to represent the Partnership in connection with any tax audit or investigation of the Partnership and any administrative or judicial proceedings arising out of such audit. The fees and expenses of such counsel shall be a Partnership expense and shall be paid by the Partnership.
(h) Survival. The obligations of each Partner or former Partner under this Annex A shall survive the transfer or redemption by such Partner of its partnership interest, the termination of this Agreement, or the dissolution of the Partnership.
Annex A-2
EXHIBIT A
PARTNERS, OP UNITS, PERCENTAGE INTERESTS
| Names and Addresses: | Class A <br>OP Units | Class B OP<br><br>Units | Class K OP<br><br>Units | Class K-I <br>OP Units | Class K-T <br>OP Units | Percentage <br>Interest |
|---|---|---|---|---|---|---|
| General Partner | PER THE | BOOKS | AND | RECORDS | OF THE | REIT |
| Procaccianti Hotel REIT, Inc. <br>1140 Reservoir Avenue <br>Cranston, Rhode Island 02920-6320 | ||||||
| Limited Partners | ||||||
| Procaccianti Hotel REIT LP, LLC <br>1149 Reservoir Avenue <br>Cranston, Rhode Island <br>02920-6320 | PER THE | BOOKS | AND | RECORDS | OF THE | REIT |
| LFHI, LLC <br>1149 Reservoir Avenue <br>Cranston, Rhode Island <br>02920-6320 | 22,641.10 | |||||
| PEH 1999 Realty Trust #2 <br>1149 Reservoir Avenue <br>Cranston, Rhode Island <br>02920-6320 | 11,321.19 | |||||
| LHG 1997 Realty Trust <br>1149 Reservoir Avenue <br>Cranston, Rhode Island <br>02920-6320 | 11,321.19 | |||||
| TH Investment Holdings II, LLC <br>1149 Reservoir Avenue <br>Cranston, Rhode Island <br>02920-6320 | 81,807.72 | |||||
| ETJ Gano Holdings, Inc. <br>1149 Reservoir Avenue <br>Cranston, Rhode Island <br>02920-6320 | 666.62 |
Exhibit A-1
| PRJA GANO HOLDINGS, LLC<br><br><br>Cranston, Rhode Island<br><br><br>02920-6320 | 399.97 |
|---|---|
| EHI GANO HOLDINGS, Inc.<br><br><br>1149 Reservoir Avenue<br><br><br>Cranston, Rhode Island<br><br><br>02920-6320 | 266.65 |
Exhibit A-2
EXHIBIT B
ALLOCATIONS
- Allocations.
(a) Allocations of Net Income and Net Loss. After giving effect to the allocations set forth in paragraphs 2 and 3 of this Exhibit B, items of Net Income and Net Loss in each fiscal year shall be allocated among the Partners in a manner such that the Capital Account of each Partner, immediately after giving effect to such allocation, is, as nearly as possible, equal (proportionately) to the amount of the distribution that would be made to such Partner if:
(i) the Partnership were dissolved and terminated;
(ii) the affairs of the Partnership were wound up and each Partnership asset was sold for cash equal to its Gross Asset Value (except that any Partnership Asset actually sold during the current year shall be treated as sold for the actual proceeds of the sale);
(iii) all Partnership liabilities were satisfied; and
(iv) the net assets of the Partnership were distributed to the Partners in accordance with Article 5 immediately after giving effect to such allocation.
To the extent that any loss or deduction otherwise allocable to a Partner causes such Partner to have an Adjusted Capital Account Deficit as of the end of the fiscal year to which such loss or deduction relates, such loss or deduction shall instead be allocated to the other Partner(s) in proportion to positive Capital Account balances, until their Capital Accounts are all reduced to zero, then the remainder shall be allocated by Percentage Interest.
(b) For purposes of subparagraph 1(a) Partners holding a class or series of Partnership Units that are burdened by Special Fees that are not applicable to all Partnership Units within such class (such as the stockholder servicing fees described in the General Partner’s Prospectus, which is not applicable to Class K-T OP Units corresponding to Class K-T REIT Shares purchased through the General Partner’s dividend reinvestment plan), shall also be deemed to be a separate Partner with respect to each group of such class or series of Partnership Units.
- Regulatory Allocations. Prior to making any allocations pursuant to paragraph 1 of this Exhibit B, items of Partnership income and loss shall be allocated in the following order and priority:
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). Except as otherwise provided in Section 1.704-2(f) of the Regulations, if there is a net decrease in Partnership Minimum Gain for any Partnership fiscal year, each Partner shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner’s share of the net decrease in Partnership Minimum Gain determined in accordance with Section 1.704-2(g) of the Regulations. The items to be so allocated shall be determined in accordance with Sections 1.704-2(f) and (j) of the Regulations. This subparagraph 2(a) is intended to comply with the minimum gain chargeback requirement in section 1.704-2(f) of the Regulations and shall be interpreted consistently therewith. Allocations pursuant to this subparagraph 2(a) shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant hereto.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided in Section 1.704-2(i)(4) of the Regulations, if
Exhibit B-1
there is a net decrease in Partner Nonrecourse Debt Minimum Gain during any fiscal year, each Partner who has a share of the Partner Nonrecourse Debt Minimum Gain, determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to that Partner’s share of the net decrease in the Partner Nonrecourse Debt Minimum Gain to the extent and in the manner required by Section 1.704-2(i) of the Regulations. The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and (j)(2) of the Regulations. This subparagraph 2(b) is intended to comply with the minimum gain chargeback requirement contained in section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently therewith. Allocations pursuant to this subparagraph 2(b) shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant hereto.
(c) Qualified Income Offset. If a Partner unexpectedly receives any adjustments, allocations or distributions described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and such Partner has an Adjusted Capital Account Deficit, items of Partnership income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit as quickly as possible as required by the Regulations without creating or increasing an Adjusted Capital Account Deficit of any other Partner, provided that an allocation pursuant to this subparagraph 2(c) shall be made only if and to the extent that such Partner would have an Adjusted Capital Account Deficit after all other allocations provided for in this Exhibit B have been tentatively made as if this subparagraph 2(c) were not in the Agreement.. This subparagraph 2(c) is intended to constitute a “qualified income offset” under Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith.
(d) Gross Income Allocation. If any Partner has an Adjusted Capital Account Deficit at the end of any fiscal year or other applicable period which is in excess of the amount such Partner is obligated to restore pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, such Partner shall be specially allocated items of Partnership income (including gross income) and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this subparagraph 2(g) shall be made if and only to the extent that such Partner would have an Adjusted Capital Account Deficit in excess of such amount after all other allocations provided for under this Agreement have been tentatively made as if subparagraph 2(c) and this subparagraph 2(d) were not in this Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or other applicable period shall be allocated to the Partners the same ratio as Net Income for such fiscal year or other applicable period.
(f) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any fiscal year or other applicable period shall be specially allocated to the Partner that bears the economic risk of loss for which such Partner Nonrecourse Deductions are attributable(as determined in accordance with Section 1.704-2(i)(1) of the Regulations).
(g) Section 754 Adjustment. To the extent an adjustment to the adjusted tax basis of any asset of the Partnership pursuant to Section 734(b) of the Code or Section 743(b) of the Code is required, pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations, to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated among the Partners in a manner consistent with the manner in which each of their respective Capital Accounts are required to be adjusted pursuant to section 1.704-1(b)(2)(iv)(m) of the Regulations.
Curative Allocations and Similar Rules. The General Partner is authorized to offset all Regulatory Allocations either with other Regulatory Allocations or with special allocations of other items of Partnership income, gain, loss, or deduction pursuant to this paragraph 3. Therefore, notwithstanding any other provision of this Exhibit B (other than the Regulatory Allocations and Tax Allocations), the General Partner shall make such offsetting allocations of Partnership
Exhibit B-2
income, gain, loss or deduction in whatever manner the General Partner determines appropriate so that, after such offsetting allocations are made, each Partner’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Partner would have had if the Regulatory Allocations were not part of this Agreement. In addition, in the event the General Partner determines the allocation provisions of the Agreement and this Exhibit B result in allocations or Capital Account balances that do not comport with the economic intent of the parties, the General Partner shall be entitled, in its sole discretion, to make such adjustments to such provisions as it deems necessary or appropriate to correct such provisions.
- Tax Allocations.
(a) Items of Income or Loss. Except as is otherwise provided in this Exhibit B, an allocation of Partnership Net Income or Net Loss to a Partner shall be treated as an allocation to such Partner of the same share of each item of income, gain, loss, deduction and item of tax-exempt income or Section 705(a)(2)(B) expenditure (or item treated as such expenditure pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations) (“Tax Items”) that is taken into account in computing Net Income or Net Loss.
(b) Section 1245/1250 Recapture. Subject to subparagraph 4(c) below, if any portion of gain from the sale of Partnership assets is treated as gain which is ordinary income by virtue of the application of Sections 1245 or 1250 of the Code (“Affected Gain”), then such Affected Gain shall be allocated among the Partners in the same proportion that the depreciation and amortization deductions giving rise to the Affected Gain were allocated. This subparagraph 4(b) shall not alter the amount of Net Income (or items thereof) allocated among the Partners, but merely the character of such Net Income (or items thereof). For purposes hereof, in order to determine the proportionate allocations of depreciation and amortization deductions for each fiscal year or other applicable period, such deductions shall be deemed allocated on the same basis as Net Income and Net Loss for such respective period.
(c) Precontribution Gain, Revaluations. With respect to any Contributed Property, the Partnership shall use any permissible method contained in the Regulations promulgated under Section 704(c) of the Code selected by the General Partner, in its sole discretion, to take into account any variation between the adjusted basis of such asset and the fair market value of such asset as of the time of the contribution (“Precontribution Gain”). Each Partner hereby agrees to report income, gain, loss and deduction on such Partner’s federal income tax return in a manner consistent with the method used by the Partnership. If any asset has a Gross Asset Value which is different from the Partnership’s adjusted basis for such asset for federal income tax purposes because the Partnership has revalued such asset pursuant to Section 1.704-1(b)(2)(iv)(f) of the Regulations, the allocations of Tax Items shall be made in accordance with the principles of Section 704(c) of the Code and the Regulations and the methods of allocation promulgated thereunder. The intent of this subparagraph 4(c) is that each Partner who contributed to the capital of the Partnership a Contributed Property will bear, through reduced allocations of depreciation, increased allocations of gain or other items, the tax detriments associated with any Precontribution Gain. This subparagraph 4(c) is to be interpreted consistently with such intent.
(d) Excess Nonrecourse Liability Safe Harbor. Pursuant to Section 1.752-3(a)(3) of the Regulations, solely for purposes of determining each Partner’s proportionate share of the “excess nonrecourse liabilities” of the Partnership (as defined in Section 1.752-3(a)(3) of the Regulations), the Partners’ respective interests in Partnership profits shall be determined under any permissible method reasonably determined by the General Partner, provided however, Excess Nonrecourse Liabilities shall be allocated first to the ETJ Gano Holdings, Inc., PRJA Gano Holdings, LLC and EHI Gano Holdings, Inc. to the extent of their allocable share of 704(c) built-in gain.”
(e) References to Regulations. Any reference in this Exhibit B or the Agreement to a provision of proposed and/or temporary Regulations shall, if such provision is modified or renumbered, be deemed to refer to the successor provision as
Exhibit B-3
so modified or renumbered, but only to the extent such successor provision applies to the Partnership under the effective date rules applicable to such successor provision.)
(f) Successor Partners. For purposes of this Exhibit B, a transferee of a Partnership Interest shall be deemed to have been allocated the Net Income, Net Loss and other items of Partnership income, gain, loss, deduction and credit allocable to the transferred Partnership Interest that previously have been allocated to the transferor Partner pursuant to this Agreement.
Exhibit B-4
EXHIBIT C
NOTICE OF REDEMPTION
The undersigned hereby irrevocably (i) transfers [Class A][Class B][Class K][Class K-I][Class K-T] OP Units in Procaccianti Hotel REIT, L.P. in accordance with the terms of the Amended and Restated Agreement of Limited Partnership of Procaccianti Hotel REIT, L.P. and the rights of Redemption referred to therein, (ii) surrenders such [Class A][Class B][Class K][Class K-I][Class K-T] OP Units and all right, title and interest therein, and (iii) directs that the cash (or, if applicable, REIT Shares of the corresponding Class of OP Units being redeemed) deliverable upon Redemption or exchange be delivered to the address specified below within ten (10) days of the receipt of this Notice of Redemption, and if applicable, that such REIT Shares of the corresponding Class of OP Units being redeemed be registered or placed in the name(s) and at the address(es) specified below.
| Dated: | |
|---|---|
| Name of Partner: | |
| (Signature of Partner) | |
| --- | |
| (Street Address) | |
| (City, State, Zip Code) |
Issue REIT Shares of the corresponding Class of OP Units being redeemed to:
Please insert social security or identifying number:
Name:
Exhibit C-1
EXHIBIT D
FORM OF[Class A][Class B][Class K][Class K-I][Class K-T] OP UNIT CERTIFICATE
CERTIFICATE FOR OP UNITS OF
Procaccianti Hotel REIT, L.P.
| No. | UNITS |
|---|
Procaccianti Hotel REIT, Inc., as the General Partner of Procaccianti Hotel REIT, L.P., a Delaware limited partnership (the “Operating Partnership”), hereby certifies that is a Limited Partner of the Operating Partnership whose Partnership Interests therein, as set forth in the Amended and Restated Agreement of Limited Partnership of the Operating Partnership dated [•], 2020, as amended (the “Partnership Agreement”), under which the Operating Partnership is existing (copies of which are on file at the Operating Partnership’s principal office at 1140 Reservoir Avenue, Cranston, Rhode Island 02920-6320), represent [Class A][Class B][Class K][Class K-I][Class K-T] OP Units in the Operating Partnership.
THE UNITS REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE PARTNERSHIP AGREEMENT, AS IT MAY BE AMENDED FROM TIME TO TIME (A COPY OF WHICH IS ON FILE WITH THE OPERATING PARTNERSHIP). EXCEPT AS OTHERWISE PROVIDED IN THE PARTNERSHIP AGREEMENT, THE UNITS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE GENERAL PARTNER AN OPINION OF COUNSEL SATISFACTORY TO THE GENERAL PARTNER, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS. THIS CERTIFICATE EVIDENCES AN INTEREST IN THE OPERATING PARTNERSHIP AND SHALL BE A SECURITY GOVERNED BY ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE STATE OF DELAWARE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OTHER APPLICABLE JURISDICTION.
Exhibit D-1
TABLE OF CONTENTS
| PAGE | ||
|---|---|---|
| ARTICLE 1 DEFINED TERMS | 1 | |
| Section 1.1 | Definitions. | 1 |
| ARTICLE 2 ORGANIZATIONAL MATTERS | 17 | |
| Section 2.1 | Organization. | 17 |
| Section 2.2 | Name. | 17 |
| Section 2.3 | Registered Office and Agent; Principal Office. | 17 |
| Section 2.4 | Power of Attorney. | 17 |
| Section 2.5 | Term. | 18 |
| ARTICLE 3 PURPOSE | 18 | |
| Section 3.1 | Purpose and Business. | 18 |
| Section 3.2 | Powers. | 19 |
| Section 3.3 | Partnership only for Purposes Specified. | 19 |
| Section 3.4 | Representations and Warranties by the Parties. | 19 |
| Section 3.5 | Certain ERISA Matters. | 21 |
| ARTICLE 4 CAPITAL CONTRIBUTIONS | 21 | |
| Section 4.1 | Capital Contributions of the Partners. | 21 |
| Section 4.2 | Classes of Partnership Units. | 21 |
| Section 4.3 | Loans by Third Parties. | 22 |
| Section 4.4 | Additional Funding and Capital Contributions. | 22 |
| Section 4.5 | Other Contribution Provisions. | 23 |
| Section 4.6 | No Preemptive Rights. | 23 |
| Section 4.7 | No Interest; No Return. | 23 |
| Section 4.8 | Intentionally Omitted. | 24 |
| Section 4.9 | Special Fees. | 24 |
| ARTICLE 5 DISTRIBUTIONS | 24 | |
| Section 5.1 | Distributions. | 24 |
| Section 5.2 | Qualification as a REIT. | 27 |
| Section 5.3 | Withholding. | 28 |
| Section 5.4 | Additional Partnership Interests. | 28 |
| Section 5.5 | Distributions in Kind. | 28 |
| Section 5.6 | Distributions upon Liquidation. | 28 |
| Section 5.7 | Distribution Limitation. | 28 |
| ARTICLE 6 ALLOCATIONS | 28 | |
| Section 6.1 | Allocations. | 28 |
| ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS | 29 | |
| Section 7.1 | Management. | 29 |
| Section 7.2 | Certificate of Limited Partnership. | 32 |
| Section 7.3 | Restrictions on General Partner’s Authority. | 32 |
| Section 7.4 | Reimbursement of the General Partner. | 33 |
| Section 7.5 | Outside Activities of the General Partner. | 35 |
| Section 7.6 | Contracts with Affiliates. | 35 |
| Section 7.7 | Indemnification. | 36 |
| Section 7.8 | Liability of the General Partner. | 38 |
| Section 7.9 | Other Matters Concerning the General Partner. | 38 |
| Section 7.10 | Title to Partnership Assets. | 39 |
| Section 7.11 | Reliance by Third Parties. | 39 |
| ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS | 40 | |
| Section 8.1 | Limitation of Liability. | 40 |
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| Section 8.2 | Management of Business. | 40 |
|---|---|---|
| Section 8.3 | Outside Activities of Limited Partners. | 40 |
| Section 8.4 | Return of Capital. | 40 |
| Section 8.5 | Rights of Limited Partners Relating to the Partnership. | 40 |
| Section 8.6 | Redemption Rights. | 41 |
| ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS | 43 | |
| Section 9.1 | Records and Accounting. | 43 |
| Section 9.2 | Fiscal Year. | 44 |
| Section 9.3 | Reports. | 44 |
| Section 9.4 | Nondisclosure of Certain Information. | 44 |
| ARTICLE 10 TAX MATTERS | 44 | |
| Section 10.1 | Preparation of Tax Returns. | 44 |
| Section 10.2 | Tax Elections. | 44 |
| Section 10.3 | [Intentionally Omitted.] | 45 |
| Section 10.4 | [Intentionally Omitted.] | 45 |
| Section 10.5 | Withholding. | 45 |
| ARTICLE 11 TRANSFERS AND WITHDRAWALS | 46 | |
| Section 11.1 | Transfer. | 46 |
| Section 11.2 | Transfer of the Partnership Interest of the<br> General Partner.. | 46 |
| Section 11.3 | Limited Partners’ Rights to Transfer. | 47 |
| Section 11.4 | Substituted Limited Partners. | 48 |
| Section 11.5 | Assignees. | 49 |
| Section 11.6 | General Provisions. | 49 |
| Section 11.7 | Put Right of General Partner. | 51 |
| ARTICLE 12 ADMISSION OF PARTNERS | 51 | |
| Section 12.1 | Admission of Successor General Partner. | 51 |
| Section 12.2 | Admission of Additional Limited Partners. | 51 |
| Section 12.3 | Amendment of Agreement and Certificate of Limited<br> Partnership. | 52 |
| ARTICLE 13 DISSOLUTION AND LIQUIDATION | 52 | |
| Section 13.1 | Dissolution. | 52 |
| Section 13.2 | Winding Up. | 53 |
| Section 13.3 | Capital Contribution Obligation. | 53 |
| Section 13.4 | Compliance with Timing Requirements of Regulations. | 54 |
| Section 13.5 | Deemed Distribution and Recontribution. | 54 |
| Section 13.6 | Rights of Limited Partners. | 54 |
| Section 13.7 | Notice of Dissolution. | 54 |
| Section 13.8 | Cancellation of Certificate of Limited Partnership. | 55 |
| Section 13.9 | Reasonable Time for Winding-Up. | 55 |
| Section 13.10 | Waiver of Partition. | 55 |
| ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS | 55 | |
| Section 14.1 | Amendments. | 55 |
| Section 14.2 | Action by the Partners. | 55 |
| ARTICLE 15 GENERAL PROVISIONS | 56 | |
| Section 15.1 | Addresses and Notice. | 56 |
| Section 15.2 | Titles and Captions. | 56 |
| Section 15.3 | Pronouns and Plurals. | 56 |
| Section 15.4 | Further Action. | 56 |
| Section 15.5 | Binding Effect. | 57 |
| Section 15.6 | Creditors. | 57 |
| Section 15.7 | Waiver. | 57 |
| Section 15.8 | Counterparts. | 57 |
| Section 15.9 | Applicable Law. | 57 |
| Section 15.10 | Invalidity of Provisions. | 57 |
| Section 15.11 | Entire Agreement. | 57 |
| Section 15.12 | No Rights as Stockholders. | 57 |
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