Exhibit 10.55.8

ACKNOWLEDGMENT OF PROPERTY MANAGER AND BORROWER

THIS ACKNOWLEDGMENT OF PROPERTY MANAGER AND BORROWER is entered into as of
January 8, 2020, by NHS LLC, a North Dakota limited liability company (the
"Property Manager"), with an address at 1635 - 43rd St. South, Suite 305, Fargo,
ND 58103, and LF3 LUBBOCK EXPO, LLC, a Delaware limited liability company ("Fee
Owner") and LF3 LUBBOCK EXPO TRS, LLC, a Delaware limited liability company
("Operating Lessee"; each, individually, and collectively with Fee Owner,
"Borrower") to and for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as
Trustee for Morgan Stanley Capital I Trust 2019-H6, Commercial Mortgage
Pass-Through Certificates, Series 2019-H6, acting by and through its Master
Servicer, Midland Loan Services, a Division of PNC Bank, National Association
(collectively referred to herein as "Lender").

A.   Pursuant to a Consent, Amendment and Assumption Agreement (the "Assumption
Agreement") by and among TREEMONT CAPITAL PARTNERS IV, LP, a Texas limited
partnership ("Original Borrower"), Borrower, Lender, and certain other parties
named therein, Borrower has assumed all of Original Borrower's obligations in
connection with a loan (the "Loan") evidenced by, among other things, (i) that
certain Promissory Note dated April 4, 2019, executed by Original Borrower,
payable to the order of Starwood Mortgage Capital LLC ("Original Lender"), in
the original principal amount of $9,500,000.00 (collectively with all amendments
and modifications thereto, the "Note"), (ii) that certain Deed of Trust,
Assignment of Leases and Rents and Security Agreement dated April 4, 2019 and
that certain Leasehold Deed of Trust, Assignment of Leases and Rents and
Security Agreement dated as of the date hereof (collectively with all amendments
and modifications thereto, the "Mortgage") securing the Note and covering, among
other things, the property encumbered thereby and certain property located at
435 50th Street, Lubbock, Texas, commonly known as Fairfield Inn & Suites
Lubbock, as more particularly described therein (the "Property"), and (iii) all
other documents, instruments and agreements executed by Original Borrower in
connection with the Loan. The Loan is further evidenced by that certain Loan
Agreement dated April 4, 2019, executed by Original Lender and Original Borrower
(the "Loan Agreement"). Capitalized terms used herein and not otherwise defined,
shall have the meaning given to them in the Loan Agreement.

B.      The Property Manager has entered into a Management Agreement (the
"Contract") with Operating Lessee, a true, correct and complete copy of which is
attached hereto as Exhibit A, providing for the performance by Property Manager
of certain management obligations more particularly described therein with
respect to the management and operation of the Property.

C.      The Property Manager has entered into a Fairfield Inn & Suites By
Marriott Lubbock Southwest Alcohol Temporary Concession Agreement (together will
all modifications, extensions and replacement thereof, (the "Concession
Agreement") with Fee Owner and Original Borrower, a true, correct and complete
copy of which is attached hereto as Exhibit B, providing for the performance by
Property Manager of certain management obligations more particularly described
therein with respect to the management and operation of the Property.

 

 

 

D.        Pursuant to the Loan Documents, Borrower has collaterally transferred
to Lender all of Borrower's right, title and interests under the Contract and
Concession Agreement.

E.         Lender has requested, and Property Manager has agreed, to subordinate
any rights to payment under the Contract and Concession Agreement to Lender's
liens more particularly described in the Mortgage and the Loan Documents (as
that term is defined in the Assumption Agreement).

NOW, THEREFORE, in consideration of Ten and No/100 Dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Property Manager hereby represents, warrants and agrees with
Lender as follows:

1.         Property Manager and Borrower hereby agree that the Contract and the
Concession Agreement all payment obligations of Borrower to Property Manager for
services rendered by Property Manager for the management and operation of the
Property, as such services are more particularly described in the Contract and
Concession Agreement, are hereby subordinated to the Mortgage and all rights of
Lender to receive payment from Borrower under the Note and all other amounts
which may be due Lender under the Loan Documents. Property Manager recognizes
and agrees that so long as the Note is being paid in strict accordance with its
terms and all other requirements of the Loan Documents are being satisfied,
Property Manager shall be entitled to receive payments provided for under the
Concession Agreement and Contract in accordance with the terms thereof. Property
Manager hereby releases, discharges and waives any and all liens, claims or
demands, of any kind or nature, against the Property, either now or in the
future, arising from the services provided by Property Manager for the
management and operation of the Property but in no event waives any claim or
demand against the Borrower.

2.         As additional collateral security for the Loan, and subject to the
terms and conditions of this Agreement, Borrower hereby assigns its rights and
interest under the Contract and Concessions Agreement said assignment to
automatically become a present, unconditional assignment, at Lender's option,
upon the occurrence and continuance of an Event of Default under the Loan
Agreement, provided, that prior to an Event of Default, Borrower shall have the
right to exercise all of its rights under such Agreements in accordance with the
Loan Documents. Property Manager hereby consents to such conditional assignment
and agrees that if Lender or its designee takes possession of the Property or
any portion thereof, then Property Manager and Lender shall recognize each other
as "manager" and "owner," respectively, under the Concessions Agreement and
Contract for the remainder of the term thereof, subject to any termination
rights described therein and Lender's termination rights under Section 4 hereof.

3.         In the event that Borrower defaults under the terms of the Contract
or Concession Agreement, Property Manager agrees that before exercising any
rights or remedies with respect thereto, it will notify Lender of such default.
Upon Lender's request, Property Manager will continue to perform under the
Contract and Concession Agreement (as applicable), subject to being paid in
accordance with the Contract and Concession Agreement (as applicable) for the
work performed. In such event, Property Manager recognizes that the maximum
amount that shall be due and payable under the Contract is the amount stated
therein (such amount being adequate to complete the services called for in the
Contract), and that Property Manager will not

 

claim any incidental, consequential, or exemplary damages of any nature as a
condition to completing its performance under the Contract.

4.          Without limiting the foregoing, in the event Lender forecloses or
otherwise succeeds to the rights of Borrower with respect to the Property,
Lender shall have the option upon written notice to Property Manager delivered
within thirty (30) days following foreclosure by Lender or other acquisition of
the Property by Lender, either to (a) terminate the Contract or Concession
Agreement without any obligation or liability of Lender to pay any of the
termination fees set forth in the Contract or Concession Agreement; or (b)
continue the Contract or Concession Agreement in effect upon all of the terms
and provisions provided in the Contract or Concession Agreement, except that
Lender shall have no obligation to pay any sums due and owing under the Contract
or Concession Agreement as of the date of foreclosure or other acquisition of
the Property, and Lender shall have the right after it elects to continue the
Contract or Concession Agreement under subparagraph (b) hereof to terminate the
Contract or Concession Agreement without cause upon thirty (30) days written
notice to Property Manager without any obligation or liability of Lender to pay
any of the termination fees set forth in the Contract or Concession Agreement.
Property Manager acknowledges and agrees with Lender that Lender has not assumed
any obligations or liabilities of Borrower to Property Manager under the
Contract or Concession Agreement. If Lender chooses not to continue the Contract
or Concession Agreement following a foreclosure or other acquisition of the
Property, the only compensation from Lender for which Property Manager shall be
entitled under the Contract or Concession Agreement shall be (i) for the period
commencing with the date of such foreclosure or other acquisition and ending
upon the subsequent termination by Lender of the Contract or Concession
Agreement, and (ii) for any period covered by paragraph 2 above.

5.          Property Manager agrees (a) not to resign as property manager
without thirty (30) days prior written notice to Lender, and (b) not to amend
the Contract or Concession Agreement in any way that would have a material
economic effect on the rights, duties, obligations and/or liabilities of either
Property Manager or Borrower thereunder without Lender's prior written approval.

6.          Property Manager acknowledges and agrees that any and all rents,
profits or other sums (collectively herein called "Property Proceeds") collected
or received by Property Manager from the Property are subject to a security
interest of Lender pursuant to the Loan Documents, and shall be collected and
held by Property Manager in trust for the benefit of Borrower and Lender. If a
Sweep Event Period exists under the Loan Agreement, amounts on deposit in the
Clearing Account are to be transferred to the Cash Management Account and
applied in accordance with the Cash Management Agreement and Loan Agreement.
Property Manager hereby disclaims any and all interests in such account and in
any of the Property Proceeds. Upon written notice from Lender that (a) an Event
of Default has occurred under the Note and/or other Loan Documents, and (b) as a
result of such Event of Default, Lender has revoked Borrower's license to
collect the Property Proceeds pursuant to the terms of the Mortgage, Property
Manager agrees (i) not to pay any of the Property Proceeds to Borrower without
the prior written approval of Lender, (ii) to pay the Property Proceeds in
payment of the Secured Obligations (as such term is defined in the Mortgage) or
to otherwise pay such Property Proceeds as instructed by Lender, and, as
applicable, (iii) to cooperate in the establishment of a lockbox or cash
management

 

account for the deposit of all Property Proceeds for the benefit of Lender, if
so instructed by Lender.

7.          Upon the full payment of the Indebtedness and the performance by
Borrower of all obligations under the Loan Agreement or other satisfaction of
the Loan accepted by Lender in writing, this Acknowledgment and Lender's rights
hereunder shall terminate.

[SIGNATURE PAGE TO FOLLOW]

 

 

EXECUTED as of the date first set out above.

 

 

 

PROPERTY MANAGER: 

NHS LLC,

 

a North Dakota limited liability company

 

 

 

 

 

By:

/s/ Norman H. Leslie

 

Name:

Norman H. Leslie

 

Title:

Sole Member

 

 

BORROWER:

 

 

 

LF3 LUBBOCK EXPO, LLC,

 

a Delaware limited liability company

 

 

 

By:

Lodging Fund REIT III OP, LP, its sole member

 

 

 

By:

Lodging Fund REIT III, Inc., its general partner

 

 

 

By:

s/ Katie Cox

 

Name:

Katie Cox

 

Its:

 

Chief Financial Officer

 

 

LF3 LUBBOCK EXPO TRS, LLC,

 

a Delaware limited liability company

 

 

 

By:

Lodging Fund REIT III TRS, Inc. Its: Sole Member

 

 

 

By:

/s/ Katie Cox

 

Name:

Katie Cox

 

Its:

 

Chief Financial Officer

 

 

EXHIBIT A

Copy of Executed Property Management Agreement (See Attached)

 

 

image2.jpeg [lfr20191231ex105584256001.jpg]

 

MANAGEMENT AGREEMENT

BY AND BETWEEN

LF3 LUBBOCK EXPO TRS, LLC AND

NHS LLC dba NATIONAL HOSPITALITY SERVICES

LOCATION: Fairfield Inn & Suites by Marriott – Lubbock Southwest 6430 – 50th
Street

Lubbock, Texas 79407

DATE:                 January  8 ,2020

 

MANAGEMENT AGREEMENT

THIS AGREEMENT, is made on January   8 , 2020, to be effective as of the
Effective Date, as that term is defined below, by and between LF3 Lubbock Expo
TRS, LLC, a Delaware limited liability company, ("Owner"), having a registered
office at 1635- 43rd St. South, Suite  205,  Fargo,    ND  58103,   
and    NHS    LLC    dba    NATIONAL    HOSPITALITY SERVICES (the "Operator") or
its assignee, having its principal offices at 1635 - 43rd St.  South, Suite 305,
Fargo, ND 58103.

WITNESSETH: RECITALS

A.       Owner is the owner of certain personal property and business operations
and lessee of the real estate located 6430 – 50th Street, Lubbock, Texas 79407
(the "Hotel"), which Hotel has 101 rooms and approximately 324 square feet of
conference/banquet space. Owner is the tenant of LF3 Lubbock Expo, LLC, a
Delaware limited liability company (the "Land Owner"), which is the lessor of
the real estate.

B.         Operator, together with its affiliates, has been engaged in the
operation of hotels and inns for many years.

C.         Owner desires to utilize the services and experience of Operator in
connection with the operation of the Hotel.

D.        All prior management agreements are terminated and longer in effect.
This agreement reinstates all terms under the mutual understanding agreed to
herein.

NOW, THEREFORE, Owner and Operator agree:

ARTICLE 1 DEFINITIONS

1.01     Definitions.    As used herein, the following terms shall have the
respective meanings indicated below:

(a)      “Affiliates” means any corporation, partnership, or other entity that
directly or indirectly controls, is controlled by, or is under common control
with Operator.

(b)      “Annual Plan” is defined in Section 3.01(a) below.

(c)      “Budget” is defined in Section 3.01(b) below.

(d)      “Business” means the management and operation of the Hotel by Operator.

 

(e)     “Capital Improvements” means any alteration of, addition to, or
renovation of, the Real Property, the cost of which is not expensed as repairs
and maintenance under Generally Accepted Accounting Principles.

(f)      “Compensation” means the direct salaries and wages paid to any
executive or other employee of the Business, together with all fringe benefits
to which such employee is entitled, including: employer’s F.I.C.A contribution;
payment for unemployment benefits; employment taxes; pension fund contributions;
Worker’s Compensation premiums; group life and accident insurance premiums;
health insurance premiums; and employee benefit programs including, but not
limited to, profit sharing, retirement, disability and similar benefits.

(g)     “Effective Date” means January  8 , 2020.

(h)     “Executive Staff” means the general manager, sales manager, controller,
and food and beverage manager of the Business.

(i)       “Franchise” means the license under which the Business is operated.

(j)      “Furnishings and Operating Equipment” means all furniture, furnishings
and equipment, other than fixtures attached to and forming part of the building,
which are required for the operation of a hotel, including, without limitation,
guest room furniture, office furniture, safes, computers, cash registers,
duplication and communication machines, maintenance equipment (including tools),
kitchen equipment, laundries, dry-cleaning facilities, bars and cocktail
lounges, special lighting, chinaware, glassware, linens, silverware, uniforms
and all specialized hotel equipment and personal property needed for such
purpose.

(k)     “General Account” means a banking account in Owner’s name with Owner and
Owner-approved representatives of Operator as authorized signatories.

(l)      “Group Services” means services provided by Operator or its Affiliates
that are also provided to two or more hotels and inns operated by Operator that
are designed to provide cost savings or efficiency, or both, and include,
without limitation services for (i) group advertising and business promotion and
publicity, (ii) central purchasing and procuring, (iii) credit card association,
(iv) central accounting, (v) advice and consulting in connection with the
design, planning, and construction of the Hotel and the organization, licensing,
and operation of the Business, provided through specialists regularly employed
or retained by Operator and its Affiliates, and (vi) any other services now or
hereafter furnished by Operator to two or more hotels and inns operated by
Operator. Operator shall have sole discretion over all phases of promotion and
publicity with respect to the Group Services.

(m)    “Hotel” means the Real Property and the Furnishings and Operating
Equipment used in the Business.

 

(n)     “Hotel Accounts” means the General Account and Owner’s Depository
Account.

(o)       Reserved

(p)     “Impositions” means all taxes, assessments, water, sewer or other rents,
rates and charges, levies, license fees, permit fees, inspection fees and any
other fees and charges, which at any time may be assessed, levied, confirmed, or
imposed on the Business by a governmental or quasi-governmental authority or
utility, but excluding income taxes payable by Owner resulting from operations.

(q)     “Insurance Requirements” means all terms of each insurance policy
required to be carried hereunder, and all orders, rules, regulations and other
requirements of the National Board of Fire Underwriters (or any other body
exercising similar functions) applicable to the Business but does not include
recommendations of the insurance carriers.

(r)      “Leased Land” means the parcel or parcels of real property legally
described in Schedule 1 attached and Owner’s interest therein, whether in a fee
or leasehold estate, together with all entrances, exits, rights of ingress and
egress, easements and appurtenances.

(s)      “Legal Requirements” means all laws, statutes, ordinances, orders,
rules, regulations, permits, licenses, authorizations, directions, and
requirements of all governmental authorities, that now or hereafter apply or are
asserted to apply to the Business, but not to Owner’s federal, state, and local
tax returns.

(t)      “License Agreements” means the existing Franchise, if any, described in
Schedule 2 attached and any other license or franchise agreement selected by
Owner in its sole discretion, that grants to Owner a franchise or license to use
the distinctive trademarks, trade names, signs, emblems, color schemes and other
readily recognizable symbols of a national or international lodging chain and
providing such additional benefits as access to a national reservations system.

(u)      “Mortgage” means any mortgage, deed of trust, reciprocal operating
agreement, security agreement, equipment or chattel lease, or other agreement
now or hereafter securing an obligation of Owner with assets of the Hotel.

(v)     “Mortgagee” means the holders of any obligation secured by a Mortgage.

(w)     “Operator” means NHS LLC dba NATIONAL HOSPITALITY SERVICES, or its
permitted designees, which may include Affiliates.

 

(x)     “Operating Supplies” means food and beverages and other immediately
consumable items used in the operation of the Business such as fuel, soap,
cleaning supplies, stationery and similar items.

(y)     “Operating Year” means the 12-month period commencing on January 1,
except that the “first Operating Year” means the period beginning on the
Effective Date and ending on December 31 of that year.

(z)     “Operator Hotels and Inns” means all other hotels and inns within the
United States owned, leased, or managed, directly or indirectly, by Operator or
its Affiliates.

(aa) “Owner” means the person or entity named in the preamble, its successors
and assigns.

(bb) “Owner’s Depository Account” means an account designated by Owner in
which  the funds are at the disposal in Owner’s discretion.

(cc) “Owner Hotels and Inns” means all other hotels and inns within the United
States owned, leased, or managed, directly or indirectly, by Owner.

(dd) “Permitted Encumbrances” means (i) all Mortgages, (ii) liens for
Impositions not delinquent, (iii) undetermined or inchoate liens or charges for
labor or materials which have not at the time been filed or recorded pursuant to
law, and (iv) easements, restrictions on use, zoning laws and ordinances, rights
of way and other encumbrances and minor irregularities in title, that have been
identified to Operator and do not individually or in the aggregate impair the
operation of the Business.

(ee) “Real Property” means the Leased Land and all buildings, structures and
improvements now or hereafter located on the Leased Land.

(ff) “Service Contracts” is as defined in Section 9.02 below.

(gg) “Tax Returns” means federal, state and local income or other business tax
returns, real property and personal property tax returns, and occupancy tax
returns.

(hh) “Term” means the period beginning with the Effective Date and ending upon
the expiration or earlier termination of this Agreement.

(ii) “Uniform System of Accounts for Hotels” means the Ninth Revised Edition of
that publication and is referred to in Section 5.05.

ARTICLE 2 ENGAGEMENT, TERM AND RENEWAL

 

2.01     Engagement of Operator. Owner hereby engages Operator to be the sole
and exclusive person to supervise and direct the day-to-day Business in
accordance with the terms and provisions of this Management Agreement. Operator
agrees that it will supervise and direct the day-to-day Business as a top-rated
hotel comparable to other hotels of the same class, condition and franchise.
Operator and Owner shall endeavor to jointly determine operating policy,
standards of operation, quality of service and any other policy matters
affecting customer relations or the Business. In the event that Operator and
Owner cannot reach a joint decision on operating policy, Operator’s decision on
policy shall control, subject to adherence to the Budget.

2.02     The Term. The term of this Agreement shall commence on the Effective
Date and shall expire at midnight on December 31 of the fifth (5th) full
calendar year after the Effective Date if not earlier terminated under Article
6. If not terminated, this Agreement will automatically renew under for
successive periods of five (5) years each unless either party gives to the other
written notice of non-renewal at least sixty (60) days before the end of the
Term or any renewal term.

ARTICLE 3 HOTEL OPERATION

3.01     Budget; Reports. Operator will provide a budget before the start of
Owner’s fiscal year, for each consecutive year after the Effective Date; if the
effective day is on any date other that the start of the fiscal year, then the
Operator will provide a budget within 60 days of the Effective Date. Operator
will prepare:

(a)        A business plan (the “Annual Plan”) setting forth Operator’s
estimates of the following fiscal year’s operations, based upon the most recent
and reliable information then available taking into account the location of the
Hotel and Operator’s experience in other comparable Operator Hotels and Inns.
Annual Plans will be in such detail as is necessary for Owner to effectively
review the Annual Plan. Operator may update and revise any Annual Plan from time
to time to reflect variables and events not reasonably foreseeable by or within
the control of Operator at the time of preparation of the Annual Plan. Operator
does not guarantee the performance of the Hotel.

(b)        A budget estimating income and expense and cash flow, in reasonable
detail, for the following Operating Year (the “Budget”), including among other
things (i) a schedule of Hotel room rentals (and cabana rental, if applicable),
(ii) occupancy levels and average room rate, (iii) complimentary accommodations
and services,

(iv) categories of income, (v) operating expenses, detailed by type, and (vi)
anticipated cash flow available for distribution to Owner’ Depository Account.
The Budget will be subject to the approval of Owner and, if applicable or
requested, Mortgagee(s). Owner shall be responsible to obtain Mortgagee approval
of the Budget, if required. Owner shall approve reasonable expenses in the
Budget for the cost of employing the Executive Staff. Operator shall make the
information utilized

 

in preparing the Budget available to Owner upon Owner’s request. In the event of
a disagreement with regard to a proposed Budget, and pending settlement thereof,
Operator may continue to operate the Hotel in accordance with the standards
herein set forth at levels of expenditure not exceeding those of the preceding
year. Operator may make such expenditures from General Account as Operator deems
necessary for such continued operations.

(c)        If requested by Owner, Operator shall prepare the Budget to estimate
the ensuing year expenditures for (i) repairs and maintenance, (ii) the purchase
of Furnishings and Operating Equipment, (iii) Capital Improvements, and (iv)
separate advertising, business promotion and personnel programs of the Hotels
(as distinct from the programs included in Group Services).

(d)        If requested by Owner, but not more often than quarterly, a narrative
overview of all revenue and expense levels in the Budget and an analysis of the
year over year actual results, with an explanation of any differences between
the Budgets and the results and a reconciliation thereof.

(e)       Operator shall comply with the applicable Budgets in all material
respects unless modified verbally or in writing by Owner and Operator. Operator
shall be entitled to make additional expenditures not included in a Budget in
case of emergencies arising out of fire or any other casualty or other
unforeseen circumstance or in order to comply with any applicable Legal or
Insurance Requirements.

3.02     Group Services. During the Term, Operator will furnish to the Hotel the
Group Services furnished to other Operator Hotels and Inns and suggest
preventative maintenance programs known to Operator which it deems suitable for
the Hotel. With respect to credit services, Owner agrees that the Hotel’s policy
regarding association with any credit card system shall be in conformity with
Operator’s general policy at the time in effect. Operator will provide, as
needed, supervisory and control services to the Hotel’s front office, food and
beverage, personnel, and other operating departments. Operator shall have sole
discretion over Group Services promotion and publicity.

3.03     Personnel.

(a)        Employment. In conformity with the approved Annual Plans, Operator
shall, at the expense of the Business, employ, train, pay, supervise, promote
and discharge all employees and personnel for the operation of the Hotel
including the Executive Staff. Operator shall use due care to select qualified,
competent and trustworthy employees and personnel. Each person so hired shall be
an employee only of Owner or Owner’s designee(s). Owner or Owner’s designee(s)
shall at all times employ a sufficient number of employees to enable Operator to
properly, adequately, safely, and economically manage, operate and maintain the
Hotel. All personnel employed in the Business shall be the employees of Owner.
At no time shall the employees of Owner, Owner’s designee(s), any independent
contractor(s), or employee(s) of

 

independent contractors be considered employees of Operator. Owner and Owner’s
designee(s) shall comply in all respects with all federal, state and local Legal
Requirements governing its employees, including, without limitation, workers'
compensation, social security, unemployment insurance, hours of labor, wages,
working conditions and other employer requirements. Owner shall have the right
to review and approve Executive Staff candidates before being hired. In the
event that Owner disapproves of three candidates selected by Operator for any
Executive Staff position, Operator shall have the right to employ any other
candidate for that Executive Staff position without Owner’s approval.

(b)       Unions. Operator shall have the authority and responsibility to
negotiate with any labor union(s) representing or attempting to represent
employees at the Hotel but shall not, except when a Legal Requirement exists,
enter into negotiations with any labor union regarding wages and working
conditions without the prior written consent of Owner. Operator shall consult
with Owner, unless Owner gives written waiver of this right, during the course
of any negotiations as to terms acceptable to Owner, and shall conduct such
negotiations within parameters agreed to by Owner. Operator shall use diligent
efforts to settle and compromise all controversies and disputes arising under
any labor union contracts affecting the employees of the Hotel upon such terms
and conditions as Operator may deem to be in Owner's best interests. Nothing in
this Agreement shall require Owner to employ persons belonging to labor unions.

(c)       Forms. Operator shall prepare and be responsible for the execution and
filing of all employment related forms, reports, and returns required by Legal
Requirements in connection with unemployment insurance, workers' compensation,
disability benefits, job safety, Immigration and Naturalization Service
compliance and reporting, tax withholding, Social Security, pension,
profit-sharing and other employee benefit plans. If any violations of such Legal
Requirements shall occur as a result of any act or omission by Operator, all
costs, fines and penalties resulting therefrom, if any, shall be paid by
Operator without reimbursement by Owner. Operator shall provide Owner with all
information that is (i) available to Operator, and (ii) necessary for the
completion of Tax Returns required to be filed by Owner in connection with the
ownership or operation of the Hotel. Owner shall prepare and file all such
returns.

(d)       Room and Board. On Site If Operator deems it advisable, the general
manager, resident manager, and/or the housekeeper will reside at the Hotel at no
cost. In such a case, they will receive the maintenance (e.g., room, board and
laundry) customarily provided for such employees of a hotel or inn. Operator and
Owner shall jointly approve the rooms in the Hotel that may be occupied by the
general manager, resident manager, and housekeeper. The reasonable business
expenses of the general manager and sales manager, including travel and business
entertainment expenses, shall be paid or reimbursed by the Hotel.

 

3.04     Additional Responsibilities of Operator. Operator will, either in its
own name or as an authorized agent of Owner, perform or cause to be performed,
the following:

(a)       with the approval of Owner, make arrangements with concessionaires,
licensees, tenants, or other intended users of the facilities of the Hotel;

(b)       enter into such contracts for the furnishings of utilities and
maintenance and other services to the Hotel;

(c)       in accordance with the Annual Plans, make all repairs, decorations,
alterations and improvements to the Hotel for the proper maintenance thereof in
good order, condition and repair;

(d)       submit to Owner recommendations for preventative maintenance programs
and perform such preventative maintenance as shall be in the Annual Plans or
approved by Owner in writing;

(e)        purchase such Operating Supplies as Operator deems necessary or
advisable for the operation of the Hotel;

(f)        cooperate with Owner to apply for, obtain, and maintain all licenses
and permits required of Owner or Operator in connection with the Business;
provided that Owner shall execute and deliver any and all applications and other
documents and otherwise fully cooperate with Operator in applying for,
obtaining, and maintaining such licenses and permits; further provided that a
liquor license, if any, shall be in the name of an entity designated by Owner
and all related fees, costs, and expenses shall be paid by Owner before they
become delinquent.

(g)        do or cause to be done, all acts and things in and about the Business
as shall be necessary to comply with all Legal Requirements and Insurance
Requirements; provided that Owner is responsible for compliance with Legal
Requirements that relate to the sale of alcoholic beverages by, through, or at
the Hotel.

(h)        to discharge any lien, encumbrance or charge on or with respect to
the Business, other than Permitted Encumbrances;

(j)         pay all Impositions;

 (i)  use its best efforts to cause the Hotel to comply with the License
Agreements (if  any);

(k)        institute any and all legal actions or proceedings to (i) collect
charges, rent or other income due to the Business, (ii) dispossess guests,
tenants or other persons in possession therefrom, or (iii) cancel or terminate
any lease, license or concession agreement for default thereunder by the tenant,
licensee, or concessionaire;

 

provided, however, that without the consent of Owner, Operator shall not
institute any proceedings to terminate any lease, license or concession
agreement having a then unexpired term of one (1) year or more without the
written consent of Owner.

When any of the foregoing responsibilities require payment by or on behalf of
the Business, payment will be made from the General Account, provided that there
are sufficient funds to do so. In the event that there are not sufficient funds
in the General Account, Owner shall provide the necessary funds to make timely
payments. For expenditures greater than $10,000.00 in any one expense category
which are not within or anticipated in the Annual Plan, Operator shall be
required to obtain written consent from Owner. It is agreed that utilities,
payroll, taxes, food & beverage costs greater than $10,000.00 are approved and
anticipated in the Annual Plans.

The individuals identified on the attached Schedule 3 are the only persons
authorized to bind Owner and Operator respectively, then only to the extent of
the limits set forth opposite their respective names and within the limits
specified elsewhere in this Agreement.

3.05     Management Fee. Owner shall pay to Operator the management fee computed
and payable as provided in the Management Fee Rider attached hereto (“Management
Fee”).

3.06     Reimbursements to Operator. In addition to the Management Fee, Operator
and its Affiliates shall be entitled to be reimbursed for the following costs
and expenses:

(a)        upon Owner election and approval prior to any services being
rendered, the Operator is entitled to all fees or expenses of Group Services
that are separate and distinct from the Ancillary Fee described in the Fee Rider
attached hereto;

(b)       all costs and expenses of any separate advertising and business
promotion programs of the Business alone, separate and distinct from other
Operator Hotels and Inns;

(c)        all costs, expenses, salaries, wages and other compensation limited
to the attached fee rider, for all officers and employees of Operator and its
Affiliates while such officers and employees are working in an operational role
at and for the benefit of the Hotel; and

(d)        reasonable travel and entertainment expenses for all officers and
employees of Operator and its Affiliates incurred in connection with the
Business, provided the same is consistent with the Annual Plan.

3.07     Standard of Performance. Operator shall operate, manage and maintain
the Hotel and all of its facilities and activities (a) in a diligent, careful
and vigilant manner in accordance with the requirements of this Agreement and
the standards imposed by the Franchise Agreement, if any, (b) that maintain the
condition and character of the Hotel, (c) with the primary goal of generating
short-term and long-term profitability, and (d) in a manner that

 

takes reasonable and prudent measures to provide for the security of the Hotel
and its guests. Operator shall provide such facilities and services at the Hotel
as are normally provided by operators of similar commercial hotels, within the
limitation of the Hotel's facilities. Operator shall act in accordance with the
high standards of hotel and motel managers in the area serviced by the Hotel and
apply prudent and reasonable business practices in Owner's best interests in the
conduct of the Business (e.g., practices which include granting complimentary
rooms, food and beverage). Operator shall use all reasonable and prudent efforts
to promote profitable trade, commerce and business for the Hotel and shall bring
to Owner’s attention opportunities to obtain and increase profits.

3.08     Contest of Impositions. Operator shall review the appropriateness of
all Impositions and shall advise Owner of any that, in Operator’s opinion,
should be challenged and recommend action to obtain a reduction of such
Impositions. Owner shall notify Operator if Owner intends to contest any
Imposition or lien upon the Hotel. At Owner’s request, Operator shall institute
protests or challenges to any Imposition or lien. All expenses incurred in
contesting or seeking a reduction or elimination thereof including legal,
appraisal and accounting fees, if required, shall be borne by Owner. Operator
shall not pay any contested Imposition or lien under protest or otherwise
without Owner’s consent. Operator shall set aside the amount necessary to pay
any Imposition or lien under protest, plus interest and penalties, in an
interest-bearing reserve account (or shall deposit such amount with a third
party if so directed by Owner). In the event that there are not sufficient funds
in the General Account for Operator to make required payments, Operator shall
notify Owner in writing and Owner shall promptly pay the amount of the
Imposition shortfall into the General Account. Operator shall promptly reimburse
Owner for any interest or penalty payment imposed on Owner by reason of the
failure of Operator to make payment of uncontested Impositions when the funds
therefor in the Budget were available.

3.09     Mortgage Payments. Owner shall provide Operator with a copy of any
Mortgages on the Hotel. At Owner’s request and if monies in the General Account
are available, Operator shall make payments due under the Mortgage on or before
their due date. Owner shall be solely responsible for payment of any late fees
or interest resulting from a late payment due under the Mortgage if monies are
not available in the General Account sufficient to make payments on or before
their due date. Operator shall endeavor to comply with all covenants under any
Mortgage within the authority granted to Operator under this Agreement.

3.10     Payments under License Agreements. Owner shall provide Operator with a
copy of the License Agreements. At Owner’s request, and if monies in the General
Account are available, Operator shall make payments due under License Agreements
on or before their due date. If notified by Operator that monies are not
available in the General Account to may such payments, Owner shall deposit
monies sufficient to make such payments before the payments are due. If
resources are available under this Agreement, Operator shall (a) perform all
covenants required by Owner to be performed under the License Agreements,

(b) generally operate the Business in accordance with the terms and conditions
of the License Agreements and do nothing to cause or permit anything to be done
which would

 

constitute a violation of the License Agreements, and (c) at Owner’s request,
represent Owner in submissions, correspondence, at conferences, and during
negotiations with the current franchisor under the existing License Agreements
and with potential new franchisors.

ARTICLE 4 INSURANCE

4.01     Business Insurance. During the Term, Operator shall obtain, keep in
force, and maintain at all times Minimum Insurance Amounts that (a) is property
damage coverage for the Hotel on an “open perils” basis (including builder’s
risk during any period or periods of time that construction or remodeling is
being performed), (b) includes, without limitation, the perils of fire,
vandalism, and malicious mischief, flood, seepage and back-up of sewers and
drains, sinkhole, loss or damage from sprinklers and from leakage or explosion
or cracking of boilers carrying steam, water or gas, pressure vessels or similar
apparatus, (c) is in an amount equal to 100% of the full replacement cost of all
improvements to the Hotel, (d) has a deductible of no more than Ten Thousand
Dollars ($10,000.00), and (e) includes business interruption for at least 12
months. Owner, and Mortgagee(s) if applicable, shall be added as loss payees as
their interests may appear. The policy or policies of such insurance shall
contain or include waiver of subrogation clauses or endorsements acceptable in
all respects to Owner and Mortgagee(s) and as required by any leases. If Owner
objects to the insurance obtained by Operator, Owner shall thereafter be
responsible for obtaining and keeping in force, the Minimum Insurance Amounts
with Operator named an additional insured.

4.02     Operator’s Insurance. Operator shall carry, keep and maintain at all
times during the term of this Agreement insurance of the types and in the
minimum amounts set forth below. Upon written request, Operator shall provide
Owner and Mortgagees with certificates of insurance and copies of insurance
policies evidencing the insurance required by this Section 4.02. Operator shall
deliver to Owner and Mortgagees renewal policies and certificates not less than
thirty (30) days prior to the expiration of any such insurance. Owner and
Mortgagees shall be named as additional named insureds on each insurance policy
required by this Section 4.02 and the Business shall pay any costs associated
therewith. Operator hereby expressly waives all rights against Owner and
Mortgagees, their respective affiliates and their respective officers,
directors, employees, agents and Operators for and in connection with all
claims, losses and/or damages covered by any insurance required by this Section
4.02.

(a)        All of the policies of insurance required by this Section 4.02 shall:

 (i)         be issued by financially responsible insurance carriers or
companies;

 (ii)       be in a form acceptable in all respects to Operator, Owner, and

 

Mortgagees;

(iii)      include all standard construction industry clauses and endorsements
and such other clauses and/or endorsements as Owner or Mortgagees may from time
to time require;

(iv)       provide that such policies shall not be canceled, terminated or the
terms thereof modified or amended without at least thirty (30) days’ prior
written notice to Owner and Mortgagees;

(v)        include waiver of subrogation clauses or endorsements acceptable in
all respects to Owner and Mortgagees;

(vi)       be on an occurrence basis; and

(vii)     be written as primary policies, not contributing with, and not in
excess of, any insurance coverage that Owner or Mortgagees and/or their
respective successors, assigns, parent companies, subsidiaries and/or affiliates
may carry against same hazards.

(b)        Minimum Amounts. Only as it pertains to the Operator, and the
Operator’s employee’s, the Operator shall carry, keep and maintain, with no
deductible, at all times the following types of insurance in the minimum amounts
set forth below:

(i)         Workers' Compensation in an amount not less than the applicable
statutory minimum requirement. Operator shall also maintain employer's liability
insurance in an amount not less than Five Hundred Thousand Dollars
($500,000.00).

(ii)       The following insurance coverage to protect against claims that may
arise out of or result from operations away from the Hotel that are connected
with Operator’s performance of this Agreement: Comprehensive Commercial General
Liability (including blanket personal contractual and innkeeper’s and liquor
liability, products completed operations, independent Operators and broad form
property damage) in an amount not less than One Million Dollars ($1,000,000.00)
per occurrence and Two Million Dollars ($2,000,000.00) aggregate for bodily
injury and One Million Dollars ($1,000,000.00) per occurrence and Two Million
Dollars ($2,000,000.00) aggregate for property damage.

(iii)      Comprehensive Automobile Liability (including owned, non- owned,
leased and hired car coverage) in an amount not less than One Million Dollars
($1,000,000.00) per occurrence for bodily injury and One Million Dollars
($1,000,000.00) per occurrence for

 

property damage. This insurance shall apply to all operations of Operator both
at and away from the site of the Hotel.

(iv)       Umbrella/Excess Liability in an amount not less than Twenty-Five
Million Dollars ($25,000,000.00) per occurrence and Twenty-Five Million Dollars
($25,000,000.00) aggregate.

(v)        Employment insurance, including Employee Dishonesty Fidelity and
Forgery Insurance, in amounts anticipated to be sufficient to protect the
Business from any claims covered thereby.

4.03     Payment of Insurance and Deductibles. Operator shall be responsible for
the payment of insurance premiums and any and all deductibles in connection with
any insurance policy described in Section 4.02. Operator will proportionally
invoice the Hotel, for the attributable amount insurance coverage contracted for
by Operator. No payment therefor shall be made through the General Account
except that the costs associated with adding Owner and Mortgagees as additional
insureds on Operator’s commercial general liability policy and all deductibles
required under laws, rules, and regulations applicable to a liquor license
issued with respect to the Business shall be paid from the General Account.

4.04     Operator Cooperation. Operator will cooperate with Owner as follows:

(a)        Notice of Loss. In the event of any loss, damage or injury at the
Hotel, Operator shall:

(i)         notify Owner, Mortgagee and the insurance carrier as soon as
possible but no later than forty-eight (48) hours after Operator receives notice
of any such loss, damage or injury;

(ii)       take no action that could be construed as an admission of liability
or that might otherwise bar Owner or Mortgagee from obtaining any protection
afforded insurance or which might prejudice Owner or Mortgagee in its defense to
any claim for an insured loss, damage or injury;

(iii)      upon request of Owner, agree that Owner or Mortgagee shall have the
exclusive right to conduct the defense to any claim, demand or suit within
limits prescribed by the policy or policies of insurance; and

(iv)       defend any claim if requested by Owner.

(b)       Claim Information. Operator shall furnish information that is
requested by Owner or Mortgagees for the purpose of establishing the appropriate

 

insurance coverages and shall cooperate in every reasonable way with respect to
such insurance and any loss thereunder.

(c)        Potential Risks. Operator shall give Owner and Mortgagees written
notice of any facts of which Operator is aware that might cause an increase in
the risk of a casualty loss or a claim of liability in connection with the
Business. Such notice shall be given promptly after Operator, or any member of
the Executive Staff, has actual knowledge of such facts.

(d)        Prompt Investigation. Operator shall promptly investigate and make a
full timely written report to the insurance company as to all accidents, claims
for damages relating to the Business, any damage or destruction and the
estimated cost of repair thereof, and Operator shall prepare any and all reports
required by any insurance company in connection therewith. Operator shall file
all such reports in a timely manner with the appropriate insurance company as
required under the terms of the relevant insurance policy.

(e)        Blanket Policies. Owner agrees that the insurance Operator is
required to obtain and maintain may be provided in one or more blanket policies,
provided that Operator and Owner, and if required by the Mortgage, the
Mortgagees, are named insureds thereunder and the fairly allocated cost
associated therewith is paid out of the General Account.

4.05     Standard Coverage. The specific insurance requirements set forth above
in this Article are in addition to and not in limitation of the basic or
standard insurance coverages afforded by (a) the policies of insurance required
above and (b) the policies of insurance otherwise maintained by Owner or
Mortgagees in the course of their business.

4.06     Construction Contractors, Subcontractors, and Vendors Insurance.

(a)        If engaged by Operator, Operator shall require that all Contractors,
Subcontractors, and Vendors that engage in construction activities for the
Business have insurance coverage at the expense of each, respectively, and
evidence of such insurance shall be demonstrated at the time of contract. With
respect to any Contractors, Subcontractors and Vendors engaged to provide
construction activities that were previously engaged by Owner or any other party
for work that is ongoing and not insured to the level required in this section
4.06, Operator shall have a period of thirty (30) days from the date of this
Agreement to endeavor to bind the required insurance coverage. Operator shall
require that all construction Contractors, Subcontractors and Vendors it hires
are licensed in the state where the Hotel is located for all such activities
that require licensing.

 

(b)       Contractors, Subcontractors, and Vendors shall have coverage in the
following minimum amounts:

(i)         Worker's compensation - Statutory Amount;

(ii)       Employer's Liability - Statutory Minimum;

(iii)      Commercial General Liability - $1,000,000 per occurrence
and $3,000,000 aggregate; and

(iv)       Auto Liability Policy - Including owned, non-owned, leased or hired
and used in their business in the amount of $1,000,000 combined single limit.

(c)        Proof of Coverage. A certificate of insurance showing proof of this
coverage must be obtained and received by Operator before any work, service, or
sale shall occur. Owner and Mortgagees shall be named as additional insureds,
and such policy shall not be modified, amended, or canceled without prior
written notice to Owner and Mortgagees.

(d)        Waiver of Insurance Requirements. Operator must obtain Owner’s and
Mortgagees’ permission to waive any of the requirements of this Section 4.06.
Higher amounts may be required if the work to be performed is deemed hazardous.
Operator shall keep on file the Certificates of Insurance it is required to
obtain.

ARTICLE 5

ACCOUNTS; WORKING FUNDS; RECORDS AND REPORTS

5.01     Hotel Accounts. Operator shall establish a General Account or assume
control of an existing General Account, and Owner will deliver to Operator for
deposit into the General Account, a sum agreed by both parties, to be maintained
at all times, and funded by Owner from time to time at Operator’s request. All
monies received by Operator in connection with the Business, or derived from
claims, insurance or otherwise, shall be received by Operator for the benefit of
Owner and promptly deposited by Operator into the General Account.

5.02     No Co-Mingling of Funds. The Hotel Accounts shall be used in connection
with the operation of the Business and the performance of the terms and
conditions of this Agreement. Operator agrees to segregate from other revenues
all receipts, accounts and records pertaining to the Business. Operator may not
co-mingle the monies of the Business with the monies of any other business of
Operator.

5.03     Expenditures. Operator is hereby authorized to pay from the General
Account (or if appropriate, from available house banks or petty cash funds) to
the extent consistent with

 

the Annual Plans such amounts and at such times as are required in connection
with the Business, including without limitation the following:

(a)        salaries and expenses of employees at the Business, including the
Executive Staff, in accordance with Section 3.03;

(b)        all expenditures and reimbursements for which Operator or its
subsidiaries are entitled to under any provisions of this Agreement;

(c)        the Management Fee, computed in accordance with the provisions of the
Management Fee Rider;

(d)        deposits in Owner’s Depository Account and moneys in excess of those
required for the General Account; and

(e)        all costs and expenditures incurred or made in connection with the
items to which Operator or its subsidiaries and Affiliates are permitted or
required to make under this Agreement.

5.04     Expenses to be Borne by Operator. Operator shall be solely responsible
for the following expenses:

(a)        All costs, expenses, salaries, wages and other compensation of
officers and employees of Operator and its Affiliates, subject to the
reimbursements from Owner to Operator pursuant to Section 3.06(c);

(b)        Expenses of Operator’s principal and branch offices;

(c)        Expenses for advertising or promotional materials that feature
Operator’s name or activities;

(d)        Operator’s capital expenditures;

 (e)       Operator’s overhead or general expenses, including but not limited to
telephone, telex, duplicating, stationery and postage expenses, excluding
postage expenses for overnight or special delivery charges incurred at
Operator’s principal and branch offices, and except as may be expressly those of
the Business or assumed by Owner under this Agreement;

(f)        Any travel expenses of Operator’s central office employees in excess
of the expenses permitted under Section 3.06(d) or the Annual Plans;

(g)       Any interest or penalty with respect to an Imposition or Lien upon the
Hotel imposed on Owner by reason of (i) the failure of Operator to make a
payment required to be made by Operator under this Agreement when the funds
authorized

 

therefor were available, or (ii) funds therefor were not available and Operator
failed to provide a funding request to Owner for the same reasonably in advance
of their due date;

(h)        The cost of the insurance described in Section 4.03 of this
Agreement; and

(i)         Accounting fees paid or incurred by Operator for its own operations.

5.05     Books and Records. Operator shall keep full and adequate books of
account and such other records as are necessary to reflect the results of the
operation of the Business. Such books and records shall be kept in all material
aspects in accordance with the Uniform System of Accounts for Hotels.

5.06     Reports to Owner.

(a)      Monthly Reports. Operator will deliver or cause to be delivered to
Owner on or before the twentieth (20th) day of each calendar month, a detailed
profit and loss statement for operation of the Hotel during the previous
calendar month and the year-to-date (“Monthly Report”). The statement must list
or describe any material variances to the Annual Plans and must include a
comparison to the same month and year-to-date period from the preceding year, a
comparison of calendar month and year-to date to the applicable Annual Plan,
trial balance, and balance sheet and related statement of profit and loss, which
must include all supporting departmental schedules of revenues, and expenses.

(b)       Annual Report. Within forty-five (45) days after the end of each
calendar year, Operator will deliver a final balance sheet, a profit and loss
statement, accounts payable aging report, accounts receivable aging report,
general ledger trial balance, and a detailed general ledger (“Annual Report”).
If and when an audit or other report is requested by Owner or a Mortgagee, the
cost of the audit and any other reports, including all labor and operating costs
of Operator incurred in connection with the audit and preparation of other
reports, will be an operating expense of the Business. Owner will determine the
scope and content of the audit and other reports.

 (c)       Preparation Costs. All costs and expenses included in the Budget that
are incurred in connection with the preparation of any statements, schedules,
computations and other reports required under this Section 5.06 (a), (b), or (c)
shall be operating expenses of the Business.

5.07     Owner’s Right of Inspection and Review. Operator shall accord to Owner,
its accountants, attorneys and agents, the right to enter the Hotel on
reasonable notice during normal business hours during the term of this Agreement
for the purposes of examining or inspecting and making extracts of the books and
records of the Business or for any purpose which Owner, in its discretion, shall
deem necessary or advisable. Entry for such purposes shall be accomplished with
as little disruption to the Business as practicable. Books and

 

records of the Hotel shall be kept at the Hotel or at such other place as the
parties may agree. In the event such books and records are not kept at the
Hotel, Operator shall accord Owner, its accountants, attorneys and agents the
same access rights to such books and records as if kept at the Hotel. Operator
shall cooperate fully with Owner, its accountants, attorneys and agents and
shall make available to them any and all information concerning the Business.

ARTICLE 6 TERMINATION RIGHTS

6.01     Termination at Will. This Agreement may be terminated at will, by any
reason or no reason, by either party, upon providing sixty (60) day written
notice. If either party elects to exercise its right of termination, then the
non-terminating party may pursue damages as afforded by law.

ARTICLE 7 TITLE MATTERS

7.01     Title to Hotel. Owner covenants that, as of the Effective Date, Land
Owner is the fee owner of the Hotel and will, on request, provide evidence
thereof to the reasonable satisfaction of Operator.

7.02     Assignment by Operator. Operator, in its sole discretion, shall have
the right to assign this Agreement to any Affiliate of Operator or to any
successor or assignee of Operator resulting from any merger, consolidation or
reorganization, or to another corporation which shall acquire all or
substantially all of the business and assets of Operator. Operator will give
prompt notice to Owner of any such assignment. Operator may, with the consent of
Owner not to be unreasonable delayed or withheld, assign this Agreement to any
non- Affiliate. Except in the case of an assignment to an Affiliate of Operator,
Operator shall be released of all of its covenants and liabilities hereunder,
other than liabilities that have accrued prior to the date of the delivery of
notice to Owner.

7.03     Mortgages. Land Owner reserves the right to grant a mortgage, deed of
trust, or similar security document encumbering all or any part of the
properties of the Business to secure indebtedness of Land Owner. Land Owner
agrees to provide written notice to Operator of any Mortgage including the name
and address of the Mortgagees (or beneficiary) under such Mortgages. Operator
agrees that so long as the Real Property are subject to any Mortgage:

(a)        that simultaneously with the giving of any notice of default or
termination to Owner and Land Owner, it will concurrently send a copy of such
notice by certified mail to the Mortgagees, and no notice to Owner or Land Owner
of any default or termination hereunder shall be effective unless a copy of such
notice shall have been sent as herein provided;

 

(b)        that Operator will not exercise its right of termination hereunder
with respect to a default under clauses (a) or (b) of Section 6.01 during the
period of grace provided for therein, if any of the Mortgagees shall give
Operator notice of its intention to cure such default and proceeds diligently to
do so;

(c)        that upon the request of any Mortgagee and consent of Owner, Operator
will furnish to such Mortgagee, copies of the Annual Plans described in Section
3.01, and the unaudited monthly and audited annual financial reports described
in Section 5.06(a), (b), and (c) concurrently with the furnishing of the same to
Owner; and

(d)        Operator shall accord to the Land Owner, Mortgagees, their
accountants, attorneys and agents, the right to enter upon the Hotel on
reasonable notice during normal business hours during the Term of this Agreement
for the purpose of examining or inspecting and making extracts of the books and
records of the Business for any purpose permitted under the Mortgage.

7.04     Successors and Assigns. Subject to the foregoing, this Agreement shall
inure to the benefit of and be binding upon the parties hereto, their respective
heirs, legal representatives, successors and assigns, and with respect to Owner,
the phrase “successors and assigns” shall include purchasers of Owner’s interest
in the Business.

7.05     Remedies. Any assignment by either party of this Agreement in violation
of the provisions of this Article 7 shall be null and void. In addition to any
other remedies available to the parties, the provisions of this Article 7 shall
be enforceable by injunctive proceeding or by a suit for specific performance.

ARTICLE 8

DAMAGE OR DESTRUCTION; EMINENT DOMAIN

8.01     Damage or Destruction. If the Hotel shall be substantially damaged by
fire or other casualty so that restoration of operations cannot reasonably be
expected to be completed within 15 days after the occurrence of the event, then
Owner or Operator shall each have the right to terminate this Agreement and
neither party shall have any further obligation to the other party hereunder,
except with respect to those that are stated to survive termination. Written
notice of termination due to damage or destruction must be given to the other
party within sixty (60) days after the occurrence of such event.

8.02     Eminent Domain. In the event of any condemnation or similar proceeding
the entire award for damages shall belong solely to Owner. The foregoing shall
not limit Operator's right to seek a separate condemnation award relating to its
loss of fees and the proceeds, costs or damages permitted by applicable law.

ARTICLE 9

 

GENERAL PROVISIONS

9.01     Purchases.

(a)       Group Services. Operator will offer Group Services to Owner and
recommend firms or sources for the purchase of Furnishings and Operating
Equipment and Operating Supplies for the Business. Owner shall not be obligated
to purchase from the recommended sources. However, prior to purchasing from
other sources, Owner shall submit to Operator such samples and other information
with respect to the proposed purchases as shall be necessary to assure Operator
that the quality of such items is at least equal to those available from the
sources recommended by Operator and the design conforms to the type and class of
Hotel.

(b)        Benefit of Group Services. In connection with any purchases made by
Operator and its Affiliates for the account of Owner, Operator and its
Affiliates may perform services as a representative of the source to secure the
benefits of lower costs, and that all savings resulting therefrom shall be
passed on to Owner. In addition, all trade discounts, rebates and refunds, and
all returns from the sale of Furnishings and Operating Equipment and Operating
Supplies shall accrue to the benefit of Owner.

9.02     Service Contracts.

(a)       Procurement. Consistent with the Annual Plan, Operator shall endeavor
to procure competitive proposals for, negotiate, enter into, administer, pay (as
an Operating Expense), and enforce contracts for services required in the
ordinary course of the Business ("Service Contracts"). Service Contracts
include, without limitation, contracts for water, electricity, gas, telephone,
detective agency protection, vermin extermination, cleaning, elevator and boiler
maintenance, air conditioning maintenance, laundry service, dry cleaning
service, trash removal, landscape maintenance, snow removal, window cleaning and
all other services which are provided in hotels of a similar class. All Service
Contracts shall be signed by Operator on behalf of Owner. Operator shall
diligently seek to obtain a waiver of liens with respect to any Service Contract
providing labor or materials for the Hotel. Available rebates, commissions,
discounts, and allowances for Service Contracts shall accrue to the benefit of
Owner.

(b)       Conflict of Interest. Operator shall disclose to Owner in writing any
proposed Service Contracts or proposed purchases of supplies, equipment or other
property that will benefit Operator and its Affiliates. By proposing such
contract or purchase, Operator represents and warrants that Operator and its
Affiliates will perform the service or sell the property for the best price and
terms offered to any party by Operator and that the price and terms are fair,
competitive, and reasonable.

9.03     Reserved.

 

9.04     Indemnification by Owner. Except for the extent covered by insurance,
Owner indemnifies and agrees to defend and hold Operator free and harmless from
and against all claims, costs, expenses, demands, attorneys’ fees and
disbursements, suits, liabilities, judgments and damages caused by the negligent
acts, omissions, misconduct, or the failure to perform or exercise any of the
duties, obligations, powers or authorities of Owner or Owner’s employees which
may be suffered by Operator as a result of any occurrence or event happening in
or about the Hotel unless such event stems from a fraudulent activity or from
gross negligence of Operator. Owner agrees to reimburse Operator upon demand for
any monies (including reasonable attorneys’ fees and disbursements) which
Operator is required to pay for any items which are the responsibility of Owner
pursuant to the terms of this Section 9.04. The provisions of this Section 9.04
shall survive the termination of this Agreement.

9.05     Indemnification by Operator. Except to the extent covered by insurance,
Operator indemnifies and agrees to defend and hold Owner free and harmless from
and against all claims, costs, expenses, demands, attorneys’ fees and
disbursements, suits, liabilities, judgments and damages caused by the grossly
negligent acts, omissions, misconduct, or the failure to perform or exercise any
of the duties, obligations, powers or authorities of Operator or Operator’s
employees which may be suffered by Owner as a result of any occurrence or event
happening in or about the Hotel unless such event stems from a fraudulent
activity or from gross negligence of Owner. The provisions of this Section 9.05
shall survive the termination of this Agreement.

9.06     Trade Name. During the Term, the Hotel (excepting space subject to
commercial lease(s)) shall be known by such trade name and accompanying
phraseology as may from time to time be mutually approved by Operator and Owner.
The initial name approved is Home2 Suites by Hilton.

9.07     License Agreement. Owner reserves the right to amend, modify, cancel or
terminate any License Agreement with respect to the Hotel. Owner further
reserves the right to enter into a new or replacement License Agreement for the
Hotel. Owner shall deliver written notice to Operator of any new or substituted
License Agreement or of any amendment, modification, cancellation, or
termination of a License Agreement. If Operator reasonably believes that the
change in a License Agreement will adversely affect Operator’s ability to
perform its services under this Agreement, it may terminate this Agreement.

9.08     Notices. All notices, requests, demands or other communications
hereunder shall be in writing and deemed sent and received on the earliest of
the date received or 3 business days after mailed or the next business day if
sent by overnight delivery. Faxes shall be deemed received on the date sent if
received by the recipient prior to 4:00 p.m. on a business day and otherwise the
next business day. Notices should be sent as follows:

 

If to Owner:                                 LF3 Lubbock Expo TRS, LLC

1635 43rd St. South, Suite 205

Fargo, ND 58103 Attn: Corey Maple

Telephone No.: 701-630-6500

Telecopy No.: 701-532-3369

And Copy to:                               David R. Durell

Chief Acquisition Officer and General Counsel 644 Lovett SE, Suite A

Grand Rapids, MI 49506 Telephone No.: 616-264-3840

Telecopy No.: 616-264-3841

If to Operator:                             NHS LLC dba NATIONAL HOSPITALITY
SERVICES

1635 43rd St. South, Suite 305

Fargo, ND 58103

Attn: Norman H. Leslie Telephone No.: 701-281-7122

Telecopy No.: 701-281-7145

Or to such other address as the parties may from time to time designate by
notice in writing to the other parties.

9.09     No Partnership or Joint Venture. Nothing contained in this Agreement
shall constitute or be construed to be or create a partnership or joint venture
between Owner, its successors or assigns, on the one part, and Operator, its
successors or assigns, on the other part.

9.10     Modification and Changes. This Agreement cannot be changed or modified
except by an agreement in writing signed by both parties of this Agreement.

9.11     Understandings and Agreements. This Agreement, and the Management Fee
Rider attached hereto, constitute all of the understandings and agreements of
whatsoever nature or kind existing between the parties with respect to
Operator’s management of the Hotel.

9.12     Headings. The Article and Section headings contained herein are for
convenience of reference only and are not intended to define, limit or describe
the scope or intent of any provision of this Agreement.

9.13     Third Parties. Except for the provisions of Section 7.03 which are for
the benefit of the Mortgagees, none of the obligations hereunder of either party
shall run to or be enforceable by any party other than the other party to this
Agreement or by a party deriving rights hereunder as a result of an assignment
permitted pursuant to the terms hereof.

9.14     Non-Recourse.  In  no  event  and  under  no  circumstances  shall  Owner  or  any
officer,

 

director, employee or shareholder have any personal obligation or liability to
perform any of Owner’s obligations hereunder, and the sole remedy of Operator in
the event of default by Owner hereunder shall be to proceed against Owner’s
interest in the Hotel.

9.15     Estoppel Certificate. Operator agrees that from time to time upon not
less than ten (10) days’ prior request by Owner, Operator will deliver to Owner
a statement in recordable form certifying (a) that this Agreement is unmodified
and in full force and effect (or if there have been modifications that the
Agreement as modified is in full force and effect and stating the
modifications); (b) the dates to which the Management Fees and other charges
have been paid; (c) that Owner is not in default under any provision of this
Agreement, or if in default, the nature thereof in detail; and (d) such other
items as Owner may reasonably request.

9.16     Attorneys’ Fees. In the event either party hereto institutes legal
action against the other party to interpret or enforce this Agreement or to
obtain damages for any alleged breach hereof, the prevailing party in such
action shall be entitled to an award of reasonable attorneys’ fees incurred at
all levels (including, without limitation, appellate levels).

9.17     Interpretation. 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.

9.18     Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the state in which the Hotel is located.

9.19     Non-solicitation by Owner. Unless otherwise waived by Operator in
writing, Owner shall not, during the term of this Agreement and for twelve (12)
months thereafter, solicit or hire any employee of Operator that was directly or
indirectly employed by Operator during any period of this Agreement. In the
event Operator has not waived this provision and Owner does hire any said
employee of Operator, Owner agrees to pay Operator, as damages/fees, the amount
of three (3) times said employees contractual annual salary for one year due
immediately upon hiring. For purposes of this section, employee of Operator
shall be an employee of Operator or an employee of Owner on the payroll of the
Business. For the sake of clarity, if the Business is sold to third party (“New
Buyer”), the staff of the Hotel will be permitted to be employed by the New
Buyer with no fee to Operator.

9.20     Counterparts; Electronic Signatures. This Agreement may be signed in
any number of counterparts, each of which shall be deemed an original, and all
counterparts, when taken together, will constitute one and the same agreement.
The parties agree that this Agreement may be delivered by facsimile, email, or
other form of electronic means in lieu of an original signature, and the parties
agree to treat such electronic signatures as originals.

SIGNATURES ON FOLLOWING PAGE

 

IN WI1NESS WHEREOF, the parties hereto have executed or caused this Agreement to
be executed, all as of the day and year first above written.

OWNER: LF3Lubbock Expo TRS, LLC a Delaware limited liability company

 

 

By:

Lodging Fund REIT III TRS, Inc. Its: Sole Member

 

 

 

/s/ Samuel C. Montgomery

 

By:

Samuel C. Montgomery

 

Its:

Chief Operating Officer

 

 

 

OPERATOR: NHS LLC DBA NATIONAL

 

HOSPITALITY SERVICES

 

 

 

/s/ Norman H. Leslie

 

By:

Norman H. Leslie

 

Its:

President

 

 

 

CONSENT OF LAND OWNER TO MANAGEMENT AGREEMENT

By signing below, Land Owner consents to the Owner and Operator entering into
this Management Agreement.

LF3 Lubbock Expo, LLC

 

a Delaware limited liability company

 

 

 

BY:

Lodging Fund REIT III OP, LP ITS: Sole Member

 

 

 

By:

Lodging Fund REIT III, Inc. Its: General Partner

 

 

 

/s/ Samuel C. Montgomery

 

By: Samuel C. Montgomery Its: Chief Operating Officer

 

 

 

 

MANAGEMENT FEE RIDER TO MANAGEMENT AGREEMENT BETWEEN LF3 LUBBOCK EXPO TRS, LLC

AND

NHS LLC DBA NATIONAL HOSPITALITY SERVICES

Dated:  January   8   , 2020

MANAGEMENT FEE RIDER

Management Fee. As compensation for Operator’s services during the Operating
Period, Owner shall pay monthly to Operator a management fee equal to four
percent (4.00%) of the Gross Revenue from the operation of the Hotel in each
Operating Year (herein called the “Management Fee”). For the purpose of
determining the Management Fee, the term “Gross Revenue” shall be as determined
by the Uniform System of Accounts for Hotels as published by the American Hotel
and Lodging Association, as it may be in effect from time to time. The
Management Fee shall be payable in estimated monthly installments concurrently
with the delivery to Owner of the Monthly Report. Owner shall pay any
underpayment or Operator shall reimburse any overpayment of the Management Fee
within fifteen (15) days of Operator giving the Annual Report to Owner.

Onboarding Fee. Owner shall pay Operator’s additional out of pocket, which
includes any hourly rate charges for labor costs, non-recurring start-up costs,
which may not exceed $10,000.00 without Owner’s written consent. In the event
that Operator determines that start-up costs in excess of $10,000.00 are
reasonable in Operator’s sole opinion, and Owner does not consent to the
additional start-up costs, then Operator shall have the right to terminate this
Agreement and Operator will have earned and be paid the Onboarding Fee. If the
Hotel is sold within six (6) months of onboarding, Operator will be paid for
training and support costs.

Accounting Fee. Operator will assign for quality enhancement, and the monthly
accounting fee for service shall be $14.00 per room (“Accounting Fee”). The
Accounting Fee shall be the sole and entire amount for accounting fees for which
Owner shall be responsible to pay Operator. Owner shall be responsible for
payment of charges for third party reports, audits, and tax returns. No
deduction or disbursement in excess of the Accounting Fee amount may be made
from the General Account or any other account of Owner for the accounting
services provided by Operator. The Accounting Fee may be adjusted annually at
the discretion of Operator, but in no case shall such adjustment exceed the
annual increase in the National Consumer Price Index (CPI), as published by the
Bureau of Labor Statistics.

Operator’s Employees. Employees from other properties managed by Operator or
from within the Operator’s staff - that are required to fill day to day
operational duties of the Hotel shall be billed at 1.20 multiplied by the total
hourly cost of such employee, which hourly cost includes the hourly wage plus
taxes, fringe benefits, and workers compensation insurance. Payroll records will
be made available to Owner on request.

Ancillary Services Fee. Operator will charge 0.60% of Gross Revenue for all of
Operator’s internally furnished services relating to Operators human resources,
technology and purchasing

 

fee associated with Operating the Business. This fee will be evaluated each
year, for any market conditions that may vary.

Off Boarding Fee. Upon the sale or disposition of the Hotel, Operator will
receive an Off Board/Transition fee equal to two months of the average of T12
billing plus all out of pocket expense. This is not to exceed the contract
maturity. This fee is waivable if a Buyer appoints Operator as its Management
Company for at least a six-month time post-closing. Any and all travel or out of
pocket expense relating to the transitions or terminations will be paid as
billed within 60 days upon receipt.

Guarantee of Payment; Security Agreement. The individual(s) signing on behalf of
Owner, by affixing their signature(s) below, do hereby guarantee payment of all
fees due to Operator under the Agreement and this Management Fee Rider. By
signing the Agreement, Owner, and the individual(s) signing on its behalf,
hereby agree that the Agreement constitutes a Security Agreement permitting
Operator to file a financing statement securing the payments due Operator with
the assets of Owner and Hotel. Owner consents to such financing statements and
agrees to cooperate with Operator to sign any documentation that is necessary or
helpful in connection with such financing statements. Owner agrees to provide
Operator with twenty (20) days advance written notice of Owner's intent to
change its name, change its address, dispose of assets, sell the Hotel, sell the
entity of Owner, or merge Owner with any third party.

New Services or Fees. If requested by Owner, all new services provided by
Operator and fees associated are subject to review and approval prior to
implementation.

 

SCM Owner

NHL Operator

 

 

SCHEDULE 1 TO MANAGEMENT AGREEMENT

(Legal Description)

Parcel A: Fee Simple Estate

Lot Five-A (5-A), a replat of Lot 5, CANYON WEST ADDITION to the City of
Lubbock, Lubbock County, Texas, according to the Map, Plat and/or Dedication
Deed thereof, recorded in/under Clerk's File No. 2016024991 of the Official
Public Records of Lubbock County, Texas, save and except any and all rights,
titles and interests previously reserved, conveyed or created with respect to
oil, gas, or to other minerals in and under the land.

Parcel B: Easement Estate

All right, title and interest as provided in the Declaration of Restrictions and
Reciprocal Easement Agreement recorded in/under Volume 10138, Page 14; amended
in/under Clerk's File No. 2011012478, and ratified and corrected in/under
Clerk's File No. 2013030944 to Lot Five-B (5-B), a replat of Lot 5, CANYON WEST
ADDITION to the City of Lubbock, Lubbock County, Texas, according to the Map,
Plat and/or Dedication Deed thereof, recorded in/under Clerk's File No.
2016024991 of the Official Public Records of Lubbock County, Texas.

 

SCHEDULE 2 TO MANAGEMENT AGREEMENT

(License Agreement)

 

SCHEDULE 3

AUTHORIZED SIGNERS AND LIMITATIONS ON SPENDING AUTHORITY

 

AMOUNT

VENDOR EMPLOYEE/AGENT

Up to $5,000

NHS Regional Director

 

 

Up to $10,000

NHS Vice President of Operations

 

 

Up to $15,000

NHS Executive Vice President

 

NHS Chief Development Officer

 

 

All Levels and Any Amounts

NHS President

 

 

Exhibit B Concession Agreement

[Attached]

 

FAIRFIELD INN & SUITES BY MARRIOTT-LUBBOCK SOUTHWEST ALCOHOL TEMPORARY
CONCESSION AGREEMENT

This Temporary Concession Agreement (this “Agreement”) is made and entered into
effective as of , 2019 (“Effective Date”), between LF3 Lubbock Expo TRS, LLC, a
Delaware limited liability company, (“Licensor”), Treemont Capital Partners IV
GP, LLC, a Texas limited liability company (hereinafter called “Permittee”), and
NHS LLC dba ND NHS, LLC, a North Dakota limited liability company, (“Manager”).

WHEREAS, as of the Effective Date Licensor has the rights to possess, occupy,
and use the real property and improvements as related, directly or indirectly to
the Fairfield Inn & Suites Marriott – Lubbock Southwest hotel located at 6435
50th Street, Lubbock, Texas 79407 which has personal property assets and rights
including personal property, fixtures and equipment located thereon
(collectively, the “Premises”), and desires that Permittee sell alcoholic
beverages, beer and/or wine, to patrons at the Premises only under this
Agreement (the “Beverage Business”);

WHEREAS, Permittee presently maintains the permits described on Exhibit A
attached hereto (the “Permits”), issued by the Texas Alcoholic Beverage
Commission (“TABC”) in favor of Permittee, to sell alcoholic beverages, as
applicable, at the Premises, but no longer has rights to possession of said
Premises;

WHEREAS, Manager or an affiliate of Manager intends to obtain appropriate
permits from the TABC for the sale of alcoholic beverages, as applicable, at the
Premises, under its own licenses;

WHEREAS, Permittee has agreed to sell alcoholic beverages, as applicable, to
patrons at the Premises, upon the terms and conditions and for the consideration
set forth herein, prior to the time when Manager or an affiliate of Manager has
obtained appropriate permits from the TABC for the sale of alcoholic beverages,
as applicable, at the Premises, a time period estimated to be about 120 days.

NOW THEREFORE, in consideration of the foregoing, the mutual promises of the
parties set forth herein, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by the parties hereto, the
parties agree as follows:

1.         Recitals Adopted. The parties hereby adopt and confirm the foregoing
recitals.

2.         Temporary Concession Arrangement. Permittee, Licensor, and Manager
have entered into this Agreement in order for the patrons at the Premises to be
able to purchase and consume alcoholic beverages, on a basis that creates no
loss or liability to Permittee, with Permittee owning and controlling the
business of sale, service and storage of alcoholic beverages, as applicable, at
the Premises. The intention of this arrangement is to provide for the sale and
service of alcoholic beverages, as applicable, to patrons at the Premises on a
temporary basis such that Permittee shall be protected against any loss, cost
and expense in the conduct of its Beverage Business at the Premises and Manager
shall perform duties such as purchasing inventory and remitting taxes and other
costs and obligations on behalf of Permittee at Permittee’s direction in
accordance with the terms and conditions of this Agreement. Manager, as agent
for and on behalf of Permittee, will receive all revenues and remit payment of
all expenses of Permittee relating to

 

the Premises as provided in this Agreement. The parties agree that a bank
account under control of the Permittee and in its name, but with co-signature
privileges by Manager as Permittee’s agent, will be utilized wherein all cash
and credit card receipts and all other alcoholic beverage revenue from the
Premises will be deposited (the “Beverage Account”). Permittee agrees to direct
its credit card company to deposit all credit card revenue into this separate
account or take such other measures as may be necessary in order to ensure these
revenues are deposited into the Beverage Account in a timely manner.

3.         Description of Licensed Space and Concession.

(a)        Licensor hereby grants to Permittee, and Permittee hereby obtains
from Licensor, a license and right to operate its Beverage Business only and
strictly according to this Agreement. The license granted by this Agreement
includes only the bar areas and other areas of the Premises in which alcoholic
beverages are stored, prepared and served, including all such available floor
space, storage space, shelving and refrigerated space and all fixtures,
equipment, supplies (other than inventory of alcoholic beverages and other than
consumable supplies or supplies which cannot be reused) and furniture
("Operating Supplies") necessary for Permittee to store, prepare, serve and sell
alcoholic beverages and for patrons to be served and consume such beverages, and
Permittee’s rights as to Premises and Operating Supplies shall be strictly
limited to use for such purposes and further subject to the terms and conditions
of this Agreement. Such license and grant of rights shall not entitle Permittee
to exclusive possession or use of any of the Premises other than those areas
where and when alcoholic beverages are stored, prepared or served, which shall
be subject to the exclusive control of Permittee.

(b)        Licensor and Manager shall bear all risk of loss, damage or
destruction of (i) the Premises and (ii) the Operating Supplies. Permittee shall
bear all risk of loss, damage or destruction of the inventory of alcoholic
beverages, consumable supplies related to service of alcoholic beverages and
supplies related to service of alcoholic beverages which cannot be reused
(“Inventories”) which shall be limited to the proceeds of the Beverage Account,
to the extent such funds actually exist. At the end of the term of this
Agreement, Permittee shall assign to Manager on a quitclaim basis all of its
right, title and interest in and to the unopened portion of alcoholic beverage
Inventories on hand at the Premises as of the last day of the term. At the end
of the term of this Agreement, Permittee shall release and surrender the space,
the Premises and non-alcoholic Operating Supplies licensed to Permittee under
this Agreement to Manager and Licensor in its then current condition, and after
termination of this Agreement.

4.         Conduct of Permittee’s Operations. During the term of this Agreement,
Permittee shall conduct the operations of the Beverage Business on the Premises
in a manner substantially similar to the manner in which it conducted such
Beverage Business prior to the Effective Date and shall comply with all
governmental laws, ordinances and regulations and shall obtain and maintain any
and all governmental licenses and permits necessary for the sale of alcoholic
beverages at the Premises, including, but not limited to, any permit or
authorization required to be obtained from the TABC in order to sell and serve
alcoholic beverages at the Premises. Manager shall record, maintain and deliver
to Permittee accurate, true and complete records of all operations of the
Beverage Business at the Premises including revenue reports, expense reports,
tax reports

 

and depository reports and purchase orders, invoices and receipts or other
back-up materials or evidence of the foregoing on a monthly basis or as more
frequently if and as requested by Permittee. Manager shall have a right to be a
required signatory on the Beverage Account, and Permittee shall take such action
promptly upon Manager’s request to be added to such Beverage Account.

5.         Termination.

(a)        Permittee, Manager, and Licensor agree that this Agreement shall
terminate automatically and immediately, without cost or obligation to either
party (other than remitting to Permittee any monies received by Manager as agent
for Permittee and other than any fees or expense reimbursements due by Permittee
to Manager and/or Licensor) and without any notice from any party to the other,
upon the earlier to occur of: (i) the expiration of 120 days from the Effective
Date of this Agreement, (ii) delivery of written notice of termination by
Licensor to Permittee and Manager, or (iii) the day on which Manager or an
affiliate of Manager obtains permits from the TABC to sell alcoholic beverages,
as applicable, at the Premises. This term may be extended by agreement of
Manager, Licensor, and Permittee for up to two additional thirty (30) day
periods upon showing by Manager or its affiliate that it has been duly diligent
in seeking to obtain its or its affiliates’ permits from the Texas Alcoholic
Beverage Commission. Such agreement may not be unreasonably withheld by Licensor
or Permittee. The indemnification obligations of Manager and Permittee set forth
in this Agreement shall survive such termination.

(b)        Manager and Permittee agree that upon the termination of this
Agreement, a complete and full accounting shall be made of such Beverage Account
by Manager and Permittee. A copy of such accounting will promptly be delivered
to Licensor. All concession and license fees owing by Permittee pursuant to this
Agreement shall be paid to Manager and Licensor, respectively, out of said
Beverage Account.

6.         Damage to the Premises. If the Premises are damaged or destroyed by
fire or other casualty during the term of this Agreement so that Permittee’s
occupancy is interrupted or substantially interfered with, the operations of
Permittee under this Agreement shall be abated during the entire period of such
interruption or substantial interference, provided any and all due and payable
fees, and costs will remain due and payable and will be paid and delivered as
provided in this Agreement. If the Premises are so damaged that the continuing
operation of the Beverage Business is reasonably expected not to continue for a
period of at least sixty (60) days, as reasonably determined by Licensor, then
this Agreement may be terminated by any party upon delivery of at least ten (10)
days advance written notice of termination to all other parties.

7.         Appointment of Manager to Perform Management and Other Services.
Permittee hereby designates and appoints Manager as its sole and exclusive agent
to perform the management and other services and provide the Operating Supplies
necessary in connection with the service and sale of alcoholic beverages at the
Premises for on-premise consumption, and Manager hereby accepts such designation
and appointment, which designation and acceptance shall conform with and are
subject to the terms of this Agreement and further subject to the exclusive
direction and control of Permittee.

 

(a)        In connection with the operation of Permittee’s Beverage Business at
the Premises, Manager shall have the following duties:

(i)         carry out directions of Permittee, its officers, directors, partners
and employees, in connection with the purchase, storage, service and sale of
alcoholic beverages in the Premises and perform all such duties with due
diligence in accordance with standards maintained in comparable Premises located
in the municipality in which the Premises are located and within all of the
terms and provisions of the Texas Alcoholic Beverage Code (the “Code”), and all
other applicable laws, rules and regulations promulgated by the TABC (the
“Rules”);

(ii)       maintain the Premises and all fixtures and equipment therein in good,
clean, operating and serviceable appearance and condition;

(iii)      supply such bartenders, servers, janitors and other personnel as may
be necessary for the efficient handling, sale and service of beer, wine, and/or
alcoholic beverages, all of which personnel shall be paid by Manager, provided
all such bartenders and servers shall be qualified, trained and certified under
seller/service training courses approved by the TABC;

(iv)       comply with all applicable provisions of the Code and the Rules of
the TABC to ensure Permittee is at all times in full compliance with the
requirements thereof, so as to obtain the benefits afforded by Section 106.14(a)
of the Code;

(v)        for the account, and at the direction, of Permittee, manage the
inventory, storage, pricing, sale and service of beer, wine, and/or alcoholic
beverages at the Premises and accept on behalf of Permittee deliveries of
inventory of beer, wine, and/or alcoholic beverages at the Premises, it being
expressly understood that all expenses arising out of or related to purchases of
beer, wine, and/or alcoholic beverages shall be borne solely by Manager using
its own funds and shall be paid from the Beverage Account;

(vi)       maintain separate, complete, true and accurate books and records
showing the gross receipts from the sale of beer, wine, and/or alcoholic
beverages on a daily basis during each calendar month in which this Agreement
shall be in effect, and the amount of taxes or charges levied in respect of such
sales, such books and records shall be subject to inspection and/or copying by
Licensor or Permittee at any time and from time to time;

(vii)     perform all of its obligations under this Agreement in compliance with
all applicable federal, state, or local laws relating to the service and sale of
beer, wine, and/or alcoholic beverages including, but not limited to, the Code
and the Rules of the TABC;

(viii)    submit to Permittee promptly after the end of each fiscal month during
the term of this Agreement a complete and accurate statement showing the

 

gross sales of beer, wine, and/or alcoholic beverages by Permittee during such
month in form and content reasonably acceptable to Permittee or Licensor and any
other information required to be submitted to the TABC or the Texas Comptroller
of Public Accounts or as requested by Permittee or Licensor;

(ix)       deliver to Permittee no later than the tenth (10th) calendar day of
each month, funds equal to the sales tax due from the sale of alcoholic
beverages and use tax due from the service of complimentary beer, wine, and/or
alcoholic beverages during said month (which obligations shall survive the
expiration or termination of this Agreement); and

(x)        maintain all records required of alcoholic beverages licensees by the
TABC and otherwise cooperate with Permittee and Licensor in assuring compliance
with the Code and Rules.

(b)        Manager will collect from patrons at the Premises and shall receive
and hold in trust as the sole property of Permittee, all charges and revenue
received for the sale of beer, wine, and/or alcoholic beverages and all taxes
levied or charged in respect of such sales. Manager shall remit to Permittee, by
deposit in the Beverage Account as soon as practicable, but no less than once a
week, an amount equal to all receipts and charges received by it on behalf of
Permittee from sales of beer, wine, and/or alcoholic beverages to Permittee’s
customers at the Premises, and said monies and income shall not be deemed to be
comingled with the funds of Manager. Manager will be solely responsible for
payment of all purchases of Inventories of beer, wine, and/or alcoholic
beverages, other taxes relating to the sales of beer, wine, and/or alcoholic
beverages at the Premises and all other expenses of the Beverage Business.
Manager shall look solely to its own funds for the payment of all such expenses,
which shall not be paid using any funds in the Beverage Account except as
otherwise described and authorized in accordance with Section 7 (a)(v) of this
Agreement, and Permittee shall have no liability for any such expenses.
Permittee will be responsible solely for payments due by Permittee to Manager
and/or Licensor pursuant to this Agreement, which shall be paid by Permittee to
Manager and/or Licensor solely out of Permittee’s funds remitted to it by
Manager and not by retention or offset of any funds by Manager.

8.         Compensation.

(a)        Manager shall be entitled to receive as a fee for the license granted
by this Agreement and as compensation for its services under this Agreement the
sum equal to four percent (4%) of the monthly gross sales derived by Permittee
from the sale of all beer, wine, and/or alcoholic beverages at the Premises,
payable in arrears on or before such date as shall be mutually agreed upon by
Manager and Permittee. Manager and Permittee agree that said compensation shall
be due solely from the proceeds of the Beverage Account, to the extent such
funds actually exist.

(b)        Licensor shall be entitled to receive as a fee for the license
granted by this Agreement and as compensation for its services under this
Agreement the sum equal to forty one percent (41%) of the monthly gross sales
derived by Permittee from the sale of

 

all alcoholic beverages at the Premises, payable in arrears on or before such
date as shall be mutually agreed upon by Licensor and Permittee. Manager and
Permittee agree that said compensation shall be due solely from the proceeds of
the Beverage Account, to the extent such funds actually exist. Said compensation
may be increased or decreased from time to time as agreed upon by Licensor and
Permittee, without the necessity of a formal amendment to this Agreement.

9.         Accounting. Manager agrees to supply accounting and bookkeeping
services for the Beverage Business for Permittee. Manager will make available
accounting data to Permittee and/or Licensor whenever requested and at least on
a monthly basis before the 15th of each subsequent calendar month hereunder.
Manager will report accounting data for the Beverage Business on an entirely
separate set of books, and will provide summaries of all purchases, sales and
other accounting data, including any records regarding complimentary beverages
served on the licensed premises. Manager will provide all accounting functions
including, but not limited to, the preparation of such reports as Permittee or
Licensor may reasonably request and as may be required by the TABC and/or any
other governmental authority using such method of accounting as may be agreed by
Permittee and Manager or as reasonably designated by Licensor, which will
control. Permittee and Licensor shall have the right to inspect such books and
records at all reasonable business hours and to conduct reviews, make copies and
conduct audits at any time at its sole expense. Except as otherwise provided
under Section 7(a)(viii) and (ix) of this Agreement, Permittee will retain all
responsibility for the preparation and filing of sales and other tax returns and
reports relating to its Beverage Business and for payment of all income taxes
due by it. The accounting described above will take place on the first day of
each calendar month during the term of this Agreement unless otherwise agreed to
by the parties.

10.       Manager’s Expenses. The following expenses incurred in connection with
the operation of the Beverage Business on the Premises shall be borne solely by
Manager using its own funds:

(a)        payment of all purchases of Inventories of beer, wine, and/or
alcoholic beverages, and taxes relating to the sales of beer, wine, and/or
alcoholic beverages at the Premises, and any and all other expenses, of any kind
or character whatsoever, arising out of or related to the Beverage Business,
including, but not limited to the maintenance of liquor liability/Dram Shop
insurance on the Premises with such policy listing the Permittee and Licensor as
insured parties;

(b)        telephone expenses and office supplies;

(c)        accounting expenses incurred in the preparation of reports required
to be made to Permittee and/or filed with the TABC and/or any other governmental
authority and expenses of preparation of any other documents necessary to the
operations of Manager under this Agreement;

(d)        all expenses incurred by Manager in connection with the operation of
the Beverage Business for the Premises and the sale by it of food,
non-perishable items, beverages other than beer, wine, and/or alcoholic
beverages and any other items which are not alcoholic beverages;

 

(e)        direct and indirect payroll expenses for Manager’s personnel engaged
in the performance of services for Permittee under this Agreement; and

(f)        all other expenses which Manager may incur in the performance of its
duties as outlined in this Agreement, including, but not limited to, expenses
for equipment, supplies, and insurance.

11.       Expenses of Permittee. The following expenses incurred in connection
with the operation of the Beverage Business on the Premises shall be borne
solely by Permittee using its own funds, unless otherwise expressly stated
herein:

(a)        all fees required to be paid to the TABC and any county or city
authority in connection with obtaining any permits required under the Code and
in connection with the renewal of any such permits during the term of this
Agreement; and

(b)        accounting and legal expenses incurred in connection with obtaining
and maintaining any permits required under the Code during the term of this
Agreement.

12.       Expenses of Licensor. The following expenses incurred in connection
with the operation of the Beverage Business on the Premises shall be borne
solely by Licensor using its own funds:

(a)        expenses for equipment, furniture and fixture maintenance, repairs or
replacement; and

(b)        fire and general liability insurance.

13.       Insurance.

(a)        Throughout the term of this Agreement, Manager will maintain policies
of liquor liability/Dram Shop liability insurance on the Premises listing
Permittee and Licensor as an insured or additional insured (with contractual
indemnity) with the premiums thereon fully paid in advance, issued by and
binding upon an insurance company authorized to transact business in the State
of Texas and of good financial standing with a general policyholders rating of
not less than “A-VII” as related in the most current available Best’s Key Rating
Guide, such insurance to afford minimum protection of not less than $1,000,000
combined single limit for each occurrence and $2,000,000 for the aggregate of
all occurrences within each policy year, with excess/umbrella coverage written
on a follow- form basis with limits of not less than $10,000,000 per each
occurrence and $10,000,000 in the aggregate. The cost of said insurance policies
shall be the responsibility of and at the sole cost and expense of the Manager.

(b)       The policies of insurance to be maintained by Manager shall only be
cancelable following at least thirty (30) days written notice to Permittee and
Licensor. Manager shall furnish evidence of such insurance concurrently with the
execution of this Agreement.

 

(c)        All policies shall be specifically endorsed to provide that (1) the
coverages obtained by virtue of this Agreement will be primary and (2) any
insurance carried by Permittee or its affiliates if any, shall be excess and
non-contributory. All policies shall be specifically endorsed to provide that
such coverage shall not be cancelled or materially reduced without at least
thirty (30) days prior written notice to Permittee and Licensor. Manager, upon
twenty-four (24) hours’ notice by Permittee and/or Licensor, shall deliver
certificates of insurance and any renewals thereof to Permittee and Licensor,
which evidences the required coverages. Prior to execution of this Agreement, a
certificate of insurance evidencing the required insurance and additional
insured endorsements shall be tendered to Permittee.

14.       Responsibility for Obligations. No party hereunder shall contract or
incur any indebtedness or obligation in the name of the other. All sales at the
Premises shall belong to, and shall be accounted for as belonging to, Permittee,
and each party shall promptly make payment of any taxes, assessments and other
charges attributable to its operations as they may become due in accordance with
the terms and conditions of this Agreement, and shall not allow any lien or
other encumbrance to be fixed upon the property of either party hereto, without
the prior written consent of the other party. Nothing in this Agreement is
intended to create, or shall be interpreted as creating, any partnership or
joint venture by, between, or among Permittee, Manager and/or Licensor.

15.       Security Refunds. Permittee shall retain all rights it presently has
to a refund of any cash or other form of security posted with any governmental
agency in connection with the Permits.

16.       Indemnification.

(a)        Manager and Licensor hereby agree to indemnify, defend and hold
harmless Permittee and its officers, directors, partners, shareholders and
employees (collectively, the “Permittee Indemnified Persons”) from and against
any and all demands, losses, damages, fines, penalties, causes of action,
claims, liabilities (specifically including, without limitation, dram shop
liability), obligations, judgments, costs and expenses (including, without
limitation, reasonable attorneys’ fees and court costs, and all expenses of
litigation) arising on or after the date hereof (all of the foregoing being
referred to collectively or individually as “Claim”) which are claimed against,
incurred, suffered or sustained by any of the Permittee Indemnified Persons and
which arise out of or are caused by, incident to, or in any manner connected
with any of the following:

(i) the use or occupancy of the Premises or any activity conducted in or about
any of the Premises;

(ii) the sale of beer, wine, and/or alcoholic beverages at the Premises and
consumption of any beer, wine, and/or alcoholic beverages sold at the Premises;
(iii) any violation of the Code or the Rules of the TABC at the Premises by any
employee or agent of Manager or Licensor, and (iv) any breach by Manager or
Licensor of this Agreement. This Section 16 shall survive the expiration or
earlier termination of this Agreement.

(b)        (b) Permittee hereby agrees to indemnify, defend and hold harmless
Licensor and Manager and their respective officers, directors, shareholders and
employees (collectively, the “Licensor/Manager Indemnified Persons”) from and
against any and all Claims which are claimed against, incurred, suffered or
sustained by any of the Licensor/Manager

 

Indemnified Persons and which arise out of or are caused by, incident to or in
any manner connected with any violation of the Code or the Rules of the TABC by
Permittee or any of its employees, agents or affiliates, whether relating to any
of the Premises or otherwise, except to the extent such violation arises out of
and is caused by, incident to or in any manner connected with any act of
negligence or willful misconduct on the part of Licensor and/or Manager or any
of their respective employees, agents or affiliates.

17.       Status of Existing Permits. Permittee acknowledges to Manager and
Licensor that

(a) the Permits are all held in the name of Permittee, do not expire until the
dates specified on Exhibit A, have not been revoked (nor is there any current
proceeding to revoke such permits) and are in good standing, and (b) there is
not now pending any administrative or enforcement case or action by the TABC or
any other governmental authority which alleges any violation by Permittee of any
provision of the Code or of the Rules of the TABC. Permittee will promptly
notify Manager, and vice versa, of any administrative or enforcement case or
action, of any investigation by the TABC of which Permittee or Manager has
notice from the TABC relating in any way to any of the Permits, and of any
proposed or actual suspension, revocation or denial of renewal of any of such
permits. Manager shall reimburse Permittee for all fines, penalties, costs and
expenses incurred by Permittee relating to conduct of business by Manager at the
Premises after the date of this Agreement. Permittee will take all necessary
actions to maintain the Permits in good standing. If any of the Permits is due
for renewal prior to Manager or its affiliate obtaining its own permits from the
TABC at the Premises, Permittee will renew such Permits. Any out-of-pocket costs
or expenses incurred by Permittee in complying with this Section 17 shall be
paid in advance by Manager and/or Licensor.

18.       Inventory. The parties shall arrange for and agree to have a complete
inventory taken of all beer, wine, and/or alcoholic beverages, as applicable,
located at the Premises on the date of this Agreement. The parties shall arrange
for and agree to have an additional complete inventory taken of all beer, wine,
and/or alcoholic beverage products located at the Premises on the date Manager
obtains the necessary permits from the TABC to sell alcoholic beverages at the
Premises or the date that this Agreement terminates (the “Transfer Date
Inventory”). The Transfer Date Inventory shall be sworn to as required by law
and a duplicate original thereof promptly filed with the TABC on the certain
forms required by the TABC.

19.       Physical Surrender of Permit Documents. When required to do so by the
TABC in connection with the process of application for and issuance of necessary
permits to Manager or an affiliate by the TABC, Permittee shall promptly
surrender all of the Permits to the TABC and obtain “Letters of Authority” from
that agency allowing it to continue to sell alcoholic beverages at the Premises.
Such Letters of Authority shall be posted in the Premises.

20.       No Sublicense or Sublease. Permittee may not sublicense or sublet the
Premises or any part of the Premises.

21.       Authority. Each of the parties executing this Agreement acknowledges
that it has the respective authority to act for and bind the entity for which
such party is executing this Agreement.

 

22.       Survival. Unless expressly stated to the contrary, all obligations for
any payment or reimbursement by one party to the other shall survive the end of
the term of this Agreement. The provisions of Section 16 of this Agreement shall
survive the end of the term.

23.       Notices. All notices, demands, requests or other communications that
may be or are required to be given, served or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be (a) mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, (b) transmitted by a reputable overnight courier service or by hand
delivery, or (c) delivered by email, if confirmed by either of the methods
described in (a) or (b) on the business day immediately following the date of
transmission, addressed as follows:

If to Permittee:                                        Treemont Capital
Partners IV GP LLC

1415 S Voss #110-94

Houston, TX 77057 Attn: Philip McRae

Email: pmcrae@treemontpartners.com

If to Manager:                                         NHS LLC dba ND NHS LLC

1635 – 43rd Street S, Suite 305 Fargo, ND 58103

Attention: Norman H. Leslie Email: nhleslie@nhshotels.com

If to Licensor:                                         LF3 Lubbock Expo TRS,
LLC

1635 – 43rd Street S, Suite 305 Fargo, ND 58103

Attention: Sam Montgomery

Email: smontgomery@lodgingfund.com

Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, being deemed conclusive evidence of such
delivery) or at such time as delivery is refused by the addressee upon
presentation.

24.       Miscellaneous. The laws of the State of Texas shall govern the
validity or enforceability and the interpretation or construction of all
provisions of this Agreement and all issues hereunder and the venue for any
action arising out this Agreement shall be in the state or federal courts
sitting in Lubbock County, Texas. Any mediation or arbitration hearing arising
out of this Agreement shall take place in Lubbock, Texas. The unenforceability
or invalidity, as determined by a court of competent jurisdiction, of any
provision of this Agreement shall not render unenforceable or invalid any other
provision of this Agreement. Except as expressly stated herein, no change or
modification of this Agreement shall be valid or binding upon the parties hereto
unless such change or modification shall be in writing and signed by all the
parties hereto. The provisions of this Agreement shall be binding upon and inure
to the benefit of all parties and their respective legal representatives,
successors and assigns. Nothing in this Agreement shall

 

create or be deemed to create the relationship of partners, joint venturers,
employer-employee, or principal-agent between the parties, except as expressly
provided. In the event of any litigation, mediation, or arbitration in
connection with or with respect to this Agreement, the prevailing party shall be
awarded all costs, including, without limitation, reasonable attorney’s fees.
This Agreement is and shall a valid, legally binding obligation of and
enforceable against Permittee, Manager and Licensor in accordance with its
terms, subject only to applicable laws affecting or limiting the rights of
contracting parties generally. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which, taken
together, shall constitute one and the same agreement.

(Signature page(s) follow(s)).

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date and year first above written.

PERMITTEE:

 

Treemont Capital Partners IV GP LLC a Texas limited liability company

By:

/s/ Philip A McRae

 

 

Name: Philip A. McRae

 

 

Title: President

 

Fairfield Inn & Suites Marriott- Lubbock Southwest

 

Alcohol Temporary Concession Agreement

Page 12 of 15

 

 

MANAGER:

 

NHS LLC dba ND NHS, LLC

 

By:

/s/ Noman H. Leslie

 

Noman H. Leslie, Sole Member

 

 

 

Fairfield Inn & Suites Marriott- Lubbock Southwest

 

Alcohol Temporary Concession Agreement

Page 13 of 15

 

 

 

LICENSOR:

 

 

 

LF3 Lubbock Expo TRS, LLC

 

 

 

By:

Lodging Fund REIT III TRS, Inc. Its: Sole Member

 

 

 

By:

/s/ Katie Cox

 

 

Katie Cox, CFO

 

 

 

EXHIBIT A

 

License #:

BG987264

Trade Name:

FAIRFIELD INN & SUITES BY MARRIOT-LUBBOCK SOUTHWEST

Owner:

TREEMONT CAPITAL PARTNERS IV GP LLC

Location Address:

Mailing Address:

 

1415 S VOSS #110-

 

6435 50TH STREET

 

94

 

 

 

 

 

LUBBOCK , TX 79407

 

HOUSTON , TX 77057

 

 

 

 

County:

Lubbock

Orig. Issue Date:

7/5/2017

Status:

Current

Exp. Date:

7/4/2021

 

 

Wine Percent:

17

Location Phone No.:

832-790-7772

 

 

Subordinates:

 

 

 

Related To:

 

Gun Sign:

RED