Exhibit 10.4

 

Execution Version

 

LOAN AGREEMENT

 

This LOAN AGREEMENT, dated as of January 12, 2017 (as amended, supplemented or
otherwise modified, this “Agreement”) is made between American Realty Capital
Hospitality Trust, Inc., a Maryland corporation (the “Borrower”) and Summit
Hotel OP, LP (the “Lender”).

 

WHEREAS, the Borrower and the Lender have entered into that certain Loan
Agreement, dated as of February 11, 2016 (as amended, supplemented or otherwise
modified from time to time, the “Existing Loan Agreement”), pursuant to which
the Lender extended a loan to the Borrower in an aggregate original principal
amount of $27,500,000; and

 

WHEREAS, Lender has agreed to extend an additional loan to the Borrower in the
original principal amount of $3,000,000 subject to the terms of this Agreement
(the “Loan”).

 

THEREFORE, the parties hereto agree as set forth herein.

 

1.       Use of Proceeds. The proceeds of the Loan made by the Lender on the
date hereof will be deemed applied as consideration for the entry into that
certain letter agreement, dated as of January 12, 2017, between American Realty
Capital Hospitality Portfolio SMT ALT, LLC, Summit Hotel OP, LP and each of the
Sellers identified therein (the “Summit II PSA Amendment”, amending that certain
Real Estate Purchase and Sale Agreement, dated as of June 2, 2015, by and among
American Realty Capital Hospitality Portfolio SMT, LLC, as Original Purchaser,
the Sellers party thereto and Summit Hotel OP, LP, in its capacity as Seller
Representative for the Sellers (as amended, supplemented or otherwise modified,
the “Summit II Purchase Agreement”)).

 

2.       Repayment of Principal. The entire principal amount of the Loan, and
any accrued and unpaid interest, shall be due and payable on July 31, 2017 (the
“Maturity Date”). The Borrower shall repay the principal amount of the Loan in
installments of $1,000,000 on the last day of each of May, June and July 2017
(the “Amortization Payments”). The Loan may be prepaid in whole or in part at
any time, without payment of any penalty or premium. Notwithstanding any
provision to the contrary in this Agreement, upon the Closing Date, as defined
in the Summit II Purchase Agreement (as amended, supplemented or otherwise
modified, the “Summit II PSA Closing Date”), the Loan shall be deemed paid in
full and the Borrower shall have no further obligations with respect thereto,
except for unpaid interest accrued and payable in cash under Section 3(a)(i),
Section 3(a)(ii), Section 3(b)(i) and Section 3(b)(ii) prior to the Summit II
PSA Closing Date, which shall be due and payable on the Summit II PSA Closing
Date. If the closing of the acquisition contemplated by the Summit II Purchase
Agreement does not occur under the revised terms of the Summit II PSA Amendment,
then the full amount of the Loan shall become due and payable on the Maturity
Date.

 

3.       Interest on Unpaid Principal Balance. Interest payments shall be made
as set forth in this Section 3 and interest shall accrue on the unpaid principal
amount of the Loan at a rate of:

 

(a)       from the date of the Loan to February 11, 2017, thirteen percent
(13.0%) per annum (the “Basic Interest Rate”) until the principal amount has
been paid in full (or such earlier date upon which the entire principal amount
of the Loan has been paid in full or deemed paid in full under Section 2), of
which (i) a portion of the Basic Interest Rate equal to nine percent (9.0%) per
annum shall be paid in cash on the last day of each calendar month commencing
with January 31, 2017 (each such date, an “Interest Payment Date”) and (ii) the
remaining portion of the Basic Interest Rate equal to four percent (4.0%) per
annum, compounded monthly on each Interest Payment Date during such period,
together with any incremental amount of accrued interest to the extent interest
accrues at the Default Interest Rate, shall be paid in kind and added to the
principal amount of the Loan then outstanding on the Maturity Date, unless
otherwise paid in cash on or prior to such date; provided that such amount
described in Section 3(a)(ii) shall not be added to the principal amount of the
Loan, but instead shall be payable in cash on the earlier of (x) the Summit II
PSA Closing Date and (y) the termination of the Summit II Purchase Agreement as
the result of a breach of the Summit II Purchase Agreement by American Realty
Capital Hospitality Portfolio SMT ALT, LLC or its successor or permitted
assignee; and

 

 

 

 

(b)       from February 11, 2017 to the Maturity Date, fourteen percent (14.0%)
per annum until the principal amount has been paid in full and the Loan has been
fully satisfied on the Maturity Date (or such earlier date upon which the entire
principal amount of the Loan and all interest thereon has been paid in full), of
which (i) a portion of the Basic Interest Rate equal to nine percent (9.0%) per
annum shall be paid in cash on each Interest Payment Date and (ii) a portion of
the Basic Interest Rate equal to five percent (5.0%) per annum, compounded
monthly on each Interest Payment Date during such period, together with any
incremental amount of accrued interest to the extent interest accrues at the
Default Interest Rate, shall be paid in kind and added to the principal amount
of the Loan then outstanding on the Maturity Date, unless otherwise paid in cash
on or prior to such date; provided that such amount described in Section
3(b)(ii) shall not be added to the principal amount of the Loan, but instead
shall be payable in cash on the earlier of (x) the Summit II PSA Closing Date
and (y) the Maturity Date.

 

Following any increase in the outstanding principal amount of the Loan as a
result of a payment in kind under Section 3(a)(ii) and Section 3(b)(ii), the
Loan will bear interest on such increased principal amount from and after the
date of such payment in kind. Interest shall be computed on the basis of a
365-day (or 366-day, as applicable) year, counting the actual number of days
elapsed. The Borrower and the Lender hereby agree to the interest and
amortization payment schedule attached hereto as Annex A, subject to any
periodic prepayments that may be paid hereunder by the Borrower.

 

4.       Default Interest. Notwithstanding the above, upon the occurrence of an
Event of Default under the Loan, the Loan shall immediately and automatically
begin to bear interest at the applicable rate pursuant to Section 3 above, plus
two percent (2.0%) (such rate, the “Default Interest Rate”), until such Event of
Default is cured or waived in writing by Lender.

 

5.       Payments. All payments of principal and interest on the Loan that are
to be paid in cash shall be paid to Lender in immediately available funds, to
such account as Lender may specify in writing. All payments made by the Borrower
hereunder shall be applied first to all costs incurred by Lender which are to be
reimbursed or otherwise paid by the Borrower pursuant to the terms hereof,
second to interest accrued through the date of such payment, and then in
satisfaction of outstanding principal. In each case unless otherwise directed by
the Borrower, all principal payments shall be applied in direct order of
amortization and maturity. If all or any portion of the principal and interest
owed pursuant to the Loan is due and payable on a day that is not a Business
Day, such time for payment shall be extended to the next succeeding Business
Day. “Business Day” means a day on which banks are not required or authorized by
law to close in New York City.

 

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6.       Optional Note. The Lender may request that the Loan be evidenced by a
promissory note. In such event, the Borrower shall prepare, execute and deliver
to the Lender a promissory note payable to the Lender and in customary form
reasonably acceptable to the Lender. Thereafter, the portion of the Loan
evidenced by such promissory note(s) and interest thereon shall at all times
(including after assignment pursuant to Section 13) be represented by a
promissory note in such form payable to the payee(s) named therein. Upon
satisfaction in full of the outstanding principal amount of the Loan, interest
thereon and any other amounts due hereunder, the Lender will promptly return the
promissory note to the Borrower for cancellation.

 

7.       Authority. The Borrower is a corporation duly organized and validly
existing under the laws of the state of its formation. The Borrower is
authorized to do business and is in good standing in all other states and
jurisdictions where the ownership of property or the nature of the business
transacted by it, makes such qualification necessary, except where the failure
to be so authorized would not reasonably be expected to result in a material
adverse effect on the business, assets or financial condition of the Borrower
and its subsidiaries, taken as a whole (a “Material Adverse Effect”). The
Borrower has all requisite power and authority to execute and deliver this
Agreement and each document attached hereto as an exhibit, any promissory note
or other document related hereto (collectively, the “Loan Documents”) and to
perform its obligations under such Loan Documents and to own its property and
carry on its business. The Loan Documents to which the Borrower is party on the
date hereof have been duly authorized by all requisite corporate action on the
part of the Borrower and duly executed and delivered by authorized officers of
the Borrower. Each of the Loan Documents to which the Borrower is a party on the
date hereof constitutes a valid obligation of the Borrower, legally binding upon
and enforceable against the Borrower in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally or by general principles of equity.

 

8.       Actions Pending. There is no action, suit, investigation or proceeding
pending or, to the actual knowledge of the Borrower, threatened in writing
against the Borrower, or any properties, assets or rights of the Borrower, by or
before any court, arbitrator or administrative or governmental body that would
reasonably be expected to result in a Material Adverse Effect if resulting in a
decision not in favor of the Borrower.

 

9.       Conflicts. Neither the execution nor delivery of this Agreement, nor
performance of the Borrower’s obligations under this Agreement in accordance
with its terms, will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any lien upon any properties or
assets of Borrower, the charters or by-laws or other organizational documents of
Borrower or, except to the extent it would not reasonably be expected to result
in a Material Adverse Effect, any award of any arbitrator or any agreement,
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Borrower, or any properties or assets of Borrower is subject.

 

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10.       Public Filings. Since the date of its most recently filed quarterly
report on Form 10-Q, Borrower is not aware of any circumstance or event which
has occurred that has not been previously disclosed in the Borrower’s public
filings or otherwise disclosed to the Lender and that would be reasonably likely
to result in a Material Adverse Effect or a material adverse effect on its
ability to repay the loan evidenced by this Agreement.

 

11.       Default and Acceleration. The occurrence of any of the following shall
constitute an event of default under this Agreement (each an “Event of
Default”):

 

(a)       the Borrower fails to make any payment of principal when due and
payable under this Agreement or fails to make any payment of interest within 5
Business Days of when such payment is due and payable under this Agreement;

 

(b)       the Borrower otherwise defaults in the performance or compliance with
the provisions of this Agreement and such default continues for thirty (30) days
after the Borrower receives written notice of such default from Lender;

 

(c)       Borrower’s failure to maintain its status as a real estate investment
trust;

 

(d)       if an Event of Default as defined in the Existing Loan Agreement
occurs and remains continuing;

 

(e)       any proceeding shall be instituted by or against the Borrower seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidating, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it) that is being diligently
contested in good faith, such proceeding shall remain undismissed or unstayed
for a period of sixty (60) days, or the court in such proceeding shall have
entered a decree or order granting the relief sought in such proceeding (an
“Insolvency Event of Default”); or

 

(f)       the Borrower dissolves or is dissolved, or ceases business operations.

 

Upon an Event of Default, other than an Insolvency Event of Default, then the
unpaid balance of the Loan shall, at the option of Lender, mature and then
become immediately payable. The unpaid balance hereunder shall automatically
mature and become immediately payable in the case of an Insolvency Event of
Default. Any election to accelerate the outstanding balance of the Loan shall
not preclude any other rights or remedies that Lender may have at law or equity,
and the non-exercise of such right to accelerate the outstanding balance of the
Loan, as set forth above, shall not constitute a waiver or the right to do so at
any future time or for any other Event of Default.

 

12.       Costs and Expenses. Borrower shall pay on demand all of the reasonable
costs and expenses (including reasonable attorneys’ fees and disbursements of
external counsel to Lender) which Lender incurs in connection with the
preparation, negotiation and collection and enforcement of this Agreement.

 

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13.       Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Borrower and the Lender and their respective successors
and assigns, except that the Borrower shall not assign any of its rights
hereunder without the written consent of the Lender, which may be withheld in
Lender’s sole discretion. The Lender shall be permitted to assign any of its
rights hereunder without the written consent of the Borrower; provided that the
Lender shall not be permitted to make any such assignment to the Borrower’s
competitors as listed in Annex B or any of their respective affiliates, except
in connection with a merger, consolidation, or sale of all or substantially all
the assets of the Lender with or to any such person.

 

14.       Complete Agreement. This Agreement (together with any notes provided
hereunder) embodies the complete agreement and understanding among the parties,
and supersedes and preempts any prior understanding, agreements or
representation by or among the parties, written or oral, which relate to the
subject matter hereof.

 

15.       Amendment; Waiver. The provisions of this Agreement (and any notes
provide hereunder) may be amended, modified or waived only with the prior
written consent of the Borrower and Lender, and no course of conduct or course
of dealing or failure or delay by any party hereto in enforcing or exercising
any of the provision of this Agreement shall affect the validity, binding effect
or enforceability of this Agreement or be deemed to be an implied waiver of any
provision of this Agreement.

 

16.       No Accord and Satisfaction. No marking of “paid in full” or similar
language on any check or other form of payment shall be deemed to cause an
accord and satisfaction of this Agreement if such payment is cashed or otherwise
collected by Lender.

 

17.       Governing Law. This Agreement and the Loan shall be governed and
interpreted in accordance with the laws of the State of New York.

 

18.       Submission to Jurisdiction. The parties irrevocably and
unconditionally submit to the exclusive jurisdiction of the courts of the State
of New York sitting in New York County and of the United States District Court
of the Southern District of New York and any appellate court thereof, in any
action or proceeding arising out of or relating to this Agreement and the Loan,
or for recognition or enforcement of any judgment, and each of the parties
hereto irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York court.
Each party hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Each party hereto irrevocably
and unconditionally waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of venue of any action
or proceeding arising out of or relating to this Agreement in any court referred
to in this Section. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

 

19.       Excess Interest. If interest payable under this Agreement is in excess
of the maximum permitted by law, then the interest chargeable hereunder shall be
reduced to the maximum amount permitted by law and any excess over the maximum
amount permitted by law shall be credited to the principal amount of the Loan
and applied to the same and not to the payment of interest.

 

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20.       WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

21.       Notices. All notices, demands or requests made pursuant to, under or
by virtue of this Agreement or the Loan must be in writing and shall be and
other communications to be given or delivered under or by reason of the
provisions of this Agreement shall be in writing and shall be (i) personally
delivered, (ii) delivered by express mail, Federal Express or other comparable
overnight courier service, (iii) telecopied, with telephone confirmation within
one Business Day or (iv) mailed to the party to which the notice, demand or
request is being made by certified or registered mail, postage prepaid, return
receipt requested, as follows (unless another address has been previously
specified in writing):

 

 

Notices to Borrower:

 

American Realty Capital Hospitality Trust, Inc.

405 Park Avenue

New York, NY 10022

Attn: Jonathan P. Mehlman

Facsimile No.: (212) 421-5799

Telephone No.: (646) 626-8857

 

with a copy to:

 

Proskauer Rose LLP

11 Times Square

New York, NY 10036

Attn: Steven L. Lichtenfeld, Esq. and Jeffrey A. Horwitz, Esq.

Facsimile No.: (212) 969-2900

Telephone No.: (212) 969-3229; (212) 969-3735

 

Notices to the Lender:

 

Summit Hotel OP, LP

c/o Summit Hotel Properties, Inc.

12600 Hill Country Boulevard, Suite R-100

Austin, TX 78738

Attn: Chris Eng, Senior Vice President, General Counsel & Chief Risk Officer

Facsimile No.: (512) 538-2333

Telephone No.: (512) 538-2307

 

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with a copy to:

 

Hagen, Wilka & Archer, LLP

600 South Main Avenue, Suite 102

Sioux Falls, SD 57104

Attn: Jennifer L. Larsen, Esq.

Facsimile No.: (605) 334-4814

Telephone No.: (605) 334-0005

 

 

 

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IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly executed
as of the day and year first above written.

  

  Borrower:       AMERICAN REALTY CAPITAL HOSPITALITY TRUST, INC.           By:
/s/ Paul C. Hughes   Name: Paul C. Hughes   Title: Authorized Signatory

 

  lENDER:       SUMMIT HOTEL OP, LP   a Delaware limited partnership   By:
Summit Hotel GP, LLC,   a Delaware limited liability company   Its: General
Partner   By: Summit Hotel Properties, Inc.,   a Maryland corporation   Its:
sole member

 

  By: /s/ Christopher Eng   Name: Christopher Eng   Title: EVP & General Counsel
     

 

 

 

 

 

 

Annex A

Debt Service Payment Schedule

 

 

 

 

 

 

 

 

Annex B

 

Competitor List