Document:

Exhibit

Exhibit 10.4

FIRST AMENDMENT TO 
FOURTH AMENDED and RESTATED CREDIT AGREEMENT 

THIS FIRST AMENDMENT TO FOURTH AMENDED and RESTATED CREDIT AGREEMENT (this “Amendment”) dated as of April 26, 2017, by and among DIAMONDROCK HOSPITALITY LIMITED PARTNERSHIP (the “Borrower”), DIAMONDROCK HOSPITALITY COMPANY (the “Parent”), each of the Lenders party hereto and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent (the “Administrative Agent”).

WHEREAS, the Borrower, the Parent, the Lenders, the Administrative Agent and certain other parties have entered into that certain Fourth Amended and Restated Credit Agreement dated as of May 3, 2016 (as amended and in effect immediately prior to the effectiveness of this Amendment, the “Credit Agreement”); 

WHEREAS, the parties hereto desire to amend certain provisions of the Credit Agreement on the terms and conditions contained herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto hereby agree as follows:

Section 1.  Specific Amendments to Credit Agreement.  Upon the effectiveness of this Amendment, the parties hereto agree that the Credit Agreement shall be amended as follows:

(a)The Credit Agreement is amended by adding the following definitions to Section 1.1. thereof in the appropriate alphabetical location:

“Availability Surge Period” has the meaning given that term in the definition of Maximum Loan Availability.

“Existing Term Loans” means, collectively, (a) that certain Term Loan Agreement dated as of May 3, 2016, by and among the Borrower, the Parent, the financial institutions from time to time party thereto, KeyBank National Association, as administrative agent, and the other parties thereto and (b) that certain Term Loan Agreement dated as of April 26, 2017, by and among the Borrower, the Parent, the financial institutions from time to time party thereto, Regions Bank, as administrative agent, and the other parties thereto.

“First Amendment Effective Date” means April 26, 2017.

“Leverage Ratio Surge Period” has the meaning given to that term in Section 10.1.(a).

“New York Mortgage” has the meaning given that term in Section 13.20.(a).

(b)The Credit Agreement is amended by amending and restating clause (c) of the definition of “Applicable Margin” set forth in Section 1.1. thereof in its entirety as follows:

(c)    During the Leverage Ratio Surge Period, any Applicable Margin determined as provided above shall be increased by 0.35% unless a Material Acquisition occurred during the Leverage Ratio Surge Period.

(c)The Credit Agreement is amended by amending and restating the definitions of “Approved Manager”, “Capitalization Rate”, “Loan Party”, “Maximum Loan Availability”, “Permitted Liens” and “Secured Indebtedness” set forth in Section 1.1. thereof in their entirety as follows:

“Approved Manager” means (i) each property management company listed on Schedule 1.1.(a), (ii) any Affiliate thereof and (ii) any other nationally recognized third-party property management company approved by the Administrative Agent in writing.

“Capitalization Rate” means (a) 7.25% for Properties developed with hotels categorized as Upscale, Upper Upscale or above Full-Service and located within (i) the central business districts of Boston, Massachusetts, Chicago, Illinois, Borough of Manhattan, New York, Washington, D.C., San Francisco, California, San Diego, California and (ii) Key West, Florida, or (b) 8.00% for all other Properties. Categorization of hotels shall be as determined by Smith Travel Research or as otherwise requested by the Borrower and consented to in writing by the Requisite Lenders.

“Loan Party” means the Borrower, the Parent and each other Guarantor. Schedule 1.1.(b) sets forth the Loan Parties in addition to the Borrower and the Parent as of the Agreement Date.

“Maximum Loan Availability” means, at any time, the lesser of (a) 60% of the Unencumbered Property Value; provided, however, that the Borrower shall have the option, exercisable one time, upon written notice from the Borrower to the Administrative Agent that the Borrower is exercising such option, to elect that such percentage may exceed 60% for a period not to exceed two (2) full fiscal quarters, such period to commence on the date set forth in such notice (such period, the “Availability Surge Period”), so long as (i) the Borrower has delivered a written notice to the Administrative Agent that the Borrower is exercising its option for the Availability Surge Period, (ii) such percentage does not exceed 65% at any time during the Availability Surge Period and (iii) the Borrower completed a Material Acquisition which resulted in such ratio (after giving effect to such Material Acquisition) exceeding 60% at any time during the fiscal quarter in which such Material Acquisition took place, or (b) the aggregate principal balance of Indebtedness (excluding Nonrecourse Indebtedness and Indebtedness to the extent owing among the Parent and/or any of its Subsidiaries but including Secured Recourse Indebtedness and the aggregate principal amount of all Loans and the aggregate amount of all Letter of Credit Liabilities) of the Parent and the Ownership share of all such Indebtedness of its Subsidiaries that would cause the ratio of (A) Adjusted NOI of the Unencumbered Properties at such time to (B) Implied Debt Service for such period determined with respect to such principal balance of Indebtedness to equal 1.20 to 1.00.  The Borrower shall have the option to exercise both a Leverage Ratio Surge Period and an Availability Surge Period in the same notice.

“Permitted Liens” means, as to any Person:  (a) Liens securing taxes, assessments and other charges or levies imposed by any Governmental Authority (excluding any Lien imposed pursuant to any of the provisions of ERISA or pursuant to any Environmental Laws) or the claims of materialmen, mechanics, carriers, warehousemen or landlords for labor, materials, supplies or rentals incurred in the ordinary course of business, which either (x) are not at the time required to be paid or discharged under Section 8.6. or (y) relate to claims not in excess of $500,000 in the aggregate at any one time; (b) Liens consisting of deposits or pledges made, in the ordinary course of business, in connection with, or to secure payment of, obligations under workers’ compensation, unemployment insurance or similar Applicable Laws; (c) Liens consisting of encumbrances in the nature of zoning restrictions, easements, and rights or restrictions of record on the use of real property, which do not materially detract from the value of such property or impair the intended use thereof in the business of such Person; (d) the rights of tenants under leases or subleases or licenses not interfering with the ordinary conduct of business of such Person; (e) Liens in favor of the Administrative Agent for the benefit of the Lenders; (f) Liens in favor of the Borrower or a Guarantor securing obligations owing by a Subsidiary to the Borrower or a Guarantor; (g) Liens (i) in existence as of the Agreement Date and set forth in Part II of Schedule 7.1.(f) and (ii) in respect of any New York Mortgage or any mortgage encumbering property located in New York State securing Indebtedness of the Loan Parties pursuant to provisions in loan documentation governing such Indebtedness which provisions are substantially similar to Section 13.20. of this Agreement; (h) Liens arising out of judgments or awards in respect of the Parent or any of its Subsidiaries not constituting an Event of Default under Section 11.1.(i); (i) any interest or title of a lessor under any lease of equipment (not constituting a fixture) entered into 

by the Borrower or any Subsidiary in the ordinary course of its business and covering only the assets so leased; (j) Liens arising in the ordinary course of business by virtue of any contractual, statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies covering deposit or securities accounts (including funds or other assets credited thereto) and (k) Liens securing the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business and not securing any Indebtedness.

“Secured Indebtedness” means, with respect to any Person, (a) all Indebtedness of such Person that is secured in any manner by any Lien on any Property plus (b) such Person’s pro rata share of the Secured Indebtedness of any of such Person’s Unconsolidated Affiliates; provided that neither any New York Mortgage nor any mortgage encumbering property located in New York State securing Indebtedness of the Loan Parties pursuant to provisions in loan documentation governing such Indebtedness which provisions are substantially similar to Section 13.20 of this Agreement shall constitute Secured Indebtedness hereunder.

(d)The Credit Agreement is amended by deleting the definition of “Surge Period” in Section 1.1. thereof.

(e)The Credit Agreement is amended by amending and restating Section 7.1.(t) thereof its entirety as follows:

(t)    Intellectual Property.  Each of the Loan Parties and each other Subsidiary owns or has the right to use, under valid license agreements or otherwise, all material patents, licenses, franchises, trademarks, trademark rights, service marks, service mark rights, trade names, trade name rights, trade secrets and copyrights (collectively, “Intellectual Property”) necessary to the conduct of its businesses as now conducted and as contemplated by the Loan Documents, without, to the knowledge of the Loan Parties and except as disclosed in writing to the Administrative Agent prior to the First Amendment Effective Date, conflict in any material respect with any patent, license, franchise, trademark, trademark right, service mark, service mark right, trade secret, trade name, copyright, or other proprietary right of any other Person.  The Parent, the Borrower and each other Subsidiary have taken all such steps as they deem reasonably necessary to protect their respective rights under and with respect to such Intellectual Property.

(f)The Credit Agreement is amended by amending and restating Section 10.1.(a) thereof its entirety as follows:

(a)    Maximum Leverage Ratio.  The Parent and the Borrower shall not permit the Leverage Ratio to exceed 60.0% at any time; provided, however, that the Borrower shall have the option, exercisable one time, upon written notice from the Borrower to the Administrative Agent that the Borrower is exercising such option, to elect that the Leverage Ratio may exceed 60.0% for a period not to exceed two (2) full fiscal quarters, such period to commence on the date set forth in such notice (such period, the “Leverage Ratio Surge Period”), so long as (i) the Borrower has delivered a written notice to the Administrative Agent that the Borrower is exercising its option under this subsection (a) and (ii) the Leverage Ratio does not exceed 65.0% at any time during the Leverage Ratio Surge Period.  The Borrower shall have the option to exercise both a Leverage Ratio Surge Period and an Availability Surge Period in the same notice.

(g)The Credit Agreement is amended by amending and restating Section 10.1.(e) thereof its entirety as follows:

(e)    Minimum Number and Value of Unencumbered Properties.  (x) The number of Unencumbered Properties shall not be less than 8 at any time and (y) the aggregate Unencumbered Property Value of the Unencumbered Properties shall not be less than $750,000,000 at any time.

(h)The Credit Agreement is amended by amending and restating Section 10.3. thereof its entirety as follows:

Section 10.3.  Indebtedness.

The Parent and the Borrower shall not, and shall not permit any Subsidiary to, incur, assume, or otherwise become obligated in respect of any Indebtedness after the Agreement Date if immediately prior to the assumption, incurring or becoming obligated in respect thereof, or immediately thereafter and after giving effect thereto, a Default or Event of Default is or would be in existence, including without limitation, an Event of Default resulting from a violation of any of the covenants contained in Section 10.1.

(i)The Credit Agreement is amended by adding “or” at the end of clause (iv) of Section 11.1.(e) thereof and adding the following clause (v) immediately after clause (iv) of Section 11.1.(e) thereof:

(v)    There occurs an “Event of Default” under and as defined in either of the Existing Term Loans;

(j)The Credit Agreement is amended by adding Schedule 1.1.(a) attached hereto, which shall be deemed to be Schedule 1.1.(a) to the Credit Agreement, as amended by this Amendment, and the reference to Schedule 1.1. to the Credit Agreement immediately following the table of contents thereof shall be deemed to be a reference to Schedule 1.1.(b) to the Credit Agreement, as amended by this Amendment.

Section 2.  Conditions Precedent.  The effectiveness of this Amendment, is subject to receipt by the Administrative Agent of the following, each in form and substance satisfactory to the Administrative Agent:

(a)    a counterpart of this Amendment duly executed by the Borrower, the Parent, the Administrative Agent and the Requisite Lenders;

(b)    a Guarantor Acknowledgement substantially in the form of Exhibit A attached hereto, executed by each Guarantor;     
    
(c)    a certified copy of (i) an enforceable amendment to that certain Term Loan Agreement dated as of May 3, 2016, by and among the Borrower, the Parent, the financial institutions from time to time party thereto, KeyBank National Association, as administrative agent, and the other parties thereto effected on the date hereof and (ii) that certain Term Loan Agreement dated as of the date hereof, by and among the Borrower, the Parent, the financial institutions from time to time party thereto, Regions Bank, as administrative agent, and the other parties thereto; and

(d)    evidence that all fees, expenses and reimbursement amounts due and payable to the Administrative Agent have been paid.

Section 3.  Representations.  Each of the Parent and the Borrower represents and warrants to the Administrative Agent and the Lenders that:

(a)    Authorization.  Each of the Borrower the Parent has the right and power, and has taken all necessary action to authorize it, to execute and deliver this Amendment and to perform this Amendment and the Credit Agreement, as amended by this Amendment, in accordance with their respective terms and to consummate the transactions contemplated hereby and thereby.  This Amendment has been duly executed and 

delivered by the duly authorized officers, agents and/or signatories of the Borrower and the Parent and each is a legal, valid and binding obligation of such Person enforceable against such Person in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, and other similar laws affecting the rights of creditors generally and the availability of equitable remedies for the enforcement of certain obligations (other than the payment of principal) contained herein or therein and as may be limited by equitable principles generally.

(b)    Compliance with Laws, etc.  The execution and delivery of this Amendment and the performance of this Amendment and the Credit Agreement, as amended by this Amendment, in accordance with their respective terms and the borrowings and other extensions of credit hereunder do not and will not, by the passage of time, the giving of notice, or both: (i) require any Governmental Approval or violate any Applicable Law (including all Environmental Laws) relating to the Borrower or any other Loan Party; (ii) conflict with, result in a breach of or constitute a default under the organizational documents of any Loan Party, or any indenture, agreement or other instrument to which the Borrower or any other Loan Party is a party or by which it or any of its respective properties may be bound; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by any Loan Party. 

(c)    No Default.  No Default or Event of Default has occurred and is continuing as of the date hereof, nor will exist immediately after giving effect to this Amendment.

Section 4.  Reaffirmation of Representations by Borrower and Parent.  The representations and warranties made or deemed made by the Borrower or any other Loan Party in any Loan Document to which such Loan Party is a party are true and correct in all material respects (except in the case of a representation or warranty qualified by materiality, in which case such representation or warranty shall be true and correct in all respects) on the date hereof except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and correct in all material respects (except in the case of a representation or warranty qualified by materiality, in which case such representation or warranty shall have been true and correct in all respects) on and as of such earlier date) and except for changes in factual circumstances specifically and expressly permitted under the Credit Agreement.

Section 5. Certain References.  Each reference to the Credit Agreement in any of the Loan Documents shall be deemed to be a reference to the Credit Agreement as amended by this Amendment.  

Section 6.  Expenses.  The Borrower shall reimburse the Administrative Agent upon demand for all reasonable, documented out-of-pocket costs and expenses (including reasonable attorneys’ fees) incurred by the Administrative Agent in connection with the preparation, negotiation and execution of this Amendment and the other agreements and documents executed and delivered in connection herewith.

Section 7.  Benefits.  This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

Section 8.  GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

Section 9.  Effect.  Except as expressly herein amended, the terms and conditions of the Credit Agreement and the other Loan Documents remain in full force and effect.  The amendments contained in Section 1 hereof shall be deemed to have prospective application only from the date this Amendment becomes effective.  The Credit Agreement, as herein amended, is hereby ratified and confirmed in all respects.  Nothing in this Amendment shall limit, impair or constitute a waiver of the rights, powers or remedies available to the Administrative Agent or the Lenders under the Credit Agreement, as herein amended, or any other Loan Document.  

Section 10.  Counterparts.  This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and shall be binding upon all parties, their successors and assigns.  Signatures hereto 

delivered by facsimile transmission, emailed .pdf file or other similar forms of electronic transmission shall be deemed original signatures, which hereby may be relied upon by all parties and shall be binding on the respective signor.

Section 11.  Loan Documents.  This Amendment and the executed Guarantor Acknowledgement substantially in the form attached hereto as Exhibit A shall be deemed to be “Loan Documents” for all purposes under the Credit Agreement and the other Loan Documents.

Section 12.  Definitions.  All capitalized terms not otherwise defined herein are used herein with the respective definitions given them in the Credit Agreement, as amended by this Amendment.

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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Fourth Amended and Restated Credit Agreement to be executed as of the date first above written.

BORROWER:

DIAMONDROCK HOSPITALITY LIMITED PARTNERSHIP

By:  DiamondRock Hospitality Company, its sole General Partner

By: /s/ Sean M. Mahoney
     Name: Sean M. Mahoney
Title: Executive Vice President, Chief Financial Officer 
and Treasurer

PARENT:

DIAMONDROCK HOSPITALITY COMPANY

By: /s/ Sean M. Mahoney
  Name: Sean M. Mahoney
Title: Executive Vice President, Chief Financial Officer 
and Treasurer

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THE ADMINISTRATIVE AGENT AND THE LENDERS:

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent and as a Lender 

By: /s/ Mark F. Monahan    
     Name: Mark F. Monahan    
     Title:  Senior Vice President

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BANK OF AMERICA, N.A., as a Lender

By: /s/ Suzanne E. Pickett    
     Name: Suzanne E. Pickett    
     Title: Vice President    

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CITIBANK, N.A., as a Lender 

By: /s/ John C. Rowland    
     Name: John C. Rowland    
     Title: Vice President    

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U.S. BANK NATIONAL ASSOCIATION, as a Lender 

By: /s/ Timothy J. Tillman
     Name: Timothy J. Tillman
     Title: Vice President    

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KEYBANK NATIONAL ASSOCIATION, as a Lender 

By: /s/ James Komperda    
     Name: James Komperda    
     Title: Vice President

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PNC BANK, NATIONAL ASSOCIATION, as a Lender 

By: /s/ Katie Chowdhry    
     Name: Katie Chowdhry    
     Title: Vice President

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REGIONS BANK, as a Lender 

By: /s/ T. Barrett Vawter    
     Name: T. Barrett Vawter    
     Title: Vice President

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BARCLAYS BANK PLC, as a Lender 

By: /s/ Craig Malloy    
     Name: Craig Malloy    
     Title: Director    

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DEUTSCHE BANK AG NEW YORK BRANCH, as a Lender 

By: /s/ Murray Mackinnon    
     Name: Murray Mackinnon     
     Title: Director    

By: /s/ Joanna Soliman    
     Name: Joanna Soliman    
     Title: Vice President    

    

EXHIBIT A

FORM OF GUARANTOR ACKNOWLEDGEMENT

THIS GUARANTOR ACKNOWLEDGEMENT dated as of April 26, 2017 (this “Acknowledgement”) executed by each of the undersigned (the “Guarantors”) in favor of Wells Fargo Bank, National Association, as Administrative Agent (the “Administrative Agent”) and each “Lender” a party to the Credit Agreement referred to below (the “Lenders”).

WHEREAS, DiamondRock Hospitality Limited Partnership (the “Borrower”), DiamondRock Hospitality Company (the “Parent”), the Lenders, the Administrative Agent and certain other parties have entered into that certain Fourth Amended and Restated Credit Agreement dated as of May 3, 2016 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”);

WHEREAS, each of the Guarantors is a party to that certain Amended and Restated Guaranty dated as of May 3, 2016 (as amended, restated, supplemented or otherwise modified from time to time, the “Guaranty”) pursuant to which they guarantied, among other things, the Borrower’s obligations under the Credit Agreement on the terms and conditions contained in the Guaranty;

WHEREAS, the Borrower, the Parent, the Administrative Agent and certain of the Lenders are to enter into the First Amendment to Fourth Amended and Restated Credit Agreement dated as of the date hereof (the “First Amendment”), to amend the Credit Agreement on the terms and conditions contained therein; and

WHEREAS, it is a condition precedent to the effectiveness of the First Amendment that the Guarantors execute and deliver this Acknowledgement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto agree as follows:

Section 1.  Reaffirmation.  Each Guarantor hereby reaffirms its continuing obligations to the Administrative Agent and the Lenders under the Guaranty and agrees that the transactions contemplated by the First Amendment, shall not in any way affect the validity and enforceability of the Guaranty, or reduce, impair or discharge the obligations of such Guarantor thereunder.

Section 2.  Governing Law.  THIS ACKNOWLEDGEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

Section 3.  Counterparts.  This Acknowledgement may be executed in any number of counterparts, each of which shall be deemed to be an original and shall be binding upon all parties, their successors and assigns. Signatures hereto delivered by facsimile transmission, emailed .pdf file or other similar forms of electronic transmission shall be deemed original signatures, which hereby may be relied upon by all parties and shall be binding on the respective signor.

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IN WITNESS WHEREOF, each Guarantor has duly executed and delivered this Guarantor Acknowledgement as of the date and year first written above.

THE GUARANTORS:

DIAMONDROCK HOSPITALITY COMPANY
By:                
Name: Sean M. Mahoney
Title: Executive Vice President, Chief Financial Officer 
and Treasurer

BLOODSTONE TRS, INC.
By:                
Name: Sean M. Mahoney
Title: President and Chief Executive Officer

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	DiamondRock Alpharetta Owner, LLC

	DiamondRock Alpharetta Tenant, LLC

	DiamondRock Bethesda Tenant, LLC

	DiamondRock Boston Broad Street Owner, LLC

	DiamondRock Boston Broad Street Tenant, LLC

	DiamondRock Burlington Owner, LLC

	DiamondRock Burlington Tenant, LLC

	DiamondRock Charleston Owner, LLC

	DiamondRock Charleston Tenant, LLC 

	DiamondRock Chicago Conrad Owner, LLC

	DiamondRock Chicago Conrad Tenant, LLC

	DiamondRock Chicago Owner, LLC

	DiamondRock Chicago Tenant, LLC

	DiamondRock Denver Downtown Owner, LLC

	DiamondRock Denver Downtown Tenant, LLC

	DiamondRock FL Owner, LLC 

	DiamondRock FL Tenant, LLC 

	DiamondRock HB Owner, LLC 

	DiamondRock HB Tenant, LLC 

	DiamondRock Key West North Owner, LLC 

	DiamondRock Key West North Tenant, LLC 

	DiamondRock KW South Owner, LLC 

	DiamondRock KW South Tenant, LLC 

	DiamondRock SF Sutter Street Owner, LLC 

	DiamondRock SF Sutter Street Tenant, LLC 

	DiamondRock Times Square Owner, LLC 

	DiamondRock Times Square Tenant, LLC 

	DiamondRock Vail Owner, LLC 

	DiamondRock Vail Tenant, LLC 

	DiamondRock AZ Holdings, LLC

	DiamondRock AZ LA Owner, LLC

	DiamondRock AZ LA Tenant, LLC

	DiamondRock AZ OR Owner, LLC

	DiamondRock AZ OR Tenant, LLC

By:
     Name: Sean M. Mahoney
     Title:  Director

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DiamondRock Bethesda Owner Limited Partnership

By:  DiamondRock Bethesda General, LLC, its general partner

By:
     Name: Sean M. Mahoney
     Title:  Director

Schedule 1.1.(a)

Approved Managers

	
		
	Manager
	Notes

	Access Hotels & Resorts
	 

	AccorHotels
	Owner of Fairmont

	Ace Hotel Group
	 

	Aimbridge Hospitality
	Owner of Evolution, Pillar, InterMountain

	Auberge Resorts Collection
	 

	Benchmark Resorts & Hotels
	Recently merged with Gemstone

	Charlie Palmer Group
	 

	Crescent Hotels & Resorts, LLC, 
	 

	Crestline Hotels & Resorts, Inc.
	 

	Concord Hospitality Enterprises Company
	 

	Davidson Hotels & Resorts
	 

	Denihan Hospitality Group
	 

	Four Seasons Hotels & Resorts
	 

	HEI Hotels & Resorts
	 

	Hersha Hospitality Management
	 

	Highgate Hotels
	 

	Hilton Hotels Corporation
	 

	Hyatt Hotels Corporation
	 

	Intercontinental Hotel Group (IHG)
	Includes Kimpton Hotels

	Interstate Hotel Group 
	Includes RIM Hospitality

	IMH Financial Corp.
	 

	Kessler Collection Management, LLC
	 

	Kokua Hospitality
	 

	Loews Hotels & Resorts
	 

	Magna Hospitality Group, L.C.
	 

	Marriott International, Inc.
	Includes Starwood, Ritz-Carlton

	Montage Hotels & Resorts
	 

	Noble House IKW, LLC
	 

	Ocean Properties Ltd. 
	 

	OLS Hotels & Resorts
	 

	OTO Development, LLc
	 

	Pacifica Hotels
	 

	Provenance Hotels
	 

	Pyramid Hotel Group
	 

	Sage Hospitality Resources, LLC
	 

	sbe Hotel Group
	Includes Morgans Hotel Group

	Stonebridge Companies
	 

	TPG Hotels & Resorts
	 

	Two Roads Hospitality
	Includes JDV, Commune, Destination 

	Vail Resorts Management Company
	 

	Viceroy Hotel Group
	 

	White Lodging ServicesExhibit 10.1

      

THIS SECURITY HAS NOT
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL
BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

	Principal Amount: $2,000,000	Issue Date: May 1, 2017

 

15% SECURED PROMISSORY NOTE

DUE May 1, 2020

 

FOR VALUE RECEIVED, Arkados
Group, Inc., a Delaware corporation, (the “Company “) promises to pay to SolBright Renewable Energy, LLC (which
name of the entity will be changed after the Original Issue Date to SRE Holdings, LLC), or its registered assigns (the “Holder
“), or shall have paid pursuant to the terms hereunder, the principal sum of $2,000,000 (the “Principal”)
on May 1, 2020, unless accelerated upon an Event of Default (the “Maturity Date “), or such earlier date as
this Note is required or permitted to be repaid, in whole or in part, as provided hereunder, and to pay interest to the Holder
on the aggregate and then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject
to the following additional provisions:

 

Section 1.            Definitions. For the purposes
hereof the following terms shall have the following meanings:

 

“Bankruptcy Event”
means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation
S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant
Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding
that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent
or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant
Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is
not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof
makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting
of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the
foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

“Business Day”
means any day except any Saturday, any Sunday, or any day which is a federal legal holiday in the United States.

 

    	 	 1	 

     

    

 

“Change of Control”
means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended, the
“1934 Act”) of effective control (whether through legal or beneficial ownership of capital stock of the Company,
by contract or otherwise) of in excess of 50.1% of the voting securities of the Company (other than by conversion of the Note),
(b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and,
after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50.1%
of the aggregate voting power of the Company or the successor entity of such transaction, or (c) the Company sells or transfers
all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction
own less than 50.1% of the aggregate voting power of the acquiring entity immediately after the transaction.

 

“Event of Default”
shall have the meaning set forth in Section 5(a).

 

“Mandatory Default
Amount” means the payment of 100% of the outstanding principal amount of this Note and accrued and unpaid interest hereon,
in addition to the payment of all other amounts, costs, expenses and liquidated damages due in respect of this Note.

 

“Note Register”
shall have the meaning set forth in Section 2(a).

 

“Original Issue
Date” means the date of the first issuance of this Note, regardless of any transfers of this Note and regardless of the
number of instruments which may be issued to evidence such Note.

 

“Outstanding Amount”
means the outstanding principal amount and any accrued but unpaid interest under this Note.

 

“Person”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization,
a government or any department or agency thereof and any other legal entity.

 

“Purchase Agreement”
means the Asset Purchase Agreement dated as of the date hereof between the Company and the Holder, as amended, modified or supplemented
from time to time in accordance with its terms.

 

“Securities Act”
means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

Section 2.            Repayment and Interest.

 

a)            Repayment.
Unless earlier repaid, the Outstanding Amount shall be due and payable in full on the Maturity Date. The Company shall make interest–only
payments to the Holder on a quarterly basis, with the first interest payment due on May 31, 2017. Additionally, the Company shall
make Principal payments to the Holder on a quarterly basis as provided in Section 2(c) below, with the first interest payment due
following the end of the Company’s fiscal quarter ended May 31, 2017. All payments made hereunder shall be applied first
to accrued unpaid interest and then to unpaid Principal, provided, however, that any payments made pursuant to Section 2(c) shall
be applied to Principal only and shall not be utilized to satisfy any accrued unpaid interest then outstanding. Principal and interest
hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration
and transfers of this Note (the “Note Register”). The Company hereby covenants and agrees that before any principal
repayment will be made by the Company or its affiliates with respect to any other notes or loans for other borrowings by the Company
or its affiliates, this Note must first be satisfied in full.

 

    	 	 2	 

     

    

 

b)            Interest Calculations.
Interest at the rate of 15% per annum shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day
periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together
with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made.

 

c)            Prepayment of
this Note with Prepayment Funds.

 

i.            On the terms and conditions
of this Section 2(c), the Company shall prepay this Note, in whole or in part (each such event, a “Company Prepayment”),
in the event Prepayment Funds are determined to exist for any fiscal quarter of the Company.

 

ii.            The Company shall
prepay this Note under this Section 2(c) from time to time only if Prepayment Funds (as defined below) are available for such prepayment
by delivering a written notice thereof to the Holder (the “Company Prepayment Notice” and the date the Holder
receives such notice is referred to as the “Company Prepayment Notice Date”). The Company Prepayment Notice
shall (x) state the date on which the applicable Company Prepayment shall occur (each a “Company Prepayment Date”)
and (y) state the aggregate amount to be prepaid on this Note, which full amount shall be regarded as a repayment of the principal
balance of this Note and shall not be utilized to offset any accrued unpaid interest then due on this Note, and (z) include a detailed
calculation of the amount of the Prepayment Funds available for such quarter for the prepayment.

 

iii.            The Company shall
determine no later than 20 days after the end of each Company fiscal quarter if Prepayment Funds are available for a Company Prepayment
for such quarter, and if Prepayment Funds are deemed available, then the Company shall send the Company Prepayment Notice to the
Holder no later than 30 days after the end of the respective Company fiscal quarter.

 

iv.            Nothing in this Section
2(c) shall be construed to require or permit the Company to prepay this Note if such prepayment would result in a violation of
law, including any violation of the Delaware General Corporation Law.

 

v.            “Prepayment
Funds” shall mean during the period from the Closing Date (as defined in the Purchase Agreement) until any and all amounts
due under this Note have been fully paid and this Note has been extinguished, the amount that equals (A) 25% of the earnings before
interest, taxes, depreciation and amortization (“EBITDA”) of the “Business” (as defined in the Purchase
Agreement), calculated in accordance with generally accepted accounting principles, for the Company’s last four fiscal quarters
preceding the Prepayment Funds calculation, minus (B) the sum of all interest payments paid by the Company to the Holder for the
Note during the last 12 months preceding the Prepayment Funds calculation, minus (C) $1,200,000; provided, however, since the Prepayment
Funds calculation is intended to cover a full twelve-month period, until the Prepayment Funds calculation period includes a full
twelve-month period after the Closing Date, the calculation of the Prepayment Funds shall be adjusted for each of (A) and (B) by
dividing the amount so calculated in such subsection by the number of days between the Closing Date and the end of such calculation
period, and then multiplying such amount by 365.

 

Section 3.            Registration of Transfers and
Exchanges.

 

a)            Different Denominations.
This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested
by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.

 

    	 	 3	 

     

    

 

b)            Transfers.
This Note may be transferred or exchanged only with the prior written consent of the Company and applicable federal and state securities
laws and regulations.

 

c)            Reliance on Note
Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat
the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment
as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent
shall be affected by notice to the contrary.

 

Section 4.            Automatic
Redemption Upon a Qualified Equity Financing. Upon the closing of an equity financing by the Company at any time after the
Original Issue Date, in a single transaction or a series of related transactions, in which the Company issues equity securities
which yields gross cash proceeds to the Company of at least $10,000,000 (excluding this Note and any and all redeemable or convertible
notes), which is led by a bona fide third party who is not currently affiliated with the Company, and with the principal purpose
of raising capital, the Maturity Date shall be accelerated to the date of closing such equity financing transaction, and the Outstanding
Amount shall be paid in full by the Company to satisfy this Note.

 

Section 5.            Event of Default.

 

a) “Event of Default”
means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary
or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):

 

i.           The non-payment of
any of the amounts due hereunder within five (5) Business Days after the date such payment is due and payable.

 

ii.          The dissolution or
liquidation, as applicable, of the Company.

 

iii.         The occurrence of
a Bankruptcy Event.

 

iv.         Any seizure, vesting
or intervention by or under authority of a government, by which the management of the Company is displaced or its authority in
the conduct of its business is curtailed.

 

v.          The appointment of
any receiver of any material property of the Company.

 

vi.         A Change of Control
occurs or any agreement or understanding that could result in a Change of Control is prepared by or for Company.

 

vii.        The occurrence of
a material breach or an event of default by the Company under this Note.

 

viii.       Any default by the
Company under, or the occurrence of any event of default as defined in, any other indebtedness (other than relating to trade payables)
owed by the Company.

 

b)            Remedies Upon
Event of Default. If any Event of Default occurs, then the Mandatory Default Amount shall become, at the Holder's election,
immediately due and payable. Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this
Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and
the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it
under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the
Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this
Section 5(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

    	 	 4	 

     

    

 

c)            Expenses of Collection
and Attorneys’ Fees. In any Event of Default, the Company agrees to pay all expenses of collection of this Note and reasonable
attorneys’ fees incurred by Holder in connection therewith.

 

Section 6.            Security.

 

This Note shall be secured
with a second priority lien on the accounts receivable of the Company, now or hereafter existing, relating to the solar engineering,
procurement and construction business of Holder acquired by the Company pursuant to the Purchase Agreement (the “Accounts
Receivables”) for so long as the Note is outstanding, with such lien being junior only to that certain first priority security
position granted in the Accounts Receivables to AIP ASSET MANAGEMENT INC. (“Senior Secured Lender”) under that certain
Note Purchase Agreement and that certain Security Agreement, both by and between the Company and the Senior Secured Lender and
dated May 1, 2017. The Company shall, when requested by the Holder, provide the Holder with
such information and reports reasonably requested by the Holder documenting the amount of such solar engineering, procurement and
construction business accounts receivable of the Company, and the amount of any appropriate reserve for such accounts receivable.

 

On or following the Original
Issue Date, the Holder may file such UCC financing statements as it deems appropriate in the jurisdictions as it so determines
to record its lien upon, and security interest in, the designated collateral. Upon repayment in full and satisfaction of the Note,
the Company may file such termination statements as necessary to terminate any such previously filed financing statements.

 

Section 7.            Miscellaneous.

 

a)            Notices.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company at the facsimile
number or address set forth on the signature page of this Note, or such other facsimile number or address as the Company may specify
for such purposes by notice to the Holder delivered in accordance with this Section 7(a). Any and all notices or other communications
or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a
nationally recognized overnight courier service addressed to the Holder at the facsimile number or address set forth on the signature
page of this Note, or such other facsimile number or address as the Holder may specify for such purposes by notice to the Company
delivered in accordance with this Section 7(a). Any notice or other communication or deliveries hereunder shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Business Day, (ii)
the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile
number set forth on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m. (New York City
time) on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight
courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

    	 	 5	 

     

    

 

b)            Absolute Obligation.
Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place,
and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company.

 

c)            Lost or Mutilated
Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note
for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss,
theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.

 

d)            Governing Law.
All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws
thereof. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted
by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions
contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses
incurred in the investigation, preparation and prosecution of such action or proceeding.

 

e)            Waiver.
Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or
the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other
occasion. Any waiver by the Company or the Holder must be in writing.

 

f)            Severability.    If
any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision
is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.
If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury,
the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under
applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would
prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and
the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants
that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such power as though no such law has been enacted.

 

    	 	 6	 

     

    

 

g)            Remedies, Characterizations,
Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note
shall be cumulative and in addition to all other remedies available under this Note and any of the other transaction documents
entered into in connection with the Purchase Agreement, at law or in equity (including a decree of specific performance and/or
other injunctive relief), and nothing herein shall limit the Holder's right to pursue actual and consequential damages for any
failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization
concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as
expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such
breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall
be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach,
without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide
all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company's compliance
with the terms and conditions of this Note.

 

h)            Next Business
Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day

 

i)            Headings.
The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit
or affect any of the provisions hereof.

 

(Signature Pages Follow)

 

    	 	 7	 

     

    

 

IN WITNESS WHEREOF, the
Company has caused this Secured Promissory Note to be duly executed by a duly authorized officer as of the date first above indicated.

 

	 	COMPANY:
	 	Arkados Group, Inc.
	 	 	 
	 	By:	/s/ Terrence DeFranco
	 	Name: Terrence DeFranco
	 	Title: Chief Executive Officer

	 	Address:	 
	 	 	 
	 	Facsimile:	 

 

	AGREED TO AND ACCEPTED:	 
	 	 
	HOLDER:	 
	SolBright Renewable Energy, LLC	 
	 	 	 
	By:  	/s/ Patrick Hassell	 
	Name: Patrick Hassell	 
	Title: Managing Director	 

	Address:	 	 
	 	 	      
	Facsimile:	 	 

 

    	 	 8

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