Document:

ex_10d1.htm

Exhibit 10.1

PROMISSORY NOTE

$1,000,000.00                                                                                                Phoenix, Arizona

August 1, 2010

FOR VALUED RECEIVED, the undersigned RRF LIMITED PARTNERSHIP, a Delaware partnership, (“Maker”), promises to pay to the order of Rare Earth Financial, L.L.C., an Arizona limited liability company, (the “Payee”; Payee and each subsequent transferee and/or owner of this Note, whether taking by endorsement or otherwise, are herein successively called “Holder”) at 1625 East Northern Avenue, Suite 105, Phoenix, Arizona 85020-3932, or at such other place as the Holder may from time to time designate in writing, the principal sum of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00), or so much as has been advanced, plus interest calculated on a daily basis (based on a 360-day year) from the date hereof on the principal balance from time to time outstanding as hereinafter provided, principal, interest and all other sums payable hereunder to be paid in lawful money of the United States of America as follows:

	
(A)  

	
During the 20 month term of the Note, interest shall accrue monthly at the rate equal to 7% per annum.

 

 

	
(B)  

	
All accrued interest shall be due and payable on the first day of each calendar month after the date of this Note commencing with August 1, 2010, and continuing each month thereafter until this Note is paid in full on April 1, 2012.

	
(C)  

	
Payments shall include interest only payments on the first of each month.

	
(D)  

	
One half (1⁄2) of the entire unpaid principal balance, 1⁄2 of all accrued and unpaid interest, and 1⁄2 of all other amounts payable hereunder shall be due and payable in full no later than March 1, 2011. The entire remaining unpaid principal, all accrued and unpaid interest and all other amounts payable hereunder shall be due and payable in full no later than April 1, 2011.

	
(E)  

	
On June 1, 2011, the Maker may request advances from the Lender until March 1, 2012.

Notwithstanding anything herein to the contrary, Lender shall not be obliged to make any advance under this Note and the determination to provide any advances requested by Maker shall be made in Lender’s sole and absolute discretion.

If payment is ten (10) days or more late, Maker will be charged five percent (5%) of the regularly scheduled payment. This late charge may be assessed without written notice and shall be immediately due and payable and shall be in addition to all other rights and remedies available to Holder.

Unless otherwise agreed to, in writing, or otherwise required by applicable law, payments will be applied first to late charges and any unpaid collection costs, then to accrued, unpaid interest, then to principal and other charges; provided, however, upon delinquency or other default, Holder reserves the right to apply payments among principal, interest, late charges, collection costs and other charges at its discretion. All prepayments shall be applied to the indebtedness owing hereunder in such order and manner as Holder may from time to time determine in its sole discretion.

Payee, upon written notice, may require Maker to grant Payee a security interest in 51% of Maker’s membership interests in Tucson St. Mary’s Suite Hospitality, LLC as collateral for Maker’s obligations under this note.

Time is of the essence of this Note. At the option of Holder, the entire unpaid principal balance, all accrued and unpaid interest and all other amounts payable hereunder shall become immediately due and payable without notice upon the failure to pay any sum due and owing hereunder as provided herein if such failure continues for thirty (30) days after written notice thereof to Maker or upon the occurrence of any Event of Default as defined in the Loan Agreement or any of the Security Documents.

Upon default, including failure to pay upon final maturity, Holder, at is option, may also, if permitted under applicable law, do one or both of the following: (a) increase the applicable interest rate on this Note to ten percent (10%) per annum, and (b) add any unpaid accrued interest to principal and such sum will bear interest therefrom until paid at the rate provided in this Note (including any increased rate). The interest rate will not exceed the maximum rate permitted by applicable law. Maker shall pay all costs and expenses, including reasonable attorneys’ fees and court costs, incurred in the collection or enforcement of all or any part of this Note. All such costs and expenses shall be secured by the Deed of Trust and by all other Security Documents. In the event of any court proceedings, court costs and attorneys’ fees shall be set by the court and not by jury and shall be included in any judgment obtained by Holder.

Failure of Holder to exercise any option hereunder shall not constitute a waiver of the right to exercise the same in the event of any subsequent default or in the event of continuance of any existing default after demand for strict performance hereof.

Maker and all sureties, guarantors and/or endorsers hereof (or of any obligation hereunder) and accommodation parties hereon (all of which, including Maker, are severally each hereinafter called a “Surety”) each:  (a) agree that the liability under this Note of all parties hereto is joint and several; (b) severally waive any homestead or exemption laws and right thereunder affecting the full collection of this Note; (c) severally waive any and all formalities in connection with this Note to the maximum extent allowed by law, including (but not limited to) demand, diligence, presentment for payment, protest and demand, and notice of extension, dishonor, protest, demand and nonpayment of this Note; and (d) consent that Holder may extend the time of payment or otherwise modify the terms of payment of any part or the whole of the debt evidenced by this Note at the request of any other person liable hereon, and such consent shall not alter nor diminish the liability of any person hereon.

Maker agrees that to the extent Maker or any Surety makes any payment to Holder in connection with the indebtedness evidenced by this Note, and all or any part of such payment is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid by Holder or paid over to a trustee, receiver or any other entity, whether under any bankruptcy act or otherwise (any such payment is hereinafter referred to as a “Preferential Payment”), then the indebtedness of Maker under this Note shall continue or shall be reinstated, as the case may be, and, to the extent of such payment or repayment by Holder, the indebtedness evidenced by this Note or part thereof intended to be satisfied by such Preferential Payment shall be revived and continued in full force and effect as if said Preferential Payment had not been made.

Without limiting the right of Holder to bring any action or proceeding against Maker or any Surety or against any property of Maker or any Surety (an “Action”) arising out of or relating to this Note or any indebtedness evidenced hereby in the courts of other jurisdictions, Maker and each Surety hereby irrevocably submit to the jurisdiction, process and venue of any Arizona State or Federal court sitting in Phoenix, Arizona, and hereby irrevocably agree that any Action may be heard and determined in such Arizona State court or in such Federal court. Maker and all Sureties each hereby irrevocably waives, to the fullest extent it may effectively do so, the defenses of lack of jurisdiction over any person, inconvenient forum or improper venue, to the maintenance of any Action in any jurisdiction.

This Note shall be binding upon Maker and its successors and assigns and shall inure to the benefit of Payee, and any subsequent holders of this Note, and their successors and assigns.

All notices required or permitted in connection with this Note shall be given at the place and in the manner provided in the Loan Agreement for the giving of notices.

This Note shall be governed by and construed according to the laws of the State of Arizona, without giving effect to conflict of laws principles.

JURY WAIVER. THE UNDERSIGNED AND HOLDER (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE UNDERSIGNED AND HOLDER ARISING OUT OF OR IN ANY WAY RELATED TO THIS DOCUMENT OR ANY OTHER AGREEMENTS, DOCUMENTS OR INSTRUMENTS EXECUTED OR DELIVERED IN CONNECTION WITH, OR OTHERWISE RELATING TO, THE INDEBTEDNESS EVIDENCED HEREBY (TOGETHER WITH THIS NOTE, THE “RELATED DOCUMENTS”), OR ANY RELATIONSHIP BETWEEN HOLDER AND THE UNDERSIGNED. THIS PROVISION IS A MATERIAL INDUCEMENT TO HOLDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER RELATED DOCUMENTS.

IN WITNESS WHEEREOF, these presents are executed as of the date first written above.

	
LENDER

	  	
MAKER

	  	  	  
	
RARE EARTH FINANCIAL, LLC

	  	
RRF LIMITED PARTNERSHIP,

	
an Arizona Limited Liability Company

	  	
a Delaware limited partnership,

	  	  	
InnSuites Hospitality Trust, General Partner,

	  	  	
             An Ohio real estate investment trust

	  	  	  
	
By:    /s/   James F. Wirth

	  	
By:   /s/  Marc E. Berg

	
            Name: James F. Wirth

	  	
           Name: Marc E. Berg

	
            Title :  Manager

	  	
           Title:   Executive Vice-Presidentex_10d2.htm

Exhibit 10.2

Albuquerque Suite Hospitality LLC

Restructuring Agreement

 

This Agreement is made as of August 30, 2010, by and among:

 

RARE EARTH FINANCIAL, LLC, an Arizona limited liability company (“Rare Earth”);

 

RRF LIMITED PARTNERSHIP, a Delaware limited partnership (“RRF”);

 

INNSUITES HOSPITALITY TRUST, an Ohio business trust (“IHT”) and General Partner of RRF; and

 

ALBUQUERQUE SUITE HOSPITALITY LLC, an Arizona limited liability company (“ASH”)

 

RECITALS:

 

	
  

	
A.

	
ASH owns and operates the Albuquerque InnSuites Hotels & Suites, a 101-unit hotel in Albuquerque, New Mexico (the “Property”).

 

	
 

	
B.

	
ASH is currently owned approximately 88% by RRF and approximately 12% by Rare Earth.

 

	 	
C.

	
 
Rare Earth and RRF wish to restructure ASH, creating Class A, Class B and Class C Membership Interests (referred to collectively as “Interests”), and cause ASH to offer and sell up to 400 Class A Interests in ASH to accredited investors for $4,000,000 (the “Offering”).  Rare Earth, as the new Administrative Member of ASH, will coordinate the offering and sale of Class A Interests to third parties.  Rare Earth and other Affiliates may purchase Interests under the offering.

 

	
  

	
D.

	
As a part of the restructuring, RRF would exchange its current Membership Interests in ASH for 295 Class B Interests in ASH, and Rare Earth would exchange its current Interest in ASH for 40 Class C Interests in ASH. Proceeds from the Offering will be used in part to redeem Class B Interests, and may be used in part to redeem Class C Interests.

 

FOR VALUABLE CONSIDERATION RECEIVED, the parties agree as follows:

 

1. Restructuring of ASH.  As soon as practicable after execution of this Agreement, Rare Earth and RRF, as the sole Members and Manager of ASH, will amend the Articles of Organization and Operating Agreement, in form and substance reasonably acceptable to RRF and ASH, for ASH to:

 

(a) Change ASH from a manager-managed to a member-managed limited liability company;

 

(b) Create three classes of Membership Interests authorized for issuance in amounts sufficient to accommodate the offering and the restructuring issuances to Rare Earth and RRF, and provide for distribution and liquidation rights and preferences as described in Section 3 and 7 below and the exchange provided for in Recital D above; and

 

(c) Name Rare Earth as the Administrative Member of ASH.

 

2. Offering.  Upon completion of the restructuring, ASH will conduct an offering to accredited investors only of up to 400 Class A Interests at $10,000 per Interest (the “Offering”), for a total offering $4,000,000 (the “Offering Price”). The Offering Price reflects the appraised value of the Property of $4,900,000, less current debt and other liabilities of approximately $1,550,000 for a net equity value of approximately $3,350,000. The $3,350,000 net equity value is further reduced by the $400,000 in Interests held by Rare Earth to net of $2,950,000 to RRF. As Class A Interests are sold in the Offering, RRF’s Class B Interests will be redeemed on a one-for-one basis.  The Offering contemplates the sale of 65 Interests to build cash reserves estimated at $650,000, less a Restructuring and Offering Fee of $320,000 to Rare Earth and offering costs of $30,000, for a net of $300,000 in cash reserves.  Subject to the closing of the Offering, ASH will pay:  (a) a Restructuring and Offering Fee to Rare Earth of 8% of the Offering Price ($320,000); and (b) offering costs of $30,000.  If 51% of the Interests in the Offering are not sold (including Interests purchased by Rare Earth and its affiliates), Rare Earth will be paid a fee equal to 8% of the aggregate offering price of the actual Interests sold, including $400,000 worth of Interests sold to Rare Earth and its affiliates (the “Alternate Fee”), instead of the $320,000 Restructuring and Offering Fee.  The Alternate Fee will be payable by ASH in cash or Class C Interests of ASH valued at $10,000 per Interest, as agreed between ASH and RRF, and will be due on the earlier of the closing of the Offering or December 31, 2011.

 

3. Interests.

 

(a) All Membership Interests will have equal voting rights and will share equally in all distributions (including distributions or proceeds payable upon a Triggering Event), subject to (1) priority distribution rights and distribution catch-up rights described in paragraph 3(b), and (2) the Administrative Member’s 50% participation right described in paragraph 3(e).  All Memberships will be redeemable by ASH for $10,000 after payment of all distributions to which such Interests are entitled under paragraphs 3(b) and (c).

 

(b) All Membership Interests will be entitled to receive priority distributions annually from ASH of $700 per $10,000 Interest from January 1, 2011 through December 31, 2015.  However, priority distributions will be paid first to Class A Interests, second to Class B Interests and third to Class C Interests.  Priority distributions will be cumulative, so that all priority distributions must be paid in full to Class A Interests before any priority distributions are paid to Class B or C Interests, and all priority distributions must be paid in full to Class A and B Interests before priority distributions are paid to Class C Interests.  Rare Earth, James Wirth and certain named affiliates shall elect to defer receiving all priority distributions on their Class A Interests until all priority distributions to other holders of Class A and Class B Interests have been paid current.  Upon completion of priority distributions due Class A Interests through December 31, 2015, Class A Interests will not participate in distributions by ASH until Class B and Class C priority distributions have been paid current through December 31, 2015.  Upon completion of priority distributions due Class A and Class B Interests through December 31, 2015, Class A and Class B Interests will not participate in distributions by ASH until Class C priority distributions have been paid current through December 31, 2015.  If a Triggering Event of ASH occurs (including a sale or refinancing of substantially all of the assets of ASH or merger, sale, liquidation or other winding-up of ASH) prior to the payment of all priority distributions to Class A, B and C Interests, such priority distributions will be paid to the respective Members out of any proceeds of the event before general distribution of the proceeds to the Members (including the Administrative Member’s participation described in 3(e)).

 

(c) After December 31, 2015, all Membership Interests will be entitled to annual distributions of $700 per $10,000 Interest, which will be cumulative.  All Interests will share equally in all such distributions.  If a Triggering Event (as defined in 3(b)) of ASH occurs prior to the payment of any accumulated distributions to the Members, such accumulated distributions will be paid out of any proceeds of the event before general distribution of the proceeds to the Members (including the Administrative Member’s participation described in 3(e)).  In the event that funds generated from a Triggering Event are insufficient to pay the total amount of all such accumulated distributions owed to the Members, all Members will participate pro rata in the funds available for distribution to them.

 

(d) Distributions will be payable quarterly in arrears based on calendar quarters, due 40 days after the end of the quarter.  The first regularly scheduled distribution will be for the first calendar quarter January 1 through March 31st and will be payable 40 days later on May 10, 2011.  Thereafter, distributions will be made every three months provided, in the sole judgment and discretion of the Administrative Member, cash is available for such distributions.  ASH will use its best efforts to pay the quarterly distributions contemplated in paragraphs 3(b) and (c).

 

(e) In the event that either (a) all Interests have been redeemed or (b) all Interests are current in the distributions to which they are entitled and each Interest has received distributions totaling at least $10,000, Rare Earth will receive 50% of (1) any distributions made by ASH and (2) the proceeds from any Triggering Event (as defined in 3(b)) as consideration for its role as Administrative Member.

 

4. Payments from Rare Earth to RRF.  As consideration for the transactions contemplated by this Agreement and with the expectation that the transactions contemplated by this Agreement will be consummated, Rare Earth has paid RRF $400,000 prior to the date of this Agreement for Rare Earth’s current 12% Interest in ASH.

 

5. Administrative Member.  If a minimum of 160 Interests (excluding 40 Interests sold to Rare Earth) are not sold by December 31, 2011, Rare Earth will resign as Administrative Member of ASH, and Rare Earth and RRF will cause RRF to be elected as Administrative Member.  Rare Earth will use its best efforts to sell at least 160 Interests (excluding 40 Interests sold to Rare Earth) on or before January 31, 2011.

 

 

 

 

6. Removal of Administrative Member.  At any time, a Majority-in-Interest of the Class A Members may remove Rare Earth as Administrative Member and elect a new Administrative Member.  Notwithstanding its removal as Administrative Member pursuant to this paragraph, Rare Earth will retain the participation right described in paragraph 3(e) provided that 160 or more Interests have been sold by December 31, 2011.

 

7. Ownership of ASH.  The table below demonstrates the capital structure of ASH immediately upon restructuring, the capital structure in the event of the sale of 203 Class A Interests in the Offering, and the capital structure in the event of the sale of all 400 Class A Interests in the Offering.

 

	  	
Immediately Upon Restructuring

	
In the Event of Sale of 203 Class A Interests

	
In the Event of Sale of 400 Class A Interests

	
Owners

	
Interests

	
Interests

	
Interests

	
Third Parties

	
0

	
203 Class A

	
400 Class A

	
RRF

	
295 Class B

	
95 Class B

	
0 Class B

	
Rare Earth

	
40 Class C

	
72 Class C

	
0 Class C

	
Authorized & Unissued

	
65

	
30

	
0

	
Total

	
400

	
400

	
400

 

8. Miscellaneous.

 

(a) Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Arizona.

 

(b) Waiver.  No waiver or modification of this Agreement shall be valid unless in writing and executed by the party against which the waiver or modification is to be enforced.  No waiver of any breach or default shall operate as a waiver of any other breach or default, whether similar or different from the breach or default waived.

 

(c) Severability.  All provisions of this Agreement are severable, and if any provision is held to be invalid, illegal or unenforceable in any respect by any court of competent jurisdiction, the validity, legality and enforceability of the remaining provisions shall not be affected, and this Agreement shall be interpreted as if such invalid, illegal or unenforceable provisions were not contained herein.

 

(d) Entire Agreement.  This Agreement constitutes the complete understanding of the parties hereto, and supersedes all prior understandings or agreements, whether oral or written.  This Agreement shall be binding upon the inure to the benefit of the parties hereto, their successors, their legal representatives, heirs and assigns.

 

The parties have executed this Agreement effective as of the date first written above.

 

RRF LIMITED Partnership

By:  InnSuites Hospitality Trust

Its:  General Partner

 

          /s/  Marc E. Berg

By:             Marc E. Berg                                                   

Its:             Executive Vice President                           

RARE EARTH FINANCIAL LLC

 

          /s/  James F. Wirth

By:            James Wirth, Manager

ALBUQUERQUE SUITE HOSPITALITY LLC

By:  RRF Limited Partnership, Manager

          /s/  Marc E. Berg

By:            Marc E. Berg                                                   

Its:            Executive Vice President                                        

JAMES WIRTH

 

         /s/  James F. Wirth

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