Document:

ex-10_2.htm

MOODY NATIONAL REIT I, INC. 8-K

EXHIBIT 10.2

HOTEL MANAGEMENT

AGREEMENT

Homewood Suites by Hilton - Houston-Woodlands

The Woodlands, Texas

between

MOODY NATIONAL WOOD-HOU MT, LLC

and

MOODY NATIONAL HOSPITALITY MANAGEMENT, LLC

 

EFFECTIVE DATE:   November 8, 2012

 

  

  

  

 

HOTEL MANAGEMENT AGREEMENT

This Hotel Management Agreement (“Agreement”) is made November 7, 2012  by and between MOODY NATIONAL WOOD-HOU MT, LLC, a Delaware limited liability company, whose principal place of business is 6363 Woodway, Suite 110, Houston, Texas 77057 (“Owner”), and MOODY NATIONAL HOSPITALITY MANAGEMENT, LLC, a Texas limited liability company, whose principal place of business is 6363 Woodway, Suite 110, Houston, Texas 77057 (“Manager”).

 

RECITALS

 

WHEREAS, Moody National Wood-Hou Holding, LLC, a Delaware limited liability company (“Landlord”) is the owner of that certain tract of land located at 29813 I-45 North, The Woodlands, Texas 77381 (“Land”), upon which has been constructed a hotel known as Homewood Suites by Hilton - Houston-Woodlands (Hotel”);

 

WHEREAS, Owner leases the Hotel from Landlord pursuant to a Master Lease Agreement dated November 8, 2012 (as may have been subsequently amended, modified or supplemented);

 

WHEREAS, Manager is engaged in the business of managing hotels and Manager is experienced in the various components of managing a hotel;

 

WHEREAS, subject to the terms and provisions of this Agreement, Owner desires to have Manager manage and operate the Hotel; and

 

WHEREAS, Manager desires to perform such services on behalf, and for the account, of the Owner in accordance with the terms hereof.

 

NOW THEREFORE, in consideration of the foregoing recitals and the premises and the mutual covenants herein contained, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINED TERMS

 

Section 1.1             “Accounting Period” shall mean each of twelve (12) accounting periods of one (1) calendar month occurring each Fiscal Year.

 

Section 1.2             “Affiliates” (or Affiliate) shall mean any parent, subsidiary, affiliated or related corporation or other entity of Manager or Owner, or any officer, director, employee or stockholder of Manager or Owner or of any said parent, subsidiary, affiliated or related corporation or other entity, except a stockholder owning less than fifty percent (50%) of the issued and outstanding stock of Manager or Owner or of such parent, subsidiary, affiliated or related corporation or other entity directly or indirectly, who controls, is controlled by or is under common control provided however, for the purposes of to whom this Agreement may be assigned under Section 16.1 hereof, officers, directors and employees shall not be deemed to be Affiliates.  For purposes of this definition, the term “control” (including the terms “controlling,” “controlled by” and “under common control with”) of means the possession, directly or indirectly, of the power: (i) to vote more than fifty percent (50%) of the voting stock of any such entity; or (ii) to direct or cause the direction of the management and policies of any such entity, whether through the ownership of voting stock, by contract or otherwise.

 

  

  

  

 

Section 1.3              “Annual Business Plan” shall have the meaning set forth in Section 9.1 hereof.

 

Section 1.4              “Base Management Fee” shall have the meaning set forth in Section 10.1 hereof.

 

Section 1.5              “Capital Renewals” shall mean a collective term for (a) normal capital replacements of, or additions to, FF&E, and (b) special projects designed to maintain the Hotel in a first-class condition in accordance with the standards contemplated by this Agreement, including without limitation, renovation of the guest room areas, public space, food and beverage facilities, or back of the house areas, which projects will generally comprise replacements of, or additions to, FF&E, but may include revisions and alterations to the Hotel; most of the expenditures for such special projects will be capitalized, but a portion thereof may be currently expended, such as the purchase of smaller items of FF&E, or expenditures which are ancillary to the overall project but which are properly chargeable to “Property Operations and Maintenance” under the Uniform System.

 

Section 1.6             “Capital Renewals Budget” shall mean a budget covering the estimated Capital Renewals for three (3) years which indicates in reasonable detail the replacements of, or additions to, FF&E, and the nature of the special projects covered thereby, as approved by the Owner.

 

Section 1.7              “ERISA” shall mean the Employees Retirement Income Security Act of 1974, as amended.

 

Section 1.8             “Fiscal Year” shall mean a Calendar Fiscal Year starting on January 1 and ending on December 31 or portion thereof depending upon the Management Commencement Date.

 

Section 1.9              “Franchise Agreement” shall mean that certain Franchise Agreement by and between Franchisor and Owner (as franchisee) dated ___________________________ , 2012 and any subsequent and/or future franchise agreements entered into by Owner (as franchisee) Franchisee regarding the Hotel.

 

Section 1.10            “Franchisor” shall mean Promus Hotels, Inc.

 

Section 1.11           “Furniture, Fixtures, and Equipment” (“FF&E”) shall mean all furniture, furnishings, light fixtures, outfittings, apparatus, equipment and all other items of personal property customarily installed in, held in storage for use in, used in or required for use in connection with the operation of the Hotel.

 

Section 1.12           “Gross Operating Revenues” shall mean all receipts, revenues, income and proceeds of sales of every kind received by Manager directly or indirectly from the operation of the Hotel, and shall include, without limitation: room rentals; rent or other payments received from sub-tenants, licensees, and occupants of commercial and retail space located in the Hotel; the proceeds of insurance received by Owner or Manager with respect to use and occupancy or business interruption insurance; deposits forfeited and not refunded; frequent guest program payments; and any amount recovered in any legal action or proceeding or settlement thereof which amount represents and was directly related to, the collection of accounts receivables, cancellation fees or other uncollected revenue.  Gross Operating Revenues shall exclude all sales and excise taxes and any similar taxes collected as direct taxes payable to taxing authorities; gratuities or service charges collected for payment to and paid to employees; credit or refunds to guests; proceeds of insurance, save and except for proceeds of insurance with respect to use and occupancy or business interruption insurance; proceeds of sales of property attributable under the accrual method of accounting, pursuant to generally accepted accounting practice or the Uniform System to a different Fiscal Year; proceeds from condemnation or casualty; interest earned on the Reserve Fund (as defined herein); and financing proceeds obtained by the Owner.

 

  

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Section 1.13            “Group Services” shall have the meaning set forth in Section 5.2 hereof.

 

Section 1.14           “Hazardous Materials” shall mean any substance or material containing one or more of any of the following: “hazardous material,” “hazardous waste,” “hazardous substance,” “regulated substance,” “petroleum,” “pollutant,” “contaminant,” or “asbestos,” as such terms are defined in any applicable environmental law, in such concentration(s) or amount(s) as may impose clean­up, removal, monitoring or other responsibility under any applicable environmental law, or which may present a significant risk of harm to guests, invitees or employees of the Hotel.

 

Section 1.15            “Hotel” shall mean the Homewood Suites by Hilton - Houston-Woodlands hotel referred to in the first recital herein consisting of 91 units.

 

Section 1.16           “House Profit” shall mean the excess, during each Fiscal Year (and proportionately for any period less than a Fiscal Year), of Gross Operating Revenues over expenses and deductions incurred in the operation of the Hotel by Manager in fulfilling its duties hereunder during such period, determined in accordance with the accounting system established by the Uniform System (except as modified by this Agreement).  In arriving at House Profit, the following expenses shall be proper deductions from Gross Operating Revenues insofar as they relate to the operation of the Hotel: salaries, wages, fringe benefits, payroll taxes, workers’ compensation costs, and other costs related to Manager’s employees in or assigned to the Hotel, including Area Manager, including, without limitation, any claim for wrongful discharge and/or discrimination which expenses are not paid by insurance (provided, however, if such claim is determined to have been caused by the negligence or willful misconduct of any Key Employee, the amount for which Manager is required to indemnify Owner pursuant to this Agreement and has in fact paid to Owner, shall not be a deduction); department expenses; administrative and general expenses; credit card and collection expenses; and the cost of Hotel advertising and business promotion and public relations; heat, light and power; routine repairs, maintenance, landscaping, snow removal, and minor alterations including the cost of maintenance contracts for equipment and any insurance costs related thereto; costs of sales and the cost of replacing inventories and fixed asset supplies consumed in the operation of the Hotel such as linen, china, glassware, silver, uniforms and similar items; sales or excise taxes on goods or services provided to the Hotel; a reasonable reserve for uncollectible accounts receivable as determined by Manager; all costs and fees of independent accountants or other third parties who perform services required or permitted hereunder on behalf of the Hotel; the cost and expense of technical consultants and operational experts for specialized services provided to the Hotel; the Base Management Fee; rental payments on telephone leases, long distance access systems, and other operational leases approved by Manager; all costs or expenses incurred under any franchise, such as franchise fees if applicable, system charges for such items as reservations, frequent traveler programs, and airline points, system advertising or promotional costs, but excluding the initial fees paid in consideration of granting any franchise; and all other out of pocket actual costs and expenses and fees incurred by the Manager in the proper and efficient operation of the Hotel, including, but not limited to, all licenses, travel costs, and out-of-pocket expenses of employees of Manager or its Affiliates employed at the Hotel or performing services for the Hotel such as fax, postage, telephone and express mail.

 

Section 1.17           “Independent Auditor” shall mean a reputable national firm of independent certified public accountants having hotel experience, recommended by Manager from time to time and approved by Owner.

 

Section 1.18           “Key Employees” shall mean (to the extent such positions exist): (a) at the Hotel level, any salaried manager including Area Manager and (b) at the corporate level, positions at or below Vice President Hospitality.

 

  

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Section 1.19           “Legal Requirements” shall mean all public laws, statutes, ordinances, orders, rules, regulations, permits, licenses, authorizations, directions and requirements of all governments and governmental authorities, which, now or hereafter, may be applicable to the Hotel premises and the operation thereof, including, without limitation, those relating to zoning, building, life/safety, environmental and health, employee benefits, and providing continued health care coverage under ERISA.

 

Section 1.20           “Management Commencement Date” shall be _________________________, 2012.

 

Section 1.21           “Manager” shall mean Moody National Hospitality Management, LLC, and its permitted successors and assigns.

 

Section 1.22           “Net Operating Income” shall mean House Profit less property taxes and insurance expense.

 

Section 1.23           “Operating Funds” shall have the meaning set forth in Section 7.2 hereof.

 

Section 1.24           “Operating Supplies” shall mean all chinaware, glassware, linens, silverware, uniforms, utensils and other similar items necessary to the operation of the Hotel.

 

Section 1.25           “Termination Fee” shall have the meaning set forth in Section 12.3 hereof.

 

Section 1.26           “Reserve Fund” shall have the meaning set forth in Section 7.3.

 

Section 1.27           “Uniform System” shall mean the Uniform System of Accounts for the Lodging Industry, “Tenth Revised Edition”, 2006, as revised and adopted by the Hotel Association of New York City, Inc., from time to time and as modified by applicable provisions of this Agreement.

 

Other terms are defined in the Recitations and the further provisions of this Agreement, and shall have the respective meanings there ascribed to them.

 

ARTICLE II

 

ENGAGEMENT OF MANAGER

AND COMMENCEMENT OF MANAGEMENT OF THE HOTEL

 

Section 2.1             Engagement of Manager to Manage Hotel. Owner hereby appoints Manager as Owner’s exclusive independent contractor, subject to the terms of this Agreement, to supervise, direct and control the management and operation of the Hotel, and Manager hereby undertakes and agrees to perform, as an independent contractor of and for the account of Owner, all of the services and to comply with all of the provisions of this Agreement.

 

Section 2.2             Management Commencement Date and Takeover Activities.

 

A.           Manager shall assume management and operation of the Hotel at 12:00:01 AM on the Management Commencement Date.

 

  

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B.           In connection with assuming management of the Hotel, Manager must undertake certain activities prior to and following the Management Commencement Date. These activities (“Takeover Activities”) shall include, without limitation, the following: (i) recruiting, relocating, training, and employing certain management staff required for the Hotel; (ii) assisting Owner (as requested) in applying for and procuring (in Manager’s name and/or Owner’s name as required by local authorities) all licenses and permits required for the operation of the Hotel, including, but not limited to, all licenses for the sale of alcoholic beverages (if applicable); and (iii) any other activities customarily required in order to assume management responsibilities of a hotel under current operation or newly constructed hotel (as applicable), including, but not limited to verifying inventories and other closing allocations on closing statements.

 

Section 2.3            Representations of Manager. Manager represents that it is experienced and capable in the planning, decorating, furnishing, equipping, promoting, management, and operation of limited-service hotels, and Manager covenants and agrees to manage and operate the Hotel and to protect and preserve the assets that comprise the Hotel. Manager covenants and agrees to manage and operate the Hotel in accordance with the standards and specifications set forth in the Franchise Agreement for the Hotel, so long as Owner provides sufficient capital to enable Manager to operate the Hotel in good standing under the Franchise Agreement, and in accordance with the Annual Business Plan. Manager represents and acknowledges that as of the Management Commencement Date Manager will cause the Hotel to be adequately staffed and capable of operating.

 

ARTICLE III

 

OPERATION OF THE HOTEL AFTER

THE MANAGEMENT COMMENCEMENT DATE

 

Section 3.1             Authority of Manager. On and after the Management Commencement Date, the Manager shall have the exclusive authority and duty to direct, supervise, manage and operate the Hotel in an efficient and economical manner and to determine the programs and policies to be followed in connection therewith, all in accordance with the provisions of this Agreement and the Annual Business Plan.  Subject to the provisions of this Agreement and the Annual Business Plan, Manager shall have the discretion and control in all matters relating to the management and operation of the Hotel. Without limiting the generality of the foregoing, Manager shall have the authority and duty consistent with the Annual Business Plan to:

 

	 	
A.

	
Recruit, employ, relocate, pay, train, supervise, and discharge all employees and personnel necessary for the operation of the Hotel in a manner consistent with Manager’s practices at other comparable hotels managed and operated by Manager (taking into account locational differences). Included in the foregoing shall be the determination of all personnel policies, which shall be in writing;

	 	  	  
	 	
B.

	
Establish all prices, price schedules, rates and rate schedules, rents, lease charges, concession charges, and, in connection therewith, the supervision, direction and control of the collection, receipt and giving of receipts for all services or income of any nature from the Hotel’s operations;

	 	  	  
	 	
C.

	
Supervise and maintain complete books and records, including without limitation, the books of accounts and accounting procedures of the Hotel which shall at all times be kept at the Hotel or in its Affiliate’s corporate office or other suitable location pursuant to the operation of centralized accounting services;

	 	  	  
	 	
D.

	
Administer leases, license and concession agreements for all public space at the Hotel, including all stores, office space and lobby space. Manager shall not, without first obtaining Owner’s prior written consent, enter into any space leases. All such leases shall be in Owner’s name and may be executed by Manager on Owner’s behalf;

 

  

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E.

	
Keep the Hotel and the Furniture, Fixtures, and Equipment in good order, repair and condition, including, without limitation, making necessary replacements, improvements, additions and substitutions to the Hotel, subject to the approved Annual Business Plan and in conformity with all Legal Requirements and in accordance with the Franchisor’s standards for the operation of the Hotel;

	 	  	  
	 	
F.

	
Negotiate and enter into, on behalf of the Owner, service contracts and licenses required in the ordinary course of business in operating the Hotel, including, without limitation, contracts for life/safety systems maintenance, electricity, gas, telephone, cleaning, elevator and boiler maintenance, air conditioning maintenance, master television service, master internet service, laundry and dry cleaning, and other services which Manager deems advisable; provided however, any contract for a term in excess of one (1) year or an annual payment in excess of Ten Thousand and No/100 Dollars ($10,000.00) shall be approved by Owner, which approval shall not be unreasonably withheld or delayed;

	 	  	  
	 	
G.

	
Negotiate and enter into, on behalf of Owner, agreements for banquet facilities and guest rooms and agreements to provide entertainment for the Hotel, and licenses for copyright music and videos;

	 	  	  
	 	
H.

	
Supervise and purchase or arrange for the purchase in the most economical manner of all inventories, provisions, and Operating Supplies, which, in the normal course of business, are necessary and proper to maintain and operate the Hotel in accordance with the Annual Business Plan;

	 	  	  
	 	
I.

	
Timely prepare and submit to Owner the Annual Business Plan as hereinafter described;

	 	  	  
	 	
J.

	
Perform such other tasks as are customary and usual in the operation of a hotel of a class and standing consistent with the Hotel’s facilities;

	 	  	  
	 	
K.

	
Operate the Hotel in accordance with the standards and specifications set forth in the Franchise Agreement for the Hotel so long as Owner provides sufficient capital to enable Manager to operate the Hotel in good standing under the Franchise Agreement;

	 	  	  
	 	
L.

	
Provide risk management services in accordance with the terms of this Agreement;

	 	  	  
	 	
M.

	
Manager will not permit the presence, use, storage, handling or disposal of any Hazardous Materials on the Hotel premises and in violation of any Legal Requirements and regardless of whether or not a given Hazardous Material is permitted on the Hotel premises under applicable Legal Requirements, Manager shall only bring on the premises such Hazardous Materials as are needed in the normal course of business of the Hotel; and

	 	  	  
	 	
N.

	
Subject to Article XVII, administer and remit all real estate, personal property taxes, and ad valorem property taxes, assessments and similar charges on or relating to the Hotel during the Term of this Agreement.

 

Section 3.2            Employees. Manager or an Affiliate of Manager shall at all times be the employer of all employees in the Hotel. Owner’s and Manager’s agents and employees who provide consulting services to Manager in connection with the Hotel, shall be acting as the agent of the Owner. Manager shall have complete authority over pay scales and all benefit plans as long as the pay scales and benefits plans are reasonable and competitive in the market and consistent with those at comparable hotels managed by Manager or its Affiliates.

 

  

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Section 3.3             Independent Contractors.  Manager may hire independent contractors to provide such legal, accounting and other professional services as Manager deems necessary or appropriate in the ordinary course of business in connection with the operation of the Hotel and at an expense approved by Owner and itemized in the Annual Business Plan.

 

ARTICLE IV

 

OPERATING EXPENSES PAID BY OWNER

 

Section 4.1             Expenses Incurred by Manager on Behalf of Owner. Everything done by Manager in the performance of its obligations and all expenses incurred under this Agreement shall be for and on behalf of Owner and for its account except the services referred to in Article V hereof, which shall be rendered and performed by Manager or its Affiliates at their expense and not separately charged to Owner, except as otherwise provided in Article V.

 

Section 4.2             Liabilities to Third Parties. Except to the extent provided in Article XVIII hereof or elsewhere herein, all liabilities to third parties arising in the course of business of the Hotel are and shall be the obligations of Owner, and Manager shall not be liable for any of such obligations by reason of its management, supervision and operation of the Hotel for Owner.

 

Section 4.3             Manager Not Obligated to Advance Own Funds. Neither Manager nor any of its Affiliates shall be obligated to advance any of its own funds to or for the account of Owner, nor to incur any liability unless Owner shall have furnished Manager with funds necessary for the discharge thereof prior to incurring such liability. If Manager shall have advanced any funds in payment of an expense in the maintenance and operation of the Hotel, Manager shall promptly provide Owner with written notice upon making Owner such advances and Owner shall reimburse Manager therefor no later than five (5) days after receipt of such notice. Notwithstanding the foregoing, Manager shall pay from its own funds the expenses hereinafter described in Section 5.1 hereof.

 

ARTICLE V

 

SUPPORT SERVICES PAID BY MANAGER’S AFFILIATES

 

Section 5.1             Normal Consulting Services of Manager’s Affiliates. Except as hereinafter provided in Section 5.2, after the Management Commencement Date, the normal consulting services of the corporate officers and employees of Manager’s Affiliates, including its corporate executives for operations, room operations, food and beverage, sales and marketing, finance and administration, real estate, and accounting (excluding the Accounting Fee), to be rendered from time to time to Manager in connection with the operations of the Hotel, shall be provided by Manager’s Affiliates to Manager at Manager’s sole cost and expense and not charged to Owner.

 

  

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Section 5.2             Exceptions for Certain Support Services of Manager’s Affiliates. Notwithstanding the foregoing, Owner shall reimburse Manager for: (i) the appropriate and pro-rata share of salaries, wages or benefits of any officers, directors or employees of Manager or Manager’s Affiliates who shall be regularly or temporarily employed or assigned on a full-time basis at the Hotel subject to (unless included in the Annual Business Plan) the prior written approval of Owner; (ii) personnel providing legal services to Manager in connection with matters involving the Hotel, which services shall be charged at rates which approximate Manager’s Affiliates’ costs associated with such personnel and which services, unless included in the Annual Business Plan, shall be subject to the prior written approval of Owner; (iii) the out-of-pocket expenses directly related to the operation and management of the Hotel; and (iv) certain other services (“Group Services”) best provided to Owner and Manager’s Affiliates on a group rather than on an individual basis, including, without limitation, any insurance program Manager may institute.  Manager and its Affiliates may profit from such programs and services through volume rebates, rate reductions, and other incentives from outside vendors, through markups, internal profits, and other benefits.  Manager’s intention is to make available to Owner certain benefits of group or national purchasing programs on a number of items that can be used by or at the Hotel, although Manager cannot and does not assure or represent that any item or that the total of items purchased through any Group Services program will be at a cost lower than may otherwise be available to Owner or the Hotel from other sources.  Owner hereby acknowledges the foregoing disclosure and consents to the retention by Manager or its Affiliates of such rebates, incentives, profits and other benefits which are paid, accrue to, or are retained by Manager in connection with the Group Services programs Owner elects to participate in.  Owner specifically acknowledges and stipulates that Manager, in its capacity as operator of the Hotel or otherwise, is not acting as a fiduciary to Owner in connection with any aspect of Group Services.  Further, Owner agrees that Manager is not required to disclose to Owner any profit, rebate, markup, incentive or other similar payment that Manager receives or retains from any markup or other source, including third party vendors and suppliers and Affiliates of Manager, such disclosure being specifically waived.  Owner hereby waives any claim it might have to any profit, rebate, markup, incentive or similar sum which Manager or an Affiliate of Manager receives or retains in connection with purchases for the Hotel through any Group Services program, if any.

 

ARTICLE VI

 

COMPLIANCE WITH LAWS

 

Section 6.1             Compliance by Manager and Owner After Management Commencement Date. Manager shall make all reasonable efforts, at expense of Owner, to comply with all Legal Requirements, including but not limited to, all laws, rules, regulations, requirements, orders, notices, determinations and ordinances of any governing authority, including, without limitation, the state and local liquor authorities, and the requirements of any insurance companies covering any of the risks against which the Hotel is insured (provided, however, if such noncompliance is determined to have been caused by the gross negligence or willful misconduct of the Manager, the amount for which Manager is required to indemnify Owner pursuant to Article XVIII hereof shall not be an expense of Owner and Manager shall reimburse Owner or pay same directly). If the cost of compliance exceeds Two Thousand Dollars ($2,000) in any instance, Manager shall promptly notify Owner, and Owner shall promptly provide Manager with funds for the payment of such costs.

 

Section 6.2             Owner’s Right to Contest or Postpone Compliance. With respect to a violation of any such laws or rules, the Owner shall have the right to contest any of the foregoing and postpone compliance pending the determination of such contest, if so permitted by law and not detrimental to the operation of the Hotel but in such event, Owner shall indemnify and hold harmless Manager from any loss, cost, damage or expense, resulting solely from such postponement.

 

Section 6.3             Manager’s Right to Terminate Agreement. Notwithstanding anything in this Agreement to the contrary and subject to Section 12.4, if within thirty (30) days of receiving Manager’s written request, Owner fails to approve the changes, repairs, alterations, improvements, renewals or replacements to the Hotel which Manager determines in its reasonable judgment are necessary to (i) protect the Hotel, Owner and/or Manager from innkeeper liability exposure; or (ii) ensure material compliance with any applicable code requirements pertaining to life safety systems requirements; or (iii) ensure material compliance with any and all Legal Requirements including, but not limited to, all state, local, or federal employment law, including, without limitation, the Americans with Disabilities Act, then Manager may thirty (30) days after providing Owner an additional notice regarding its termination and, terminate this Agreement any time after the expiration of such second thirty (30) day notice period upon seven (7) days’ written notice.

 

  

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ARTICLE VII

 

OPERATING ACCOUNT AND OPERATING FUNDS

 

Section 7.1             Manager shall establish and implement Owner’s cash management plan.  Manager shall establish, at such bank(s) designated by the Owner, at least two hotel accounts necessary for the operation of the Hotel (collectively, the “Agency Accounts”).  The Agency Accounts are the property of Owner and Owner may not more frequently than weekly direct Manager to distribute into the Owner Account, within one (1) business day after receipt of notice from Owner, any funds remaining in the Operating Account after accrued fees and expenses have been either disbursed.

 

	 	
A.

	
Owner Account.  Manager shall deposit all monies from the operation of the Hotel and due to Owner into a depository account for the sole benefit of Owner.  Manager may endorse any and all checks drawn to the order of Owner for deposit in the Owner Account, however, Manager shall have no rights to withdrawal any monies from the Owner Account, or otherwise direct, any such funds into the Operating Account (as defined below).

	 	  	  
	 	
B.

	
Operating Account.  Owner will supply to Manager any working capital for the operation of the Hotel, which sum shall be deposited into one or more separate operating accounts to assure the timely payment of expenses of the Hotel in accordance with the Franchise Agreement and Annual Business Plan (the “Operating Account”).  If at any time during the Term, the funds available from the Hotel operations for the payment of any of the costs of the Hotel, including Manager’s Management Fee and reimbursable expenses, shall be insufficient to pay the same as they become due and payable, Owner shall within five (5) days of written request from Manager, deposit sufficient funds in the Hotel bank accounts to make such payments.  Business days shall exclude Saturdays, Sundays and all statutory holidays observed under the laws of the state where the Hotel is located.

 

Section 7.2             Operating Funds. From time to time if and as required, Owner shall maintain cash in the Operating Account (“Operating Funds”) sufficient in amount to properly operate the Hotel (including amounts sufficient to pay those expenses described as deductions from Gross Operating Revenues). If at any time during the Term, the Operating Funds on hand fall below $35,000 (the “Minimum Balance”), Owner shall, within five (5) days after Manager’s written notice to Owner, deposit in the Operating Account additional funds in an amount equal to the difference between the Operating Funds then on hand and the Minimum Balance. The Operating Funds shall at all times be the property of the Owner.

 

  

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Section 7.3             Reserve Fund Account.  There shall be established the Reserve Fund in an interest bearing account in a bank selected by Owner and approved by Manager which approval shall not be unreasonably withheld. The Reserve Fund shall at all times be the property of the Owner. Any amounts remaining in the Reserve Fund at the end of each Fiscal Year will be carried forward until fully expended, but shall not be credited against required contributions to the Reserve Fund for any subsequent Fiscal Year.  Owner shall deposit into a reserve fund (“Reserve Fund”) an annual amount of up to Five Percent (5%) of Gross Operating Revenues (the “FF&E Percentage Contribution”). Manager shall deduct the FF&E Percentage Contribution on a monthly basis from Gross Operating Revenues and deposit such amount in the Reserve Fund. The Reserve Fund shall be used only for additions or replacements to FF&E and Capital Renewals as contemplated by the Capital Renewals Budget. It is understood that the amounts to be reserved for Capital Renewals under this Section 7.3 may not represent the amounts which may be required in later years to keep the Hotel in the condition contemplated by this Agreement and, accordingly, the parties recognize that the Capital Renewals Budgets in future years may call for additional expenditures in excess of the amounts being reserved therefor under this Section 7.3,which additional expenditures, if necessary, shall be paid from the Operating Funds (such expenditure shall not be considered an expense in calculating House Profit) and the balance, if any, shall be paid by Owner.  Notwithstanding anything herein to the contrary, in the event Owner’s lender requires the same or greater reserve requirements, and Owner provides Manager reasonable evidence to this effect, the Reserve Fund shall not be required.

 

ARTICLE VIII

 

BOOKS, RECORDS AND FINANCIAL STATEMENTS

 

Section 8.1             Accounting System. Manager shall keep full and adequate books of account and other records reflecting the results of operation of the Hotel on an accrual basis, all substantially in accordance with the Uniform System. The Fiscal Year used by Manager will consist of twelve (12) Accounting Periods of one (1) calendar month each. Except for such books and records as Manager may elect to keep in its Affiliate’s corporate office or other suitable location pursuant to the operation of centralized accounting services, the books of account and all other records relating to, or reflecting the operation of, the Hotel shall be kept at the Hotel and shall be available to Owner and its representatives at all reasonable times for examination, audit, inspection and transcription. All of such books and records, including, without limitation, books of accounts, guest records and front office records, at all times shall be the property of Owner and shall not be removed from the Hotel by Manager without notifying Owner. Upon termination of this Agreement, all the books and records shall be turned over to Owner to ensure the orderly continuation of the operation of the Hotel, but the books and records shall thereafter be available to the Manager at all reasonable times for inspection, audit, examination and transcription.

 

Section 8.2             Financial Statements. Manager shall deliver to Owner within twenty-one (21) days after the end of each Accounting Period a profit and loss statement showing the results of the operation of the Hotel for such Accounting Period and the Fiscal Year to date and a balance sheet as of the close of such Accounting Period. Manager shall deliver to Owner within thirty (30) days after the end of each Fiscal Year a profit and loss statement showing the result of operation of the Hotel during such Fiscal Year, and the House Profit, if any, and Net Operating Income, for such Fiscal Year and a balance sheet for the Hotel as of the close of such Fiscal Year. Manager shall, if Owner elects to conduct an audit, cooperate with the Independent Auditor so as to allow the Independent Auditor to deliver audited financial statements to Owner within ninety (90) days after the end of each Fiscal Year. Any disputes as to the contents of any such statements or any accounting matter hereunder, shall be determined by the independent auditor mutually agreed upon by Owner and Manager (the “Independent Auditor”) whose decision shall be final and conclusive on Manager and Owner, the expense for which shall be an operating expense.

 

Section 8.3             Initial Accounting Records. Owner shall provide Manager with opening balance sheet entries for Manager’s use within fifteen (15) days following the Management Commencement Date, and Manager shall not be responsible for any reconstruction of accounting records prior to the Management Commencement Date. Manager shall not be responsible for the submission of a completed profit and loss statement prior to thirty (30) days after the receipt of the balance sheet entries. Owner acknowledges that Manager has no knowledge of and cannot certify the accuracy of any historical financial information provided to Manager by Owner.

 

  

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ARTICLE IX

 

ANNUAL BUSINESS PLAN

 

Section 9.1             Preparation of Annual Business Plan. Manager shall submit to Owner as soon as reasonably practicable after the Management Commencement Date a forecast of performance for the balance of the year in which the Management Commencement Date Occurs.  Thereafter, at least thirty (30) days prior to the end of each Fiscal Year, Manager shall submit an annual business plan for the succeeding Fiscal Year (“Annual Business Plan”). The Annual Business Plan shall include: an operating budget showing estimated Gross Operating Revenues, department profits, operating expenses, House Profit and Net Operating Income for the forthcoming Fiscal Year for the Hotel; a marketing plan; a Capital Renewals Budget; all in reasonable detail and, where appropriate, with the basis for all assumptions expressly set forth. Owner shall review the Annual Business Plan and either approve or notify Manager of any objections to the Annual Business Plan in writing within twenty (20) days of its receipt thereof.  Owner’s approval of the Annual Business Plan shall not be unreasonably withheld or delayed. The parties will attempt to resolve in good faith any objections by Owner within thirty (30) days following Manager’s receipt of Owner’s disapproval.

 

Section 9.2             Annual Business Plan Disputes. If Manager and Owner are unable to agree upon an Annual Business Plan or any details thereof, the final Annual Business Plan shall be determined by arbitration in accordance with the provisions of Section 19.7 hereof, it being understood that only those details, line items or portions of the Annual Business Plan which are in dispute shall be the subject of such arbitration. Pending the conclusion of any such arbitration proceeding, the Annual Business Plan for all purposes under this Agreement shall be as follows: (a) the undisputed items shall be as set forth in the proposed Annual Business Plan and (b) the disputed items shall be modified by increasing the actual expenses incurred by the Hotel during the prior year in accordance with the Consumer Price Index (for purposes hereof, Consumer Price Index shall mean Consumer Price Index-Cities-All Urban Consumers (1982-84=100), issued by the Bureau of Labor Statistics of the United States Department of Labor). Owner and Manager agree that arbitration or mediation shall be the sole procedure for resolving any dispute regarding the Annual Business Plan.

 

Section 9.3             Deviations from Annual Business Plan. Manager shall diligently pursue all feasible measures to enable the Hotel to adhere to the Annual Business Plan, provided, however, Owner acknowledges and agrees that Manager will not be responsible for any variances from the Annual Business Plan. In the event that Manager determines that circumstances require that there be material changes in the Annual Business Plan, Manager shall so notify Owner as soon as practically possible after the need for such changes becomes apparent. Such determination is made when the annual amount in a specified department described below is forecasted to exceed the budgeted amount set forth in the Annual Business Plan as reflected in the monthly forecast.  For purposes of this Section 9.3, (i) a variation of more than ten percent (10%) below or in excess of the amount set forth in the Annual Business Plan for either the Sales & Marketing department or the Repairs & Maintenance department; or (ii) a variation of more than ten percent (10%) in excess of the amount set forth in the Annual Business Plan for any other major deduction category in calculating House Profit (e.g., a department such as General and Administrative), shall be deemed to be material. Any such material change shall be subject to Owner’s approval; provided, however, Owner’s approval shall not be required to the extent such material change consists of: (a) expenses which are deducted from House Profit, (b) expenses which are nondiscretionary by virtue of being determined by a third party or governmental entity, such as minimum wages under collective bargaining agreements, utility costs, franchise fee increases, changes in franchise standards and sales taxes, (c) the amount of increased expenses resulting directly from increases in volume, provided that, departmental profit margins and House Profit margins are not diminished or otherwise negatively affected or (d) expenditures as may be required if Manager reasonably believes such expenditure to be required by any emergency situation imminently threatening life, health or safety (provided that Manager shall notify Owner of such emergency and the need for such expenditure in advance or if not possible in advance then as soon as practicable). Notwithstanding anything herein to the contrary, Manager is not warranting or guaranteeing in any respect the actual operating results of the Hotel.

 

  

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ARTICLE X

 

MANAGER’S FEES AND REIMBURSEMENTS

 

Section 10.1           Base Management Fee. During each Fiscal Year after the Management Commencement Date (and for a fraction of any partial Fiscal Year), in consideration of the services Manager is to render under this Agreement, Manager will be paid a fee (“Base Management Fee”) at the rate of three percent (3%)  of Gross Operating Revenues per Fiscal Year. The Base Management Fee will be paid in installments by deducting such fee from Gross Operating Revenues immediately following each Accounting Period at the rate of three percent (3%) of Gross Operating Revenues for that Accounting Period.

 

Section 10.2           Accounting Fee. In addition to the Base Management Fee, the Manager shall be paid a fee for centralized accounting services (the “Accounting Fee”) equal to $2,500 per Accounting Period during the Term of this Agreement and for one (1) Accounting Period after the termination of this Agreement. The Accounting Fee shall be increased each year in accordance with increases in the Consumer Price Index-Cities-All Urban Consumers (1982-84 — 100), issued by the Bureau of Labor Statistics of the United States Department of Labor.

 

Section 10.3           Technical, Procurement or Other Services. Service fees for technical or procurement services for the Hotel shall be paid to Manager or its Affiliates if and only if Owner requests such services of Manager, or any other services beyond the scope of services to be provided pursuant to this Agreement. The amount of fees shall be agreed to by Owner and Manager prior to commencing such services. Technical services include renovation coordination, design review, construction management and related services. Procurement services relate to purchase and installation of furniture, fixtures, equipment, and operating equipment of the hotel.  Other services may include such services as Revenue Management, IT Support, Human Resource-related support and so forth.

 

Section 10.4           Takeover Expenses. Appropriate expenses incurred in connection with the Takeover Activities (the “Takeover Expenses”) shall be paid by Owner and advanced to Manager in accordance with an accounting of such expenses and any and all relevant documents to support such accounting prepared by Manager.

 

  

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ARTICLE XI

 

INSURANCE

 

Section 11.1           Insurance Coverage. Manager and/or Owner (as identified in Exhibit A) shall procure and maintain from and after the Management Commencement Date, at Owner’s cost and expense, the insurance policies as provided on Exhibit A in amounts sufficient to reasonably and adequately protect Owner and Manager against loss or damage arising in connection with the ownership, management and operation of the Hotel, as well as to satisfy the requirements of Owner’s lender and the Franchise Agreement.  The Owner shall be responsible for obtaining the insurance coverages identified in Part A to Exhibit A.  These policies will be in the name of Owner and will name the Manager as an additional insured.  The Manager shall be responsible for obtaining the insurance coverages identified in Part B to Exhibit A.  These policies will be in the name of Manager and name the Owner of the Hotel as an additional insured.  All insurance policies shall be issued by insurance companies having an A.M. Best’s rating of not less than A – IX.  Any insurance required to be provided by Manager in Section 11.1 may be provided under the blanket insurance policy of Manager, which policy covers other hotel properties managed by Manager.  All premiums, costs and expenses shall be allocated among the properties participating under such program in accordance with generally accepted underwriting standards.  Owner assumes no responsibility for, or interest in, additional premiums or proceeds (other than standard audit adjustments) generated by the blanket insurance policy of Manager.  Owner shall be provided certificates evidencing the insurance coverages required pursuant to Section 11.1 on or before thirty (30) days after the Management Commencement Date, and upon any and all subsequent renewals thereof.  Owner shall have the right at any time for any reasonable period of time to place property and casualty insurance coverage, and with the consent of Manager (which shall not be unreasonably withheld or delayed) any other required coverage under this Section 11.1.  If Owner notifies Manager that Owner shall place the insurance coverage, Manager shall cooperate with Owner and shall terminate, with advance notice to Owner, any overlapping insurance coverage.

 

Section 11.2           Waiver of Subrogation - Owner Assumes Risk of Adequacy. Neither Manager nor Owner shall assert against the other, and do hereby waive with respect to each other, or against any other entity or person named as additional insureds on any policies carried under this Article XI, any claims for any losses, damages, liability or expenses (including attorneys’ fees) incurred or sustained by either of them on account of injury to persons or damage to property arising out of the operation or maintenance of the Hotel, to the extent that the same are covered by the insurance required under this Article XI. Each policy of insurance shall contain a specific waiver of subrogation reflecting the provisions of this Section 11.2, and a provision to the effect that the existence of the preceding waiver shall not affect the validity of any such policy or the obligation of the insurer to pay the full amount of any loss sustained. Owner and Manager acknowledge that they have agreed on the adequacy of the amounts of any insurance coverage provided under this Agreement.

 

ARTICLE XII

 

TERM

 

Section 12.1           Term. This Agreement shall be for a period commencing on the Management Commencement Date and unless sooner terminated as hereinafter provided, shall continue until the end of the Fiscal Year in which the tenth (10th) annual anniversary of the Management Commencement Date occurs (the “Term”). Thereafter, and subject to the mutual written consent of the Owner and Manager, this Agreement shall automatically renew for four (4) consecutive five (5) year renewal terms (“Renewal Terms”) unless Manager or Owner provides written notice of termination to the other party at least one hundred and eighty (180) days prior to the end of the then current term. Any reference in this Agreement to “Term” shall be deemed to be a reference to the Initial Term and any Renewal Term.

 

Section 12.2           Early Termination.  Owner and Manager acknowledge that, but for the Term of this Agreement and the parties’ commitment to the contemplated relationship for the Term of this Agreement, the Manager would not have made the significant investments of money and time necessary to commence and conduct services under this Agreement and foregone other opportunities.  In the event that this Agreement is terminated prior to the expiration of the Term (or any Renewal Term), for any reason other than Manager Default and except as set forth in Section 12.4, then Owner shall pay to Manager the Termination Fee (as calculated below).  Owner and Manager further acknowledge and agree that Manager’s damages in the event of a termination of this Agreement would be difficult or impossible to determine, including, without limitation, loss of management fees, harm to Manager’s reputation, loss of goodwill, disruption of operations, loss of contributions to budgeted system expenses and loss of a hotel with strategic significance to Manager’s system, and the Termination Fee is a fair estimate of those damages which has been agreed to in an effort to cause the amount of said damages to be certain.

 

  

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Section 12.3           Termination Fee.  The Termination Fee shall be the sum of the Base Management Fee estimated to be received for each Fiscal Year remaining Term of this Agreement (“Termination Fee”).   The fees estimated to be received for any given Fiscal Year shall be determined by increasing the Base Management Fee for the last Fiscal Year prior to the termination of this Agreement (if there has not been one (1) full Fiscal Year under this Agreement prior to such termination, then the fees that would have been earned by Manager for the twelve (12) month period under the Annual Business Plan.  Owner and Manager specifically acknowledge that the calculation of the Termination Fee must take into account, and reasonably does take into account, (1) Manager’s loss of Management Fees and the benefit of this Agreement over the full remaining Term of this Agreement, (2) the material impact of inflation on Fees over such an extended period, and (3) the inherent difficulty in predicting or quantifying the measure of damages from the non-fee components of Manager’s damages described above.

 

Section 12.4           Special Lender Provision.  Notwithstanding any other provision of this Agreement, so long as the loan to Landlord from U.S. Bank, National Association, as Trustee, successor-in-interest to Bank of America, N.A., as Trustee, successor by merger to LaSalle Bank National Association, as trustee for the registered holders of J.P. Morgan Chase Commercial Mortgage Securities Trust 2006-LDP9, Commercial Mortgage Pass-Through Certificates, Series 2006-LDP9 or its successors, remains outstanding, this Agreement may be terminated by Owner upon 30 days prior written notice, with or without cause, and no termination fee shall be payable while the loan is outstanding.

 

ARTICLE XIII

 

DEFAULT AND REMEDIES

 

Section 13.1           Manager Default.  This Agreement and the employment of Manager may be terminated by Owner, at its option, upon the happening of any of the following events:  (a) a material breach, default, or noncompliance by Manager with any covenants contained in this Agreement; (b) operation of the Hotel by Manager in such a manner as to cause the Franchisor to require the removal of Manager as the operator of the Hotel or to give notice to the Owner of intent to terminate the Franchise Agreement (unless such termination is due to Owner’s failure to provide the funds necessary for any required capital improvements or renovations); or (c) the making by Manager of a general assignment for the benefit of creditors; or a petition of application by either party to any tribunal for the appointment of a trustee, custodian, receiver or liquidator of all or substantially all of its business, estate or assets; or the commencement by Manager of any proceeding under any bankruptcy, reorganization, arrangement, insolvency, readjustment or debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect.

 

Section 13.2           Owner Default.  This Agreement may be terminated by Manager, at its option, upon the happening of any of the following events:  (a) failure of Owner to pay or reimburse Manager as stipulated in this Agreement, said termination to become effective within five (5)  days after Manager having served Owner notice of the failure and Owner’s continued failure to remedy; (b) material breach, default, or noncompliance by Owner with any other covenants contained in this Agreement; (c) the making by Owner of a general assignment for the benefit of creditors; or a petition of application by either party to any tribunal for the appointment of a trustee, custodian, receiver or liquidator of all or substantially all of its business, estate or assets; or the commencement by Owner of any proceeding under any bankruptcy, reorganization, arrangement, insolvency, readjustment or debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect.

 

  

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Section 13.3           Right to Cure.  Except with respect to a default under Section 13.2(a) above, the defaulting party shall have a period of thirty (30) days after receipt of written notice from the non-defaulting party to cure the matter giving rise to the default, and if the nature of the default is such that it is not reasonably susceptible to cure within a thirty (30) day period, the defaulting party shall have up to one hundred twenty (120) days after receipt of written notice to cure such default, provided the defaulting party promptly commences and diligently pursues the curing of such default.

 

Section 13.4           Remedies.  Upon the breach of any term or condition of this Agreement by Manager and the expiration of any applicable cure period, the sole remedy of Owner shall be to terminate this Agreement without the payment of any Termination Fee to Manager; except that Owner shall be able to seek actual damages and/or equitable relief in the event that: (a) Manager solely causes a default under the Franchise Agreement, (b) Manager voluntarily ceases operations of the Hotel for more than twenty-four (24) hours; or (c) Manager commits a crime or intentional tort, as the case may be.  Upon the breach of any term or condition of this Agreement by Owner and expiration of any applicable cure period, Manager can elect to terminate this Agreement and shall be entitled to the Termination Fee.

 

ARTICLE XIV

 

DAMAGE TO AND DESTRUCTION OF THE HOTEL

 

Section 14.1           Casualty.  In the event that the Hotel shall be substantially destroyed during the term of the Agreement, by fire or other casualty, and the Owner shall elect, for any reason, not to rebuild the Hotel and other improvements, the terms of this Agreement shall cease and terminate as of the date of such destruction and no Termination Fee shall be applicable.  If this Agreement is terminated pursuant to the provisions of this Section 14.1 and within a period of two (2) years from the date of termination, Owner commences the construction of a new hotel on the Land, then Manager shall be given a right of first refusal to operate the Hotel on the basis set forth in this Agreement, subject to those changes required by the changes in circumstances and for a term which remained under the Agreement prior to such termination.  In the event that the Hotel shall be partially destroyed during the term of the Agreement, by fire or other casualty, and the Owner shall elect to temporarily close all or a portion the Hotel for repair and restoration, Manager shall continue to manage the Hotel and shall be entitled to all Fees described in Article X, including a monthly management fee during the period or reconstruction.  The proceeds of any business interruption insurance shall be included in Gross Operating Revenues for the period for which such proceeds are payable.  In addition, in the event that Owner engages the Manager to complete the renovations, Manager shall be entitled to a renovation and construction fee of five percent (5%) of the entire cost of reconstruction for the additional time and expense associated with the work as approved by Owner in writing.  Upon completion of the reconstruction, Manager shall be entitled to its normal management fee as set forth in Article X.

 

Section 14.2           Condemnation.  If the whole or a substantial portion of the Hotel shall be taken or condemned in any eminent domain, condemnation, compulsory acquisition or like proceeding by any competent authority for any public or quasi-public use of purpose, or if such a portion thereof shall be taken or condemned as to make it imprudent or unreasonable, in either party’s reasonable opinion, to use the remaining portion as a Hotel of the type and class immediately preceding such taking or condemnation, then, in either of such events, the terms of this Agreement shall cease and terminate as of the date of such taking or condemnation and no Termination Fee shall be applicable.  If this Agreement is terminated pursuant to the provisions of this Section 14.2 and within a period of two (2) years from the date of termination, Owner commences the construction of a hotel on the Land, then Manager shall be given a right of first refusal to operate the Hotel on the basis set forth in this Agreement subject to those changes required by the changes in circumstances and for a term which remained under the Agreement prior to such termination.  Any condemnation award or similar compensation shall be the property of Owner, provided that Manager shall have the right to bring a separate proceeding against the condemning authority for any damages and expenses specifically incurred by Manager as a result of such condemnation.

 

  

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ARTICLE XV

 

EARLY TERMINATION

 

Section 15.1           If a termination event occurs pursuant to this Agreement for any reason other than under Section 13.2(a), the party electing to terminate shall give the other party written notice of such election. On the date which is thirty (30) days after the date of such notice, Manager shall cease all activities at the Hotel and shall have no further obligations under this Agreement.

 

Section 15.2           If a termination occurs pursuant to Section 13.2(a), Manager shall give to Owner notice of such election. Any time thereafter, Manager may, on ten (10) days’ written notice, cease all activities at the Hotel and thereafter have no further obligations under this Agreement.

 

Section 15.3           Manager shall continue to operate the Hotel in good faith in accordance with the terms of this Agreement until the effective date of such termination. Manager shall peacefully vacate and surrender the Hotel to Owner on the effective date of such termination.

 

Section 15.4           After the notice is given, and prior to the date Manager ceases activities at the Hotel, Manager shall be paid any and all fees or expenses due it pursuant to this Agreement, and Manager shall cooperate with Owner in the orderly transfer of management to Owner or Owner’s designated agent.

 

Section 15.5           Manager shall assign and transfer to Owner:

 

1.           any interest which Manager may have or claim in and to all of Owner’s books and records, plans and specifications, architectural or engineering drawings, contracts, leases and other documents respecting the Hotel that are not Manager’s proprietary information and are in the custody and control of Manager; and

 

2.           all of Manager’s right, title and interest in and to all liquor, restaurant and any other licenses and permits, if any, held by Manager in connection with the operation of the Hotel; but only to the extent such assignment or transfer is permitted under the law of the state in which the Hotel is located; provided, however, that if Manager has expended any of its own funds in the acquisition of licenses or permits, Owner shall reimburse Manager therefore;

 

3.           and any interest which Manager may have or claim in and to the Operating Account(s) (excluding any funds deposited in the payroll account for final payrolls) or the Reserve Fund.

 

Section 15.6           Non-Solicitation of Employees. During the period ending six (6) months from the termination or expiration of this Agreement, Owner shall not, directly or indirectly, hire or solicit for hire (whether as an employee, consultant or otherwise) any Key Employees of Manager, without the prior written consent of Manager. For the purposes of this Section 15.6 “solicit for hire” shall not include a general advertisement for employment not directed at employees of Manager.

 

  

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ARTICLE XVI

 

ASSIGNMENT

 

Section 16.1           Assignment. Neither party shall assign or transfer or permit the assignment or transfer of this Agreement without the prior written consent of the other; provided, however, that Manager shall have the right, without such consent, to irrevocably and totally assign its interest in this Agreement to (i) any of its Affiliates, (ii) any successor by merger or consolidation with Manager, or (iii) any party succeeding to substantially all of the assets of the Manager.

 

ARTICLE XVII

 

TAXES

 

Section 17.1           Real Estate and Property Taxes. Upon (i) the written request of Owner and (ii) the provision of sufficient funds and the necessary documentation, and unless otherwise required by Owner’s lender, all real estate and ad valorem property taxes, assessments and similar charges on or relating to the Hotel during the Term of this Agreement shall be paid by Manager before any fine, penalty or interest is added thereto or lien placed upon the Hotel or this Agreement, unless payment thereof is, in good faith, being contested and enforcement thereof is stayed. Manager shall, within the earlier of thirty (30) days of payment or ten (10) days following written demand by Owner, furnish Owner with copies of official tax bills, assessments and evidence of payment or contest thereof. Owner, or Manager at direction of Owner, at Owner’s expense, may contract with a tax consultant firm to review assessments and tax bills, file personal property tax returns as necessary, make recommendations regarding appeals, and to manage the appeals process.

 

ARTICLE XVIII

 

INDEMNIFICATION AND LIMITATION OF LIABILITY

 

Section 18.1           Indemnification by Owner. Owner shall hold harmless, indemnify and defend Manager and its Affiliates and their respective agents, employees, officers, directors and shareholders (collectively, “Manager Indemnities”), from and against any action, cause of action, suit, debt, cost, expense (including, without limitation, reasonable attorneys’ fees for pre-trial, trial and appellate proceedings), claim or demand whatsoever brought or asserted by any third person whomsoever, at law or in equity, incurred by Manager Indemnities arising out of, as a result of, or in connection with the operation of the Hotel including, without limitation:  (a) the performance by Manager or its Affiliates of its services hereunder, including, without limitation, any and all obligations incurred relating to any agreements with third parties entered into by Manager or Owner in connection with the management or operation of the Hotel in accordance with this Agreement; (b) any act or omission (whether or not willful, tortuous, or negligent) of Owner or any third party; or (c) any other occurrence related to the Hotel or Manager’s duties under this Agreement (except for liabilities for which Manager indemnifies Owner).  Owner may apply the proceeds of any available insurance to the payment of any claim under the indemnity set for the in this Section 18.1.  The provisions of this Section 18.1 shall survive the expiration or termination of this Agreement ands hall be binding upon Owner’s successors and assigns.

 

  

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Section 18.2           Indemnification by Manager.  Manager shall hold harmless, indemnify and defend Owner and its Affiliates and their respective agents, employees, officers, directors and shareholders (collectively, “Owner Indemnities”), from and against any action, cause of action, suit, debt, cost, expense (including, without limitation, reasonable attorneys’ fees for pre-trial, trial and appellate proceedings), claim or demand whatsoever brought or asserted by any third person whomsoever, at law or in equity, incurred by Owner Indemnities, arising by reason of:  (a) the gross negligence or willful misconduct of any Key Employees, which results in a claim for bodily injury, death or property damage occurring on, in or in conjunction with the business of the Hotel, to the extent not covered by insurance (including the deductible, if any); (b) Manager’s gross negligence or willful misconduct in the selection, hiring, training discharge or supervision of any Hotel employees; or (c) any action taken by Manager, its employee or agent, which is beyond the scope of Manager’s authority under this Agreement.  Manager may apply the proceeds of any available insurance to the payment of any claim under the indemnity set for the in this Section 18.2.  The provisions of this Section 18.2 shall survive the expiration or termination of this Agreement ands hall be binding upon Manager’s successors and assigns.

 

Section 18.3           Indemnification Procedure. Upon the occurrence of a claim of an event giving rise to indemnification, the party seeking indemnification shall notify the other party hereto and provide the other party hereto with copies of any documents reflecting the claim, damage, loss or expense. The party seeking indemnification is entitled to engage such attorneys and other persons to defend against the claim, damage, loss or expense, as it may choose. The party providing indemnification shall pay the reasonable charges and expenses of such attorneys and other persons on a current basis within twenty (20) days of submission of invoices or bills.  In the event Owner neglects or refuses to pay such charges, Manager may pay such charges out of the Operating Account and deduct such charges from any amounts due Owner or add such charges to any amounts due Manager from Owner.

 

ARTICLE XIX

 

MISCELLANEOUS

 

Section 19.1           Severability. In the event that any portion of this Agreement shall be declared invalid by order, decree or judgment of a court, this Agreement shall be construed as if such portion had not been inserted herein except when such construction would operate as an undue hardship to Manager or Owner or constitute a substantial deviation from the general intent and purpose of said parties as reflected in this Agreement.

 

Section 19.2           Performance. The failure of either party to insist upon a strict performance of any of the terms or provisions of this Agreement or to exercise any option, right or remedy herein contained, shall not be construed as a waiver or as a relinquishment for the future of such term, provision, option, right or remedy, but the same shall continue and remain in full force and effect. No waiver by either party of any term or provision hereof shall be deemed to have been made unless expressed in writing and signed by such party.

 

Section 19.3           Relationship. The relationship of Owner and Manager shall be that of independent contractor. Nothing contained in this Agreement shall be construed to create an agency, partnership or joint venture between them or their successors in interest. Neither party shall borrow money in the name of, or pledge the credit of, the other.

 

Section 19.4           Meetings. Owner shall meet with representatives of the Manager, from time to time, so that the Manager and Owner may discuss the status of operations and future plans, recommendations and projections. The meetings will be held at mutually convenient dates and locations.

 

Section 19.5           Consents. Except as herein otherwise provided, whenever in this Agreement the consent or approval of Owner or Manager is required, such consent or approval shall not be unreasonably withheld or delayed. Such consent or approval shall be in writing only and shall be duly executed by an authorized officer or agent of the party granting such consent or approval.

 

  

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Section 19.6           Applicable Law. This Agreement shall be construed under, and governed in accordance with, the laws of the State of Texas

 

Section 19.7          Mediation and Arbitration. Any controversy, dispute or claim arising out of or relating to this Agreement or the performance, enforcement, breach, termination or validity thereof, including the determination of the scope of this Agreement to arbitrate, shall first be submitted to non-binding mediation and shall thereafter be determined by final binding arbitration, and not litigation, the agreed venue for mediation and arbitration being in Houston, Texas. The mediation process shall be administered by a mutually acceptable mediator selected in accordance with the Commercial Mediation Rules of the American Arbitration Association (“AAA”). If any dispute remains unresolved between the parties after the mediation process has been completed, either party may then submit any such unresolved dispute to final and binding arbitration pursuant to the Commercial Arbitration rules of AAA, with all matters related to the enforceability of this arbitration agreement and any award rendered pursuant to this agreement to be governed by the Federal Arbitration Act, 9 U.S.C. Section 1-16. The Arbitration Tribunal shall be formed of three (3) arbitrators each of which shall have at least five (5) years’ experience in hotel operation, management, ownership or leasing, one (1) to be appointed by each party and the third (3rd) to be appointed by the American Arbitration Association. The arbitration panel may require and facilitate such discovery as it shall determine is appropriate in the circumstances, taking into account the needs of the parties and the desirability of making discovery expeditious and cost-effective. The arbitration panel shall be empowered to subpoena non-party and party witnesses for deposition and hearing to the full extent provided under the AAA Rules and the Federal Arbitration Act (or the applicable state arbitration statute if the arbitration panel is appointed pursuant to a petition filed in state court). The arbitration panel may also direct the production of documents and other information and the advance identification of witnesses to be called and documents to be admitted. The arbitration panel may issue orders to protect the confidentiality of proprietary information, trade secrets and other sensitive information before it is required to be disclosed in discovery. In addition to monetary damages, or in lieu thereof, the arbitration panel shall have the power to grant all equitable relief (both by way of interim relief and as a part of its final award) as may be granted by any court in the state where the Hotel is located. Monetary damage liability shall be limited to actual damages; the parties hereby waive the right to claim and/or receive punitive damages or exemplary relief. The arbitration panel shall determine whether and to what extent any party is a prevailing party and shall award attorneys’ fees and expenses associated with the arbitration proceeding to the “prevailing party, if any. All proceedings shall be reported by a certified shorthand court reporter and written transcripts of the proceedings shall be prepared and made available to the parties. The fees of the arbitration panel, together with all costs and expenses incurred in conducting the arbitration (but excluding the parties’ respective attorney, witness and related costs and expenses) shall be borne by the party against whom the arbitral award is made and shall be a (the) component of the arbitral award. The arbitration shall take place in Orlando, Florida, and shall be conducted in the English language. The arbitration award shall be final and binding upon the parties hereto and subject to no appeal. Arbitration expenses shall not be an expense in determining House Profit. Judgment upon the award rendered maybe entered into any court having jurisdiction, or applications may be made to such court for an order of enforcement.

 

Section 19.8           Successors Bound. This Agreement shall be binding upon and inure to the benefit of Owner, its successors and assigns, and shall be binding and inure to the benefit of Manager and its permitted assigns.

 

Section 19.9           Headings. Headings of Articles and Sections are inserted only for convenience and are in no way to be construed as a limitation on the scope of the particular Articles or Sections to which they refer.

 

  

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Section 19.10         Incorporation of Recitals. The recitals set forth in the preamble of this Agreement are hereby incorporated into this Agreement as if fully set forth herein.

 

Section 19.11         Force Majeure. If any one or more of the following events or circumstances that, alone or in combination, adversely affects the operation of the Hotel: fire, earthquake, storm or other casualty; strikes, lockouts, or other labor interruptions; war, acts of terrorism, rebellion, riots or other civil unrest; or any other event beyond Manager’s or Owner’s, as the case maybe, reasonable control, a party shall be excused from performance of any provision hereof to the extent that such party’s ability to comply with such provision is materially impacted by such event.

 

Section 19.12         Notices. Notices, statements and other communications to be given under the terms of this Agreement shall be in writing and delivered by hand against receipt or sent by certified or registered mail, return receipt requested, or by Federal Express or other similar overnight mail service:

 

	
To Owner:

Moody National Wood-Hou MT, LLC

6363 Woodway, Suite 110

Houston, Texas 77057

Attn:  Vice President - Corporate Asset Management

Phone:  713-977-7500

Fax:  713-977-7505

	  
	
 

To Manager:

 

Moody National Hospitality Management, LLC

6363 Woodway, Suite 110

Houston, Texas 77057

Attn: Vice President - Hospitality

Phone:  714-977-7500

Fax:  713-977-7505

	  

 

or at such other address as from time to time designated by the party receiving the notice.

Section 19.13         Entire Agreement. This Agreement, together with other writings signed by the parties expressly stated to be supplementing hereto and together with any instruments to be executed and delivered pursuant to this Agreement, constitutes the entire agreement between the parties and supersedes all prior understandings and writings, and may be changed only by a writing signed by the parties hereto.

 

Section 19.14         Manager’s Authority Limited. Manager’s authority shall be derived wholly from this Agreement, and Manager has no authority to act for or represent Owner except as herein specified.

 

Section 19.15         Exclusive Compensation. The payments to be made to Manager hereunder shall be in lieu of all other or further compensation or commissions of any nature whatsoever for the services described herein and this Agreement shall be considered as a special agreement between the parties hereto covering the appointment and compensation of Manager to the exclusion of any other method of compensation unless otherwise agreed to in writing.

 

  

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Section 19.16          Time. Time is of the essence with respect to this Agreement.

 

Section 19.17         Attorneys’ Fees. In the event of any litigation arising out of this Agreement, the prevailing party shall be entitled to reasonable costs and expenses, including without limitation, attorneys’ fees.

 

Section 19.18         Complimentary/Discount Policies. Manager will be permitted to provide customary gratuitous accommodations, services and amenities to such employees and representatives of Manager visiting the Hotel in connection with the Hotel’s management.

 

[Signatures appear on following page]

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers.

	  	
OWNER:

 

MOODY NATIONAL WOOD-HOU MT, LLC, a Delaware limited liability company

	  	  
	  	
By:

	
/s/ Brett C. Moody

	  	
Name: Brett C. Moody

	  	
Title: President

	  	  
	  	
MANAGER:

 

MOODY NATIONAL HOSPITALITY MANAGEMENT, LLC., a Texas limited liability company

	  	  
	  	
By:

	
/s/ Brett C. Moody

	  	
Name:  Brett C. Moody

	  	
Title:  Chief Executive Officer

 

  

 

  

 

Exhibit A

 

Insurance

 

Insurance Requirements for Owner and Manager

 

	 	

 

PART A – OWNER REQUIREMENTS

	 	 	 
	 	
1.

	
Commercial General Liability policy (with respect to the Property) with limits not less than $1,000,000 per occurrence with a $2,000,000 annual aggregate.

	 	 	 
	 	
2.

	
Commercial Umbrella policy (with respect to the Property) with limits not less than $10,000,000.

	 	 	 
	 	
3.

	
Business Automobile Insurance with limits not less than a $1,000,000 Combined Single Limit.

	 	 	 
	 	
4.

	
Commercial Property policy insuring the building, business personal property, business income and signs at a replacement cost with agreed upon deductibles.  Policy shall be written on a special causes of loss form including coverage for flood, wind and earthquake where applicable.

	 	 	 
	 	
5.

	
Terrorism.

	 	 	 
	 	
6.

	
Business Interruption.

	 	 	 
	 	
7.

	
Boiler & Machinery.

	 	 	 
	 	
8.

	
Garage Keepers Liability.

	 	 	 
	 	
9.

	
Liquor Liability Insurance policy with limits not less than $1,000,000 per occurrence (Only when applicable)

	 	 	 
	 	
10.

	
Insurance against the theft or damage to guests’ property in an amount not less than $25,000 per guest.

	 	 	 
	 	
11.

	
Insurance against such other operating risks against which it is customary or advisable to insure in the operations of hotels of this nature.

	 	 	 
	 	

 

PART B – MANAGER REQUIREMENTS

 

	 	
1.

	
Commercial General Liability policy (with respect to Management Company) with limits not less than $1,000,000 per occurrence with a $2,000,000 annual aggregate.

	 	 	 
	 	
2.

	
Commercial Umbrella policy (with respect to Management Company) with limits not less than $10,000.000.

	 	 	 
	 	
3.

	
Workers Compensation Insurance on all Hotel Employees in compliance with applicable statutory requirements with a $1,000,000 limit under the employer’s liability section.

 

  

 

  

 

	 	
4.

	
A blanket Fidelity bond with a limit not less than $500,000 and a deductible of no more than $25,000, or as may be reasonably requested by the Owner.

	 	 	 
	 	
5.

	
Employment Practices Liability insurance policy covering all employees with a limit of not less than $1,000,000 per occurrence.

	 	 	 
	 	
6.

	
Management Errors and Omissions policy with limits of at least $1,000,000 per occurrence.

	 	 	 
	 	
7.

	
Insurance covering such other hazards an in such amounts as may be customary for comparable properties in the areas of the Hotel as may be reasonably requested by the Owner.

 

 2ex-10_4.htm

MOODY NATIONAL REIT I, INC. 8-K

EXHIBIT 10.4

RECORDING REQUESTED BY AND

AFTER RECORDING RETURN TO:

Polsinelli Shughart PC

700 W. 47th Street, Suite 1000

Kansas City, Missouri 64112

Attention:  Michael B. Hickman

Asset No. 03-0265963

CONSENT, MODIFICATION AND ASSUMPTION AGREEMENT WITH RELEASE

This Consent, Modification and Assumption Agreement With Release (this “Agreement”) is entered into as of November 7, 2012, by and among WOODLANDS TERRAPIN INVESTORS I, LLC, WOODLANDS TERRAPIN INVESTORS II, LLC, WOODLANDS TERRAPIN INVESTORS III, LLC, 537 HOUSTON, LLC, MAVEN HOUSTON, LLC, MARC HOTEL HOUSTON, LLC, AND MIRIAM HOTEL HOUSTON, LLC, each a Texas limited liability company, jointly and severally as tenants in common (collectively, “Seller”), each with an address of 38 Miller Avenue, Suite 109, Mill Valley, California 94941, Attention:  Anthony Jon Sherman, SHERMAN FAMILY TRUST DTD 4/22/03 TRUST, with an address of 38 Miller Avenue, Suite 109, Mill Valley, California 94941, MARC E. LIPTON LIVING TRUST, with an address of 18930 W. 10 Mile Road, Suite 3000, Southfield, Michigan 48075, MARC E. LIPTON, an individual with an address of 18930 W. 10 Mile Road, Suite 3000, Southfield, Michigan 48075, CRAIG S. LIPTON REVOCABLE TRUST DTD 3/22/04, with an address of 1138 Taylor Street, San Francisco, California 94108, CRAIG S. LIPTON, an individual with an address of 1138 Taylor Street, San Francisco, California 94108, MIRIAM F. LIPTON, an individual with an address of 1865 Clay Street #4, San Francisco, California 94109, DWIGHT W. DAVIS, an individual with an address of 1148 Alpine Drive, Walnut Creek, California  94596, WILLIAM D. SCHMICKER, an individual, with an address of 1148 Alpine Drive, Walnut Creek, California 94596 and ANTHONY JON SHERMAN, an individual with an address of 38 Miller Avenue, Suite 109, Mill Valley, California 94941 (collectively, “Seller Principal”), TERRAPIN OPERATOR WOODLANDS, LLC, a Texas limited liability company (“Seller Tenant”), with an address of 38 Miller Avenue, Suite 109, Mill Valley, California  94941, Attention:  Anthony Jon Sherman, MOODY NATIONAL WOOD-HOU HOLDING, LLC, a Delaware limited liability company (“Buyer”), with an address of 6363 Woodway, Suite 110, Houston, Texas 77057, MOODY NATIONAL REIT I, INC., a Maryland corporation, MOODY NATIONAL OPERATING PARTNERSHIP I, L.P., a Delaware limited partnership, BRETT C. MOODY, an individual (collectively, “Buyer Principal”), each with an address of 6363 Woodway, Suite 110, Houston, Texas 77057, MOODY NATIONAL WOOD-HOU MT, LLC, a Delaware limited liability company (“Buyer Tenant”) with an address of 6363 Woodway, Suite 110, Houston, Texas 77057, and U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE, SUCCESSOR-IN-INTEREST TO BANK OF AMERICA, N.A., AS TRUSTEE, SUCCESSOR BY MERGER TO LASALLE BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR THE REGISTERED HOLDERS OF J.P. MORGAN CHASE COMMERCIAL MORTGAGE SECURITIES TRUST 2006-LDP9, COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-LDP9 (collectively referred to herein as “Lender”), with an address of c/o Midland Loan Services, 10851 Mastin, Suite 300, Overland Park, Kansas 66210.

 

  

  

  

 

RECITALS

A.           Seller is the owner of certain real property located in Montgomery County, Texas commonly known as Homewood Suites, which real property is more particularly described in Exhibit A attached hereto and incorporated herein by reference.  Such real property, together with all improvements, fixtures and personal property located thereon is collectively referred to as the “Property.”

B.           Lender is the owner and holder of certain documents (the “Original Loan Documents”) evidencing and securing a loan (the “Loan”) made by ARCS Commercial Mortgage Co., L.P., a California limited partnership (“Original Lender”) to Seller, including, without limitation, the:

	  	
(i)

	
Promissory Note dated as of November 17, 2006 (the “Original Closing Date”), in the original principal amount of 7,500,000.00, executed by Seller, as maker, in favor of Original Lender (the “Note”).

	  	  	  
	  	
(ii)

	
Deed of Trust and Security Agreement dated as of the Original Closing Date, executed by Seller in favor of Ronald J. Dold, as trustee for the benefit of Original Lender, filed for record November 27, 2006, in the Office of the Register of Deeds, Recorder of Deeds or County Clerk, as applicable, in and for Montgomery County, Texas (the “Recording Office”), under Clerk’s File No. 2006-137885 (the “Security Instrument”).

	  	  	  
	  	
(iii)

	
Assignment of Leases and Rents dated as of the Original Closing Date, executed by Seller in favor of Original Lender, filed for record November 27, 2006 in the Recording Office under Clerk’s File No. 2006-137886 (the “Seller Assignment of Leases”).

	  	  	  
	  	
(iv)

	
Assignment of Leases and Rents dated as of the Original Closing Date, executed by Seller Tenant in favor of Original Lender, filed for record November 27, 2006 in the Recording Office under Clerk’s File No. 2006-137886 (the “Seller Tenant Assignment of Leases” and together with the Seller Assignment of Leases, the “Assignment of Leases”).

 

  

  

  

 

	  	
(v)

	
Nine (9) Hazardous Substances Indemnity Agreements dated as of the Original Closing Date, in favor of Original Lender each executed by Seller and one executed by each Seller Principal (collectively, the “Environmental Indemnity”).

	  	  	  
	  	
(vi)

	
Nine (9) Indemnity and Guaranty Agreements dated as of the Original Closing Date, one each executed by each Seller Principal in favor of Original Lender (collectively, the “Guaranty”).

	  	  	  
	  	
(vii)

	
Assignment and Subordination of Management Agreement dated as of the Original Closing Date executed by Lender, Seller Tenant and Hospitality Management Advisors, Inc., a Tennessee corporation (the “Seller Manager”) (the “Subordination of Management Agreement”).

	  	  	  
	  	
(viii)

	
Subordination and Acknowledgment Agreement dated as of the Original Closing Date executed by Seller, Original Lender and Seller Tenant (the “Subordination”).

	  	  	  
	  	
(ix)

	
Notice and Final Agreement dated as of the Original Closing Date executed by Seller and Original Lender (the “Notice”).

	  	  	  
	  	
(x)

	
Cash Management Agreement dated as of the Original Closing Date executed by Seller, Seller Tenant, and Seller Manager in favor of Original Lender (“Cash Management Agreement”).

	  	  	  
	  	
(xi)

	
Restricted Account Agreement dated as of the Original Closing Date executed by Seller, Original Lender, Seller Tenant and Wells Fargo Bank, N.A. (“Restricted Account Agreement”).

C.           Midland Loan Services, a Division of PNC Bank, National Association, services the Loan for Lender, as master servicer, pursuant to that certain Amended and Restated Pooling and Servicing Agreement (the “Pooling and Servicing Agreement”) dated as of March 17, 2010.

D.           Seller and Buyer are the current parties to a Purchase Agreement (as amended, the “Purchase Agreement”) dated March 22, 2012, pursuant to which the Property is to be transferred to Buyer and Buyer is to assume the Loan.  Buyer also intends to lease the Property to Buyer Tenant and to transfer to Buyer Tenant certain personal property related to the operation of the Property.  Said transfers and lease of the Property and related personal property, and assumption of the Loan, shall be referred to herein collectively as the “Transfer and Assumption”.

E.           Seller and Buyer have requested that Lender consent to the Transfer and Assumption, and without the prior consent of the Lender, the Transfer and Assumption would constitute a default under the Original Loan Documents.  Subject to the terms and conditions of this Agreement, Lender has agreed to consent to the Transfer and Assumption.

 

  

  

  

 

F.           With respect to Seller, Seller Principal and Seller Tenant, the term “Loan Documents” as used hereinafter shall mean the Original Loan Documents.  With respect to Buyer, Buyer Principal and Buyer Tenant, the term “Loan Documents” as used hereinafter shall mean collectively the Original Loan Documents (except to the extent amended or replaced pursuant to this Agreement), this Agreement, and all other documents, instruments and agreements executed by Buyer, Buyer Principal and Buyer Tenant in connection with the Loan or the Transfer and Assumption.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties agree as follows:

1.           Consent to Transfer.  Subject to satisfaction of all of the conditions contained herein, Lender consents to the Transfer and Assumption.  This consent is strictly limited to the Transfer and Assumption described in this Agreement.  This Agreement shall not constitute a waiver or modification of any requirement of obtaining Lender’s consent to any future transfer of the Property or any portion thereof or interest therein, nor shall it constitute a modification of the terms, provisions, or requirements in the Loan Documents in any respect except as expressly provided herein.  Buyer specifically acknowledges that any subsequent transfer of any interest in any of the Property or interest in Buyer in violation of the Loan Documents shall be a default thereunder.  The Loan Documents are hereby ratified and, except as expressly modified in this Agreement, remain unmodified and are in full force and effect.

2.           Loan Information.  The parties hereto agree that as of the date hereof:

	  	
(a)

	
The outstanding principal balance of the Note is $6,911,421.98.

	  	
(b)

	
The interest rate of the Note is a fixed rate of 6.000% per annum.

	  	
(c)

	
The maturity date of the Note is December 6, 2016.

	  	
(d)

	
The following listed payments are due and payable on the first day of each and every calendar month:

	 	
•

	
$44,966.29

	
principal and interest installments.

	 	

•

	
$14,785.28

	
tax escrow deposit.

	 	

•

	
$2,473.35

	
insurance escrow deposit.

	 	

•

	
$10,889.02

	
FF&E reserve escrow deposit.

	 	
(e)

	
The current balance of each escrow account held by Lender with respect to the Loan Note is:

	 	

•

	
$162,638.02

	
tax escrow account.

	 	

•

	
$37,968.88

	
insurance escrow account.

	 	

•

	
$54,445.10

	
FF&E reserve escrow account.

 

  

  

  

 

	  	
(f)

	
All required payments due through November 6, 2012 under the Loan Documents have been paid.

	  	
(g)

	
There are no defenses or claims of setoffs with respect to any sums or amounts owing under the Loan Documents.

	  	
(h)

	
Lender is the current owner and holder of the Loan Documents.

	  	
(i)

	
There is no existing Event of Default (as defined in the Loan Documents) or event or condition that, with the giving of notice or passage of time or both, would constitute an Event of Default.

3.           Conditions.  In addition to any other conditions set forth herein or required by Lender, the following are conditions precedent that must be satisfied prior to the closing of the Transfer and Assumption (the “Closing”):

	  	
(a)

	
The execution, acknowledgment, delivery and recordation of this Agreement by all of the parties concurrently with the Closing, and the execution, acknowledgement and delivery of all other agreements, instruments and documents required by Lender hereunder concurrently with and in connection with the Closing, including but not limited to (i) an operating lease between Buyer and Buyer Tenant, (ii) a Security Agreement (“Security Agreement”) executed by Buyer Tenant, (iii) replacements for the Environmental Indemnity, Guaranty, Notice, Seller Tenant Assignment of Leases, Subordination of Management Agreement, Subordination, Cash Management Agreement, and Restricted Account Agreement, (iv) terminations of the following Seller/Seller Tenant agreements:  Franchise Agreement, tenancy in common agreement and any recorded memorandum thereof, and operating lease and any recorded memorandum thereof, and (v) a new franchise agreement and related comfort letter.

	  	
(b)

	
The execution, delivery and recordation or filing, as applicable, of one more new financing statements, or amendments to existing financing statements as required by Lender at Closing.

	  	
(c)

	
Buyer’s delivery to Lender of satisfactory evidence that all insurance over the Property required by the Loan Documents (the “Required Insurance”) is in full force and effect as of the Closing, with all required premiums paid, and contains a mortgagee’s clause (the “Mortgagee’s Clause”) satisfactory to Lender in favor of Lender, its successors and/or assigns, c/o Midland Loan Services, Master Servicer, 10851 Mastin, Suite 300, Overland Park, Kansas 66210; re: Loan Number 03-0265963.

	  	
(d)

	
Lender’s receipt of satisfactory Title Policy (hereinafter defined).

	  	
(e)

	
The full release and reconveyance of any other liens or monetary encumbrances against the Property.

	  	
(f)

	
Lender’s receipt of all of the Required Payments (hereinafter defined).

	  	
(g)

	
The satisfaction of all other conditions contained in the approval letter issued by the Lender in connection with the Transfer and Assumption.

 

4.           Fees, Payment and Expenses.  Buyer and/or Seller covenants and agrees to pay to Lender at Closing the following (the “Required Payments”):

 

  

  

  

	  	
(a)

	
1% of the amount listed in Section 2(a) above, as an assumption fee for Lender’s consent to the Transfer and Assumption of the Loan.

	  	
(b)

	
The amounts listed in Section 2(d) above due and payable on December 6, 2012, but only if the Transfer and Assumption closes after November 15, 2012.

	  	
(c)

	
The amount of $6,645.18 as a deposit into the FF&E Reserve (as defined in Section 1.7 of the Security Instrument), for the purposes set forth in the Security Instrument.

	  	
(d)

	
The amount of $1,315,870.15 to be held by Lender in escrow for the purposes set forth in replacement Exhibit B to the Security Instrument, which is attached to this Agreement as Exhibit B.

	  	
(e)

	
Payment of underwriting fee of $3,250.00 and a UCC filing fee of $50.00.

	  	
(f)

	
Payment of legal fees and expenses of Lender’s counsel in connection with the Transfer and Assumption.

	  	
(g)

	
Payment of the fees and expenses of rating agencies, and their respective counsel, if applicable.

5.           Loan Modifications; Post Closing Matters.

	  	
(a)

	
The Security Instrument is hereby modified in the following manner:

	  	
(i)

	
Section 1.4(g) is hereby amended by deleting ARCS Commercial Mortgage Co., L.P. as the named mortgagee for insurance purposes, and replacing it with the phrase “As may be directed by Lender from time to time.”

	  	  	  
	  	
(ii)

	
Section 1.7 is hereby amended as follows:

	  	
(A)

	
Borrower has requested that it be permitted to obtain disbursements from the FF&E reserve twice per month, notwithstanding the current limitation of once per month.  Lender’s standard disbursement frequency is once per month, so disbursement related to any second monthly disbursement request shall be made at Lender’s discretion using commercially reasonable efforts to process such second disbursement.

	  	  	  
	  	
(B)

	
Clause (1) is hereby amended to read as follows:

	  	  	  
	  	  	
“(1) affidavits, lien waivers (provided, however, Lender shall not unreasonably withhold its consent to Borrower’s provision of a conditional lien waiver subject only to the payment of the amount specified in such disbursement request so long as a final unconditional lien waiver corresponding to any conditional lien waiver previously delivered accompanies additional funding requests) or other evidence reasonably satisfactory to Lender showing that all materialmen, laborers, subcontractors and any other parties who might or could claim statutory or common law liens and are furnishing or have furnished materials or labor to the Property have been paid all amounts due for labor and materials furnished to the Property.”

	  	  	  
	  	
(C)

	
The certification required under clause (2) shall be required only upon Lender’s request.

 

  

  

  

 

	  	
(iii)

	
The first, second and third sentences of Section 1.12(b) shall not apply to intermittent or non-recurring breaches of Leases of less than thirty (30) days to overnight guests or of banquet facilities or meeting rooms (collectively, “Short Term Leases”), unless such breaches, or the failure to enforce such Leases, as applicable, could reasonably be expected to have a materially adverse effect on the business, operations or financial condition of the Borrower or the Operating Tenant.

	 	 	 
	  	
(iv)

	
The covenant contained in Section 1.12(c)(ii) shall be applied to all Leases as a whole, since there is a wide range of rental rates that may be charged from day to day and from one customer to another within the hotel industry.

	  	
 

	  
	  	
(v)

	
Notwithstanding the provisions of Section 1.12(c)(iii), Borrower and Operating Tenant shall be permitted to rent rooms to officers and employees of Borrower and Operating tenant in the ordinary course of their business so long as such rentals do not have a material adverse effect on the business, operations or financial condition of the Borrower or the Operating Tenant.

	  	  	  
	  	
(vi)

	
Section 1.12(c)(iv) shall not be deemed to prohibit the renting of or payment for rooms (i) by employers or other organizations for their employees, agents and members, (ii) by travel facilitators (such as Expedia, Travelocity, etc.) for their customers, and (iii) by guests using Hilton Points or similar types of credits.

	  	  	  
	  	
(vii)

	
The third sentence of Section 1.12(c) is hereby amended to read as follows:

	  	  	  
	  	  	
“Borrower or Operating Tenant shall not, without the prior written consent of Lender:  (1) modify any Lease; (2) terminate or accept the surrender of any Lease; or (3) waiver or release any other party from the performance or observance of any obligation or condition under any Lease; provided, however, that Borrower or Operating Tenant may do any of the foregoing in the normal course of business in a manner which is consistent with sound and customary leasing and management practices for similar properties in the community in which the Property is located so long as such actions do not have a material adverse effect on the business, operations or financial condition of the Borrower or the Operating Tenant.”

 

  

  

  

 

	  	
(viii)

	
Notwithstanding the provisions of Section 1.12(d), and provided no Event of Default exists, Operating Tenant shall be permitted to occasionally take advance deposits with respect to reservations of rooms, banquet facilities and meeting rooms, and hold such deposits in Operating Tenant’s operating account so long as Operating Tenant makes ledger entries in its records reflecting such deposits, keeps such deposits in the Operating Account until the date they become earned Rents, and within one (1) business day after such date, causes them to be deposited into the deposit account controlled by Lender.

	  	  	  
	  	
(ix)

	
Notwithstanding anything to the contrary contained in Section 1.13 of the Deed of Trust, the sale, conveyance, transfer, disposition, alienation, hypothecation, pledge or encumbering (collectively, a “Transfer”) of all or any portion of the direct or indirect ownership interests in Moody National REIT I, Inc., a Maryland corporation (the “REIT”) shall be permitted without Lender’s consent, provided that following such Transfer (a) except with the Lender’s prior written consent, the REIT remains a publicly reporting company, and (b) no Person together with such Person's Affiliates, other than Brett C. Moody and his Affiliates, owns, Controls or holds a lien or pledge on, more than forty-nine percent (49%) of the direct or indirect ownership interests in the REIT. For purposes of this paragraph:

	  	
(A)

	
the term “Person “shall mean any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, any other entity, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing;

	  	  	  
	  	
(B)

	
the term “Affiliate” shall mean, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified; and

	  	  	  
	  	
(C)

	
the term “Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise, and the term “Controlled” shall have a meaning correlating thereto.

	  	
(x)

	
Section 1.32 (v) is hereby amended by deleting the defined term of “Terrapin Operator” and replacing it with the following:  “Moody National Wood-Hou MT, LLC, a Delaware limited liability company (“Moody Operator”)”.  All other references in the Security Instrument to the term “Terrapin Operator” shall be deemed to be deleted and replaced with the term “Moody Operator”.

	  	  	  
	  	
(xi)

	
The first sentence of Section 1.37 is hereby amended and restated to read as follows:  “Borrower shall comply with all terms and provisions of that certain  Franchise Agreement dated on or about November ___, 2012 between Moody Operator and Homewood Suites Franchise, LLC (the “Franchisor”) relating to the Property, a copy of which has been delivered to Lender (as may be amended, restated or replaced with the consent of the Lender, the “Franchise Agreement”), and shall keep the Franchise Agreement in full force and effect so long as any portion of the secured indebtedness remains outstanding.”

	  	  	  
	  	
(xii)

	
Section 1.38 is hereby deleted in its entirety.

	  	  	  
	  	
(xiii)

	
The first sentence of Section 1.39 is hereby amended and restated to read as follows:  “With respect to that certain Property Lease dated on or about November ___, 2012, by and between Borrower, as landlord, and Moody Operator, as tenant (“Operating Lease”), Borrower covenants, agrees or warrants (as applicable) as follows:”.  Buyer hereby remakes the covenants, agreements and warranties (as applicable) contained in revised Section 1.39.

	  	  	  
	  	
(xiv)

	
The Borrower and Lender contact information referenced on Page 1 and in Section 5.4 shall be as follows:

	
  

	 

	  	
Borrower:

	
Moody National Wood-Hou Holding, LLC

	  	  	
6363 Woodway, Suite 110

	  	  	
Houston, Texas  77057

	  	  	  
	  	
Lender:

	
U.S. Bank National Association, as Trustee, successor-in-interest to Bank of America, N.A., as Trustee, Successor by Merger to LaSalle Bank National Association, as Trustee for the Registered Holders of J.P. Morgan Chase Commercial Mortgage Securities Trust 2006-LDP9, Commercial Mortgage Pass-Through Certificates, Series 2006-LDP9

	  	  	
c/o Midland Loan Services

	  	  	
10851 Mastin, Suite 300

	  	  	
Overland Park, Kansas 66210

 

	  	
(xv)

	
Section 5.28 is hereby amended by replacing each instance of the term “Renovation Reserve” with the term “PIP Reserve”.

	  	  	  
	  	
(xvi)

	
Exhibit B is hereby deleted in its entirety and replaced with the attached Exhibit B.

	  	  	  
	  	
(xvii)

	
Exhibit C is hereby deleted in its entirety.

 

  

  

  

 

	  	
(b)

	
Within ninety (90) days from the date hereof, Buyer shall complete the immediate repairs identified in that certain Property Condition Report dated April 24, 2012 (“PCR”) prepared by Nova Consulting Group, Inc. in connection with this transaction (as more particularly described in the PCR (“Immediate Repairs”).  Buyer shall provide evidence reasonably satisfactory to Lender that the Immediate Repairs have been completed.  Required evidence may include any and all items reasonably required by Lender or Lender’s servicer as evidence that such items have been completed.  Failure to make the Immediate Repairs within said time period shall constitute an Event of Default under the Loan Documents, at the election of Lender, and Lender shall have all remedies provided therein including the right to make the Immediate Repairs and obtain reimbursement from the Buyer.

	  	  	  
	  	
(c)

	
Seller acknowledges that the Security Instrument as recorded, contains incorrect pages on pages 3 – 7 (Recorded Pages ###-##-#### through ###-##-####) (collectively, the “Original Pages”) which error inadvertently resulted from inserting the wrong Original Pages into the Security Instrument at the closing of the Loan (the “Error”). The Original Pages are hereby replaced by the pages attached to this Agreement as Schedule I, with such replacement to be effective as of the Original Closing Date.  Seller hereby remakes, ratifies, affirms, reaffirms, acknowledges and confirms the Security Instrument, the grant and conveyance made therein, and its obligations thereunder, to be effective from and after the Original Closing Date, and agrees that the Security Instrument remains in full force and effect and represents the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with its terms.  Buyer agrees that the foregoing provisions of this Section 5(c) fully correct the Error with the same force and effect as if Seller had executed the Security Instrument without the Error.  The release of Seller under Section 17 of this Agreement, as to the Security Instrument, shall be deemed to become effective as to the Security Instrument immediately following the effectiveness of the foregoing provisions of this Section 5(c).

	  	  	  
	  	
(d)

	
Lender hereby releases and discharges the Seller Tenant Assignment of Leases.

	  	  	  
	  	
(e)

	
Seller entered into (or in the case of clause (iii) below, permitted) the following agreements without the consent of Lender, with respect to the granting of a drainage easement on the Property, the construction and operation of a detention pond on the Property (the “Pond”), the granting of a purchase option with respect to that portion of the Property affected by the Pond (since terminated), and the leasing of that portion of the Property containing the Pond (collectively, the “Subordinate Agreements”):

	  	
(i)

	
Drainage Easement dated July 21, 2008, from Seller in favor of the City of Shenandoah, Montgomery County, Texas (the “City”), filed for record July 24, 2008, in the Recording Office under Clerk’s File No. 2008-074377 (the “Drainage Easement”);

 

  

  

  

 

	  	
(ii)

	
Lease dated August 13, 2008, between Seller and the City;

	  	  	  
	  	
(iii)

	
Affidavit Regarding Lease and Purchase Option executed by the Mayor of the City, filed for record in the Recording Office under Clerk’s File No. 2008-086247;

	  	  	  
	  	
(iv)

	
City of Shenandoah/Homewood Suites Lease dated August 1, 2011, between Seller and the City; and

	  	  	  
	  	
(v)

	
Memorandum of Lease dated the date hereof, executed by Seller and the City, to be recorded in the Recording Office concurrently with the closing of the Transfer and Assumption.

	  	  	  
	  	
Seller hereby represents and warrants to Lender that the Subordinate Agreements are and remain subject and subordinate to the Loan and the Loan Documents.  Lender hereby waives any and all defaults and Events of Default under the Loan Documents with respect to the Subordinate Agreements and any actions taken pursuant thereto in constructing, operating and maintaining the utility lines pursuant to the Drainage Easement, and the Pond pursuant to the other Subordinate Agreements.  This waiver shall not extend to any future easements, leases or alterations that may require prior Lender consent under any applicable provisions of the Loan Documents, and shall not be deemed to modify such provisions.

6.           Title Policy.  At Closing, Buyer shall (a) cause Old Republic National Title Insurance Company to issue a new mortgagee’s title insurance policy, in such form as Lender may require (“Title Policy”), including showing that the Buyer is the owner of the Property, the effective date of the Title Policy is the date of the Closing, and showing that the Loan Documents are in a first lien position, and (b) pay the cost of the Title Policy, any escrow, filing or recording fees applicable to this transaction, and Lender’s costs and expenses incurred in connection with this Agreement or this transaction, including Lender’s attorneys’ fees, if any, incurred in connection with this Agreement or this transaction.

7.           Buyer’s Assumption of Loan; Financing Statements.  Buyer hereby expressly assumes the obligation to pay the unpaid balance due and owing on the Loan, all interest thereon as provided in the Note and all other obligations under the Loan Documents, with the same force and effect as if Buyer had been specifically named therein as the original maker, borrower or grantor, as applicable.  Without limiting the generality of the foregoing, Buyer expressly assumes the obligation to pay all loan installments as they become due and to observe all obligations of the Loan Documents.  Buyer’s assumption of the foregoing obligations (a) is absolute, unconditional and is not subject to any defenses, waivers, claims or offsets, (b) shall not be affected or impaired by any agreement, condition, statement or representation of any person or entity other than Lender.  Buyer expressly agrees that it has read, approved and will comply with and be bound by all of the terms, conditions, and provisions contained in the Loan Documents.  Buyer specifically agrees that if the Note is recourse, Lender’s remedies shall not in any respect or extent be limited solely to the Property or any other collateral securing the Loan.

 

  

  

  

 

Buyer hereby authorizes Lender to file one or more new financing statements, or amendments to existing financing statements, covering fixtures and personal property collateral included in the Property and covered by the security agreement contained in the Loan Documents, without signature of Buyer where permitted by law. Buyer hereby confirms that it grants Lender a security interest in all fixtures and personal property collateral described in the Loan Documents.

8.           No Representations of Lender.  The parties hereto agree that (a) Lender has made no representations or warranty, either express or implied regarding the Property and has no responsibility whatsoever with respect to the Property, its condition, or its use, occupancy or status, and (b) no claims relating to the Property, its condition, or its use, occupancy or status, will be asserted against Lender or its agents, employees, professional consultants, affiliated entities, successors or assigns, either affirmatively or as a defense.

9.           Intentionally Omitted.

10.         Intentionally Omitted.

11.         Seller’s Representations & Warranties.  Seller hereby represents and warrants that:

	  	
(a)

	
Seller is the owner of the Property and is duly authorized to execute, deliver and perform this Agreement.

	  	
(b)

	
Any court or third-party approvals necessary for Seller to enter into this Agreement have been obtained.

	  	
(c)

	
The entities and/or persons executing this Agreement on behalf of Seller are duly authorized to execute and deliver this Agreement.

	  	
(d)

	
This Agreement and the Loan Documents are in full force and effect and the transactions contemplated therein constitute valid and binding obligations of Seller, enforceable against Seller in accordance with their terms and have not been modified either orally or in writing.

	  	
(e)

	
Lender has not waived any requirements of the Loan Documents nor any of Lender’s rights thereunder.

	  	
(f)

	
There is no existing Event of Default or event or condition that, with the giving of notice or passage of time or both, would constitute an Event of Default.

	  	
(g)

	
All taxes and assessments applicable to the Property that are due and payable as of the Closing have been paid.

	  	
(h)

	
The next payment for real property taxes applicable to the Property is due on or before January 31, 2013.

	  	
(i)

	
All representations and warranties of Seller in the Purchase Agreement are true and correct.

	  	
(j)

	
The Original Loan Documents listed in Recital B, Paragraphs (i) through (xi) constitute all of the documents, instruments and agreements evidencing and securing the Loan immediately prior to the closing of the Transfer and Assumption (excluding any recorded or filed UCC financing statements).

 

  

  

  

 

	  	
(k)

	
All information provided to Lender or Midland Loan Services, a division of PNC Bank, National Association (“Midland”) by Seller, or any of its employees, officers, directors, partners, members, managers or representatives, in connection with or relating to (i) this Agreement or the transactions contemplated hereby or (ii) the Property, contains no untrue statement of material fact and does not omit a material fact necessary in order to make such information not misleading, and the provision of any such information by Lender or Midland to any rating agency is expressly consented to by Seller and will not infringe upon or violate any intellectual property rights of any party.  Seller, by its execution of this Agreement, jointly and severally with Seller Principal, agrees to reimburse, indemnify and hold Lender, its officers, agents, loan servicers (including, without limitation, Midland) and employees harmless from and against any and all liabilities, judgments, costs, claims, damages, penalties, expenses, losses or charges (including, but not limited to, all legal fees and court costs), which may now or in the future be undertaken, suffered, paid, awarded, assessed or otherwise incurred as a result of or arising out of any breach or inaccuracy of the foregoing representations and warranties or any fraudulent or tortious conduct of Seller in connection with this Agreement or the transactions contemplated hereby, or the Property, including the misrepresentation of financial data presented to Lender.

	  	
(l)

	
All representations and warranties referred to herein shall be true as of the date of this Agreement and the Closing and shall survive the Closing.

	  	
(m)

	
All Renovation Work, (as defined in the Security Instrument), as required in Schedule B of the Security Instrument, has been completed and paid for and all funds have been disbursed to Seller from the Renovation Reserve (as defined in the Security Instrument).

Lender is entitled to rely, and has relied, upon these representations and warranties in the execution and delivery of this Agreement and all other documents and instruments executed and delivered by Lender in connection with this Agreement.

12.         Seller Principal’s Representations and Warranties.  Seller Principal hereby represents and warrants that:

	  	
(a)

	
Seller Principal is duly authorized to execute, deliver and perform this Agreement.

	  	
(b)

	
Any court or third-party approvals necessary for Seller Principal to enter into this Agreement have been obtained.

	  	
(c)

	
The entities and/or persons executing this Agreement on behalf of Seller Principal are duly authorized to execute and deliver this Agreement.

	  	
(d)

	
This Agreement and the Loan Documents are in full force and effect and the transaction contemplated therein constitute valid and binding obligations of Seller Principal, enforceable against Seller Principal in accordance with their terms, and have not been modified either orally or in writing.

	  	
(e)

	
Lender has not waived any requirements of the Loan Documents nor any of Lender’s rights thereunder.

	  	
(f)

	
There is no bankruptcy, receivership or insolvency proceeding pending or threatened against Seller Principal.

 

  

  

  

 

	  	
(g)

	
Seller Principal does not have any intention to do any of the following prior to the Closing or within the 180 days following the Closing:  (i) seek entry of any order for relief as debtor and a proceeding under the Code (hereinafter defined), (ii) seek consent to or not contest the appointment of a receiver or trustee for itself or for all or any part of its property, (iii) file a petition seeking relief under any bankruptcy, arrangement, reorganization or other debtor relief laws, or (iv) make a general assignment for the benefit of its creditors.

	  	
(h)

	
All information provided to Lender or Midland by Seller or Seller Principal, or any of its employees, officers, directors, partners, members, managers or representatives, in connection with or relating to (i) this Agreement or the transactions contemplated hereby or (ii) the Property, contains no untrue statement of material fact and does not omit a material fact necessary in order to make such information not misleading, and the provision of any such information by Lender or Midland to any rating agency is expressly consented to by Seller Principal and will not infringe upon or violate any intellectual property rights of any party.  Seller Principal, by its execution of this Agreement, jointly and severally with Seller, agrees to reimburse, indemnify and hold Lender, its officers, agents, loan servicers (including, without limitation, Midland) and employees harmless from and against any and all liabilities, judgments, costs, claims, damages, penalties, expenses, losses or charges (including, but not limited to, all legal fees and court costs), which may now or in the future be undertaken, suffered, paid, awarded, assessed or otherwise incurred as a result of or arising out of any breach or inaccuracy of the foregoing representations and warranties or any fraudulent or tortious conduct of Seller or Seller Principal in connection with this Agreement or the transactions contemplated hereby, or the Property, including the misrepresentation of financial data presented to Lender by Seller.

	  	
(i)

	
All representations and warranties referred to herein shall be true as of the date of this Agreement and Closing and shall survive Closing.

Lender is entitled to rely, and has relied, upon these representations and warranties in the execution and delivery of this Agreement and all other documents and instruments executed and delivered by Lender in connection with this Agreement.

13.         Seller Tenant’s Representations and Warranties.  Seller Tenant hereby represents and warrants that:

	  	
(a)

	
Seller Tenant is duly authorized to execute, deliver and perform this Agreement.

	  	
(b)

	
Any court or third-party approvals necessary for Seller Tenant to enter into this Agreement have been obtained.

	  	
(c)

	
The entities and/or persons executing this Agreement on behalf of Seller Tenant are duly authorized to execute and deliver this Agreement.

	  	
(d)

	
This Agreement and the Loan Documents to which Seller Tenant is a party, are in full force and effect and the transaction contemplated therein constitute valid and binding obligations of Seller Tenant, enforceable against Seller Tenant in accordance with their terms, and have not been modified either orally or in writing.

	  	
(e)

	
Lender has not waived any requirements of the Loan Documents nor any of Lender’s rights thereunder.

 

  

  

  

 

	  	
(f)

	
There is no bankruptcy, receivership or insolvency proceeding pending or threatened against Seller Tenant.

	  	
(g)

	
Seller Tenant does not have any intention to do any of the following prior to the Closing or within the 180 days following the Closing:  (i) seek entry of any order for relief as debtor and a proceeding under the Code (hereinafter defined), (ii) seek consent to or not contest the appointment of a receiver or trustee for itself or for all or any part of its property, (iii) file a petition seeking relief under any bankruptcy, arrangement, reorganization or other debtor relief laws, or (iv) make a general assignment for the benefit of its creditors.

	  	
(h)

	
All information provided to Lender or Midland by Seller Tenant, or any of its employees, officers, directors, partners, members, managers or representatives, in connection with or relating to (i) this Agreement or the transactions contemplated hereby or (ii) the Property, contains no untrue statement of material fact and does not omit a material fact necessary in order to make such information not misleading, and the provision of any such information by Lender or Midland to any rating agency is expressly consented to by Seller Tenant and will not infringe upon or violate any intellectual property rights of any party.  Seller Tenant, by its execution of this Agreement, jointly and severally with Seller, agrees to reimburse, indemnify and hold Lender, its officers, agents, loan servicers (including, without limitation, Midland) and employees harmless from and against any and all liabilities, judgments, costs, claims, damages, penalties, expenses, losses or charges (including, but not limited to, all legal fees and court costs), which may now or in the future be undertaken, suffered, paid, awarded, assessed or otherwise incurred as a result of or arising out of any breach or inaccuracy of the foregoing representations and warranties or any fraudulent or tortious conduct of Seller or Seller Tenant in connection with this Agreement or the transactions contemplated hereby, or the Property, including the misrepresentation of financial data presented to Lender by Seller Principal.

	  	
(i)

	
All representations and warranties referred to herein shall be true as of the date of this Agreement and Closing and shall survive Closing.

Lender is entitled to rely, and has relied, upon these representations and warranties in the execution and delivery of this Agreement and all other documents and instruments executed and delivered by Lender in connection with this Agreement.

14.         Buyer’s Representations and Warranties.  Buyer hereby represents and warrants that:

	  	
(a)

	
Buyer is duly authorized to execute, deliver and perform this Agreement.

	  	
(b)

	
Any court or third-party approvals necessary for Buyer to enter into this Agreement have been obtained.

	  	
(c)

	
The entities and/or persons executing this Agreement on behalf of Buyer are duly authorized to execute and deliver this Agreement.

	  	
(d)

	
This Agreement and the Loan Documents, as assumed by Buyer, are in full force and effect and the transactions contemplated therein constitute valid and binding obligations of Buyer, enforceable against Buyer in accordance with their terms and have not been modified either orally or in writing.

 

  

  

  

 

	  	
(e)

	
To Buyer’s knowledge, there is no existing Event of Default or event or condition that, with the giving of notice or passage of time or both, would constitute an Event of Default.

	  	
(f)

	
To Buyer’s knowledge, all taxes and assessments applicable to the Property that are due and payable as of the Closing have been paid.

	  	
(g)

	
The next payment for real property taxes applicable to the Property is due on or before January 31, 2013.

	  	
(h)

	
All representations and warranties of Buyer in the Purchase Agreement are true and correct.

	  	
(i)

	
There is no bankruptcy, receivership or insolvency proceeding pending or threatened against Buyer.

	  	
(j)

	
Buyer does not have any intention to do any of the following prior to the Closing or within the 180 days following the Closing (i) seek entry of any order for relief as debtor and a proceeding under the Code (hereinafter defined), (ii) seek consent to or not contest the appointment of a receiver or trustee for itself or for all or any part of its property, (iii) file a petition seeking relief under any bankruptcy, arrangement, reorganization or other debtor relief laws, or (iv) make a general assignment for the benefit of its creditors.

	  	
(k)

	
All of the Required Insurance is in full force and effect, with all required premiums paid, and contains the required Mortgagee’s Clause.

	  	
(l)

	
All funds used by the Buyer to acquire the Property and to close the Transfer and Assumption, derive from capital contributions to Buyer, and are not secured, directly or indirectly, by an interest in the Buyer or any collateral for the Loan.

	  	
(m)

	
The financial position of the Buyer has not significantly deteriorated from the financial position reflected in the most recent financial statements of Buyer  provided to Lender (to the extent such statements have been provided).

	  	
(n)

	
All information provided to Lender or Midland by Buyer, or any of its employees, officers, directors, partners, members, managers or representatives, in connection with or relating to (i) this Agreement or the transactions contemplated hereby or (ii) the Property, contains no untrue statement of material fact and does not omit a material fact necessary in order to make such information not misleading, and the provision of any such information by Lender or Midland to any rating agency is expressly consented to by Buyer and will not infringe upon or violate any intellectual property rights of any party.  Buyer, by its execution of this Agreement, jointly and severally with Buyer Principal, agrees to reimburse, indemnify and hold Lender, its officers, agents, loan servicers (including, without limitation, Midland) and employees harmless from and against any and all liabilities, judgments, costs, claims, damages, penalties, expenses, losses or charges (including, but not limited to, all legal fees and court costs), which may now or in the future be undertaken, suffered, paid, awarded, assessed or otherwise incurred as a result of or arising out of any breach or inaccuracy of the foregoing representations and warranties or any fraudulent or tortious conduct of Buyer in connection with this Agreement or the transactions contemplated hereby, or the Property, including the misrepresentation of financial data presented to Lender by Buyer.

	  	
(o)

	
All representations and warranties referred to herein shall be true as of the date of this Agreement and the Closing and shall survive the Closing.

 

  

  

  

 

Lender is entitled to rely, and has relied, upon these representations and warranties in the execution and delivery of this Agreement and all other documents and instruments executed and delivered by Lender in connection with this Agreement.

15.         Buyer Principal’s Representations and Warranties.  Buyer Principal hereby represents and warrants that:

	  	
(a)

	
Buyer Principal is duly authorized to execute, deliver and perform this Agreement.

	  	
(b)

	
Any court or third-party approvals necessary for Buyer Principal to enter into this Agreement have been obtained.

	  	
(c)

	
The entities and/or persons executing this Agreement on behalf of Buyer Principal are duly authorized to execute and deliver this Agreement.

	  	
(d)

	
This Agreement, and the replacements for the Environmental Indemnity and the Guaranty are in full force and effect and the transaction contemplated therein constitute valid and binding obligations of Buyer Principal, enforceable against Buyer Principal in accordance with their terms, and have not been modified either orally or in writing.

	  	
(e)

	
There is no bankruptcy, receivership or insolvency proceeding pending or threatened against Buyer Principal.

	  	
(f)

	
Buyer Principal does not have any intention to do any of the following prior to the Closing or within the 180 days following the Closing:  (i) seek entry of any order for relief as debtor and a proceeding under the Code (hereinafter defined), (ii) seek consent to or not contest the appointment of a receiver or trustee for itself or for all or any part of its property, (iii) file a petition seeking relief under any bankruptcy, arrangement, reorganization or other debtor relief laws, or (iv) make a general assignment for the benefit of its creditors.

	  	
(g)

	
All funds used by the Buyer and Buyer Tenant to acquire the Property and to close the Transfer and Assumption, derive from capital contributions to Buyer or Buyer Tenant, and are not secured, directly or indirectly, by an interest in the Buyer, the Buyer Tenant or any collateral for the Loan.

	  	
(h)

	
The financial position of the Buyer, Buyer Principal and Buyer Tenant has not significantly deteriorated from the financial position reflected in the most recent financial statements of Buyer, Buyer Principal and Buyer Tenant provided to Lender (to the extent such statements have been provided).

 

  

  

  

 

	  	
(i)

	
All information provided to Lender or Midland by Buyer or Buyer Principal, or any of its employees, officers, directors, partners, members, managers or representatives, in connection with or relating to (i) this Agreement or the transactions contemplated hereby or (ii) the Property, contains no untrue statement of material fact and does not omit a material fact necessary in order to make such information not misleading, and the provision of any such information by Lender or Midland to any rating agency is expressly consented to by Buyer Principal and will not infringe upon or violate any intellectual property rights of any party.  Buyer Principal, by its execution of this Agreement, jointly and severally with Buyer, agrees to reimburse, indemnify and hold Lender, its officers, agents, loan servicers (including, without limitation, Midland) and employees harmless from and against any and all liabilities, judgments, costs, claims, damages, penalties, expenses, losses or charges (including, but not limited to, all legal fees and court costs), which may now or in the future be undertaken, suffered, paid, awarded, assessed or otherwise incurred as a result of or arising out of any breach or inaccuracy of the foregoing representations and warranties or any fraudulent or tortious conduct of Buyer or Buyer Principal in connection with this Agreement or the transactions contemplated hereby, or the Property, including the misrepresentation of financial data presented by Buyer Principal to Lender by Buyer Principal.

	  	
(h)

	
All representations and warranties referred to herein shall be true as of the date of this Agreement and Closing and shall survive Closing.

Lender is entitled to rely, and has relied, upon these representations and warranties in the execution and delivery of this Agreement and all other documents and instruments executed and delivered by Lender in connection with this Agreement.

16.         Buyer Tenants Representations and Warranties.  Buyer Tenant hereby represents and warrants that:

	  	
(a)

	
Buyer Tenant is duly authorized to execute, deliver and perform this Agreement.

	  	
(b)

	
Any court or third-party approvals necessary for Buyer Tenant to enter into this Agreement have been obtained.

	  	
(c)

	
The entities and/or persons executing this Agreement on behalf of Buyer Tenant are duly authorized to execute and deliver this Agreement.

	  	
(d)

	
This Agreement, and the replacements for the Seller Tenant Assignment of Leases, Subordination of Management Agreement and Subordination are in full force and effect and the transaction contemplated therein constitute valid and binding obligations of Buyer Tenant, enforceable against Buyer Tenant in accordance with their terms, and have not been modified either orally or in writing.

	  	
(e)

	
There is no bankruptcy, receivership or insolvency proceeding pending or threatened against Buyer Tenant.

	  	
(f)

	
Buyer Tenant does not have any intention to do any of the following prior to the Closing or within the 180 days following the Closing:  (i) seek entry of any order for relief as debtor and a proceeding under the Code (hereinafter defined), (ii) seek consent to or not contest the appointment of a receiver or trustee for itself or for all or any part of its property, (iii) file a petition seeking relief under any bankruptcy, arrangement, reorganization or other debtor relief laws, or (iv) make a general assignment for the benefit of its creditors.

	  	
(g)

	
All funds used by the Buyer Tenant to acquire a portion of the Property and to close the Transfer and Assumption, derive from capital contributions to Buyer Tenant, and are not secured, directly or indirectly, by an interest in the Buyer Tenant or any collateral for the Loan.

 

  

  

  

 

	  	
(h)

	
The financial position of the Buyer Tenant has not significantly deteriorated from the financial position reflected in the most recent financial statements of Buyer Tenant provided to Lender (to the extent such statements have been provided).

	  	
(i)

	
All information provided to Lender or Midland by Buyer Tenant, or any of its employees, officers, directors, partners, members, managers or representatives, in connection with or relating to (i) this Agreement or the transactions contemplated hereby or (ii) the Property, contains no untrue statement of material fact and does not omit a material fact necessary in order to make such information not misleading, and the provision of any such information by Lender or Midland to any rating agency is expressly consented to by Buyer Tenant and will not infringe upon or violate any intellectual property rights of any party.  Buyer Tenant, by its execution of this Agreement, jointly and severally with Buyer, agrees to reimburse, indemnify and hold Lender, its officers, agents, loan servicers (including, without limitation, Midland) and employees harmless from and against any and all liabilities, judgments, costs, claims, damages, penalties, expenses, losses or charges (including, but not limited to, all legal fees and court costs), which may now or in the future be undertaken, suffered, paid, awarded, assessed or otherwise incurred as a result of or arising out of any breach or inaccuracy of the foregoing representations and warranties or any fraudulent or tortious conduct of Buyer Tenant in connection with this Agreement or the transactions contemplated hereby, or the Property, including the misrepresentation of financial data presented to Lender.

	  	
(h)

	
All representations and warranties referred to herein shall be true as of the date of this Agreement and Closing and shall survive Closing.

Lender is entitled to rely, and has relied, upon these representations and warranties in the execution and delivery of this Agreement and all other documents and instruments executed and delivered by Lender in connection with this Agreement.

17.         Release of Seller, Seller Principal and Seller Tenant.  Lender hereby releases Seller, Seller Principal and Seller Tenant from all liability and obligations under the Loan Documents arising from and after the Closing, including, but not limited to, repayment of the Loan, but excepting, without limitation (i) any environmental or other damage to the Property occurring prior to the Closing, (ii) any obligations arising from the Purchase Agreement, (iii) any liability related to or arising from Seller’s or Seller Principal’s acts or omissions occurring prior to the Closing, and (iv) any liability related to or arising from fraudulent or tortious conduct, including intentional misrepresentation of financial data presented to Lender.

18.         Release of Lender.  Seller, Seller Principal and Seller Tenant, for themselves and for their agents, employees, representatives, officers, directors, general partners, limited partners, joint shareholders, beneficiaries, trustees, administrators, subsidiaries, affiliates, employees, servants and attorneys (collectively, the “Seller Releasing Parties”) jointly and severally release and forever discharge Lender, PNC Bank, National Association, Midland Loan Services, a Division of PNC Bank, National Association, and their respective successors, assigns, partners, directors, officers, employees, agents, attorneys, administrators, trustees, subsidiaries, affiliates, beneficiaries, shareholders and representatives from all liabilities, obligations, costs, expenses, claims and damages, at law or in equity, known or unknown, which any of the Seller Releasing Parties may now or hereafter hold or claim to hold under common law or statutory right, arising in any manner out of the Property, the Loan, any of the Loan Documents or any of the documents, instruments or any other transactions relating thereto or the transactions contemplated thereby.  Without limiting the generality of the foregoing, this release shall include the following matters: (a) all aspects of this Agreement and the Loan Documents, any negotiations, demands or requests with respect thereto, and (b) Lender’s exercise or attempts to exercise any of its rights under this Agreement, any of the Loan Documents, at law or in equity.  The Seller Releasing Parties agree that this release is a full, final and complete release and that it may be pleaded as an absolute bar to any or all suit or suits pending or which may thereafter be filed or prosecuted by any of the Seller Releasing Parties, or anyone claiming by, through or under any of the Seller Releasing Parties.  The Seller Releasing Parties agree that this release is binding upon each of them and their respective agents, employees, representatives, officers, directors, general partners, limited partners, joint shareholders, beneficiaries, trustees, administrators, subsidiaries, affiliates, employees, servants and attorneys.

 

  

  

  

 

Buyer, Buyer Principal and Buyer Tenant, for themselves and for their agents, employees, representatives, officers, directors, general partners, limited partners, managers, members, joint shareholders, beneficiaries, trustees, administrators, subsidiaries, affiliates, employees, servants and attorneys (collectively, the “Buyer Releasing Parties”) jointly and severally release and forever discharge Lender, PNC Bank, National Association, Midland Loan Services, a Division of PNC Bank, National Association, and their respective successors, assigns, partners, directors, officers, employees, agents, attorneys, administrators, trustees, subsidiaries, affiliates, beneficiaries, shareholders and representatives from all liabilities, obligations, costs, expenses, claims and damages, at law or in equity, known or unknown, which arise out of any matters occurring prior to the Closing in connection with the transactions contemplated hereby. The Buyer Releasing Parties agree that this release is a full, final and complete release and that it may be pleaded as an absolute bar to any or all suit or suits pending or which may thereafter be filed or prosecuted by any of the Buyer Releasing Parties, or anyone claiming by, through or under any of the Buyer Releasing Parties.  The Buyer Releasing Parties agree that this release is binding upon each of them and their respective agents, employees, representatives, officers, directors, general partners, limited partners, joint shareholders, beneficiaries, trustees, administrators, subsidiaries, affiliates, employees, servants and attorneys.

19.         Ratification and Confirmation of the Loan.  Buyer agrees to perform each and every obligation under the Loan Documents, as specifically modified by this Agreement, in accordance with their respective terms and conditions.  Buyer ratifies, affirms, reaffirms, acknowledges, confirms and agrees that the Loan Documents, as modified, remain in full force and effect and represent legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their terms. Buyer agrees that, except as expressly provided herein,  this Agreement does not diminish, impair, release or relinquish the liens, powers, titles, security interests and rights securing or guaranteeing payment of the Loan, including the validity or first priority of the liens and security interests encumbering the Property granted Lender by the Loan Documents.

 

  

  

  

 

At all times Buyer shall comply with all terms of the Loan Documents, including without limitation, the insurance requirements of the Loan Documents. Although the Lender may accept certain evidence of insurance for purposes of closing the Transfer and Assumption, the Lender or its servicer may at any time and from time to time request additional insurance information from Buyer to ensure or monitor Buyer’s compliance with the insurance provisions of the Loan Documents and may request that Buyer provide such coverages as Lender or its servicer may require consistent with the terms of the Loan Documents.  By entering into this Agreement, Lender specifically does not waive or modify any of the insurance requirements under the Loan Documents nor any of the remedies provided therein for failure to secure such required insurance coverage.

20.         Intentionally Omitted.

21.         Nonwaiver. The parties hereto acknowledge and agree that (a) any performance or non-performance of the Loan Documents prior to the date of this Agreement does not affect or diminish Lender’s ability to require future compliance with the Loan Documents, and (b) in the future, Lender will require strict compliance with and performance of the Loan Documents. Nothing contained herein shall be construed as a waiver of any of Lender’s rights or remedies with respect to any default under this Agreement or any Loan Document.

22.         Bankruptcy of Buyer or Buyer Principal.  Buyer covenants and agrees that in the event Buyer shall (i) file any petition with any bankruptcy court or be the subject of any petition under the United States Bankruptcy Code (11 U.S.C. §101 et seq., the “Code”), (ii) file or be the subject of any petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency, or other relief for debtors, (iii) have sought or consented to or acquiesced in the appointment of any trustee, receiver, conservator, or liquidator, or (iv) be the subject of any order, judgment, or decree entered by any court of competent jurisdiction approving a petition filed against such party for any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency, or relief for debtors, Lender shall thereupon be entitled, and Buyer irrevocably consents, to the entry of an order by a bankruptcy court granting to Lender relief from any automatic stay imposed by Section 362 of the Code, or otherwise, on or against the exercise of the rights and remedies otherwise available to Lender as provided in the Loan Documents, this Agreement or as otherwise provided by law or in equity, and Buyer irrevocably waives its right to object to, attempt to enjoin or otherwise interfere with such relief and the exercise and enforcement by Lender of its rights and remedies following entry of such order.  Without limiting the generality of the immediately preceding sentence, Buyer agrees that Lender will be entitled to and it consents to immediate relief from the automatic stay imposed by the Code to allow Lender to take any and all actions necessary, desirable or appropriate to enforce any rights Lender may have under the Loan Documents, including, but not limited to, the right to possession of the Property, collection of rents, and/or the commencement or continuation of an action to foreclose Lender’s liens and security interests.  Buyer further agrees that the filing of any petition for relief under the Code which postpones, prevents, delays or otherwise hinders Lender’s efforts to collect the amounts due under the Note or to liquidate any of the collateral therefor shall be deemed to have been filed in bad faith and, therefore, shall be subject to prompt dismissal or conversion to a liquidation case under the Code upon motion therefor by Lender.  Further, Buyer agrees that it will not seek, apply for or cause the entry of any order enjoining, staying, or otherwise prohibiting or interfering with Lender’s obtaining an order granting relief from the automatic stay and enforcement of any rights which Lender may have under the Loan Documents, including, but not limited to, Lender’s right to possession of the Property, collection of rents and/or the commencement or continuation of an action to foreclose Lender’s liens and security interests under the Loan Documents.

 

  

  

  

 

Buyer Principal covenants and agrees that in the event Buyer Principal shall (i) file any petition with any bankruptcy court or be the subject of any petition under the Code, (ii) file or be the subject of any petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency, or other relief for debtors, (iii) have sought or consented to or acquiesced in the appointment of any trustee, receiver, conservator, or liquidator, or (iv) be the subject of any order, judgment, or decree entered by any court of competent jurisdiction approving a petition filed against such party for any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency, or relief for debtors, Lender shall thereupon be entitled, and Buyer Principal irrevocably consents, to the entry of an order by a bankruptcy court granting to Lender relief from any automatic stay imposed by Section 362 of the Code, or otherwise, on or against the exercise of the rights and remedies otherwise available to Lender as provided in the Loan Documents, this Agreement or as otherwise provided by law or in equity, and Buyer Principal irrevocably waives its right to object to, attempt to enjoin or otherwise interfere with such relief and the exercise and enforcement by Lender of its rights and remedies following entry of such order.  Without limiting the generality of the immediately preceding sentence, Buyer Principal agrees that Lender will be entitled to and it hereby consents to immediate relief from the automatic stay imposed by the Code to allow Lender to take any and all actions necessary, desirable or appropriate to enforce any rights Lender may have under the Loan Documents, including, but not limited to, the right to possession of the Property, collection of rents, and/or the commencement or continuation of an action to foreclose Lender’s liens and security interests. Buyer Principal further agrees that the filing of any petition for relief under the Code which postpones, prevents, delays or otherwise hinders Lender’s efforts to collect the amounts due under the Note or to liquidate any of the collateral therefor shall be deemed to have been filed in bad faith and, therefore, shall be subject to prompt dismissal or conversion to a liquidation case under the Code upon motion therefor by Lender.  Further, Buyer Principal agrees that it will not seek, apply for or cause the entry of any order enjoining, staying, or otherwise prohibiting or interfering with Lender’s obtaining an order granting relief from the automatic stay and enforcement of any rights which Lender may have under the Loan Documents, including, but not limited to, Lender’s right to possession of the Property, collection of rents and/or the commencement or continuation of an action to foreclose Lender’s liens and security interests under the Loan Documents.

23.         Compliance with Interest Law.  It is the intention of the parties hereto to conform strictly to any present or future law which has application to the interest and other charges under the Loan Documents (the “Interest Law”).  Accordingly, notwithstanding anything to the contrary in the Loan Documents, the parties hereto agree that the aggregate amount of all interest or other charges taken, reserved, contracted for, charged or received under the Loan Documents or otherwise in connection with the Loan shall under no circumstances exceed the maximum amount of interest allowed by the Interest Law.  If any excess interest is provided for in the Loan Documents, then any such excess shall be deemed a mistake and canceled automatically and, if theretofore paid, shall be credited against the indebtedness evidenced and secured by the Loan Documents (the “Indebtedness”) (or if the Indebtedness shall have been paid in full, refunded by Lender), and the effective rate of interest under the Loan Documents shall be automatically reduce to the maximum effective contract rate of interest that Lender may from time to time legally charge under the then applicable Interest Law with respect to the Loan.  To the extent permitted by the applicable Interest Law, all sums paid or agreed to be paid to Lender for the use, forbearance or detention of the Indebtedness shall be amortized, prorated, allocated and spread throughout the full term of the Loan.

 

  

  

  

 

24.         Impound Accounts.  The Seller hereby assigns to the Buyer, its successors and assigns, all of its rights, title and interest in and to the reserve accounts, impound accounts and/or Escrow Deposits which have been established with Lender for the payment of taxes, assessments, repairs and replacements, production of financial reports, tenant rollover, tenant improvements and insurance, and the Lender, PNC Bank, National Association, and Midland Loan Services, a Division of PNC Bank, National Association, are hereby released from any further responsibility to the Seller in connection with such accounts.

25.         Single Purpose Entity.  Until the indebtedness provided in the Note has been paid in full to Lender and Buyer, its successors and/or assigns have satisfied all covenants, conditions and agreements contained in the Loan Documents (collectively, the “Debt”), Buyer’s organizational documents will provide that Buyer’s sole business purpose shall be the acquisition, ownership and operation of the Property and Buyer Tenant’s organizational documents will provide that Buyer Tenant’s sole business purpose shall be the operation of the Property.

26.         Compliance with Organizational Documents.  Buyer and Buyer Tenant shall at all times during the term of the Note conduct their business affairs in compliance with their respective organizational documents, and shall not amend them without Lender’s consent.

27.         Compliance with Anti-Terrorism Orders.

(i)          Buyer will not permit the transfer of any interest in Buyer to any person or entity who is listed on the Lists or whose beneficial owners are listed on the specially Designated Nationals and Blocked Persons List (the “List”) maintained by the Office of Foreign Asset Control, Department of the Treasury (“OFAC”) pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (September 25, 2001) (the “Order”) and/or any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders (such lists are collectively referred to as the “Lists”).

(ii)         Buyer will not knowingly enter into a Lease with any party who is either (A) listed on the Lists or (B) engaged in illegal activities.

(iii)        Buyer shall immediately notify Lender if it becomes known to Buyer that any member or beneficial owner of Buyer is listed on the Lists or (A) is indicted on, or (B) arraigned and held over on charges involving money laundering or predicate crimes to money laundering.

(iv)        Buyer shall immediately notify Lender if it becomes known to Buyer that any tenant at the Property is listed on the Lists or (A) is convicted on, (B) pleads nolo contendere to, (C) is indicted on or (D) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering.

  

  

  

 

28.         Further Assurances.  The parties hereto agree to do any act or execute any additional documents required by Lender, from time to time, to correct errors in the documenting of the Transfer and Assumption, to effectuate the purposes of this Agreement or to better assure, convey, assign, transfer, perfect or confirm unto Lender the property and rights intended to be given it in the Loan Documents.

29.         Liability.  If any party hereto consists of more than one person, the obligations and liabilities of each such person hereunder shall be joint and several.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns forever.

30.         Severability.  If any term, covenant or condition of this Agreement is held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such term, covenant or condition and the validity or enforceability of the remaining terms, covenants or conditions shall not in any way be affected.

31.         Applicable Law; Jurisdiction.  This Agreement shall be governed and construed in accordance with the laws of the state in which the Property is located.  The parties hereto submit to personal jurisdiction in the state courts located in said state and the federal courts of the United States of America located in said state for the enforcement of any obligations hereunder and waive any and all personal rights under the law of any other state to object to jurisdiction within such state for the purposes of any action, suit, proceeding or litigation to enforce such obligations.

32.         No Restrictions on Performance.  The execution and delivery of this Agreement and compliance with the provisions hereof, will not conflict with, or constitute a breach of or a default under any agreement or other instrument to which any party hereto is a party or by which it is bound.

33.         Definitions.  Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Agreement (including pronouns) shall include the corresponding masculine, feminine or neuter forms, and the singular form such words shall include the plural and vice versa. The words “included,” “includes” and “including” shall each be deemed to be followed by the phrase, “without limitation.”  The words “herein,” “hereby,” “hereof,” and “hereunder” shall each be deemed to refer to this entire Agreement and not to any particular paragraph, article or section hereof.  Notwithstanding the foregoing, if any law is amended so as to broaden the meaning of any term defined in it, such broader meaning shall apply subsequent to the effective date of such amendment.  Where a defined term derives its meaning from a statutory reference, any regulatory definition is broader than the statutory reference and any reference or citation to a statute or regulation shall be deemed to include any amendments to that statue or regulation and judicial and administrative interpretations of it.

 

  

  

  

 

34.         Securities Act of 1933.  Seller and Seller Principal represent that neither Seller, Seller Principal, nor any agent acting for any of them has offered the Note or any similar obligation for sale to or solicited any offers to buy the Note or any similar obligation from any person or party other than Lender, and neither Seller, Seller Principal, nor any agent acting for any of them will take any action which would subject the sale of the Note to the provisions of Section 5 of the Securities Act of 1933, as amended.  Buyer and Buyer Principal represent that neither Buyer, Buyer Principal, nor any agent acting for any of them has offered the Note or any similar obligation for sale to or solicited any offers to buy the Note or any similar obligation from any person or party other than Lender, and neither Buyer, Buyer Principal, nor any agent acting for any of them will take any action which would subject the sale of the Note to the provisions of Section 5 of the Securities Act of 1933, as amended.

35.         Compliance with ERISA.  Seller and Seller Principal represent and warrant that as of the date of this Agreement, neither Seller nor Seller Principal maintains any employee benefit plan which requires compliance with ERISA, and that if at any time either of them shall institute any employee benefit plans, they shall at all times comply with the requirements of ERISA. Buyer and Buyer Principal represent and warrant that as of the date of this Agreement, neither Buyer nor Buyer Principal maintains any employee benefit plan which requires compliance with ERISA, and that if at any time either of them shall institute any employee benefit plans, they shall at all times comply with the requirements of ERISA.

36.         Sole Discretion of Lender.  Wherever pursuant to this Agreement, Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, Lender’s decision to approve or disapprove or to decide that arrangements or terms are satisfactory or not satisfactory shall be in the sole and absolute discretion of Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein.

37.         Headings, Etc.  The headings and captions of various paragraphs of this Agreement are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof.

38.         Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement.

39.         Integration, Survival.  This Agreement and the Loan Documents embody the entire agreement by and between the parties hereto with respect to the Loan, and any and all prior correspondence, discussions or negotiations are deemed merged therein.  Except as otherwise specifically provided herein, all obligations of any party contained in this Agreement or the Loan Documents shall survive the Closing and Lender hereby preserves all of its rights against all persons or entities and all collateral securing the Loan, including, without limitation, the Property.

40.         No Oral Change.  This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of any party hereto, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought.

  

  

  

 

41.         Notices.  Except as otherwise specified herein, any notice, consent, request or other communication required or permitted hereunder shall be in writing and shall be deemed properly given if delivered in accordance with the notice requirements contained in the Loan Documents using the address for a party hereto set forth at the top of the first page of this Agreement.

42.        WAIVER OF JURY TRIAL.  THE PARTIES HERETO KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THE LOAN OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE LOAN DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF ANY PARTY HERETO.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER’S CONSENT TO THE TRANSFER AND ASSUMPTION.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

  

  

  

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day, month and year first above written.

	  	
BUYER:

	  	  	  
	  	
MOODY NATIONAL WOOD-HOU HOLDING, LLC,

	  	
a Delaware limited liability company

	  	  	  
	  	
By:

	
/s/ Brett C. Moody

	  	  	
Brett C. Moody, President

	  	  	  
	  	
BUYER PRINCIPAL:

	  	  	  
	  	
MOODY NATIONAL REIT I, INC., a Maryland corporation

	  	  	  
	  	
By:

	
/s/ Brett C. Moody

	  	  	
Brett C. Moody, Chief Executive Officer

	  	  	  
	  	
MOODY NATIONAL OPERATING PARTNERSHIP I, L.P., a Delaware limited partnership

	  	  	  
	  	
By:

	
Moody National REIT I, Inc.,

	  	  	
a Maryland corporation,

	  	  	
its general partner

	  	  	  
	  	
By:

	
/s/ Brett C. Moody

	  	  	
Brett C. Moody,

	  	  	
Chief Executive Officer

	  	  	  
	  	/s/ Brett C. Moody
	  	BRETT C. MOODY

 

  

  

  

 

	  	
BUYER TENANT:

	  	  	  
	  	
MOODY NATIONAL WOOD-HOU MT, LLC, a Delaware limited liability company

	  	  	  
	  	
By:

	
/s/ Brett C. Moody

	  	  	
Brett C. Moody,

	  	  	
President

 

	  	
SELLER:

	  	  	  
	  	
WOODLANDS TERRAPIN INVESTORS I, LLC, a Texas limited liability company

	  	  	  
	  	
By:

	
/s/ Anthony J. Sherman

	  	  	
Anthony Jon Sherman,

	  	  	
Manager

	  	  	  
	  	
WOODLANDS TERRAPIN INVESTORS II, LLC, a Texas limited liability company

	  	  	  
	  	
By:

	
/s/ Anthony J. Sherman

	  	  	
Anthony Jon Sherman,

	  	  	
Manager

	  	  	  
	  	
WOODLANDS TERRAPIN INVESTORS III, LLC, a Texas limited liability company

	  	  	  
	  	
By:

	
/s/ Anthony J. Sherman

	  	  	
Anthony Jon Sherman,

	  	  	
Manager

	  	  	  
	  	
537 HOUSTON, LLC,

	  	
a Texas limited liability company

	  	  	  
	  	
By:

	
/s/ Anthony J. Sherman

	  	  	
Anthony Jon Sherman,

	  	  	
Manager

	  	  	  
	  	
MAVEN HOUSTON, LLC,

	  	
a Texas limited liability company

	  	  	  
	  	
By:

	
/s/ Anthony J. Sherman

	  	  	
Anthony Jon Sherman,

	  	  	
Manager

 

  

  

  

 

	  	
MARC HOTEL HOUSTON, LLC,

	  	
a Texas limited liability company

	  	  	  
	  	  	
By: /s/ Anthony J. Sherman

	  	  	
Anthony Jon Sherman,

	  	  	
Manager

	  	  	  
	  	
MIRIAM HOTEL HOUSTON, LLC,

	  	
a Texas limited liability company

	  	  	  
	  	
By:

	
/s/ Anthony J. Sherman

	  	  	
Anthony Jon Sherman,

	  	  	
Manager

	  	  	  
	  	
SELLER TENANT:

	  	  	  
	  	
TERRAPIN OPERATOR WOODLANDS, LLC, a Texas limited liability company

	  	  	  
	  	
By:

	
/s/ Anthony J. Sherman

	  	  	
Anthony Jon Sherman,

	  	  	
Manager

	  	  	  
	  	
SELLER PRINCIPAL:

	  	  	  
	  	  	
/s/ Anthony J. Sherman

	  	  	
ANTHONY JON SHERMAN

 

  

  

  

 

	  	
SHERMAN FAMILY TRUST DTD 4/22/03 TRUST

	  	  	  
	  	
By:

	
/s/ Anthony J. Sherman

	  	  	
Anthony Jon Sherman,

	  	  	
Trustee

	  	  	  
	  	  	
/s/ Miriam F. Lipton

	  	  	
MIRIAM F. LIPTON

	  	  	  
	  	  	
/s/ Marc E. Lipton

	  	  	
MARC E. LIPTON

	  	  	  
	  	
MARC E. LIPTON LIVING TRUST

	  	  	  
	  	
By:

	
/s/ Marc E. Lipton

	  	  	
Marc E. Lipton,

	  	  	
Trustee

	  	  	  
	  	/s/ Craig S. Lipton
	  	CRAIG S. LIPTON
	  	  	  
	  	
CRAIG S. LIPTON REVOCABLE TRUST DTD 3/22/04

	  	  	  
	  	
By:

	
/s/ Craig S. Lipton

	  	  	
Craig S. Lipton,

	  	  	
Trustee

	  	  	  
	  	   /s/ Dwight W. Davis
	  	DWIGHT W. DAVIS
	  	  	  
	  	   /s/ William D. Schmikler
	  	WILLIAM D. SCHMICKER

 

  

  

  

 

	  	
LENDER:

	  	  	  
	  	
U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE, SUCCESSOR-IN-INTEREST TO BANK OF AMERICA, N.A., AS TRUSTEE, SUCCESSOR BY MERGER TO LASALLE BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR THE REGISTERED HOLDERS OF J.P. MORGAN CHASE COMMERCIAL MORTGAGE SECURITIES TRUST 2006-LDP9, COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-LDP9

	  	  	  
	  	
By:

	
Midland Loan Services, a Division of

	  	  	
PNC Bank, National Association,

	  	  	
Its Attorney-in-Fact

 

	  	
By:

	
/s/ Gregory L. McFarland

	  	  	
Gregory L. McFarland,

	  	  	
Senior Vice President

 

  

  

  

 

EXHIBIT A

Legal Description

Reserve A, Block 1, Final Plat of HOMEWOOD SUITES-SHENANDOAH, a subdivision in  Montgomery County, Texas, according to map or plat thereof recorded in Volume N, Page 154 of the Map Records of Montgomery County, Texas.

Tax Parcel No.: 0389-00-02822

  

  

  

EXHIBIT B

Additional Stipulations

	  	
B-1

	
Cash Management Stipulations.Borrower, Lender and Moody National Wood-Hou MT, LLC, a Delaware limited liability company (“Operating Tenant”) have entered into that certain Cash Management Agreement (the “Cash Management Agreement”) of even date herewith which, among other things, provides for the disposition of Rents and Profits from the Property.  It is specifically agreed that (i) the Cash Management Agreement is one of the Loan Documents (as defined in this Deed of Trust), and (ii) the Reserves (as defined in the Cash Management Agreement) shall be maintained by Lender as provided for in the Cash Management Agreement.  The Reserves and any disbursement therefrom shall be subject to both this Deed of Trust, the Cash Management Agreement and the other Loan Documents.  All references in this Deed of Trust to the Impound Account and to the other Reserves shall be deemed to refer to the account or accounts into which the proceeds of each such Reserve have been deposited pursuant to the Cash Management Agreement.  All payments from Borrower or Operating Tenant to Lender with respect to Reserves shall be made as provided in the Cash Management Agreement.

	  	  	  
	  	
B-2

	
Curtailment Reserve.During any Curtailment Period (as defined in the Cash Management Agreement), Borrower shall be required to establish and maintain a reserve (the “Curtailment Reserve”) to be funded, maintained and disbursed in accordance with the terms and provisions of the Cash Management Agreement.

	  	  	  
	  	
B-3

	
PIP Reserve.    (i)     Contemporaneously with the execution of this Agreement, Borrower or Operating Tenant has established with Lender a reserve in the amount of $1,315,870.15 (the “PIP Reserve”), by depositing such amount with Lender.  Borrower or Operating Tenant shall complete the repairs and renovations identified in the Property Improvement Plan dated April 6, 2012 (the “PIP Report”) established by Homewood Suites by Hilton (the “PIP Repairs”), and provide evidence reasonably satisfactory to Lender and the Franchisor, that the PIP Repairs have been completed within the required deadlines as set forth in the PIP Report or as otherwise agreed by the Franchisor (the “PIP Repairs Deadline”).  If the PIP Repairs are not completed or if the funds are not completely drawn down by the PIP Repairs Deadline, Lender may, in its sole discretion, in addition to any other remedies Lender may have, undertake the PIP Repairs (at Borrower’s and Operating Tenant’s expense, and to the extent sufficient, using funds in the PIP Reserve).  Failure to make the PIP Repairs by the PIP Repairs Deadline shall constitute an Event of Default under the Loan Documents, at the election of Lender, and Lender shall have all remedies provided therein including the right to apply the PIP Reserve against amounts owed with respect to the Loan and the right to make the PIP Repairs and obtain reimbursement from the Borrower or Operating Tenant.  Upon completion of the PIP Repairs to Lender’s and Franchisor’s reasonable satisfaction, Lender shall disburse to Borrower or Operating Tenant, as directed by such parties, the PIP Reserve (to the extent it has not been applied to the Loan following an Event of Default or used to pay or reimburse Lender) for PIP Repairs.  Borrower and Operating Tenant shall be entitled to perform any of the PIP Repairs in a manner that is more extensive than what is described in the PIP Report; provided, however, that to the extent Lender permits Borrower or Operating Tenant to obtain reimbursement from the PIP Reserve for any item described in the PIP Report before completion of all items described in the PIP Report, Borrower’s or Operating Tenant’s disbursement from the PIP Reserve shall be limited to the lesser of actual cost or one hundred twenty-five (125%) of the estimated cost for such item as stated in the PIP Report.

 

  

  

  

 

	  	  	
(ii)     So long as no Event of Default has occurred and is continuing (i) all sums in the PIP Reserve shall be held by Lender in the PIP Reserve to pay the costs and expenses of completing the PIP Repairs and (ii) Lender shall, provided each item of PIP Repairs has been completed in accordance with the PIP Report and to the extent funds are available for such purpose in the PIP Reserve and no more frequently two times a month, disburse to Borrower or Operating Tenant the amount paid or incurred by Borrower or Operating Tenant in completing and performing the PIP Repairs; provided, however, (a) the minimum draw request hereunder shall be $10,000.00, (b) Lender shall receive a written request from Borrower or Operating Tenant for disbursement from the PIP Reserve which shall include a certification by Borrower or Operating Tenant that the applicable item of PIP Repairs has been completed in accordance with the terms of the Security Instrument and the PIP Report, and (c) Lender shall receive invoices, receipts or other evidence satisfactory to Lender verifying the costs of the PIP Repairs to be paid or reimbursed have been incurred, and such other information and documentation as Lender shall request in its reasonable discretion.  Draw requests for individual invoices in excess of $50,000.00 shall include, in addition to the items specified in (b) and (c) above, affidavits, and/or unconditional lien waivers (provided, however, Lender shall not unreasonably withhold its consent to Borrower’s or Operating Tenant’s provision of a conditional lien waiver subject only to the payment of the amount specified in such disbursement request so long as an applicable unconditional lien waiver accompanies each succeeding funding request for the particular contractor and/or vendor) or other evidence reasonably satisfactory to Lender showing that all materialmen, laborers, subcontractors and any other parties who might or could claim statutory or common law liens and are furnishing or have furnished materials or labor to the Property have been paid all amounts due for such labor and materials furnished to the Property.  Borrower and Operating Tenant shall pay to Lender a processing fee of $200 for each draw request.  At Lender’s discretion, such processing fee may be taken from the PIP Reserve provided it does not cause the balance of the PIP Reserve to fall below an amount equal to one hundred twenty-five percent (125%) of the estimated cost for the remaining PIP Repairs.  At Lender’s reasonable discretion, disbursement may be made by joint check payable to Borrower or Operating Tenant on the one hand, and the applicable contractor on the other.

	  	  	  
	  	  	
(iii)    Lender, in its reasonable discretion, may require Borrower or Operating Tenant to engage, at Borrower’s or Operating Tenant’s expense, as applicable, an independent construction consultant reasonably acceptable to the Lender, to verify the completion of work and the value of the completed work and, if applicable, certify that the Property is, as a result of such work, in compliance with all applicable laws, ordinances, rules and regulations relating to the PIP Repairs so performed.  Lender, in its reasonable discretion, may, from time to time, request that Borrower or Operating Tenant provide a No Further Changes Certificate pursuant to the laws of the State of Texas evidencing that there are no liens of record on the Property other than those in favor of the Lender.  If there is any cost associated with obtaining this Certificate, Lender will allow Borrower or Operating Tenant to utilize funds in the PIP Reserve to pay said costs provided that following such payment the PIP Reserve contains a balance equal to or greater than one hundred twenty-five percent (125%) of the estimated cost for the remaining PIP Repairs.

	  	  	  
	  	  	
(iv)     The disbursement of the last ten percent (10%) of the funds in the PIP Reserve shall be conditioned on (a) Borrower’s or Operating Tenant’s satisfaction of all other draw requirements under this Section B-3 including, without limitation, Borrower’s or Operating Tenant’s provision of invoices and other reasonable evidence that Borrower or Operating Tenant has incurred costs equal to the amount required (if not already provided with previous draw requests), (b) completion of the PIP Repairs as evidenced by a third party inspection acceptable to Lender, including delivery of the following, if applicable: (1) a final certificate of occupancy from the appropriate building authority; (2) a certificate from Franchisor or another third party acceptable to Lender certifying that the PIP Repairs have been completed in accordance with the PIP Report; (3) final lien waivers for individual invoices of $50,000.00 or more (provided, however, Lender shall not unreasonably withhold its consent to Borrower’s or Operating Tenant’s provision of a conditional lien waiver subject only to the payment of the amount specified in such disbursement request so long as an unconditional lien waiver is delivered in conjunction with subsequent draw requests pertaining to said contractor and/or vendor); (4) an affidavit from Borrower or Operating Tenant stating that all contractors have been paid in full or will be paid in full upon the release of funds from the PIP escrow and an affidavit from each contractor stating that all subcontractors have been paid in full or will be paid in full upon receipt of requested final funds (which Lender’s consent for release of funds from the PIP escrow to pay for said requests will not be unreasonably withheld); and (5) a No Further Changes Certificate pursuant to the laws of the State of Texas showing no intervening liens of record on the Property other than those in favor of the Lender.

 

  

  

  

 

	  	  	
(v)     Lender shall not be required to make advances from the PIP Reserve more frequently than two times in any calendar month. Borrower acknowledges that Lender’s standard disbursement frequency is once per month; however, Lender agrees to make commercially reasonable efforts to process up to two disbursements requests each month. In making any payment from the PIP Reserve, Lender shall be entitled to rely on such request from Borrower or Operating Tenant without any inquiry into the accuracy, validity or contestability of any such amount. Interest or other earnings on the funds contained in the PIP Reserve shall be credited to Operating Tenant in accordance with Section 5.28 of the Security Instrument. In the event that the amounts on deposit or available in the PIP Reserve are inadequate to pay the costs of the PIP Repairs, Borrower or Operating Tenant shall pay the amount of such deficiency. To the extent that all of the PIP Repairs have been completed at a cost less than the aggregate PIP Reserve, then the residual balance of the PIP Reserve shall be disbursed to Operating Tenant.

	  	  	  
	  	
B-4

	
Events of Default.  In addition to those circumstances which are defined as Events of Default in Section 2.1 of this Deed of Trust, the following circumstance shall also constitute an Event of Default:

	  	  	  
	  	  	
(i)     If any of the facts forming the basis of the assumptions set forth in that certain Single Member LLC Opinion covering the Borrower and the Operating Tenant, shall no longer be true and correct in all material respects.

 

  

  

  

 

SCHEDULE I

Replacement Pages 3 – 7 of Security Instrument

(See attached)

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