Document:

soho-ex1021_15.htm

 

Exhibit 10.21

AMENDMENT TO
MASTER AGREEMENT

 

THIS AMENDMENT TO MASTER AGREEMENT (“Amendment”) is made this 13th day of December, 2019 (the “Effective Date”) by and among SOTHERLY HOTELS LP, a Delaware limited partnership (“Owner”); SOTHERLY HOTELS INC., a Maryland corporation and general partner of the Owner (the “REIT”) (the Owner and REIT are hereinafter referred to as the “Company”); MHI HOSPITALITY TRS, LLC, a Delaware limited liability company (“Lessee”), NEWPORT HOSPITALITY GROUP, INC., a Virginia corporation (“Manager Parent”) and OUR TOWN HOSPITALITY, LLC, a Virginia limited liability company (“Our Town” or the “Manager” and collectively with the Company, Lessee and the Manager Parent, the “Parties”).  Capitalized terms used herein without definition shall have the same meaning as set forth in the Agreement (as defined below).

RECITALS

WHEREAS, the Parties entered into that certain Master Agreement dated September 6, 2019 (“Agreement”);

WHEREAS, the Parties desire to amend the Agreement to reflect certain changes to the ownership structure of Manager and to incorporate a new exhibit in the Agreement and substitute a new exhibit for an existing exhibit.

NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, Owner, REIT, Lessee, Manager Parent and Manager hereby agree as follows:

1.Section 1a of the Agreement is hereby modified to read in its entirety as follows:

Manager Parent has formed Manager as a limited liability company under the laws of Virginia and is the sole member of Manager.  Manager Parent: (i) has properly treated Manager as an entity disregarded as separate from Manager Parent for U.S. federal income tax purposes since Manager’s formation, and (ii) following adoption of the Amended Operating Agreement (as hereinafter defined), Manager shall be classified as a partnership for U.S. federal tax purposes and will not file any elections to change its default classification of U.S. federal income tax purposes.  Manager has or will qualify to conduct business in each jurisdiction in which a Current Hotel is located and shall qualify in any additional jurisdictions in which an Additional Hotel is located or will form subsidiary limited liability companies to manage a Current Hotel or an Additional Hotel and will cause each such entity to qualify to conduct business in those jurisdictions in which a hotel managed by such entity is located.

2.Exhibit B attached hereto (the “Amended Operating Agreement”) shall be substituted for and shall supersede the Exhibit B attached to the Agreement which is no longer of any force or effect.

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3.The attached Exhibit C shall be incorporated by this reference into the Agreement and shall constitute the Exhibit C referenced in Section 1d of the Agreement.

4.Except as otherwise provided herein, the Agreement and the related Exhibits remain in full force and effect.

5.This Amendment shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia without deference to conflicts of laws principals.

6.This Amendment may be executed in one or more counterparts and by different parties in separate counterparts.  All of such counterparts shall constitute one and the same agreement (or other document) and shall become effective (unless otherwise therein provided) when one or more counterparts have been signed by each Party and delivered to the other Party.

7.This Amendment may be transmitted for execution by facsimile or e-mail and, therefore, signatures transmitted by facsimile or e-mail shall be acceptable and binding.  

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

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THIS Amendment is executed by the parties effective as of the date and year first above written.

 

	
	
SOTHERLY HOTELS LP, 

	
a Delaware limited partnership

 

	
By:
	
 
	
SOTHERLY HOTELS INC., its General Partner,

	
 
	
 
	
a Maryland corporation

 

	
By:
	
 
	
/s/ David R. Folsom

	
Name:
	
 
	
David R. Folsom

	
Title:
	
 
	
President and COO

 

	
	
SOTHERLY HOTELS INC., 

	
a Maryland corporation

 

	
By:
	
 
	
/s/ David R. Folsom

	
Name:
	
 
	
David R. Folsom

	
Title:
	
 
	
President and COO

 

	
	
MHI HOSPITALITY TRS, LLC, 

	
a Delaware limited liability company

 

	
By:
	
 
	
/s/ David R. Folsom

	
Name:
	
 
	
David R. Folsom

	
Title:
	
 
	
Manager

 

	
	
NEWPORT HOSPITALITY, INC.

	
a Virginia corporation

 

	
By:
	
 
	
/s/ Wayne West III

	
Name:
	
 
	
Wayne West III

	
Title:
	
 
	
President

 

	
	
OUR TOWN HOSPITALITY, LLC

	
a Virginia limited liability company

 

	
By:
	
 
	
WWIII MANAGER, LLC, its Manager

 

	
By:
	
 
	
/s/ Wayne West III

	
Name:
	
 
	
Wayne West III

	
Title:
	
 
	
Manager

 

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EXHIBIT B

FORM OF AMENDED OPERATING AGREEMENT

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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
OUR TOWN HOSPITALITY, LLC

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF OUR TOWN HOSPITALITY, LLC (this “Agreement”) is made and entered into as of the 1st day of January, 2020 (the “Effective Date”), by Newport Hospitality Group, Inc., a Virginia corporation (“Newport”) and AMS Family Partnership, R.L.L.L.P. (“AMS”) and DLE Holdings I, LLC, a Virginia limited liability company (“DLE” and each of Newport, AMS and DLE, a “Member” and together the “Members”) and Our Town Hospitality, LLC (the “Company”).

WHEREAS, the Company (formerly known as Newport NuCo, LLC) was formed as a limited liability company on July 3, 2019 pursuant to the provisions of the Virginia Limited Liability Company Act (the “Act”) by the filing of Articles of Organization (the “Articles”) with the State Corporation Commission of the Commonwealth of Virginia and the issuance by such commission of a certificate of organization relating to the Company and in connection with such actions Newport became the sole member of the Company;

WHEREAS, prior to the date hereof Newport, as the sole member of the Company, entered into a Limited Liability Company Agreement dated July 3, 2019 (the “Original Agreement”); and

WHEREAS, Newport desires to add AMS and DLE as Members and to amend and restate the Original Agreement in its entirety.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereby agree as follows:

ARTICLE 1
ORGANIZATION

1.1Formation of the Company.  The Company has been organized as a Virginia limited liability company by the filing of the Articles under and pursuant to the Act.  The Company shall operate as a manager-managed limited liability company.

1.2Name.  The name of the Company is “Our Town Hospitality, LLC” and all Company business shall be conducted in that name or such other names that may be selected by the Board (as hereinafter defined) and that comply with applicable law.

1.3Principal Business Office.  The principal place of business of the Company shall be located at 4290 New Town Avenue, Williamsburg, Virginia 23188 or at such other location as may hereafter be determined by the Board.

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1.4Registered Office; Registered Agent.  The registered office of the Company is  David, Kamp & Frank, LLC, 739 Thimble Shoals Boulevard, Suite 105, Newport News, Virginia 23606 (the “Registered Office”).  The Company’s registered agent for service of process is Joshua M. David, Esq. (the “Registered Agent”).  The Board may change the Registered Office or Registered Agent from time to time as permitted under the Act provided that it has given the Members prior written notice thereof.  

1.5Purpose.  The Company has been formed for the object and purpose of providing management services to entities involved with the hospitality industry including, without limitation, hotels, condominium hotels, restaurants and other like establishments and engaging in any related lawful act or activity for which limited liability companies may be formed under the Act and engaging in any and all activities necessary or incidental to the foregoing; provided, however, in no event shall the Company take any action or engage in any activities that individually or collectively would be reasonably likely to result in the Company failing to qualify as an “eligible independent contractor” as defined in Section 856(d)(9) of the Internal Revenue Code.

1.6Term.  The Company commenced its existence on the effective date of the Articles and shall remain in existence unless and until it is dissolved in accordance with Article 9. 

1.7No Partnership for State Law Purposes; Federal Tax Treatment.  The Members intend that the Company be respected as a limited liability company for all relevant purposes and the Company shall not be treated as or construed to be a partnership (including a limited partnership) or joint venture for purposes of the laws of any state, and no Member shall be treated as a partner or joint venturer of any other Member, for any purposes from and after the Effective Date, other than for purposes of applicable United States tax laws, and this Agreement may not be construed to suggest otherwise.  For federal income tax purposes, the Company will be classified as a partnership for U.S. federal income tax purposes as of the date hereof since the Company has more than one Member and has not filed any elections to change its default classification for U.S. federal tax purposes.  If the Company becomes owned (or is considered to be owned) by a single Member for U.S. federal income tax purposes, the Company shall be disregarded as an entity separate from the sole Member under Section 301.7701‐3(b)(1)(ii) of the U.S. Treasury Regulations (as well as for any analogous state or local tax purposes), and the sole Member and the Company shall take all actions, if any, as is necessary for the Company to be treated as a disregarded entity for U.S. federal income tax purposes (as well as for any analogous state or local tax purposes).

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Article 2
MEMBER; MEMBERSHIP INTEREST

2.1Members.  Each of the Members shall be the members of the Company and subject to the limitations set forth herein, shall own and hold the membership interests in the Company, which interest shall include all entitlements to the income, gains, losses, deductions and distributions of the Company, as may be affected by the terms of this Agreement (“Membership Interest”) as reflected on Exhibit A attached hereto and incorporated herein.

2.2Admission of Additional Membership Interests.  One or more additional Members of the Company may be admitted with the written consent of holders of a majority of the Membership Interests subject to the prior approval of such additional member or members by the affirmative vote of a majority of the Board with at least one (1) of the Sotherly Directors (as hereinafter defined) voting in favor of approving such additional member.

2.3Expulsion.  No Member may be expelled from the Company.

2.4Limited Liability.  Except as otherwise provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and the Members shall not be obligated for any such debt, obligation or liability of the Company solely by reason of being a Member of the Company.

2.5Power to Bind the Company.  No Member (acting in its capacity as such) will have any authority to bind the Company to any contract or obligation to or with any third party with respect to any matter except pursuant to a resolution expressly authorizing such action (and authorizing such Member to bind the Company with respect to such action), which resolution is duly adopted by the Board by the affirmative vote required for such matter pursuant to the terms of this Agreement.

2.6No Management Rights in the Members.  Except to the extent set forth in this Agreement or as required under the Act, the Members (in their capacity as such) will have no right, power or authority to take part in the management, control or operation of the Company or its business and will have no right, power or authority to (a) act for or on behalf of the Company, (b) make any expenditures or incur any obligations on behalf of the Company, or (c) vote or render consent on Company matters.  Any action required to be taken by Members pursuant to this Agreement or applicable law shall be determined by vote of Members holding a majority of the Membership Interests at a meeting of Members or by written action of such Members.

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Article 3
CAPITAL CONTRIBUTIONS

3.1Capital Contribution.  Each Member has contributed assets with a value as set forth or described on Exhibit A as such Member’s capital contribution to the Company (the Member’s “Initial Capital Contribution”).  The Members may from time to time, but shall not be required to, make additional capital contributions to the Company in such form and amount as determined by holders of a majority of the Membership Interests provided any such capital contribution is approved in advance by the affirmative vote of a majority of the Board (each an “Additional Contribution” and together with the Member’s Initial Capital Contribution, the Member’s “Capital Contributions”).

3.2Return of Contributions.  No Member is entitled to the return of any part of its Capital Contributions or to be paid interest in respect of its Capital Contributions.  Unrepaid Capital Contributions of any Member will not be liabilities of the Company.

Article 4
ALLOCATIONS AND DISTRIBUTIONS

4.1Allocation of Profits and Losses as Partnership for U.S. Tax.  Except as otherwise provided in this paragraph pursuant to the regulatory requirements of U.S. Treasury Regulation Sections 1.704-1 and 1.704-2, and after adjusting for all of the Capital Contributions of the Members and distributions to each Member made during a Fiscal Year, net profits and net losses (as determined pursuant to U.S. Treasury Regulation Section 1.704-1) shall be allocated annually (and at such other times in which it is necessary to allocate net profits and net losses) by the Company in a manner such that, after such allocations have been made, the balance of each Member’s capital account (as determined pursuant to U.S. Treasury Regulation Sections 1.704-1) shall, to the extent possible, be equal to an amount that would be distributed to such Member if (a) the Company were to sell its assets for an amount of cash equal to the book value (as determined pursuant to U.S. Treasury Regulation Section 1.704-1(b)(2)(iv)(g)), (b) all Company liabilities were satisfied (limited with respect to each nonrecourse liability to the book value of the assets securing such liability), (c) the Company were to distribute the proceeds of sale pursuant to Section 4.5, and (d) the Company were to dissolve pursuant to Article 9, minus the sum of (i) such Member’s share of partnership minimum gain as defined in U.S. Treasury Regulation Section 1.704-2(g)(1) or such Member’s “share of partner nonrecourse debt minimum gain” as defined in U.S. Treasury Regulation Section 1.704-2(i)(5)), and (ii) the amount, if any, that such Member is obligated (or deemed obligated) to contribute, in its capacity as a Member, to the Company, computed immediately prior to the hypothetical sale of assets.  Such allocations shall incorporate regulatory requirements in U.S. Treasury Regulation section 1.704-1(b)(2)(ii)(d)(3) (relating to a “qualified income offset” and limitations on the ability to allocate losses to a partner that would cause a deficit in their “adjusted capital account”) and U.S. Treasury Regulation section 1.704-2 (relating to allocations with respect to nonrecourse debt).  

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4.2Distributions.  

(a)Quarterly Cash Distributions.  The Company shall make cash distributions to the Members within sixty (60) days of the end of each of the first three calendar quarters in a given calendar year (each a “Quarterly Distribution”) and within ninety (90) days of the end of each calendar year (the “Final Distribution”) commencing January 1, 2020.  Each Quarterly Distribution shall be paid to the Members in proportion to their Membership Interests and the aggregate Quarterly Distribution paid to the Members shall equal the actual year to date net operating income through the end of the immediately preceding calendar quarter (“Actual YTD NOI”) as reasonably determined by the Company and approved by the Board less the aggregate amount of all Quarterly Distributions made with respect to prior calendar quarters during such calendar year.  The Final Distribution shall be calculated based on the actual net operating income for such year (“Actual Annual NOI”) as reasonably determined by the Company and confirmed by Sotherly (as hereinafter defined in Section 5.1).  In the event the Board does not approve Actual YTD NOI as determined by the Company or in the event of a disagreement between the Company and Sotherly regarding the calculation of Actual Annual NOI for any calendar year, the disputed items giving rise to such disagreement shall be submitted by the Company to an independent auditor that has no relationship with the Company, any Member or Sotherly and such independent auditor shall make a determination regarding the correct calculation of such disputed items based on the reasonable accounting conventions adopted by the Company and consistently applied for the period in question.  Such determination will be final and binding on the Company and each Member.  In the event Actual Annual NOI as so determined is greater than the aggregate amount distributed in such year to the Members in the Quarterly Distributions (the “Aggregate Quarterly Distributions”), the Final Distribution shall equal the difference between Actual Annual NOI and the Aggregate Quarterly Distributions.  In the event Actual Annual NOI is less than the Aggregate Quarterly Distributions, the Final Distribution shall be zero and the difference between the Actual Annual NOI and the Aggregate Quarterly Distributions shall be repaid by the Members to the Company with each Member paying a pro rata portion of such difference based on its Membership Interest.  Any such repayment shall not be treated as part of a Member’s Capital Contribution.  For purposes of calculating Actual YTD NOI and Actual Annual NOI for any applicable period, net operating income shall be reduced by all amounts paid by the Company in respect of indebtedness for borrowed money.  The Board, in its reasonable discretion, may increase or decrease distributions that otherwise may be payable pursuant to this Section 4.2(a) as appropriate to reflect adjustments made to Actual Annual NOI for prior calendar years.

Notwithstanding the foregoing, the Members shall receive a minimum annual aggregate distribution for calendar year 2021 and each calendar year thereafter of $250,000.

(b)Tax Distributions.  To the extent that the amount distributed to (or withheld on behalf of) any Member in respect of a fiscal year of the Company (other than in a year of liquidation) is less than such Member’s Assumed Tax Liability (as defined under this Section 4.2(b), the Company shall distribute cash equal to such shortfall to such Member, at such times as to permit such Member to timely satisfy estimated tax or other tax payment requirements.  Each Member’s “Assumed Tax Liability” shall equal the expected aggregate federal, state, and local tax liability, of such Member attributable to items of income, gain, loss, and deduction allocated to such Member for income tax purposes (excluding allocations under U.S. Internal Revenue Code  section 704(c), assuming the highest marginal income tax rates (including U.S. Internal Revenue 

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Code section 1411) applicable to any Member (with the state of residence of a Member that is a “flow through” entity for tax purposes determined to be the state or states of residence of any direct or indirect owner of the entity who is responsible for paying taxes on such income), taking into account the character of the relevant income or loss to such Member and the deductibility, if any, of any state or local tax in computing any state or federal tax liability.  Any amounts paid to Members pursuant to this Section 4.2(b) under this Section 4.2(b) shall be treated as advances on distributions otherwise payable under this Agreement.  Amounts to be distributed to the Members are to always be limited to cash or funds available for distribution, as the Board determines in its discretion considering the reasonable business needs and obligations of the Company, with any shortfall prorated according to each Member’s relative Assumed Tax Liability for such fiscal year.

Article 5
MANAGEMENT

5.1The Board of Directors.  Except for situations in which the approval of the Members is required by this Agreement or by non-waivable provisions of applicable law (including the Act), the right to manage, control and conduct the business and affairs of the Company and to take any and all actions on behalf of the Company shall be vested completely and exclusively in the Board of Directors of the Company (the “Board”) which shall serve as the manager of the Company.  The Board shall consist of five (5) members (each a “Director” and collectively the “Directors”).  The initial Directors who shall serve on the Board from the Effective Date will be Wayne West III and Michael L. Pleninger (the “Member Directors”) and Drew Sims and David Folsom (the “Sotherly Directors”) and a fifth director who shall be an independent director (the “Independent Director”).  David Beatty will be the initial Independent Director.  The Members holding a majority of the Membership Interests will have the continuing and irrevocable right to appoint, remove and replace either or both of the Member Directors.  Sotherly Hotels Inc. or its designated affiliate (“Sotherly”) shall have the continuing and irrevocable right to appoint successor Sotherly Directors upon the death or disability or earlier resignation from the Board of a Sotherly Director.  In the event of the death, disability or earlier resignation of David Beatty (or his duly appointed successor), the remaining four (4) Directors shall by majority vote select a fifth Director who shall not be an employee, member or director of any Member or Sotherly.  In the event the Board is unable to reach a majority vote on a potential successor to the Independent Director, the Sotherly Directors shall have the right to determine the outcome and to cast the deciding vote on such successor and their decision will be final and binding on the Company and the Members.  A Director need not be a Member or a resident of the Commonwealth of Virginia.

5.2Authority of Board.  Except as expressly limited in this Agreement, the Board shall have all of the rights, authority and powers relating to the management of the Company, its business and its assets.  The Board shall have exclusive responsibility for conducting the business and operations of the Company and no Member in its capacity as a member shall take part in the management of the affairs of the Company or control the Company business.  The delegation of all management authority to the Board shall be irrevocable.  Notwithstanding the foregoing, the consent of Members holding a majority of the Membership Interests shall be required as a condition to the Company taking any of the following actions:  (i) except as required by a Management Agreement (as hereinafter defined) or in a lease or sublease of office space or a loan or line of credit extended by Sotherly or an affiliate, paying a fee or other payment to Sotherly or any of its affiliates or their officers, directors or employees; provided nothing in this clause (i) shall 

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condition the making of a  pro rata distribution to the Members on the approval of the Members; (ii) directing an expenditure that is not in furtherance of the purpose of the Company as described in Section 1.5 hereof; (iii) agreeing to pay above-market rent or other rental fees or charges to Sotherly or any of its affiliates or prepaying more than one month in advance any rent or rental fees or charges to Sotherly or any of its affiliates and (iv) with respect to any Management Agreement, agree to any deviation from the management fee structure provided for in the Master Agreement among the Company, Newport and Sotherly.  For purposes of this Agreement, a “Management Agreement” shall refer to an agreement entered into by the Company and a direct or indirect subsidiary or affiliate of Sotherly for purposes of managing or operating a lodging facility or similar hospitality venue.

5.3Approval or Ratification of Acts or Contracts by Board.  The Board in its discretion may approve or ratify any act or contract and such act or contract shall be valid and binding upon the Company.

5.4Resignation.  Any Director may resign at any time by notice given in writing or by electronic transmission to the Company.  Such resignation shall take effect at the date of receipt of such notice by the Company or at such later time as is therein specified. 

5.5Fees and Expenses.  The Independent Director shall receive fees and expenses relating to his or her service on the Board based on prevailing market rates.  The Member Directors and the Sotherly Directors will not be entitled to receive any fees or expenses related to their service on the Board. 

5.6Regular Meetings.  Regular meetings of the Board may be held without notice at such times and at such places as may be determined from time to time by the Board. 

5.7Special Meetings.  Special meetings of the Board may be held at such times and at such places as may be determined by a Director on at least 24 hours’ notice to each other Director given by one of the means specified in Section 5.9 hereof other than by mail or on at least three (3) days’ notice if given by mail.  Special meetings may also be called by the President in like manner and on like notice on the written request of any Director. 

5.8Telephone Meetings.  Board meetings may be held by means of telephone conference or other communications equipment by means of which all persons participating in the meeting can hear each other and be heard.  Participation by a Director in a meeting pursuant to this Section 5.8 shall constitute presence in person at such meeting. 

5.9Notice.  Subject to Section 5.7 and Section 5.10 hereof, whenever notice is required to be given to any Director such notice shall be deemed given effectively if given in person or by telephone, mail addressed to such Director at such Director’s address as it appears on the records of the Company, facsimile, e-mail or by other means of electronic transmission.

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5.10Waiver of Notice.  Whenever notice to Directors is required, a waiver thereof, in writing signed by, or by electronic transmission by, the Director entitled to the notice, whether before or after such notice is required, shall be deemed equivalent to notice.  Attendance by a Director at a meeting shall constitute a waiver of notice of such meeting except when the Director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting was not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special Board meeting need be specified in a waiver notice.

5.11Organization.  At each meeting of the Board, a Director selected by the Board shall preside.  The Board may adopt such procedural rules as it deems necessary and appropriate. 

5.12Action By Majority Vote.  Except as otherwise expressly required by this Agreement or by the Act, the vote of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board.  A quorum will be present at any meeting of the Board if three (3) or more Directors are present (either in person or telephonically) and participating in the meeting.

5.13Action Without Meeting.  Any action required or permitted to be taken at any meeting of the Board may be taken without a meeting if all of the Directors consent thereto in writing or by electronic transmission.

5.14Other Competing Business.  Notwithstanding anything else to the contrary contained in or inferable from this Agreement, the Act or any other statute or principle of law, neither any Member nor any Director or any affiliate of a Member or a Director shall be prohibited or restricted in any way from investing in or conducting, either directly or indirectly, and may invest in and/or conduct, either directly or indirectly, businesses of any nature whatsoever, including the ownership and operation of businesses similar to, competitive with or in the same geographical area as those held by the Company.  Any investment in or conduct of any such businesses by a Member, a Director or any affiliate shall not give rise to any claim for an accounting by the Company or a Member or any right to claim any interest therein or the profits therefrom or damages in respect thereof.

5.15Indemnification.  To the fullest extent permitted by applicable law (including the Act), each Director and Officer (as hereinafter defined) shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such Director or Officer by reason of any act or omission performed or omitted by such Director or Officer in good faith on behalf of the Company.  In addition, the Company shall indemnify each Member against any direct, out-of-pocket damages incurred as a result of any act or omission by the Company or its Officers or Directors provided that such damages shall not include indirect, consequential or punitive damages or damages calculated on the basis of any depreciation in the economic value of a Member’s Membership Interest.  Without limiting the foregoing, any indemnity under this Section 5.15 shall be provided out of and to the extent of Company assets only, and in no event shall any Member have personal liability on account thereof. 

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5.16Exculpation.  To the fullest extent permitted by applicable law, no Director or Officer will have any duty (fiduciary or otherwise), at law or in equity, to the Company or any Member except as expressly set forth in this Agreement and as provided in the Act.  No Director or Officer will be personally liable under any judgment of a court, or in any other manner, for any debt, obligation or liability of the Company, whether that liability arises in contract, tort or otherwise, or for any losses of the Company, solely by reason of being a Director or Officer of the Company.  To the fullest extent permitted by applicable law, no Director or Officer will be liable to the Company, any Member, or any other Director or Officer by reason of the actions or omissions of such Person in the conduct of the business of the Company except for any liabilities arising out of such Person’s fraud, gross negligence, willful misconduct, willful breach of this Agreement or knowing violation of law.

5.17Waiver of Corporate Opportunity.  To the fullest extent permitted by applicable law (including the Act) and without limiting the generality of the obligations of the Company under this Agreement, the doctrine of corporate opportunity, or any other analogous doctrine, will not apply with respect to the Company, the Board or any Member, and, except as contemplated by this Agreement, neither any Member nor any Director, will have any obligation to refrain from (a) doing business with any client or customer of the Company or (b) employing or otherwise engaging a former Officer or employee of the Company; and neither the Company nor any Member will have any right by virtue of this Agreement in or to, or to be offered any opportunity to participate or invest in, any venture engaged or to be engaged in by a Director or an affiliate of a Director or will have any right by virtue of this Agreement in or to any income or profits derived therefrom.

5.18Standards of Conduct; Conflicts of Interest. 

(a)Each Director (other than the Independent Director) will be deemed to be acting at all times solely as the representative of the entity designating such Director, and, except as expressly required under the Act or this Agreement, no such Director will be deemed to have any fiduciary or other duties or obligations to the Company or to a Member other than the entity designating such Director.  The foregoing provision shall not relieve any Director from its duty to act in good faith.

(b)Each Director and Officer will be fully protected and will have no liability for relying in good faith on (i) the provisions of this Agreement, (ii) the records of the Company, (iii) information, opinions, reports or statements presented by a Member, an Officer or employee of the Company, (iv) professionals or advisors to the Company, or by any other Person as to matters the Director or Officer reasonably believes are within such other Person’s professional or expert competence, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits or losses of the Company.  No Director or Officer is responsible for or will have liability for any loss or damage due to the fraud, bad faith, willful misconduct or negligence, whether of omission or commission, of any experts, professionals, independent contractors, employees or other agents of the Company unless the Director or Officer engaged in gross negligence, fraud or intentional misconduct in connection with the foregoing Persons.

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Article 6
OFFICERS

6.1Position and Election.  The officers of the Company  (each an “Officer”) shall be elected by the Board and shall include a President, a Chief Operating Officer, a Director of Finance, a Senior Vice President of Sales and Marketing, a Vice President of Operations and a Senior Vice President of Human Resources and Personnel.  The Board, in its discretion, may also elect a Chairman (who must be a Director), one or more Vice Chairman (who must be Directors) and one or more additional officers.  Any two or more offices may be held by the same person. 

6.2Term.  Each Officer of the Company shall hold office until such Officer’s successor is elected and qualified or until such Officer’s earlier death, resignation or removal.  Any Officer elected or appointed by the Board may be removed by the Board at any time with or without cause by the majority vote of the Directors then in office.  The removal of an Officer shall be without prejudice to his or her contract rights, if any.  The election or appointment of an Officer shall not of itself create contract rights.  Any Officer of the Company may resign at any time by giving written notice of his or her resignation to the President or the Board.  Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt.  Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.  Should any vacancy occur among the Officers, the position shall be filled by appointment made by the Board.

6.3The President.  The President, who shall also hold the title of chief executive officer of the Company, shall have general supervision over the business of the Company and other duties incident to the office of President, and any other duties as may be from time to time assigned to the President by the Board and subject to the control of and oversight by the Board in each case. 

6.4Chief Operating Officer.  The Chief Operating Officer shall have such powers and perform such duties as may be assigned to him or her from time to time by the Board or the President which shall include the day to day operations of the Company and the management of the hotels owned by Sotherly. 

6.5Senior Vice President of Sales and Marketing.  The Senior Vice President of Sales and Marketing shall be responsible for developing, implementing, monitoring and, as necessary and appropriate or as directed by the President, the Chief Operating Officer or the Board, amending the sales and marketing plan and activities of the Company. 

6.6Director of Finance.  The Director of Finance shall have the custody of the corporate funds and securities, except as otherwise provided by the Board, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Board.  The Director of Finance shall disburse the funds of the Company as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and the Directors, at the regular meetings of the Board, or whenever they may require it, an account of all his or her transactions as Director of Finance and of the financial condition of the Company.

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6.7Vice President of Operations.  The Vice President of Operations shall have responsibility for managing and overseeing the general managers of each hotel managed by the Company and such other responsibilities as determined from time to time by the President or Chief Operating Officer or as otherwise directed by the Board.

6.8Senior Vice President of Human Resources and Personnel.  The Senior Vice President of Human Resources and Personnel shall be responsible for all employment related issues arising in connection with the activities of the Company including developing, implementing and administering benefits programs for the employees of the Company which shall each be subject to Board approval. 

Article 7
FISCAL MATTERS

7.1Fiscal Year.  The fiscal year of the Company shall be the calendar year end or such other period as is required under the U.S. Internal Revenue Code.

7.2Accounts.  The Company may establish one or more separate bank and investment accounts and arrangements for the Company.

7.3Books and Records.  The Company shall keep correct and complete books and records of account at the principal office of the Company.  The books and records shall be maintained with respect to accounting matters in accordance with sound accounting practices.

7.4Tax Matters. 

(a)Tax Representative.  The Company, with the approval of the Board, shall designate a “Partnership Representative,” and if necessary, a “Designated Individual” (as such terms are defined under U.S. Internal Revenue Code Section 6223 and to be referred to herein as the “Tax Representative”) and may remove, replace, or revoke such designation, or require such Tax Representative to resign.  The Tax Representative, if appointed, shall have all of the rights, duties, powers, and obligations reasonably needed to perform their duties and obligations associated with their role including making tax elections, gathering and providing information to the Members, the U.S. Internal Revenue Service, and any other U.S. federal, state, local or non-U.S. tax authority, and fairly apportioning audit adjustments among the Members; provided, however, that all actions of the Tax Representative shall be subject to approval of the Board.  The Members agree to cooperate in good faith to timely provide information reasonably requested by the Tax Representative.  Any direct or indirect costs and expenses incurred by the Tax Representative, acting in its capacity as such, shall be deemed costs and expenses of the Company and shall be reimbursed by the Company.

(b)Tax Elections. The Tax Representative, with the consent of the Board, shall have the authority to make all Company elections permitted under the U.S. Internal Revenue Code (or any other applicable tax law), including, without limitation, elections of methods of depreciation and an election under U.S. Internal Revenue Code Section 754. Specifically, in the event the Company is liable for any imputed underpayment with respect to items of Company income, gain, loss, deduction or credit, the Tax Representative may, if approved by the Board, cause the Company to make the election under Section 6226 of the U.S. Internal Revenue Code in the manner provided by the Internal Revenue Service.

15

 

(c)Withholding Taxes. The Company shall be permitted to withhold any amount required under U.S. federal law or any provision of any state, local or foreign tax law with respect to any payment, distribution or allocation to the Company or the Members, and pay such withheld amounts over to any federal, state and local government or any foreign government.  All amounts withheld pursuant to the foregoing shall be treated as amounts paid or distributed to the Members for all purposes under this Agreement, including payments or distributions to be made to the Members under Section 4.2 or Article 9. To the extent withholdings exceed distributions or payment otherwise to be made to a Member, such shortfall shall be treated as an interest-free loan to such Member.

(d)Income Tax Information.  Within ninety (90) days after the end of each fiscal year or as soon as reasonably practicable thereafter, the Company shall prepare and send, or cause to be prepared and sent, to each person who was a Member at any time during such fiscal year copies of such information as may be required for income tax reporting purposes, including (i) copies of Schedule K-1 or any successor schedule or form, for such person, (ii) such other information as a Member may reasonably request for the purpose of applying for refunds of any withholding taxes and (iii) any additional information as may be reasonably requested by a Member, provided that such information is known and tracked by the Company.  

(e)Continuing Application of Tax Provisions.  The provisions contained in this Section 7.4 shall survive the dissolution of the Company and the withdrawal of any Member or the transfer of any Member’s interest in the Company.

Article 8
TRANSFERS 

8.1Transfer of Membership Interest.  No Member may at any time sell, transfer, assign or otherwise dispose of all or any part its Membership Interest without the prior approval of a majority of the Directors including at least one of the Sotherly Directors.  Notwithstanding the foregoing, a Member who is an individual may transfer all or any portion of his Membership Interest to a trust, family partnership or similar vehicle provided all of the beneficial owners or beneficiaries of such vehicle are members of the immediate family of such Member or their lineal descendants.  If a Member transfers all or any portion of his or its Membership Interest pursuant to this Section 8.1, the transferee shall be admitted to the Company upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of this Agreement.  Such admission shall be deemed effective immediately prior to the transfer, and immediately following such admission, the transferor Member shall cease to be a Member of the Company.

Article 9
DISSOLUTION, WINDING‐UP AND TERMINATION

9.1Dissolution.  The Company shall dissolve and its affairs shall be wound up on the first to occur of the following events:

(a)the written consent of the Members and approval of the Board, including at least one of the Sotherly Directors;

16

 

(b)entry of a decree of judicial dissolution of the Company under the Act; or

(c)the termination or expiration of all Management Agreements between the Company and Sotherly or an affiliate of Sotherly.

9.2Winding-Up and Termination.

(a)On the occurrence of an event described in Section 9.1, the Board shall designate an individual or entity to wind-up the affairs of the Company and act as liquidator.  Until distribution of all remaining assets, the Board and the Officers shall continue to operate the Company business.  The costs of winding-up shall be borne as a Company expense.

(b)Any assets of the Company remaining at the conclusion of the winding-up process shall be distributed to the Members in proportion to each Member’s Membership Interest.  All distributions in kind to the Members shall be made subject to the liability for costs, expenses, and liabilities theretofore incurred or for which the Company has committed prior to the date of termination.  The distribution of cash and/or property to the Members in accordance with the provisions of this Section 9.2(b) constitutes a complete return of each Member’s Capital Contributions and a complete distribution to each Member of their Membership Interest and all the Company’s property and constitutes a compromise to which each Member consents.

(c)On completion of such final distribution, the liquidator shall file Articles of Cancellation with the Virginia State Corporation Commission, cancel any other filings made by the Company, and take such other actions as may be necessary to terminate the existence of the Company.

Article 10
GENERAL PROVISIONS

10.1Amendments to Articles and Agreement.  Notwithstanding any other provision of this Agreement or the Articles, an amendment or restatement of either the Articles or this Agreement may be adopted by the Company only with both the written consent of the Members and the approval of the Board, including at least one of the Sotherly Directors.

10.2Binding Effect.  This Agreement is binding on and shall inure to the benefit of the Members and their permitted successors and assigns.

10.3Governing Law; Severability.  This Agreement is governed by and shall be construed in accordance with the laws of the Commonwealth of Virginia (excluding its conflict of laws rules).  If any provision of this Agreement or the application thereof to any person or circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other persons or circumstances is not affected thereby and that provision shall be enforced to the greatest extent permitted by applicable law.

17

 

10.4Construction.  Unless the context requires otherwise:  (a) the gender (or lack of gender) of all words used in this Agreement includes the masculine, feminine, and neuter; (b) the word “including” means “including, without limitation,”; and (c) references to Sections refer to Sections of this Agreement. 

10.5Further Assurances.  In connection with the performance of this Agreement and the transactions contemplated hereby, each Member shall execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the provisions of this Agreement and those transactions. 

10.6Third Party Beneficiary.  Each Member and the Company acknowledge and agree that Sotherly is entitled to exercise certain rights hereunder notwithstanding that it is not a member of the Company or a signatory hereto, but shall nonetheless be entitled to exercise the rights expressly set forth herein as a third party beneficiary.

[Signature page follows]

 

 

 

18

 

IN WITNESS WHEREOF, the undersigned executed this Agreement as of the Effective Date.

	
MEMBERS:

	
 

	
NEWPORT HOSPITALITY GROUP, INC.,

	
a Virginia corporation

	
 
	
 
	
 

	
By:
	
 
	
 

	
Name:
	
 
	
 

	
Its:
	
 
	
 

 

	
AMS FAMILY PARTNERSHIP, R.L.L.L.P.,

	
a Virginia registered limited liability limited partnership

	
 
	
 
	
 

	
By:
	
 
	
 

	
Name:
	
 
	
Andrew M. Sims

	
Its:
	
 
	
General Partner

 

	
DLE Holdings I, LLC,

	
a Virginia limited liability company

	
 
	
 
	
 

	
By:
	
 
	
 

	
Name:
	
 
	
David R. Folsom

	
Its:
	
 
	
Manager

 

	
OUR TOWN HOSPITALITY, LLC, 

	
a Virginia limited liability company

	
 
	
 
	
 

	
By:
	
 
	
WWIII MANAGER, LLC, its Manager

	
 
	
 
	
 

	
By:
	
 
	
 

	
Name:
	
 
	
 

	
Its:
	
 
	
 

 

 

 

[Signature Page]

 

EXHIBIT A

 

LIST OF MEMBER, CAPITAL CONTRIBUTIONS AND MEMBERSHIP INTERESTS OF
OUR TOWN HOSPITALITY, LLC

 

			
	
Member Name and Address
	
Capital Contribution
	
Membership Interest

	
Newport Hospitality Group, Inc.

4290 New Town Avenue

Williamsburg, VA  23188

 
	
US$780.00
	
78.0%

	
AMS Family Partnership, R.L.L.L.P

 
	
US$195.00
	
19.5%

	
DLE Holdings I, LLC

 
	
US$25.00
	
2.5%

 

 

 

20

 

EXHIBIT C

 

REQUIRED ASSETS

 

 

	
 
	
1.
	
Executive Office Furniture including desks, chairs and storage (6) 

	
 
	
2.
	
Board Table (1) 

	
 
	
3.
	
Board Chairs (12) 

	
 
	
4.
	
Workstations and chairs (8) 

	
 
	
5.
	
Personal Computers (14) 

	
 
	
6.
	
Office Telephones (14) 

	
 
	
7.
	
Copier (1) – Leased

	
 
	
8.
	
Television (1) 

	
 
	
9.
	
Minifridge (1) 

	
 
	
10.
	
Microwave (1) 

	
 
	
11.
	
Modem (1)

	
 
	
12.
	
Routers (4) 

	
 
	
13.
	
Miscrosoft 365 License

	
 
	
14.
	
Great Plains Accounting License

	
 
	
15.
	
ProfitSword License

	
 
	
16.
	
Delphi License 

	
 
	
17.
	
Paylocity License

	
 
	
18.
	
Papersave License

	
 
	
19.
	
MyCOI License

	
 
	
20.
	
Avendra/BuyEfficient License

 

21soho-ex1022_14.htm

 

Exhibit 10.22

 

 

 

CREDIT AGREEMENT

 

 

OUR TOWN HOSPITALITY, LLC

as Borrower

and

MHI HOSPITALITY TRS, LLC

as Lender

Dated as of January 1, 2020

 

 

 

 

CREDIT AGREEMENT

This Credit Agreement (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”), dated as of January 1, 2020, is by and between OUR TOWN HOSPITALITY, LLC, a Virginia limited liability company (the “Borrower”), and MHI HOSPITALITY TRS, LLC, a Delaware limited liability company (the “Lender”).

WHEREAS, Sotherly Hotels LP, a Delaware limited partnership, Sotherly Hotels Inc., a Maryland corporation (“Sotherly”), the Lender, Newport Hospitality Group, Inc., a Virginia corporation, and the Borrower are parties to that certain Master Agreement dated as of September 6, 2019 (the “Master Agreement”); and

WHEREAS, in accordance with Section 2(c)(iii) of the Master Agreement, the Borrower has requested that the Lender make available to the Borrower a line of credit to fund its working capital requirements, and the Lender is willing to do so on the terms and conditions set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Borrower and the Lender agree as follows:

ARTICLE I

DEFINITIONS

	
1.1
	
Definitions  

As used in this Agreement, the following terms shall have the following meanings:

“Advance” has the meaning assigned to that term in Section 2.1.

“Advance Date” means any date on which an Advance is made.

“Affiliate” means, with respect to a specified 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, provided that neither the Lender nor any direct or indirect subsidiary of Sotherly, or any of its or their officers, directors or employees shall be considered Affiliates of the Borrower.

“Applicable Law” means, with respect to any Person, (a) all provisions of law, statute, treaty, ordinance, rule, regulation, requirement, restriction, permit, certificate, decision, directive or order of any Governmental Authority applicable to such Person or any of its property and (b) all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which such Person is a party or by which any of its property is bound.

“Availability Period” means the period from and including the Closing Date to but excluding the Maturity Date.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

 

 

“Borrowing Request” has the meaning assigned to that term in Section 2.2(a).

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in Virginia are authorized or required by law to remain closed.

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Closing Date” has the meaning assigned to that term in Section 3.1.

“Control” means 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.  “Controlling” and “Controlled” have meanings analogous thereto.

“Debtor Relief Laws” means 11 of the United States Code and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws of the United States or other applicable jurisdictions.

“Default” means any event or condition that constitutes an Event of Default or that with notice, lapse of time or both would become an Event of Default.

“Dollars” means lawful money of the United States of America.

“Events of Default” has the meaning assigned to that term in Section 7.1.

“GAAP” means generally accepted accounting principles in the United States of America.

“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state, regional, provincial, territorial or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank). 

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding accounts payable incurred in the ordinary course of business that are not more than sixty days past due), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property 

2

 

owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed (provided that the amount of any such Indebtedness at any time shall be deemed to be the lesser of (i) the amount of such Indebtedness at such time and (ii) the fair market value of such property, as determined by such Person in good faith at such time), (g) all guaranties by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all direct or contingent obligations of such Person arising under (i) letters of credit (including standby and commercial), bankers’ acceptances and bank guaranties and (ii) surety bonds, performance bonds and similar instruments issued or created by or for the account of such Person, (j) any equity interest of such Person that, by its terms (or by the terms of any security or other equity interest into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is redeemable at the option of the holder thereof, in whole or in part, (iii) provides for scheduled payments or dividends in cash or (iv) is or becomes convertible into or exchangeable for Indebtedness or any other equity interests that would constitute any of the foregoing, in each case, prior to the date that is 91 days after the Maturity Date and (k) all net obligations, contingent or otherwise, of such Person under swap and hedging contracts.

“Indemnified Person” has the meaning assigned to that term in Section 8.4(b).

“Investment” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of any direct or indirect advance, loan or other extension of credit (including by way of guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property or any payment for property or services for the account or use of others), or any purchase or acquisition of equity interests, evidences of Indebtedness or other securities of, such other Person and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP, and any purchase or other acquisition (in one transaction or a series of transactions) of any assets of any other Person constituting a business unit; except that the endorsement of negotiable instruments and documents in the ordinary course of business will not be deemed to be an Investment.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower, (b) the ability of the Borrower to perform any of its obligations under this Agreement, (c) the legality, binding effect or enforceability against the Borrower of this Agreement or (d) the rights, remedies and benefits available to the Lender under this Agreement.

“Maturity Date” means January 1, 2021 (except that, if such date is not a Business Day, the Maturity Date shall be the next preceding Business Day) or any earlier date on which the repayment of the Obligations is accelerated pursuant to the terms hereof.

3

 

“Maximum Credit Amount” means $500,000.

“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, the Borrower arising under this Agreement or otherwise with respect to any Advance, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against the Borrower or any Affiliate thereof of any proceeding under any Debtor Relief Law naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

“Operating Agreement” means that certain Amended and Restated Limited Liability Company Agreement of the Borrower, dated as of January 1, 2020.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, members, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.

“Responsible Officer” means the chief executive officer, president, executive vice president, chief financial officer, principal accounting officer, treasurer or controller of the Borrower.

“Restricted Payment” means (a) any dividend or other distribution (whether in cash, securities or other property) with respect to any equity interests in the Borrower, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such equity interests in the Borrower or any option, warrant or other right to acquire any such equity interests in the Borrower and (b) any payment of management fees or similar fees by the Borrower to any of its equityholders or any Affiliate thereof.

“Taxes” has the meaning assigned to that term in Section 2.7(a).

“Termination Date” means the first date on which all Obligations (other than contingent indemnification obligations for which no claim has been asserted) have been paid in full in cash.

4

 

ARTICLE II

ADVANCES

	
2.1
	
Advances  

The Lender may in its discretion make advances (each, an “Advance”) to the Borrower from time to time on any Business Day during the Availability Period in an aggregate principal amount outstanding at any time not to exceed the Maximum Credit Amount. 

	
2.2
	
Making the Advances  

(a)Each Advance shall be made, in the Lender’s discretion, on notice given by the Borrower to the Lender not later than 11:00 a.m. ET three (3) Business Days prior to the proposed Advance Date, specifying the date and amount thereof (each, a “Borrowing Request”).  The Lender may on the proposed Advance Date, in its discretion, make such Advance available to the Borrower in same-day funds.  The Borrower may borrow, repay and reborrow Advances provided that the aggregate outstanding principal amount of all Advances does not exceed the Maximum Credit Amount at any time.

(b)If requested by the Lender with respect to any Borrowing Request, the Borrower shall include with such Borrowing Request an estimate of its working capital requirements for the three month period immediately following such Borrowing Request and a proposed use of proceeds for the requested Advance.

	
2.3
	
Repayment and Prepayment  

The Borrower shall repay the aggregate unpaid principal amount of all Advances, together with all other Obligations, on the Maturity Date.  The Borrower may prepay any Advances in whole or in part at any time without premium or penalty, subject to three (3) Business Days’ advance notice to the Lender.

	
2.4
	
Interest  

(a)Interest shall accrue on the outstanding principal amount of the Advances at a rate equal to 3.5% per annum.  Interest accruing during each calendar quarter shall be paid by the Borrower in arrears on the tenth (10th) day of the month immediately following the end of such calendar quarter.  If any amount of principal is not paid when due (whether by demand, at stated maturity, by acceleration or otherwise), that amount of principal shall bear interest from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate equal to 8.5% per annum.

(b)In no event whatsoever shall interest and other charges charged hereunder exceed the highest rate permissible under Applicable Law.  In the event interest and other charges as computed hereunder would otherwise exceed the highest rate permitted under Applicable Law, such excess amount shall be first applied to any unpaid principal balance owed by the Borrower, and if the then remaining excess amount is greater than the previously unpaid principal balance, the Lender shall promptly refund such excess amount to the Borrower and the provisions hereof shall be deemed amended to provide for such permissible rate.

5

 

	
2.5
	
Payments and Computations 

(a)The Borrower shall make each payment of principal, interest and other amounts payable hereunder not later than 1:00 p.m. ET on the due date therefor in Dollars in immediately available funds.

(b)Interest shall be computed on the basis of a year of 360 days and for the actual number of days elapsed.  Each computation of interest by the Lender made in accordance with the terms of this Agreement shall be conclusive and binding for all purposes absent manifest error.

(c)Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest.

	
2.6
	
Termination   

The Borrower may terminate this Agreement upon thirty (30) days’ notice to the Lender and repayment in full of the Obligations.  The Lender may terminate this Agreement upon the occurrence and during the continuance of an Event of Default.  Termination of this Agreement shall not relieve the Borrower of its obligation to pay in full the Obligations, all of which shall survive termination of this Agreement. 

	
2.7
	
Taxes 

(a)Any and all payments made by the Borrower hereunder shall be made free and clear of and without deduction for any present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding income and franchise taxes imposed on the Lender (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”).  If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.7), the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation or other authority in accordance with Applicable Law.

(b)The Borrower will indemnify the Lender for the full amount of Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Section 2.7) paid by the Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto whether or not such Taxes were correctly or legally asserted.  This indemnification shall be made within 15 days after demand therefor by the Lender, which demand shall be accompanied by a certificate setting forth in reasonable detail the circumstances concerning the imposition of, and the calculations used to determine, such Taxes.  The amounts set forth in such certificate shall be conclusive and binding for all purposes, absent manifest error.

 

	
2.8
	
Evidence of Debt  

The Obligations owing to the Lender hereunder shall be evidenced by notations made by the Lender in its financial accounting records and such records shall be prima facie evidence of the existence and amounts of the Obligations; provided that the failure of the Lender to make such notations or any error therein shall not in any manner affect the obligation of the Borrower to repay the Obligation in accordance with the terms of this Agreement.

6

 

ARTICLE III

CONDITIONS PRECEDENT

	
3.1
	
Conditions to Effectiveness

This Agreement shall not become effective until the date on which each of the following conditions is satisfied (such date, the “Closing Date”):

(a)This Agreement shall have been executed and delivered by the Borrower and the Lender;

(b)The Lender shall have received a Promissory Note, in form and substance satisfactory to the Lender, executed by the Borrower; and

(c)The Lender shall have received such documents and certificates (including organizational documents and good standing certificates) as the Lender may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of the transactions contemplated by this Agreement and any other legal matters relating to the Borrower, this Agreement or the transactions contemplated hereby.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lender (with each such representation and warranty deemed made as of the Closing Date and as of the date of the making of any Advance hereunder) as follows:

	
4.1
	
Organization; Powers  

The Borrower is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

	
4.2
	
Authorization; Enforceability  

The transactions contemplated by the Agreement are within the limited liability company powers of the Borrower and have been duly authorized by all necessary limited liability company action.  This Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

7

 

	
4.3
	
Governmental Approvals; No Conflicts

The transactions contemplated by the Agreement (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any other Person, except such as have been obtained or made and are in full force and effect, (b) will not violate any Applicable Law or the organizational documents of the Borrower or any order of any Governmental Authority, (c) will not conflict with or result in any breach or contravention of, or require any payment to be made under (i) any indenture, agreement or other instrument to which the Borrower is a party or affecting the Borrower or its properties or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which the Borrower or its property is subject and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower.

	
4.4
	
No Material Adverse Effect  

No Material Adverse Effect has occurred since the Closing Date and no other facts or circumstances exist that have had or could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

	
4.5
	
Compliance with Laws and Agreements; No Default  

The Borrower is in compliance in all material respects with all Applicable Laws.  The Borrower is in compliance with all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.  No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement.

	
4.6
	
Investment Company Status

The Borrower is not an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, and the Borrower is not subject to any other law restricting its ability to incur Indebtedness.

	
4.7
	
Solvency 

On the Closing Date, and immediately prior to and after giving effect to the making of each Advance hereunder and the use of the proceeds thereof, (a) the fair value of the Borrower’s assets is greater than the amount of its liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated, (b) the present fair saleable value of the Borrower’s assets is not less than the amount that will be required to pay the probable liability on its debts as they become absolute and matured, (c) the Borrower is able to realize upon its assets and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business, (d) the Borrower  does not intend to, and does not believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature and (e) the Borrower is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which its property would constitute unreasonably small capital.

8

 

ARTICLE V

AFFIRMATIVE COVENANTS

The Borrower covenants and agrees with the Lender that, until the Termination Date:

	
5.1
	
Existence; Conduct of Business  

The Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises necessary or desirable in the conduct of its business.

	
5.2
	
Payment of Obligations  

The Borrower shall pay its obligations, including Tax liabilities, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings diligently conducted, (b) the Borrower has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

	
5.3
	
Maintenance of Properties  

The Borrower shall (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (b) make all necessary repairs thereto and renewals and replacements thereof, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

	
5.4 
	
Compliance with Laws  

The Borrower shall comply in all material respects with all Applicable Laws.

	
5.5
	
Use of Proceeds  

The proceeds of the Advances shall be used only for the Borrower’s working capital requirements.  No part of the proceeds of any Advance shall be used, whether directly or indirectly (a) for any purpose that entails a violation of any regulation of the Board, including Regulations T, U and X, (b) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of the any anti-corruption law, (c) to purchase or carry margin stock (within the meaning of Regulation U of the Board), or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund Indebtedness originally incurred for such purpose or (d) for any other illegal purpose.

	
5.6
	
Payment of Taxes, Etc.  

The Borrower shall pay and discharge, before the same shall become delinquent, (a) all taxes, assessments and governmental charges or levies imposed upon it or upon its income, profit or property and (b) all lawful claims which, if unpaid, might by law become a Lien upon its property; provided, however that the Borrower shall not be required to pay or discharge any such tax, assessment, charge or levy which is being contested in good faith and by proper proceedings and with respect to which the Borrower shall have established appropriate reserves in accordance with GAAP.

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ARTICLE VI

NEGATIVE COVENANTS

The Borrower covenants and agrees with the Lender that, until the Termination Date:

	
6.1
	
Indebtedness 

The Borrower shall not create, incur, assume or permit to exist any Indebtedness, except:

(a)Indebtedness under this Agreement; and 

(b)Indebtedness consisting of Capital Lease Obligations in an aggregate amount not to exceed $150,000 at any time outstanding.

	
6.2
	
Liens  

The Borrower shall not create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:

(a)Liens and rights of setoff of banks and securities intermediaries in respect of deposit accounts and securities accounts maintained in the ordinary course of business;

(b)Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.2;

(c)carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.2;

(d)pledges and deposits made in the ordinary course of business in connection with (i) workers' compensation, unemployment insurance and other social security laws or regulations and (ii) public utility services provided to the Borrower;

(e)deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

(f)judgment liens securing judgments for the payment of money that do not constitute an Event of Default under Section 7.1(i); and

(g)any interest or title of a lessor under any operating lease entered into by the Borrower in the ordinary course of its business and covering only the assets so leased.

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6.3
	
Fundamental Changes 

The Borrower shall not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all any substantial part of its assets, (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, or engage in any statutory division or divisive merger, or purchase or otherwise acquire all or substantially all of the assets or any equity interests of any class of, or any partnership or joint venture interest in, any other Person, or change its jurisdiction of organization or the form or type of its organization, or amend, modify or restate its Operating Agreement.

	
6.4
	
Disposition of Property

The Borrower shall not sell or otherwise dispose of any of its property, whether now owned or hereafter acquired, except the disposition of obsolete or worn out property in the ordinary course of business.

	
6.5
	
Investments  

The Borrower shall not purchase, hold or acquire (including pursuant to any merger with any Person) any Investment, except:

(a)cash and cash equivalents;

(b)bank deposits in the ordinary course of business;

(c)Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss; and

(d)Investments consisting of the indorsement by the Borrower of negotiable instruments payable to such Person for deposit or collection in the ordinary course of business.

	
6.6
	
Restricted Payments  

Except as permitted pursuant to its Operating Agreement, the Borrower shall not declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment.

	
6.7
	
Transactions with Affiliates  

The Borrower shall not sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower than could be obtained on an arm’s-length basis from unrelated third parties or as otherwise permitted pursuant to its Operating Agreement.

	
6.8
	
Changes in Nature of Business  

The Borrower shall not engage in any business other than businesses of the type conducted by the Borrower on the date of execution of this Agreement and businesses reasonably related or incidental thereto.

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ARTICLE VII

EVENTS OF DEFAULT

	
7.1
	
Events of Default 

If any of the following events (“Events of Default”) shall occur: 

(a)the Borrower shall fail to pay any principal of any Advance when and as required to be paid hereunder, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b)the Borrower shall fail to pay any interest on any Advance or any fee or any other amount (other than an amount referred to in Section 7.1(a)) payable under this Agreement, when and as required to be paid hereunder, and such failure shall continue unremedied for a period of three (3) Business Days;

(c)any representation or warranty made or deemed made by or on behalf of the Borrower in or in connection with this Agreement or any amendment or modification hereof or waiver hereunder or thereunder shall prove to have been incorrect or misleading in any material respect (or, in the case of any such representation or warranty already qualified by materiality, such representation or warranty shall prove to have been incorrect or misleading) when made or deemed made;

(d)the Borrower  shall fail to observe or perform any covenant, condition or agreement contained in Section 5.1, 5.3 or 5.5 or in Article VI;

(e)the Borrower shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in Section 7.1(a), (b) or (d)), and such failure shall continue unremedied for a period of 30 days after the earlier of (i) notice thereof from the Lender to the Borrower and (ii) the date a Responsible Officer of the Borrower had actual knowledge of such failure;

(f)an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or its debts, or of a substantial part of its assets, under any Debtor Relief Law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for a period of 60 or more days or an order or decree approving or ordering any of the foregoing shall be entered;

(g)the Borrower shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Debtor Relief Law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Section 7.1(f), (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

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(h)the Borrower shall become unable, admit in writing its inability, publicly declare its intention not to, or fail generally to pay its debts as they become due;

(i)there is entered against the Borrower (i) a final judgment or order for the payment of money in an aggregate amount (as to all such judgments and orders) in excess of $25,000  (or the equivalent thereof in a foreign currency) or (ii) a non-monetary final judgment or order that, either individually or in the aggregate, has or could reasonably be expected to have a Material Adverse Effect and in either case (A) enforcement proceedings are commenced by any creditor upon such judgment or order or (B) there is a period of 30 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or

(j)any provision of this Agreement, for any reason other than as expressly permitted hereunder or satisfaction in full of all the Obligations, shall cease to be in full force and effect; or the Borrower or any other Person shall contest in any manner the validity or enforceability of any provision of this Agreement; or the Borrower shall deny that it has any or further liability or obligation under this Agreement, or shall purport to revoke, terminate or rescind any provision of this Agreement; 

then, and in every such event (other than an event with respect to the Borrower described in Section 7.1(f) or (g)), and at any time thereafter during the continuance of such event, the Lender may, by notice to the Borrower, take any or all of the following actions, at the same or different times: 

(i)cease to make any additional Advances; 

(ii)declare the Advances then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Advances so declared to be due and payable, together with accrued interest thereon and all fees and other Obligations of the Borrower accrued hereunder, shall become due and payable immediately, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and

(iii)exercise all rights and remedies available to it under the Agreement and Applicable Law;

and in case of any event with respect to the Borrower described in Section 7.1(f) or (g), the principal amount of the Advances then outstanding, together with accrued interest thereon and all fees and other Obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

13

 

ARTICLE VIII

MISCELLANEOUS

	
8.1
	
Amendments, Etc. 

No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender and the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

	
8.2
	
Notices

All notices and other communications provided for hereunder shall be in writing (including e-mail,  mail, facsimile or overnight courier) and delivered (a) if to the Borrower, at Our Town Hospitality, LLC, Attn: Todd Felsen, 306 South Henry Street, Suite 200, Williamsburg, Virginia 23185 and (b) if to the Lender, at MHI Hospitality TRS, LLC, Attn: Scott Kucinski, 306 South Henry Street, Suite 100, Williamsburg, Virginia 23185 or, as to each party, at such other address as shall be designated by such party in a written notice to the other party.  Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient); notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement).

	
8.3
	
No Waiver; Remedies 

No failure on the part of the Lender to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right.  The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

	
8.4
	
Costs and Expenses; Indemnity

(a)The Borrower agrees to pay on demand all costs and expenses, if any (including outside counsel fees and expenses), in connection with the collection or enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement.

(b)The Borrower agrees to indemnify and hold harmless the Lender, its Affiliates, and its and their respective directors, officers and employees (each, an “Indemnified Person”) against all claims, damages, liabilities and expenses (including, without limitation, fees and disbursements of counsel) which may be incurred by or asserted against any Indemnified Person in connection with or arising out of any investigation, litigation or proceeding (i) related to any transaction or proposed transaction (whether or not consummated) in which any proceeds of any Advance are applied or proposed to be applied, directly or indirectly, by the Borrower, whether or not the 

14

 

Lender or any such Indemnified Person is a party to such transactions or (ii) related to the facility under this Agreement or the Borrower’s entering into this Agreement, or to any actions or omissions of the Borrower or any of its officers, directors or employees in connection herewith; provided that the Borrower shall not be required to indemnify any such Indemnified Person from or against any portion of such claims, damages, liabilities or expenses arising out of the gross negligence or willful misconduct of such Indemnified Person.

(c)To the extent permitted by Applicable Law, the Borrower shall not assert, and hereby waives, any claim against any Indemnified Person, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, any transactions contemplated hereby, any Advance or the use of the proceeds thereof.

	
8.5
	
Binding Effect

This Agreement shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder or any interest herein without the prior written consent of the Lender.

	
8.6
	
Execution in Counterparts

This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

	
8.7
	
Headings  

Article and Section headings used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

	
8.8
	
Severability

If any provision of this Agreement is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

	
8.9
	
Right of Setoff  

If an Event of Default shall have occurred and be continuing, the Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by Applicable Law, to set off and apply any and all obligations (in whatever currency) at any time owing, by the Lender or any such Affiliate, to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement to such Lender or its Affiliates, irrespective of whether or not the Lender or such 

15

 

Affiliate shall have made any demand under this Agreement and although such obligations of the Borrower may be contingent or unmatured or are owed to an Affiliate of the Lender different from the Affiliate obligated on such Indebtedness.  The rights of the Lender and its Affiliates under this Section 8.9 are in addition to other rights and remedies (including other rights of setoff) that the Lender or its Affiliates may have.  The Lender agrees to notify the Borrower promptly after any such setoff and application, but the failure to give such notice shall not affect the validity of such setoff and application.

	
8.10
	
Governing Law; Jurisdiction; Jury Trial Waiver 

(a)This Agreement and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement and the transactions contemplated hereby shall be governed by, and construed in accordance with, the law of the Commonwealth of Virginia without deference to conflicts of laws principals.

(b)The Borrower irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Lender or any Related Party thereof in any way relating to this Agreement or the transactions relating hereto, in any forum other than the courts of the Commonwealth of Virginia sitting in City of Williamsburg/James City County, Virginia, and of the United States District Court for the Eastern District of Virginia, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each party hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, in any way relating to this Agreement or the transactions relating hereto may be heard and determined in such Virginia court or, to the fullest extent permitted by Applicable Law, in such federal court.  Each party hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Applicable Law.  Nothing in this Agreement shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction.

(c)The Borrower irrevocably and unconditionally waives, to the fullest extent permitted by Applicable Law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement in any court referred to in clause (b) of this Section.  Each party hereto irrevocably waives, to the fullest extent permitted by Applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d)EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, 

16

 

AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

	
8.11
	
Third Party Beneficiary 

No third-party beneficiary is intended hereby.

[Signature Pages Follow]

 

 

17

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

 

	
OUR TOWN HOSPITALITY, LLC, as Borrower

	
 

	
By:
	
WWIII Manager, LLC, its manager

	
 

	
 

	
By:
	
/s/ Wayne West III

	
Name:
	
Wayne West III

	
Title:
	
Manager

 

 

	
MHI HOSPITALITY TRS, LLC, as Lender

	
 

	
 

	
By:
	
/s/ David R. Folsom

	
Name:
	
David R. Folsom

	
Title:
	
Manager

 

[Signature Page to Credit Agreement]

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