Document:

RDN-EX10.6_2013.6.30-Q2

 Exhibit 10.6

RADIAN GROUP INC.
2008 EQUITY COMPENSATION PLAN

STOCK OPTION GRANT

TERMS AND CONDITIONS

These Terms and Conditions (“Terms and Conditions”) are part of the Stock Option Grant made as of May 14, 2013 (the “Grant Date”), by Radian Group Inc., a Delaware corporation (the “Company”), to the employee named in the Award Summary delivered in connection with this grant (the “Grantee”).
RECITALS
WHEREAS, the Radian Group Inc. 2008 Equity Compensation Plan, as amended (the “Plan”), permits the grant of stock options to employees, officers, directors, consultants and advisors of the Company to purchase shares of Common Stock, in accordance with the terms and provisions of the Plan; 
WHEREAS, the Company desires to grant a Nonqualified Stock Option to the Grantee, and the Grantee desires to accept such Nonqualified Stock Option, on the terms and conditions set forth herein and in the Plan; and
WHEREAS, the applicable provisions of the Plan are incorporated in this Stock Option Agreement by reference, including the definitions of terms contained in the Plan (unless such terms are otherwise defined herein). 
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows: 
1.Grant of Option.  Subject to the terms and vesting conditions hereinafter set forth, the Company hereby awards to the Grantee a Nonqualified Stock Option to purchase the number of shares of Common Stock at the exercise price per share set forth in the Award Summary delivered in connection with this grant (the “Award Summary”), subject to the vesting and other conditions of this Grant Letter (the “Option”).  The Grantee hereby accepts the Option and agrees to be bound by the terms and conditions of this Stock Option Agreement and the Plan with respect to the award.    
2.Vesting.  
(a)Provided the Grantee remains employed by the Company or a Subsidiary through the applicable vesting date and meets any applicable vesting requirements set forth in this Stock Option Agreement, and provided that the Stock Price Hurdle (as defined below) is met, except as set forth in Sections 3 and 4 below, the Option awarded under this Stock Option Agreement shall vest as follows:
		
	Date
	Vested Shares subject to the Option 

(subject to achievement of the Stock Price Hurdle)

May 14, 2016                50% of the shares                

May 14, 2017                Remaining 50% of the shares                
(b)Notwithstanding the foregoing, the Option will only vest if the closing price of the Company's Common Stock on the New York Stock Exchange equals or exceeds $17.49 (which is 125% of the fair market value of the Company's Common Stock on the Grant Date) for ten consecutive trading days ending on or after May 14, 2016 (the “Stock Price Hurdle”), except as provided in Sections 3 and 4 below.  If the Stock Price Hurdle has not been met on the third anniversary of the Date of Grant, the Option with respect to 50% of the shares will vest on the first date after the third anniversary on which the Stock Price Hurdle is met, provided the Grantee remains employed by the Company or a Subsidiary through the applicable vesting date.  If the Stock Price Hurdle has not been met by the fourth anniversary of the Date of Grant, the Option with respect to the remaining 50% of the shares will vest on the first date after the fourth anniversary on which the Stock Price Hurdle is met, provided the Grantee remains employed by the Company or a Subsidiary through the applicable vesting date.  The Stock Price Hurdle must be met by May 13, 2023 in order for the Option to vest under this Section 2.

(c)If the vesting schedule above would produce a fractional share, the portion of the Option that is exercisable shall be rounded down to the nearest whole share.   
(d)Except as provided in Sections 3 and 4 below, no portion of the Option will vest after the Grantee's employment with the Company and its Subsidiaries has terminated for any reason.  In the event of any termination of employment, the Grantee will forfeit the portion of the Option that does not vest either before the termination date or on the termination date associated with such termination.   
3.Retirement, Disability and Death.  
(a)In the event of (i) the Grantee's termination of employment due to Retirement or (ii) the Grantee's death or Disability while employed by the Company or a Subsidiary, the Grantee's Option will automatically vest in full on the date of the Grantee's Retirement, death or Disability, as applicable, regardless of whether the Stock Price Hurdle has been met.  
(b)For purposes of this Stock Option Agreement, “Retirement” shall mean the Grantee's separation from service, without Cause, other than on account of death or Disability, (A) following the Grantee's attainment of age 65 and completion of five years of service with the Company or a Subsidiary, or (B) following the Grantee's attainment of age 55 and completion of ten years of service with the Company or a Subsidiary.
(c)For purposes of this Stock Option Agreement, “Disability” shall mean a physical or mental impairment of sufficient severity that the Grantee is both eligible for and in receipt of benefits under the long-term disability program maintained by the Company, provided that the Grantee completes 30 days of active service with the Company at any time after the Date of Grant and prior to the first vesting date.  The date of Disability for purposes of this Stock Option Agreement is the date on which the Grantee has been in receipt of such long-term disability benefits for six consecutive months.  In the event that the Grantee is not in active service on the Date of Grant (for example, on account of short-term disability) and the Grantee does not return to the Company and complete 30 days of active service with the Company prior to the first vesting date, the Option will be forfeited.
(d)For purposes of this Stock Option Agreement, “Cause” shall mean the Grantee's (A) indictment for, conviction of, or pleading nolo contendere to, a felony or a crime involving fraud, misrepresentation or moral turpitude (excluding traffic offenses other than traffic offenses involving use of alcohol or illegal substances), (B) fraud, dishonesty, theft or misappropriation of funds in connection with the Grantee's duties with the Company and its Subsidiaries, (C) material violation of the Company's Code of Conduct or employment policies, as in effect from time to time, (D) gross negligence or willful misconduct in the performance of the Grantee's duties with the Company and its Subsidiaries, or (E) a breach of any written confidentiality, nonsolicitation or noncompetition covenant with the Company or an Affiliate, in each case as determined in the sole discretion of the Committee.
4.Change of Control.  
(a)If a Change of Control occurs, the Grantee's Option shall continue to vest in accordance with Section 2(a) on the third and fourth anniversaries of the Date of Grant, without regard to whether the Stock Price Hurdle is met, provided that the Grantee remains continuously employed by the Company and its Subsidiaries through such vesting date.  If the Change of Control occurs after the third anniversary of the Date of Grant and before the Stock Price Hurdle has been met, the Option with respect to 50% of the shares will vest on the Change of Control date.  If the Change of Control occurs after the fourth anniversary of the Date of Grant and before the Stock Price Hurdle has been met, the Option with respect to all of the shares will vest on the Change of Control date.  However, in no event may the Option be exercised after ten years from the Date of Grant. 
(b)Notwithstanding the foregoing, if a Change of Control occurs and the Grantee's employment with the Company and its Subsidiaries is terminated by the Company or a Subsidiary without Cause or the Grantee terminates employment for Good Reason (as defined herein), and the Grantee's date of termination occurs (or in the event of the Grantee's termination for Good Reason, the event giving rise to Good Reason occurs), in each case, during the period beginning on the date that is 90 days before the Change of Control and ending on the date that is one year following the Change of Control, the Option will automatically vest in full on the Grantee's date of termination (or, if later, on the date of the Change of Control), regardless of whether the Stock Price Hurdle has been met.  However, in no event may the Option be exercised after ten years from the Date of Grant.  

(c)For purposes of this Stock Option Agreement, “Good Reason” shall mean: 
(i)a material diminution of the Grantee's authority, duties or responsibilities;
(ii)a material reduction in the Grantee's base salary, which, for purposes of this Stock Option Agreement, means a reduction in base salary of 10% or more that does not apply generally to all similarly situated employees of the Company; or
(iii)any material change in the geographic location at which the Grantee must perform his duties to the Company and its Subsidiaries, which, for purposes of this Stock Option Agreement, means the permanent relocation of the Grantee's principal place of employment to any office or location which is located more than 100 miles from the location where the Grantee is based immediately prior to the change in location.  
In order to terminate employment for Good Reason, the Grantee must provide a written notice of termination with respect to termination for Good Reason to the Company within 90 days after the event constituting Good Reason has occurred.  The Company shall have a period of 30 days in which it may correct the act, or the failure to act, that gave rise to the Good Reason event as set forth in the notice of termination.  If the Company does not correct the act, or the failure to act, the Grantee must terminate employment for Good Reason within 30 days after the end of the cure period, in order for the termination to be considered a Good Reason termination.  Notwithstanding the foregoing, in no event will the Grantee have Good Reason for termination if an event described in Section 4(c)(i) occurs in connection with the Grantee's inability to perform his or her duties on account of illness or short-term or long-term disability.
(d)For the avoidance of doubt, in no event shall a Change of Control occur as a result of the Company's participation in the Troubled Asset Relief Program under the Emergency Economic Stabilization Act of 2008, the American Recovery and Reinvestment Act of 2009, or any similar program of the United States, any of its states, or any of their respective political subdivisions, departments, agencies or instrumentalities.
5.Exercise of the Option.  When the Option becomes vested in accordance with Sections 2, 3, or 4 above, the Grantee may exercise part or all of the vested and exercisable Option by delivering a duly completed notice of intent to exercise to the Company, specifying the number of shares as to which the Option is to be exercised and the method of payment.  Payment of the exercise price shall be made in accordance with procedures in effect from time to time based on the type of payment being made but, in any event, prior to issuance of the shares of Common Stock.  The Grantee shall pay the exercise price (i) in cash, (ii) with the approval of the Committee, by delivering shares of Common Stock, which shall be valued at their fair market value on the date of exercise, or by attestation (on a form prescribed by the Committee) to ownership of shares of Common Stock having a fair market value on the date of exercise equal to the exercise price, (iii) by payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board or (iv) by any combination of the foregoing.  The Company's obligation to deliver shares of Common Stock upon exercise of the Option shall be subject to all applicable laws, rules and regulations and also to such approvals by governmental agencies as may be deemed appropriate by the Committee.  Upon exercise of the Option (or portion thereof), the Option (or portion thereof) will terminate and cease to be outstanding.   
6.Transferability.
(a)During the Grantee's lifetime, except as set forth in subsection (b) below, exercise of the Option shall be solely by the Grantee (or his or her legal guardian or legal representative) and, after the Grantee's death, the Option shall be exercisable (subject to the limitations specified in the Plan) solely by the legal representatives of the Grantee, or by the person or persons who acquire the right to exercise such Option by will or by the laws of descent and distribution, to the extent that the Option was outstanding as of the date of the Grantee's death.  Neither the Option nor any right hereunder shall be assignable or otherwise transferable except by will or by the laws of descent and distribution or except as otherwise permitted by the Plan, nor shall any Option be subject to attachment, execution or other similar process.  In the event of any attempt by the Grantee to alienate, assign, pledge, hypothecate or otherwise dispose of any Option or any right hereunder, except as provided for herein, or in the event of the levy of any attachment, execution or similar process upon the rights or interest hereby conferred, the Company may terminate any Option by notice to the Grantee and the Option and all rights hereunder shall thereupon become null and void. 
(b)Notwithstanding the foregoing, the Committee may provide that a Grantee may transfer this Option to family members, one or more trusts for the benefit of family members, or one or more partnerships of which family members are the only partners, according to such terms as the Committee may determine; provided that the Grantee receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately before the transfer.

7.Termination of the Option.  
(a)The Option shall have a term of ten years from the Date of Grant and shall terminate at the expiration of that period (on May 13, 2023), unless the Option is terminated at an earlier date pursuant to the provisions of this Stock Option Agreement or the Plan.
(b)The Option granted and subsequently vested hereunder (including pursuant to Section 4 hereof) shall terminate immediately after the first to occur of: (i) one year after the termination of the Grantee's employment with the Company or a Subsidiary due to an involuntary termination by the Company or a Subsidiary without Cause (except as provided in subsection (c) below), (ii) one year after the termination of the Grantee's employment with the Company or a Subsidiary by the Grantee for Good Reason during the Change of Control period described in Section 4(b) hereof (except as provided in subsection (c) below), (iii) 90 days after the Grantee's voluntary termination of employment with the Company and its Subsidiaries (except as provided in subsection (c) below or as provided in clause (ii) above), or (iv) ten years from the Date of Grant.
(c)In the event of the termination of the Grantee's employment on account of Retirement, Disability or death of a Grantee, the Option held by the Grantee may be exercised, pursuant to the terms of the Plan, by the Grantee (or the Grantee's personal representative) at any time prior to the expiration of the ten-year term of the Option.
(d)Notwithstanding the foregoing, in no event may the Option be exercised after ten years from the Date of Grant (after May 13, 2023).  Any portion of the Option that is not vested at the time the Grantee ceases to be employed by the Company and its Subsidiaries shall immediately terminate.  In the event a Grantee's employment is terminated by the Company or a Subsidiary for Cause, the Option (including the vested portion, if any) held by such Grantee shall immediately terminate and be of no further force or effect.
8.Certain Corporate Changes.  If any change is made to the Common Stock (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination of shares, or exchange of shares or any other change in capital structure made without receipt of consideration), then unless such event or change results in the termination of the Option, the Committee shall adjust, in an equitable manner and as provided in the Plan, the number and class of shares subject to the Option held by the Grantee and/or the exercise price of such Option, and the Stock Price Hurdle, if appropriate, to reflect the effect of such event or change in the Company's capital structure in such a way as to preserve the value of the Option. Any adjustment that occurs under the terms of this Section 8 or the Plan will not change the timing or form of payment with respect to any exercised Option or portion thereof.
9.Restrictive Covenants. 
(a)The Grantee acknowledges and agrees that during the Grantee's employment with the Company and its Affiliates and for the 12 month period following the Grantee's termination of employment for any reason (the “Restricted Period”), the Grantee will not, without the Company's express written consent, engage (directly or indirectly) in any employment or business activity whose primary business involves or is related to providing mortgage insurance or financial guaranty insurance within the United States.  The Grantee further agrees that, given the nature of the Company's business, a nationwide geographic scope is appropriate and reasonable.
(b)For purposes of this Stock Option Agreement, the Grantee acknowledges and agrees that the terms “Confidential Information” and “Trade Secrets” shall mean information that the Company or any of its Affiliates owns or possesses, that the Company or its Affiliates have developed at significant expense and effort, that they use or that is potentially useful in the business of the Company or its Affiliates, that the Company or its Affiliates treat as proprietary, private or confidential, and that is not generally known to the public.  The Grantee further acknowledges that the Grantee's relationship with the Company is one of confidence and trust such that the Grantee has in the past been, and may in the future be, privy to Confidential Information and Trade Secrets of the Company or any of its Affiliates.

(c)The Grantee covenants and agrees that during the term of the Grantee's employment by the Company and during the Restricted Period, the Grantee shall not, directly or indirectly through others, (i) hire or attempt to hire any employee of the Company or any of its Affiliates, (ii) solicit or attempt to solicit any employee of the Company or its Affiliates to become an employee, consultant or independent contractor to, for or of any other person or business entity, or (iii) solicit or attempt to solicit any employee, or any consultant or independent contractor of the Company or any of its Affiliates to change or terminate his or her relationship with the Company or any of its Affiliates, unless in each case of (i) through (iii) more than three months shall have elapsed between the last day of such person's employment or service with the Company or any of its Affiliates and the first date of such solicitation or hiring or attempt to solicit or hire.  If any employee, consultant or independent contractor is hired or solicited by any entity that has hired or agreed to hire the Grantee, such hiring or solicitation shall be conclusively presumed to be a violation of this Agreement; provided, however, that any hiring or solicitation pursuant to a general solicitation conducted by an entity that has hired or agreed to hire the Grantee, or by a headhunter employed by such entity, which does not involve the Grantee, shall not be a violation of this Section 9(c).
(d)The Grantee covenants and agrees that during the term of the Grantee's employment by the Company or its Affiliates and during the Restricted Period, the Grantee shall not, either directly or indirectly through others:
(i)solicit, divert, appropriate or do business with, or attempt to solicit, divert, appropriate or do business with, any customer for whom the Company or any of its Affiliates provided goods or services within 12 months prior to the Grantee's date of termination or any actively sought prospective customer of the Company or any of its Affiliates for the purpose of providing such customer or actively sought prospective customer with services or products competitive with those offered by the Company or any of its Affiliates during the Grantee's employment with the Company or any of its Affiliates, or 
(ii)encourage any customer for whom the Company or any of its Affiliates provided goods or services within 12 months prior to the Grantee's date of termination to reduce the level or amount of business such customer conducts with the Company or any of its Affiliates.
(e)The Grantee acknowledges and agrees that the business of the Company and its Affiliates is highly competitive, that the Confidential Information and Trade Secrets have been developed by the Company at significant expense and effort, and that the restrictions contained in this Section 9 are reasonable and necessary to protect the legitimate business interests of the Company and its Affiliates.
(f)Because the Grantee's services are personal and unique and the Grantee has had and will continue to have access to and has become and will continue to become acquainted with Confidential Information and Trade Secrets, the parties to this Stock Option Agreement acknowledge and agree that any breach by the Grantee of any of the covenants or agreements contained in Section 9 will result in irreparable injury to the Company or any of its Affiliates, as the case may be, for which money damages could not adequately compensate such entity.  Therefore, the Company or any of its Affiliates shall have the right (in addition to any other rights and remedies which it may have at law or in equity and in addition to the forfeiture requirements set forth in Section 9(g) below) to seek to enforce Section 9 and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company or any of its Affiliates may have for a breach, or threatened breach, of the restrictive covenants set forth in Section 9.  The Grantee agrees that in any action in which the Company or any of its Affiliates seeks injunction, specific performance or other equitable relief, the Grantee will not assert or contend that any of the provisions of Section 9 are unreasonable or otherwise unenforceable. The Grantee irrevocably and unconditionally (i) agrees that any legal proceeding arising out of this paragraph may be brought in the United States District Court for the Eastern District of Pennsylvania, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Philadelphia County, Pennsylvania, (ii) consents to the non-exclusive jurisdiction of such court in any such proceeding, and (iii) waives any objection to the laying of venue of any such proceeding in any such court.  The Grantee also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers.
(g)The Grantee acknowledges and agrees that in the event the Grantee breaches any of the covenants or agreements contained in this Section 9:
(i)The Committee may in its discretion determine that the Grantee shall forfeit the outstanding Option (without regard to whether any portion of the Option has vested), and the outstanding Option shall immediately terminate, and

(ii)The Committee may in its discretion require the Grantee to return to the Company any shares of Common Stock received upon exercise of the Option, net of the exercise price paid by the Grantee upon exercise of the Option; provided, that if the Grantee has disposed of any shares of Common Stock received upon exercise of the Option, then the Committee may require the Grantee to pay to the Company, in cash, the fair market value of such shares of Common Stock as of the date of disposition, net of the exercise price paid by the Grantee upon exercise of the Option.   The Committee shall exercise the right of recoupment provided in this Section 9(g)(ii) within 180 days after the Committee's discovery of the Grantee's breach of any of the covenants or agreements contained in this Section 9.
(h)If any portion of the covenants or agreements contained in this Section 9, or the application hereof, is construed to be invalid or unenforceable, the other portions of such covenants or agreements or the application thereof shall not be affected and shall be given full force and effect without regard to the invalid or unenforceable portions to the fullest extent possible.  If any covenant or agreement in this Section 9 is held to be unenforceable because of the duration thereof or the scope thereof, then the court making such determination shall have the power to reduce the duration and limit the scope thereof, and the covenant or agreement shall then be enforceable in its reduced form.  The covenants and agreements contained in this Section 9 shall survive the termination of this Stock Option Agreement.
10.Grant Subject to Plan Provisions.  This Stock Option Agreement is made pursuant to the terms of the Plan, the terms of which are incorporated herein by reference, and shall in all respects be interpreted in accordance therewith. The decisions of the Committee shall be conclusive upon any question arising hereunder. The Grantee's receipt of the Option awarded under this Stock Option Agreement constitutes such Grantee's acknowledgment that all decisions and determinations of the Committee with respect to the Plan, this Stock Option Agreement, and/or the Option shall be final and binding on the Grantee, his or her beneficiaries and any other person having or claiming an interest in such Option.  The settlement of any award with respect to the Option is subject to the provisions of the Plan and to interpretations, regulations and determinations concerning the Plan as established from time to time by the Committee in accordance with the provisions of the Plan. A copy of the Plan will be furnished to each Grantee upon request. Additional copies may be obtained from the Corporate Secretary of the Company, 1601 Market Street, Philadelphia, Pennsylvania 19103-2197.
11.No Employment or Other Rights.  Neither the granting of the Option, nor any other action taken with respect to such Option, shall confer upon the Grantee any right to continue in the employ of the Company or a Subsidiary or shall interfere in any way with the right of the Company or a Subsidiary to terminate Grantee's employment at any time.  The right of the Company or a Subsidiary to terminate at will the Grantee's employment or service at any time for any reason is specifically reserved.
12.No Stockholder Rights.  Neither the Grantee, nor any person entitled to exercise the Grantee's rights in the event of the Grantee's death or in accordance with the terms of this Stock Option Agreement, shall have any of the rights and privileges of a stockholder with respect to the shares subject to the Option, except to the extent that certificates for such shares shall have been issued upon the exercise of the Option as provided for herein (or an appropriate book entry has been made).  Except as described in the Plan, no adjustments are made for dividends or other rights if the applicable record date occurs before Grantee's shares are issued (or an appropriate book entry has been made).
13.Assignment and Transfers.  The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company's parents, subsidiaries, and other Affiliates.  This Stock Option Agreement may be assigned by the Company without the Grantee's consent.
14.Income Taxes; Withholding Taxes.  All obligations of the Company under this Stock Option Agreement shall be subject to the rights of the Company as set forth in the Plan to withhold amounts required to be withheld for any taxes, if applicable.  At the time of exercise, the Company shall have the right to deduct from other compensation, or to withhold shares of Common Stock, in an amount equal to the federal (including FICA), state, local and foreign income taxes and other amounts as may be required by law to be withheld with respect to the exercise of the Option, provided that any share withholding shall not exceed the Grantee's minimum applicable withholding tax rate for federal (including FICA), state, local and foreign tax liabilities.

15.Applicable Law.  The validity, construction, interpretation and effect of this instrument shall exclusively be governed by, and determined in accordance with, the applicable laws of the State of Delaware, excluding any conflicts or choice of law rule or principle.  This Grant shall be subject to any required approvals by any governmental or regulatory agencies.  This Grant shall also be subject to any applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Board from time to time.  Notwithstanding anything in this Stock Option Agreement to the contrary, the Plan, this Stock Option Agreement, and the Option awarded hereunder shall be subject to all applicable laws, including any laws, regulations, restrictions or governmental guidance that becomes applicable in the event of the Company's participation in any governmental programs, and the Committee reserves the right to modify this Stock Option Agreement and the Option as necessary to conform to any restrictions imposed by any such laws, regulations, restrictions or governmental guidance or to conform to any applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Board from time to time.  As a condition of participating in the Plan, and by the Grantee's acceptance of the Option, the Grantee is deemed to have agreed to any such modifications that may be imposed by the Committee, and agrees to sign such waivers or acknowledgments as the Committee may deem necessary or appropriate with respect to such modifications.
16.Notice.  Any notice to the Company provided for in this Stock Option Agreement shall be addressed to it in care of the Corporate Secretary of the Company, 1601 Market Street, Philadelphia, Pennsylvania 19103-2197, and any notice to the Grantee shall be addressed to such Grantee at the current address shown on the payroll of the Company, or to such other address as the Grantee may designate to the Company in writing in accordance with this Section.  Except as otherwise provided by this Section, any notice provided for hereunder shall be delivered by hand, sent by telecopy or electronic mail or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage and registry fee prepaid in the United States mail or other mail delivery service.  Notice to the Company shall be deemed effective upon receipt. By receipt of the Option granted hereunder, Grantee hereby consents to the delivery of information (including without limitation, information required to be delivered to the Grantee pursuant to the applicable securities laws) regarding the Company, the Plan, the Option via the Company's electronic mail system or other electronic delivery system.
IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute and attest this instrument, and the Grantee has placed his or her signature hereon, effective as of the date of the grant set forth above.
            	
	
	 

	Radian Group Inc.

	/s/    Anita Scott

	Anita Scott

	SVP, Chief Human Resources Officersppr8k_aug5clermont.htm

HOTEL PURCHASE AGREEMENT

AGREEMENT, dated for reference purposes only, August 2, 2013, is made by and between CHM CLERMONT HOTEL PARTNERS, LLC, a Delaware limited liability company (collectively, the “Seller”) and SUPERTEL LIMITED PARTNERSHIP, a Virginia limited partnership (“Buyer”).

 

RECITALS:

 

This Agreement is made with reference to the following facts and objectives:

 

(a) Seller is the owner of certain parcels of real estate, together with improvements and related assets located at the Property described in Section 1(a) below (the “Hotel”).

 

(b) Robert G. Schaedle, III and Phillip H. McNeill, Sr. (the “Principals”) are the principals in Chartwell Hospitality, LLC, (“Chartwell”), the current manager of the Hotel, and are investors in the Seller.

 

(c) Seller desires to sell on the terms and conditions herein below set forth the Hotel together with the improvements and other assets relating to the Hotel.

 

(d) Buyer wishes to purchase the Hotel and all such assets relating to the Hotel, upon the terms and conditions hereinafter set forth.

 

AGREEMENT:

 

In order to consummate the desires of the parties set forth in the foregoing recitals, which are made a contractual part of this Agreement, and in consideration of the mutual agreements, provisions and covenants herein contained, Seller and Buyer each hereby agree as follows:

 

1. Sale and Purchase of Property. Subject to the terms and conditions of this Agreement, Seller hereby agrees that, at closing, it will sell, convey, assign, transfer and deliver to Buyer, the following real estate, improvements, buildings, facilities, machinery, equipment, furniture, fixtures and other assets (collectively, the “Property”) owned by Seller:

 

(a) Real Property. The real property, including all buildings and improvements situated thereon, located at 2200 East Highway 50, Clermont, Florida  34711 – Hampton Inn and Suites.

 

The real property described on Exhibit A is one (1) of two (2) hotels and real estate being sold to the Buyer by the Seller (or an affiliate of Seller).  The other property (“Other Property”) is known as follows:

	
·  

	
5614 Vineland Road, Orlando, Florida  32819 – Fairfield Inn & Suites

 

The legal description of which are set forth in Exhibit 1(a) which list will be attached hereto within 14 days of the Effective Date and incorporated by reference herein;

 

The parties acknowledge that a lienholder may require the escrow of any deeds of conveyances and/or instruments modifying any liens pending settlement on the sale pursuant to this Agreement and the parties shall cooperate with each other concerning such escrow agreement.

 

(b) Machinery, Equipment, Furniture, Fixtures and Signage. All items of machinery, equipment, furniture, fixtures, vehicles, computer hardware, leasehold improvements and signage and similar fixed assets located in, on or about the Hotel and used in connection with the operation thereof, including, but not limited to, all of those items of personal property described in Exhibit 1(b), which list shall be agreed upon by the Buyer and Seller within forty five (45) days of the Effective Date and which shall be attached hereto and incorporated by reference herein, together with all inventories of spare parts, tools, maintenance equipment, and miscellaneous similar items and materials related to the Hotel presently owned, acquired or leased (provide Buyer assumes such leases) by Seller between the date of execution hereof and closing;

 

(c) Sales, General and Administrative Property. All customer and supplier lists, books and records, computer programs and systems and other sales, general and administrative property related to the Hotel and owned by Seller;

 

(d) Contracts. All leases, contracts, licenses and other agreements relating to the Hotel identified on Exhibit 1(d) which list will be attached hereto within 14 days of the Effective Date (collectively, the “Contracts”).

 

(e) Licenses, Permits and Orders. All approvals, authorizations, consents, licenses, orders and establishment numbers and other permits and similar items of all governmental agencies whether federal, state or local, related to the Hotel and owned, held or utilized by Seller;

 

(f) Materials and Supplies. All office and room supplies located at and used in connection with the operation of the Hotel, including, but not limited to, all sheets, pillows, linens and towels and all maintenance equipment and all similar property used in connection with the operation of the Hotel;

 

(g) Domain Names. The domain names (the “Domain Names”) listed on Exhibit 1(e) which list will be attached hereto within 14 days of the Effective Date, together with all the related website content, to the extent that the same is not owned by the franchisor of the Hotel;

 

(h) Prepaid Expenses. All prepaid expenses and deposits, including rent, utility deposits and similar prepaid items that relate to the Hotel and which exist as of the Closing Date, and which are assignable by Seller, except (i) expenses and other items that are being pro-rated hereunder, and (ii) all FF&E, capital maintenance, tax and insurance reserves and deposits being held by the holder of the existing Loan on the Hotel, as described in Section 2 below; and

 

(i) Telephone Numbers. All telephone and facsimile numbers for the Hotel.

 

The properties referred to in Section 1(a) above shall hereinafter sometimes be referred to individually as the “Real Property” when intending to exclude reference to the other assets and property being purchased hereunder and, similarly, the other assets and property referred to in subparagraphs 1(b)-(i) shall sometimes hereinafter be referred to as the “Personal Property”, when it is intended that the Real Property shall be excluded from such reference. The Real Property and the Personal Property shall otherwise be collectively referred to as the “Property”. Buyer hereby agrees to purchase the Property from Seller upon the terms and conditions set forth herein. The Personal Property shall not be deemed to include any franchise agreement for the Hotel unless all parties agree that the same is being assumed and the same is approved by the franchisor.

 

2. Purchase Price. As consideration for the sale, conveyance, assignment, transfer and delivery of the Property by Seller to Buyer, Buyer hereby agrees that the purchase price for the Property shall be $9,050,000.00. The Purchase Price shall be allocated between the Real Property and Personal Property as the parties may reasonably agree prior to Closing.

 

The remaining balance of the Purchase Price, subject to closing adjustments and prorations, and after crediting the Deposit, shall be paid in cash or immediately available funds at the Closing.

 

Of the purchase price, the sum of $50,000.00 earnest money (the “Deposit”) shall be paid to First American Title Insurance Company, 13924 Gold Circle, Omaha, Nebraska 68144 (the “Escrow Agent”) upon acceptance of this Agreement by Seller. The Deposit shall be applied to the Purchase Price. In the event that all of the conditions set forth in this Agreement have not been satisfied prior to the time set for Closing, Buyer may elect to terminate this Agreement, whereupon the Deposit shall be refunded by the Escrow Agent to Buyer and all further rights and obligations to the parties under this Agreement shall terminate, except for any indemnification provisions set forth herein which by their terms survive termination of this Agreement.

 

3. No Assumption of Liabilities. Buyer does not assume and shall not be deemed to assume any liability or obligation of Seller or the Hotel arising prior to the date of Closing, except for the Contracts which are being assigned to the Buyer. Buyer shall not be responsible for the payment of any wages or salaries due to any employees of the Hotel arising prior to the date of Closing, including any bonuses, deferred compensation or sick leave or vacation pay, or reimbursing lost vacation days due to any employees of the Hotel, and shall not have any obligation to hire any such employees.  Buyer acknowledges that all Hotel employees are employees of the hotel manager.

 

4. Due Diligence Period. Buyer shall have until the sixtieth (60th) day after the Effective Date (the “Due Diligence Period”) to conduct its due diligence at the Property, including inspections, environmental surveys and engineering studies and review of books and records, and Seller will provide Buyer with full access to the Property to conduct such inspections. Buyer may terminate this Agreement, in its sole discretion, by written notice to Seller, on or prior to the end of the Due Diligence Period, whereupon the Escrow Agent shall immediately refund the Deposit to Buyer without any further action by Buyer or Seller being required and all further rights and obligations of the parties under this Agreement shall terminate.  In the event Buyer terminates this Agreement, Buyer shall provide Seller with copies of all third-party reports obtained by Buyer.

 

5. Closing. The time of closing the purchase and sale of the Property shall be as follows:

 

(a) Closing. The transfer of the Property from Seller to Buyer and the closing of the transaction contemplated by this Agreement (the “Closing”) will take place at the offices of the Escrow Agent, or at such other mutually agreeable location, on the latter of the 30th day at 10:00 a.m. after the expiration of the Due Diligence Period or the 7th day after completion of the equity financing along with successful completion of the loan assumption noted in Section 19 below, but in no event later than September 30, 2013 (the “Closing Date”). If such date is a non-business day then the Closing shall occur on the 1st business day thereafter.

 

Notwithstanding the foregoing, if Buyer is unable to obtain the equity financing, on terms acceptable to Buyer, by the Closing Date, Buyer may terminate this Agreement at any time on or prior to the Closing Date, in which case the Deposit will be refunded to Buyer; provided that Buyer may only elect to terminate the Purchase Agreement between the end of the Due Diligence Period and the Closing Date in the event Buyer is unable to obtain financing on terms satisfactory to Buyer, to purchase the Property.

 

Buyer may accelerate the Closing Date to any date selected by the Buyer (in all cases the same must be on a business day) by providing at least ten (10) days prior written notice to Seller of such accelerated Closing Date. Seller shall have no obligation to physically attend Closing provided that Seller shall have delivered the necessary documents to the Escrow Agent prior to Closing and otherwise performed its obligations as set forth below.

 

(b) Buyer’s Obligations at Closing. At Closing, Buyer shall:

 

(i) Purchase Price. Pay to Seller the Purchase Price described in Section 2 above, after crediting the Deposit, by cashier’s check or certified check or other immediately available funds, subject to closing adjustments.

 

(ii) Title Insurance Policy. Obtain its owner’s title insurance policy required and procured in accordance with Section 9, below, or binding commitments from the title insurance company marked down to the time of Closing.

 

(iii) Hotel Management Agreement.  Execute a new hotel management agreement with Chartwell, the current manager of the Hotel, on terms to be agreed upon by the Buyer and Seller within the Due Diligence Period and which shall eventually be attached hereto as Exhibit 5(b)(iv).

 

(c) Seller’s Obligations at Closing. At Closing, Seller shall deliver, or cause to be delivered, to Buyer:

 

(i) Instruments of Conveyance. Duly executed assignments, bills of sale with covenants of warranty of title only and without other representations or warranty of condition of the item assigned, special warranty deeds, notices, consents, assurances and such other instruments of conveyance and transfer as counsel for Buyer shall reasonably request and are reasonably acceptable to counsel for Seller and as shall be effective or necessary to vest in Buyer good, marketable and sufficient title to all of the Property, subject to no liens, encumbrances, claims or security interests not otherwise approved by Buyer. Simultaneously with such delivery, Seller shall take all such steps as may be necessary to put Buyer in actual possession or control of the Property. Appropriate forms of such instruments of conveyance and transfer in conformity with this Agreement shall be submitted by Buyer’s counsel to Seller’s counsel for examination within a reasonable time in advance of the Closing Date. Seller further agrees that it will, at any time from time to time after Closing, upon request of Buyer and without additional consideration, do, execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, transfers, conveyances, and assurances as may be reasonably required and customary, in conformity with this Agreement for the assigning, transferring, granting, conveying, assuming and conforming to Buyer or Buyer’s successors and assigns, or for aiding and assisting in collecting and reducing to possession, any and all of the Property at Closing to Buyer. If there shall be any attorney fees incurred in the review of such additional documentation, such fees shall be paid by Buyer.

 

(ii) Special Warranty Deed. Duly executed and notarized special warranty deed conveying to Buyer good and marketable fee simple title to the Real Property.

 

(iii) Assignment of Domain Names. Assignment of the Domain Names to Buyer in form reasonably acceptable to Buyer, executed by Seller.

 

(iv) Resolutions. Deliver the resolutions of the authorized agents of the Seller authorizing and ratifying the execution and performance of this Agreement.

 

(d) Closing of One Property Dependent on Other Property Closing.  The Property and the Other Property shall all be closed on the same day as the Closing Date herein. The closing documents and closing funds for each closing, shall be held in escrow by the Escrow Agent and no documents shall be delivered or recorded and no funds disbursed until the Property and the Other  Property have been closed and operational control of each of the two properties transferred to the Seller, and the Escrow Agent is in a position to deliver and record documents and disburse funds for the two (2) properties.  In the event one (1) of the properties are not able to close or do not close for any reason and/or operational control is not transferred to Seller, the sale and purchase of the remaining property must be by the mutual agreement of the parties.

 

6. Employee Matters. Seller shall terminate the existing hotel management agreement with Chartwell as of the Closing Date. Buyer shall enter into a new hotel management agreement with Chartwell as contemplated by this Agreement.  Seller shall be responsible for any severance, termination and other liabilities, obligations, costs and expenses incurred in connection with the termination of any employees by Chartwell, as set forth in the existing hotel management agreement.  Seller shall have no obligation to close unless Buyer and Chartwell have entered into a mutually-acceptable management agreement. Chartwell shall provide to Buyer, upon request in writing, a list of all hotel employees, listing such employees’ initial hiring date, position, current pay and any accrued vacation time or other accrued benefits.

 

7. Representations and Warranties of Seller. Seller represents, warrants and covenants to and with Buyer as follows:

 

(a) Title to Property. To Seller’s knowledge, Seller presently has, and will as of Closing have, good and marketable title to the Property free and clear of all liens, encumbrances, covenants, conditions, restrictions and easements except for such easements, covenants, and non-monetary encumbrances as contemplated or permitted by this Agreement. There are no leases affecting any of the Property and none of the Property or any of the equipment used in conjunction with the Hotel is leased from any third party, except as set forth in Exhibit 1(b) attached hereto. None of the Property has been leased by Seller to any third party.

 

(b) Condition of the Property; Inventory. The Property, as of Closing, will be in all material respects in a condition for performing the functions and purposes for which it was normally used by Seller and has been and will be maintained by Seller until Closing in accordance with Seller’s normal business and maintenance practices which are consistent with customary business and maintenance practices in the industry. As of Closing, the Hotel shall be sufficiently stocked with inventory so that there exists two par level sets of all linens, including sheets and pillow cases, and terrycloth items, including towels, wash clothes and hand towels for each bed located in the Hotel, one par level set of blankets and bedspreads for each bed located in the Hotel, and one par level set of bath mats per room located in the Hotel. As of Closing there shall also be sufficient number of good quality, new guests supplies sufficient for three weeks of operation, and food inventory consistent with the franchisor’s standards. Buyer and Seller shall conduct a walk-through of the Property within 48 hours prior to the closing to verify that the Property is in compliance with the terms of this Agreement.

 

(c) Real Property. To Seller’s knowledge, all buildings, structures and other improvements located on the Real Property are being used and occupied in substantial compliance with and conform, in all material respects, to all building, zoning, use and occupancy laws, codes, ordinances, rules, regulations and restrictions, whether federal, state or local, including all such laws which relate to environmental or safety matters.

 

(d) Personal Property. To Seller’s knowledge, all machinery, equipment, furniture and fixtures are being used in compliance with and conform, in all material respects, to all codes, ordinances, rules, regulations and restrictions, whether federal, state or local, including all such laws which relate to environmental or safety matters.

 

(e) Organization, Good Standing and Power. Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and is authorized to transact business in the State where the Property is located and has the power to own, operate and lease its properties and carry on its business as now being conducted.

 

(f) Corporate Authorization, Binding Effect. The execution, delivery and performance of this Agreement by Seller has been duly authorized and the Seller has the authority to execute, deliver and perform this Agreement. This Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the members of Seller, and constitutes the legal, valid and binding obligation of Seller enforceable in accordance with its terms.

 

(g) No Conflict with Articles of Organization and Operating Agreement. The execution, delivery and performance of this Agreement by Seller will not result in a breach or violation of or constitute a default under Seller’s Articles of Organization or Operating Agreement.

 

(h) No Conflicting Agreement. There are no provisions of any existing mortgage, indenture, trust indenture, loan agreement, contract bonds or other agreement binding on Seller or materially affecting any of the Property or the Hotel, which if it remained unpaid after the Closing Date would conflict with the execution, delivery and carrying out of the terms of this Agreement by Seller other than such consents or approvals as may be required pursuant to the franchise agreement or under the Contracts. The execution and delivery by Seller of this Agreement and the performance by Seller of its obligations hereunder, do not require the consent, approval of action of, or any filing with, or notice to, any public authority or other party other than such consents or approvals as may be required pursuant to the franchise agreement or under the Contracts.

 

(i) Litigation and Other Proceedings. Seller has no knowledge of any suits, actions or legal, administrative, arbitration or other proceedings or governmental investigations, or any event or condition of any character pertaining to the Hotel, or any change in the zoning or building ordinances affecting the Property, pending or threatened against the Seller which might adversely affect the Property.

 

(j) Absence of Certain Changes and Events. During the period from the date hereof to the Closing Date there will have not have been, without the prior written consent of Buyer:

 

(i) any change in the general policies or methods of operation of Seller, any material increase in its supply levels, or any sales, alterations or changes in the Property, except in the ordinary course of business, or

 

(ii) any increase in the rates of compensation paid to hotel employees, or

 

(iii) any mortgage or pledge, or any sale or transfer of any of the Property (other than the replacement of personal property in the ordinary course of business), or

 

(iv) any other event or condition of any character resulting from any act or omission of the Seller which adversely affects the Property or business operations being purchased by Buyer hereunder.

 

(k) No Unpaid Bills. Seller shall have paid all bills and charges for all materials delivered to, and services rendered with respect to, the Hotel accruing prior to the Closing.

 

(l) Financial Statements. Seller will furnish to Buyer the reviewed balance sheet of Seller as of December 31, 2012, and December 31, 2011, and the related statements of operations, comprehensive income (loss), members’ equity and cash flows for each of the years ended December 31, 2012, and December 31, 2011, together with the appropriate notes to such financial statements and the review report thereon and the related statements of operations, comprehensive income (loss), members’ equity and cash flows for the period then ended, together with the appropriate notes to such financial statements (collectively, the “Financial Statements”). Such Financial Statements fairly present in all material respects the financial condition, results of operations and cash flow of Seller as of their respective dates and for the respective periods covered thereby. Seller shall make all books and records applicable to the Property available for Buyer’s review.

 

(m) Compliance with SEC Reporting Requirements. For a period of time commencing on the date of this Agreement and continuing through the first anniversary of the Closing Date, Seller shall, or shall cause Chartwell, as applicable, from time to time, upon reasonable advance written notice from Buyer, and at Buyer’s sole cost and expense, provide Buyer and its representatives with reasonable access to all of Seller’s information and documentation relating to the Property, which information is relevant and reasonably necessary, in the reasonable opinion of the outside accountants of Buyer, to enable Buyer and Buyer’s outside accountants to file financial statements, pro formas and any and all other information in compliance (at Buyer’s cost) with any or all of (a) Rule 3-05 or 3-14 of Regulation S-X of the SEC; (b) any other rule issued by the SEC and applicable to Buyer or its subsidiaries; and (c) any registration statement, 424(b) prospectus, report or disclosure statement filed with the SEC by or on behalf of Buyer. Seller shall reasonably cooperate with Buyer, at the cost of the Buyer, to cause any SEC audit requirements to be completed and delivered to Buyer within a reasonable time period to insure that all SEC filing requirements are met. Seller shall also authorize, and shall cause Chartwell to authorize, as applicable, any attorneys who have represented Seller or Chartwell, as applicable, in material litigation pertaining to or affecting the Property to respond, at Buyer’s expense, to inquiries from Buyer’s representatives, attorneys and independent accounting firm. Seller shall also provide and/or shall cause Chartwell, as applicable, to provide to Buyer’s independent accounting firm a signed representation letter which would be sufficient to enable an independent public accountant to render an opinion on the financial statements related to the Property.

 

(n) Tax Returns and Other Filings. Proper and accurate amounts have been withheld by Seller or the Property Manager from its employees for all periods in full and complete compliance with the tax withholding provisions of applicable state and federal laws. Proper and accurate returns have been filed by or on behalf of Seller for all periods for which returns were due with respect to income tax withholdings, social security and unemployment taxes of such employees. The amounts shown on such returns to be due and payable have been paid in full.

 

(o) Employee Matters. Seller has no employment agreements, or any agreements that contain any severance or termination pay liabilities, or any obligations for any bonus, deferred compensation, or similar amounts. Seller has no employee with respect to whom there is any accrued or potential liability for sick leave or vacation pay for periods up to the Closing Date who will not be compensated by the Seller for said accrued sick leave or vacation pay as required under applicable law.

 

(p) Preservation of Organization. Prior to the Closing Date, Seller shall use its best efforts (without making any commitments on behalf of Buyer) to preserve its business organization intact, and to preserve for Buyer the present relationships of Seller with its suppliers and customers and others having business relations with them.

 

(q) Disclosure. No representation or warranty by Seller in this Agreement, nor any statement, certificate or schedule furnished by or on behalf of Seller pursuant to this Agreement, nor any document or certificate delivered to Buyer pursuant to this Agreement or in connection with actions contemplated hereby, contains or shall knowingly contain any untrue statement of a material fact or omits or shall knowingly omit a material fact necessary to make the statements contained therein not misleading.

 

(r) Access to Information/Property. During the period from the date hereof to the Closing Date Seller shall give Buyer and its duly authorized representatives full access to all books, records, Property and facilities of Seller which relate to the Property, so that Buyer may conduct such inspection, investigation and review of the financial records, business and properties of Seller being purchased hereunder as Buyer deems appropriate, provided that any entries upon the Property shall be at the sole risk of the Buyer and the Buyer shall indemnify and hold harmless the Seller from and against any liability, cost or expense arising from such entries, shall repair any damage to the Property caused by such entries and such entries shall be conducted in such manner so as to minimize the interruption of the business activities of the Seller. The indemnification and repair obligations set forth herein shall survive termination of this Agreement.

 

(s) Release of Information. Within 7 days after acceptance and execution of this Agreement by Seller, Seller will authorize the Hotel’s franchisors to release to Buyer any and all information regarding the franchise agreement affecting the Hotel, including all royalty reports and operating reports relating to the Hotel. Seller agrees to execute any such documents required by said franchisor to release such information. Further, within 10 days after acceptance and execution of this Agreement by Seller, Seller shall deliver to Buyer true and correct copies of all service contracts for the Property as well as the financial information set forth in Section 7(l) above.

 

(t) Environmental. No notice has been served on Seller from any entity, governmental body or individual claiming any violation of any law, regulation, ordinance or code, or requiring compliance with any law, regulation, ordinance or code, demanding payment or contribution, for environmental damage or injury to natural resources.

 

(u) Survival of Representations, Warranties, Covenants and Indemnifications. The representations, warranties, covenants, agreements and indemnifications contained in this Section 7 of this Agreement shall survive for a period of six (6) months from and after the Closing. Notwithstanding the above, the Seller and Buyer agree that, except as expressly provided for in this Agreement, the Property shall be sold in an “as is”, “where is”, “with all faults” condition.

 

BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED IN AND LIMITED BY THE SPECIFIC REPRESENTATIONS SET FORTH IN THIS SECTION 7, SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, EITHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, DRAINAGE, SOIL AND GEOLOGY, (B) THE INCOME TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH BUYER MAY CONDUCT THEREON, (D) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY, (F) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, (G) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY, (H) COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION, LAND USE OR OTHER LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING THE EXISTENCE IN OR ON THE PROPERTY OF HAZARDOUS MATERIALS, (I) ANY DILIGENCE INFORMATION DELIVERED TO BUYER, OR (J) ANY OTHER MATTER WITH RESPECT TO THE PROPERTY. ADDITIONALLY, NO PERSON ACTING ON BEHALF OF SELLER IS AUTHORIZED TO MAKE, AND BY EXECUTION HEREOF BUYER ACKNOWLEDGES THAT NO PERSON HAS MADE, ANY REPRESENTATION, AGREEMENT, STATEMENT, WARRANTY, GUARANTY OR PROMISE REGARDING THE PROPERTY OR THE TRANSACTION CONTEMPLATED HEREIN, AND NO SUCH REPRESENTATION, WARRANTY, AGREEMENT, GUARANTY, STATEMENT OR PROMISE IF ANY, MADE BY ANY PERSON ACTING ON BEHALF OF SELLER SHALL BE VALID OR BINDING UPON SELLER UNLESS EXPRESSLY SET FORTH HEREIN OR IN THE DOCUMENTS TO BE DELIVERED BY SELLER AT CLOSING. BUYER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE PROPERTY, BUYER IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY, THE REPRESENTATIONS, WARRANTIES, AND COVENANTS OF SELLER SPECIFICALLY SET FORTH HEREIN AND THE DOCUMENTS DELIVERED AT THE CLOSING, AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER, INCLUDING ANY DILIGENCE INFORMATION DELIVERED TO BUYER, AND AGREES TO ACCEPT THE PROPERTY AT THE CLOSING AND HEREBY WAIVES AND RELEASES ALL OBJECTIONS, SUITS, CAUSES OF ACTION, DAMAGES, LIABILITIES, LOSSES, DEMANDS, PROCEEDINGS, EXPENSES AND CLAIMS AGAINST SELLER (INCLUDING, BUT NOT LIMITED TO, ANY RIGHT OR CLAIM OF CONTRIBUTION) ARISING FROM OR RELATED TO THE PROPERTY OR TO ANY HAZARDOUS MATERIALS ON THE PROPERTY, EXCEPT AS EXPRESSLY PROVIDED IN AND LIMITED BY THE REPRESENTATIONS SET FORTH IN THIS SECTION 7 AND THE DOCUMENTS DELIVERED BY SELLER AT CLOSING. BUYER FURTHER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED IN AND LIMITED BY THE REPRESENTATIONS SET FORTH IN THIS SECTION 7 AND THE DOCUMENTS DELIVERED BY SELLER, TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN “AS-IS” CONDITION AND BASIS WITH ALL FAULTS. IT IS UNDERSTOOD AND AGREED THAT THE PURCHASE PRICE FOR THE PROPERTY HAS BEEN ADJUSTED BY PRIOR NEGOTIATION TO REFLECT THAT ALL OF THE PROPERTY IS SOLD BY SELLER AND PURCHASED BY BUYER SUBJECT TO THE FOREGOING.

8. Survey. Buyer may cause the Property to be surveyed by a competent, duly licensed land surveyor in the state where the Property is located, which survey shall show the Property free from any material defects, discrepancies or conflicts in boundary lines and encroachments. The survey shall be an “as-built” survey showing, inter alia, all boundaries, improvements, encroachments, easements, roadways, right-of-ways and rights of access to public streets. If the survey discloses any such discrepancies, conflicts, defects or encroachments, Buyer shall have the right to request Seller to cure the same in like manner as provided in Section 9 below, and if the same are not timely cured, as provided in Section 9 below, Buyer shall have the right to rescind this Agreement or waive such defect, which defects may only be waived in writing. In the event Buyer elects to thus rescind this Agreement, the Deposit shall be immediately refunded to Buyer and the parties shall be discharged from all further obligation or liability under this Agreement.

 

9. Evidence of Title. Within thirty (30) days of execution of the agreement Buyer shall obtain a title insurance commitment for an ALTA Owner’s policy in the full amount of the Purchase Price which shall show good and marketable fee simple title to the Property in Seller, with extended coverage endorsement over the standard exceptions. Buyer shall have until fifteen (15) days following receipt of said title insurance commitment from Seller to notify Seller of any defects in title, otherwise Buyer shall be deemed to have approved title to the Property. If Seller elects to cure said defects, Seller shall have until Closing to cure any defects, causing title to be not less than marketable and, if not cured in such time, Buyer shall have the right on or before the Closing Date to terminate this Agreement or waive such defects, which defects may only be waived in writing. In the event Buyer elects to thus terminate this Agreement, the Deposit shall be immediately refunded to Buyer and the parties shall be discharged from all further obligation or liability under this Agreement. At the Closing, Buyer shall cause the title insurance company to issue the title insurance policy for the Property in favor of Buyer which policy shall include extended coverage over the standard exceptions and contain endorsements for zoning and access coverage. Notwithstanding the above, Seller, at its expense, shall cause the discharge and removal from title and cure (by payment, bonding or escrow deposit in a manner reasonably acceptable to the title insurance company) at or before the Closing any mortgage, financing statements, deed of trust lien, or similar lien placed on the Property, mechanic’s or materialmen’s lien arising from work performed on the Property, or money judgment or other monetary lien against Seller which can be discharged or removed by the payment of a liquidated sum and Buyer shall have no obligation to object to the same and Seller may not refuse to cure the same.

 

10. Loss or Damage Prior to Closing. Risk of loss arising from fire, windstorm, explosion, condemnation, or other casualty (“Loss”) to the Property shall be borne by Seller until the Closing Date. In the event any material Property in excess of $100,000.00 is subject to a Loss prior to the Closing Date, Buyer may elect either to accept the proceeds of any insurance or any condemnation award as full settlement for the Loss or, alternatively, may elect to terminate this Agreement. In the event of any such Loss occurs prior to the Closing Date, Seller shall notify Buyer within 5 business days after it receives notice of such Loss and Buyer shall then have 10 days after receipt of such notice to review the Property as to which the Loss occurred and advise Seller of Buyer’s election under this Section 10. Seller agrees to maintain until the Closing Date and delivery of the deeds, assignments, and other documents of title, fire and extended insurance coverage, together with such other insurance in such amounts as is customarily maintained by prudent businessmen conducting comparable business operations and insuring against such other insurable hazards which are customarily insured against in the case of property similarly situated with respect to the Property.

 

11. Pro Rata Adjustments. The following adjustments shall be computed as of the Closing Date and prorated at the Closing:

 

(a) Real Estate Taxes and Assessments. Consolidated real estate taxes and any personal property taxes assessed for the tax year in which Closing occurs shall be prorated as of the Closing based on the latest tax bills available which adjustment shall be final and binding upon the parties after the date of Closing; all prior taxes shall be paid by Seller and all subsequent taxes shall be paid by Buyer. Seller shall pay all special assessments for public improvements constructed or under construction prior to the Closing.

 

(b) Utility Charges. Proration of sewer and water rents and other utility charges shall be made as of Closing. To the extent such charges are based upon meter readings, the meter readings shall be made as close as reasonably possible to the Closing Date.

 

(c) Revenues. Revenues and expenses attributable to room and service operation of the Hotel from and after 12:00 noon on the Closing Date shall be allocated to Buyer and such revenues and expenses prior to 12:00 noon on the Closing Date shall be allocated to Seller.

 

(d) Petty Cash. Buyer shall retain $1,000.00 of Seller’s petty cash on hand at the Hotel, and Seller shall be reimbursed for the same on the closing statement.

 

(e) Rents, Charges and Fees. Rents, fees or other payments on the leases or other contracts assigned to Buyer and described in Section 1(d) above shall be prorated as of Closing. Buyer shall assume responsibility for purchase orders made by Seller in the ordinary course of business for expendables or consumables not delivered to the Hotel as of Closing. All prepaid expenses shall be credited to Seller.

 

12. Expenses. Except as otherwise specifically provided in this Agreement, the parties shall be liable for expenses as follows:

 

(a) Document or Transfer Taxes. Seller shall pay the cost of any required documentary or transfer taxes due in connection with the transfer, conveyance, assignment or delivery of the Real Property or any instruments in connection therewith pursuant to this Agreement. Seller shall pay the sales taxes, if any, imposed in connection with the transfer of any items of Personal Property.

 

(b) Recording Fees. Buyer shall pay any recording fees required for recording the warranty deed described in Section 5(c)(ii) above.

 

(c) Title Insurance. Buyer shall pay the cost of providing the title insurance as required in Section 9, above.

 

(d) Survey. Buyer shall pay the cost of providing the survey as required in Section 8.

 

(e) Escrow Fees. Buyer and Seller each shall pay half the cost of all escrow fees necessary for the closing of the transaction contemplated by this Agreement.

 

(f)           Miscellaneous Fees. Any other closing cost not specifically allocated by this Agreement shall be allocated in accordance with closing customs for similar properties in the area of the hotel.

 

13. Benefit. This Agreement shall be binding upon and inure to the benefit of Seller and Buyer and their respective successors and assigns.

 

14. Notices. All notices which are required or may be given pursuant to the terms of this Agreement shall be in writing and either be sent by facsimile transmission or be in writing and shall be delivered personally or mailed by registered, certified or express mail, postage prepaid, or by overnight delivery service, as follows:

 

If to Seller, to:

 

CHM CLERMONT HOTEL PARTNERS, LLC

 

c/o 2000 Meridian Blvd., Suite 200

Franklin, TN 37067

Attn: _________________________

 

With a copy to:

 

Sherrard & Roe, PLC

150 Third Avenue South, Suite 1100

Nashville, TN 37201

Attn: Kim A. Brown, Esq.

 

If to Buyer, to:

 

Supertel Limited Partnership

11422 Miracle Hills Drive, Suite 501

Omaha, Nebraska 68154

Attention: Ms. Lauren Green, J.D.

 

With copy to:

 

Robert G. Dailey

McGrath North Mullin & Kratz, PC LLO

1601 Dodge Street, Suite 3700

Omaha, Nebraska 68102

 

15. Waivers. The waiver by any party hereto of a breach of any portion of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

 

16. Default. If Buyer defaults under this Agreement, and such default continues for ten (10) days following written notice from Seller, then at Seller’s election by written notice to Buyer, this Agreement shall be terminated and of no effect, in which event the Deposit, including any interest thereon, shall be paid to and retained by the Seller as Seller’s sole and exclusive remedy hereunder, and as liquidated damages for Buyer’s default or failure to close, and both Buyer and Seller shall thereupon be released from all obligations hereunder.

 

If Seller defaults under this Agreement, and such default continues for ten (10) days following written notice from Buyer, Buyer may elect, as Buyer’s sole and exclusive remedy, either (i) to terminate this Agreement by written notice to Seller delivered to that Seller at any time prior to the completion of such cure, in which event the Deposit, including any interest thereon, shall be returned to the Buyer and both the Buyer and Seller shall thereupon be released from all obligations with respect to this Agreement, except as otherwise expressly provided herein; or (ii) to treat this Agreement as being in full force and effect by written notice to Seller delivered to Seller at any time prior to the completion of such cure, in which event the Buyer shall have the right to an action against the defaulting Seller for specific performance.

 

17. Broker’s Fees.  The Mumford Company and Jones Lang LaSalle (the “Seller Brokers”) are Seller’s brokers in this transaction and all parties acknowledge that there are no other Brokers involved.  THE SELLER’S BROKERS REPRESENT SOLELY THE SELLER AND WILL BE PAID A COMMISSION BY THE SELLER, at closing, as agreed to in a separate agreement with Seller. Seller shall indemnify and hold harmless Buyer from any brokerage or real estate commissions or fees due Seller’s Brokers in conjunction with this transaction.

 

18. Franchise.  As a condition to Closing, Buyer shall have negotiated and obtained a new franchise agreement (the “New Franchise Agreement”) with Hampton Inns Franchise, LLC (“Franchisor”) granting Buyer, or Buyer’s nominee, a franchise agreement with terms of a minimum of fifteen (15) years for the Hotel and a protection agreement defining areas of protection, for the exclusive operation of the hotel, in favor of Buyer, or Buyer’s nominee, in the areas in and around the hotel’s respective submarket, acceptable to Buyer in Buyer’s sole discretion. The Buyer must pay for all application fees and costs for such assumption of or negotiation for the franchise. Seller agrees, that if required by the Franchisor, Seller will pay up to $150,000.00 towards the requirements of the Product Improvement Plan (“PIP”) required by the Franchisor for said assumption or new franchise.

 

At or prior to the Closing, Seller shall terminate the existing hotel management agreement with Chartwell (the “Existing Management Agreement”),  and the existing franchise agreement with Franchisor (the “Existing Franchise Agreement”), and Seller shall be solely responsible for all claims and liabilities arising thereunder on, prior to or following the Closing Date, and Seller shall be responsible for paying all reasonable and actual costs of Franchisor  related to the assignment or termination, as applicable, of the Existing Franchise Agreement.  As an additional condition to Closing, Buyer shall enter into a new hotel Management Agreement with Chartwell, each to be effective as of the Closing Date.  Seller shall be responsible for paying all costs related to the termination of the Existing Management Agreement.  Seller shall use best efforts to promptly provide all information required by the Franchisor in connection with the New Franchise Agreement, and Buyer shall diligently pursue obtaining the same.  Seller will cooperate with Buyer in obtaining the New Franchise Agreement, at no cost to Seller.

 

19. Equity Financing. This Agreement shall be subject to Buyer securing an equity financing satisfactory to Buyer on terms acceptable to Buyer by September 30, 2013 (the “Financing Contingency Date”). Buyer will proceed aggressively and continuously to secure financing. In the event Buyer is unsuccessful, the Earnest Deposit will be fully refunded to Buyer.

 

20. Noncompetition. In order to further induce Buyer to enter into this Agreement and consummate the transactions contemplated hereunder, Seller, Chartwell and the Principals agree that from and after Closing and for a period of five (5) years thereafter, they shall not, within the Trade Area (as defined below) associate in any capacity whatsoever in any business, whether as a promoter, owner, officer, director, employee, partner, shareholder, member, lessee, lessor, lender, agent, consultant, broker, commission salesman or otherwise, or have any interest in any corporation, partnership, joint venture or limited liability company, engage in the operation of a motel or hotel or any related business of a type competitive, directly or indirectly, with the business of Seller as conducted by Buyer following the Closing.  If Seller or Principals fail to keep and perform every covenant of this Section 20, Buyer shall be entitled to specifically enforce the same by injunction in equity in addition to any other remedies which Buyer may have. If any portion of this Section 20 shall be invalid or unenforceable, such invalidity or unenforceability shall in no way be deemed or construed to affect in any way the enforceability of any other portion of this Section 20. If any court in which Buyer seeks to have the provisions of this Section 20 specifically enforced determines that the activities, time or geographic area hereinabove specified are too broad, such court may determine a reasonable activity, time or geographic area and shall specifically enforce this Section for such activity, time and geographic area. The covenants on the part of Seller and Principals under this Section 20 shall be construed as an agreement independent of any other provision of this Agreement, and the existence of any claim or cause of action by Seller or Principals against Buyer or any corporation affiliated with Buyer, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Buyer of said covenants. For purposes of this Section 20, “Trade Area” shall mean all of Clermont, Florida and any area located within 5 miles of the Hotel.

 

The parties hereto acknowledge that the restrictions in this noncompetition agreement are essential to the Buyer’s successful operation of the Hotel and Buyer would not have entered into this Agreement except for the inducement of the restrictions contained herein. The parties hereto further acknowledge that these restrictions are reasonable and necessary means of protecting Buyer’s legitimate business interests in the Property and the Hotel. Seller shall cause Chartwell and the Principals to execute a letter agreeing to the provisions of this Section 20 to be delivered to Buyer within 10 days of the Effective Date.

 

21. Indemnification. Seller shall, and hereby agrees to, indemnify and hold Buyer harmless against and in respect of:

 

(a) All debts, liabilities and obligations of Seller of any nature, whether accrued, absolute, contingent, or known or unknown on the Closing Date, existing or arising on or resulting from events which occurred or failed to occur on or before the Closing Date, to the extent not specifically assumed by Buyer hereunder.

 

(b) Any claim, action, loss, damage or cost relating to or arising by reason of (i) the presence, or any governmental or third party requirements relating to the disposal or arranging for disposal (on-site or off-site), or the release or threatened release prior to the Closing Date, of any Hazardous Material in, on, to, under, upon or from any of the Property, or in, on, to, under, upon or from the Real Property or any portion thereof upon which the Property are, or have been, located or (ii) any violation or operation of any applicable Environmental Law which occurs prior to the date hereof in, on, under, upon or from any of the Property, or in, on, to, under, upon or from the Real Property or any part thereof upon which the Property are or have been located or which otherwise apply to the activities at the Property.

 

(c) Any liability, loss, claim, damage or deficiency resulting directly or indirectly from any misrepresentation, breach of warranty or non-fulfillment of any agreement on the part of Seller under this Agreement, or from Seller’s misrepresentation in or omission from any certificate or other instrument furnished or to be furnished to Buyer hereunder.

 

(d) Any actions, suits, proceedings, demands, assessments, adjustments, costs and expenses incident to the foregoing, including, without limitation, attorneys’ fees and other out-of-pocket expenses.

 

From and after the Closing Buyer shall indemnify, defend and hold Seller harmless from against and in respect of any liability, loss, claim, damage or deficiency resulting directly or indirectly from Buyer’s breach of any provision of any Contracts assumed by Buyer, or from any of the matters described in (a)-(d) above which arise on or after the Closing.

 

22. Effective Date. As used herein the term “Effective Date” shall mean the date of the last signature on this Agreement.

 

23. Acceptance of Agreement. Buyer’s signature hereon constitutes an offer to purchase the Property upon the terms and conditions hereof. Unless acceptance hereof is executed by Seller and the duly executed counterpart delivered to Buyer either in person, by facsimile transmission, or by depositing in U. S. Mail, or delivery by overnight delivery service, as provided in Section 14, above, on or before July 26, 2013, at 5:00 p.m., this offer shall be deemed revoked.

 

24. Time is of the Essence. Time shall be of the essence with respect to the performance of all obligations of the parties under this Agreement.

 

25. Attorneys’ Fees. If any litigation between Seller and Buyer shall arise in connection with this Agreement, then the prevailing party shall be entitled to the payment by the other party of the prevailing party’s actual attorneys’ fees and costs related to such litigation.

 

26. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Delaware.

 

27. Counterparts; Execution by Facsimile. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Executed counterparts of this Agreement exchanged by facsimile transmission shall be fully enforceable.

 

28. Personal Liability. Buyer and Seller expressly agree that the obligations and liabilities of Buyer and Seller under this Agreement and any document referenced herein shall not constitute personal obligations of the officers, directors, employees, agents, trustees, partners, members, representatives, stockholders or other’ principals and representatives of Seller or Buyer.

 

(Remainder of page intentionally left blank)

 

  

  

  

IN WITNESS WHEREOF, the parties have executed this Agreement in multiple counterparts, each of which shall be deemed an original and all of which shall constitute one agreement, as of the date first written above.

 

	  	
 

CHM CLERMONT HOTEL PARTNERS, LLC, a Delaware limited liability company

 

 

 

By:  /s/ Robert G. Schaedle, III

Robert G. Schaedle, III

Authorized Manager

 

Date:  August 2, 2013

 

 

SUPERTEL LIMITED PARTNERSHIP, a

Virginia limited partnership

 

By:           Supertel Hospitality REIT Trust

Its: General Partner

 

 

By:  /s/ Kelly A. Walters

Title:  President

Date: August 5, 2013

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