CONTRIBUTION AGREEMENT by and between
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CONTRIBUTION AGREEMENT
by and between
Wichita Airport Hospitality, LLC
a South Dakota limited liability company and
Lodging Fund REIT III OP, LP a Delaware limited partnership
Dated as of August 5, 2022
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TABLE OF CONTENTS
Page
| 1. | Defined Terms1 |
| 2. | Contribution; Total Consideration; Inspection and Title5 |
| 2.1 | Contribution of Property5 |
| 2.2 | Contribution of Assets6 |
| 2.3 | Inventory6 |
| 2.4 | Excluded Assets6 |
| 2.5 | Assumed Liabilities6 |
| 2.6 | Excluded Liabilities6 |
| 2.7 | Existing Loans and Creditors7 |
| 2.8 | Consideration and Exchange of Series T Limited Units7 |
| 2.9 | Treatment as Contribution7 |
| 2.10 | Allocation of Total Consideration7 |
| 2.11 | Terms of Series T Limited Units8 |
| 2.12 | Term of Agreement8 |
| 2.13 | Management Company8 |
| 2.14 | Risk of Loss8 |
| 2.15 | Escrow8 |
| 2.16 | Title8 |
| 2.17 | Due Diligence Period9 |
| 3. | Closing10 |
| 3.1 | Conditions Precedent - Operating Partnership10 |
| 3.2 | Conditions Precedent - Contributor10 |
| 3.3 | Time and Place11 |
| 3.4 | Closing Deliveries11 |
| 3.5 | Closing Costs12 |
| 4. | Representations and Warranties and Indemnities13 |
| 4.1 | Representations and Warranties of the Operating Partnership13 |
| 4.2 | Representations and Warranties of the Contributor13 |
| 5. | Indemnification20 |
| 5.1 | Survival of Representations and Warranties; Remedy for Breach20 |
| 5.2 | General Indemnification20 |
| 5.3 | Notice and Defense of Claims21 |
| 5.4 | Limitations on Indemnification Under Section 5.2.121 |
| 5.5 | Indemnification21 |
| 5.6 | Matters Excluded from Indemnification22 |
| 5.7 | Offset22 |
| 6. | Covenants22 |
| 6.1 | Covenants of the Contributor22 |
| 6.2 | Prorations23 |
| 6.3 | Tax Covenants25 |
| 6.4 | Capital Contribution25 |
| 7. | Termination25 |
| 7.1 | Termination25 |
| 7.2 | Default by the Operating Partnership26 |
| 7.3 | Default by the Contributor26 |
| 8. | Miscellaneous26 |
| 8.1 | Further Assurances26 |
| 8.2 | Counterparts26 |
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TABLE OF CONTENTS
(continued)
Page
| 8.3 | Governing Law26 |
| 8.4 | Amendment; Waiver26 |
| 8.5 | Entire Agreement26 |
| 8.6 | Assignability26 |
| 8.7 | Titles27 |
| 8.8 | Third Party Beneficiary27 |
| 8.9 | Severability27 |
| 8.10 | Reliance27 |
| 8.11 | Survival27 |
| 8.12 | Days27 |
| 8.13 | Calculating Time Periods27 |
| 8.14 | Incorporation of Exhibits27 |
| 8.15 | Notice27 |
| 8.16 | Force Majeure28 |
| 8.17 | Impracticability28 |
| 8.18 | Equitable Remedies28 |
EXHIBITS
| A | Legal Description of the Properties |
| B | Contribution and Assumption Agreement |
| C | Assignment of Warranties |
| D | Total Consideration |
| E | Non-Competition Agreement Confidentiality and Non-Solicitation Agreement |
| F | Confidentiality and Non-Disclosure Agreement |
2.2List of Contributed Assets, Assumed Agreements and Leases
| 2.4 | List of Excluded Assets |
| 2.5 | List of Assumed Liabilities; Permitted Liens |
| 2.6 | List of Excluded Liabilities |
2.7.4Creditors
2.10Allocation of Total Consideration
3.1.83-05 Audit APPENDICES
ADisclosure Schedule
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CONTRIBUTION AGREEMENT
This Contribution Agreement (this “Agreement”) is made and entered into as of August 5, 2022 (the “Effective Date”) by and between Lodging Fund REIT III OP, LP, a Delaware limited partnership (the “Operating Partnership”), and Wichita Airport Hospitality, LLC, a South Dakota limited liability company (the “Contributor”).
RECITALS
NOW, THEREFORE, in consideration of the foregoing premises, and the mutual undertakings set forth below, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
| 1. | Defined Terms. |
The following terms have the meanings set forth below:
“Act” shall have the meaning as set forth in Section 4.2.9.
“Actions” mean all actions, litigations, complaints, charges, accusations, investigations, petitions, suits, arbitrations, mediations or other proceedings, whether civil or criminal, at law or in equity, or before any arbitrator or Governmental Entity.
“Adverse Change” shall have the meaning as set forth in Section 2.17.1.
“Adverse Change Review Period” shall have the meaning as set forth in Section 2.17.1. “Agreement” shall have the meaning as set forth in the Preamble.
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“Amendment” shall have the meaning as set forth in Section 2.8. “Assumed Agreements” shall have the meaning as set forth in Section 2.2. “Assumed Liabilities” shall have the meaning as set forth in Section 2.5. “Basket” shall have the meaning as set forth in Section 5.4.
“Closing” shall have the meaning as set forth in Section 3.2. “Closing Agent” shall have the meaning as set forth in Section 2.15. “Closing Date” shall have the meaning as set forth in Section 3.2.
“Closing Documents” shall have the meaning as set forth in Section 3.3. “Code” shall mean the Internal Revenue Code of 1986, as amended.
“Common Limited Units” shall have the meaning set forth in the OP Agreement. “Company” shall mean Lodging Fund REIT III, Inc., a Maryland corporation. “Contributed Assets” shall have the meaning as set forth in Section 2.2. “Contributor” shall have the meaning as set forth in the Preamble.
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“Contributor Point of Contact” shall have the meaning as set forth in Section 2.17.3(d). “Contributor’s Breakage Fee” shall have the meaning as set forth in Section 7.3. “Contributor’s Cure Period” shall have the meaning as set forth in Section 2.16. “Deed” shall have the meaning as set forth in Section 3.3.2.
“Disclosure Schedule” means that disclosure schedule attached as Appendix A. “Due Diligence Documents” shall have the meaning as set forth in Section 2.17.1. “Due Diligence Period” shall have the meaning as set forth in Section 2.17.1. “Due Diligence Review” shall have the meaning as set forth in Section 2.17.3. “▇▇▇▇▇▇▇ Money” shall have the meaning as set forth in Section 2.15.
“Environmental Law” means all applicable statutes, regulations, rules, ordinances, codes, licenses, permits, orders, demands, approvals, authorizations and similar items of any Governmental Entity and all applicable judicial, administrative and regulatory decrees, judgments and orders relating to the protection of human health or the environment as in effect on the Closing Date, including but not limited to those pertaining to reporting, licensing, permitting, investigation, removal and remediation of Hazardous Materials, including without limitation (i) the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251), the Safe Drinking Water Act (42 U.S.C. 300f et seq.), the Toxic Substances Control Act (15 U.S.C. 2601 et seq.), the Endangered Species Act (16 U.S.C. 1531 et seq.), the Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C. 11001 et seq.), and
(ii) applicable state and local statutory and regulatory laws, statutes and regulations pertaining to Hazardous Materials.
“Environmental Permits” means any and all licenses, certificates, permits, directives, requirements, registrations, government approvals, agreements, authorizations, and consents that are required under or are issued pursuant to any Environmental Laws.
“Effective Date” shall have the meaning as set forth in the Preamble. “Excluded Assets” shall have the meaning as set forth in Section 2.4. “Excluded Liabilities” shall have the
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meaning as set forth in Section 2.6. “Existing Loan” shall have the meaning as set forth in Section 2.7.1.
“Existing Loan Documents” shall have the meaning as set forth in Section 2.7.1.
“Fixtures and Personal Property” shall mean all fixtures, furniture, furnishings, apparatus and fittings, equipment, machinery, appliances, building supplies, business supplies, software, tools, linens (in no event less than 3 par), inventories of standard supplies, services and amenities including without limitation paper goods, brochures, office supplies, unopened food and beverage inventory, chinaware, glassware, flatware, soap, gasoline, fuel oil, inventory held for sale, engineering, pool, maintenance and housekeeping supplies, TV, phone, and internet services, software and hardware, and other operation and guest supplies (each of which shall be maintained and transferred in accordance with brand standards), merchandise, goods, electronics, customer lists and records (including but not limited to customer, supplier, advertising, promotional material, sales, services, delivery and/or operations lists and records), goodwill, intellectual and/or proprietary information and property and applications therefor or licenses thereof and other items of personal property used in connection with the ownership, operation or maintenance of the Property, including all assets located off site from the Property but owned and used by the Contributor in connection with operation of the Property; excluding, however, all fixtures, furniture, furnishings, apparatus and fittings, equipment, machinery, appliances, building supplies, business supplies, software, tools, linens, merchandise, goods,
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electronics and other items of personal property owned by tenants, subtenants, guests, invitees, employees, easement holders, service contractors and other Persons who own any such property located on the Property.
“Franchise Agreement” shall have the meaning as set forth in Section 3.1.12.
“Governmental Entity” means any governmental agency or quasi-governmental agency, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign.
“Hazardous Material” means any substance:
| (f) | radon gas. |
“Indemnified Contributor Party” shall have the meaning as set forth in Section 5.5. “Indemnified OP Party” shall have the meaning as set forth in Section 5.5. “Indemnified Party” shall have the meaning as set forth in Section 5.2.1. “Independent Consideration” shall have the meaning as set forth in Section 2.15.
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“Intangible Personal Property” shall mean all right, title and interest relating to the Property in and to all intangible personal property now or hereafter used in connection with the operation, ownership, maintenance, management, or occupancy of the Property, including without limitation: all trade names and trademarks associated with the ownership of the Property; the plans and specifications for the improvements; warranties; guaranties; indemnities; claims against third parties; claims against tenants for tenant improvement reimbursements; all contract rights related to the construction, operation, ownership or management of the Property; certificates of occupancy; applications, permits, approvals and licenses; insurance proceeds and condemnation awards or claims thereto to be assigned to the Operating Partnership hereunder; all books and records relating to the Property; any existing computer software or programs; any franchise agreements which shall not be terminated at the Closing and are to be assigned to the Operating Partnership, if any; any records, files, lists, and other tangible assets that pertain to the Property, including lists and records pertaining to any one or more of the following: the Contributor’s customers, suppliers, advertising, promotional material, sales, services, delivery, and/or operations, except those items, if any, required to be retained by law, including accounting records and returns.
“Inventory Period” shall have the meaning as set forth in Section 2.3.1. “Key Personnel” shall have the meaning as set forth in Section 2.17.3(d).
“Knowledge” means with respect to any representation or warranty so indicated, the actual awareness of facts or other information, of ▇▇▇▇▇ ▇▇▇▇▇▇▇. The term “Knowledge” expressly includes the knowledge the foregoing
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individual would be reasonably expected to have if, as a result of the position such person holds, such person made a reasonable inquiry in light of the circumstances.
“Leases” shall have the meaning as set forth in Section 4.2.21. “Lender” shall have the meaning as set forth in Section 2.7.1.
“Liens” means with respect to any real and personal property, all mortgages, pledges, liens, options, charges, security interests, mortgage deed, restrictions, prior assignments, encumbrances, covenants, encroachments, assessments, purchase rights, rights of others, licenses, easements, voting agreements, liabilities or claims of any kind or nature whatsoever, direct or indirect, including, without limitation, interests in or claims to revenues generated by such property.
“Losses” shall have the meaning as set forth in Section 5.2.1.
“Material Adverse Effect” shall have the meaning as set forth in Section 4.2.3.
“Maximum Per Property Total Consideration Adjustment” shall have the meaning as set forth in Section
2.14.
“Merchandise” shall have the meaning as set forth in Section 2.3.1. “Name” shall have the meaning as set forth in Section 4.2.19(c).
“Non-Competition Agreement and Non-Solicitation Agreement” shall have the meaning as set forth in
Section 6.1.7.
“Objections” shall have the meaning as set forth in Section 2.16. “OFAC” shall have the meaning as set forth in Section 4.2.32.
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“Offering Documents” shall have the meaning as set forth in Section 2.17.2. “Offering Review Period” shall have the meaning as set forth in Section 2.17.2.
“OP Agreement” shall mean the Amended and Restated Limited Partnership Agreement of Lodging Fund REIT III OP, LP, a Delaware limited partnership, as may be amended.
“Operating Partnership” shall have the meaning as set forth in the Preamble. “Other Taxes” means Taxes other than income Taxes.
“Permitted Liens” means:
“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or governmental entity.
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“PIP” shall have the meaning as set forth in Section 4.2.31.
“Preliminary Title Report” means the preliminary commitment for title insurance committing to insure marketable fee simple title as of the date of the Closing, subject only to the Permitted Liens.
“Property” shall have the meaning as set forth in the Recitals.
“Property Deposits” shall have the meaning as set forth in Section 6.2.1(b)(i).
“Property Reports” means the property condition assessment reports, appraisals, zoning reports and other similar reports prepared for the Property.
“Proprietary Rights” shall have the meaning as set forth in Section 4.2.19(a). “REIT Shares” shall have the meaning set forth in the OP Agreement.
“Release” shall have the same meaning as the definition of “release” in the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) at 42 U.S.C. Section 9601(22), but not including the exclusions identified in that definition, at subparts (A) through (D).
“Satisfaction Notice” shall have the meaning as set forth in Section 2.17.1. “Series T Limited Units” shall have the meaning set forth in the OP Agreement. “Service Contracts” shall have the meaning as set forth in Section 4.2.23.
“Subscription Agreement” shall mean the Subscription Agreement to be entered into by Contributor with respect to the acquisition of the Series T Limited Units.
“Tax” or “Taxes” means any federal, state, provincial, local or foreign income, gross receipts, license, payroll, employment-related, excise, goods and services, harmonized sales, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property,
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personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.
“Tax Return” means any return, declaration, report, claim for refund, or information return or statement related to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Tenants” shall have the meaning as set forth in Section 4.2.21. “Title Company” shall have the meaning as set forth in Section 2.16. “Title Policy” shall have the meaning as set forth in Section 3.1.6.
“Total Consideration” shall have the meaning as set forth in Section 2.8. “Transfer” shall have the meaning as set forth in Section 4.2.9(a).
| 2. | Contribution; Total Consideration; Inspection and Title. |
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| 2.7 | Existing Loans and Creditors. |
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and assignments of the foregoing, shall be referred to, collectively, as the “Existing Loan Documents.” The Existing Loan shall be considered a Permitted Lien for purposes of this Agreement.
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in all events. The Operating Partnership and Contributor stipulate that the Independent Consideration is sufficient consideration to support this Agreement notwithstanding the Operating Partnership’s rights to terminate this Agreement as set forth herein.
(b) terminate this Agreement by notice to the Contributor and receive a full return of the ▇▇▇▇▇▇▇ Money or (c) cure the defect at Contributor’s expense and the cost would be credited at Closing, not to exceed a $100,000, and proceed to Closing.
| 2.17 | Due Diligence Period. |
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on behalf of the Operating Partnership. Upon the request of the Contributor, the Operating Partnership shall deliver to Contributor a certificate of insurance evidencing Commercial General Liability ("CGL") insurance.
| 3. | Closing. |
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Any or all of the foregoing conditions may be waived by the Operating Partnership in its sole and absolute discretion.
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| 3.2.6 | The Title Company shall be irrevocably committed to issue the Title Policy. |
Any or all of the foregoing conditions may be waived by the Contributor in its sole and absolute discretion.
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| 3.4.1 | The Contribution and Assumption Agreement in the form attached hereto as Exhibit B; |
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Property is located and in form and substance satisfactory to the Operating Partnership, conveying good, indefeasible and marketable fee simple title to the Property, subject only to the Permitted Liens;
| 3.4.3 | The OP Agreement; |
| 3.4.4 | The Amendment evidencing the transfer of Series T Limited Units to the Contributor; |
| 3.4.7 | Intentionally omitted; |
| 3.4.11 | The Contributor shall deliver to the Operating Partnership possession of the Property; |
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| 3.4.14 | Closing Statements detailing all prorations and adjustments; |
| 3.4.15 | A duly executed Non-Competition and Non-Solicitation Agreement; and |
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| 4. | Representations and Warranties and Indemnities. |
(a) result in a default (or an event that, with notice or lapse of time or both would become a default) or give to any third party any right of termination, cancellation, amendment or acceleration under,
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or result in any loss of any material benefit, pursuant to any material agreement, document or instrument to which the Operating Partnership or any of its properties or assets may be bound, or (b) violate or conflict with any judgment, order, decree or law applicable to the Operating Partnership or any of its properties or assets; provided in the case of (a) and (b), unless any such default, violation or conflict would not have a material adverse effect on the Operating Partnership.
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| 4.2.2 | Ownership of the Property; Contributed Assets. |
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Property, free and clear of any Liens (other than the Permitted Liens), and, upon delivery of consideration for the Property as herein provided, the Operating Partnership will acquire good and marketable title thereto, free and clear of any Liens (other than the Permitted Liens and any liens arising through the Operating Partnership).
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pursuant to an effective registration statement under the Act and qualification or other compliance under applicable blue sky or state securities laws, or (ii) counsel for the Contributor (which counsel shall be reasonably acceptable to the Operating Partnership) shall have furnished the Operating Partnership with an opinion, reasonably satisfactory in form and substance to the Operating Partnership, to the effect that no such registration is required because of the availability of an exemption from registration under the Act and qualification or other compliance under applicable blue sky or state securities laws, and (iii) the Transfer is permitted pursuant to the OP Agreement. The term “Transfer” shall not include any redemption of the Series T Limited Units or exchange of the Series T Limited Units for REIT Shares pursuant to Section 9.4 of the OP Agreement. Notwithstanding the foregoing, no Transfer shall be made unless it is permitted under the OP Agreement.
| (c) | Holding Period. The Contributor acknowledges that it has been advised that |
(i) the Series T Limited Units must be held for 12 months and may have to be held indefinitely thereafter, and the Contributor must continue to bear the economic risk of the investment in the Series T Limited Units (and any Common Stock that might be exchanged therefor), unless they are subsequently registered under the Act or an exemption from such registration is available (it being understood that the Operating Partnership has no intention of so registering the Series T Limited Units) and (ii) a notation shall be made in the appropriate records of the Operating Partnership indicating that the Series T Limited Units are subject to restrictions on transfer.
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properly filed all Tax Returns relating to Other Taxes required to be filed by it and has timely paid all Other Taxes required to be paid by it. The Contributor has not requested any extension of time or agreed to any extension of the applicable statute of limitations within which to file any pending Tax Return relating to Other Taxes. None of the Tax Returns relating to Other Taxes filed by the Contributor is the subject of a pending or ongoing audit, and no federal, state, local or foreign taxing authority has asserted any tax deficiency or other assessment against the Property.
| 4.2.14 | Real Property. |
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| 4.2.16 | Trademarks and Tradenames; Proprietary Rights. |
| 4.2.17 | Condition of Property. |
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2.2 contains a complete and accurate list of all Leases. The Contributor owns fee title to the Property and holds the lessor’s interest under such Leases; a true and complete copy of all such Leases have been made available to the Operating Partnership; the Contributor, as lessor under such Leases, has not received any notice that it is in default of any of its obligations under such Leases beyond any applicable grace period which has not been cured. To the Contributor’s Knowledge, all material obligations of the lessor under the Leases that have accrued to the Effective Date have been performed or satisfied. To the Contributor’s Knowledge, no tenants under any of the Leases is presently the subject of any voluntary or involuntary bankruptcy or insolvency proceedings. Unless otherwise agree to by the Operating Partnership the Contributor shall terminate all Leases prior to the Closing.
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claim has been asserted and (iv) the Operating Partnership shall not incur any liability or obligation of any kind arising out of the Contributor’s employment of or termination of the Contributor’s employees nor for any other claim by any of the Contributor’s employees arising out of any employment relationship with the Contributor. In the event that the WARN Act or portions thereof apply to the Agreement, the Contributor is responsible for compliance with the duties and obligations of the employer under the act.
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Commit, or Support Terrorism), or other governmental action, and is not and will not engage in any dealings or transactions or be otherwise with such person or entities.
| 5. | Indemnification. |
| 5.2 | General Indemnification. |
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claim has been threatened by a third party, regardless of whether an actual Loss has been suffered, so long as the Indemnified Party shall in good faith determine that such claim is not frivolous and that the Indemnified Party may be liable for, or otherwise incur, a Loss as a result thereof and shall give notice of such determination to the Contributor. The Indemnified Party shall permit the Contributor, at the Contributor’s option and expense, to assume the defense of any such claim by counsel selected by the Contributor and reasonably satisfactory to the Indemnified Party, and to settle or otherwise dispose of the same; provided, however, that the Indemnified Party may at all times participate in such defense at its expense; and provided further, however, that the Contributor shall not, in defense of any such claim, except with the prior written consent of the Indemnified Party in its sole and absolute discretion, consent to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff in question to all Indemnified Parties a release of all liabilities in respect of such claims, or that does not result only in the payment of money damages which are paid in full by the Contributor. If the Contributor shall fail to undertake such defense within 30 days after such notice, or within such shorter time as may be reasonable under the circumstances or as required by applicable law, then the Indemnified Party shall have the right to undertake the defense, compromise or settlement of such liability or claim on behalf of and for the account of the Contributor at the Contributor’s sole cost and expense.
4.2.10 shall not be subject to the Basket and shall be recoverable from the first dollar of Losses.
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| 6. | Covenants. |
| 6.1 | Covenants of the Contributor. |
| (a) | Enter into any material transaction not in the ordinary course of business with |
respect to any Property;
| (b) | Except as otherwise disclosed in the Disclosure Schedule, mortgage, pledge or |
encumber (other than by Permitted Liens) the Property or any assets related to the Property or the Contributed Assets, except (i) liens for taxes not delinquent or being disputed by the Contributor in good faith and by appropriate proceeding in the ordinary course of the Contributor’s business, and (ii) mechanics’ liens being disputed by the Contributor in good faith and by appropriate proceeding in the ordinary course of the Contributor’s business;
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an amount representing the reduction in value to the Property that the Operating Partnership reasonably determines has resulted or is likely to result from such disclosed item(s).
| 7.1 | Prorations. |
| (a) | Such prorated items shall include the following: |
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| (iv) | all amounts payable with respect to Assumed Liabilities in effect as of |
the Closing;
| (v) | credit shall be given to the Contributor for interest accounts, impound |
accounts, escrow accounts and other reserves included within the Existing Loans, which shall be transferred to the Operating Partnership at the Closing;
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apply:
| (b) | Notwithstanding anything contained in this Section 6.2.1, the following shall |
| (i) | The Operating Partnership shall be entitled to a credit against the |
Contributor’s Total Consideration to be delivered for the total sum of all deposits with respect to the Assumed Liabilities (not including interest accounts, impound accounts, escrow accounts and other reserves included within the Existing Loans, which shall be addressed in accordance with Section 6.2.1(a)(v) above) (the “Property Deposits”) to the extent not paid over to the Operating Partnership, and the Operating Partnership shall assume at the Closing the obligation under the Assumed Liabilities with respect to all Property Deposits credited or paid over to the Operating Partnership;
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(iii) conducting or defending any proceeding in respect of taxes, or (iv) performing tax diligence, including with respect to the impact of this transaction on the Company’s tax status as a REIT. The Contributor shall promptly notify the Operating Partnership in writing upon receipt by the Contributor or any of their respective affiliates of notice of any pending or threatened federal, state, local or foreign tax audits or assessments relating to the income, properties or operations of the Contributor. The Operating Partnership may participate at its own expense in the prosecution of any claim or audit with respect to taxes attributable to any taxable period ending on or before the Closing Date. The Contributor shall retain all tax returns, schedules and work papers, and all material records and other documents relating thereto, until the expiration of the statute of limitations (and, to the extent notified by any party, any extensions thereof) of the taxable years to which such tax returns and other documents relate and until the final determination of any tax in respect of such years.
| 8. | Termination. |
| 8.1.1 | The Contributor fails to comply with any of the Contributor’s obligations hereunder; |
| 8.1.2 | Intentionally deleted; |
| 8.1.4 | There shall be a material action, suit or proceeding pending or threatened against the |
Contributor;
| 8.1.5 | The Title Company shall refuse to provide written confirmation it will issue an owner’s |
title insurance policy reflecting only Permitted Liens, endorsements or affirmative insurance requested by the Operating Partnership during the Due Diligence Period; and
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| 9. | Miscellaneous. |
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that will achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provision and to execute any amendment, consent or agreement deemed necessary or desirable by the Operating Partnership to effect such replacement.
To the Contributor:
Wichita Airport Hospitality, LLC c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To the Operating Partnership:
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Lodging Fund REIT III OP, LP Attn: ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇.▇., ▇▇▇▇▇ ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to:
Legendary Capital Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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insurrection, military or usurped power or confiscation, terrorist activities, nationalization, decrees of a court, tribunal or governmental authority, government sanction, blockage, embargo, labor dispute, strike, or lockout. If a party asserts any force majeure as an excuse for failure to perform, such non-performing party must prove that it took reasonable steps to minimize delay or damages caused by foreseeable events and that the other party was timely notified of the likelihood or actual occurrence of a force majeure event. In the event of non-performance and/or termination pursuant to this Section 8.16, notwithstanding any other provision of this Agreement, the ▇▇▇▇▇▇▇ Money shall be returned to the Operating Partnership in full.
[signature page follows]
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above.
IN WITNESS WHEREOF, the parties have executed this Contribution Agreement as of the date first written
OPERATING PARTNERSHIP:
Lodging Fund REIT III OP, LP a Delaware limited partnership
By:Lodging Fund REIT III, Inc. Its:General Partner
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Chief Investment Officer
CONTRIBUTOR:
Wichita Airport Hospitality, LLC
a South Dakota limited liability company
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Name:▇▇▇▇▇ ▇▇▇▇▇▇▇
Title:Manager
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Exhibit A
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EXHIBIT B TO
CONTRIBUTION AGREEMENT CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby
acknowledged, the undersigned hereby assigns, transfers and conveys to Lodging Fund REIT III OP, LP, a Delaware limited partnership (the “Operating Partnership”), its entire legal and beneficial right, title and interest (other than any Excluded Assets) in, to all of the Contributed Assets and the Assumed Agreements, as listed on Schedule 2.2 of the Agreement, together with all amendments, waivers, supplements and other modifications of and to such agreements, contracts, licenses and other instruments through the date hereof, in each case to the fullest extent assignment thereof is permitted by applicable law,
TO HAVE AND TO HOLD the same unto the Operating Partnership, its successors and assigns, forever.
Upon the execution and delivery hereof, the Operating Partnership absolutely and unconditionally accepts the foregoing assignment of each Contributed Asset and Assumed Agreement and assumes all Assumed Liabilities in respect of the Assumed Agreements, and agrees to be bound by the terms, conditions and covenants thereof, and to perform all duties and obligations of the Contributor thereunder from and after the date hereof.
The Contributor for itself, its successors and assigns hereby covenants and agrees that, at any time and from time to time after the date hereof upon the written request of the Operating Partnership, the Contributor will, without further consideration, do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, each and all of such further acts, deeds, assignments, transfers, conveyances and assurances as may reasonably be required by the Operating Partnership in order to assign, transfer, set over, convey, assure and confirm unto and vest in the Operating Partnership, its successors and assigns, title to the Assumed Agreements (other than the Excluded Assets) granted, transferred, conveyed and delivered by this Agreement.
Capitalized terms used herein, but not defined have the meanings ascribed to them in the Contribution Agreement, dated as of [ ], 2021, between the Operating Partnership and the Contributor.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered the Agreement as of the date first above written.
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CONTRIBUTOR:
Wichita Airport Hospitality, LLC
a South Dakota limited liability company
By:
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Title:Manager
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ACKNOWLEDGEMENT
STATE OF )
) ss.: COUNTY OF )
On , before me, the undersigned, a Notary Public in and for said State, personally appeared, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and executed before me the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument.
Notary Public(SEAL)
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EXHIBIT D TO
CONTRIBUTION AGREEMENT TOTAL CONSIDERATION
Total Consideration pursuant to Section 2.8 of the Agreement shall be 7,400,000 consisting of:
$5,952,375via assumption of Contributor’s current financing as of the Effective Date
$1,447,625 in Series T Limited Units, equivalent to 144,762.50 Series T Limited Units Distributions pursuant to Section 2.11 of the Agreement shall be: Base Year NOI shall be $695,886
Distribution Amount | Condition |
.5% | If NOI is equal to or greater than 70% but less than 80% of Base year NOI |
1% | If NOI is equal to or greater than 80% but less than 90% of Base year NOI |
1.5% | If NOI is equal to or greater than 90% but less than 100% of Base year NOI |
2% | If NOI is equal to or greater than 100% but less than 110% of Base year NOI |
2.5% | If NOI is equal to or greater than 110% but less than 120% of Base year NOI |
3% | If NOI is equal to or greater than 120% of Base year NOI |
The number of Common Limited Units in the Operating Partnership shall be determined based on the formula below, which shall constitute the Series T Value. The Series T Value shall be determined upon (i) 36 months after the Closing Date or (ii) the sale of (a) the Property or (b) substantially all of the Operating Partnership’s assets.
The Applicable Cap Rate when applied to the then current trailing 12 month net operating income of the Contributed Asset, less amounts incurred or accrued by the Partnership for (i) any funds advanced as cash at closing, (ii) the Original Loan Balance, (iii) loan assumption or origination fees and related expenses, (iv) if applicable, costs of prepayment or defeasance and related expenses, (v) PIP and capital expenditures, (vi) operating cash infused by the General Partner and/or Partnership, (vii) any shortfall of the 10% minimum cumulative yield on General Partner’s invested capital, and (viii) any other unrealized or unreimbursed costs of operating the Contributed Asset.
Applicable Cap Rate shall mean:9.5%
“12 month net operating income of the Contributed Asset” shall mean: (a) the Gross Revenue of the Property, minus
(b) Operating Expenses for the Property, for the current trailing twelve (12)-month period.
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“Gross Revenue” shall include the following amounts recorded in accordance with generally accepted accounting principles consistently applied:
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“Operating Expenses” shall mean: all of the ordinary and normal expenses of operation of the Property, determined on an annualized accrual basis, including annualized property taxes and property assessed clean energy (“PACE”) loan payments, insurance premiums (or taxes and/or insurance impounds, if taxes and/or insurance are impounded by Lender), reserve account equal to 4 percent (4%) of Gross Revenue for furniture, fixtures and equipment reserves, franchise fees and royalties, telephone and internet expenses, administrative and general expenses, management fees, utilities, repair and maintenance, salaries and wages, and advertising and marketing expenses; provided, however, that Operating Expenses will not include:
| a. | depreciation and amortization; |
| b. | non-cash items; |
| c. | all capital items or expenditures, including construction costs and professional fees and other expenses relating thereto and any amortization thereof; |
| d. | costs of repair or restoration after a casualty or condemnation; |
| e. | debt service payments made to lenders; |
| f. | income or franchise taxes; and |
| g. | extraordinary one-time expenses that are not reasonably expected to be incurred in future periods. |
“Net Cash Flow” means the Property Net Operating Income (including any FF&E Reserves) less Principal and Interest, less any distributions provided on T-Unit Equity, less Borrower’s Fund Level Expenses attributable to Property.
“Combined Yield” defined as the sum of Borrower’s 10% annual returns plus Borrower’s share of Distributable Cash, divided by all of Borrower’s invested capital, annualized.
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EXHIBIT E TO
CONTRIBUTION AGREEMENT
NON-COMPETITION CONFIDENTIALITY AND NON-SOLICITATION AGREEMENT
This NON-COMPETITION, CONFIDENTIALITY AND NON-SOLICITATION AGREEMENT (this
“Agreement”) is dated as of , 20 (the “Effective Date”), between Lodging Fund REIT III OP, LP a Delaware limited partnership with an address of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (“Operating Partnership”), [Contributor Name], [Contributor Entity Type] with an address of
[ ] (“Contributor”), and [ ], its manager and ,
operating officers of the Contributor (the “Interested Parties”). The Contributor and Interested Parties are collectively referred to herein as the “Restricted Parties.”
R E C I T A L S:
| A. | The Operating Partnership and Contributor have entered into a Contribution Agreement, dated as of |
, 2022, (the “Contribution Agreement”), pursuant to which the Contributor has agreed to contribute property to the Operating Partnership, such property located at [Hotel Address] (the “Hotel”).
A G R E E M E N T
For valuable consideration, the parties agree to the following covenants and agreements set forth in this Agreement and in the Contribution Agreement:
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| 1.3 | Confidential Information. |
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limitations of this Agreement and will have agreed to be comply with and be bound by such limitations; (c) where the Restricted Parties have obtained the express, prior written consent from the Operating Partnership; or (d) in connection with the enforcement of the Contribution Agreement and the other documents referenced therein.
(b) solicit, recruit, or encourage any employee or independent contractor of the Hotel or Operating Partnership to leave his or her employment, (c) hire, employ or cause to be hired, or establish a business with, any person who was employed at the Hotel, within the 12-month period preceding the Closing Date, (d) solicit any business clients of the Hotel or encourage them to terminate any contracts, and (e) interfere with or encourage any adjustments to long term negotiated rate clientele. In addition, any attempt by any Restricted Party to induce others to terminate any contracts, employment, or independent contractor relationship with Operating Partnership or the Hotel, or any effort by any Restricted Party to interfere with any of the relationships between each of theHotel and any of its business clients, employees, or independent contractors, would be harmful and damaging to the Operating Partnership. For purposes of this Section 1.3, an “employee” will include any person who is a common law employee or who is an independent contractor providing personal services.
| 1.7 | Remedies. |
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any other rights and remedies available to Operating Partnership at law or in equity, including the right to seek monetary damages.
If to the Restricted Parties:
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With copy to:
Fax:
Email:
If to Operating Partnership:
Lodging Fund REIT III OP, LP
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With copy to:
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Legendary Capital Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
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[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
OPERATING PARTNERSHIP:
Lodging Fund REIT III OP, LP a Delaware limited partnership
By:Lodging Fund REIT III, Inc. Its:General Partner
By: Name: Title:
CONTRIBUTOR:
[Contributor name] [Contributor entity type]
By: Name: Title:
RESTRICTED PARTIES:
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[Individual Name]
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EXHIBIT F TO
CONTRIBUTION AGREEMENT CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT
THIS AGREEMENT is made and entered into as of August , 2022 by and between Lodging Fund REIT
III OP, LP (individually and collectively with its subsidiaries, owners and affiliates, the “Partnership”) and Wichita Airport Hospitality, LLC (“Contributor”) (the Partnership and Contributor individually, a “Party” and collectively, the “Parties”).
The Parties intend to exchange Confidential Information to one another in connection with the possibility of engaging in the transaction described in the Contribution Agreement (the “Transaction”).
In consideration of the promises exchanged herein, the Parties hereto agree that the following terms and conditions shall apply when one Party discloses "Confidential Information" to the other Party:
| 1. | DEFINITION OF “CONFIDENTIAL INFORMATION”. As used in this Agreement, the term “Confidential Information” means all information relating to or used in the Partnership’s business, regardless of whether it is marked “confidential” or otherwise. Confidential Information includes, but is not limited to, all business processes and procedures, systems, methods of doing business, data, reports, specifications, formulae, proposals, strategies, business plans and analyses, financial information and projections, investment strategy, marketing, advertising, promotions, market research, plans, information about past, present or potential investors, information about past, present or potential vendors, information about existing or future technology, and proprietary software or models. Without limiting the foregoing, the term “Confidential Information” expressly includes: the Partnership’s investment strategies, including without limitation the possibility of entering into an umbrella real estate investment trust (“UPREIT”) transaction; and potential details related to the Transaction, including without limitation potential Transaction terms, provisions, and pricing. The foregoing notwithstanding, the term “Confidential Information” does not include information that: |
| a) | Is or becomes known to the public through no fault of the receiving Party; |
| b) | The receiving Party already rightfully possessed before the disclosing Party disclosed it to the receiving Party; |
| c) | Is subsequently disclosed to the receiving Party by a third-party who is not under obligation of confidentiality to the disclosing Party; or |
| d) | The receiving Party develops independently without using Confidential Information. |
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| 2. | NON-DISCLOSURE OBLIGATIONS. Neither Party shall not disclose Confidential Information of the other Party to any of its officers, directors, employees, contractors or agents or to any third-party without the disclosing Party’s written consent, except that (a) the receiving Party may disclose such information to its officers, directors, employees, contractors, and agents whose duties justify their need to know such Confidential Information, and who have been clearly informed of their obligation to maintain the confidential status of such Confidential Information, and in the case of contractors or agents, who have signed a written document acknowledging the obligation to maintain the confidential status of Confidential Information, and shall cause them to comply fully with these obligations; and (b) the receiving Party may disclose Confidential Information to the extent required by applicable federal, state or local law, regulation, court order, or other legal process, provided such Party has given the disclosing Party prior written notice of such required disclosure and, to the extent reasonably possible, has given the disclosing Party an opportunity to contest such required disclosure at the disclosing Party’s expense. |
| 3. | PROTECTION OF CONFIDENTIAL INFORMATION. The receiving Party shall use the same care to prevent the unauthorized use or disclosure of the Confidential Information as such Party uses with respect to its own confidential information of a similar nature, which shall not in any case be less than the care a |
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reasonable business person would use under similar circumstances. Without limiting the foregoing, the receiving Party shall take reasonable action by instruction, agreement or otherwise with respect to such Party’s employees or other persons permitted access to Confidential Information to cause them to comply fully with the receiving Party’s obligations hereunder.
| 4. | PERMITTED USE OF CONFIDENTIAL INFORMATION. The receiving Party may not use the Confidential Information directly or indirectly for any purpose other than the purpose for which it was originally disclosed, or for any purposes which could be deemed to be adverse to or competitive with the disclosing Party’s business. Notwithstanding the foregoing and anything to the contrary in this Agreement, nothing contained herein shall impair Buyer’s right (or the right of any permitted assignee or Lodging Fund REIT III, Inc. (“Parent”)) to disclose information relating to this Agreement, the Contribution Agreement, or the Property (a) to any due diligence representatives and/or consultants that are engaged by, work for or are acting on behalf of, any securities dealers, investment advisors and/or broker-dealers evaluating Buyer, its permitted assignees or Parent, (b) in connection with any filings with governmental agencies (including the Securities and Exchange Commission) by Parent, (c) to any broker-dealers or investment advisors in Parent’s selling group and any of Parent’s investors, including pursuant to the confidential offering memorandum used in connection with Parent’s ongoing private offering, and (d) to the public as long as such information does not specifically disclose the identity of the Contributor or the Property if such disclosure occurs before the end of the Due Diligence Period. |
| 5. | DESTRUCTION OF CONFIDENTIAL INFORMATION. Upon the written request of the disclosing Party, the receiving Party shall cease using and arrange for the destruction of all copies of any Confidential Information then in the receiving Party’s possession or under such Party’s control. The receiving Party agrees to dispose of the Confidential Information in such a manner that the information cannot be read or reconstructed after destruction. Upon the written request of the disclosing Party, the receiving Party shall certify in writing that it has complied with the obligations set forth in this paragraph. |
| 6. | INFORMATION SECURITY. (a) The receiving Party shall take appropriate measures designed to protect the security, confidentiality, and integrity of Confidential Information; (b) the receiving Party shall restrict access to Confidential Information to those officers, directors, employees, contractors, agents or other third parties whose access the disclosing Party deems appropriate; (c) Confidential Information shall continue to be subject to the terms of this Agreement indefinitely; and (d) the disclosing Party shall have the right to review the receiving Party’s operations and procedures to ensure compliance with the foregoing requirements. The receiving Party agrees to indemnify the disclosing Party for all reasonable fees, costs, charges, and expenses resulting from any unauthorized access to Confidential Information. |
| 7. | OWNERSHIP OF CONFIDENTIAL INFORMATION. The disclosing Party shall retain all right, title and interest in and to its own Confidential Information. Neither this Agreement nor any disclosure of Confidential Information shall be deemed to grant the receiving Party any license or other intellectual property right. |
| 8. | DISCLAIMERS. The receiving Party acknowledges and agrees that the disclosing Party provides Confidential Information disclosed hereunder on an “AS IS” basis, without warranties of any kind, except as specified in Section 7 above. Without limiting the foregoing, the disclosing Party does not represent or warrant that Confidential Information is accurate, complete or current. The disclosure of Confidential Information containing business plans is for planning purposes only. The disclosing Party may change or cancel its plans at any time at such Party's sole discretion. The receiving Party further acknowledges and understands that disclosure of Confidential Information is not a representation that the parties will enter into |
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| any type of business relationship. |
| 9. | INJUNCTIVE RELIEF. The receiving Party acknowledges that the unauthorized use or disclosure by such Party of Confidential Information would cause immediate and irreparable damage that could not be fully remedied by monetary damages. The receiving Party therefore agrees that the disclosing Party may specifically enforce this Agreement and shall be entitled to injunctive or other equitable relief to prevent unauthorized use or disclosure without the necessity of proving actual damage. |
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| 10. | TERMINATION. This Agreement shall remain in full force and effect until the earlier of (i) the Parties’ execution of a binding agreement superseding this Agreement, or (ii) a date two years after the conclusion of business discussions between the Parties. |
| 11. | SEVERABILITY. If any provision of this Agreement is held invalid, illegal or unenforceable the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired. |
| 12. | GENERAL. This Agreement supplements the LOI, and to the extent inconsistent, supersedes any other non- disclosure or confidentiality agreement between the Parties. The Parties may not amend this Agreement except in a writing that each party signs. The terms of such an amendment shall apply as of the effective date of the amendment, unless the amendment specifies otherwise. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. The laws of the State of North Dakota shall govern this Agreement. No provision of this Agreement may be waived, except pursuant to a writing executed by the party against whom the waiver is sought to be enforced. No failure or delay in exercising any right or remedy or requiring the satisfaction of any condition under this Agreement operates as a waiver or estoppel of any right, remedy or condition. All remedies provided for in this Agreement shall be cumulative and in addition to and not in lieu of any other remedies available at law, in equity or otherwise. |
LODGING FUND REIT III OP, LP
on behalf of itself and
its subsidiaries, owners and affiliates
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Investment Officer
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CONTRIBUTOR
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Manager
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EXHIBIT G TO
CONTRIBUTION AGREEMENT TAX INFORMATION
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Schedule 2.2
List of Contributed Assets and Assumed Agreements
Contributed Assets:
Assumed Agreements:
-The Leases.
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Schedule 2.4
List of Excluded Assets
| 1. | Contributor’s cash, cash equivalents and investments. |
| 2. | Contributor’s account receivables. |
| 3. | Contributor’s rights to any prorations pursuant to this Agreement. |
| 4. | Any management agreement pertaining to the Property, which management agreements must be terminated at Closing. |
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Schedule 2.5
List of Assumed Liabilities; Permitted Liens
Assumed Liabilities:
| - | Assumed Agreements. |
| - | Existing Loans. |
| - | Any liabilities arising pursuant to a Permitted Lien. |
Permitted Liens:
| - | Any Lien that would be revealed by a survey or physical inspection. |
| - | Any Lien of record. |
| - | Any Lien related to the Existing Loans. |
| - | Any Lien related to the rights of guests of the Property. |
| - | Any Lien related to the Assumed Agreements. |
| - | Any Lien arising from purchase money or leased property. |
| - | Any Lien related to licensed software. |
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Schedule 2.6
List of Excluded Liabilities
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Schedule 2.7.4 List of Creditors
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Schedule 2.10 Allocation of Total Consideration
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Schedule 3.1.8
3-05 Audit
Contributor acknowledges that under either Rule 3-05 or Rule 3-14 of Regulation S-X, the Operating Partnership is required to provide certain information in connection with reports the Company is required to file with the Securities and Exchange Commission.
Accordingly, Contributor agrees to:
In connection with the foregoing, the Operating Partnership will give the Contributor no less than 10 business days’ prior written notice of the Operating Partnership’s plans to inspect and audit such books and records, and the Contributor’s obligation to perform herein shall extend beyond the Closing.
Notwithstanding the foregoing, the Contributor will not be required to (a) prepare or compile any materials,
(b) incur any third-party costs or expenses in connection with the Rule 3-05 or 3-14 Audit, (c) provide any books, records or materials that could reasonably be expected to be books, records or materials in the possession or control of the tenant parties, (d) provide any books, records or materials that are not within the possession or control of the Contributor, or (e) make any representations or warranties with respect to such information beyond a customary management representation letter signed by the Contributor reasonably requested by any accounting firm engaged by the Operating Partnership to deliver its auditors report with respect to the Rule 3-05 or Rule 3-14 Audit. The Operating Partnership acknowledges and agrees that the foregoing accounting and financial materials to be provided by the Contributor does not include any information or materials related to the period prior to the date the Contributor acquired the Property and the Contributed Assets and is to be limited solely to information regarding the Property and the Contributed Assets after they were placed into operation by the Contributor. The Contributor acknowledges that the Rule 3-05 or Rule 3-14 Audit may require the Operating Partnership to perform a Rule 3-05 or 3-14 Audit both after the Effective Date and after the Closing Date and the Contributor agrees that the Contributor’s obligations under this Schedule 3.1.8 are material terms of this Agreement, and breach of this Schedule 3.1.8 will constitute a default under
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the terms of this Agreement. The Contributor further agrees, that the Operating Partnership’s sole and absolute remedy in the event of default is that of specific performance.