EFTA00805215.pdf

SMRH DRAFT 1/10/2019 PURCHASE AND SALE AGREEMENT Between LIFE HOTEL ONE LLC SELLER, And IMRR DEVELOPMENT' LLC PURCHASER Property: Life Hotel 19 West 3V Street New York, New York 513950-2-W EFTA00805215  SMRH DRAFT 1/10/2019 CONTRACT INFORMATION SUMMARY PROPERTY: Life Hotel 19 West 3 Street, New York, New York BLOCK/LOT: Block 833 Lot 28 PURCHASE PRICE: Forty-Eight Million and No/100 Dollars ($48,000,000.00). DEPOSIT: • Initial Deposit of Five Million and No/100 Dollars ($5,000,000.00) on the Effective Date. • Final Deposit of Five Million and No/I00 Dollars ($5,000,000.00) due on or prior to the expiration of the Due Diligence Period. DUE DILIGENCE Thirty (30) days from the Effective Date PERIOD: SCHEDULED , 2019 (The Forty-Fifth (45th) day following the expiration CLOSING DATE: of the Due Diligence Period.] PARTIES: (address for notices) With copy to: SELLER: LIFE HOTEL ONE LLC c/o Mitchell Holdings Katsky Korins LLP 801 Madison Avenue, 4th Floor 605 Third Avenue, 16th Floor New York, New York 10065 New York, New York 10158 Attn: Mr. David Mitchell Attn: Matthew Danow Esq. Phone Phone: Email: Email: PURCHASER: [MRR Development] LLC 600 Madison Avenue Sheppard Mullin Richter & 20th Floor Hampton LLP New York, New York 10022 70 West Madison, 48th Floor Attn: Rotem Rosen Chicago, Illinois 60602 Phon. Attn: Lawrence C. Eppley Email: Phone: Email: ESCROW Sutton Land Title Agency AGENT/TITLE 515 Rockaway Avenue COMPANY: Valley Stream, New York 11581 Attn: Phone: (516) 837- Email: 513950-2-W EFTA00805216 The Contract Information Summary set forth above and any schedules and exhibit(s) attached to this Agreement are incorporated into and made a part of the following Agreement. In the event of any inconsistency between the provisions of this Summary and the body of this Agreement, the provisions contained in the body of this Agreement shall control the rights of the parties and shall supersede any inconsistent provisions, as the case may be. SCHEDULES & EXHIBITS Schedule I —Equipment Leases Schedule 2 — Service Contracts Exhibit A — Legal Description of the Land Exhibit B — Permitted Exceptions to Title Exhibit C — Form of Deed Exhibit D — Form of Assignment of Equipment Leases Exhibit E — Form of Assignment and Assumption of Service Contracts Exhibit F — Form of Bill of Sale Exhibit G — Form of Assignment and Assumption of Collective Bargaining Agreement Exhibit H — Form of Holdback Escrow Agreement 3 513950-2-W EFTA00805217  SMRH DRAFT 1/10/2019 AGREEMENT OF PURCHASE AND SALE (Life Hotel, 19 West 31" Street, New York, New York) THIS AGREEMENT OF PURCHASE AND SALE (this "Agreement") is made as of January , 2019 (the "Effective Date"), by and between LIFE HOTEL ONE LLC, a Delaware limited liability company, having an address at do Mitchell Holdings, 801 Madison Avenue, glth Floor, New York, New York 10065 ("Seller"), and [MRR DEVELOPMENT], LLC, a limited liability company, having an address at 600 Madison Avenue, 20th Floor, New York, New York 10022 ("Purchaser"). WITNESETH: 1. AGREEMENT TO SELL AND PURCHASE; DESCRIPTION OF PROPERTY. 1.1 Seller shall sell to Purchaser and Purchaser shall purchase from Seller upon the terms and conditions set forth in this Agreement, all right, title and interest of Seller and to: (a) that certain parcel of land commonly known as 19 West 31" Street, New York, New York, as more particularly bounded and described in Exhibit A annexed hereto and incorporated herein (the "Land"); (b) the buildings, improvements, structures and fixtures located on the Land (collectively, the "Hotel"); and (c) all of the following personalty (collectively, the "Personal Property"): (i) all furniture, furnishings, fixtures (other than those which are part of the Hotel), rugs, mats, carpeting, appliances, devices, engines, telephone and other communications equipment, televisions and other video equipment, plumbing fixtures and other equipment located in or related to the Hotel, excluding property described in the Equipment Leases (the "FF&E"); (ii) Seller's interest in the Assumed Equipment Leases (as defined below); (iii) all items included within the definition of "Property and Equipment" under the Uniform System of Accounts for the Lodging Industry, Eleventh Revised Edition, 2015, as copyrighted by the Hotel Association of New York City, Inc. and published by the American Hotel & Motel Association (n/k/a the American Hotel & Lodging Association) (the "Uniform System of Accounts"), including, without limitation, linen, china, glassware, tableware, uniforms and similar items, whether in use or held in stock for future use, in connection with the operation of the Hotel, subject to such depletion and including such resupplies prior to the Closing Date as shall occur in the ordinary course of business (the "Fixed Asset Supplies"); (iv) all "Inventories," as defined in the Uniform System of Accounts, such as provisions in storerooms, refrigerators, pantries, and kitchens, beverages in wine cellars and bars, other merchandise intended for sale or resale, fuel, mechanical supplies, stationery, guest supplies, maintenance and housekeeping supplies and other expensed supplies and similar items (the "Inventories"), provided that to the extent that any applicable law prohibits the transfer of alcoholic beverages from Seller to Purchaser, such beverages shall not be considered a part of Inventories until such time as the same may lawfully be transferred after Closing, at which point the same shall be transferred; (v) Seller's interest in the Assumed Service Contracts (as defined below); (vi) all contracts and reservations made for rooms, banquets, meals or other services to be supplied from and/or after the Closing Date (the "Bookings"), and the aggregate amount of any deposits received by Seller (whether paid in cash or by credit card) as a down payment for any Bookings ("Advance Deposits"); (vii) to the extent in Seller's possession and control, surveys, architectural, consulting and engineering blueprints, plans and specifications and drawings related to the Hotel (the "Plans"); (viii) to the extent transferable and owned or held by Seller (but excluding the Liquor License (hereinafter 513950-2-W EFTA00805218 defined)), all licenses, permits and other authorizations or approvals required by any governmental or quasi-governmental agency, body, department, commission, board, bureau, instrumentality or office, or otherwise appropriate with respect to the construction, ownership, operation, leasing, maintenance or use of the Property or any part thereof (the "Permits"); (ix) any telephone exchanges, intemet websites, intemet domain names and other identifying material, and all variations thereof to the extent owned by Seller or any of Seller's principals or affiliates; (x) any trademarks, trade names, servicemarks, logos, copyrights, brands, patents and other intellectual property owned by Seller or any of its principals or affiliates and/or used by the Hotel and the restaurants, banquet and other food and beverage operations of the Hotel (including, without limitation, the names, brands marks, copyrights and other intellectual property associated with "Life", "Life Magazine", "Life Hotel", "Henry" and "Gibson & Luce" and any derivations thereof); (xi) any and all menus and stationery bearing the names "Life", "Life Magazine", "Life Hotel", "Henry", "Gibson & Luce" or any derivations thereof, bur excluding any such items that bear the name of the Seller; (xii) all books and records located at the Hotel that relate exclusively to the Hotel but expressly excluding all documents and other materials that (i) are legally privileged or constitute attorney work product, (ii) are subject to an applicable law or a confidentiality agreement prohibiting their disclosure, or (iii) constitute confidential internal valuation assessments, reports, studies, memoranda, notes or other correspondence prepared by or on behalf of any officer or employee of Seller, including, without limitation, all (A) internal financial analyses, appraisals, tax returns, financial statements, (B) corporate or other entity governance records, (D) any work papers, memoranda, analysis, correspondence and similar documents and materials prepared by or for Seller in connection with the transaction described in this Agreement; and (xiii) all warranties and guaranties held by Seller with respect to the Hotel or any other Personal Property, to the extent the same are transferable or the Parties obtain any consent necessary to effectuate such a transfer. Notwithstanding anything to the contrary in this Agreement, the Land, the Hotel and the Personal Property shall not include any of the following: (1) accounts receivable for periods prior to and including the Apportionment Date (hereinafter defined); (2) property of guests; (3) tax deposits, utility deposits and other deposits held by parties other than Seller, except for any transferable deposits assigned to Purchaser, for which Seller is to be reimbursed as herein provided; (4) any tax, insurance, FF&E, capital improvement and/or other escrows, impounds or reserves held by Seller's lender or any other party; (5) except to the extent that any of the same represent Advance Deposits, all checks, drafts, notes and other evidence of indebtedness held at the Hotel on the Closing Date, and any balances on deposit with banking institutions relating to the Hotel, including amounts held in "house banks;" (6) any rights to any Personal Property described in the preceding sentence that has been prepared, promulgated, or published by Seller or which otherwise identifies that the Hotel was owned by Seller, but excluding any and all menus and stationery bearing the names "Life", "Life Magazine", "Life Hotel", "Henry", "Gibson & Luce" or any derivations thereof; (7) all computer software and/or systems owned by the Manager or any third party, including, without limitation, the payroll software and/or system; (8) all personnel files ("Excluded Personnel Files") other than employee files containing only name, sex, social security number, date of birth, date of hire, rate of pay and benefits and other census type information; and (9) any and all personal property owned by guests, the Manager, or any employees of the Hotel or by a vendor or any other third party distinct from Seller (all of the 5 513950-2-W EFTA00805219 foregoing, collectively, the "Excluded Property"). The Land, the Hotel, and the Personal Property located at the Hotel are referred to herein collectively as the "Property.". 2. PURCHASE PRICE AND PAYMENT; ESCROW. 2.1 The total purchase price payable to Seller for the Property is the Purchase Price, subject to adjustment as herein provided. 2.2 The Purchase Price is payable as follows: 2.2.1.1 Simultaneously with the execution and delivery of this Agreement by the parties hereto, Purchaser delivered to Escrow Agent by wire transfer of immediately available United States federal funds, the sum of Five Million and No/100 Dollars ($5,000,000.00) (the "Initial Deposit"), which Initial Deposit shall be held by Escrow Agent in escrow pursuant to the terms of this Agreement and shall become non- refundable to Purchaser upon the delivery of a Go Forward Notice (as hereinafter defined), except as otherwise expressly provided in this Agreement. The "Initial Deposit" shall include all interest accrued thereon, and such interest shall be payable to the party entitled to receive the Initial Deposit pursuant to the terms of this Agreement. 2.2.1.2 Not later than 5:00 p.m. Eastern Time on the business day following the expiration of the Due Diligence Period, if Purchaser has timely delivered a Go Forward Notice, Purchaser shall deliver to Seller by wire transfer of immediately available United States federal funds, the sum of Five Million and No/100 Dollars ($5,000,000.00) (the "Final Deposit", together with the Initial Deposit, collectively referred to as the "Deposit"), which Final Deposit shall become non-refundable to Purchaser, except as otherwise expressly provided in this Agreement. The "Deposit" shall include all interest accrued thereon, and such interest shall be payable to the party entitled to receive the Final Deposit pursuant to the terms of this Agreement. Failure by Purchaser to timely deliver all or any part of the Final Deposit in accordance with this subsection shall constitute a material default by Purchaser hereunder and Seller shall be entitled to terminate this Agreement by written notice to Purchaser. 2.2.1.3 At Closing (hereinafter defined), Purchaser shall pay the additional sum of Thirty Eight Million and No/I 00 Dollars ($38,000,000.00), subject to adjustments as provided herein, in cash by wire transfer of immediately available federal funds payable to the direct order of, or as otherwise directed, by Seller. 2.3 Purchaser expressly agrees and acknowledges that Purchaser's obligations to pay the Purchase Price at the Closing and to consummate the transactions contemplated hereby are not in any way contingent, conditioned upon or qualified by Purchaser's obtaining or failing to obtain any financing of any amount, type or nature whatsoever (e.g., whether by way of debt financing, equity investment, or otherwise). Nevertheless, if Purchaser obtains a mortgage, notwithstanding the fact that neither this Agreement, nor the Closing is contingent on Purchaser's ability to obtain such a mortgage, then upon Purchaser's request, Seller will request 6 513950-2-W EFTA00805220 that its lender cooperate in attempting to arrange for an assignment of Seller's mortgage to Purchaser's lender (the "Assignment of Mortgage"), at no cost, expense or assumption of liability to Seller. Seller makes no representation or warranty that an Assignment of Mortgage will be available to Purchaser or that Seller's lender will cooperate in this regard. In the event that the parties are able to accomplish an Assignment of Mortgage, Purchaser shall pay all costs and expenses of both Seller's mortgagee and Purchaser's lender required in connection therewith. All mortgage recording tax savings realized by Purchaser due to the Assignment of Mortgage shall be for the benefit of Purchaser at Closing. 2.4 Purchaser expressly agrees and acknowledges that although the Property includes the Personal Property, such Personal Property has no independent resale value, that no portion of the Purchase Price is allocated to such Personal Property, and that no Personal Property shall be sold to Purchaser in the event that the Closing does not occur. Notwithstanding the foregoing, Purchaser shall remain solely liable for the payment of any sales tax that may be imposed upon the transfer of any Personal Property and shall indemnify, defend and hold Seller harmless from any and all such tax. The provisions of this Section 2.4 shall survive the Closing. 2.5 'Escrow Agent shall hold the Deposit in escrow in a segregated bank account until Closing or sooner termination of this Agreement and shall pay over or apply the Deposit in accordance with the terms of this Section 2.5 (or, if applicable, Escrow Agent shall return the Initial Deposit to Purchaser pursuant to Section 8.1.2 if Purchaser timely fails to deliver a Go Forward Notice pursuant to said Section 8.1.2). 2.5.1.1 The Social Security or Federal Identification Numbers of the parties shall be furnished to Escrow Agent upon request. At Closing, the Deposit shall be paid by Escrow Agent to Seller. If for any reason Closing does not occur and either party gives notice to Escrow Agent demanding payment of the Deposit, Escrow Agent shall give prompt notice to the other party of such demand. If Escrow Agent does not receive notice of objection from such other party to the proposed payment within ten (10) days after the giving of such notice, Escrow Agent is hereby authorized and directed to make such payment. If Escrow Agent does receive such notice of objection within such ten (10) day period or if for any other reason Escrow Agent in good faith shall elect not to make such payment, Escrow Agent shall continue to hold such amount until otherwise directed by notice from Seller and Purchaser or a final, non-appealable judgment, order or decree of a court. However, Escrow Agent shall have the right at any time to deposit the Deposit with the clerk of a court in the county in which the Property are located or in which the parties have consented to the laying of venue and shall give notice of such deposit to Seller and Purchaser. Upon such deposit or other disbursement in accordance with the terms of this paragraph, Escrow Agent shall be relieved and discharged of all further obligations and responsibilities hereunder. 2.5.1.2 The parties acknowledge that Escrow Agent is acting solely as a stakeholder at their request and for their convenience and that Escrow Agent shall not be 1Section 2.5 subject to escrow agent review. 7 513950-2-W EFTA00805221  liable to either party for any act or omission on its part unless taken or suffered in bad faith or in willful disregard of this Agreement or involving gross negligence on the part of Escrow Agent. Seller and Purchaser jointly and severally (with right of contribution) agree to defend (by attorneys selected by Escrow Agent), indemnify and hold Escrow Agent harmless from and against all costs, claims and expenses (including reasonable attorneys' fees whether services are performed in-house or by another firm or counsel) incurred in connection with the performance of Escrow Agent's duties hereunder, except with respect to actions or omissions taken or suffered by Escrow Agent in bad faith or in willful disregard of this Agreement or involving gross negligence on the part of Escrow Agent. 2.5.1.3 Escrow Agent may act or refrain from acting in respect of any matter referred to herein in full reliance upon and with the advice of counsel which may be selected by it and shall be fully protected in so acting or refraining from action upon the advice of such counsel. 2.5.1.4 Escrow Agent acknowledges receipt of the Deposit by wire transfer and Escrow Agent's agreement to the provisions of this Section 2.5 by signing in the place indicated on the signature page of this Agreement. 3. CLOSING. 3.1 The closing of the transactions contemplated hereby (the "Closing") shall occur at the office of the Title Company though an escrow with the Title Company or its underwriter, in all cases at 10:00 a.m. eastern time, on the Scheduled Closing Date (and the actual date of the Closing, being the "Closing Date"). Purchaser shall have one (1) option to extend the Scheduled Closing Date for a period of thirty (30) days, provided that by no later than five (5) business days prior to the then Scheduled Closing Date (time being of the essence with respect thereto), Purchaser shall (x) deliver written notice to Seller regarding such extension and (y) tender to Seller an additional deposit of One Million and 00/100 Dollars ($1,000,000.00), which additional deposit shall become part of the Deposit, shall be credited against the Purchase Price at Closing and shall be non-refundable to Purchaser (except as otherwise expressly provided in this Agreement). TIME SHALL BE OF THE ESSENCE WITH RESPECT TO PURCHASER'S OBLIGATION TO CLOSE ON OR BEFORE THE SCHEDULED CLOSING DATE (AS THE SAME MAY BE EXTENDED BY SELLER PURSUANT TO THE EXPRESS PROVISIONS OF THIS CONTRACT). 3.2 The acceptance by Purchaser of the Deed shall constitute an acknowledgment by Purchaser that all obligations of Seller set forth in this Agreement have been discharged in full, and upon such acceptance, Seller shall be released from any and all obligations by reason of this Agreement, except only such obligations, if any, which shall pursuant to the express provisions of this Agreement survive the Closing hereunder. 4. PURCHASER'S TITLE REPORT; OBJECTIONS TO TITLE. 8 513950-2-W EFTA00805222  4.1 Seller shall give and Purchaser shall accept such title the Title Company shall be willing to approve and insure, subject only to the matters provided for in this Agreement, including, without limitation, the permitted exceptions more particularly set forth on Exhibit B annexed hereto and incorporated herein ("Permitted Exception(s)"). Purchaser shall promptly order a title commitment and a survey or survey update or inspection for the Property and Purchaser shall direct the Title Company2, in writing, to furnish a copy of such title commitment ("Commitment") and survey, survey update or survey inspection (collectively, "Survey"), together with any update thereof, to Seller's attorneys, addressed to the attention of Matthew Danow, Esq. Purchaser shall be deemed to have agreed to accept title subject to such matters as disclosed in the Commitment and/or Survey, unless, within five (5) business days prior to the expiration of the Due Diligence Period (time being of the essence), Purchaser shall deliver a notice in the form of a letter or e-mail from Purchaser's attorney to Seller's attorney (an "Objection Notice") to Seller identifying any encumbrances or objections to title (other than Permitted Exceptions) as disclosed by the Commitment and/or Survey. In the event Purchaser shall fail to timely deliver an Objection Notice, time being of the essence, all matters, encumbrances or objections to title as disclosed by the Commitment and/or Survey shall be deemed to be Permitted Exceptions, Seller shall have no obligation to cause to be removed (and Purchaser agrees to take title subject to) any such matters, encumbrances or objections to title, except that Seller shall cause to be removed (and Purchaser shall not be required to object to) (i) any mortgages, financing statements or similar security instruments placed on the Property in connection with Seller's financing of the Property (subject to the provisions of Section 7.4) (ii) any mechanic's liens against the Property for work performed, and (iii) liens which can be cured by the payment of a liquidated sum of money, provided that Seller shall not be obligated to incur or pay sums in excess of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) in the aggregate in order to cure any liens or defects pursuant to this clause (iii) (collectively, the "Required Removal Items"). In the event the Commitment and/or Survey is updated, Purchaser shall have until the earlier of: (a) two (2) business days following its receipt of the same; or (b) the Closing, time being of the essence as to the earlier of the foregoing dates, to deliver an Objection Notice to any new matters disclosed by such update. Purchaser shall have no right to object to any matter disclosed or raised in any update to the Commitment and/or Survey to the extent such matters were previously disclosed in the Commitment and/or Survey (or previous updates of either) and Purchaser did not timely deliver an Objection Notice, time being of the essence, as required pursuant to this Section 4.1 or if such updated matters otherwise constitute a Permitted Exception. 4.2 If Seller shall be unable to cause to be removed any exceptions or defects disclosed by the Commitment and/or Survey (or update thereof), which do not constitute Permitted Exceptions, or is otherwise unable to convey title in accordance with this Agreement, by the Closing Date, Seller shall have the right to adjourn the Closing Date for up to sixty (60) days (the "Extended Removal Period"), in the aggregate, to attempt to remove such exceptions or defects; provided, however, and notwithstanding any other provision of this Agreement, Seller shall not be required to bring any action or proceeding, or pay or incur any expenses in order to remove or correct any exceptions, encumbrances or defects except that Seller shall cause to be 2 Does Seller have an existing survey? 9 513950-2-W EFTA00805223 removed the Required Removal Items. The foregoing sentence shall not affect the parties' obligation to prorate certain adjustments at and subsequent to the Closing. If, at the expiration of the Extended Removal Period, Seller remains unable to cause the exceptions or defects to be removed or corrected, or is otherwise unable to convey title in accordance with the terms of this Agreement, then Seller shall so notify Purchaser and Purchaser may elect either to: (a) terminate this Agreement by notice to Seller within ten (10) business days following the earlier of: (i) Purchaser's receipt of notice from Seller that Seller is or will be unable to cause such matters to be removed; or (ii) the expiration of Seller's Extended Removal Period; or (b) accept such title as Seller may convey and shall complete the transaction as otherwise contemplated by this Agreement, but in no event shall Purchaser be entitled to any abatement of the Purchase Price or to any lost profits or other damages, deductions, offsets or credits. In the event Purchaser fails to notify Seller of its election within such ten (10) business day period, Purchaser shall be deemed to have elected to terminate hereunder in accordance with the preceding clause "(a)". In the event Purchaser timely delivers notice of its termination of this Agreement pursuant to the preceding clause "(a)", or is deemed to have elected the same, this Agreement shall thereupon terminate, Purchaser shall be entitled to the return of the Deposit together with any interest earned thereon and neither party shall have any further liability or obligation to the other hereunder except those expressly stated to survive termination of this Agreement. 4.3 It is expressly understood and agreed that Purchaser shall not have the right to terminate this Agreement by reason of the existence of any conditions which Purchaser has agreed to take subject to or has otherwise waived or has been deemed to waive (each as expressly provided in this Agreement), the Purchase Price shall not, in any respect, be reduced, nor shall Purchaser be entitled to any damages by reason thereof. Purchaser agrees that upon settlement at Closing, it shall be deemed and considered as full compliance by Seller of all representations and warranties made by Seller in this Agreement, and all obligations and agreements by Seller to be performed, except those representations and warranties and obligations and agreements stated in this Agreement to expressly survive the Closing. 4.4 If the Property shall, at the time of Closing, be subject to any liens, judgments, encumbrances or other title defects which are not otherwise Permitted Exceptions, the same shall not be deemed an objection to title or grounds for Purchaser's refusal to close hereunder; provided, that, at Closing, at Purchaser's option, either: (a) Seller uses all or a portion of the Purchase Price to satisfy the same and delivers to Purchaser and/or the Title Company instruments in recordable form sufficient to satisfy and discharge of record such liens and encumbrances, together with the cost of recording or filing such instruments; or (b) the Title Company will otherwise issue or bind itself to issue a policy which will insure Purchaser against collection thereof from, or enforcement thereof, against the Property. Upon request, Purchaser agrees to provide (out of the balance of the Purchase Price), at Closing, separate certified or official bank checks, as directed by Seller, to facilitate the satisfaction or removal of any of such liens or defects. Notwithstanding anything contained in Articles 4 or 5 to the contrary, Purchaser may at any time accept such title as Seller can convey, without reduction of the Purchase Price. 4.5 [Purchaser agrees to purchase the Property subject to any and all notes or notices of violations of law, or municipal ordinances, orders, designations or requirements whatsoever 10 513950-2-W EFTA00805224 noted in or issued by any federal, state, municipal or other governmental department, agency or bureau or any other governmental authority having jurisdiction over the Premises (collectively, "Violations") and any condition or state of repair or disrepair or other matter or thing, whether or not noted, which, if noted, would result in a Violation being placed on the Premises, provided that Seller shall at the time of Closing pay any liquidated fine imposed with respect to any and all such Violations. Seller shall have no duty to remove or comply with or repair any condition, matter or thing whether or not noted, which resulted in a Violation, or which, if noted, would result in a Violation being placed on the Hotel, and Seller shall have no duty to remove or comply with or repair any of the aforementioned Violations or other conditions, or to remove the same of record, and Purchaser shall accept the Property subject to all such Violations, the existence of any conditions at the Premises which would give rise to such Violations, if any, and any governmental claims arising from the existence of such Violations, in each case without any abatement of or credit against the Purchase Price.]3 5. APPORTIONMENTS. 5.1 The following items are to be apportioned as of 11:59 p.m. on the day immediately prior to the Closing Date (the "Apportionment Date"): 5.1.1 Real estate taxes, sewer rents and taxes, water rates and charges (to the extent not accounted for pursuant to Section 5.1.1 above), vault charges and taxes, business improvement district taxes and assessments and any other governmental taxes, charges or assessments levied or assessed against the Property (collectively, "Property Taxes"), on the basis of the respective periods for which each is assessed or imposed; 5.1.1.1 Property Taxes shall be apportioned on the basis of the fiscal period for which assessed. If the Closing Date shall occur before an assessment is made or a tax rate is fixed for the tax period in which the Closing Date occurs, the apportionment of such Property Taxes based thereon shall be made at the Closing Date by applying the tax rate for the preceding year to the latest assessed valuation, but, promptly after the assessment and/or tax rate for the current year are fixed, the apportionment thereof shall be recalculated and Seller or Purchaser, as the case may be, shall make an appropriate payment to the other within five (5) business days based on such recalculation. If as of the Closing Date, the Property or any portion thereof shall be affected by any special or general assessments which are or may become payable in installments of which the first installment is then a lien and has become payable, Seller shall pay the unpaid installments of such assessments which are due prior to the Closing Date and Purchaser shall pay the installments which are due on or after the Closing Date. In the event either party succeeds in obtaining a reduction of any Property Taxes, then any refund or recovery (whether in the form of a check, statement or account credit or future rate reductions (to the extent attributable to a refund or recovery for prior overpayments) or otherwise) shall be apportioned between the parties as of the Apportionment Date; provided, that any reasonable costs and fees of either party applicable to obtaining said reduction (provided 3 Section subject to review of outstanding violations. 11 513950-2-W EFTA00805225  there is a recovery or refund resulting therefrom) shall be apportioned pro rata in accordance with the respective percentages (as of the Apportionment Date) of the recovery or refund received or paid by Seller and Purchaser. 5.1.2 Fuel, if any, as estimated by Seller's supplier, at current cost, together with any sales taxes payable in connection therewith, if any (a letter from Seller's fuel supplier shall be conclusive evidence as to the quantity of fuel on hand and the current cost therefor); 5.1.3 Prepaid fees for licenses and other permits assigned to Purchaser at the Closing, if any; 5.1.4 Amounts prepaid or payable by the owner of the Property under the Assumed Service Contracts and the Assumed Equipment Leases; and 5.1.5 Advance Deposits and other amounts received by Seller (whether paid in cash or by credit card) in respect of Bookings to be fulfilled on or after the Closing Date; 5.1.6 Prepaid operating and advertising expenses; 5.1.7 Commissions of credit and referral organizations related to bookings for which Purchaser shall receive payment; 5.1.8 Outstanding gift certificates, that have not yet expired ("Vouchers"); and 5.1.9 All other charges and fees which are customarily prorated and adjusted in similar transactions. 5.2 If there are water meters at the Property, the unfixed water rates and charges and sewer rents and taxes covered by the meters, if any, shall be apportioned, to the extent not paid directly by any tenant: (a) on the basis of an actual reading done within thirty (30) days prior to the Apportionment Date; or (b) if such reading has not been made, on the basis of the last available reading. If the apportionment is not based on an actual current reading, then upon the taking of a subsequent actual reading, the parties shall, within ten (10) business days following notice of the determination of such actual reading, readjust such apportionment and Seller shall deliver to Purchaser or Purchaser shall deliver to Seller, as the case may be, the amount determined to be due upon such readjustment. 5.3 Charges for all electricity, steam, gas and other utility services, to the extent not paid directly by any tenant (collectively, "Utilities") shall be billed to Seller's account up to the Apportionment Date and, from and after the Apportionment Date, all Utilities shall be billed to Purchaser's account. If for any reason such changeover in billing is not practicable as of the Closing Date as to any Utility, such Utility shall be apportioned on the basis of actual current readings or, if such readings have not been made, on the basis of the most recent bills that are available. If any apportionment is not based on an actual current reading, then upon the taking of a subsequent actual reading, the parties shall, within ten (10) business days following notice of 12 513950-2-W EFTA00805226 the determination of such actual reading, readjust such apportionment and Seller shall promptly deliver to Purchaser, or Purchaser shall promptly deliver to Seller, as the case may be, the amount determined to be due upon such adjustment. 5.4 All deposits (including any interest thereon due the party making such deposit) from guests or others made as security or in connection with future services to be rendered, shall be credited to Purchaser at the Closing. Purchaser shall assume responsibility for the amount so credited and shall hold Seller harmless therefrom. Seller shall hold Purchaser harmless from any liability for deposits paid to or held by Seller and not so credited with respect to the Property. 5.5 Hotel Operation Apportionments: 5.5.1 Room Revenue. All revenues received or to be received from transient guests on account of room rents for the period ending on the Apportionment Date shall belong to Seller, and for the period beginning on the day immediately following the Apportionment Date such revenues shall belong to Purchaser; provided, however, that revenues received or "posted" in the normal course after the time Seller normally closes its front desk activity for the "night" audit for the Apportionment Date (the "Front Desk Closing Hour") shall belong to Purchaser. The accounts receivable of registered guests at the Property who have not checked out and were occupying rooms as of 11:59 p.m. on the Apportionment Date are collectively called the "Current Ledger"; the portion of the Current Ledger that relates to the night preceding the Closing Date (the "Pre-Closing Ledger") shall be split 50/50 between Seller and Purchaser net of sales and occupancy taxes, which shall be paid to Seller, who shall pay to the appropriate taxing authority the sales and occupancy taxes assessed on the entire Pre-Closing Ledger. At Closing, Purchaser shall credit to Seller the Seller's share of the proceeds of the Current Ledger attributable to each guest's account for the period ending on the Apportionment Date, less two percent (2%) of Seller's share to account for applicable credit card and travel agent commissions allocable to such share, which commissions shall be paid by Purchaser out of such proceeds when and as collected. 5.5.2 Accounts Receivable & Accounts Payable. All accounts receivable (other than the Current Ledger) originating on or before the Apportionment Date shall be retained by Seller, and there shall be no credit therefore between Seller and Purchaser. Any such accounts receivable collected by Purchaser or Seller after the Closing from any person that are not otherwise directed to a particular invoice or purchase order shall be applied as follows (determined as of the date of receipt of such payment): (A) first, in payment of accounts receivable by such person which accrued after Closing, and (B) second, in payment of accounts receivable by such person which accrued prior to Closing. Each such amount, less any costs of collection (including reasonable attorneys' fees) reasonably allocable thereto, shall be promptly paid over to the party so entitled to payment. Any indebtedness, accounts payable, liabilities or obligations of any kind or nature related to Seller or the Property for the periods prior to and including the Apportionment Date shall be retained and paid by Seller, and Purchaser shall not be or become liable therefor, except to the extent, if any, that Purchaser receives a credit therefor at Closing or otherwise expressly assumes such liabilities pursuant to this Agreement. 13 513950-2-W EFTA00805227  5.5.3 Food & Beverage and Vending Machine Revenue. Any and all revenues earned or derived by Seller from the operation of the Hotel or the sale of goods or services to guests, patrons, or occupants of the Hotel on or before the Apportionment Date, other than revenues described in Section 5.5.1, but including, without limitation, revenues from the sale of food, the sale of alcoholic and non-alcoholic beverages, rental of meeting and banquet rooms, telephone sales, pay television sales, valet and parking services, and other similar revenues, together with any sales tax or other taxes thereon, shall belong to Seller. Vending machine proceeds shall be counted as close to the Front Desk Closing Hour as is possible and the net amount thereof shall be credited to Seller at Closing. 5.5.4 Accounting. Except as otherwise expressly provided herein, all apportionments and adjustments shall be made on an accrual basis in accordance with generally accepted accounting principles. A final accounting of the apportionments and adjustments shall be prepared by Seller's and Purchaser's representatives at the Hotel on the Apportionment Date or on the Closing Date (in either case, subject to adjustment as provided below). The results of the accounting shall be incorporated into the Closing Statement. To the extent the exact amount of any adjustment item provided for in this Article 5 cannot be precisely determined on the Closing Date, the parties shall estimate the amount thereof, for purposes of computing the net amount due Seller or Purchaser pursuant to this Article 5 and shall determine the exact amount thereof not later than one hundred eighty (180) days after the Closing Date; provided, however with respect to any real estate taxes, personal property taxes, special assessments and vault charges, if any, the determination will be made on or before the later of one hundred eighty (180) days after the Closing Date or the date of Purchaser's receipt of such tax or assessment bills. 5.5.5 Employees. Seller shall be solely responsible for any liability for payment of all employees' wages, accrued vacation pay, bonuses, pension benefits and other benefits earned by and due to or accrued to employees at the Property through 11:59 p.m. on the Apportionment Date, together with F.I.C.A., unemployment and other taxes and benefits due from any employer of such employees. Purchaser shall be solely responsible for the payment of all such amounts from and after 11:59 p.m. on the Apportionment Date. 5.5.6 Unopened Fixed Asset Supplies and Inventories. At Closing, Seller shall receive a credit for the cost of any unopened Fixed Asset Supplies and Inventories at the Hotel on the Apportionment Date. The parties will cooperate in a preparation of an inventory of same two (2) days prior to the Closing Date. 5.5.7 House Funds. At Closing, Seller shall receive a credit for all the cash on hand at the Hotel as of the Closing Date, and such cash on hand shall become the property of Purchaser as of the Closing. 5.5.8 Lease Rents. There shall be no proration with respect to the Restaurant Lease (as defined below), as the same shall be terminated as of Closing. 5.6 The provisions of this Article 5 shall survive the Closing or termination of this Agreement. 14 513950-2-W EFTA00805228  6. REPRESENTATIONS AND WARRANTIES OF THE PARTIES. 6.1 Seller warrants, represents and covenants to and with Purchaser that the following are true and correct as of the date hereof and which shall remain and be true and correct as of the Closing: 6.1.1 Seller is a limited liability company duly organized and validly existing in the State of Delaware and authorized to transact business in the State of New York. 6.1.2 The execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all requisite action of Seller. 6.1.3 Neither the execution and delivery by Seller of the Seller Closing Deliveries (as defined below), nor the performance by Seller of any of its obligations under any of Seller Closing Deliveries, nor the consummation by Seller of the transactions described in this Agreement will (a) violate any provision of the organizational or governing documents of Seller, (b) violate any applicable law to which Seller is subject, or (c) result in a violation or breach of or constitute a default under any contract, agreement or other instrument or obligation to which Seller is a party, including any other agreement to acquire the Property, or (d) result in the creation or imposition of any lien or encumbrance on the Property or any portion thereof. 6.1.4 Except for the approval of the appropriate Governmental Authorities in connection with the transfer of the Permits, and the recordation of the Seller Closing Deliveries, no filing with, and no permit, authorization, consent or approval of, any governmental authority or other person is necessary for the execution or delivery by Seller of the Seller Closing Deliveries, or the performance by Seller of any of its obligations under any of the Seller Closing Deliveries, or the consummation by Seller of the transactions described in this Agreement, except to the extent the failure to obtain such permit, Authorization, consent or approval would not have a material adverse effect on the Property, or Seller's ability to consummate the transactions described in this Agreement. 6.1.5 Seller is not a "foreign person" within the meaning of Section 1445 of the Internal Revenue Code 1986, as amended, or any regulations promulgated thereunder (collectively, the "Code"). 6.1.6 Neither Seller nor any of its constituents have engaged in any dealings or transactions, directly or indirectly: (a) in contravention of any U.S., international or other money laundering regulations or conventions, including, without limitation, the United States Bank Secrecy Act, the United States Money Laundering Control Act of 1986, the United States International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, Trading with the Enemy Act (50 U.S.C. § I et seq., as amended), or any foreign asset control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto; or (b) in contravention of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56), Executive Order No. 13224 dated September 24, 15 513950-2-W EFTA00805229 2001 issued by the President of the United States (Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), as may be amended or supplemented from time to time ("Anti-Terrorism Order") or on behalf of terrorists or terrorist organizations, including those persons or entities that are included on any relevant lists maintained by the United