ASSIGNMENT AND SUBORDINATION OF MANAGEMENT AGREEMENT
Exhibit 10.8
ASSIGNMENT AND SUBORDINATION OF MANAGEMENT AGREEMENT
THIS ASSIGNMENT AND SUBORDINATION OF MANAGEMENT AGREEMENT (“Assignment”) is made as of July 27, 2012, which date shall be the effective date of this Assignment, by and between FSP 00 XXXXX XXXXX XXXXXX CORP., a Delaware corporation (“Borrower”), BANK OF AMERICA, N.A., a national banking association, as administrative agent for itself and other lenders who become parties to the Loan Agreement (including its successors, transferees and assigns, “Lender”), and XXXX COMPANIES US, INC., a Minnesota corporation (“Agent”).
RECITALS:
A. This Assignment is being executed in connection with the Lender making a mortgage loan to the Borrower in the original principal amount of $106,200,000.00 (the “Loan”) secured primarily by the real and personal property and improvements located approximately at 00 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx (the “Property”).
B. The Loan is evidenced by one or more Promissory Notes (together with all amendments or modifications thereto or restatements thereof, the “Note”), dated the date of this Assignment, made by the Borrower, and a certain Loan Agreement (together with all amendments or modifications thereto or restatements thereof, the “Loan Agreement”), and is secured by, among other things, a certain mortgage, assignment of leases and rents, security agreement and fixture filing (together with all amendments or modifications thereto or restatements thereof, the “Security Instrument”), dated the date of this Assignment, granting a first lien on the Property (this Assignment, the Note, the Security Instrument, the Loan Agreement and all other documents executed in connection with the Loan are collectively referred to as the “Loan Documents”).
C. Pursuant to a certain management agreement between the Borrower and the Agent (including any amendments or modifications thereto or restatements thereof, the “Management Agreement”), a true and correct copy of which is attached hereto as Exhibit A, the Borrower employed the Agent exclusively to operate and/or manage the Property.
D. The Lender requires as a condition to the making of the Loan that the Borrower assign the Management Agreement as set forth below.
NOW, THEREFORE, in consideration of the above and the mutual promises contained in this Assignment, the receipt and sufficiency of which are acknowledged, the parties hereto agree as follows:
1. Definitions. All capitalized terms used herein and not otherwise defined shall have the meanings set forth for such terms in the Loan Agreement.
2. Assignment of Management Agreement. The Borrower hereby absolutely and unconditionally transfers, sets over and assigns to the Lender all of the Borrower’s rights, title, interests and benefits in and to the Management Agreement. This is an absolute assignment, not an assignment for security only; provided, however, until the occurrence of an Event of Default (as defined in the Loan Agreement), the Borrower shall have a license to retain all rights, title, interests and benefits under the Management Agreement, and provided further that said assignment shall not be construed to impose any liability or obligation on the Lender. Upon the occurrence of any such Event of Default, such license shall be deemed immediately revoked.
3. Termination; Security. The obligations of the Borrower hereunder shall be secured hereby and by the Security Instrument and any other collateral securing the Loan. At such time as the Loan is paid in full and the Security Instrument is released of record, this Assignment and all of the Lender’s right, title and interest hereunder with respect to the Management Agreement shall terminate.
4. Borrower’s Covenants. The Borrower hereby covenants with the Lender that during the term of this Assignment (a) the Borrower shall not transfer the responsibility for the management of the Property from the Agent to any other Person without the prior written consent of the Lender, which consent shall not be unreasonably withheld, conditioned or delayed; (b) the Borrower shall not terminate or amend any of the material terms or provisions of the Management Agreement without the prior written consent of the Lender, which consent shall not be unreasonably withheld, conditioned or delayed; and (c) the Borrower shall, in the manner provided for in this Assignment, give notice to the Lender of any notice or information that the Borrower receives which indicates that the Agent is terminating the Management Agreement or that the Agent is otherwise discontinuing its management of the Property. Notwithstanding the provisions of this Section 4, Borrower may, without obtaining Lender’s prior consent, terminate the Management Agreement in accordance with the terms of the Management Agreement, (A) in the event such termination is a result of (i) Agent’s negligence in the management, operation, maintenance or servicing of the Property or other default by Agent in the performance of its obligations under the Management Agreement and Agent shall have failed to cure such breach to the satisfaction of Borrower after thirty (30) days prior written notice; (ii) Agent having caused or allowed to exist a breach of any Basic Document (as defined in the Management Agreement) and, only to the extent that such breach is curable, shall have failed to cure such breach to the satisfaction of Borrower by the earlier of any required date or after thirty (30) days prior written notice from Borrower; (iii) a receiver, liquidator or trustee of Agent having been appointed by court order or a petition to liquidate or reorganize Agent under any bankruptcy, reorganization or insolvency law, and such order or petition is not vacated or dismissed within sixty (60) days or Agent shall have filed a petition in bankruptcy, for reorganization or under any insolvency laws, or if Agent shall have made an assignment for the benefit of its creditors, or if Agent is adjudicated a bankrupt; (iv) the present management of Agent having materially changed by reason of the acquisition or merger of Agent by or with any other entity; or (v) damage or destruction to the Property and Borrower decides not to rebuild or restore the Property or there is a taking by condemnation, or similar proceeding, of a substantial portion of the Property, and (B) provided that, within 30 days of such termination, Borrower enters into a replacement management agreement on then market terms and conditions, and otherwise reasonably acceptable to Lender with a replacement manager reasonably acceptable to Lender.
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5. Agreement by Borrower and Agent. The Borrower and the Agent hereby agree that upon the occurrence and during the continuance of any Event of Default, at the option of the Lender exercised by written notice to the Borrower and the Agent all rents, security deposits, issues, revenues, income, proceeds and profits of the Property collected by the Agent, after payment of all costs and expenses of operating the Property (including, without limitation, operating expenses, real estate taxes, insurance premiums, repairs and maintenance and the fees and commissions payable under the Management Agreement), shall be applied in accordance with the Lender’s written directions to the Agent.
6. Lender’s Right to Replace Agent. Borrower, upon the request of Lender, shall, no later than thirty (30) days from the date of Lender’s request, terminate the Management Agreement and replace the Agent, without penalty or fee, if at any time during the Loan: (i) Agent shall become insolvent or a debtor in a bankruptcy proceeding; (ii) there exists a default, beyond any applicable notice and grace periods, by Agent under the Management Agreement; or (iii) following Event of Default under the Loan Agreement with respect to which Lender has elected to accelerate the Loan, Lender determines that a Manager Termination Event (defined below) exists. Borrower, upon the request of Lender, shall, no later than ten (10) days from the date of Lender’s request, terminate the Management Agreement and replace the Agent, without penalty or fee, if Manager has engaged in gross negligence, fraud, willful misconduct or misappropriation of funds. At such time as the Agent may be removed, a replacement manager selected by Borrower and approved by Lender shall assume management of the Property on terms and conditions satisfactory to Lender, it being understood and agreed that the management fee for such replacement manager shall not exceed then prevailing market rates. “Manager Termination Event” shall mean a determination by Lender, made in the exercise of Lender’s reasonable good faith discretion, that replacing Agent with a replacement manager is likely to result in a positive affect on the value of the Property. If Lender fails to determine that a Manager Termination Event exists, then Lender (together with any successor or any purchaser at foreclosure) shall be deemed to waive any right to terminate the Management Agreement as a result of an Event of Default under the Loan Agreement.
In addition to the foregoing, in the event that Lender, in Lender’s reasonable discretion, at any time prior to the termination of this Assignment, determines that the Property is not being managed in accordance with generally accepted management practices for projects similarly situated, Lender may deliver written notice thereof to Borrower and Agent, which notice shall specify with particularity the grounds for Lender’s determination. If Lender reasonably determines that the conditions specified in Lender’s notice are not remedied to Lender’s reasonable satisfaction by Borrower or Agent within thirty (30) days from the date of such notice or that Borrower or Agent have failed to diligently undertake correcting such conditions within such thirty (30) day period, Lender may direct Borrower to terminate the Management Agreement and to replace Agent with a manager approved by Lender on terms and conditions reasonably satisfactory to Lender, it being understood and agreed that the management fee for such replacement manager shall not exceed then prevailing market rates.
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7. Subordination of Management Agreement and Management Fees. The Borrower and the Agent hereby agree that at all times prior to the termination of this Assignment, the Management Agreement shall be subordinate, inferior and subject to the Security Instrument and the other Loan Documents. The Borrower and the Agent further agree that the Agent shall not be entitled to receive any fee, commission or other amount payable to the Agent under the Management Agreement (including, without limitation, incentive management fees, if any) for and during any period of time that any amount due and owing the Lender under the Note and the other Loan Documents is not paid when due; provided, however, that (i) the Agent shall not be obligated to return or refund to the Lender any fee, commission or other amount already received by the Agent, and to which the Agent was entitled under this Assignment and (ii) so long as Agent is not in default under the Management Agreement and so long as the Management Agreement has not been terminated, Borrower shall be required to make and Agent shall be entitled to receive the payments (including payments to employees of Agent) regularly becoming due under the Management Agreement. Any incentives or other scheduled compensation beyond the base management fee set forth in the Management Agreement will be deferred and will be paid annually in arrears, provided that all debts and other obligations or expenses have been paid in full for the prior year and there has been no material adverse change in the Property since the time of the last annual payment.
8. Consent and Agreement by Agent. The Agent hereby acknowledges and consents to this Assignment and agrees that the Agent will act in conformity with the provisions of this Assignment and the Lender’s rights hereunder or otherwise related to the Management Agreement. In the event that the responsibility for the management of the Property is transferred from the Agent in accordance with the provisions hereof, the Agent shall fully cooperate in transferring its responsibility to a Person reasonably acceptable to the Lender and agrees to effectuate such transfer no later than thirty (30) days after notice from the Lender requiring such transfer. Further, the Agent hereby agrees (a) not to contest or impede the exercise by the Lender of any right it has under or in connection with this Assignment or any of the other Loan Documents; and (b) that it shall, in the manner provided for in this Assignment, give to the Lender at least thirty (30) days written notice of and opportunity to cure any default by the Borrower under the Management Agreement (provided that the Lender shall have no obligation to effect any such cure) prior to any termination of the Management Agreement or discontinuance of its management of the Property.
9. Lender’s Agreement. So long as there exists no Event of Default, the Lender agrees to permit any sums due to the Borrower under the Management Agreement to be paid directly to the Borrower.
10. Notice. All notices given hereunder shall be in writing to the other party at the address, and in the manner set forth in the Loan Agreement, and in the case of the Agent to the address below:
To Agent:
Xxxx Companies US, Inc.
00 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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11. Binding Nature of Assignment. This Assignment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.
12. Counterparts. This Assignment may be executed in any number of counterparts all of which taken together shall constitute one and the same instrument.
13. Governing Law: Recourse. This Assignment shall be governed by the laws of the jurisdiction in which the Property is located, and applicable federal law. This Agreement is being executed in connection with the making of the Loan pursuant to the terms of the Note. The Borrower’s liability hereunder shall be limited to the same extent provided in the Note.
14. Attorneys’ Fees. In the event of any litigation or other legal proceeding arising between the parties to this Assignment, whether relating to the enforcement of a party’s rights under this Assignment or otherwise, the prevailing party shall be entitled to receive its reasonable attorneys’ fees and costs of suit from the non-prevailing party in such amount as the court shall determine.
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IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the day and year first written above.
FSP 00 XXXXX XXXXX XXXXXX CORP.,
a Delaware corporation
By: /s/ Xxxxxx X. Carter_________
Name: Xxxxxx X. Xxxxxx
Title: President
BANK OF AMERICA, N.A., a national banking association
By: /s/ Israel Lopez_____________
Name: Xxxxxx Xxxxx
Title: Senior Vice President
AGENT:
XXXX COMPANIES US, INC.
By: /s/ Xxxxxxx X. McElroy_______
Name: Xxxxxxx X. XxXxxxx
Title: EVP
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EXHIBIT A
COPY OF MANAGEMENT AGREEMENT
(attached hereto)
