Pooling Agreement, dated as of December 15, 2020, among Sonesta International Hotels Corporation, certain subsidiaries of the Company named therein as owners and certain subsidiaries of Sonesta International Hotels Corporation named therein as managers. (Conversion Hotels)

THIS POOLING AGREEMENT (this “Agreement”) is executed on December 15, 2020, but is made effective as of September 18, 2020, by and among Sonesta International Hotels Corporation, a Maryland corporation, and the other parties listed on Schedule A, as managers (each a “Manager” and collectively, “Managers”), and the parties listed on Schedule B, as owners (each an “Owner” and collectively, “Owners”).

 

WHEREAS, contemporaneously with or prior to the execution of this Agreement, each Owner has entered into a Master Management Agreement or a Management Agreement with a Manager, as listed on Schedule C (each a “Management Agreement” and collectively, the “Management Agreements”) with respect to the real estate and personal property described in Schedule D opposite such Owner’s name which is operated as a full service or a select service hotel (each a “Hotel” and collectively, the “Hotels”).

 

WHEREAS, Owners and Managers desire to pool working capital for each of the Hotels and all revenues and reserves from operation of each of the Hotels for purposes of paying operating expenses of the Hotels and fees and other amounts due to Managers and Owners under the Management Agreements.

 

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, the receipt of which is hereby acknowledged, each Owner and each Manager agree as follows:

 

a.Definitions.  Capitalized terms used, but not otherwise defined in this Agreement shall have the meanings given to such terms in the Management Agreements. The following capitalized terms as used in this Agreement shall have the meanings set forth below:

 

“Additional Hotel” is defined in Section 6.01.

 

“Additional Manager” is defined in Section 6.01.

“Additional Owner” is defined in Section 6.01.

“Agreement” is defined in the Preamble.

 

“Aggregate Additional Manager Advances” means the sum of Additional Manager Advances under all Management Agreements.

 

“Aggregate Annual Operating Statement” is defined in Article IV.

 

“Aggregate Base Management Fee” means an amount equal to 3% of the Aggregate Gross Revenues attributable to full service Hotels and 5% of the Aggregate Gross Revenues attributable to select service Hotels.

 

“Aggregate Deductions” means the sum of Deductions of the Hotels.

“Aggregate FF&E Reserve Deposit” means, with respect to each Year or portion thereof, an amount equal to five percent (5%) of Aggregate Gross Revenues.

“Aggregate Gross Room Revenues” means the sum of Gross Room Revenues of the Hotels.

“Aggregate Gross Revenues” means the sum of Gross Revenues of the Hotels.

 

“Aggregate Monthly Statement” is defined in Article IV.

 

“Aggregate Operating Profit” means an amount equal to Aggregate Gross Revenues less Aggregate Deductions.

 

“Aggregate Owner Advances” means the sum of Owner Advances under all Management Agreements.

  

“Aggregate Owner’s Priority” means the sum of the Owner’s Priority for the Hotels.

“Aggregate Owner’s Residual Payment” means, with respect to each Year or portion thereof an amount equal to Aggregate Operating Profit remaining after deducting amounts paid or payable in respect of Aggregate Owner’s Priority, Aggregate Reimbursable Advances, the Aggregate FF&E Reserve Deposit and the Aggregate Incentive Management Fee for such Year.

 

“Aggregate Reservation Fee” means for each Year or portion thereof an amount equal to one and one-half percent (1.5%) of Aggregate Gross Room Revenues.

 

“Aggregate Reimbursable Advances” means the sum of Reimbursable Advances of the Hotels.

“Aggregate System Fee” means with respect to each Year or portion thereof an amount equal to one and one-half percent (1.5%) of Aggregate Gross Revenues.

 

“Effective Date” means, with respect to each Hotel, the date listed as the Effective Date for such Hotel on Schedule D.

“Hotel” and “Hotels” are defined in the Recitals.

 

“Landlord(s)” means the owner of the Hotel(s) set forth on Schedule D.

 

“Management Agreement” and “Management Agreements” are defined in the Recitals.

 

“Manager” and “Managers” are defined in the Preamble.

“Owner” and “Owners” are defined in the Preamble.

“Pooled FF&E Reserves” is defined in Section 5.01.B.

“Pooled FF&E Reserve Account” is defined in Section 5.01.B.

 

The parties agree that from and after the Effective Date for each Hotel, so long as such Hotel is subject to this Agreement, all Working Capital and all Gross Revenues of such Hotel shall be pooled pursuant to this Agreement and disbursed to pay all Aggregate Deductions, fees and other amounts due to Managers and Owners (not including amounts due pursuant to Section 11.18 of the Management Agreements) with respect to the Hotels and that the corresponding provisions of each Management Agreement shall be superseded as provided in Section 3.03. 

 

PRIORITIES FOR DISTRIBUTION

3.01.    Priorities for Distribution of Aggregate Gross Revenues.  Aggregate Gross Revenues shall be distributed in the following order of priority:

 

A.First, to pay all Aggregate Deductions (excluding the Aggregate Base Management Fee, the Aggregate Reservation Fee and the Aggregate System Fee);

B.Second, to Managers, an amount equal to the Aggregate Base Management Fee, the Aggregate Reservation Fee and the Aggregate System Fee;

C.Third, to Owners, an amount equal to Aggregate Owner’s Priority;

D.Fourth, pari passu, (i) to Owners, in an amount necessary to reimburse Owners for all Aggregate Owner Advances which have not yet been repaid pursuant to this Section 3.01, and (ii) to Managers, in an amount necessary to reimburse Managers for all Aggregate Additional Manager Advances which have not yet

been repaid pursuant to this Section 3.01.  If at any time the amounts available for distribution to Owners and Managers pursuant to this Section 3.01 are insufficient (a) to repay all outstanding Aggregate Owner Advances, and (b) all outstanding Aggregate Additional Manager Advances, then Owners and Managers shall be paid from such amounts the amount obtained by multiplying a number equal to the amount of the funds available for distribution by a fraction, the numerator of which is the sum of all outstanding Aggregate Owner Advances, or all outstanding Aggregate Additional Manager Advances, as the case may be, and the denominator of which is the sum of all outstanding Aggregate Owner Advances plus the sum of all outstanding Aggregate Additional Manager Advances;

E.Fifth, to the Pooled FF&E Reserve Account, an amount equal to the Aggregate FF&E Reserve Deposit;

F.Finally, to Owners, the Aggregate Owner’s Residual Payment.

 

3.02.    Timing of Payments.

A.     Payment of the Aggregate Deductions, excluding the Aggregate Base Management Fee, the Aggregate Reservation Fee and the Aggregate System Fee, shall be made in the ordinary course of business. The Aggregate Base Management Fee, the Aggregate Reservation Fee, the Aggregate System Fee, the Aggregate Owner’s Priority, the Aggregate FF&E Reserve Deposit, and the Aggregate Owner’s Residual Payment shall be paid on or before the twentieth (20th) day after the end of each calendar month, based upon Aggregate Gross Revenues or Aggregate Gross Room Revenues, as the case may, be for such month as reflected in the Aggregate Monthly Statement for such month. If any installment of the Aggregate Base Management Fee, the Aggregate Reservation Fee, the Aggregate System Fee or the Aggregate Owner’s Priority is not paid when due, it shall accrue interest at the Interest Rate. Calculations and payments of the Aggregate FF&E Reserve Deposit and/or the Aggregate Owner’s Residual Payment with respect to each calendar month within a calendar year shall be accounted for cumulatively based upon the year-to-date Aggregate Operating Profit as reflected in the Aggregate Monthly Statement for such calendar month and shall be adjusted to reflect distributions for prior calendar months in such year. Additional adjustments to all payments will be made on an annual basis based upon the Aggregate Annual Operating Statement for the Year and any audit conducted pursuant to Section 4.02 of the Management Agreements.

 

B.     Subject to Section 3.02.C, if the portion of Aggregate Gross Revenues to be distributed to Managers or Owners pursuant to Section 3.01 is insufficient to pay amounts then due in full, any amounts left unpaid shall be paid from and to the extent of Aggregate Gross Revenues available therefor at the time distributions are made in successive calendar months until such amounts are paid in full, together with interest thereon, if applicable, and such payments shall be made from such available Aggregate Gross Revenues in the same order of priority as other payments made on account of such items in successive calendar months.

 

C.     Other than with respect to Aggregate Reimbursable Advances, calculations and payments of the fees and other payments in Section 3.01 and distributions of Aggregate Gross Revenues within a Year shall be accounted for cumulatively within a Year but shall not be cumulative from one Year to the next. Calculations and payments of Aggregate Reimbursable Advances shall be accounted for cumulatively within a Year and shall be cumulative from one Year to the next.

 

D.     The Aggregate Owner’s Priority, the Pooled FF&E Reserves and the Aggregate Owner’s Residual Payment shall be allocated among Owners as Owners shall determine in their sole discretion and Managers shall have no responsibility or liability in connection therewith. The Aggregate Incentive Management Fee, Aggregate Base Management Fee, the Aggregate Reservation Fee and the Aggregate System Fee shall be allocated among Managers as Managers shall determine in their sole discretion and Owners shall have no responsibility or liability in connection therewith.

 

3.03.    Relationship with Management Agreements.  For as long as this Agreement is in effect with respect to a Hotel, the provisions of Sections 3.01 and 3.02 shall supersede Sections 3.02 and 3.03 of the Management Agreement then in effect with the applicable Hotel.

Managers shall prepare and deliver the following financial statements to Owners:

 

(a)Within fifteen (15) days after the close of each calendar month, Managers shall deliver an accounting to Owners showing Aggregate Gross Revenues, Aggregate Gross Room Revenues, occupancy percentage and average daily rate, Aggregate Deductions, Aggregate Operating Profit, and applications and distributions thereof for the preceding calendar month and year-to-date (“Aggregate Monthly Statement”).

 

(b)Within forty-five (45) days after the end of each Year, Managers shall deliver to Owners and Landlords a statement (the “Aggregate Annual Operating Statement”) in reasonable detail summarizing the operations of the Hotels for the immediately preceding Year and an Officer’s Certificate setting forth the totals of Aggregate Gross Revenues, Aggregate Deductions, and the calculation of the Aggregate Owner’s Residual Payment for the preceding Year and certifying that such Aggregate Annual Operating Statement is true and correct. Managers and Owners shall, within ten (10) Business Days after Owner’s receipt of such statement, make any adjustments, by cash payment, in the amounts paid or retained for such Year as are required because of variances between the Aggregate Monthly Statements and the Aggregate Annual Operating Statement. Any payments shall be made together with interest at the Interest Rate from the date such amounts were due or paid, as the case may be, until paid or repaid. The Aggregate Annual Operating Statement shall be controlling over the Aggregate Monthly Statements and shall be final, subject to adjustments required as a result of an audit requested by Owners or Landlords pursuant to Section 4.02.B of the Management Agreements.

(c)Managers shall also prepare and deliver such other statements or reports as any Owners may, from time to time, reasonably request.

 

The financial statements delivered pursuant to this Article IV are in addition to any financial statements required to be prepared and delivered pursuant to the Management Agreements.

 

5.01.    Accounts; Pooled FF&E Reserve Account.

A.     Subject to Section 5.01.B, all Working Capital and all Gross Revenues of each of the Hotels may, until applied in accordance with this Agreement and the applicable Management Agreements, be pooled and deposited in one or more bank accounts in the name(s) of Owners designated by Managers, which accounts may, except as required by any Mortgage and related loan documentation or applicable law, be commingled accounts containing other funds owned by or managed by Managers.

B.     Managers shall establish an interest-bearing account, in the name of Cambridge TRS, Inc., in a bank designated by Manager (and approved by Owners, such approval not to be unreasonably withheld), into which all FF&E Reserve Deposits and any other amounts to be deposited into an FF&E Reserve Account under a Management Agreement shall be paid (the “Pooled FF&E Reserve Account”). Funds on deposit in the Pooled FF&E Reserve Account (the “Pooled FF&E Reserves”) shall not be commingled with any other funds without Owners’ consent, and the Pooled FF&E Reserves shall be withdrawn from the Pooled FF&E Reserve Account and applied by Managers only to the extent they are permitted to withdraw and apply FF&E Reserves under a Management Agreement.

C.     Managers shall be authorized to access the accounts above without the approval of Owners, subject to (i) any limitation on the maximum amount of any check, if any, established between Managers and Owners as part of the Annual Operating Projections, and (ii) in the case of the Pooled FF&E Reserve Account, such other limitations as maybe set forth in the Management Agreements. One or more Owners shall be a signatory on all accounts maintained with respect to each Hotel, and Owners shall have the right to require that one or more Owners’ signature be required on all checks/withdrawals after the occurrence of a Manager Event of Default. Owners shall provide such instructions to the applicable bank(s) as are necessary to permit Managers to implement Managers’ rights and obligations under this Agreement. The failure of any Owner to provide such instructions shall relieve any Manager of its obligations hereunder until such time as such failure is cured.

6.01.    Addition of Hotels.  At any time and from time to time, if a Manager or any Affiliate of Manager (an “Additional Manager”) and any Owner or any Affiliate of an Owner (an “Additional Owner”) add an additional Hotel (an “Additional Hotel”) to an existing Management Agreement or enter into a management agreement for the operation of an Additional Hotel, the Additional Owner may become a party to this Agreement by signing an accession agreement confirming the applicability of this Agreement to such Additional Hotel, provided if the Additional Owner is then a party to this Agreement, the Additional Hotel may be made subject to this Agreement by such Additional Owner and Manager amending and restating the applicable Schedules. If an Additional Hotel is made subject to this Agreement other than on the first day of a calendar month, the parties shall include such prorated amounts of the Gross Revenues and Deductions (and other amounts as may be necessary) applicable to the Additional Hotel for such calendar month, as mutually agreed in their reasonable judgment, in the calculation of Aggregate Gross Revenues and Aggregate Deductions (and other amounts as may be necessary) for the calendar month in which the Additional Hotel became subject to this Agreement and shall make any other prorations, adjustments, allocations and changes required. Additionally, any amounts held as Working Capital for the Additional Hotel or to fund capital expenditures, if any, shall be held by Managers under this Agreement.

 

6.02.    Removal of Hotels. From and after the date of termination of any Management Agreement with respect to any Hotel, such Hotel shall no longer be subject to this Agreement. If the termination occurs on a day other than the last day of a calendar month, the parties shall exclude such prorated amounts of the Gross Revenues and Deduction (and other amounts as may be necessary) applicable to such Hotel for such calendar month, as mutually agreed in their reasonable judgment, in the calculation of Aggregate Gross Revenues and Aggregate Deductions (and other amounts as may be necessary) for the calendar month in which the termination occurred. Additionally, Owners and Managers, acting reasonably, shall mutually agree to the portion of the Aggregate Working Capital and Aggregate Gross Revenues allocable to the Hotel being removed from this Agreement and the amount of the Aggregate Working Capital, Aggregate Gross Revenues so allocated and any amounts held to fund capital expenditures, shall be remitted to the relevant Owner and the relevant Owner and relevant Manager shall make any other prorations, adjustments, allocations and changes required.

 

7.01.    Term.  This Agreement shall continue and remain in effect indefinitely unless terminated pursuant to Section 7.02.

 

7.02.     Termination.  This Agreement may be terminated as follows:

 

(a)By the mutual consent of Managers and Owners which are parties to this Agreement.

(b)Automatically, if all Management Agreements terminate or expire in their entirety for any reason.

(c)By Managers, if any or all Owners do not cure a material breach of this Agreement by any Owner or Landlord within thirty (30) days of written notice of such breach from any Manager and if such breach is not cured, it shall be an Owner Event of Default under the Management Agreements.

(d)By Owners, if any or all Managers do not cure a material breach of this Agreement by any Manager within thirty (30) days of written notice of such breach from any Owner and if such breach is not cured, it shall be a Manager Event of Default under the Management Agreements.

 

7.03.    Effect of Termination.  Upon the termination of this Agreement, except as otherwise provided in Section 8.04.B. of the Management Agreements, Managers shall be compensated for their services only through the date of termination and all amounts remaining in any accounts maintained by Managers pursuant to Article V, after payment of such amounts as may be due to Managers hereunder, shall be distributed to Owners. Notwithstanding the foregoing, upon the termination of any single Management Agreement, pooled funds shall be allocated as described in Section 6.02.

 

7.04.    Survival.  The following Sections of this Agreement shall survive the termination of this Agreement: Section 7.03 and Article VIII.

 

8.01.    Notices.  All notices, demands, consents, approvals, and requests given by any party to another party hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, upon confirmation of receipt, or on the next business day if transmitted by nationally recognized overnight courier, to the parties at the following addresses:

 

To Owners:

 

Cambridge TRS, Inc.

Two Newton Place

255 Washington Street

Newton, Massachusetts 02458

Attn:  President

To Managers:

 

Sonesta International Hotels Corporation

Two Newton Place

255 Washington Street

Newton, Massachusetts 02458

Attn:  President

 

8.02.     Applicable Law; Arbitration.  This Agreement shall be interpreted, construed, applied and enforced in accordance with the laws of the Commonwealth of Massachusetts, with regard to its “choice of law” rules. Any “Dispute” (as such term is defined in the Management Agreements) under this Agreement shall be resolved through final and binding arbitration conducted in accordance with the procedures and with the effect of, arbitration as provided for in the Management Agreements.

 

8.03.    Severability.  If any term or provision of this Agreement or the application thereof in any circumstance is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof.

 

8.04.    Gender and Number.  Whenever the context of this Agreement requires, the gender of all words herein shall include the masculine, feminine, and neuter, and the number of all words herein shall include the singular and plural.

 

8.05.    Headings and Interpretation.  The descriptive headings in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. References to “Section” in this Agreement shall be a reference to a Section of this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement they shall be deemed to be followed by “without limitation.” The words “hereof,” “herein,” “hereby,” and “hereunder, when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision unless otherwise indicated. The word “or” shall not be exclusive. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting.

 

8.06.    Confidentiality of Information.  Any information exchanged between a Manager and each Owner pursuant to the terms and conditions of this Agreement shall be subject to Section 11.06 of the Management Agreements.

 

8.07.    Assignment.  Neither any Manager nor any Owner may assign its rights and obligations under this Agreement to any other Person without the prior written consent of the other parties.

8.08.    Entire Agreement; Construction; Amendment.  With respect to the subject matter hereof, this Agreement supersedes all previous contracts and understandings between the parties and constitutes the entire Agreement between the parties with respect to the subject matter hereof. Accordingly, in the event of any conflict between the provisions of this Agreement and the Management Agreements, the provisions of this Agreement shall control, and the provisions of the Management Agreements are deemed amended and modified, in each case as required to give effect to the intent of the parties in this Agreement. All other terms and conditions of the Management Agreements shall remain in full force and effect; provided that, to the extent that

compliance with this Agreement shall cause a default, breach or other violation of the Management Agreement by one party, the other party waives any right of termination, indemnity, arbitration or otherwise under the Management Agreement related to that specific default, breach or other violations, to the extent caused by compliance with this Agreement. This Agreement may not be modified, altered or amended in any manner except by an amendment in writing, duly executed by the parties hereto.

 

8.09.    Third Party Beneficiaries.  The terms and conditions of this Agreement shall inure to the benefit of, and be binding upon, the respective successors, heirs, legal representatives or permitted assigns of each of the parties hereto and except for Landlord(s), which are intended third party beneficiaries, no Person other than the parties hereto and their successors and permitted assigns is intended to be a beneficiary of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement with the intention of creating an instrument under seal.

                    MANAGERS:

SONESTA INTERNATIONAL HOTELS CORPORATION, a Maryland corporation

By: /s/ Carlos R. Flores                           

Carlos R. Flores

President and Chief Executive Officer

SONESTA JERSEY CITY LLC,

SONESTA MORRIS PLAINS LLC,

SONESTA NANUET LLC,

SONESTA NJ LLC,

SONESTA RANDOLPH STREET LLC,

SONESTA REDONDO BEACH LLC,

SONESTA SAN JUAN LLC,

SONESTA STATE STREET LLC,

each a Maryland limited liability company

By: /s/ Carlos R. Flores                              

Carlos R. Flores

President and Chief Executive Officer

SONESTA CANADA ULC,

SONESTA TORONTO ULC,

each a British Columbian unlimited liability company

By: /s/ Carlos R. Flores                              

Carlos R. Flores

President and Chief Executive Officer

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement with the intention of creating an instrument under seal.

HPT STATE STREET TRS LLC,

 

Sonesta Canada ULC

Sonesta Gatehall Drive LLC

Sonesta International Hotels Corporation

Sonesta Jersey City LLC

Sonesta Morris Plains LLC

Sonesta Nanuet LLC

Sonesta NJ LLC

Sonesta Randolph Street LLC

Sonesta Redondo Beach LLC

Sonesta San Juan LLC

Sonesta State Street LLC

Sonesta Toronto ULC

 

Cambridge TRS, Inc.

HPT CY TRS, Inc.

HPT State Street TRS LLC

HPT TRS IHG-2, Inc.

HPT TRS MRP, Inc.

SVC Gatehall Drive TRS LLC

SVC Jersey City TRS LLC

SVC Morris Plains TRS LLC

SVC Nanuet TRS LLC

SVC NJ TRS LLC

SVC Randolph Street TRS LLC

SVC Redondo Beach TRS LLC

SVC San Juan LLC

1.Master Management Agreement, dated as of September 25, 2020, between Sonesta International Hotels Corporation and Cambridge TRS, Inc.

2.Management Agreement, dated as of October 1, 2020, between Sonesta NJ LLC and SVC NJ TRS LLC.

3.Master Management Agreement, executed on November 25, 2020, but effective as of December 1, 2020, between Sonesta International Hotels Corporation and HPT TRS IHG-2, Inc.

4.Management Agreement, dated as of December 1, 2020, between Sonesta Redondo Beach LLC and SVC Redondo Beach TRS LLC.

5.Management Agreement, dated as of December 1, 2020, between Sonesta Randolph Street LLC and SVC Randolph Street TRS LLC.

6.Management Agreement, dated as of December 1, 2020, between Sonesta State Street LLC and HPT State Street TRS LLC.

7.Management Agreement, dated as of December 1, 2020, between Sonesta Jersey City LLC and SVC Jersey City TRS LLC.

8.Management Agreement, dated as of December 1, 2020, between Sonesta Morris Plains LLC and SVC Morris Plains TRS LLC.

9.Management Agreement, dated as of December 1, 2020, between Sonesta Nanuet LLC and SVC Nanuet TRS LLC. (Nanuet Hotel)

10.Management Agreement, dated as of December 15, 2020, between San Juan LLC and SVC San Juan LLC.

11.Management Agreement, dated as of December 15, 2020, between Sonesta Canada ULC and HPT TRS IHG-2, Inc.

12.Management Agreement, dated as of December 15, 2020, between Sonesta Toronto ULC and HPT TRS IHG-2, Inc.

13.Master Management Agreement, dated as of December 15, 2020, between Sonesta International Hotels Corporation and HPT CY TRS, Inc., as amended.

14.Master Management Agreement, dated as of December 15, 2020, between Sonesta International Hotels Corporation and HPT TRS MRP, Inc., as amended.

15.Management Agreement, dated as of February 12, 2021, between Sonesta Gatehall Drive LLC and SVC Gatehall Drive TRS LLC, as amended.