Gilmore & Bell, P.C.
Draft – May 29, 2025
CITY ACKNOWLEDGEMENT TO COLLATERAL ASSIGNMENT AND AGREEMENT This CITY ACKNOWLEDGEMENT TO COLLATERAL ASSIGNMENT AND
AGREEMENT (this “Acknowledgement”), dated as of this ___ day of __________, 2025, is made and entered into by and among the CITY OF GARDEN GROVE, a municipal corporation duly organized and existing under the Constitution and laws of the State of California (the “City”), GWGG, LLC, a Delaware limited liability company (the “Hotel Owner”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association (the “Trustee”), and joined to this Acknowledgement solely for purposes of Section 5 hereof, MGWGG INVESTMENTS, LLC , a Colorado limited liability company (the “ McWhinney Member”), and the CALIFORNIA MUNICIPAL FINANCE AUTHORITY, a joint exercise of powers authority organized and existing under the laws of the State of California (the “Authority”) RECITALS:
A. The City and the Hotel Owner are parties to that certain Restrictive Covenant Agreement dated, for identification purposes only, as of November 26, 2024 (the “Restrictive Covenant Agreement”), a copy of which is attached hereto as Exhibit A. Capitalized terms used and not defined herein shall have the meaning given to them in the Restrictive Covena nt Agreement. Nothing herein shall be construed as amending or modifying the Restrictive Covenant Agreement.
B. Pursuant to the Restrictive Covenant Agreement, (1) the Hotel Owner is obligated to Complete Construction of certain Gen 4 Improvements in accordance with the Scope of Development and within the Schedule of Performance and (2) upon Completion of Construction of the Gen 4 Improvements, and subject to the satisfaction of the City Disbursement Conditions, the City will pay the Hotel Owner annual Covenant Consideration equal to 40% of the Applicable Transient Occupancy Tax collected and remitted to the City with the respect to the Hotel for a period of ten years, as further set forth in the Restrictive Covenant Agreement.
C. Pursuant to an agreement between the Hotel Owner, certain of its direct or indirect members, including the McWhinney Member, McWhinney Real Estate Services, LLC, GWR Manager, LLC and certain other parties thereto dated December 23, 2024(the “Member Agreement”), all such parties have agreed that the Covenant Consideration to be paid by the City pursuant to the Restrictive Covenant Agreement shall be paid to the McWhinney Member or an affiliate thereof, either directly by the City or, if paid by the City to the Hotel Owner, by the Hotel Owner. The City is not a party to the Member Agreement but is relying on the Hotel Owner ’s representation with respect to the Member Agreement permitting the payment of the Covenant Consideration to the McWhi nney Member or affiliate as directed by the Hotel Owner.
D. Section 703.2(c) of the Restrictive Covenant Agreement permits the collateral assignment of the Covenant Consideration.
E. Pursuant to a Collateral Assignment of Covenant Consideration (the “Collateral Assignment”) dated of even date by the McWhinney Member and the Hotel Owner for the benefit of the Authority, the McWhinney Member and the Hotel Owner have collaterally assigned their interests in the Covenant Consideration to the Authority to facilitate the Authority’s issuance of its $________ original principal amount of Limited Obligation Revenue Bonds (Covenant Consideration), Series 2025 (the “Series 2025 Bonds”) pursuant to a Trust Indenture as of June 1, 2025 (the “Indenture”) between the Authority and the Trustee. The Authority’s interest in the Covenant Consideration will be pledged and assigned to -2-
the Trustee under the Indenture. The proceeds of the Series 2025 Bonds will be made available to the McWhinney Member to, among other things, pay or reimburse certain costs in connection with the Completion of Construction of the Gen 4 Improvements (the “Project”), pursuant to the Loan Agreement dated as of June 1, 2025 (the “Loan Agreement”) between the Authority and the McWhinney Member. The Covenant Consideration received by the Trustee will be used to pay the principal of and interest on the Series 2025 Bonds, as further provided in the Indenture and the Loan Agreement. The City is not a party to the Collateral Assignment or the Loan Agreement.
F. The Authority was organized pursuant to the provisions of the Joint Exercise of Powers Act, comprising Articles 1, 2, 3 and 4 of Chapter 5 of Division 7 of Title 1 (commencing with Section 6500) of the Government Code of the State of California, and a Joint Exercise of Powers Agreement Relating to the California Municipal Finance Authority, dated as of January 1, 2004 (the “JPA Agreement”), among certain local agencies, including the City.
G. In connection with the issuance of the Series 2025 Bonds and the transactions described above, the Hotel Owner has requested that the City execute this Acknowledgement.
ACKNOWLEDGEMENT AND AGREEMENT
NOW THEREFORE, in consideration of the foregoing recitals, the agreements, promises and covenants herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Acknowledgement hereby agree as follows:
1. Acknowledgement of Collateral Assignment; Approval for Purposes of JPA Agreement. The City hereby acknowledges the existence of the Collateral Assignment and the pledge of the Covenant Consideration under the Indenture to the Trustee as security for the Series 2025 Bonds. The City acknowledges for the benefit of the Trustee that the City will observe and perform all of its covenants and obligations under this Acknowledgement and the Restrictive Covenant Agreement solely with respect to the Covenant Consideration. For purposes of Sect ion 4 of the JPA Agreement, the City approves the Project, including the issuance of the Series 2025 Bonds therefor, and hereby acknowledges that the Authority will rely on such approval to issue the Series 2025 Bonds.
2. Amendment of the Restrictive Covenant Agreement. The City agrees that, so long as the Series 2025 Bonds (including any subsequent bonds, notes or other obligations issued under any amendment or supplement to the Indenture to refund or refinance the Series 2025 Bonds) shall remain outstanding and unpaid, City shall not, without the prior written consent of the Trustee, which consent shall only be provided in accordance with the terms of the Indenture: (a) amend or modify the Restrictive Covenant Agreement in a manner that would decrea se the amount and/or duration of the Covenant Consideration; (b) cancel or terminate the Restrictive Covenant Agreement except in accordance with the terms and the provisions of the Restrictive Covenant Agremeent; or (c) assign any portion of the Restrictive Covenant Agreement other than pursuant to the terms of the Restrictive Covenant Agreement.
3. Notices under Restrictive Covenant Agreement. Simultaneously with the provision of any notice, demand or written communication to the Hotel Owner under Section 701 of the Restrictive Covenant Agreement, the City, as a matter of courte sy, shall provide a copy of such notice, demand or written communication to the Trustee at the address listed in Section 8 (or such address as the Trustee may notify the City of in writing from time). Any failure of the City under this Section shall not be a breach or default hereunder.
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4. Representations. The City represents to and for the benefit of the Trustee that, to the best of the City Manager’s knowledge:
(a) There are no side letters or oral or other agreements between the City and the Hotel Owner which affect any terms of the Restrictive Covenant Agreement or the relationship as between City and the Hotel Owner.
(b) The City is not in default under the Restrictive Covenant Agreement and has not breached any of the terms of the Restrictive Cove nant Agreement. To the best knowledge of the City Manager, the Hotel Owner is not in default under the Restrictive Covenant Agreement and has not breached any of the terms of the Restrictive Covenant Agreement. As of the date hereof and to the best knowledge of the City Manager, the City has no claims against the Hotel Owner, and no offsets or defenses against the performance of its obligations under the Restrictive Covenant Agreement.
(c) Any amounts required to be paid prior to the date hereof by the Hotel Owner to City pursuant to the Restrictive Covenant Agreement have been paid in full. (d) The City has not subordinated or caused to be subordinated its interest in the Restrictive Covenant Agreement to any deed of trust or other lien. The City has not sold, transferred or assigned the Restrictive Covenant Agreement or otherwise incurred or granted a lien or encumbrance of its interest in the Restrictive Covenant Agreement. (e) To the best knowledge of City Manager, there is no litigation or proceeding pending or threatened against or affecting the City which would materially adversely affect the Restrictive Covenant Agreement, Construction of the Gen 4 Improvements, or the ability of the City to perform any of its obligations under the Restrictive Covenant Agreement. (f) Except as described in the Recitals to this Acknowledgement with respect to the Member Agreement, the City has received no notice of prior sale, transfer or assignment, hypothecation or pledge of the Hotel Owner’s interest in the Covenant Consideration or the Restrictive Covenant Agreement, other than the Collateral Assignment. (g) None of the following events have occurred: (i) the filing by the City of a petition in bankruptcy, insolvency or reorganization, or for the appointment of a receiver or trustee, or (ii) the making of an assignment by the City for the benefit of its creditors.
5. Acknowledgement of Trustee’s Rights and Interests in the Covenant Consideration.
The Authority, the Hotel Owner and the McWhinney Me mber hereby irrevocably direct all payments of the Covenant Consideration to be paid directly to the Trustee. The Trustee shall provide written payment instructions to the City. The City shall acknowledge receipt of such instructions and agrees, pursuant to the terms hereof and the Collateral Assignment, to make payments of the Covenant Consideration directly to the Trustee until such time as this Acknowledgement is terminated pursuant to Section 6.
6. Termination. This Acknowledgement shall terminate upon the earliest of (a) the mutual written consent of the Trustee and the Hotel Owner and written notice thereof to the City; (b) written notice from the Trustee to the City of the full cancellation and discharge of the Indenture, including any amendments or supplements thereto; or (c) the expiration or termination of the City’s obligations to pay the Covenant Consideration under the Restrictive Covenant Agreement. -4-
7. Miscellaneous.
(a) Waiver. No waiver of any breach or default hereunder shall constitute or be construed as a waiver by the Trustee of any subsequent breach or default or of any breach or default of any other provisions of this Acknowledgement. Any waiver by the Trustee must be in writing and will not be construed as a continuing waiver. No waiver will be implied from any delay or failure to take action on account of any default of the Hotel Owner.
(b) Notices. Any notices required or permitted to be given with this Acknowledgement shall be in writing and shall be deemed to have been give n if and when received if personally delivered, or on the second business day after being deposited in United States registered or certified mail, postage prepaid, and addressed to a party at its address set forth below or to such other address the party to receive such notice may have designated to all other parties by notice in accordance herewith:
If to the Hotel Owner: GWGG, LLC
c/o McWhinney Real Estate Services, LLC
1800 Wazee Street, Suite 200
Denver, Colorado 80202
Attn: Executive Vice President, Hospitality
with a copy to: GWGG, LLC
c/o McWhinney Real Estate Services, LLC
1800 Wazee Street, Suite 200
Denver, Colorado 80202
Attn: General Counsel
If to the Trustee: U.S. Bank National Association
633 W. 5th Street, 24th Floor
Los Angeles California 90071
Attn: Corporate Trust Department
If to the City: City of Garden Grove
11222 Acacia Parkway
Garden Grove, California 92840
Attn: City Manager
with a copies to: City of Garden Grove
11222 Acacia Parkway
Garden Grove, California 92840
Attn: Office of Economic Development
Woodruff & Smart
555 Anton Blvd. Suite 1200
Costa Mesa, California 92626
Attn: Omar Sandoval, Esq.
Stradling Yocca Carlson & Rauth LLP
660 Newport Center Dr., Suite 1600
Newport Beach, California 92660
Attn: Thomas P. Clark, Esq.
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If to the McWhinney Member: MGWGG Investments, LLC
c/o McWhinney Real Estate Services, LLC
1800 Wazee Street, Suite 200
Denver, Colorado 80202
Attn: Executive Vice President, Hospitality
with a copy to: MGWGG Investments, LLC
c/o McWhinney Real Estate Services, LLC
1800 Wazee Street, Suite 200
Denver, Colorado 80202
Attn: General Counsel
or to such other address the party to receive such notice may have theretofore furnished to all other parties by notice in accordance herewith.
(c) Counterparts. This Acknowledgement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same Acknowledgement.
(d) Governing Law. This Acknowledgement and the terms, provisions and conditions herewith shall be governed by and construed and enforced in accordance with the internal laws of the State of California.
(e) Successors and Assigns. This Acknowledgem ent, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties and each of their successors and assigns, including without limitation, any successor trustee under the Indenture. (f) General. This Acknowledgement may not be modified or amended except by written agreement of each of the parties hereto. The headings contained herein have been inserted for convenience of reference only and shall in no way restrict or othe rwise modify any of the terms and provisions hereof.
If any term, covenant or condition of this Acknowledgement, or the application thereof to any person or circumstance, shall to any extent be invalid or unenforceable, the remainder of this Acknowledgement, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby and each term, covenant and condition of this Acknowledgement shall be valid and enforceable to the fullest extent permitted by law. This Acknowledgement represents the entire agreement be tween the parties and all prior negotiations and communications between the parties concerning the subject loan are superseded hereby. (g) Knowledge. Whenever a statement herein is qualified by “to the best of the City Manager’s knowledge,” it shall be deemed to indicate that, during the course of the City Manager’s involvement with the Restrictive Covenant Agreement, no information that would give her current, actual knowledge of the inaccuracy of such statement has come to her attention. She has not, however, undertaken any independent investigation to determine the accuracy of such statements or representations, and any limited inquiry undertaken by her during the preparation of this docume nt should not be regarded as such investigation.
No inference as to her knowledge of any matters bearing upon the accuracy of any such statement should be drawn from the fact of her involvement with the Restrictive Covenant Agreement. [The remainder of this page is intentionally left blank.] -6-
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have caused this Acknowledgement to be duly executed as of the year and date first set forth above.
CITY:
CITY OF GARDEN GROVE, a municipal corporation
duly organized and existing under the Constitution and
laws of the State of California
By:
Name:
Title:
(SEAL)
Attest:
City Clerk
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COUNTERPART SIGNATURE PAGE
HOTEL OWNER:
GWGG, LLC, a Delaware limited liability company
By: GWGG MEZZ, LLC, a Delaware limited liability
company, sole member
By: GWGG JV, LLC, a Delaware limited liability
company, sole member
By: McWhinney Real Estate Services, LLC, a
Colorado limited liability company, Manager
By:
Name:
Title:
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COUNTERPART SIGNATURE PAGE
TRUSTEE:
U.S. BANK NATIONAL ASSOCIATION
By:
Name:
Title:
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JOINDER WITH RESPECT TO SECTION 5
MCWHINNEY MEMBER:
MGWGG INVESTMENTS, LLC, a Colorado limited
liability company
By: McWhinney Real Estate Services, LLC,
a Colorado limited liability company,
Manager
By:
Name:
Title:
AUTHORITY:
CALIFORNIA MUNICIPAL FINANCE
AUTHORITY
By:
Name:
Title:___________________________________
EXHIBIT A
RESTRICTIVE COVENANT AGREEMENT
(SEE ATTACHED)